DAVIS VARIABLE ACCOUNT FUND INC, N-1A, 1999-04-16

DAVIS VARIABLE ACCOUNT FUND INC
N-1A, 1999-04-16

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------------

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 33-______
PRE-EFFECTIVE AMENDMENT NO. 1

AND

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-_____
AMENDMENT NO. 1

DAVIS VARIABLE ACCOUNT FUND, INC.

124 East Marcy Street
Santa Fe, New Mexico 87501
(1-505-820-3000)

Agents For Service: Thomas D. Tays, Esq.
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-505-820-3055

-or-

Sheldon R. Stein, Esq.
D'Ancona & Pflaum
111 East Wacker Drive, Suite 2800
Chicago IL 6060130
(1-312-602-2014)

It is proposed that this filing will become effective:

________ Immediately upon filing pursuant to paragraph (b)

________ On______________, pursuant to paragraph (b)

________ 60 days after filing pursuant to paragraph (a)(1)

________ On December 1, 1998, pursuant to paragraph (a) of Rule 485

________ 75 days after filing pursuant to paragraph (a)(2)

X On_July 1, 1999, pursuant to paragraph (a)(2) of Rule 485
--------

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RULE 473 DELAYING AMENDMENT: The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the Commission
acting pursuant to said section 8(a), may determine.

Title of Securities being Registered: Common Stock of:

DAVIS VALUE PORTFOLIO;
DAVIS FINANCIAL PORTFOLIO; AND
DAVIS REAL ESTATE PORTFOLIO

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FORM N-1A
DAVIS VALUE PORTFOLIO
DAVIS FINANCIAL PORTFOLIO
AND
DAVIS REAL ESTATE PORTFOLIO
AUTHORIZED PORTFOLIOS OF
DAVIS VARIABLE ACCOUNT FUND, INC.

PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION
STATEMENT NO. 33-____UNDER THE SECURITIES ACT OF 1933
AND AMENDMENT NO. 1 UNDER THE INVESTMENT COMPANY ACT
OF 1940 TO REGISTRATION STATEMENT NO. 811-____.

CROSS REFERENCE SHEET
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N-1A
ITEM NO. PART A CAPTION OR PLACEMENT: PROSPECTUS FOR CLASS ABC SHARES
-------- ------------------------------------------------------------
1. Front and Back Cover pages
2. Overview of the Fund:
Investment Objective and Strategy
Determining if this Fund is Right for You
Principal Risks
Past Performance
3. Overview of the Fund: Expenses of the Fund
4. How We Manage the Fund
5. Annual Report, not applicable to a new Fund
6. Who is Responsible for Your Davis Account
7. Not applicable
8. Information Concerning Shares In the Fund
9. Financial Highlights, not applicable to a new Fund

N-1A
ITEM NO. PART B CAPTION OR PLACEMENT: STATEMENT OF ADDITIONAL INFORMATION
-------- ----------------------------------------------------------------
10. Cover Page
11. Organization of the Company
12. Portfolio Securities
Other Investment Practices
Investment Restrictions
13. Directors and Officers
Directors Compensation Table
14. Certain Shareholders of the Fund

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15. Investment Advisory Services
Distribution of Company Shares
Other Important Service Providers
16. Portfolio Transactions
17. Organization of the Company
18. Contained in the Prospectuses
19. Federal Income Taxes
20. Distribution of Company Shares
21. Performance Data
22. Annual Report Incorporated by Reference

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DAVIS VALUE PORTFOLIO

(Part of Davis Variable Account Fund, Inc.)

July 1, 1999

A mutual fund sold exclusively to insurance company separate accounts for
variable annuity and variable life insurance contracts.

The Securities and Exchange Commission has not approved or disapproved of these
securities. The Securities and Exchange Commission has not determined whether
this prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.

Over 25 Years of Reliable Investing

1
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TABLE OF CONTENTS

Overview Of The Fund
Investment Objective And Strategy
Determining If This Fund Is Right For You
Principal Risks
Past Performance
Expenses Of The Fund

Who Is Responsible For The Fund

How We Manage The Fund

Davis Selected Advisers' Performance History
How We Invest The Fund's Assets
How We Manage Risk

Information Concerning Shares In The Fund

OTHER FUND DOCUMENTS

For more information about Davis Real Estate Portfolio, request a free copy of
the Statement of Additional Information or the Annual and Semi-Annual Reports.
The STATEMENT OF ADDITIONAL INFORMATION provides more detailed information about
the Fund and its management and operations. An ANNUAL REPORT discusses the
market conditions and investment strategies that significantly affected Fund
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.

Davis Real Estate Portfolio's Statement of Additional Information and Annual
Report have been filed with the Securities and Exchange Commission, are
incorporated by reference, and are legally a part of this prospectus.

WHERE YOU CAN GET THESE DOCUMENTS:

o FROM YOUR ACCOUNT REPRESENTATIVE. Your Account Representative can provide
you with copies of these documents. You may also call this number for
account inquiries.

o VIA THE INTERNET. Visit the SEC web site (WWW.SEC.GOV).

Investment Company Act File No. 811-xxxx

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STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 1999

DAVIS VALUE PORTFOLIO,
DAVIS FINANCIAL PORTFOLIO,
AND
DAVIS REAL ESTATE PORTFOLIO

PART OF
DAVIS VARIABLE ACCOUNT FUND, INC.,

THE FUNDS ARE SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUSES FOR EACH FUND DATED JULY 1, 1999. THIS
STATEMENT OF ADDITIONAL INFORMATION INCORPORATES THE PROSPECTUS BY REFERENCE.
THE PROSPECTUSES MAY BE OBTAINED FROM INSURANCE COMPANIES INVESTING IN THE FUND.

THE FUNDS HAVE NOT YET PUBLISHED AN ANNUAL REPORT. WHEN THEY ARE AVAILABLE, THE
ANNUAL REPORT AND SEMI-ANNUAL REPORT TO SHAREHOLDERS WILL BE SEPARATE DOCUMENTS
SUPPLIED WITH THIS STATEMENT OF ADDITIONAL INFORMATION. THE ANNUAL REPORT,
ACCOMPANYING NOTES AND REPORT OF INDEPENDENT AUDITORS APPEARING IN THE ANNUAL
REPORT WILL BE INCORPORATED BY REFERENCE INTO THE THEN-CURRENT STATEMENT OF
ADDITIONAL INFORMATION.

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TABLE OF CONTENTS

PAGE

Section I: Investment Strategies and Restrictions ...........................4

Investment Objective and Policies.................................4
Portfolio Securities..............................................4

Equity Securities
Financial Services Industry
Foreign Investments
Real Estate Securities and REITs
Bonds & Other Debt Securities

Other Investment Policies.........................................9
Portfolio Transactions ..........................................11
Investment Restrictions..........................................13

Section II: Key Persons......................................................16

Organization of the Company......................................16
Directors and Officers...........................................16
Directors Compensation Schedule..................................18
Certain Shareholders of the Fund.................................19
Investment Advisory Services.....................................20
Administrative and Service Fees..................................17
Distribution of Company Shares...................................22
Other Important Service Providers................................25

Section III: General Information..............................................35

Determining the Price of Shares..................................35
Year 2000 Transition Issues......................................36
Federal Income Taxes.............................................37
Performance Data.................................................37

Appendix A: Initial Balance Sheet............................................40

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Section I: Investment Strategies and Restrictions

INVESTMENT OBJECTIVES AND POLICIES

DAVIS VALUE PORTFOLIO. The investment objective of Davis Value Portfolio
is growth of capital. It invests primarily in common stocks and other equity
securities. The Fund's principal risks are the risk of price fluctuations
reflecting both market evaluations of the businesses involved, and general
changes in the equity markets. The Fund may invest in foreign securities and
attempt to reduce currency fluctuation risks by engaging in related hedging
transactions. These investments involve special risk factors.

DAVIS FINANCIAL PORTFOLIO. The investment objective of Davis Financial
Fund is growth of capital. It invests primarily in common stocks and other
equity securities and will concentrate investments in companies principally
engaged in the financial services industry, including banking, insurance, and
other financial services described below. Davis Financial Portfolio generally
will invest a minimum of 65% of its total assets in investments in the financial
services industry. The Fund's principal risks are market risk and company risk.
Because Davis Financial Portfolio concentrates its investments in the financial
services industry, it may be affected by economic or regulatory developments in,
or related to, that market sector. The Fund may also invest in foreign
securities.

DAVIS REAL ESTATE PORTFOLIO. The investment objective of Davis Real
Estate Portfolio is total return through a combination of growth and income. It
seeks to achieve this objective by investing primarily in equity securities of
companies principally engaged in, or related to, the real estate industry or
which own significant real estate assets, or which primarily invest in real
estate financial instruments. Normally, at least 65% of its total assets will be
so invested. It does not invest directly in real estate. Davis Real Estate
Portfolio's principal risks are market risk, company risk, and the risk of
having a concentrated real estate portfolio. The Fund may invest in foreign
securities or in high yield, high-risk debt securities, which may involve
additional risk.

An investment in the Funds may not be appropriate for all investors, and
short-term investing is discouraged.

PORTFOLIO SECURITIES

The principal securities in which the Funds invest are described below.

EQUITY SECURITIES. Each of the Funds invest primarily in equity
securities. Equity securities represent an ownership position in a company.
These securities may include, without limitation, common stocks, preferred
stocks, and securities with equity conversion or purchase rights. The Funds
usually purchase common stock. The prices of equity securities fluctuate based
on changes in the financial condition of their issuers and on market and
economic conditions. The Funds' results will be related to the overall market
for these securities. There is no limit on the percentage of its assets which
the Funds may invest in equity securities.

Davis Value Portfolio and Davis Financial Portfolio predominantly invest
in the common stock of companies with market capitalizations of at least $5
billion. The Funds may also invest in issues with smaller capitalizations. The
equity of smaller companies is subject to additional risks. Smaller companies
are usually less established and less diversified than larger companies, and
have fewer resources available to take advantage of opportunities or overcome
challenges.

Davis Financial Fund and Davis Real Estate Fund concentrate their
investments in specific industries. This concentration is expected to cause the
performance of these funds to be closely tied to the performance of the
industries in which they concentrate.

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Primary Risks. Events which have a negative impact on a business will
probably be reflected in a decline in their equity securities. Furthermore, when
the stock market declines, most equity securities, even those issued by strong
companies, are likely to decline in value.

FINANCIAL SERVICES INDUSTRY. During normal market conditions Davis
Financial Portfolio concentrates 65% or more of its total assets in obligations
of domestic and foreign companies in the financial services industry. Davis
Value Portfolio may also invest a significant portion of its assets in the
financial services industry if the Adviser believes that such investments will
contribute to the Fund's investment objectives. For purposes of defining
concentration, Davis Financial Portfolio will consider an issuer to be deemed
"principally engaged" in the area of concentration if operations in the
identified areas comprise more than 50% of the issuer's assets or revenues on a
consolidated basis. Companies in the financial services industry include
commercial and industrial banks, savings and loan associations and their holding
companies, consumer and industrial finance companies, diversified financial
services companies, investment banking, securities brokerage and investment
advisory companies, leasing companies, and insurance companies. As a result of
such concentration, the Fund's portfolio may be subject to greater risks than a
portfolio without such a concentration, especially with respect to those risks
associated with regulatory developments in, or related to. such industries.

Primary Risks. By concentrating its investments in the financial
services industry, Davis Financial Fund is particularly vulnerable to events
affecting that industry.

Banking. Commercial banks (including "money center" regional and
community banks), savings and loan associations, and holding companies of the
foregoing are especially subject to adverse effects of volatile interest rates,
concentrations of loans in particular industries (such as real estate or
energy), and significant competition. The profitability of these businesses is
to a significant degree dependent upon the availability and cost of capital
funds. Economic conditions in the real estate market may have a particularly
strong effect on certain banks and savings associations. Commercial banks and
savings associations are subject to extensive federal and, in many instances,
state regulation. Neither such extensive regulation nor the federal insurance of
deposits ensures the solvency or profitability of companies in this industry,
and there is no assurance against losses in securities issued by such companies.

Broadening bank powers, including the ability to engage in multi-state
operations while permitting diversification of operations, also could expose
banks to well-established competitors in new areas of operations. The broadening
of regional and national interstate powers and the aggressive expansion of
larger publicly-held foreign banks may result in increased competition and a
decline in the number of publicly-traded regional banks.

Insurance. Insurance companies are particularly subject to government
regulation and rate setting, potential anti-trust and tax law changes, and
industry-wide pricing and competition cycles. Property and casualty insurance
companies may also be affected by weather and other catastrophes. Life and
health insurance companies may be affected by mortality and morbidity rates,
including the effects of epidemics. Individual insurance companies may be
exposed to reserve inadequacies, problems in investment portfolios (for example,
due to real estate or "junk" bond holdings), and failures of reinsurance
carriers.

Other Financial Services Companies. Many of the investment
considerations discussed in connection with banks and insurance also apply to
financial services companies. These companies are all subject to extensive
regulation, rapid business changes, volatile performance dependent upon the
availability and cost of capital and prevailing interest rates, and significant
competition. General economic conditions significantly affect these companies.
Credit and other losses resulting from the financial difficulty of borrowers or
other third parties have a potentially adverse effect on companies in this
industry. Investment banking, securities brokerage and investment advisory
companies are particularly subject to government regulation and the risks
inherent in securities trading and underwriting activities.

Other Considerations. Regulations of the Securities and Exchange
Commission limit investments in the securities of companies that derive more
than 15% of their gross revenues from the securities or investment management
business. The Competitive Equality Banking Act of 1987 requires that with
respect to at least 75% of the total assets of any fund investing in bank
securities, no more than 5% of total assets may be invested in a single issuer.
The Fund intends to comply with these restrictions.

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REAL ESTATE SECURITIES AND REITS. During normal market conditions Davis
Real Estate Portfolio invests at least 65% of its total assets in real estate
securities and REITs. Davis Value Portfolio and Davis Financial Portfolio may
also invest a portion of their assets in real estate securities and REITs if the
Adviser believes that such investments will contribute to the Funds' investment
objectives.

Real estate securities are issued by companies which have at least 50%
of the value of their assets, gross income, or net profits attributable to
ownership, financing, construction, management or sale of real estate, or to
products or services that are related to real estate or the real estate
industry. None of the Funds invest directly in real estate. Real estate
companies include real estate investment trusts ("REITs"), or other securitized
real estate investments, brokers, developers, lenders and companies with
substantial real estate holdings such as paper, lumber, hotel and entertainment
companies. REITs pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to shareholders if it complies with various
requirements relating to its organization, ownership, assets and income, and
with the requirement that it distribute to its shareholders at least 95% of its
taxable income (other than net capital gains) for each taxable year. REITs can
generally be classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity
REITs invest the majority of their assets directly in real property and derive
their income primarily from rents. Equity REITs can also realize capital gains
by selling property that has appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITs combine the characteristics of
both Equity REITs and Mortgage REITs.

Primary Risks. Real estate securities and REITs are subject to risks
associated with the direct ownership of real estate. The Funds could also be
subject to such risks by reason of direct ownership as a result of a default on
a debt security it may own. These risks include declines in the value of real
estate, risks related to general and local economic conditions, over-building
and increased competition, increases in property taxes and operating expenses,
changes in zoning laws, casualty or condemnation losses, fluctuations in rental
income, changes in neighborhood values, the appeal of properties to tenants, and
increases in interest rates.

Equity REITs may be affected by changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by the
quality of credit extended. Equity and mortgage REITs are dependent upon
management skill, may not be diversified, and are subject to project financing
risks. Such trusts are also subject to heavy cash flow dependency, defaults by
borrowers, selfliquidation and the possibility of failing to qualify for taxfree
passthrough of income under the Internal Revenue Code, and failing to maintain
exemption from registration under the Investment Company Act of 1940. Changes in
interest rates may also affect the value of the debt securities in the Fund's
portfolio. By investing in REITs indirectly through the Funds, a shareholder
will bear not only his proportionate share of the expense of the Fund, but also,
indirectly, similar expenses of the REITs, including compensation of management.
Some real estate securities may be rated less than investment grade by rating
services. Such securities may be subject to the risks of high yield, high-risk
securities discussed below.

FOREIGN INVESTMENTS. Each of the Funds may invest in foreign securities.
Foreign securities are either issued by foreign companies or are principally
traded in foreign markets ("foreign securities"). Foreign securities include
equity securities, real estate securities, convertible securities, and bonds.
Investments in foreign securities may be made through the purchase of individual
securities on recognized exchanges and developed over-the-counter markets,
through American Depository Receipts ("ADRs") or Global Depository Receipts
("GDRs") covering such securities, and through U.S.-registered investment
companies investing primarily in foreign securities. When the Funds invest in
foreign securities, their operating expenses are likely to be higher than that
of an investment company investing exclusively in U.S. securities, since the
custodial and certain other expenses are expected to be higher.

Primary Risks. Investments in foreign securities may involve a higher
degree of risk than investments in domestic issuers. Foreign securities are
often denominated in foreign currencies, which means that their value will be
affected by changes in exchange rates, as well as by other factors that affect
securities prices. There is generally less publicly available information about
foreign securities and securities markets, and there may be less government
regulation and supervision of foreign issuers and securities markets. Foreign
securities and markets may also be affected by political and economic
instabilities, and may be more volatile and less liquid than domestic securities
and markets. Investment risks may include expropriation or nationalization of
assets, confiscatory taxation,

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exchange controls and limitations on the use or transfer of assets, and
significant withholding taxes. Foreign economies may differ from the United
States favorably or unfavorably with respect to inflation rates, balance of
payments, capital reinvestment, gross national product expansion, and other
relevant indicators. The Funds may attempt to reduce exposure to market and
currency fluctuations by trading in currency futures contracts or options on
futures contracts for hedging purposes only.

BONDS AND OTHER DEBT SECURITIES. While not primary investments, bonds
and other debt securities may be purchased by each of the Funds to increase
current income or to diversify their investment portfolios. The U.S. government,
corporations and other issuers sell bonds and other debt securities to borrow
money. Issuers pay investors interest and generally must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate, depending on such factors as interest
rates, credit quality and maturity. While there is no limit on the percentage of
its assets which the Funds may invest in bonds and other debt securities, the
Funds invest primarily in equity securities under normal market conditions.

Primary Risks. Bonds and other debt securities are generally considered
to be interest rate-sensitive. The market value of the Funds' investments will
change in response to changes in interest rates. During periods of falling
interest rates, the value of debt securities held by the Funds generally rises.
Conversely, during periods of rising interest rates, the value of such
securities generally declines. Changes by recognized rating services in their
ratings of debt securities and changes in the ability of an issuer to make
payments of interest and principal will also affect the value of these
investments.

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OTHER INVESTMENT POLICIES

TEMPORARY DEFENSIVE INVESTMENTS. For defensive purposes or to
accommodate inflows of cash awaiting more permanent investment, the Funds may
temporarily and without limitation hold high-grade short-term money market
instruments, cash and cash equivalents, including repurchase agreements.

REPURCHASE AGREEMENTS. The Funds may enter into repurchase agreements,
but normally will not enter into repurchase agreements maturing in more than
seven days. A repurchase agreement, as referred to herein, involves a sale of
securities to a Fund, with the concurrent agreement of the seller (a bank or
securities dealer which the Adviser determines to be financially sound at the
time of the transaction) to repurchase the securities at the same price plus an
amount equal to accrued interest at an agreed-upon interest rate, within a
specified time, usually less than one week, but, on occasion, at a later time.
The repurchase obligation of the seller is, in effect, secured by the underlying
securities. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Funds could experience both delays in liquidating the
underlying securities and losses, including: (a) possible decline in the value
of the collateral during the period while the Funds seek to enforce their rights
thereto; (b) possible loss of all or a part of the income during this period;
and (c) expenses of enforcing its rights.

The Funds will enter into repurchase agreements only when the seller
agrees that the value of the underlying securities, including accrued interest
(if any), will at all times be equal to or exceed the value of the repurchase
agreement. The Funds may enter into tri-party repurchase agreements in which a
third party custodian bank issues the cash upon purchase of the securities used
as collateral, and also holds the securities. The Funds will not enter into a
repurchase agreement maturing in more than seven days if it would cause more
than 15% of the value of their net assets to be invested in such transactions.
Repurchase agreements maturing in less than seven days are not deemed illiquid
securities for the purpose of the Funds' limitation on illiquid securities.

HEDGING FOREIGN CURRENCY RISKS. To attempt to reduce exposure to
currency fluctuations, the Funds may trade in forward foreign currency exchange
contracts (forward contracts), currency futures contracts and options thereon
and securities indexed to foreign securities. These techniques may be used to
lock in an exchange rate in connection with transactions in securities
denominated or traded in foreign currencies, to hedge the currency risk in
foreign securities held by the Funds, and to hedge a currency risk involved in
an anticipated purchase of foreign securities. Cross-hedging may also be
utilized, that is, entering into a hedge transaction in respect to a different
foreign currency than the one in which a trade is to be made or in which a
portfolio security is principally traded. There is no limitation on the amount
of assets that may be committed to currency hedging. However, the Funds will not
engage in a futures transaction if it would cause the aggregate of initial
margin deposits and premiums paid on outstanding options on futures contracts to
exceed 5% of the value of its total assets (excluding in calculating such 5% any
in-the-money amount of any option). Currency hedging transactions may be
utilized as a tool to reduce currency fluctuation risks due to a current or
anticipated position in foreign securities. The successful use of currency
hedging transactions usually depends on the Adviser's ability to forecast
interest rate and currency exchange rate movements. Should interest or exchange
rates move in an unexpected manner, the anticipated benefits of futures
contracts, options or forward contracts may not be achieved or losses may be
realized, and thus the Funds could be in a worse position than if such
strategies had not been used. Unlike many exchange-traded futures contracts,
there are no daily price fluctuation limits with respect to options on
currencies and forward contracts, and adverse market movements could therefore
continue to an unlimited extent over a period of time. In addition, the
correlation between movements in the prices of such instruments and movements in
the price of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses. Unanticipated changes in
currency prices may result in poorer overall performance for the Funds than if
they had not entered into such contracts. When taking a position in an
anticipatory hedge (when the Funds purchase a futures contract or other similar
instrument to gain market exposure in anticipation of purchasing the underlying
securities at a later date), the Funds are required to set aside cash or
high-grade liquid securities to fully secure the obligation.

