DAVIS VARIABLE ACCOUNT FUND INC, 485BPOS, 2000-04-25

DAVIS VARIABLE ACCOUNT FUND INC
485BPOS, 2000-04-25

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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. 333-76407
POST-EFFECTIVE AMENDMENT NO. 2

AND

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-9293
POST EFFECTIVE AMENDMENT NO. 2

DAVIS VARIABLE ACCOUNT FUND, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
(1-505-820-3000)

Agents For Service: Thomas D. Tays, Esq.
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
1-520-434-3771

-or-

Sheldon R. Stein, Esq.
D'Ancona & Pflaum
111 East Wacker Drive
Suite 2800
Chicago IL 60601-4205
(1-312-602-2014)

It is proposed that this filing will become effective:
Immediately upon filing pursuant to paragraph (b)
-----
X On May 1, 2000, pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a)(1)
-----
On _____, pursuant to paragraph (a)(1) of Rule 485
-----
75 days after filing pursuant to paragraph (a)(2)
-----
On________, pursuant to paragraph (a)(2) of Rule 485
-----

<PAGE>

Title of Securities being Registered: Common Stock of:

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

<PAGE>

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

POST-EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION
STATEMENT NO. 333-76407 UNDER THE SECURITIES ACT OF 1933
AND POST EFFECTIVE AMENDMENT NO. 2 UNDER THE
INVESTMENT COMPANY ACT OF 1940
TO REGISTRATION STATEMENT NO. 811-09293.

CROSS REFERENCE SHEET
N-1A
ITEM NO. PART A CAPTION OR PLACEMENT: SEPARATE PROSPECTUSES FOR :
DAVIS VALUE PORTFOLIO, DAVIS FINANCIAL PORTFOLIO, AND
DAVIS REAL ESTATE PORTFOLIO

1. Front and Back Cover pages
2. Investment Objective and Strategies
The Davis Investment Philosophy
Principal Risks of Investing in Davis Value Portfolio
Performance Information
3. Not applicable, information included in "wrap" prospectus
4. The Adviser's Performance History
5. 1999 Annual Report
6. The Adviser and Sub-Adviser
7. Not applicable
8. Purchase and Redemption of Shares
9. Financial Highlights,

N-1A
ITEM NO. PART A CAPTION OR PLACEMENT: COMBINED 3 IN 1 PROSPECTUS FOR:
DAVIS VALUE PORTFOLIO, DAVIS FINANCIAL PORTFOLIO, AND DAVIS
REAL ESTATE PORTFOLIO

1. Front and Back Cover pages
2. Investment Objective and Strategies
Principal Risks of Investing in [each portfolio]
Performance Information
3. Not applicable, information included in "wrap" prospectus
4. The Davis Investment Philosophy
The Adviser's Performance History
5. 1999 Annual Report

<PAGE>

6. The Adviser and Sub-Adviser
7. Not applicable
8. Purchase and Redemption of Shares
9. Financial Highlights,

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
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

<PAGE>

DAVIS VALUE PORTFOLIO

(A Portfolio of Davis Variable Account Fund, Inc.)

May 1, 2000

This prospectus contains important information. Please read it carefully before
investing and keep it for future reference.

Davis Value Portfolio is sold exclusively to insurance company separate accounts
for variable annuity and variable life insurance contracts.

An investment in Davis Value Portfolio is not a deposit in a bank and is neither
insured nor guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. There is a risk that you could lose a portion or all of your
investment.

The Securities and Exchange Commission has neither approved nor disapproved of
these securities, nor has it determined whether this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a crime.

<PAGE>

TABLE OF CONTENTS

DAVIS VALUE PORTFOLIO
Investment Objective and Strategies
The Davis Investment Philosophy
Principal Risks of Investing in Davis Value Portfolio
Performance Information

DAVIS MANAGEMENT
The Adviser and Sub-Adviser
The Adviser's Performance History
Adviser Compensation
Senior Research Adviser and Founder, Portfolio Managers

OTHER INFORMATION
Purchase and Redemption of Shares
Pricing of Shares
Taxes
Dividends and Distributions
Financial Highlights

OBTAINING ADDITIONAL INFORMATION

<PAGE>

DAVIS VALUE PORTFOLIO

INVESTMENT OBJECTIVE AND STRATEGIES

Davis Value Portfolio's investment objective is growth of capital. The Fund
invests primarily in common stock of U.S. companies with market capitalizations
of at least $5 billion that we believe are of high quality and whose shares are
selling at attractive prices. We select stocks with the intention of holding
them for the long term. We believe that managing risk is the key to delivering
superior long-term investment results; therefore, we consider how much could
potentially be lost on an investment before considering how much might be
gained.

THE DAVIS INVESTMENT PHILOSOPHY

Davis Value Portfolio is managed using the Davis investment philosophy which
stresses a back-to-basics approach. We use extensive research to buy growing
companies at value prices and hold on to them for the long term. We look for
companies with sustainable growth rates selling at modest price-earnings
multiples that we hope will expand as other investors recognize the companies'
true worth.

Over the years, Davis Selected Advisers, L.P. has developed a list of 10
characteristics that we believe allow companies to sustain long-term growth and
minimize risks to enhance their potential for superior long-term returns.
Although few companies exhibit all 10 characteristics, we search for those
possessing:

o Excellent management.
o Managers who own stock in their own company.
o Strong returns on investments of its capital.
o A lean expense structure.
o A dominant or growing market share in a growing market.
o A proven record as an acquirer.
o A strong balance sheet.
o Products or services that are not likely to become obsolete.
o Successful international operations.
o Innovation in all aspects of operations.

We emphasize individual stock selection and believe that the ability to evaluate
management is critical. We routinely visit the managers at their places of
business in order to gain insight into the relative value of different
businesses.

PRINCIPAL RISKS OF INVESTING IN DAVIS VALUE PORTFOLIO

There is a risk that you could lose all or a portion of your investment in Davis
Value Portfolio. The value of your investment in the Fund will vary with the
prices of the securities in which the Fund invests. This section describes what
we think are the most significant factors that can cause Davis Value Portfolio's
performance to suffer.

>> MARKET RISK. The market value of shares of common stock can change rapidly
and unpredictably as a result of political or economic events having little
or nothing to do with the performance of the company.

<PAGE>

>> COMPANY RISK. The price of a common stock varies with the success and
failure of its issuer. As a result, the success of the companies in which
Davis Value Portfolio invests largely determines the Fund's performance.

PERFORMANCE INFORMATION

Davis Value Portfolio began selling shares to the public on July 1, 1999. The
past performance of the Fund will be included in the next annual update of the
Fund's prospectus after it has been offered to the public for a full calendar
year.

DAVIS MANAGEMENT

THE ADVISER AND SUB-ADVISER

Davis Selected Advisers, L.P. ("Adviser") serves as the investment adviser for
each of the Davis Funds, including Davis Value Portfolio. The Adviser's offices
are located at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706. The
Adviser provides investment advice for each of the Davis Funds, manages their
business affairs, and provides day-to-day administrative services. The Adviser
also serves as investment adviser for other mutual funds and institutional
clients.

Davis Selected Advisers-NY, Inc. ("Sub-Adviser") serves as the sub-adviser for
each of the Davis Funds, including Davis Value Portfolio. The Sub-Adviser's
offices are located at 609 Fifth Avenue, New York, New York 10017. The
Sub-Adviser provides investment management and research services for the Davis
Funds and other institutional clients, and is a wholly owned subsidiary of Davis
Selected Advisers, L.P. The Sub-Adviser's fee is paid by Davis Selected
Advisers, not Davis Value Portfolio.