A forward contract is an obligation to purchase or sell a specific
currency for an agreed price at a future date which is individually negotiated
and privately traded by currency traders and their customers. Such a contract
gives the Funds a position in a negotiated, currently non-regulated market. A
Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). Additionally, when the Adviser believes that a foreign
currency may suffer a substantial decline against the U.S. dollar, the Funds may
enter

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into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. When the Adviser believes that the U.S.
dollar may suffer a substantial decline against a foreign currency, the Funds
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount in anticipation of purchasing foreign traded securities
("position hedge"). In this situation the Funds may, in the alternative, enter
into a forward contract in respect to a different foreign currency for a fixed
U.S. dollar amount ("cross hedge"). This may be done, for example, where the
Adviser believes that the U.S. dollar value of the currency to be sold pursuant
to the forward contract will fall whenever there is a decline in the U.S. dollar
value of the currency in which portfolio securities of the Fund are denominated.

The Funds may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the U.S. dollar
value of foreign currency-denominated portfolio securities and against increases
in the U.S. dollar cost of such securities to be acquired. As in the case of
other kinds of options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium received, and
the Funds could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to a Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be written or
purchased by the Funds are traded on U.S. and foreign exchanges or
over-the-counter. Currently, a significant portion or all of the value of an
over-the-counter option may be treated as an illiquid investment and subject to
the restriction on such investments as long as the SEC requires that
over-the-counter options be treated as illiquid. Generally, the Funds would
utilize options traded on exchanges where the options are standardized.

The Funds may enter into contracts for the purchase or sale for future
delivery of foreign currencies ("currency futures contracts") and may purchase
and write put and call options to buy or sell currency futures contracts. A
"sale" of a currency futures contract means the acquisition of a contractual
obligation to deliver the foreign currencies called for by the contract at a
specified price on a specified date. A "purchase" of a currency futures contract
means the incurring of a contractual obligation to acquire the foreign
currencies called for by the contract at a specified price on a specified date.
Options on currency futures contracts to be purchased by the Funds will be
traded on U.S. or foreign exchanges or over-the-counter.

The Funds may also purchase securities (debt securities or deposits)
which have their coupon rate or value at maturity determined by reference to the
value of one or more foreign currencies. These strategies will be used for
hedging purposes only. The Funds will hold securities or other options or
futures positions whose values are expected to offset its obligations under the
hedge strategies. No Fund will enter into a currency hedging position that
exposes the Fund to an obligation to another party unless it owns either (i) an
offsetting position in securities, options or futures positions, or (ii) cash,
receivables and short-term debt securities with a value sufficient to cover its
potential obligations. The Funds will comply with requirements established by
the SEC with respect to coverage of options and futures strategies by mutual
funds, and, if so required, will set aside liquid securities in a segregated
account with its custodian bank in the amount prescribed. The Funds' custodian
will maintain the value of such segregated account equal to the prescribed
amount by adding or removing additional liquid securities to account for
fluctuations in the value of securities held in such account. Securities held in
a segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with similar securities.

The Funds' ability to dispose of its positions in futures contracts,
options and forward contracts will depend on the availability of liquid markets
in such instruments. Markets in options and futures with respect to currencies
are still developing. It is impossible to predict the amount of trading interest
that may exist in various types of futures contracts, options and forward
contracts. If a secondary market does not exist with respect to an option
purchased or written by the Funds over-the-counter, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option) with
the result that (i) an option purchased by the Funds would have to be exercised
in order for the Funds to realize any profit, and (ii) the Funds may not be able
to sell currencies covering an option written by the Funds until the option
expires or it delivers the underlying futures currency upon exercise. Therefore,
no assurance can be given that the Funds will be able to utilize these
instruments effectively for the purposes set forth above. The Funds' ability to
engage in currency hedging transactions may be limited by tax considerations.

8
<PAGE>

The Funds' transactions in forward contracts, options on foreign
currencies and currency futures contracts will be subject to special tax rules
under the Internal Revenue Code that, among other things, may affect the
character of any gains or losses of the Funds as ordinary or capital, and the
timing and amount of any income or loss to the Funds. This, in turn, could
affect the character, timing and amount of distributions by the Funds to
shareholders. The Funds may be limited in its foreign currency transactions by
tax considerations.

RESTRICTED AND ILLIQUID SECURITIES. The Funds may invest in restricted
securities which are subject to contractual restrictions on resale. The Funds'
policy is to not purchase or hold illiquid securities (which may include
restricted securities) if more than 15% of the Funds' net assets would then be
illiquid.

The restricted securities which the Funds may purchase include
securities which have not been registered under the 1933 Act but are eligible
for purchase and sale pursuant to Rule 144A ("Rule 144A Securities"). This Rule
permits certain qualified institutional buyers, such as the Funds, to trade in
privately placed securities even though such securities are not registered under
the 1933 Act. The Adviser, under criteria established by the Funds' Board of
Directors, will consider whether Rule 144A Securities being purchased or held by
the Funds are illiquid and thus subject to the Funds' policy limiting
investments in illiquid securities. In making this determination, the Adviser or
Sub-Adviser will consider the frequency of trades and quotes, the number of
dealers and potential purchasers, dealer undertakings to make a market, and the
nature of the security and the market place trades (for example, the time needed
to dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A Securities will also be monitored by the
Adviser and, if as a result of changed conditions, it is determined that a Rule
144A Security is no longer liquid, the Funds' holding of illiquid securities
will be reviewed to determine what, if any, action is required in light of the
policy limiting investments in such securities. Investing in Rule 144A
Securities could have the effect of increasing the amount of investments in
illiquid securities if qualified institutional buyers are unwilling to purchase
such securities.

BORROWING. The Funds may borrow money for temporary or emergency
purposes. The Funds will not borrow money with the intent of leveraging their
investments. Borrowing activities are strictly limited as described in the
section entitled "Investment Restrictions".

LENDING PORTFOLIO SECURITIES. The Funds may lend securities to
broker-dealers or institutional investors for their use in connection with short
sales, arbitrages and other securities transactions. The Funds will not lend
portfolio securities unless the loan is secured by collateral. The Funds will
not lend securities if such a loan would cause more than 33 1/3% of the total
value of its assets (including collateral received) to then be subject to such
loans.

CALL OPTIONS. For income purposes, the Funds may write covered call
options on their portfolio securities and purchase call options in closing
transactions. The Funds may suffer an opportunity loss if the value of the
underlying security should rise above the strike price of the call option before
the option expires. The Funds do not currently intend to engage in any such
transaction if it would cause more than 10% of total assets to be subject to
options.

A covered call option gives the purchaser of the option the right to buy
the underlying security at the price specified in the option (the "exercise
price") at any time until the option expires, generally within three to nine
months, in return for the payment to the writer upon the issuance of the option
of an amount called the "premium." A commission may be charged in connection
with the writing of the option. The premium received for writing a call option
is determined by the option markets. The premium paid plus the exercise price
will always be greater than the market price of the underlying securities at the
time the option is written. By writing a covered call option, a Fund foregoes,
in exchange for the premium, the opportunity to profit from an increase in the
market value of the underlying security above the exercise price, if the option
is exercised. The call obligation is terminated upon exercise of the call
option, expiration of the call or when the Fund effects a closing purchase
transaction. A closing purchase transaction is one in which the writer purchases
another call option in the same underlying security (identical as to exercise
price, expiration date and number of shares). The writer thereby terminates its
obligation and substitutes the second writer as the obligor to the original
option purchaser. A closing purchase transaction would normally involve payment
of a brokerage commission. During the remaining term of the option, if a Fund
cannot enter into a closing purchase transaction, that Fund would lose the
opportunity for realizing any gain over

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<PAGE>

and above the premium through sale of the underlying security, and if the
security is declining in price, that Fund would continue to experience such
decline.

PORTFOLIO TRANSACTIONS

The Adviser and Sub-Adviser are responsible for the placement of
portfolio transactions, subject to the supervision of the Board of Directors.
The Funds have adopted a policy of seeking to place portfolio transactions with
brokers or dealers who will execute transactions as efficiently as possible and
at the most favorable price. Subject to this policy, research services and
placement of orders by securities firms for Funds shares may be taken into
account as a factor in placement of portfolio transactions. In seeking the
Funds' investment objectives, the Funds may trade to some degree in securities
for the short term if the Adviser or Sub-Adviser believes that such trading is
advisable.

In placing executions and paying brokerage commissions, the Adviser or
Sub-Adviser considers the financial responsibility and reputation of the broker
or dealer, the range and quality of the services made available to the Funds and
the professional services rendered, including execution, clearance procedures,
wire service quotations and ability to provide supplemental performance,
statistical and other research information for consideration, analysis and
evaluation by the Adviser's or Sub-Adviser's staff. In accordance with this
policy, brokerage transactions may not be executed solely on the basis of the
lowest commission rate available for a particular transaction. Research services
provided to the Adviser or Sub-Adviser by or through brokers who effect
portfolio transactions for the Funds may be used in servicing other accounts
managed by the Adviser, and likewise research services provided by brokers used
for transactions of other accounts may be utilized by the Adviser or Sub-Adviser
in performing services for the Funds. Subject to the requirements of best
execution, the placement of orders by securities firms for shares of the Funds
may be taken into account as a factor in the placement of portfolio
transactions.

On occasions when the Adviser or Sub-Adviser deems the purchase or sale
of a security to be in the best interests of a Fund as well as other fiduciary
accounts, the Adviser or Sub-Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for other accounts in
order to obtain the best net price and most favorable execution. In such event,
the allocation will be made by the Adviser or Sub-Adviser in the manner
considered to be most equitable and consistent with its fiduciary obligations to
all such fiduciary accounts, including the Fund involved. In some instances,
this procedure could adversely affect a Fund, but the Adviser and Sub-Adviser
deem that any disadvantage in the procedure would be outweighed by the increased
selection available and the increased opportunity to engage in volume
transactions.

The Adviser and Sub-Adviser believe that research from brokers and
dealers is desirable, although not essential, in carrying out their functions,
in that such outside research supplements the efforts of the Adviser and
Sub-Adviser by corroborating data and enabling the Adviser and Sub-Adviser to
consider the views, information and analyses of other research staffs. Such
views, information and analyses include such matters as communicating with
persons having special expertise on certain companies, industries, areas of the
economy and/or securities prices, obtaining written materials on these or other
areas which might affect the economy and/or securities prices, obtaining
quotations on securities prices and obtaining information on the activities of
other institutional investors. The Adviser and Sub-Adviser research, at their
own expense, each security included in, or being considered for inclusion in,
the Funds' portfolios. As any particular research obtained by the Adviser or
Sub-Adviser may be useful to the Funds, the Board of Directors or its Committee
on Brokerage, in considering the reasonableness of the commissions paid by the
Funds, will not attempt to allocate, or require the Adviser or Sub-Adviser to
allocate, the relative costs or benefits of research.

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<PAGE>

Because of the Funds' investment policies, portfolio turnover rate will
vary. At times it could be high, which could require the payment of larger
amounts in brokerage commissions. The Adviser and Sub-Adviser are authorized to
place portfolio transactions with Shelby Cullom Davis & Co., a member of the New
York Stock Exchange, which may be deemed to be an affiliate of the Adviser, if
the commissions are fair and reasonable and comparable to commissions charged by
non-affiliated qualified brokerage firms for similar services. The Funds
anticipate that, during normal market conditions, their annual portfolio
turnover rate will be less than 100%.

INVESTMENT RESTRICTIONS

The fundamental investment restrictions set forth below may not be
changed without the approval of the holders of the lesser of (i) 67% of the
eligible votes, if the holders of more than 50% of the eligible votes are
represented, or (ii) more than 50% of the eligible votes. All percentage
limitations set forth in these restrictions apply as of the time of an
investment without regard to later increases or decreases in the value of
securities or total or net assets.

FUNDAMENTAL INVESTMENT RESTRICTIONS ADOPTED BY THE FUNDS

1. Senior Securities. The Fund may not issue senior securities nor sell
short more than 5% of its total assets. This limitation does not apply
to selling short against the box.

2. Borrowing and Leverage. The Fund may borrow money from any source for
temporary purposes in an amount not exceeding 5% of total assets. The
Fund may borrow money from banks as a temporary measure in amounts not
exceeding 33 1/3% of the amount of its total assets (reduced by the
amount of all liabilities and indebtedness other than such borrowing)
when deemed desirable or appropriate to effect redemptions. The Fund
will not purchase portfolio securities on margin and will not purchase
additional portfolio securities while borrowings exceed 5% of the total
assets of the Fund.

3. Underwriting. The Fund will not engage in the underwriting of
securities; however, the Fund may technically be considered an
"underwriter" if it sells restricted securities.

4. Concentration. Davis Value Portfolio does not concentrate its
investments in any one industry and may not buy the securities of
companies in any one industry if 25% or more of the value of the Fund's
total assets would then be invested in companies in that industry. (U.S.
Government Securities are not included in this limitation.)

Davis Financial Portfolio concentrates its investments in the financial
services industry. Davis Real Estate Portfolio concentrates its
investments in the real estate industry.

5. Commodities, Futures Contracts, and Options. The Fund may not purchase
or sell futures contracts, forward contracts, options, and other
derivative investments except for the sole purpose of hedging the
portfolio against market, currency, interest rate, and other risks.
Hedging transactions include, but are not limited to, writing covered
calls, purchasing protective puts, selling futures to hedge existing
positions, and buying futures in anticipation of purchasing the
underlying securities. This prohibition does not limit the Fund's
ability to purchase warrants, or adjustable rate debt obligations.

6. Real Estate. The Fund may not purchase real estate or real estate
mortgages as such, but may purchase the liquid securities of companies,
including real estate investment trusts, holding real estate or
interests (including mortgage interests) therein.

7. Lending. The Fund may not lend money, except that it may buy debt
securities customarily acquired by institutional investors. These debt
securities may comprise all or a portion of an issue of "restricted"
debt securities. The Fund may also buy debt securities which have been
sold to the public and may enter into repurchase agreements. The Fund
may lend its portfolio securities subject to having 100% collateral in
cash, U.S. Government Securities, or other liquid securities. The Fund
will not lend securities if such a

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<PAGE>

loan would cause more than 33 1/3% of the total value of its assets
(including collateral received) to then be subject to such loans.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS ADOPTED BY EACH OF THE FUNDS

In addition to the foregoing restrictions, each of the Funds is also
subject to certain other non-fundamental policies, which may be changed without
shareholder approval including the following:

1. Diversification. With respect to 75% of its total assets the Fund will not:
(a) make an investment that will cause more than 5% of the value of its
total assets to be invested in securities of any one issuer, except such
limitation shall not apply to obligations issued or guaranteed by the
United States ("U.S.") Government, its agencies or instrumentalities, or
(b) acquire more than 10% of the voting securities of any one issuer.

2. Illiquid Securities. The Fund may not purchase illiquid securities if more
than 15% of the value of the Fund's net assets would be invested in such
securities.

3. State-Imposed-Investment Limitations. In order to enable California
investors to allocate variable annuity or variable life insurance contract
values to one or more of the Funds, the Funds have committed to comply with
the following guidelines: (i) the borrowing limits for any Fund are (a) 10%
of net asset value when borrowing for any general purpose, and (b) 25% of
net asset value when borrowing as a temporary measure to facilitate
redemptions (for purposes of this clause, the net asset value of a Fund is
the market value of all investments or assets owned less outstanding
liabilities of the Fund at the time that any new or additional borrowing is
undertaken); and (ii) if a Fund invests in foreign companies, the foreign
country diversification guidelines to be followed by the Fund are as
follows:

(a) The Fund will be invested in a minimum of five different foreign
countries at all times. However, this minimum is reduced to four when
foreign country investments comprise less than 80% of the Fund's net asset
value, to three when less than 60% of such value, to two when less than 40%
and to one when less than 20%.

(b) Except as set forth in items (c) and (d) below, the Fund will have no
more than 20% of its net asset value invested in securities of issuers
located in any one country.

(c) The Fund may have an additional 15% of its net asset value invested in
securities of issuers located in any one of the following countries:
Australia, Canada, France, Japan, the United Kingdom, or Germany.

(d) The Fund's investments in United States issuers are not subject to the
foreign country diversification guidelines.

State insurance laws and regulations may impose additional limitations on
lending securities and the use of options, futures and other derivative
instruments.

Section II: Key Persons

ORGANIZATION OF THE COMPANY

THE COMPANY. Davis Variable Account Fund, Inc. ("Company") is an
open-end, diversified, management investment company incorporated in Maryland in
1999 and registered under the Investment Company Act of 1940. The Company is a
series investment company which may issue multiple series, each of which would
represent an interest in its separate portfolio. The Company currently offers
three series, Davis Value Portfolio, Davis Financial Portfolio and Davis Real
Estate Portfolio (a "Fund" or the "Funds").

SOLD EXCLUSIVELY TO INSURANCE COMPANIES, POTENTIAL CONFLICTS. The
Company's shares are not offered directly to the public, but are sold
exclusively to insurance companies ("Participating Insurance Companies") as a
pooled funding vehicle for variable annuity and variable life insurance
contracts issued by separate accounts of Participating Insurance Companies.
Differences in tax treatment or other considerations may cause the interests of

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<PAGE>

various Variable Contract owners participating in the Funds to conflict. The
Board will monitor the Funds for any material conflicts and determine what
action, if any, should be taken.

FUND SHARES. While they have not done so at this time, the Funds may
issue shares in different classes. The Board of Directors may offer additional
classes in the future and may at any time discontinue the offering of any class
of shares. Each share, when issued and paid for in accordance with the terms of
the offering, is fully paid and non-assessable. Shares have no preemptive or
subscription rights and are freely transferable. Each of the Funds' shares
represents an interest in the assets of the Fund issuing the share and have
identical voting, dividend, liquidation and other rights, and the same terms and
conditions as any other shares except that (i) each dollar of net asset value
per share is entitled to one vote, (ii) the expenses related to a particular
class, such as those related to the distribution of each class and the transfer
agency expenses of each class are borne solely by each such class, and (iii)
each class of shares votes separately with respect to provisions of the Rule
12b-1 Distribution Plan, which pertains to a particular class, and other matters
for which separate class voting is appropriate under applicable law. Each
fractional share has the same rights, in proportion, as a full share. Shares do
not have cumulative voting rights; therefore, the holders of more than 50% of
the voting power of the Company can elect all of the directors of the Company.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the shareholders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2 further
provides that a series shall be deemed to be affected by a matter unless it is
clear that the interests of each series in the matter are identical, or that the
matter does not affect any interest of such series. Rule 18f-2 exempts the
selection of independent accountants and the election of Board members from the
separate voting requirements of the Rule.

In accordance with Maryland law and the Company's By-laws, the Company
does not hold regular annual shareholder meetings. Shareholder meetings are held
when they are required under the Investment Company Act of 1940, or when
otherwise called for special purposes. Special shareholder meetings may be
called upon the written request of shareholders of at least 25% of the voting
power that could be cast at the meeting.

DIRECTORS AND OFFICERS

The Company's Board of Directors is responsible for the management and
supervision of the Company and the Funds. The Board approves all significant
agreements between the Company, on behalf of the Funds, and those companies that
furnish services to the Funds. The names and addresses of the directors and
officers of the Company are set forth below, together with their principal
business affiliations and occupations for the last five years. As indicated
below, certain directors and officers of the Company hold similar positions with
the following funds that are managed by the Adviser: Davis New York Venture
Fund, Inc., Davis Intermediate Investment Grade Bond Fund, Inc., Davis Tax-Free
High Income Fund, Inc., Davis Series, Inc. and Davis International Series, Inc.
(collectively the "Davis Funds"). As indicated below, certain directors and
officers of the Company may also hold similar positions with the following funds
that are managed by the Adviser: Selected American Shares, Inc., Selected
Special Shares, Inc., and Selected Capital Preservation Trust (collectively the
"Selected Funds").

WESLEY E. BASS, JR. (8/21/31), 710 Walden Road, Winnetka IL 60093. Director of
the Company and each of the Davis Funds except Davis International Series, Inc.;
President, Bass & Associates (a financial consulting firm); formerly, First
Deputy City Treasurer, City of Chicago, and Executive Vice President, Chicago
Title and Trust Company.

JEREMY H. BIGGS (8/16/35),* Two World Trade Center, 94th Floor, New York NY
10048. Director and Chairman of the Company and each of the Davis Funds;
Director of the Van Eck Funds; Consultant to the Adviser. Director, Van Eck
Funds; Vice Chairman, Head of Equity Research Department; Chairman of the U.S.
Investment Policy Committee, and member of the International Investment
Committee of Fiduciary Trust Company International.