THE ADVISER'S PERFORMANCE HISTORY

Davis Value Portfolio was first offered to the public on July 1, 1999, and does
not yet have a performance record covering a full calendar year; however, Davis
Selected Advisers has been managing accounts in a similar style for a number of
years. The performance results presented in the table that follows should not be
considered predictions of the future performance of Davis Value Portfolio. DAVIS
VALUE PORTFOLIO'S PERFORMANCE MAY BE EITHER HIGHER OR LOWER THAN THE DAVIS LARGE
CAP EQUITY COMPOSITE PRESENTED AS FOLLOWS.

The Davis Large Cap Equity Composite performance history includes all accounts
with investment objectives, policies and strategies substantially similar
(although not necessarily identical) to those used by Davis Selected Advisers in
managing Davis Value Portfolio. Mutual funds and private accounts may be
included in the performance history. Private accounts are not subject to certain
investment limitations, diversification requirements, and other restrictions
imposed by the 1940 Act and the Internal Revenue Code, which, if applicable,
might adversely affect the performance results.

The performance history compares the Davis Large Cap Equity Composite on an
annualized asset-weighted basis against the S&P 500(R) Index. Composite

<PAGE>

performance is presented net of the Fund's annual operating expenses of 1.00%.
The Adviser is contractually committed to waive fees and/or reimburse the Fund's
expenses to the extent necessary to cap total annual fund operating expenses at
1.00% until May 1, 2001; after that date, there is no assurance that expenses
will be capped. Davis Large Cap Equity Composite performance is computed using
an internal time-weighted rate of return for each account (including every
private account and every mutual fund in the composite), weighted for the
relative size of each account using beginning of period values.

The insurance company's charges would have lowered the Composite Returns
presented below. The calculation used to measure the performance of a composite
is different from the standardized SEC method used to measure the performance of
a single mutual fund. The S&P 500(R) Index is a widely recognized unmanaged
index of large capitalization stock performance.

THE PERFORMANCE INFORMATION SET FORTH AS FOLLOWS FOR DAVIS SELECTED ADVISERS
DOES NOT REPRESENT THE PERFORMANCE OF DAVIS VALUE PORTFOLIO.

DAVIS LARGE CAP EQUITY COMPOSITE RETURNS VS. S&P 500(R) INDEX
(For the periods ended December 31, 1999)

- ----------------------------- ------------------ ----------------- --------------------- --------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SINCE JANUARY 1,
1970
- ----------------------------- ------------------ ----------------- --------------------- --------------------
<S> <C> <C> <C> <C>
- ----------------------------- ------------------ ----------------- --------------------- --------------------
DAVIS LARGE CAP EQUITY
COMPOSITE 17.90% 26.55% 18.72% 14.95%
- ----------------------------- ------------------ ----------------- --------------------- --------------------
S&P 500(R)INDEX 21.04% 28.51% 18.17% 13.69%
- ----------------------------- ------------------ ----------------- --------------------- --------------------
</TABLE>

As of December 31, 1999, the composite included 28 accounts with aggregate
assets of $23.7 billion.

ADVISER COMPENSATION

The Adviser's compensation for its services (based on average net assets) was
0.75%.

SENIOR RESEARCH ADVISER AND FOUNDER, PORTFOLIO MANAGERS

SHELBY M.C. DAVIS serves as Senior Research Adviser and Founder of Davis
Selected Advisers. He previously served as Davis New York Venture Fund's
Portfolio Manager from its inception until February 1997 and served as President
of the Davis Funds until March 2000. The Davis Funds are a family of mutual
funds managed by the Adviser, including the Davis Value Portfolio, Davis
Financial Portfolio, and Davis Real Estate Portfolio.

CHRISTOPHER C. DAVIS has served as Portfolio Manager of Davis Value Portfolio
with Kenneth Charles Feinberg since inception of the Fund, July 1, 1999, and
also manages other equity funds advised by Davis Selected Advisers. He has
served as Portfolio Manager of various equity funds managed by Davis Selected
Advisers since October 1995. Mr. Davis served as Assistant Portfolio Manager and
research analyst working with Shelby M.C. Davis from September 1989 through
September 1995.

KENNETH CHARLES FEINBERG has served as Portfolio Manager of Davis Value
Portfolio with Christopher C. Davis since the inception of the Fund, July 1,
1999, and also manages other equity funds advised by Davis Selected Advisers. He
has served as

<PAGE>

Portfolio Manager of various equity funds managed by Davis
Selected Advisers since May 1997. Mr. Feinberg started with Davis Selected
Advisers as a research analyst in December 1994.

OTHER INFORMATION

PURCHASE AND REDEMPTION OF SHARES

We ordinarily effect orders to purchase and redeem shares at the Fund's next
computed net asset value after we have received an order. Life insurance
companies participating in the Fund serve as our designee for receiving orders
of separate accounts that invest in the Fund.

The Fund has adopted a plan under Rule 12b-1 allowing the payment of up to 0.25%
for distribution expenses. If, in the future, the Fund begins making payments
under the plan, then these fees would be paid out of the Fund's assets on an
ongoing basis. Over time, these fees would increase the cost of your investment
and may cost you more than paying other types of sales charges. Currently, the
Fund does not intend to make any payments under this plan.

PRICING OF SHARES

We use current market valuations to price the securities in the Fund. Securities
that trade on an organized exchange are valued at the last published sales price
on the exchange. If no sales are recorded, the securities are valued at the
average of the closing bid and asked prices on the exchange. Over-the-counter
securities are valued at the average of closing bid and asked prices. Debt
securities purchased with a maturity of one year or less are usually valued at
amortized cost. Longer-term debt securities may be valued by an independent
pricing service. Securities with unavailable market quotations and other assets
are valued at "fair value" as determined by the Board of Directors.

If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time their
prices are determined and the time the Fund's shares are priced will generally
not be reflected in the Fund's share price. The net asset value of the Fund's
shares may change on days when shareholders will not be able to purchase or
redeem the Fund's shares.

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 and Trust Company, our
custodian bank. Fluctuation in the value of foreign currencies in relation to
the U.S. dollar may affect the net asset value of the Fund's shares even if
there has not been any change in the foreign currency price of the Fund's
investments.

<PAGE>

TAXES

Davis Value Portfolio has elected to be taxed as a "regulated investment
company" under the provisions of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). If the Fund continues to qualify as a regulated
investment company and complies with the appropriate provisions of the Code, it
will pay no federal income taxes on the amounts it distributes.

Because the Fund's shareholders are insurance companies (such as the one that
issues your contract), no discussion of the federal income tax consequences to
shareholders is included herein. For information about the federal income tax
consequences of purchasing the contracts, see the prospectus for your contract.

DIVIDENDS AND DISTRIBUTIONS

Davis Value Portfolio generally declares and pays dividends and short-term and
long-term capital gains, if any, annually. All dividends and capital gains are
paid to separate accounts of participating insurance companies. At the election
of these companies, dividends and distributions are automatically reinvested at
net asset value in shares of the Fund.

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Davis Value
Portfolio for the period from July 1, 1999 (commencement of operations) through
December 31, 1999, assuming that all dividends and capital gains have been
reinvested. Some of the information reflects financial results for a single Fund
share

The information has been audited by KPMG LLP. KPMG LLP's report, along with the
Fund's financial statements, is included in the annual report which is available
upon request.

<PAGE>

FINANCIAL HIGHLIGHTS

DAVIS VALUE PORTFOLIO
JULY 1, 1999 (COMMENCEMENT OF
OPERATION) THROUGH DECEMBER 31, 1999

The following financial information represents data for each share of capital
stock outstanding throughout each period:

Net Asset Value, Beginning of Period $ 10.00

Income From Investment Operations
Net Investment Income 0.01
Net Realized and Unrealized Gains (Losses) 0.25
Total From Investment Operations 0.26

Dividends and Distributions
Dividends from Net Investment Income (0.01)
Return of Capital (3)
--------
Total Dividends and Distributions (0.01)

Net Asset Value, End of Period $ 10.25
---------

Total Return(1) 2.64%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 12,668
Ratio of Expenses to Average Net Assets 1.00%*(4)
Ratio of Net Investment Income to Average Net Assets 0.43%*
Portfolio Turnover Rate(2) 5.00%

1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one year.