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<PAGE>

MARC P. BLUM (9/9/42), 233 East Redwood Street, Baltimore MD 21202. Director of
the Company and each of the Davis Funds except Davis International Series, Inc.;
Chief Executive Officer, World Total Return Fund, L.P.; Member, Gordon,
Feinblatt, Rothman, Hoffberger and Hollander, LLC (attorneys); Director,
Mid-Atlantic Realty Trust.

JERRY D. GEIST (5/23/34), 931 San Pedro Drive S.E., Albuquerque NM 87108.
Director of the Company and each of the Davis Funds except Davis International
Series, Inc.; Chairman, Santa Fe Center Enterprises; President and Chief
Executive Officer, Howard Energy International Utilities; Director, CH2M-Hill,
Inc.; Retired Chairman and President, Public Service Company of New Mexico.

D. JAMES GUZY (3/7/36), 508 Tasman Drive, Sunnyvale CA 94089. Director of the
Company and each of the Davis Funds except Davis International Series, Inc.;
Chairman, PLX Technology, Inc. (a manufacturer of semi-conductor circuits);
Director, Intel Corp. (a manufacturer of semi-conductor circuits), Cirrus Logic
Corp. (a manufacturer of semi-conductor circuits) and Alliance Technology Fund
(a mutual fund).

G. BERNARD HAMILTON (3/18/37), Avanti Partners, P.O. Box 1119, Richmond VA
23218. Director of the Company and each of the Davis Funds; Managing General
Partner, Avanti Partners, L.P.

LEROY E. HOFFBERGER (6/8/25), The Exchange - Suite 215, 1112 Kenilworth Drive,
Towson MD 21204. Director of the Company and each of the Davis Funds except
Davis International Series, Inc.; of Counsel to Gordon, Feinblatt, Rothman,
Hoffberger and Hollander, LLC (attorneys); Chairman, Mid-Atlantic Realty Trust;
Director and President, CPC, Inc. (a real estate company); Director and Vice
President, Merchant Terminal Corporation; formerly, Director of Equitable
Bancorporation, Equitable Bank and Maryland National Bank; and formerly,
Director and President, O-W Fund, Inc. (a private investment fund).

LAURENCE W. LEVINE (4/9/31), Walsh & Levine 40 Wall Street, 21st, Floor, New
York NY 10005. Director of the Company and each of the Davis Funds except Davis
International Series, Inc.; Partner, Bigham, Englar, Jones and Houston
(attorneys); United States Counsel to Aerolineas Argentina; Director, various
private companies.

CHRISTIAN R. SONNE (5/6/30), P.O. Box 777, Tuxedo Park NY 10987. Director of the
Company and each of the Davis Funds except Davis International Series, Inc.;
General Partner of Tuxedo Park Associates (a land holding and development firm);
President and Chief Executive Officer of Mulford Securities Corporation (a
private investment fund) until 1990; formerly, Vice President of Goldman Sachs &
Company (investment banker).

MARSHA WILLIAMS (3/28/51), 725 Landwehr Road, Northbrook IL 60062. Director of
the Company and each of the Davis Funds (except Davis International Series,
Inc.) and the Selected Funds; Chief Administrative Officer of Crate & Barrel;
former Treasurer, Amoco Corporation. Director, Illinois Benedictine College, The
Conference Board Council of Corporate Treasurers, Illinois Council on Economic
Education, Chicagoland Chamber of Commerce; formerly Director, Fertilizers of
Trinidad and Tobago from 1989-1993, Ok Tedi Mining Limited from 1992-1993, and
Just Jobs from 1988-1992.

SHELBY M.C. DAVIS (3/20/37),** 4135 North Steers Head Road, Jackson Hole WY
83001. President of the Company and each of the Davis Funds and the Selected
Funds; Director, Chairman and Chief Executive Officer, Venture Advisers, Inc.;
Director, Davis Selected Advisers-NY, Inc.; Director, Shelby Cullom Davis
Financial Consultants, Inc.

ANDREW A. DAVIS (6/25/63),* ** 124 East Marcy Street, Santa Fe NM 87501.
Director and Vice President of the Company and each of the Davis Funds (except
Davis International Series, Inc.) and the Selected Funds; Director and
President, Venture Advisers, Inc.; Director and Vice President, Davis Selected
Advisers-NY, Inc.; Former Vice President and head of convertible security
research, PaineWebber, Inc.

CHRISTOPHER C. DAVIS (7/13/65),* ** 609 Fifth Ave, New York NY 10017. Director
and Vice President of the Company and each of the Davis Funds and the Selected
Funds; Director, Vice Chairman, Venture Advisers, Inc.; Director, Chairman,
Chief Executive Officer, Davis Selected Advisers-NY, Inc.; Chairman and
Director, Shelby Cullom Davis Financial Consultants, Inc.; Employee of Shelby
Cullom Davis & Co., a registered broker/dealer; Director, Kings Bay Ltd., an
offshore investment management company.

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<PAGE>

KENNETH C. EICH (8/14/53), 124 East Marcy Street, Santa Fe NM 87501. Vice
President of the Company and each of the Davis Funds and Selected Funds; Chief
Operating Officer, Venture Advisers, Inc.; Vice President, Davis Selected
Advisers-NY, Inc.; President, Davis Distributors, L.L.C. Former President and
Chief Executive Officer of First of Michigan Corporation. Former Executive Vice
President and Chief Financial Officer of Oppenheimer Management Corporation.

CAROLYN H. SPOLIDORO (11/19/52), 124 East Marcy Street, Santa Fe NM 87501. Vice
President of the Company and each of the Davis Funds and Selected Funds; Vice
President, Venture Advisers, Inc.

SHARRA L. REED (9/25/66), 124 East Marcy Street, Santa Fe NM 87501. Vice
President, Treasurer and Assistant Secretary of the Company and each of the
Davis Funds and Selected Funds; Vice President of Venture Advisers, Inc. Former
Unit Manager with Investors Fiduciary Trust Company.

THOMAS D. TAYS (3/7/57), 124 East Marcy Street, Santa Fe NM 87501. Vice
President and Secretary of the Company and each of the Davis Funds and Selected
Funds; Vice President and Secretary, Venture Advisers, Inc., Davis Selected
Advisers-NY, Inc., and Davis Distributors, L.L.C. Former Vice President and
Special Counsel of U.S. Global Investors, Inc.

SHELDON R. STEIN (11/29/28), 111 East Wacker Drive, Suite 2800, Chicago IL
60601. Assistant Secretary of the Company and each of the Davis Funds and
Selected Funds; Partner D'Ancona & Pflaum, the Company's legal counsel.

ARTHUR DON (9/24/53), 111 East Wacker Drive, Suite 2800, Chicago IL. Assistant
Secretary of the Company and each of the Davis Funds and Selected Funds; Partner
D'Ancona & Pflaum, the Company's legal counsel.

*Jeremy H. Biggs, Andrew A. Davis and Christopher C. Davis are considered to be
"interested persons" of the Company, as defined in the Investment Company Act.
** Shelby M.C. Davis is the father of Andrew A. Davis and Christopher C. Davis.

The Company does not pay salaries to any of its officers. The Adviser performs
certain services on behalf of the Company and is reimbursed by the Company for
the costs of providing these services.

DIRECTORS' COMPENSATION SCHEDULE

During the year ended December 31, 1998, the compensation paid to the
directors who are not considered to be interested persons of the Company was as
follows:

AGGREGATE COMPANY TOTAL
NAME COMPENSATION* COMPLEX COMPENSATION**
---- ------------- ----------------------

Wesley E. Bass $0 $52,600
Marc P. Blum 0 49,000
Jerry D. Geist 0 49,500
D. James Guzy 0 49,000
G. Bernard Hamilton 0 50,250
LeRoy E. Hoffberger 0 49,000
Laurence W. Levine 0 49,000
Christian R. Sonne 0 49,000
Edwin R. Werner*** 0 24,500
Marsha Williams 0 25,500

*Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate
Portfolio did not make their initial public offer prior to the date of this SAI,
thus the Fund did not pay any compensation to directors. However, each of the
independent Directors also serve as Directors for other mutual funds managed by
the Adviser.

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<PAGE>

**Complex Compensation is the aggregate compensation paid, for service as a
Director, by all mutual funds with the same investment adviser. There are nine
registered investment companies in the complex.

**Mr. Werner has retired as a Director 12/31/97, but still serves in a
non-voting emeritus status.

CERTAIN SHAREHOLDERS OF THE FUNDS

As of the date of this SAI, officers of the Adviser owned 100% of the
Fund's outstanding shares.

INVESTMENT ADVISORY SERVICES

Davis Selected Advisers, L.P. (the "Adviser") whose principal office is
at 124 East Marcy Street, Santa Fe, New Mexico 87501, serves as the investment
adviser of the Funds. Venture Advisers, Inc. is the Adviser's sole general
partner. Shelby M.C. Davis is Chief Investment Officer of the Adviser and the
controlling shareholder of the general partner. Subject to the direction and
supervision of the Board of Directors, the Adviser manages the investment and
business operations of the Funds. Davis Distributors, LLC ("the Distributor"), a
subsidiary of the Adviser, serves as the distributor or principal underwriter of
the Funds' shares. Davis Selected Advisers-NY, Inc., ("DSA-NY") a wholly owned
subsidiary of the Adviser, performs investment management, research and other
services for the Funds on behalf of the Adviser under a Sub-Advisory Agreement
with the Adviser. The Adviser also acts as investment adviser for Davis New York
Venture Fund, Davis Intermediate Investment Grade Bond Fund, Inc., Davis
Tax-Free High Income Fund, Inc., Davis Series, Inc., Davis International Series,
Inc., (collectively with the Fund, the "Davis Funds"), Selected American Shares,
Inc., Selected Special Shares, Inc. and Selected Capital Preservation Trust
(collectively the "Selected Funds"). The Distributor also acts as the principal
underwriter for the Davis Funds and the Selected Funds.

ADVISORY AGREEMENT. Pursuant to the Advisory Agreement, each Fund pays
the Adviser a fee at the annual rate of 0.75% of average net assets. These fees
may be higher than that of most other mutual funds, but are not necessarily
higher than those paid by funds with similar objectives.

The Adviser has entered into a Sub-Advisory Agreement with its wholly
owned subsidiary, Davis Selected Advisers-NY, Inc. ("DSA-NY"), where DSA-NY
performs research and other services on behalf of the Adviser. Under the
Agreement, the Adviser pays all of DSA-NY' s direct and indirect costs of
operation. All of the fees paid to DSA-NY are paid by the Adviser and not the
Funds.

The Advisory Agreement also makes provisions for portfolio transactions
and brokerage policies of the Funds which are discussed above under "Portfolio
Transactions."

In accordance with the provisions of the Investment Company Act of 1940,
the Advisory Agreement and Sub-Advisory Agreement will terminate automatically
upon assignment, and are subject to cancellation upon 60 days' written notice by
the Company's Board of Directors, the vote of the holders of a majority of the
Funds' outstanding shares, or the Adviser. The continuance of the Advisory
Agreement and Sub-Advisory Agreement must be approved at least annually by the
Funds' Board of Directors or by the vote of holders of a majority of the
outstanding shares of the Funds. In addition, any new agreement, or the
continuation of the existing agreement, must be approved by a majority of
directors who are not parties to the agreements or interested persons of any
such party.

Pursuant to the Advisory Agreement, the Adviser, subject to the general
supervision of the Funds' Board of Directors, provides management and investment
advice, and furnishes statistical, executive and clerical personnel,
bookkeeping, office space, and equipment necessary to carry out its investment
advisory functions and such corporate managerial duties as requested by the
Board of Directors of the Funds. The Funds bear all expenses other than those
specifically assumed by the Adviser under the Advisory Agreement, including
preparation of its tax returns, financial reports to regulatory authorities,
dividend determinations, transaction and accounting matters related to its
custodian bank, transfer agency, custodial and shareholder services, and
qualification of its shares

16
<PAGE>

under federal and state securities laws. Each Fund reimburses the Adviser for
providing certain services including accounting and administrative services,
qualifying shares for sale with state agencies, and shareholder services.

CODE OF ETHICS. The Adviser has adopted a Code of Ethics which regulates
the personal securities transactions of the Adviser's investment personnel,
other employees, and affiliates, with access to information regarding securities
transactions of the Funds. The Code of Ethics requires investment personnel to
disclose personal securities holdings upon commencement of employment and all
subsequent trading activity to the Adviser's Compliance Officer. Investment
personnel are prohibited from engaging in any securities transactions, including
the purchase of securities in a private offering, without the prior consent of
the Compliance Officer. Additionally, such personnel are prohibited from
purchasing securities in an initial public offering and are prohibited from
trading in any securities (i) for which the Funds have a pending buy or sell
order, (ii) which the Funds are considering buying or selling, or (iii) which
the Funds purchased or sold within seven calendar days.

ADMINISTRATIVE AND SERVICER FEES

The Davis Selected Advisers or its affiliates will pay a fee to the insurance
companies offering the Funds as an investment vehicle for variable annuity or
variable life insurance contracts issued by the life insurance companies. The
fee is equal, on an annualized basis, to 20 basis points (0.20%) per annum of
the average aggregate amount invested by the insurance company in a Fund. Such
payments will be made monthly, and only when the average aggregate amount
invested exceeds $1,000,000. Such payments are for administrative services and
investor support services, and do not constitute payment for investment
advisory, distribution or other services. Payment of such amounts by Davis
Selected Advisers or its affiliates does not increase the fees paid by the Fund
or its shareholders.

DISTRIBUTION OF COMPANY SHARES

The Company has adopted a plan under Rule 12b-1 ("Distribution Plan")
which, in the future, would allow each Fund to pay distribution and other fees
for the distribution of its shares and for services provided to shareholders or
shareholders of the insurance separate accounts investing in the Fund. At the
current time the Funds are not paying any distribution fees. In the future the
Funds may pay up to 0.25% of average annual net assets. Because these fees would
be paid out of the Fund's assets on an on-going basis, over time these fees may
increase the cost of your investment and may cost you more than paying other
types of sales charges.

Under the Distribution Plans each fund may in the future reimburse the
Distributor for some of its distribution expenses. The Distribution Plan was
approved by the Funds' Board of Directors in accordance with Rule 12b-1 under
the Investment Company Act of 1940. Rule 12b-1 regulates the manner in which a
mutual fund may assume costs of distributing and promoting the sale of its
shares. Payments pursuant to a Distribution Plan would be included in the
operating expenses of the Fund. The Distribution Plans continue annually so long
as they are approved in the manner provided by Rule 12b-1, or unless earlier
terminated by vote of the majority of the Independent Directors or a majority of
a Fund's outstanding shares. The Distributor is required to furnish quarterly
written reports to the Board of Directors detailing the amounts expended under
the Distribution Plan. The Distribution Plan may be amended, provided that all
such amendments comply with the applicable requirements then in effect under
Rule 12b-1. Currently, Rule 12b-1 provides that as long as the Distribution
Plans are in effect, the Company must commit the selection and nomination of
candidates for new Independent Directors to the sole discretion of the existing
Independent Directors.

Payments under the Distribution Plan are limited to an annual rate of
0.25% of a Fund's average daily net asset value. Such payments are made to
reimburse the Distributor for the fees it pays to its salespersons and other
firms for selling the Funds' Class A shares, servicing its shareholders and
maintaining its shareholder accounts, producing sales literature, printing
prospectuses for prospective investors, and other marketing purposes. In
addition, to the extent that any investment advisory fees paid by the Company
may be deemed to be indirectly financing any activity which is primarily
intended to result in the sale of Company shares within the meaning of Rule
12b-1, the Distribution Plan authorizes the payment of such fees.

17
<PAGE>

THE DISTRIBUTOR. Davis Distributors, LLC, ("the Distributor"), 124 East
Marcy Street, Santa Fe, New Mexico, 87501 is a wholly owned subsidiary of the
Adviser, and pursuant to a Distributing Agreement acts as principal underwriter
of the Funds' shares on a continuing basis. By the terms of the Distributing
Agreement, the Distributor pays for all expenses in connection with the
preparation, printing, and distribution of advertising and sales literature for
use in offering the Funds' shares to the public, including reports to
shareholders to the extent they are used as sales literature. The Distributor
also pays for the preparation and printing of prospectuses other than those
forwarded to existing shareholders. The continuance and assignment provisions of
the Distributing Agreement are the same as those of the Advisory Agreement.

OTHER IMPORTANT SERVICE PROVIDERS

CUSTODIAN. State Street Bank and Trust Company ("State Street" or
"Custodian"), One Heritage Drive, North Quincy, Massachusetts 02171, serves as
custodian of the Company's assets. The Custodian maintains all of the
instruments representing the Company's investments and all cash. The Custodian
delivers securities against payment upon sale and pays for securities against
delivery upon purchase. The Custodian also remits the Company assets in payment
of the Funds' expenses, pursuant to instructions of officers or resolutions of
the Board of Directors. The Custodian also provides certain fund accounting and
transfer agent services.

AUDITORS. KPMG LLP ("KPMG"), 707 17th Street, Suite 2300, Denver,
Colorado 80202, serves as independent auditors for each of the Funds. The
auditors consult on financial accounting and reporting matters, and meet with
the Audit Committee of the Board of Directors. In addition, KPMG reviews federal
and state income tax returns and related forms.

COUNSEL. D'Ancona & Pflaum, 111 East Wacker Drive, Suite 2800, Chicago,
Illinois 60601, serves as counsel to the Company and also serves as counsel for
those members of the Board of Directors who are not affiliated with the Adviser.

18
<PAGE>

Section III: General Information

DETERMINING THE PRICE OF SHARES

NET ASSET VALUE. The net asset value per share of each Fund's shares is
determined daily by dividing the total value of investments and other assets,
less any liabilities, by the total outstanding shares. The net asset value of
each Fund is determined daily as of the earlier of the close of the New York
Stock Exchange (the "Exchange") or 4:00 p.m., Eastern time, on each day that the
Exchange is open for trading.

The price per share for purchases or redemptions made directly through
State Street is generally the value next computed after State Street receives
the purchase order or redemption request.

The Company does not price its shares or accept orders for purchases or
redemptions on days when the New York Stock Exchange is closed. Such days
currently include New Year's Day, Martin Luther King, Jr. Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

Certain brokers and certain designated intermediaries on their behalf
may accept purchase and redemption orders. The Distributor will be deemed to
have received such an order when the broker or the designee has accepted the
order. Orders are priced at the net asset value next computed after such
acceptance. Such order may be transmitted to the Fund or its agents several
hours after the time of the acceptance and pricing.

VALUATION OF PORTFOLIO SECURITIES. Portfolio securities are normally
valued using current market valuations. Securities traded on a national
securities exchange are valued at the last published sales price on the
exchange, or in the absence of recorded sales, at the average of closing bid and
asked prices on such exchange. Over-the-counter securities are valued at the
average of closing bid and asked prices. Fixedincome securities may be valued on
the basis of prices provided by a pricing service. Investments in shortterm
securities (maturing in sixty days or less) are valued at amortized cost unless
the Board of Directors determines that such cost is not a fair value. Assets for
which there are no quotations available will be valued at a fair value as
determined by or at the direction of the Board of Directors.

To the extent that the Funds' securities are traded in markets that
close at different times, events affecting portfolio values that occur between
the time that their prices are determined and the time the Funds' shares are
priced will generally not be reflected in the Funds' share price. The value of
securities denominated in foreign currencies and traded in foreign markets will
have their value converted into the U.S. dollar equivalents at the prevailing
market rate as computed by State Street Bank & Trust Company. Fluctuation in the
value of foreign currencies in relation to the U.S. dollar may affect the net
asset value of the Funds' shares even if there has not been any change in the
foreign currency price of the Funds' investments.

YEAR 2000 TRANSITION ISSUES

Like all financial service providers, the Adviser, Sub-Adviser,
Distributor, and third parties providing investment advisory, administrative,
transfer agent, custodial and other services (jointly the "Service Providers")
utilize systems that may be affected by Year 2000 transition issues.

The services provided to the Funds and the shareholders by the Service
Providers depend on the smooth functioning of their computer systems and those
of other parties they deal with. Many computer software systems in use today
cannot distinguish the year 2000 from the year 1900 because of the way dates are
encoded and calculated.

19
<PAGE>

actively working on necessary changes to their computer systems to prepare for
the Year 2000 and expect that their systems, and those of other parties they
deal with, will be adapted in time for this event. In addition, there can be no
assurance that the companies in which the Funds invest will not experience
difficulties with Year 2000 transition issues, which may negatively affect the
market value of those companies.

FEDERAL INCOME TAXES

Each Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets, distribution and source of income
requirements to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund expects to
qualify as a regulated investment company in the fiscal year ended December 31,
1999. It is the policy of each Fund to distribute all investment company taxable
income and net capital gains. As a result of this policy and the Funds'
qualification as regulated investment companies, it is anticipated that none of
the Funds will pay federal income or excise taxes and that all of the Funds will
be accorded conduit or "pass through" treatment for federal income tax purposes.
Therefore, any taxes that a Fund would ordinarily owe are paid by its
shareholders on a pro-rata basis. If a Fund does not qualify as a regulated
investment company, it will be subject to corporate tax on its net investment
income and net capital gains at the corporate tax rates. If a Fund does not
distribute all of its net investment income or net capital gains, it will be
subject to tax on the amount that is not distributed.

If it invests in foreign securities, a Fund may be subject to the
withholding of foreign taxes on dividends or interest it receives on foreign
securities. Foreign taxes withheld will be treated as an expense of the Fund
unless the Fund meets the qualifications and makes the election to enable it to
pass these taxes through to shareholders for use by them as a foreign tax credit
or deduction. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.

Each Fund will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and its net capital gains for the one-year period
ending on October 31 of that year, plus certain other amounts.

Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of segregated asset accounts that fund contracts such as
the variable annuity contracts and variable life insurance policies (that is,
the assets of the Funds), which are in addition to the diversification
requirements imposed on the Funds by the 1940 Act and Subchapter M. Failure to
satisfy those standards would result in imposition of Federal income tax on a
variable annuity contract or variable life insurance policy owner with respect
to the increase in the value of the variable annuity contract or variable life
insurance policy. Section 817(h)(2) provides that a segregated asset account
that funds contracts such as the variable annuity contracts and variable life
insurance policies is treated as meeting the diversification standards if, as of
the close of each calendar quarter, the assets in the account meet the
diversification requirements for a regulated investment company and no more than
55% of those assets consist of cash, cash items, U.S. Government securities and
securities of other regulated investment companies.

The Treasury Regulations amplify the diversification standards set forth
in Section 817(h) and provide an alternative to the provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if (i) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (ii) no more than 70% of such
value is represented by any two investments; (iii) no more than 80% of such
value is represented by any three investments; and (iv) no more than 90% of such
value is represented by any four investments. For purposes of these Regulations
all securities of the same issuer are treated as a single investment, but each
United States government agency or instrumentality shall be treated as a
separate issuer.

Each Fund will be managed with the intention of complying with these
diversification requirements. It is possible that, in order to comply with these
requirements, less desirable investment decisions may be made which would affect
the investment performance of a Portfolio.

20
<PAGE>

You should consult your contract prospectus and your own tax adviser
regarding specific questions about federal, state and local tax issues relating
to your contract.

PERFORMANCE DATA

THE FUNDS' TOTAL RETURNS DO NOT REFLECT FEES AND EXPENSES APPLICABLE TO
YOUR VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACT. IF THOSE FEES AND
EXPENSES WERE REFLECTED, THE RETURNS WOULD BE LOWER. Consult your contract
prospectus for the amounts of those contract fees and charges. To keep
shareholders and potential investors informed, the Funds may, from time to time,
advertise information regarding their performance. These performance figures are
based upon historical results and are not intended to indicate future
performance.

CUMULATIVE TOTAL RETURN AND AVERAGE ANNUAL TOTAL RETURN

1 "Cumulative Total Return" is a measure of a fund's performance
encompassing all elements of return. Total return reflects the change in
share price over a given period and assumes all distributions are taken
in additional fund shares. Total return is determined by assuming a
hypothetical investment at the beginning of the period, deducting a
maximum front-end or applicable contingent deferred sales charge, adding
in the reinvestment of all income dividends and capital gains,
calculating the ending value of the investment at the net asset value as
of the end of the specified time period and subtracting the amount of
the original investment, and by dividing the original investment. This
calculated amount is then expressed as a percentage by multiplying by
100. Periods of less than one year are not annualized.

2 "Average Annual Total Return" represents the average annual compounded
rate of return for the periods presented. Periods of less than one year
are not annualized. Average annual total return measures both the net
investment income generated by, and the effect of any realized or
unrealized appreciation or depreciation of, the underlying investments
in the Fund's portfolio. Average annual total return is calculated
separately for each class in accordance with the standardized method
prescribed by the Securities and Exchange Commission by determining the
average annual compounded rates of return over the periods indicated,
that would equate the initial amount invested to the ending redeemable
value, according to the following formula:

P(1+T)n = ERV

Where: P = hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made
at the beginning of such period

This calculation (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates, and (ii) deducts (a) the
maximum front-end or applicable contingent deferred sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory fees, charged as expenses to all shareholder accounts.

30 DAY SEC YIELD

Davis Real Estate Portfolio may, from time to time, publish its 30 Day
SEC Yield.

21
<PAGE>

"30 Day SEC Yield" is computed in accordance with a standardized method
prescribed by the rules of the Securities and Exchange Commission and is
calculated separately for each class. 30 Day SEC Yield is a measure of the net
investment income per share (as defined) earned over a specified 30-day period
expressed as a percentage of the maximum offering price of the Funds' shares at
the end of the period. Such yield figure was determined by dividing the net
investment income per share on the last day of the period, according to the
following formula:

30 Day SEC Yield = 2 [(a - b + 1) 6 - 1]
-----
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period.

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of
the period.

Davis Real Estate Portfolio's 30-Day SEC Yield will fluctuate depending
upon prevailing interest rates, quality, maturities, types of instruments held,
and operating expenses. Thus, any yield quotation should not be considered
representative of future results. If a broker-dealer charges investors for
services related to the purchase or redemption of Fund shares, the yield will
effectively be reduced.

OTHER FUND STATISTICS

In reports or other communications to shareholders and in advertising
material, the performance of the Funds may be compared to recognized unmanaged
indices or averages of the performance of similar securities. Also, the
performance of the Funds may be compared to that of other funds of comparable
size and objectives as listed in the rankings prepared by Lipper Analytical
Services, Inc., Morningstar, Inc. or similar independent mutual fund rating
services, and the Funds may use evaluations published by nationally-recognized
independent ranking services and publications. Any given performance comparison
should not be considered representative of the Funds' performance for any future
period.

In advertising and sales literature the Funds may publish various
statistics describing its investment portfolio, such as the Funds' average Price
to Book and Price to Earnings ratios, beta, alpha, R-squared, standard
deviation, etc.

22
<PAGE>

APPENDIX A
INITIAL BALANCE
DAVIS VALUE PORTFOLIO
JUNE XX, 1999

ASSETS

Cash $100,000
--------
Total Assets $100,000

LIABILITIES

None
--------

Total Liabilities $0

EQUITY

Paid in Capital $100,000

--------
Total Equity $100,000

23
<PAGE>
FORM N-1A

DAVIS VARIABLE ACCOUNT FUND, INC.

PRE-EFFECTIVE AMENDMENT NO. 1 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 33-_______

AND

AMENDMENT NO. 1 UNDER THE INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-______

PART C

OTHER INFORMATION

Item 23. Exhibits:

(a)* Articles of Incorporation. Articles of
Incorporation. Included herein as Exhibit
(a).

(b)* By-laws. Included herein as Exhibit (b).

(d)(1)* Investment Advisory Contracts. Included
herein as Exhibit (d)(1).

(d)(2)* Sub-Advisory Agreement with Davis Selected
Advisers-NY, Inc. Included herein as
Exhibit (d)(2).

(e)* Underwriting Contracts. Distributor's
Agreement. Included herein as Exhibit (e).

(f) Bonus or Profit Sharing Contracts. Not
applicable.

(g)** Custodian Agreement.

(h)(1)** Other Material Contracts. Transfer Agency
and Service Agreement.

(h)(2)* Form of Participation Agreement. Included
herein as Exhibit (h)(2).

(i)** Legal Opinion. Opinion and Consent of
Counsel, (D'Ancona & Pflaum).

1
<PAGE>

(j)** Other Opinions. Consent of Independent
Accountants, KPMG, LLP.

(k) Omitted Financial Statements. Not
Applicable.

(l) Initial Capital Agreements. Not Applicable

(m)** Rule 12b-1 Plan.

(n) Financial Data Schedule. Not applicable

(o) Rule 18f-3 Plan. Not applicable

(p)** Other Exhibits. Powers of Attorney of the
Registrant, Officers and Board of
Directors appointing Sheldon Stein and
Arthur Don as attorneys-in-fact.

* Filed Herein
** To be Filed by Amendment prior to being
declared effective.

Item 24. Persons Controlled by or Under Common Control With
Registrant

Not applicable

Item 25. Indemnification

Registrant's Articles of Incorporation indemnifies its directors,
officers and employees to the full extent permitted by Section 2-418 of the
Maryland General Corporation Law, subject only to the provisions of the
Investment Company Act of 1940. The indemnification provisions of the Maryland
General Corporation Law (the "Law") permit, among other things, corporations to
indemnify directors and officers unless it is proved that the individual (1)
acted in bad faith or with active and deliberate dishonesty, (2) actually
received an improper personal benefit in money, property or services, or (3) in
the case of a criminal proceeding, had reasonable cause to believe that his act
or omission was unlawful. The Law was also amended to permit corporations to
indemnify directors and officers for amounts paid in settlement of
stockholders' derivative suits.

In addition, the Registrant's directors and officers are covered under
a policy to indemnify them for loss (subject to certain deductibles) including
costs of defense incurred by reason of alleged errors or omissions, neglect or
breach of duty. The policy has a number of exclusions including alleged acts,
errors, or omissions which are finally adjudicated or established to be
deliberate, dishonest, malicious or fraudulent or to constitute willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties
in respect to any registered investment company. This coverage is incidental to
a general policy carried by the Registrant's adviser.

In addition to the foregoing indemnification, Registrant's Articles of
Incorporation exculpate directors and officers with respect to monetary damages
except to the extent that an

2
<PAGE>

individual actually received an improper benefit in money property or services
or to the extent that a final adjudication finds that the individual acted with
active and deliberate dishonesty.

Item 26. Business and Other Connections of Investment Adviser

Davis Selected Advisers, L.P. ("DSA ") and subsidiary companies
comprise a financial services organization whose business consists primarily of
providing investment management services as the investment adviser and manager
for investment companies registered under the Investment Company Act of 1940,
unregistered off-shore investment companies, and as an investment adviser to
institutional and individual accounts. DSA also serves as sub-investment
adviser to other investment companies. Davis Distributors, L.L.C., a wholly
owned subsidiary of DSA, is a registered broker-dealer. Davis Selected Advisers
- - NY, Inc., another wholly owned subsidiary, provides investment management
services to various registered and unregistered investment companies, pension
plans, institutions and individuals.

Other business of a substantial nature that directors or officers of
DSA are or have been engaged in the last two years:

SHELBY M.C. DAVIS, 4135 North Steers Head Road, Jackson Hole, WY 83001.
Director, Chairman and Chief Executive Officer, Venture Advisers, Inc.;
Director, Davis Selected Advisers-NY, Inc.; Director, Shelby Cullom Davis
Financial Consultants, Inc.

CHRISTOPHER C. DAVIS, 609 Fifth Ave, New York, NY 10017. Vice Chairman, Venture
Advisers, Inc.; Director, Chairman, Chief Executive Officer, Davis Selected
Advisers-NY, Inc.; Chairman and Director, Shelby Cullom Davis Financial
Consultants, Inc.; employee of Shelby Cullom Davis & Co., a registered
broker/dealer; Director of Kings Bay, Ltd, an offshore investment management
company.

KENNETH C. EICH , 124 East Marcy Street, Santa Fe, NM 87501. Chief Operating
Officer, Venture Advisers, Inc.; Vice President, Davis Selected Advisers-NY,
Inc.; President, Davis Distributors, L.L.C. Former President and Chief Executive
Officer of First of Michigan Corporation. Former Executive Vice President and
Chief Financial Officer of Oppenheimer Management Corporation.

GARY TYC, 124 East Marcy Street, Santa Fe NM 87501. Vice President, Chief
Financial Officer Treasurer, and Assistant Secretary of Venture Advisers, Inc.;
Vice President, Treasurer, & Assistant Secretary of Davis Selected Advisers -
NY, Inc.; Vice President, Treasurer, & Assistant Secretary of Davis
Distributors, L.L.C. Former Vice President of Oppenheimer Management
Corporation.

THOMAS D. TAYS, 124 East Marcy Street, Santa Fe NM 87501. Vice President and
Secretary, Venture Advisers, Inc., Davis Selected Advisers-NY, Inc., and Davis
Distributors, L.L.C. Former Vice President and Special Counsel of U.S. Global
Investors, Inc.

Item 27. Principal Underwriter

3
<PAGE>

(a) Davis Distributors, LLC, a wholly owned subsidiary of the Adviser,
located at 124 East Marcy Street, Santa Fe, NM 87501, is the principal
underwriter for the Registrant and also acts as principal underwriter for
Davis New York Venture Fund, Inc., Davis Tax-Free High Income Fund, Inc.,
Davis Intermediate Investment Grade Bond Fund, Inc., Davis Series, Inc.,
Davis International Series, Inc., Selected American Shares, Inc., Selected
Special Shares, Inc. and Selected Capital Preservation Trust.

(b) Management of the Principal Underwriters:

<TABLE>
<CAPTION>
<S> <C> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT

Kenneth C. Eich President Vice President
124 East Marcy Street
Santa Fe, NM 87501

Gary P. Tyc Vice President, Treasurer and None
124 East Marcy Street Assistant Secretary
Santa Fe, NM 87501

Thomas D. Tays Vice President and Secretary Vice President and Secretary
124 East Marcy Street
Santa Fe, NM 87501

Russell O. Wiese Senior Vice President None
124 East Marcy Street
Santa Fe, NM 87501

Sharra Reed Assistant Treasurer Vice President, Treasurer and
124 East Marcy Street Assistant Secretary.
Santa Fe, NM 87501
</TABLE>

Item 28. Location of Accounts and Records

Accounts and records are maintained at the offices of Davis Selected
Advisers, L.P., 124 East Marcy Street, Santa Fe, New Mexico 87501, and at the
offices of the Registrant's custodian, State Street Bank and Trust Company, One
Heritage Drive, North Quincy, Massachusetts 02107, and the Registrant's
transfer agent State Street Bank and Trust, c/o Service Agent, BFDS, Two
Heritage Drive, 7th Floor, North Quincy, Massachusetts 02107.

Item 29. Management Services

Not applicable

Item 30. Undertakings

4
<PAGE>

Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.

5
<PAGE>

DAVIS VARIABLE ACCOUNT FUND, INC.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Fe and State of New Mexico on the 7th day of
April, 1999.

DAVIS INTERNATIONAL SERIES, INC.

By: /s/ Kenneth Eich
------------------------
Kenneth Eich
Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.

Signature Title Date

Kenneth Eich President, CEO April 7, 1999
---------------------
Shelby M.C. Davis

Sharra L. Reed Principal Financial Officer
---------------------
Sharra L. Reed and Treasurer April 7, 1999

6
<PAGE>

DAVIS INTERNATONAL SERIES, INC.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on April 7, 1999 by the following
persons in the capacities indicated.

Signature Title

Kenneth Eich Director
- -----------------
Kenneth Eich

Sharra Reed Director
- -----------------
Sharra Reed

Thomas Tays Director
- -----------------
Thomas Tays

7
<PAGE>

EXHIBIT LIST

(a) Articles of Incorporation.
(b) By-laws.
(d)(1) Investment Advisory Contract.
(d)(2) Sub-Advisory Agreement.
(e) Distributor's Agreement
(h)(2) Form of Participation Agreement.

<PAGE>

Exhibit (a)

ARTICLES OF INCORPORATION

DAVIS VARIABLE ACCOUNT FUND, INC.
(EFFECTIVE AS OF APRIL 7, 1999)

<PAGE>

CONTENTS

FIRST Incorporation

SECOND Name

THIRD Purpose

FOURTH Principal Office and Resident Agent

FIFTH Capitalization

(a) Authorized Shares

(b) Series and Classes of Shares

(d) Classes of Shares

(e) Classifying Unissued Shares

(f) Voting Power of Shares

(g) Fractional Shares

SIXTH Preemptive Rights

SEVENTH Redemption

(a) Right to Redeem Shares

(b) Series

EIGHTH Number of Directors

(a) Number

(b) Class and Tenure

NINTH Powers of Directors

(a) Enumerated Powers

(b) Additional Powers

TENTH Net Asset Value, Other Determinations

2
<PAGE>

ELEVENTH Indemnification

TWELFTH Exculpation

THIRTEENTH Majority Vote

FOURTEENTH Amendments

FIFTEENTH Meetings

SIXTEENTH Titles

3
<PAGE>

FIRST: Incorporation. The undersigned, Thomas D. Tays, whose address is
124 East Marcy Street, Santa Fe, New Mexico 87501, being at least 18 years of
age, is acting as sole incorporator with the intention of forming a corporation
under and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations.

SECOND: Name. The name of the Corporation is Davis Variable Account
Fund, Inc. (hereinafter called the "Corporation").

THIRD: Purpose. The purpose for which the Corporation is formed is to
engage in, conduct, operate and carry on the business of an open-end management
investment company under the Investment Company Act of 1940 (including any
amendment thereof or other applicable Act of Congress hereinafter enacted)
(hereinafter called the "1940 Act"), and to do any and all acts or things as are
necessary, convenient, appropriate, incidental or customary in connection
therewith.

FOURTH: Principal Office and Resident Agent. The post office address of
the place at which the principal office of the Corporation in the State of
Maryland will be located is 32 South Street, Baltimore, Maryland 21202.

The Corporation's registered agent is The Corporation Trust
Incorporated whose post office address is 32 South Street, Baltimore, Maryland
21202. Said registered agent is a corporation of the State of Maryland.

FIFTH: Capitalization.

(a) Authorized Shares. The total number of shares of capital stock
which the Corporation shall have authority to issue is five billion
(5,000,000,000) shares of capital stock of the par value of $.001 per share
("Shares"), having an aggregate par value of $5,000,000. The Board of Directors
shall have authority to increase or decrease the total number of authorized
shares by filing appropriate amendments.

(b) Series and Classes of Shares. The Shares may be issued by the
Board of Directors in such separate and distinct series ("Series") and classes
of Series ("Classes") as the Board of Directors shall from time to time create
and establish. The Board of Directors shall have full power and authority, in
its sole discretion, to create and establish Series and Classes having such
preferences, rights, voting powers, terms of conversion, restrictions,
limitations on dividends, qualifications, and terms and conditions of
redemption as shall be fixed and determined from time to time by resolution or
resolutions providing for the issuance of such Shares adopted by the Board of
Directors.

The Board of Directors is hereby expressly granted authority to
increase or decrease the number of Shares of any Series or Class, but the
number of Shares of any Series or Class shall not be decreased by the Board of
Directors below the number of Shares thereof then outstanding.

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(c) Series of Shares. Each Series of Shares shall have the following
described powers, preferences and rights and the qualifications, limitations
and restrictions thereof shall be as follows:

(i) All consideration received by the Corporation for the
issue or sale of Shares of a particular Series, together with
all income, earnings, profits and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation
thereof, and any assets derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein
referred to as "assets belonging to" such Series.

(ii) The assets belonging to a particular Series of Shares
shall be charged with the liabilities (including, in the
discretion of the Board of Directors or its delegate, accrued
expenses and reserves) incurred in respect of such Series,
and such Series shall also be charged with its share of any
general liabilities of the Corporation not incurred in
respect of any particular Series, such general liabilities to
be allocated in proportion to the net asset value of the
respective Series. The allocation of such liabilities to any
Class shall be determined by the Board of Directors or its
delegate. The determination of the Board of Directors or its
delegate shall be final and conclusive as to the amount of
assets and liabilities, including accrued expenses and
reserves, which are to be allocated to one or more particular
Series or Class. The power to make such determinations may be
delegated by the Board of Directors from time to time to one
or more of the directors and officers of the Corporation, or
to an agent of the corporation appointed for such purpose.

(iii) In the event of the liquidation or dissolution of the
Corporation (for whatever reason), stockholders of each
Series shall be entitled to receive as a class, out of the
assets of the Corporation available for distribution to
stockholders the assets belonging to such Series; and the
assets so distributable to the stockholders of any Series
shall be distributed among such stockholders in proportion to
the relative aggregate net asset values of the Shares held by
such stockholders. In the event that there are any general
assets available for distribution not belonging to any
particular Series, any distribution thereof shall be made to
the holders of all such Series in proportion to the net asset
value of the respective Series or any Class thereof.

(iv) The voting rights of the Shares of each Series shall be
as set forth in these Articles.

(v) The relative rights of the Shares of each Series to be
redeemed or repurchased shall be as set forth in these
Articles.

(vi) The relative rights of the Shares of each Series to
receive dividends shall be as set forth in these Articles

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(vii) Three initial Series are authorized, each having only
one Class of Shares, the remaining Shares are unclassified:

(A) Davis Value Portfolio. Five hundred million
(500,000,000) shares are classified as Shares of the
Davis Value Portfolio;

(B) Davis Financial Portfolio. Five hundred million
(500,000,000) shares of which are classified as
Shares of the Davis Financial Portfolio;

(C) Davis Real Estate Portfolio. Five hundred
million (500,000,000) shares of which are classified
as Shares of the Davis Real Estate Portfolio.

(d) Classes of Shares. In the event of establishment of Classes in the
future, each Class of a Series shall represent interests in the assets of that
Series and have identical voting, dividend, liquidation and other rights and
the same terms and conditions as any other Class of that Series, except as
provided in these Articles of Incorporation and except that expenses allocated
to the Class of a Series may be borne solely by such Class and a Class of a
Series may have exclusive voting rights with respect to matters affecting only
that Class. Expenses related to the distribution of, and other identified
expenses that should properly be allocated to, the Shares of a particular Class
or Series shall be charged to and borne solely by such Class or Series and the
bearing of expenses solely by a Class or Series may be appropriately reflected
and cause differences in the net asset value attributable to, and the dividend,
redemption and liquidation rights of, the Shares of each Class or Series.

(e) Classifying Unissued Shares. The Board of Directors, in its sole
discretion, may classify or reclassify any unissued Shares from time to time by
setting or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such Shares. Without limiting the generality of the
foregoing, the Board of Directors may, from time to time and in its sole
discretion,

(i) classify or reclassify any unissued Shares into Series
having "assets belonging to" such Series;

(ii) divide any Series having "assets belonging to" such
Series into Classes and classify or reclassify any unissued
Shares of such Class; and

(iii) name and change the name of any Series or Class of
outstanding or unissued Shares.