2 The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.

3 Less than $0.005 per share.

4 Had the Adviser not absorbed certain expenses the ratio of expenses to
average net assets would have been 2.29% for Davis Value Portfolio.

* Annualized

<PAGE>

OBTAINING ADDITIONAL INFORMATION

For more information about Davis Value 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 the Fund's
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.

The Fund'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:

>> FROM YOUR INSURANCE COMPANY OR YOUR ACCOUNT REPRESENTATIVE. Your
Insurance Company or Account Representative can provide
you with copies of these documents.

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

>> FROM THE SEC. The SEC's Public Reference Room in Washington, D.C.
For more information on the operations of the Public
Reference Room call 1-800-SEC-0330. Additional copies of this
information can be obtained, for a duplicating fee, by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-6009.

Investment Company Act File No. 811-9293

<PAGE>

DAVIS FINANCIAL PORTFOLIO

(A Portfolio of Davis Variable Account Fund, Inc.)

May 1, 2000

This prospectus contains important information. Please read it carefully before
investing and keep it for future reference.

Davis Financial Portfolio is sold exclusively to insurance company separate
accounts for variable annuity and variable life insurance contracts.

An investment in Davis Financial Portfolio is not a deposit in a bank and is
neither insured nor guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. There is a risk that you could lose a portion or
all of your investment.

<PAGE>

TABLE OF CONTENTS

DAVIS FINANCIAL PORTFOLIO
Investment Objective and Strategies
The Davis Investment Philosophy
Principal Risks of Investing in Davis Financial Portfolio
Performance Information

DAVIS MANAGEMENT
The Adviser and Sub-Adviser
The Adviser's Performance History
Adviser Compensation
Senior Research Adviser and Founder, Portfolio Managers

OTHER INFORMATION
Purchase and Redemption of Shares
Pricing of Shares
Taxes
Dividends and Distributions
Financial Highlights

OBTAINING ADDITIONAL INFORMATION

<PAGE>

DAVIS FINANCIAL PORTFOLIO

INVESTMENT OBJECTIVE AND STRATEGIES

Davis Financial Portfolio's investment objective is growth of capital. The Fund
invests primarily in the common stock of financial companies. During normal
market conditions, at least 65% of the Fund's assets are invested in companies
"principally engaged" in financial services.

A company is "principally engaged" in financial services if it owns financial
services related assets constituting at least 50% of the total value of its
assets, or if at least 50% of its revenues are derived from its provision of
financial services. Companies in the financial services industry include
commercial banks, industrial banks, savings institutions, finance companies,
diversified financial services companies, investment banking firms, securities
brokerage houses, investment advisory companies, leasing companies, insurance
companies, and companies providing similar services.

THE DAVIS INVESTMENT PHILOSOPHY

Davis Financial Portfolio is managed using the Davis investment philosophy,
which stresses a back-to-basics approach. We use extensive research to buy
growing companies at value prices and hold on to them for the long term. We look
for companies with sustainable growth rates selling at modest price-earnings
multiples that we hope will expand as other investors recognize the companies'
true worth.

Over the years, Davis Selected Advisers, L.P., has developed a list of 10
characteristics that we believe allow companies to sustain long-term growth and
minimize risks to enhance their potential for superior long-term returns.
Although few companies exhibit all 10 characteristics, we search for those
possessing:

We emphasize individual stock selection and believe that the ability to evaluate
management is critical. We routinely visit the managers at their place of
business in order to gain insight into the relative value of different
businesses.