(f) Voting Power of Shares. At any meeting of the stockholders, each
stockholder shall have one vote for each dollar of net asset value per Share
for each Share held irrespective of the Series or Class thereof. On any matter
submitted to a vote of stockholders, all Shares then issued and outstanding and
entitled to vote shall be voted in the aggregate and not by Series or Class
except to the extent Series or Class voting is required as to any matter by the
laws of the State of Maryland, the 1940 Act or any rule or regulation
thereunder or by the Board of Directors.

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(g) Fractional Shares. Fractional Shares shall carry proportionately
all the rights of a whole Share.

SIXTH: Preemptive Rights. No holder of any Shares shall, as such
holder, have any preemptive or other right to purchase or subscribe for, or
otherwise acquire, any Shares of the Corporation which the Corporation proposes
to issue, reissue or sell, other than such, if any, as the Board of Directors
in its sole discretion may from time to time determine to offer.

SEVENTH: Redemption.

(a) Right to Redeem Shares. Each holder of the Shares shall be
entitled at any time to require the Corporation, to the extent that the
Corporation shall have any surplus available for such purpose and out of such
surplus, to purchase all or any part of the Shares standing in the name of such
holder on the books of the Corporation at the net asset value of such Shares;
provided, however, that the Corporation may suspend such right of redemption or
postpone payment for such Shares pursuant to the 1940 Act or any rule,
regulation or order thereunder.

(b) Series. Any redemptions or purchases of Shares by the Corporation
of any Series of the Shares shall be made solely from assets belonging to such
Series.

(c) Involuntary Redemptions. The Corporation, without the vote or
consent of the stockholders of the Corporation, may redeem all Shares in any
stockholder's account in which the value of such Shares is less than $250, or
such other minimum amount as the Board of Directors may from time to time
establish, in its sole discretion; provided that any such redemption is at a
price determined in accordance with the Corporation's then-current prospectus.

EIGHTH: Number of Directors.

(a) Number. The number of directors of the Corporation shall be one
(1), provided however, that the number may be increased or decreased in
accordance with the By-Laws of the Corporation so long as after the first
annual meeting, the number of directors is never less than three (3). Thomas
Tays is the initial director and shall act until the first annual meeting and
until his successor is elected and qualifies.

(b) Class and Tenure. The By-Laws of the Corporation may divide the
Directors of the Corporation into classes and prescribe the tenure of office of
the several classes, but no class shall be elected for a period shorter than
that from the time of the election following the division into classes until
the next annual meeting and thereafter for a period shorter than the interval
between annual meetings or for a period longer than five years, and the term of
office of at least one class shall expire each year.

NINTH: Powers of Directors.

(a) Enumerated Powers. In furtherance and not in limitation of the
powers conferred by the laws of the state of Maryland, the Board of Directors,
without the vote of the stockholders of the Corporation, is expressly
empowered:

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(i) to authorize the issuance from time to time of Shares of
any Series or Class, whether now or hereafter authorized or
created, provided, however, that the consideration per Share
to be received by the Corporation upon the issuance or sale
of any Shares of any Series or Class shall be the net asset
value per share;

(ii) to adopt, alter and repeal the By-Laws of the
Corporation;

(iii) to determine the time, date and manner in which
redemption orders and purchase orders shall be made and paid
for; and

(iv) to change the name of the Corporation at any time and
from time to time.

(b) Additional Powers. In addition to the powers and authorities by
these Articles of Incorporation or by statute expressly conferred upon it, the
Board of Directors is empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation, subject,
however, to the provisions of these Articles of Incorporation, the By-Laws of
the Corporation, the applicable laws of the State of Maryland, the 1940 Act and
the rules and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) thereunder.

TENTH: Net Asset Value, Other Determinations. The net asset value of
Shares shall be determined by or pursuant to the direction of the Board of
Directors of the Corporation. Any determination made in good faith by or on
behalf of the Board of Directors or pursuant to its delegation or direction, as
to the amount of the assets, debts, obligations or liabilities of the
Corporation, as to the net asset value, bid price or asked price of the Shares,
as to the value of any asset or assets of the Corporation, or as to any other
matter relating to the issue, sale, redemption, purchase, acquisition or
disposition of the Shares, shall be final and conclusive and shall be binding
upon the Corporation and all holders of Shares issued by it, and the Shares
shall be issued and sold on the condition and understanding that any and all
such determinations shall be binding.

ELEVENTH: Indemnification. Subject to the provisions of the 1940 Act,
the Corporation shall indemnify and advance expenses to a director or officer,
or former director or officer, of the Corporation in connection with any
proceeding to the fullest extent permitted by and in accordance with Section
2-418 of the Maryland General Corporation Law, as amended from time to time
(the "Indemnification Section"). Subject to the provisions of the 1940 Act,
with respect to an employee or agent, other than a director or officer of the
Corporation, the Corporation may, as determined by and in the discretion of the
Board of Directors of the Corporation, indemnify and advance expenses to such
employee or agent in connection with a proceeding to the extent permitted by
and in accordance with the Indemnification Section. As used in this Article
Eleventh, any word or words that are defined in the Indemnification Section
shall have the same meaning as provided in the Indemnification Section. The
indemnification and advancement of expenses provided or authorized by these
Articles shall not be deemed exclusive of any other rights to which a director,
officer, employee or agent of the Corporation may be entitled.

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<PAGE>

TWELFTH: Exculpation. Subject to the provisions of the 1940 Act, no
director or officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages, except (i) to the extent that it is proved that
such director or officer actually received an improper benefit or profit in
money, property or services, for the amount of the benefit or profit in money,
property or services actually received, or (ii) to the extent that a judgment or
other final adjudication adverse to such director or officer is entered in a
proceeding based on a finding in the proceeding that such director's or
officer's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding.

THIRTEENTH: Majority Vote. Notwithstanding any provision of the General
Corporation Law of the State of Maryland requiring that any action be taken or
authorized by the affirmative vote of the holders of a designated proportion
greater than a majority of votes entitled to be cast, such action shall be
effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of votes entitled to vote thereon.
When Shares are voted by individual Series or Class, any such action shall be
effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of votes entitled to such vote
thereon.

FOURTEENTH: Amendments. The Corporation reserves the right from time to
time to amend, alter, change, add to, or repeal any provision contained in these
Articles of Incorporation in the manner now or hereafter prescribed or permitted
by statute, including any amendment which alters the contract rights, as
expressly set forth in these Articles of Incorporation, of any outstanding
Shares, and all rights conferred on stockholders and others herein are granted
subject to this reservation.

FIFTEENTH: Meetings. The Corporation shall not be required to hold an
annual meeting of stockholders in any year in which the election of directors is
not required to be acted upon under the 1940 Act.

SIXTEENTH: Titles. The titles contained in these Articles of
Incorporation are for convenience only and shall not affect the interpretation
of any of the provisions hereof.

IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.

Thomas Tays, Incorporator

<PAGE>

Exhibit (b)

BY-LAWS OF

DAVIS VARIABLE ACCOUNT FUND, INC.
(ADOPTED APRIL 7, 1999)

<PAGE>

BY-LAWS OF

DAVIS VARIABLE ACCOUNT FUND, INC.

(ADOPTED APRIL 7, 1999)

ARTICLE I
STOCKHOLDERS

SECTION 1. Place of Meeting. All meetings of the stockholders shall be
held at the principal office of the Corporation in the State of Maryland or at
such other place within or without the State of Maryland as may from time to
time be designated by the Board of Directors and stated in the notice of
meeting.

SECTION 2. Annual Meetings. Annual meetings shall not be required to
be held in any year unless the election of Directors is required to be acted
upon under the Investment Company Act of 1940 (hereinafter, the " 1940 Act").
An annual meeting shall be held in accordance with the 1940 Act in the event
that less than a majority of the Directors then in office were elected by the
vote of stockholders. Any annual meeting may be called (i) by the Board of
Directors, or (ii) if required by the 1940 Act, by the President solely for the
purposes of electing Directors and considering the ratification of the
independent public accountant selected by the Board of Directors to audit the
financial statements of the Corporation. Annual meetings called by the
President may consider other business which is proposed by the President and
properly brought before such meetings; provided, however, that specific matters
other than election of Directors and ratification of selection of accountants
may be placed on the agenda of the meeting solely with the approval of a
majority of the entire Board of Directors.

SECTION 3. Special Meetings. Special meetings of stockholders may be
called by the President or the Board of Directors, and shall be called upon the
written request of stockholders holding at least twenty-five percent (25%) of
the votes entitled to be cast at the meeting. A request by stockholders for a
meeting shall state the purpose of the meeting and the matters proposed to be
acted upon. Unless requested by stockholders entitled to cast a majority of all
the votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of the

<PAGE>

stockholders held during the preceding 12 months. Upon receipt of such written
request, the secretary shall inform the stockholders who make the request of the
reasonably estimated cost of preparing and mailing a notice of the meeting, and
on payment of these costs to the corporation, shall notify each stockholder
entitled to notice of the meeting.

SECTION 4. Notice of Meetings of Stockholders. Not less than ten days'
and not more than ninety days' written or printed notice of every meeting of
stockholders, stating the time and place thereof (and the general nature of the
business proposed to be transacted at any special meeting), shall be given to
each stockholder entitled to vote thereat and each other stockholder entitled
to notice of the meeting by leaving the same with him or at his residence or
usual place of business or by mailing it, postage prepaid, and addressed to him
or at his address as it appears upon the books of the Corporation.

No notice of the time, place or purpose of any meeting of stockholders
need be given to any stockholder who attends in person or by proxy or to any
stockholder who, in writing executed and filed with records of the meeting,
either before or after the holding thereof, waives such notice.

SECTION 5. Closing of Transfer Books and Record Dates. The Board of
Directors may fix the time, not exceeding twenty days preceding the date of any
meeting of stockholders, any vote at a meeting, any dividend payment date or
any date for the allotment of rights, during which the books of the Corporation
shall be closed against transfers of stock. If such books are closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of providing for the closing of the
books against transfers of stock as aforesaid, the Board of Directors may fix,
in advance, a date, not exceeding ninety days and not less than ten days
preceding the date of any meeting of stockholders, and not exceeding ninety
days preceding any dividend payment date or any date for the allotment of
rights, as a record date for the determination of the stockholders entitled to
notice of or to vote at such meeting, or entitled to receive such dividends or
rights, as the case may be; and only stockholders of record on such date shall
be entitled to notice of and to vote at such meeting or to receive such
dividends or rights, as the case may be.

<PAGE>

SECTION 6. Quorum and Adjournment of Meetings. The presence in person
or by proxy of the holders of record of a majority of all of the votes entitled
to be cast thereat shall constitute a quorum at all meetings of the
stockholders. If at any meeting of the stockholders there shall be less than a
quorum present, the stockholders present at such meeting may, without further
notice, adjourn the same from time to time until a quorum shall attend, but no
business shall be transacted at any such adjourned meeting except such as might
have been lawfully transacted had the meeting not been adjourned.

SECTION 7. Voting and Inspectors. At all meetings of stockholders
every stockholder of record entitled to vote shall be entitled to one vote for
each dollar of net asset value per share standing in his or her name on the
books of the Corporation irrespective of the Series or Class thereof, (and such
stockholders of record holding fractional shares, if any, shall have
proportionate voting rights.)

All elections shall be had and all questions decided by a majority of
the votes cast at a duly constituted meeting, except as otherwise provided in
the Articles of Incorporation or in these Bylaws or by specific statutory
provision, including requirements for approval of any matters by the provisions
of the 1940 Act.

At any election of Directors, the Board of Directors prior thereto
may, or if they have not so acted, the Chairman of the meeting may, and upon
the request of the holders of ten percent (10%) of the votes entitled to be
cast at such election shall, appoint at least one inspector of election who
shall first subscribe an oath or affirmation to execute faithfully the duties
of inspector at such election with strict impartiality and according to the
best of his or her ability, and shall after the election make a certificate of
the result of the vote taken. No candidate for the office of Director shall be
appointed such Inspector.

The Chairman of the meeting may cause a vote by ballot to be taken
upon any election or matter, and such vote shall be taken upon the request of
the holders of ten percent (10%) of the votes entitled to be cast at such
election or on such matter.

SECTION 8. Conduct of Stockholders' Meetings. The meetings of the
stockholders shall

<PAGE>

be presided over by the President or, if the President shall not be present, by
a Vice President or, if neither the President nor any Vice President is present,
by a chairman to be elected at the meeting. The Secretary of the Corporation, if
present, shall act as Secretary of such meeting or, if the Secretary is not
present, an Assistant Secretary shall so act; if neither the Secretary nor an
Assistant Secretary is present, then the meeting shall elect its Secretary.

SECTION 9. Concerning Validity of Proxies, Ballots, Etc. At every
meeting of the stockholders, all proxies shall be received and taken in charge
of and all ballots shall be received and canvassed by the secretary of the
meeting, who shall decide all questions touching the qualification of voters,
the validity of the proxies, and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed as provided in Section 7, in
which event such inspectors of election shall decide all such questions.

SECTION 10. Consents. Whenever stockholders are required or permitted
to take any action by vote, such action may be taken without a meeting if the
following are filed with the records of stockholders meetings: (a) a unanimous
written consent which sets forth the action and is signed by each stockholder
entitled to vote on the matter, and (b) a written waiver of any right to
dissent signed by each stockholder entitled to notice of the meeting but not
entitled to vote at it.

ARTICLE 11
BOARD OF DIRECTORS

SECTION 1. Number, Vacancies and Tenure. The Directors may, at any
time when the stockholders are not assembled in meeting, establish, increase or
decrease the number of seats on the Board of Directors by majority vote of the
entire Board of Directors; provided, that after the first annual meeting the
number of Directors shall never be less than three (3) nor more than fifteen
(15). The number of Directors may not be decreased so as to affect the term of
any incumbent Director. Except as hereinafter provided, (i) if the number of
Directors is increased, the additional Directors to fill the vacancies thus
created may be elected by majority vote of the entire Board of Directors, and
(ii) any vacancy occurring for any other cause may be filled by a majority of
the remaining Directors, even if such majority is less than a quorum. No
vacancy

<PAGE>

may be filled for any cause whatsoever unless, immediately after the filling of
such vacancy, at least two-thirds of the entire Board of Directors shall have
been elected by the stockholders of the Corporation. A Director shall hold
office until his successor is elected and qualified, or until such Director's
earlier death, resignation, retirement or removal; provided, however, that if a
Director was not elected to office by a vote of stockholders, the term of such
Director shall, in any event, end as of the date of the next annual meeting of
stockholders which is required to be held pursuant to Article I, Section 1 of
these Bylaws following such Director's election to office. Such a Director may
be a candidate for election to office at such annual meeting and, if elected at
such meeting, shall serve for the indefinite term specified above.

SECTION 2. Mandatory Retirement of Directors. A Director shall retire
from the Board of Directors and cease being a Director at the close of business
on the last day of the calendar year in which the Director attains age
seventy-two (72), except that any person who was a Director on July 1, 1994,
and that date was seventy-three (73) years of age or less shall retire from the
Board of Directors and cease being a Director at the close of business on the
last day of the year in which the Director attains age seventy-four (74).

SECTION 3. Removal. At any meeting of stockholders, duly called and at
which a quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors to
fill any resulting vacancies for the unexpired terms of removed directors.

SECTION 4. Place of Meeting. The Directors may hold their meetings,
have one or more offices, and keep the books of the Corporation outside the
State of Maryland, at any office or offices of the Corporation or at any other
place as they may from time to time by resolution determine, or in the case of
meetings, as they may from time to time by resolution determine or as shall be
specified or fixed in the respective notices or waivers of notice thereof.

SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and on such notice, if any, as the Directors may from
time to time determine.

<PAGE>

SECTION 6. Special Meetings. Special meetings of the Board of
Directors may be held from time to time upon call of the President or two or
more of the Directors, by oral or telegraphic or written notice (including
written notice transmitted electronically) duly served on or sent or mailed to
each Director not less than one day before such meeting. No notice need be
given to any Director who attends in person or to any Director who, in writing
executed and filed with the records of the meeting either before or after the
holding thereof, waives such notice. Such notice or waiver of notice need not
state the purpose or purposes of such meeting.

SECTION 7. Quorum. One-third of the Directors then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two Directors. If at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
The act of the majority of the Directors present at any meeting at which there
is a quorum shall be the act of the Directors, except as may be otherwise
specifically provided by statute, by the Articles of Incorporation or by these
Bylaws.

SECTION 8. Executive Committee. The Board of Directors may, by the
affirmative vote of a majority of the entire Board, elect from the Directors an
Executive Committee to consist of such number of Directors, but not less than
two, as the Board may from time to time determine. The Board of Directors by
such affirmative vote shall have power at any time to change the members of
such Committee and may fill vacancies in the Committee by election from the
Directors. When the Board of Directors is not in session, the Executive
Committee shall have and may exercise any or all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation
(including the power to authorize the seal of the Corporation to be affixed to
all papers which may require it) except as provided by law and except the power
to increase or decrease the size of, or fill vacancies on, the Board, to remove
or appoint executive officers or to dissolve or change the permanent membership
of the Executive Committee, and the power to make or amend the Bylaws of the
Corporation. The Executive Committee may fix its own rules of procedure, and
may meet, when and as provided by such rules or by resolution of the Board of
Directors, but in every case the presence of a

<PAGE>

majority shall be necessary to constitute a quorum. In the absence of any member
of the Executive Committee, the members thereof present at any meeting, whether
or not they constitute a quorum, may appoint a member of the Board of Directors
to act in the place of such absent member.

SECTION 9. Other Committees. The Board of Directors, by the
affirmative vote of a majority of the entire Board, may appoint other
committees which shall in each case consist of such number of members, and
shall have and may exercise such powers as the Board may determine in the
resolution appointing them. A majority of all members of any such committee may
determine its action, and fix the time and place of its meetings, unless the
Board of Directors shall otherwise provide. The Board of Directors shall have
power at any time to change the members and powers of any such committee, to
fill vacancies, and to discharge any such committee.

SECTION 10. Informal Action by Directors and Committees. Any action
required or permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting, if a written consent to
such action is signed by all members of the Board, or of such committee, as the
case may be, and if such consent is filed with the minutes of proceedings of
the Board, or of such committee, as the case may be.

SECTION 11. Compensation of Directors. Directors shall be entitled to
receive such compensation from the Corporation for their services as may from
time to time be voted by the Board of Directors.

ARTICLE III
OFFICERS

SECTION 1. Executive Officers. The executive officers of the
Corporation shall be chosen by the Board of Directors. These shall include a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Secretary and a Treasurer. The Board of Directors or
the Executive Committee may also in its discretion appoint a Chairman of the
Board of Directors, Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have such authority and perform such
duties as the

<PAGE>

Board or the Executive Committee may determine. The Board of Directors may fill
any vacancy which may occur in any office. Two or more offices, except those of
President and Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required to be executed, acknowledged or verified by two
or more officers.

SECTION 2. Term of Office. Unless a longer, shorter or indefinite term
of office is provided by the Board of Directors for any officer or all
officers, the term of office of all officers shall be one year and until their
respective successors are chosen and qualify. Any officer may be removed from
office at any time with or without cause by the vote of a majority of the
entire Board of Directors, if the Board of Directors in its judgment finds that
the best interests of the Corporation are served thereby.

SECTION 3. Powers and Duties. The officers of the Corporation shall
have such powers and duties as generally pertain to their respective offices,
as well as such powers and duties as may from time to time be conferred by the
Board of Directors or the Executive Committee.

ARTICLE IV
CAPITAL STOCK

SECTION 1. Certificate of Shares. A stockholder of Class A Shares of
any series shall, upon request, be entitled to a certificate for full shares of
stock in such form not inconsistent with law as the Board of Directors shall
determine. No certificate will be issued to evidence ownership of any other
class of shares.

SECTION 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by the holder's duly authorized attorney-in-fact or legal representative upon
presentation of proper instruments of assignment and transfer, with such proof
of the authenticity of the signature and the capacity of the signator as the
Corporation or its transfer agent may reasonably require. If certificates have
been issued evidencing the ownership of the Shares to be transferred, such
certificates must be surrendered and canceled before the transfer may be
effected.

<PAGE>

SECTION 3. Stock Ledgers. The stock ledgers of the Corporation,
containing the names and addresses of the stockholders and the number of shares
held by them respectively, shall be kept at the principal offices of the
Corporation or, if the Corporation employs a transfer agent, at the offices of
the Transfer Agent of the Corporation.

SECTION 4. Lost, Stolen or Destroyed Certificates. The Corporation may
determine the conditions upon which a new certificate of stock of the
Corporation of any class may be issued in place of a certificate which is
alleged to have been lost, stolen or destroyed; and may require the owner of
such certificate or his legal representative to give bond, with sufficient
surety to the Corporation and each Transfer Agent, if any, to indemnify it and
each Transfer Agent against any and all loss or claims which may arise by
reason of the issue of a new certificate in the place of the one so lost,
stolen or destroyed.

ARTICLE V
FISCAL YEAR

The fiscal year of the Corporation shall be fixed by the Board of
Directors.

ARTICLE VI
INDEMNIFICATION

Each Director and officer (and his heirs, executors and
administrators) shall be indemnified by the Corporation to the extent set forth
in the Articles of Incorporation.

ARTICLE VII
AMENDMENT OF BYLAWS

The Bylaws of the Corporation may be altered, amended, added to or
repealed by majority vote of the entire Board of Directors.

<PAGE>

Exhibit (d)(1)

DAVIS VARIABLE ACCOUNT FUND, INC.

INVESTMENT ADVISORY AGREEMENT

_______, 1999

Davis Selected Advisers, L.P.
124 E. Marcy St.
Santa Fe, NM 87501

Dear Sirs:

We herewith confirm our agreement with you as follows:

1. Acting as an Investment Company, Davis Selected Advisers, L.P. to
Serve as Investment Adviser. We desire to employ the capital of Davis Variable
Account Fund, Inc. (the "Company") by investing and reinvesting the same in
securities of the type and in accordance with the limitations specified in the
registration statement under the Securities Act of 1933 and the Investment
Company Act of 1940 (the "1940 Act"), of which we enclose a copy, and in such
manner and to such extent as may from time to time be approved by our Board of
Directors. We desire to employ you to supervise and assist in the management of
this business for us. You shall for all purposes herein be deemed an
independent contractor, and shall, unless otherwise expressly provided for or
authorized, have no authority to act or represent us.

2. Employees, Officers, Directors. In this connection it is understood
that you will from time to time employ or associate with yourselves such person
or persons as you may believe to be particularly fitted to assist you in the
execution of this Agreement, it being understood that the compensation of such
person or persons shall be paid by you and that no obligation may be incurred
on our behalf in any such respect. This does not apply to such individuals as
we may in due course elect as officers of our corporation, except that no
officer, director, stockholder or employee of your firm shall receive
compensation from us for acting as director, officer or employee of our
corporation, and you agree to pay the compensation of all such persons. We
understand that, during the continuance of this agreement, officers of your
firm will, if elected, serve as directors of our corporation and as its
principal officers.

3. Exclusive Authority, Information. You are to have complete and
exclusive authority to develop and handle for us any business of the type above
mentioned which you may consider advantageous for us, subject to the direction
and control of our officers and directors. You will furnish us with such
statistical information with respect to the securities which we may hold or
contemplate purchasing as we may request. We wish to be kept in touch with
important developments affecting our Company and shall expect you on your own
initiative to furnish us from time to time with such information as you may
believe appropriate for this purpose, whether concerning the individual
companies whose securities are included in our portfolio or the industries in
which they are engaged.

<PAGE>

We shall also expect you of your own motion to advise us whenever in your
opinion conditions are such as to make it desirable that a specific security be
eliminated from our portfolio.

4. Exercise of Best Judgement, Limitation on Liability. We shall
expect of you your best judgment in rendering these services to us, and we
agree as an inducement to your undertaking the same that you shall not be
liable hereunder for any mistake of judgment or in any other event whatsoever,
except for lack of good faith, provided that nothing herein shall be deemed to
protect or purport to protect you against any liability to us or to our
security holders to which you would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of your duties
hereunder, or by reason of your reckless disregard of your obligations and
duties hereunder.

5. Fee for Services. In consideration of such services, we shall pay
you a monthly fee as of the last day of each month in each year based upon the
average daily value of net assets during a month for which the monthly fee is
calculated, as follows:

a monthly rate of 1/12 of 0.75% of the value of average daily net assets during
the month.

provided, however, that such fee for any period which shall not be a full
monthly period shall be prorated according to the proportion which such period
bears to the full month and no payment of any fee shall be made before the
commencement of the public offering of any common stock. For this purpose, the
value of our net assets shall be computed in the same manner as the value of
such net assets are computed in connection with the determination of the net
asset value of our shares.

6. Clerical Services, Responsibility for Expenses. Except as otherwise
provided below in this paragraph, you will attend to, or arrange for the
performance, at your expense, of such clerical and accounting work related to
the investment and reinvestment of our capital for us as we may specify. We
shall, however, bear all costs and expenses of or attendant upon: (i)
preparation of our federal, state and local tax returns; (ii) preparation of
documents we must file with the Securities and Exchange Commission; (iii)
determination of the status and payment of dividends; (iv) reconciling and
reviewing output of our custodian bank, determining the adequacy of various
accruals, approving our expenses, authorizing our bank to receive and disburse
money and securities and verifications related thereto, and interfacing with
our auditors; (v) verification of our security ledger and preparation and
maintenance of other corporate books and records; (vi) brokerage commissions
and other transaction expenses; (vii) stockholders' and Directors' meetings;
(viii) corporate reports and proxy materials, including their preparation,
printing and distribution; (ix) fees of Directors not affiliated with you or
any other firm acting as an investment adviser to us; (x) taxes and interest
expenses; (xi) reports to government authorities including all expenses and
costs relating to such reports and to state securities law compliance; (xii)
custodian and transfer agent fees; (xiii) association membership dues; (xiv)
premiums on all insurance and bonds maintained for us or on our behalf; (xv)
retention of the transfer agent and registrar for our shares and the disbursing
agent for our stockholders, including costs and expenses attendant upon
shareholder servicing, purchase, repurchase and redemption of our shares; (xvi)
our counsel; and (xvii) our independent auditors. We may arrange for you to
provide some or all of the services relating to items (i) to (xvi) above, and
any other services not directly relating to investment and reinvestment of our
capital, upon such terms and conditions, including

<PAGE>

compensation, as we may agree and subject to the approval and review of our
Board of Directors.

All of our expenses shall be paid by us except for those you
specifically agree to assume under this Agreement.

7. Portfolio Transactions (a) Best Execution. You are authorized to
place purchase and sale orders for our portfolio transactions with brokers
and/or dealers which, in your best judgment are able to achieve "best
execution" of such orders. "Best execution" shall mean prompt and reliable
execution at the most favorable security price obtainable, taking into account
research and other services available and the reasonableness of commission
charges. Purchases and sales of securities not listed or traded on a securities
exchange shall ordinarily be executed with primary market makers, acting as
principal, except where, in your judgment, better prices and execution may
otherwise be obtained.

(b) Brokerage and Research. You are authorized to allocate
brokerage and principal business to members of securities exchanges, brokers
and dealers (such members, brokers and dealers being hereinafter referred to as
"brokers") who have provided brokerage and research services, as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934 (the "1934
Act") for us and/or other accounts, if any, for which you exercise investment
discretion (as defined in Section 3(a)(35) of the 1934 Act) and to cause us to
pay a commission for effecting a securities transaction in excess of the amount
another broker would have charged for effecting that transaction if you
determine in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker, viewed in terms of either that particular transaction or your overall
responsibilities with respect to us and the other accounts, if any, as to which
you exercise investment discretion. In reaching such determination, you will
not be required to place or attempt to place a specific dollar value on the
research or execution services of a broker or on the portion of any commission
reflecting either of said services.

(c) Sales of Shares. Portfolio transactions may be allocated
to any broker or dealer taking into account the sale by such broker or dealer
of our shares. Any such allocation shall be made in accordance with the
provisions of this agreement relating to obtaining "best execution."

8. Non-Exclusive Services, Use of Name. You may act as investment
adviser for any other person, firm or corporation. We recognize that you have
given us the right to use the name "Davis" in our corporate title. If for any
reason you no longer act as our investment adviser, we shall remove the name
"Davis" from our corporate title upon demand made by you.

9. Effective Date, Term, Termination. This Agreement shall become
effective for an initial period of not more than two years from its effective
date, and shall continue in full force and effect continuously thereafter, if
its continuance is approved at least annually as required by the 1940 Act. The
effective date of this Agreement shall be the later of (i) the effective date
of the initial registration statement covering the offer and sale of our shares
under the Securities Act of 1933, or (ii) the date this Agreement has been
approved as required by the 1940 Act. As of such effective date, this Agreement
shall supersede all prior investment advisory agreements between the parties.
This

<PAGE>

Agreement may be terminated at any time, without the payment of any penalty, by
our Board of Directors or by vote of a majority of our outstanding voting
securities (as defined in the 1940 Act) on 60 days' written notice to you, or by
you on 60 days' written notice to us, and it shall be automatically terminated
in the event of its assignment (as defined in said Act).

10. Series Offered by the Company. As of the date of this Agreement,
the Company has three series of shares (the Davis Value Portfolio, Davis
Financial Portfolio, and Davis Real Estate Portfolio) and this Agreement shall
apply to those series. In the event that the Company shall create future
series, this Agreement shall apply to and be effective as to each such series,
provided (i) that as to any additional series there may be a different fee
payable to you, and (ii) this Agreement, as amended to reflect any change in
fees, is approved as required by the 1940 Act. The effective date of this
Agreement as to each such series shall be the date that it is so approved or
any later date as shall be agreed to by you and the Company.

If the foregoing is in accordance with your understanding, will you so
kindly indicate by signing and returning to us the enclosed copy hereof.

Very truly yours,

DAVIS VARIABLE ACCOUNT FUND, INC.

By:________________________________

Its:____________________________

Accepted as of the day and year first above written.

DAVIS SELECTED ADVISERS, L.P.

By: VENTURE ADVISERS, INC., General Partner

By:___________________________________________

Its:_________________________________________

<PAGE>

Exhibit (d)(2)

Davis Selected Advisers - NY, Inc.
609 Fifth Ave
New York NY 10017

Re: Sub-Advisory Agreement for Davis Variable Account Fund, Inc.

This is to confirm that Davis Selected Advisers, L.P. (the "Adviser")
is retaining Davis Selected Advisers - NY, Inc. ("DSA-NY") as investment
sub-adviser for the portfolio of Davis Variable Account Fund, Inc.
(the "Fund").

The terms and conditions of your retention are as follows:

1. Service as Sub-Adviser. DSA-NY shall act as an investment sub-adviser for
the Fund and will provide such investment management and research services as
the Adviser shall request subject to the general supervision of the Board of
Directors of the Fund, Davis Selected Advisers, L.P. (the "Adviser") and to any
applicable provisions as in effect from time to time of (a) the Articles of
Incorporation and Bylaws of the Fund, (b) the prospectus, statement of
additional information and other information set forth in the Fund's
registration documents under the Securities Act of 1933 and the Investment
Company Act of 1940 ("1940 Act"), including any supplements thereto, (c) the
Investment Advisory Agreement between the Adviser and the Fund (the "Investment
Advisory Agreement"), the Adviser's and the Fund's Code of Ethics and (d) any
additional policies or guidelines established by the Fund's Board of Directors
or the Adviser. DSA-NY acknowledges receipt of copies of the above documents as
in effect on the date of acceptance of this letter. The Adviser agrees that it
will promptly deliver to DSA-NY any amendments, changes or additions of or to
these documents.

2. Securities Transactions. DSA-NY agrees that all securities transactions will
conform to (a) the stated objectives and policies of the Fund, (b) the
brokerage policies set forth in the Investment Advisory Agreement (which are
hereby incorporated by reference herein) and the registration documents, and
(c) those investment and brokerage policies or guidelines directed by the Board
of Directors of the Fund, any committee thereof and the Adviser.

3. Independent Contractor. DSA-NY shall be an independent contractor. Unless
otherwise expressly provided or authorized hereunder, or by the Board of
Directors of the Fund, DSA-NY shall have no authority to represent the Fund or
the Adviser in any way or otherwise be an agent of the Adviser or the Fund,
except with regard to the execution of securities transactions on behalf of the
Fund with registered broker/dealers, including broker/dealers affiliated with
the Adviser, provided such transactions comply with Rule 17e-1 of the 1940 Act.

4. Reports and Other Documentation. DSA-NY shall provide the Adviser with any
reports, analyses or other documentation the Adviser requests including those
related to placement of security transactions, its administrative
responsibilities and its responsibility to monitor compliance with stated
investment objectives, policies and limitations and the investment

<PAGE>

performance of the Fund. DSA-NY agrees, directly or through an agent, to provide
daily information in respect to any portfolio transactions of the Fund to the
Adviser. DSA-NY agrees to provide all documentation reasonably required by the
Adviser to maintain Fund's accounting records in accordance with the 1940 Act
and the Investment Advisers Act of 1940 and the regulations issued thereunder,
and to preserve copies of all documents and records related to asset
transactions, positions and valuations related to the Fund in the manner and for
the periods prescribed by such regulations. DSA-NY further agrees that all
documents and records it maintains relating to the Fund, are the property of the
Fund and will be surrendered to the Adviser or the Fund upon the request of
either. DSA-NY agrees to provide information and to allow inspection of such
documents and records at reasonable times by any authorized representative of
the Adviser, the Fund's Board of Directors or any committee thereof, the Fund's
independent public accountants or appropriate regulatory authorities. DSA-NY
shall provide to the Adviser a copy of its Form ADV as filed with the SEC and as
amended from time to time and a written list of persons DSA-NY has authorized to
give written and/or oral instructions to the Adviser and the Fund custodian.

5. Personnel Available. DSA-NY agrees to make its personnel who are engaged in
activities on behalf of the Fund available at reasonable times for
consultations with the Adviser's personnel and the Fund's Board of Directors or
any committee thereof, including attendance at their meetings, wherever
situated. In addition, personnel of DSA-NY, at the request of the Adviser, will
attend other meetings to be scheduled at mutually convenient times and shall be
reimbursed for its reasonable expenses in connection therewith.

6. Office facilities, equipment and personnel. DSA-NY agrees to provide all
office facilities, equipment and personnel for carrying out its duties
hereunder at its own expense. In addition, DSA-NY shall, if requested by the
Adviser or the Fund, employ at its own expense and subject to the prior written
approval of the Adviser which approval shall not be unreasonably withheld (i) a
public auditing firm, (ii) attorneys and (iii) such other professional staff as
in the sole discretion of the Adviser are necessary to assure the fulfillment
of the terms and conditions of this agreement.

7. Non Exclusive Services. It is agreed that DSA-NY's services are not to be
deemed exclusive and DSA-NY shall be free to render similar services or other
services to others provided that (i) its services hereunder are not impaired
and are not in violation of federal or state securities laws and (ii) that it
shall not provide services to any registered investment company other than the
Fund or other investment companies managed by the Adviser without the Adviser's
prior express written permission.

8. Limitation of Liability, Expenses of Claims. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties hereunder, DSA-NY, its officers, directors and employees
shall not be subject to liability for any act or omission in the cause of, or
connected with, rendering service hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. In the event of any
claim, arbitration, suit, or administrative proceedings in which DSA-NY or the
Adviser is a party and in which it is finally determined that there is
liability or wrongdoing by only one of us, the party liable or found to be the
wrongdoer shall pay for all liability and expenses of such claim or proceeding
including reasonable attorneys' fees. If it is determined that there is
liability or wrongdoing by both or

2
<PAGE>

none of us, then each shall pay their own liability and expenses. In the event
of any settlement of any such claim, arbitration, suit or proceeding before
final determination by a court or arbitrator(s), the liability and expenses
shall be assumed as agreed between the parties, but if there is no agreement
within thirty (30) days of such settlement, then the assumption of liability and
expenses shall be settled by arbitration, in accordance with the then applicable
rules of the American Arbitration Association. Judgment upon the award rendered
by the arbitrator shall be final and binding and may be entered in any court
having jurisdiction. The parties shall pay for their own costs and expenses in
respect to any such arbitration and may be included in the arbitrator's award.

9. Compliance with Law, Code of Ethics. As investment sub-adviser, DSA-NY
understands that it will be responsible for complying with all provisions of
applicable law, including the 1940 Act, the Investment Advisers Act of 1940,
and the Insider Trading and Securities Fraud Enforcement Act of 1988 and all
rules and regulations thereunder. DSA-NY agrees to adopt and comply with the
"Code of Ethics of and for Davis Selected Advisers, L.P. and the Companies For
Which It Acts As Investment Adviser" as in effect from time to time and to keep
in effect a policy and supervisory procedures designed to prevent insider
trading.

10. Payment for Services, Payment of Expenses. The parties acknowledge that
DSA-NY is controlled by or under common control with the Adviser. The Adviser
shall pay DSA-NY all reasonable direct and indirect costs associated with the
maintenance of an office and the performance of the terms of this Agreement.
The Adviser shall also reimburse expenses expressly approved for reimbursement
by the Adviser. Payment for DSA-NY's services and reimbursement of expenses
approved by the Adviser shall be made monthly, in arrears, by the 15th day of
the following month.

11. Term of Agreement, Effective Date. This Agreement shall become effective
for an initial period of not more than two years from its effective date, and
shall continue in full force and effect continuously thereafter, if its
continuance is approved at least annually as required by the 1940 Act;
provided, however, that if the continuation of this Agreement is not approved,
DSA-NY may continue to serve in the manner and to the extent permitted by the
1940 Act and the rules and regulations thereunder.

The effective date of this Agreement shall be the later of (i) the effective
date of the initial registration statement covering the offer and sale of our
shares under the Securities Act of 1933, or (ii) the date this Agreement has
been approved as required by the 1940 Act.

12. Termination of Agreement., No Assignment. This Agreement shall
automatically terminate immediately in the event of its assignment (except as
otherwise permitted by the 1940 Act or rules thereunder) or in the event of the
termination of the Investment Advisory Agreement. This Agreement may be
terminated without payment of any penalty at any time (a) upon sixty (60) days'
written notice to DSA-NY by the Adviser or upon such sixty (60) days' written
notice to DSA-NY by the Fund pursuant to action by its Board of Directors or by
the vote of a majority of the outstanding voting securities of the Fund, or (b)
upon 60 or more days' written notice by DSA-NY to the Adviser. The terms
"assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth in the 1940 Act and the rules and regulations
thereunder. Termination of this Agreement shall not affect DSA-NY's right to
receive payments

3
<PAGE>

on any unpaid balance of the compensation earned and reimbursable expenses
incurred prior to such termination. Upon receipt of notification of termination
as provided above DSA-NY shall immediately cease all activities in connection
with the Fund except as otherwise directed by the Adviser.

13. Use of "Davis" Name. DSA-NY agrees that it shall abide by the terms of the
agreement of the Adviser with the Fund as to the names of the Fund and the
Adviser and shall not use the name of the Adviser or the Fund without the prior
written consent of the Adviser or the Fund.

14. Independent Provisions. If any provisions of this Agreement shall be held
or made invalid by a court decision, statute or rule or otherwise, the
remainder shall not be thereby affected.

15. Applicable State Law. The Agreement shall be construed according to the
laws of the State of New Mexico. It may be executed in counterparts each of
which shall be deemed an original and all of which together shall constitute
one and the same agreement.

If the foregoing terms and conditions are acceptable to you, please acknowledge
in the space provided. Upon your acceptance, the retention and the mutual
obligations in respect thereto shall be effective as provided herein.

Sincerely,

Davis Selected Advisers, L.P.
By Venture Advisers, Inc.,
General Partner

By:_________________________

Its:_________________________

Accepted and Approved this ___ day of June, 1999

Davis Selected Advisers - NY, Inc.

By:__________________________

Its:__________________________

<PAGE>

Exhibit (e)

DAVIS VARIABLE ACCOUNT FUND, INC.

DISTRIBUTING AGREEMENT

AGREEMENT dated as of ________, 1999 between DAVIS VARIABLE ACCOUNT
FUND, INC., a Maryland corporation, hereinafter called the "Company", and DAVIS
DISTRIBUTORS, LLC, a Delaware Limited Liability Company, hereinafter called
the "Distributor".

WITNESSETH

1. Appointment Of Fund Distributor. The Company hereby appoints the
Distributor as the exclusive distributor to sell as principal and not as agent
shares of capital stock of the Company during the term of this Agreement.

2. Sales Of Capital Stock. The Company agrees to sell and deliver to
the Distributor, upon the terms set forth herein, such fully-paid and
non-assessable shares of capital stock of the Company ("Shares") then
effectively registered for continuous offering under the Securities Act of 1933
(the "1933 Act") as Distributor shall order from the Company, but only to the
extent that the Distributor shall have received purchase orders therefor. All
orders from the Distributor shall be subject to confirmation by the Company,
and the Company authorizes the Distributor to reject any purchase order.

The Distributor as principal may sell and distribute any Shares so
purchased, through dealers or otherwise, in such manner not inconsistent with
law and all applicable rules and regulations, including those of any applicable
self-regulatory organizations, and the provisions of this Agreement, as the
Distributor may from time to time determine. The Distributor agrees to use its
best efforts to effect sales of Shares, but does not undertake to sell any
specific number of Shares thereof.

The Distributor may in its discretion sell the Shares to or through
such registered and qualified retail dealers as it may select. In making
agreements with its dealers or others for sale of the Shares, the Distributor
shall act only as principal and in no sense as agent for the Company.

3. Sales By Distributor - Offering Price. All Shares, whether
purchased from the Company or otherwise, shall be offered for sale and sold by
the Distributor at a price per share (hereinafter called the "Offering Price")
in accordance with the provisions of the current prospectus applicable to such
offer and sale. Any initial or deferred sales charge and any reduction or
elimination thereof shall be determined by the Distributor in a manner not
inconsistent with law and all applicable rules and regulations and the
provisions of this Agreement, and the Company agrees to amend its current
prospectus to the extent necessary from time to time to reflect any such
determination. The Company will cause such net asset value to be determined
with such frequency and as of such times

<PAGE>

and will cause the Offering Price to be effective for such periods as are set
forth in the current prospectus of the Company. The Company will cause such
determinations to be furnished to the Distributor as often as they are made and
shall make available to the Distributor upon request the computations underlying
any such determination.

Anything to the contrary herein notwithstanding, the Company may
suspend the Offering Price currently in effect and may decline to accept or
confirm any orders for, or to make any sales of, any Shares to the Distributor
under this Agreement until such time as it shall deem it advisable to accept
and confirm such orders and to make such sales. During any period during which
the Offering Price currently in effect shall be suspended or during which the
Company shall decline to acceptor confirm any such orders or make any such
sales, the Company shall be under no obligation to confirm or accept any such
orders or make any such sale at any price.