<PAGE>

PRINCIPAL RISKS OF INVESTING IN DAVIS FINANCIAL PORTFOLIO

There is a risk that you could lose all or a portion of your investment in Davis
Financial Portfolio. The value of your investment in the Fund will vary with the
prices of the securities in which the Fund invests. This section describes what
we think are the most significant factors that can cause Davis Financial
Portfolio's performance to suffer.

>> COMPANY RISK. The price of a common stock varies with the success and
failure of its issuer. As a result, the success of the companies in which
Davis Financial Portfolio invests largely determines the Fund's
performance.

>> CONCENTRATED FINANCIAL SERVICES PORTFOLIO. Davis Financial Portfolio
invests primarily in a single market sector, and any fund that has a
concentrated portfolio is particularly vulnerable to the risks of its
target sector. Risks of investing in the financial services sector include:

o REGULATORY ACTIONS. Financial services companies may suffer a setback
if regulators change the rules under which they operate.

o CHANGES IN INTEREST RATES. Unstable interest rates can have a
disproportionate effect on the financial services industry.

o CONCENTRATION OF LOANS. Financial services companies whose securities
Davis Financial Portfolio purchases may themselves have concentrated
portfolios, such as a high level of loans to real estate developers,
which makes them vulnerable to economic conditions that affect that
industry.

o COMPETITION. The financial services industry has become increasingly
competitive.

PERFORMANCE INFORMATION

Davis Financial Portfolio began selling shares to the public on July 1, 1999.
The past performance of the Fund will be included in the next annual update of
the Fund's prospectus after it has been offered to the public for a full
calendar year.

<PAGE>

DAVIS MANAGEMENT

THE ADVISER AND SUB-ADVISER

Davis Selected Advisers, L.P. ("Adviser") serves as the investment adviser for
each of the Davis Funds, including Davis Financial Portfolio. The Adviser's
offices are located at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706.
The Adviser provides investment advice for each of the Davis Funds, manages
their business affairs, and provides day-to-day administrative services. The
Adviser also serves as investment adviser for other mutual funds and
institutional clients.

Davis Selected Advisers-NY, Inc. ("Sub-Adviser") serves as the sub-adviser for
each of the Davis Funds, including Davis Financial Portfolio. The Sub-Adviser's
offices are located at 609 Fifth Avenue, New York, New York 10017. The
Sub-Adviser provides investment management and research services for the Davis
Funds and other institutional clients, and is a wholly owned subsidiary of Davis
Selected Advisers, L.P. The Sub-Adviser's fee is paid by Davis Selected
Advisers, not Davis Financial Portfolio.

THE ADVISER'S PERFORMANCE HISTORY

Davis Financial Portfolio was first offered to the public on July 1, 1999, and
does not yet have a performance record covering a full calendar year; however,
Davis Selected Advisers has been managing accounts in similar styles for a
number of years. The performance results presented in the table that follows
should not be considered predictions of the future performance of Davis
Financial Portfolio. DAVIS FINANCIAL PORTFOLIO'S PERFORMANCE MAY BE EITHER
HIGHER OR LOWER THAN THE DAVIS FINANCIAL COMPOSITE PRESENTED AS FOLLOWS.

The Davis Financial Composite performance history includes all accounts with
investment objectives, policies and strategies substantially similar (although
not necessarily identical) to those used by Davis Selected Advisers in managing
Davis Financial Portfolio. Mutual funds and private accounts may be included in
the performance history. Private accounts are not subject to certain investment
limitations, diversification requirements, and other restrictions imposed by the
1940 Act and the Internal Revenue Code, which, if applicable, might adversely
affect the performance results.

The performance history compares the Davis Financial Composite on an annualized
asset-weighted basis against the S&P 500(R) Index. Composite performance is
presented net of the Fund's annual operating expenses of 1.00%. The Adviser is
contractually committed to waive fees and/or reimburse the Fund's expenses to
the extent necessary to cap total annual fund operating expenses at 1.00% until
May 1, 2001; after that date, there is no assurance that expenses will be
capped. Davis Financial composite performance is computed using an internal
time-weighted rate of return for each account (including every private account
and every mutual fund in the composite), weighted for the relative size of each
account using beginning of period values.