4. Payment. At or prior to the time of delivery by the Company to, or
on the order of the Distributor of any Shares, the Distributor will pay or
cause to be paid to the Company or to its order an amount equal to the Offering
Price of such Shares at which such order had been confirmed, less the initial
or deferred sales charge, if any, included thereon as aforesaid. The
Distributor agrees to cause to be remitted to the Company for the benefit of
the Company or to its order all such funds promptly after receipt thereof.

5. Delivery Of Share Certificates. Delivery of certificates for Shares
shall be made as promptly as practicable after receipt by the Company of the
purchase price therefor and written request by the Distributor for such
certificates. Such certificates shall be registered in such names and amounts
as the Distributor may specify to the Company in writing.

6. Compensation Of The Distributor. Any initial or deferred sales
charges and any compensation to be paid the Distributor out of any Distribution
Plan described in 7(e) below shall constitute the entire compensation of the
Distributor. The Distributor may allow concessions to dealers, out of sales
charges, as the Distributor shall from time to time determine.

7. Allocation Of Expenses. Except as otherwise provided herein, the
Company shall pay all expenses connected with (i) the organization of the
Company or any Series thereof, and (ii) the offering of Shares, including
without limitation all expenses of:

(a) Registering Shares for offer or sale under the federal
securities laws, except for prospectus printing costs as set forth
below; and

(b) Reports required by and under the federal securities
laws; and

(c) Issuance of Shares, including cost of stock certificates,
issue taxes (if any) and fees of legal counsel and of the transfer
agent; and

<PAGE>

(d) Registering or qualifying Shares for offer or sale under
the securities laws of any state or other jurisdiction in which the
Distributor may arrange for the sale of the Shares; and

(e) Any Distribution Plan adopted in accordance with Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act")
providing for any payments by the Company or any Series thereof.

The Distributor will pay, or promptly reimburse the Company for, all
expenses in connection with:

(a) Preparing, printing and distributing advertising and
sales literature for use in offering the Shares to the public,
including the cost of printing copies of the prospectus and the
additional cost of printing reports to stockholders other than copies
thereof required for distribution to stockholders or for filing with
any securities authorities; and

(b) The registration or qualification of the Distributor as a
dealer or broker under state or federal laws.

Transfer taxes, if any, which may be payable in connection with the
issue and delivery of certificates in a name or names other than the name of
the Distributor will not be borne by the Company and the Distributor agrees to
indemnify and hold the Company harmless against any such transfer taxes. Any
other taxes in connection with the sale of Shares pursuant to this Agreement
will be borne by the Company.

8. Company To Furnish Information. The Company shall furnish the
Distributor for use in connection with the sale of the Shares such information
with respect to the Company and the Shares as the Distributor may reasonably
request, including copies of documents filed with or furnished to any federal
or state securities authorities or sent to its stockholders.

9. Representations And Agreements With Respect To Registration
Statement And Prospectus.

(a) As used in this Agreement, the term "registration
statement" shall include any registration statement with respect to
the Shares which is effective under the Act including any amendment
thereto, and the term "prospectus" shall include any prospectus and
statement of additional information filed as part of such registration
statement.

(b) The Company represents that the registration statement
and prospectus will conform in all material respects to the
requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided that

<PAGE>

this representation will not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in
writing to the Company by the Distributor expressly for use in the
registration statement or prospectus.

(i) of any request of the Securities and Exchange
Commission for amendments to the registration statement or
prospectus or for additional information;

(ii) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the
effectiveness of the registration statement or prospectus or
the initiation of any proceedings for that purpose;

(iii) of the happening of any event which makes
untrue any statement, or which requires the making of any
change, in the registration statement or prospectus in order
to make the statements therein not misleading; and

(iv) of all actions of the Securities and Exchange
Commission with respect to any amendments to the registration
statement or prospectus which may from time to time be filed
with the Securities and Exchange Commission under the 1933
Act or the 1940 Act.

10. Indemnification. The Company agrees to indemnify, defend and hold
the Distributor, its officers and directors and any person who controls the
Distributor with the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person may incur
under the 1933 Act or the 1940 Act, or under common law or otherwise, arising
out of or based upon any untrue statement of a material fact contained in the
registration statement or prospectus relating to the Company or arising out of
or based upon any alleged omission to state a material fact required to be
stated in either thereof or necessary to make the statements in either thereof
not misleading, except insofar as such claims, demands, liabilities or expenses
arise out of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information in writing provided by the Distributor to the Company for use in
the registration statement or prospectus relating to the Company; provided,
however, that this indemnity agreement, to the extent that it might require
indemnity for liability arising out under the 1933 Act of any person who is
also an officer or director of the Company or who controls the Company within
the meaning of Section 15 of the 1933 Act, shall not inure to the benefit of
such officer, director or controlling person unless a court of competent
jurisdiction shall determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy as expressed in

<PAGE>

the 1933 Act; and further, provided, that in no event shall anything contained
herein be so construed as to protect the Distributor against any liability to
the Company or to its security holders to which the Distributor would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence, in
the performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement. The Company's agreement to indemnify the
Distributor, its officers and directors and any such controlling persons as
aforesaid is expressly conditioned upon the Company being promptly notified of
any action brought against the Distributor, its officers or directors, or any
such controlling person, such notification to be given by letter or telegram
addressed to the Company at its principal business office. The Company agrees
to promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection with
the issue and sale of any Shares.

The Distributor agrees to indemnify, defend and hold the Company, its
officers and directors and any person who controls the Company, if any, within
the meaning of Section 15 of the 1933 Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Company, its directors or
officers or any such controlling person may incur under the 1933 Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Company, its directors or officers or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in information furnished
in writing by the Distributor to the Company for use in the Company's
registration statement or prospectus or shall arise out of or be based upon any
alleged omission to state a material fact in connection with such information
not misleading or shall arise out of or be based on any false or misleading or
allegedly false or misleading sales literature relating to the Company and
prepared by the Distributor. The Distributor's agreement to indemnify the
Company, its directors and officers, and any such controlling person as
aforesaid is expressly conditioned upon the Distributor being promptly notified
of any action brought against the Company, its officers or directors or any
such controlling person, such notification being given to the Distributor at
its principal business office.

11. Compliance With Securities Laws. The Company represents that it is
registered as an open-end diversified management investment company under the
1940 Act, and agrees that it will comply with all of the provisions of such Act
and of the rules and regulations thereunder. The Company and the Distributor
each agree to comply with all of the applicable terms and provisions of the
1940 Act, the 1933 Act and, subject to the following provisions of this
paragraph 11, all applicable state securities ("Blue Sky") laws. The
Distributor agrees to comply with all of the applicable terms and provisions of
the Securities Exchange Act of 1934. The Company will cooperate with the
Distributor (to the extent of supplying all necessary documents, exhibits and
information), and will execute and permit to be filed with the proper public
bodies, such applications (including amendments and renewals thereof),
instruments, papers and exhibits as may be appropriate to enable the Shares to
be offered for sale under the laws of such states as the Distributor shall
reasonably determine, and will cooperate with the Distributor in the

<PAGE>

presentation of said applications (including amendments and renewals thereof),
to the end that Shares may be qualified in such states under the respective
Blue Sky laws thereof; provided that the Company shall not be required to amend
its Articles of Incorporation or By-Laws to comply with the laws of any state,
to maintain an office in any state, to change the terms of the offering of
Shares in any state from the terms set forth in its registration statement and
prospectus, to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims arising out
of Shares. The Distributor will furnish to the Company any information known to
the Distributor which is necessary or desirable in the preparation of the
Company's registration statement and prospectus and any amendments or
supplements thereto.

12. Effective Date, Term, Termination. This Agreement shall become
effective for an initial period of not more than two years from its effective
date, and shall continue in full force and effect continuously thereafter
provided that such continuance is approved at least annually as required by the
1940 Act. The effective date of this Agreement shall be the later of (i) the
effective date of the initial registration statement covering the offer and
sale of our shares under the Securities Act of 1933, or (ii) the date this
Agreement has been approved as required by the 1940 Act. This Agreement shall
automatically terminate in the event of its assignment (as defined by the 1940
Act). In addition, this Agreement may be terminated at any time, without
penalty, by either party on not more than sixty days' nor less than thirty
days' written notice delivered or mailed by registered mail, postage prepaid,
to the other party.

IN WITNESS WHEREOF, Davis Variable Account Fund, Inc. and Davis
Selected Advisers, L.P. have caused this instrument to be signed in several
counterparts, each of which shall be an original and which together shall
constitute one and the same Agreement, by an officer or officers thereunto duly
authorized, as of the day and year first above written.

DAVIS VARIABLE ACCOUNT FUND, INC.

By:________________________________
Its:______________________________

DAVIS DISTRIBUTORS, LLC

By:________________________________
Its:_____________________________

<PAGE>

Exhibit (h)(2)

FORM OF
PARTICIPATION AGREEMENT

Among

DAVIS VARIABLE ACCOUNT FUND, INC.

DAVIS DISTRIBUTORS, LLC.

and

[NAME OF THE INSURANCE COMPANY]

THIS AGREEMENT, made and entered into this xx day of xx , 199 xx_ by
and among xx , (hereinafter the "Insurance Company"), a xx corporation, on its
own behalf and on behalf of each segregated asset account of the Insurance
Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), DAVIS VARIABLE
ACCOUNT FUND, INC., a Maryland Corporation (the "Company") and Davis
Distributors, LLC., a Colorado Limited Liability Company ("Davis
Distributors").

WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
variable annuity and life insurance contracts to be offered by separate
accounts of insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies") and for qualified retirement and pension plans ("Qualified Plans");
and

WHEREAS, the beneficial interest in the Company is divided into
several series of shares, each designated a "Fund" and representing the
interest in a particular managed portfolio of securities and other assets; and

WHEREAS, the Company has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated xxx, 1999 (File No. 812-xxxx), granting
Participating Insurance Companies and their separate accounts exemptions from
the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Company to be sold to and held by Qualified Plans and by variable annuity and
variable life insurance

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<PAGE>

separate accounts of life insurance companies that may or may not be affiliated
with one another (the "Mixed and Shared Funding Exemptive Order"); and

WHEREAS, the Company is registered as an open-end management
investment company under the 1940 Act and the offering of its shares is
registered under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and

WHEREAS, Davis Distributors is duly registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, (the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"); and

WHEREAS, Davis Distributors is a wholly owned subsidiary of Davis
Selected Advisers, L.P. which is duly registered as an investment adviser under
the Investment Advisers Act of 1940 and any applicable state securities law;
and

WHEREAS, the Insurance Company has registered under the 1933 Act, or
will register under the 1933 Act, certain variable annuity or variable life
insurance contracts identified by the form number(s) listed on Schedule B to
this Agreement, as amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"); and

WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and

WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds at
net asset value on behalf of each Account to fund the Contracts;

NOW, THEREFORE, in consideration of their mutual promises, the
Insurance Company, the Company and Davis Distributors agree as follows:

ARTICLE I. SALE OF COMPANY SHARES

1.1. Davis Distributors agrees to sell to the Insurance Company those
shares of the Company which each Account orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Company
or its designee of the order for the shares of the Company. For purposes of
this Section 1.1, the Insurance Company shall be the designee of the Company
for receipt of such orders from the Accounts and receipt by such designee shall
constitute receipt by the Company; provided that the Company receives notice of
such order by 9:00 a.m., Eastern Time, on the next following Business Day. In
this Agreement, "Business Day" shall mean

2
<PAGE>

any day on which the New York Stock Exchange is open for trading and on which
the Company calculates its net asset value pursuant to the rules of the SEC.

1.2. The Company agrees to make its shares available for purchase at
the applicable net asset value per share by the Insurance Company and its
Accounts on those days on which the Company calculates its Funds' net asset
values pursuant to rules of the SEC and the Company shall use reasonable
efforts to calculate its Funds' net asset values on each day on which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
directors of the Company may refuse to sell shares of any Fund to any person,
or suspend or terminate the offering of shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the directors of the Company acting in good faith and in
light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of that Fund.

1.3. The Company agrees that shares of the Company will be sold only
to Accounts of Participating Insurance Companies and to Qualified Plans. No
shares of any Fund will be sold to the general public.

1.4. The Company will not sell its shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Sections 2.4, 3.4, 3.5, and Sections 7.1 - 7.7 of this Agreement is in
effect to govern such sales.

1.5. The Company agrees to redeem, on the Insurance Company's request,
any full or fractional shares of the Company held by the Account, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Company or its designee of the request for redemption. However,
if one or more Funds has determined to settle redemption transactions for all
of its shareholders on a delayed basis (more than one business day, but in no
event more than three Business Days, after the date on which the redemption
order is received, unless otherwise permitted by an order of the SEC under
Section 22(e) of the 1940 Act), the Company shall be permitted to delay sending
redemption proceeds to the Insurance Company by the same number of days that
the Company is delaying sending redemption proceeds to the other shareholders
of the Fund. For purposes of this Section 1.5, the Insurance Company shall be
the designee of the Company for receipt of requests for redemption from each
Account and receipt by that designee shall constitute receipt by the Company;
provided that the Company receives notice of the request for redemption by 9:00
a.m., Eastern Time, on the next following Business Day.

1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund offered by the then-current prospectus of the Company in accordance
with the provisions of that prospectus.

1.7. The Insurance Company shall pay for Company shares by 3:00 p.m.,
Eastern Time, on the next Business Day after an order to purchase Company
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. For the

3
<PAGE>

purpose of Sections 2.9 and 2.10, upon receipt by the Company of the federal
funds so wired, such funds shall cease to be the responsibility of the Insurance
Company and shall become the responsibility of the Company. Payment of net
redemption proceeds (aggregate redemptions of a Fund's shares by an Account
minus aggregate purchases of that Fund's shares by that Account) for a given
Business Day will be made by wiring federal funds to the Insurance Company on
the next Business Day after receipt of the redemption request. However, payment
may be postponed under unusual circumstances, such as when normal trading is not
taking place on the New York Stock Exchange, an emergency as defined by the SEC
exists, or as permitted by the SEC.

1.8. Issuance and transfer of the Company's shares will be by book
entry only. Stock certificates will not be issued to the Insurance Company or
any Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.

1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital
gain distributions payable on a Fund's shares in additional shares of that
Fund. The Insurance Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Company shall notify the Insurance Company of the number of shares issued as
payment of dividends and distributions.

1.10. The Company shall make the net asset value per share for each
Fund available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 7:00 p.m.,
Eastern Time.

ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS

2.1. The Insurance Company represents, warrants and agrees that the
offerings of the Contracts are, or will be, registered under the 1933 Act; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with applicable state insurance
suitability requirements. The Insurance Company further represents that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established the Account prior to any
issuance or sale thereof as a segregated asset account under Section xx of the
xx Insurance Code and has registered, or warrants and agrees that prior to any
issuance or sale of the Contracts it will register, the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as
a segregated investment account for the Contracts.

2.2. The Company warrants and agrees that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in

4
<PAGE>

compliance with the laws of the State of Maryland and all applicable federal
securities laws and that the Company is and shall remain registered under the
1940 Act. The Company warrants and agrees that it shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The
Company shall register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Company or Davis Distributors.

2.3. The Company represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and warrants and agrees that it will make all
reasonable efforts to maintain its qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Insurance Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.

2.4. The Insurance Company represents that the Contracts are currently
treated as annuity or life insurance contracts under applicable provisions of
the Code and warrants and agrees that it will make every effort to maintain
such treatment and that it will notify the Company and Davis Distributors
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.

2.5. The Company may elect to make payments to finance distribution
expenses pursuant to Rule 12b-1 under the 1940 Act. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1, the Company
undertakes to have a board of directors, a majority of whom are not interested
persons of the Company, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.

2.6. The Company makes no representation warranties as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) complies or will comply with the insurance laws or
regulations of the various states.

2.7. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and represents, warrants and
agrees that it does and will comply in all material respects with the 1940 Act.

2.8. Davis Distributors represents that it is and warrants that it
shall remain duly registered as an broker-dealer under all applicable federal
and state securities laws and agrees that it shall perform its obligations for
the Company in compliance in all material respects with the laws of the State
of New Mexico and any applicable state and federal securities laws.

2.9. The Company and Davis Distributors represent and warrant that all
of their officers, employees, investment advisers, investment sub-advisers, and
other individuals or entities described in Rule 17g-1 under the 1940 Act
dealing with the money and/or securities of the Company are, and shall continue
to be at all times, covered by a blanket fidelity bond or similar

5
<PAGE>

coverage for the benefit of the Company in an amount not less than the minimum
coverage required currently by Rule 17g-1 under the 1940 Act or related
provisions as may be promulgated from time to time. That fidelity bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.

2.10. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
described in Rule 17g-1 under the 1940 Act are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Company, in an amount not less than the minimum coverage required currently
for entities subject to the requirements of Rule 17g-1 of the 1940 Act or
related provisions or may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.

ARTICLE III. DISCLOSURE DOCUMENTS AND VOTING

3.1. Davis Distributors shall provide the Insurance Company (at the
Insurance Company's expense) with as many copies of the Company's current
prospectus as the Insurance Company may reasonably request. If requested by the
Insurance Company in lieu thereof, the Company shall provide such documentation
(including a final copy of the new prospectus as set in type at the Company's
expense) and other assistance as is reasonably necessary in order for the
Insurance Company once each year (or more frequently if the prospectus for the
Company is amended) to have the prospectus for the Contracts and the Company's
prospectus printed together in one document (at the Insurance Company's
expense).

3.2. The Company's prospectus shall state that the Statement of
Additional Information for the Company (the "SAI") is available from the
Company, and Davis Distributors (or the Company), at its expense, shall print
and provide the SAI free of charge to the Insurance Company and to any owner of
a Contract or prospective owner who requests the SAI.

3.3. The Company, at its expense, shall provide the Insurance Company
with copies of its proxy material, reports to shareholders and other
communications to shareholders in such quantity as the Insurance Company shall
reasonably require for distributing to Contract owners.

3.4. If and to the extent required by law, the Insurance Company
shall:

(i) solicit voting instructions from Contract owners;

(ii) vote the Company shares in accordance with instructions
received from Contract owners; and

(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of that Fund
for which instructions have been received;

6
<PAGE>

so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each
of their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule C
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligation under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.

3.5. The Company will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Company will either
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or, as the Company currently
intends, comply with Section 16(c) of the 1940 Act as well as with Sections
16(a) and, if and when applicable, 16(b). Further, the Company will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the SEC
may promulgate with respect thereto.

ARTICLE IV. SALES MATERIAL AND INFORMATION

4.1. The Insurance Company shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company, Davis Selected Advisers, L.P.,
or Davis Distributors is named, at least fifteen calendar days prior to its
use. No such material shall be used if the Company or its designee objects to
such use within ten calendar days after receipt of such material.

4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company in connection with the sale of the Contracts other than the information
or representations contained in the Company's registration statement,
prospectus or SAI, as that registration statement, prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements
for the Company, or in sales literature or other promotional material approved
by the Company or its designee or by Davis Distributors, except with the
permission of the Company or Davis Distributors.

4.3. The Company, Davis Distributors, or its designee shall furnish,
or shall cause to be furnished, to the Insurance Company or its designee, each
piece of sales literature or other promotional material in which the Insurance
Company or the Account is named at least fifteen calendar days prior to its
use. No such material shall be used if the Insurance Company or its designee
objects to such use within ten calendar days after receipt of that material.

4.4. The Company and Davis Distributors shall not give any information
or make any representations on behalf of the Insurance Company or concerning
the Insurance Company, any

7
<PAGE>

Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus or statement of additional
information for the Contracts, as that registration statement, prospectus or
statement of additional information may be amended or supplemented from time to
time, or in published reports for any Account which are in the public domain or
approved by the Insurance Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Insurance Company
or its designee, except with the permission of the Insurance Company.

4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or
its shares, contemporaneously with the filing of the document with the SEC, the
National Association of Securities Dealers, Inc. ("NASD"), or other regulatory
authorities.

4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no-action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the SEC, the NASD, or other regulatory authorities.

4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, shareholder
newsletters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials.

4.8. At the request of any party to this Agreement, each other party
will make available to the other party's independent auditors and/or
representative of the appropriate regulatory agencies, all records, data and
access to operating procedures that may be reasonably requested.

8
<PAGE>

ARTICLE V. FEES AND EXPENSES

5.1. The Company and Davis Distributors shall pay no fee or other
compensation to the Insurance Company under this agreement, except as set forth
in Section 5.4 and except that if the Company or any Fund adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, Davis
Distributors or the Company may make payments to the Insurance Company in
amounts consistent with that 12b-1 plan, subject to review by the directors of
the Company.

5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that any
offering of its shares is registered and that all of its shares are authorized
for issuance in accordance with applicable federal law and, if and to the
extent deemed advisable by the Company or Davis Distributors, in accordance
with applicable state laws prior to their sale. The Company shall bear the cost
of registration and qualification of the Company's shares, preparation and
filing of the Company's prospectus and registration statement, proxy materials
and reports, setting the prospectus in type, setting in type and printing the
proxy materials and reports to shareholders, the preparation of all statements
and notices required by any federal or state law, and all taxes on the issuance
or transfer of the Company's shares.

5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and of distributing
to Contract owners the Company's prospectus, proxy materials and reports.

5.4. The Insurance Company bears the responsibility and correlative
expense for administrative and support services for Contract owners. Davis
Distributors recognizes the Insurance Company as the sole shareholder of shares
of the Company issued under this Agreement. From time to time, Davis
Distributors may pay amounts from its past profits to the Insurance Company for
providing certain administrative services for the Company or for providing
other services that relate to the Company. In consideration of the savings
resulting from such arrangement, and to compensate the Insurance Company for
its costs, Davis Distributors agrees to pay to the Insurance Company an amount
equal to 20 basis points (0.20%) per annum of the average aggregate amount
invested by the Insurance Company in the Company under this Agreement. Such
payments will be made monthly, and only when the average aggregate amount
invested exceeds $1,000,000. The parties agree that such payments are for
administrative services and investor support services, and do not constitute
payment for investment advisory, distribution or other services. Payment of
such amounts by Davis Distributors shall not increase the fees paid by the
Company or its shareholders.

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<PAGE>

ARTICLE VI. DIVERSIFICATION

6.1. The Company will comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5 relating to the diversification requirements for
variable annuity, endowment, modified endowment or life insurance contracts and
any amendments or other modifications to that Section or Regulation at all
times necessary to satisfy those requirements.

ARTICLE VII. POTENTIAL CONFLICTS

7.1. The directors of the Company will monitor the Company for the
existence of any material irreconcilable conflict between the interests of the
variable Contract owners of all separate accounts investing in the Company and
the participants of all Qualified Plans investing in the Company. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretive letter, or
any similar action by insurance, tax, or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Fund are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of variable contract owners. The
directors of the Company shall promptly inform the Insurance Company if they
determine that an irreconcilable material conflict exists and the implications
thereof. The directors of the Company shall have sole authority to determine
whether an irreconcilable material conflict exists and their determination
shall be binding upon the Insurance Company.

7.2. The Insurance Company and Davis Distributors each will report
promptly any potential or existing conflicts of which it is aware to the
directors of the Company. The Insurance Company and Davis Distributors each
will assist the directors of the Corporation in carrying out their
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the directors of the Corporation with all information reasonably
necessary for them to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the directors of
the Corporation whenever Contract owner voting instructions are to be
disregarded. These responsibilities shall be carried out by the Insurance
Company with a view only to the interests of the Contract owners and by Davis
Distributors with a view only to the interests of Contract holders and
Qualified Plan participants.

7.3. If it is determined by a majority of the directors of the
Corporation, or a majority of the directors who are not interested persons of
the Corporation, any of its Funds, or Davis Distributors (the "Independent
Directors"), that a material irreconcilable conflict exists, the Insurance
Company and/or other Participating Insurance Companies or Qualified Plans that
have executed participation agreements shall, at their expense and to the
extent reasonably practicable (as determined by a majority of the Independent
Directors), take whatever steps are necessary to remedy or eliminate the

10
<PAGE>

irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the separate accounts from the Corporation
or any Fund and reinvesting those assets in a different investment medium,
including (but not limited to) another Fund of the Corporation, or submitting
the question whether such segregation should be implemented to a vote of all
affected variable contract owners and, as appropriate, segregating the assets
of any appropriate group (e.g., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected variable contract owners the option of making such a change; and
(2) establishing a new registered management investment company or managed
separate account and obtaining any necessary approvals or orders of the SEC in
connection therewith.

7.4. If a material irreconcilable conflict arises because of a
decision by the Insurance Company to disregard Contract owner voting
instructions and that decision represents a minority position or would preclude
a majority vote, the Insurance Company may be required, at the Corporation's
election, to withdraw the affected Account's investment in the Corporation and
terminate this Agreement with respect to that Account; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
Independent Directors. Any such withdrawal and termination must take place
within six (6) months after the Corporation gives written notice that this
provision is being implemented, and, until the end of that six month period,
the Corporation shall continue to accept and implement orders by the Insurance
Company for the purchase (and redemption) of shares of the Corporation.

7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Corporation and
terminate this Agreement with respect to that Account within six months after
the directors of the Corporation inform the Insurance Company in writing that
they have determined that the state insurance regulator's decision has created
an irreconcilable material conflict; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the Independent
Directors. Until the end of the foregoing six month period, the Corporation
shall continue to accept and implement orders by the Insurance Company for the
purchase (and redemption) of shares of the Corporation.

7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Corporation be required to establish a new funding medium for
the Contracts. The Insurance Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the directors of the
Corporation determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Insurance Company will withdraw

11
<PAGE>

the Account's investment in the Corporation and terminate this Agreement within
six (6) months after the directors of the Corporation inform the Insurance
Company in writing of the foregoing determination, provided, however, that the
withdrawal and termination shall be limited to the extent required by the
material irreconcilable conflict, as determined by a majority of the Independent
Directors.

7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Corporation and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be necessary
to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted,
to the extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2,
7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent
that terms and conditions substantially identical to those Sections are
contained in the Rule(s) as so amended or adopted.

ARTICLE VIII. INDEMNIFICATION

8.1. INDEMNIFICATION BY THE INSURANCE COMPANY

8.1(a). The Insurance Company agrees to indemnify and hold harmless
the Corporation and each director, officer, employee or agent of the
Corporation, and each person, if any, who controls the Corporation within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Insurance Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale, acquisition, or redemption of the Corporation's shares or
the Contracts and:

(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished in writing to the

12
<PAGE>

Insurance Company by or on behalf of the Corporation for use
in the registration statement or prospectus for the Contracts
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or shares of the Corporation;

(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Corporation not supplied by the Insurance
Company, or persons under its control) or wrongful conduct of
the Insurance Company or persons under its control, with
respect to the sale or distribution of the Contracts or
Corporation Shares;

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Corporation
or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in
writing to the Corporation by or on behalf of the Insurance
Company;

(iv) arise as a result of any failure by the Insurance
Company to provide the services and furnish the materials
under the terms of this Agreement; or

(v) arise out of or result from any material breach of any
representation, warranty or agreement made by the Insurance
Company in this Agreement or arise out of or result from any
other material breach of this Agreement by the Insurance
Company,

as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.

8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party
that may arise from that Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of that Indemnified Party's duties or by
reason of that Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Corporation, whichever is applicable.

8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall

13
<PAGE>

have notified the Insurance Company in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon that Indemnified Party (or after the
Indemnified Party shall have received notice of such service on any designated
agent). Notwithstanding the foregoing, the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Insurance Company of its
obligations hereunder except to the extent that the Insurance Company has been
prejudiced by such failure to give notice. In addition, any failure by the
Indemnified Party to notify the Insurance Company of any such claim shall not
relieve the Insurance Company from any liability which it may have to the
Indemnified Party against whom the action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Insurance Company shall be entitled to participate,
at its own expense, in the defense of the action. The Insurance Company also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action; provided, however, that if the Indemnified Party
shall have reasonably concluded that there may be defenses available to it which
are different from or additional to those available to the Insurance Company,
the Insurance Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Insurance
Company be liable for the fees and expenses of more than one counsel for
Indemnified Parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances). After notice from the Insurance Company to the
Indemnified Party of the Insurance Company's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurance Company will not be liable to that party under
this Agreement for any legal or other expenses subsequently incurred by the
party independently in connection with the defense thereof other than reasonable
costs of investigation.

8.1(d). The Indemnified Parties will promptly notify the Insurance
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Corporation's shares or the
Contracts or the operation of the Corporation.

8.2. INDEMNIFICATION BY DAVIS DISTRIBUTORS

8.2(a). Davis Distributors agrees to indemnify and hold harmless the
Insurance Company and each of its directors, officers, employees or agents, and
each person, if any, who controls the Insurance Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 8.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
Davis Distributors) or litigation (including legal and other expenses) to which
the Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale, acquisition
or redemption of the Corporation's shares or the Contracts and:

14
<PAGE>

(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Corporation (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if the statement or omission or alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to Davis Distributors or the
Corporation by or on behalf of the Insurance Company for use
in the registration statement or prospectus for the
Corporation or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Corporation shares;

(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Contracts not supplied by Davis
Distributors or persons under its control) or wrongful
conduct of the Corporation, Davis Distributors or persons
under their control, with respect to the sale or distribution
of the Contracts or shares of the Corporation;

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished in writing to the Insurance Company by or on behalf
of the Corporation;

(iv) arise as a result of any failure by the Corporation to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the diversification requirements specified in Article VI of
this Agreement); or

(v) arise out of or result from any material breach of any
representation, warranty or agreement made by Davis
Distributors in

15
<PAGE>

this Agreement or arise out of or result from any other
material breach of this Agreement by Davis Distributors;

as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.

8.2(b) Davis Distributors shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party
that may arise from the Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of the Indemnified Party's duties or by
reason of the Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Insurance Company or the Account, whichever is
applicable.

8.2(c) Davis Distributors shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless the Indemnified Party shall have notified Davis Distributors in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve Davis Distributors of its obligations hereunder except to the extent
that Davis Distributors has been prejudiced by such failure to give notice. In
addition, any failure by the Indemnified Party to notify Davis Distributors of
any such claim shall not relieve Davis Distributors from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, Davis Distributors will be entitled to
participate, at its own expense, in the defense thereof. Davis Distributors
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action; provided, however, that if the Indemnified
Party shall have reasonably concluded that there may be defenses available to
it which are different from or additional to those available to Davis
Distributors, Davis Distributors shall not have the right to assume said
defense, but shall pay the costs and expenses thereof (except that in no event
shall Davis Distributors be liable for the fees and expenses of more than one
counsel for Indemnified Parties in connection with any one action or separate
but similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances). After notice from Davis Distributors to
the Indemnified Party of Davis Distributors' election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and Davis Distributors will not be liable to that party under
this Agreement for any legal or other expenses subsequently incurred by that
party independently in connection with the defense thereof other than
reasonable costs of investigation.

8.2(d) The Insurance Company agrees to notify Davis Distributors
promptly of the commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or sale of the
Contracts or the operation of the Account.

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<PAGE>

8.3 INDEMNIFICATION BY THE CORPORATION

8.3(a). The Corporation agrees to indemnify and hold harmless the
Insurance Company, and each of its directors, officers, employees and agents,
and each person, if any, who controls the Insurance Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as those losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements result from the gross negligence, bad faith
or willful misconduct of any director(s) of the Corporation, are related to the
operations of the Corporation and:

(i) arise as a result of any failure by the Corporation to
provide the services and furnish the materials under the
terms of this Agreement (including a failure to comply with
the diversification requirements specified in Article VI of
this Agreement); or

(ii) arise out of or result from any material breach of any
representation, warranty or agreement made by the Corporation
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Corporation;

as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.

8.3(b). The Corporation shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party that may arise
from the Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of the Indemnified Party's duties or by reason of
the Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Insurance Company, the Corporation, Davis Distributors or
the Account, whichever is applicable.

8.3(c). The Corporation shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
the Indemnified Party shall have notified the Corporation in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Corporation of its obligations hereunder except to the extent that
the Corporation has been prejudiced by such failure to give notice. In
addition, any failure by the Indemnified Party to notify the Corporation of any
such claim shall not relieve the Corporation from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Corporation will be entitled to
participate, at its own expense,

17
<PAGE>

in the defense thereof. The Corporation also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action;
provided, however, that if the Indemnified Party shall have reasonably concluded
that there may be defenses available to it which are different from or
additional to those available to the Corporation, the Corporation shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Corporation be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
the Corporation to the Indemnified Party of the Corporation's election to assume
the defense thereof, and in the absence of such a reasonable conclusion that
there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Corporation will not be liable to that party
under this Agreement for any legal or other expenses subsequently incurred by
that party independently in connection with the defense thereof other than
reasonable costs of investigation.

8.3(d). The Insurance Company and Davis Distributors agree promptly to
notify the Corporation of the commencement of any litigation or proceedings
against it or any of its respective officers or directors in connection with
this Agreement, the issuance or sale of the Contracts, the operation of the
Account, or the sale or acquisition of shares of the Corporation.

ARTICLE IX. APPLICABLE LAW

9.1. This Agreement shall be construed and provisions hereof
interpreted under and in accordance with the laws of the State of New Mexico.

9.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including any exemptions from those statutes, rules and regulations the SEC may
grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.

ARTICLE X. TERMINATION

10.1. This Agreement shall terminate:

(a) at the option of any party upon one year advance written notice to
the other parties; provided, however, such notice shall not be given
earlier than one year following the date of this Agreement; or

(b) at the option of the Insurance Company to the extent that shares
of Funds are not reasonably available to meet the requirements of the
Contracts as determined by the

18
<PAGE>

Insurance Company, provided, however, that such a termination shall
apply only to the Fund(s) not reasonably available. Prompt written
notice of the election to terminate for such cause shall be furnished
by the Insurance Company to the Corporation and Davis Distributors; or

(c) at the option of the Corporation or Davis Distributors, in the
event that formal administrative proceedings are instituted against
the Insurance Company by the NASD, the SEC, an insurance commissioner
or any other regulatory body regarding the Insurance Company's duties
under this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Corporation's shares,
provided, however, that the Corporation determines in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of
the Insurance Company to perform its obligations under this Agreement;
or

(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Corporation or
Davis Distributors by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided, however,
that the Insurance Company determines in its sole judgement exercised
in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Corporation or Davis
Distributors to perform its obligations under this Agreement; or

(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Fund shares in accordance with the terms of the
Contracts for which those Fund shares had been selected to serve as
the underlying investment media. The Insurance Company will give at
least 30 days' prior written notice to the Corporation of the date of
any proposed vote to replace the Corporation's shares; or

(f) at the option of the Insurance Company, in the event any of the
Corporation's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or exemptions therefrom, or
such law precludes the use of those shares as the underlying
investment media of the Contracts issued or to be issued by the
Insurance Company; or

(g) at the option of the Insurance Company, if the Corporation ceases
to qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the Insurance
Company reasonably believes that the Corporation may fail to so
qualify; or

(h) at the option of the Insurance Company, if the Corporation fails
to meet the diversification requirements specified in Article VI
hereof; or

19
<PAGE>

(i) at the option of either the Corporation or Davis Distributors, if
(1) the Corporation or Davis Distributors, respectively, shall
determine, in their sole judgment reasonably exercised in good faith,
that the Insurance Company has suffered a material adverse change in
its business or financial condition or is the subject of material
adverse publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business and
operations of either the Corporation or Davis Distributors, (2) the
Corporation or Davis Distributors shall notify the Insurance Company
in writing of that determination and its intent to terminate this
Agreement, and (3) after considering the actions taken by the
Insurance Company and any other changes in circumstances since the
giving of such a notice, the determination of the Corporation or Davis
Distributors shall continue to apply on the sixtieth (60th) day
following the giving of that notice, which sixtieth day shall be the
effective date of termination; or

(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably exercised in
good faith, that either the Corporation or Davis Distributors has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and that
material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of the
Insurance Company, (2) the Insurance Company shall notify the
Corporation and Davis Distributors in writing of the determination and
its intent to terminate the Agreement, and (3) after considering the
actions taken by the Corporation and/or Davis Distributors and any
other changes in circumstances since the giving of such a notice, the
determination shall continue to apply on the sixtieth (60th) day
following the giving of the notice, which sixtieth day shall be the
effective date of termination.

10.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 10.1(a) may be exercised for
any reason or for no reason.

10.3. No termination of this Agreement shall be effective unless and
until the party terminating this Agreement gives prior written notice to all
other parties to this Agreement of its intent to terminate, which notice shall
set forth the basis for the termination. Furthermore,

(a) In the event that any termination is based upon the
provisions of Article VII, or the provision of Section 10.1(a), 10.1(i),
10.1(j), or 10.1(k) of this Agreement, the prior written notice shall be given
in advance of the effective date of termination as required by those
provisions; and

(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, the prior written
notice shall be given at least ninety (90) days before the effective date of
termination.

10.4. Notwithstanding any termination of this Agreement, subject to
Section 1.2 of this Agreement and for so long as the Corporation continues to
exist, the Corporation and Davis

20
<PAGE>

Distributors shall at the option of the Insurance Company, continue to make
available additional shares of the Corporation pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement ("Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Corporation, redeem investments in the Corporation
and/or invest in the Corporation upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.4 shall not
apply to any terminations under Article VII and the effect of Article VII
terminations shall be governed by Article VII of this Agreement.

10.5. The Insurance Company shall not redeem Corporation shares
attributable to the Contracts (as opposed to Corporation shares attributable to
the Insurance Company's assets held in the Account) except (i) as necessary to
implement Contract-owner-initiated transactions, or (ii) as required by state
and/or federal laws or regulations or judicial or other legal precedent of
general application (a "Legally Required Redemption"). Upon request, the
Insurance Company will promptly furnish to the Corporation and Davis
Distributors the opinion of counsel for the Insurance Company (which counsel
shall be reasonably satisfactory to the Corporation and Davis Distributors) to
the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, the Insurance Company shall not prevent new
Contract owners from allocating payments to a Fund that formerly was available
under the Contracts without first giving the Corporation or Davis Distributors
90 days notice of its intention to do so.

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<PAGE>

ARTICLE XI. NOTICES

Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.

If to the Corporation:
124 E. Marcy Street
Santa Fe, New Mexico 87501
Attention: Thomas Tays, Vice President

If to the Insurance Company:

Attention:

If to Davis Distributors:
124 E. Marcy Street
Santa Fe, New Mexico 87501
Attention: Thomas Tays, Vice President

ARTICLE XII. MISCELLANEOUS

12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the affected party unless and until that information may
come into the public domain.

12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.

12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

12.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.

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12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit those authorities
reasonable access to its books and records in connection with any lawful
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.

12.6. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.

12.7. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns; provided, that no
party may assign this Agreement without the prior written consent of the
others.

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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative as of the date specified below.

Insurance Company:

xx
------------------
By its authorized officer,

By: __________________
Title: _______________
Date: ________________

Corporation:

DAVIS VARIABLE ACCOUNT FUND
By its authorized officer,

By: __________________
Title: _______________
Date: ________________

Davis Distributors:

DAVIS DISTRIBUTORS, LLC.
By its authorized officer,

By: __________________
Title: _______________
Date: ________________

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SCHEDULE A
ACCOUNTS

NAME OF ACCOUNT DATE OF RESOLUTION OF INSURANCE COMPANY'S
BOARD WHICH ESTABLISHED THE ACCOUNT

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SCHEDULE B
CONTRACTS

1. Contract Form____________

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SCHEDULE C
PROXY VOTING PROCEDURE

The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Corporation by Davis Distributors, the
Corporation and the Insurance Company. The defined terms herein shall have the
meanings assigned in the Participation Agreement except that the term
"Insurance Company" shall also include the department or third party assigned
by the Insurance Company to perform the steps delineated below.

1. The number of proxy proposals is given to the Insurance Company by
Davis Distributors as early as possible before the date set by the
Corporation for the shareholder meeting to facilitate the
establishment of tabulation procedures. At this time Davis
Distributors will inform the Insurance Company of the Record, Mailing
and Meeting dates. This will be done verbally approximately two months
before meeting.

2. Promptly after the Record Date, the Insurance Company will perform a
"tape run", or other activity, which will generate the names,
addresses and number of units which are attributed to each
contract-owner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this date
that could affect the status of the Customers' accounts of the Record
Date.

Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best efforts to call
in the number of Customers to Davis Distributors, as soon as possible, but no
later than one week after the Record Date.

3. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Insurance Company by the Corporation. The
Insurance Company, at its expense, shall produce and personalize the
Voting Instruction cards. Davis Distributors must approve the Card
before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the
Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as
printed by the Corporation).
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)

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4. During this time, Davis Distributors will develop, produce, and the
Corporation will pay for the Notice of Proxy and the Proxy Statement
(one document). Printed and folded notices and statements will be sent
to Insurance Company for insertion into envelopes (envelopes and
return envelopes are provided and paid for by the Insurance Company).
Contents of envelope sent to customers by Insurance Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Insurance
Company) addressed to the Insurance Company or its
tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is
a small, single sheet of paper that requests
Customers to vote as quickly as possible and that
their vote is important. One copy will be supplied by
the Corporation.)
e. Cover letter - optional, supplied by Insurance
Company and reviewed and approved in advance by
Davis Distributors.

5. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date. Individual in charge
at Insurance Company reviews and approves the contents of the mailing
package to ensure correctness and completeness. Copy of this approval
sent to Davis Distributors.

6. Package mailed by the Insurance Company.
* The Corporation must allow at least a 15-day solicitation
time to the Insurance Company as the shareowner. (A 5-week
period is recommended.) Solicitation time is calculated as
calendar days from (but not including) the meeting, counting
backwards.

7. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.

Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure.

8. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to the Customer with an
explanatory letter, a new Card and return envelope. The mutilated or
illegible Card is disregarded and considered to be not received for
purposes of vote tabulation. Such mutilated or illegible Cards are
"hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied
individually.

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9. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.

10. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Corporation
receives the tabulations stated in terms of a percentage and the
number of shares.) Davis Distributors must review and approve
tabulation format.

11. Final tabulation in shares is verbally given by the Insurance Company
to Davis Distributors on the morning of the meeting not later than
1:00 p.m. Eastern time. Davis Distributors may request an earlier
deadline if required to calculate the vote in time for the meeting.

12. A Certificate of Mailing and Authorization to Vote Shares will be
required from the Insurance Company as well as an original copy of the
final vote. Davis Distributors will provide a standard form for each
Certification.

13. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged
or if otherwise necessary for legal, regulatory, or accounting
purposes, Davis Distributors will be permitted reasonable access to
such Cards.

14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.