The insurance company's charges would have lowered the Composite Returns
presented as follows. The calculation used to measure the performance of a

<PAGE>

composite is different from the standardized SEC method used to measure the
performance of a single mutual fund. The S&P 500(R) Index is a widely recognized
unmanaged index of large capitalization stock performance.

THE PERFORMANCE INFORMATION SET FORTH BELOW FOR DAVIS SELECTED ADVISERS DOES NOT
REPRESENT THE PERFORMANCE OF DAVIS FINANCIAL PORTFOLIO.

DAVIS FINANCIAL COMPOSITE RETURNS VS. S&P 500(R) INDEX
(For the periods ended December 31, 1999)
<TABLE>
<CAPTION>

- -------------------------------------------- ------------ ------------- ------------ -------------------
PAST 1 YEAR PAST 3 YEARS PAST 5 YEARS SINCE JANUARY 1,
1992
- -------------------------------------------- ------------ ------------- ------------ -------------------
<S> <C> <C> <C> <C>
- -------------------------------------------- ------------ ------------- ------------ -------------------
DAVIS FINANCIAL COMPOSITE (0.84)% 18.04% 26.81% 21.77%
- -------------------------------------------- ------------ ------------- ------------ -------------------
S&P 500(R)INDEX 21.04% 27.56% 28.51% 19.66%
- -------------------------------------------- ------------ ------------- ------------ -------------------
</TABLE>

As of December 31, 1999, the composite included six accounts with aggregate
assets of $919.7 million.

ADVISER COMPENSATION

The Adviser's compensation for its services (based on average net assets) was
0.75%.

SENIOR RESEARCH ADVISER AND FOUNDER, PORTFOLIO MANAGERS

SHELBY M.C. DAVIS serves as Senior Research Adviser and Founder of Davis
Selected Advisers. He previously served as Davis New York Venture Fund's
Portfolio Manager from its inception in 1969 until February 1997, and served as
President of the Davis Funds until March 2000. The Davis Funds are a family of
mutual funds managed by the Adviser, including the Davis Value Portfolio, Davis
Financial Portfolio, and Davis Real Estate Portfolio.

CHRISTOPHER C. DAVIS has served as Portfolio Manager of Davis Financial
Portfolio with Kenneth Charles Feinberg since inception of the Fund, July 1,
1999, and also manages other equity funds advised by Davis Selected Advisers. He
has served as Portfolio Manager of various equity funds managed by Davis
Selected Advisers since October 1995. Mr. Davis served as assistant Portfolio
Manager and research analyst working with Shelby M.C. Davis from September 1989
through September 1995.

KENNETH CHARLES FEINBERG has served as Portfolio Manager of Davis Financial
Portfolio with Christopher C. Davis since the inception of the Fund, July 1,
1999, and also manages other equity funds advised by Davis Selected Advisers. He
has served as Portfolio Manager of various equity funds managed by Davis
Selected Advisers since May 1997. Mr. Feinberg started with Davis Selected
Advisers as a research analyst in December 1994.

<PAGE>

OTHER INFORMATION

PURCHASE AND REDEMPTION OF SHARES

The Fund has adopted a plan under Rule 12b-1 allowing the payment of up to 0.25%
for distribution expenses. If, in the future, the Fund begins making payments
under the plan, then these fees would be paid out of the Fund's assets on an
ongoing basis. Over time, these fees would increase the cost of your investment
and may cost you more than paying other types of sales charges. Currently the
Fund does not intend to make any payments under this plan.

PRICING OF SHARES

If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time their
prices are determined and the time the Fund's shares are priced will generally
not be reflected in the Fund's share price. The next asset value of the Fund's
shares may change on days when shareholders will not be able to purchase or
redeem the Fund's shares.

TAXES

Davis Financial Portfolio has elected to be taxed as a "regulated investment
company" under the provisions of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). If the Fund continues to qualify as a regulated
investment company and complies with the appropriate provisions of the Code, it
will pay no federal income taxes on the amounts it distributes.

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

Davis Financial Portfolio generally declares and pays dividends and short-term
and long-term capital gains, if any, annually. All dividends and capital gains
are paid to separate accounts of participating insurance companies. At the
election of these companies, dividends and distributions are automatically
reinvested at net asset value in shares of the Fund.

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Davis Financial
Portfolio for the period from July 1, 1999 (commencement of operations) through
December 31, 1999, assuming that all dividends and capital gains have been
reinvested. Some of the information reflects financial results for a single Fund
share. The total returns represent the rate that an investor would have earned
(or lost) money on an investment in the Fund.

The information has been audited by KPMG LLP. KPMG LLP's report, along with the
Fund's financial statements, is included in the annual report, which is
available upon request.

<PAGE>

FINANCIAL HIGHLIGHTS

DAVIS FINANCIAL PORTFOLIO
JULY 1, 1999 (COMMENCEMENT OF
OPERATION) THROUGH DECEMBER 31, 1999

The following financial information represents data for each share of capital
stock outstanding throughout each period:

Net Asset Value, Beginning of Period $ 10.00

Income From Investment Operations 0.02
Net Investment Income (0.74)
---------
Total From Investment Operations (0.72)

Dividends and Distributions
Dividends from Net Investment Income (0.02)
Return of Capital (3)
---------
Total Dividends and Distributions (0.02)
---------
Net Asset Value, End of Period $ 9.26
=========

Total Return(1) (7.17)%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 3,471
Ratio of Expenses to Average Net Assets 1.00%*(4)
Portfolio Turnover Rate(2) 9%

3 Less than $0.005 per share.

4 Had the Adviser not absorbed certain expenses the ratio of expenses
to average net assets would have been 4.24% for Davis Financial
Portfolio.

* Annualized

<PAGE>

OBTAINING ADDITIONAL INFORMATION

For more information about Davis Financial 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 the Fund's
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.

The Fund'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:

>> FROM YOUR INSURANCE COMPANY OR YOUR ACCOUNT REPRESENTATIVE. Your
Insurance Company or Account Representative can provide you with
copies of these documents.

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

>> FROM THE SEC. The SEC's Public Reference Room in Washington, D.C.
For more information on the operations of the Public Reference
Room, call 1-800-SEC-0330. Additional copies of this information
can be obtained, for a duplicating fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.

Investment Company Act File No. 811-9293

<PAGE>

DAVIS REAL ESTATE PORTFOLIO

(A Portfolio of Davis Variable Account Fund, Inc.)

May 1, 2000

This prospectus contains important information. Please read it carefully before
investing and keep it for future reference.

Davis Real Estate Portfolio is sold exclusively to insurance company separate
accounts for variable annuity and variable life insurance contracts.

An investment in Davis Real Estate Portfolio is not a deposit in a bank and is
neither insured nor guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. There is a risk that you could lose a portion or
all of your investment.

<PAGE>

TABLE OF CONTENTS

DAVIS REAL ESTATE PORTFOLIO

Investment Objective and Strategies
The Davis Investment Philosophy
Principal Risks of Investing in Davis Real Estate Portfolio
Performance Information

DAVIS MANAGEMENT

The Adviser and Sub-Adviser
The Adviser's Performance History
Adviser Compensation
Senior Research Adviser and Founder, Portfolio Manager

OTHER INFORMATION

Purchase and Redemption of Shares
Pricing of Shares
Taxes
Dividends and Distributions
Financial Highlights

OBTAINING ADDITIONAL INFORMATION

2
<PAGE>

DAVIS REAL ESTATE PORTFOLIO

INVESTMENT OBJECTIVE AND STRATEGIES

Davis Real Estate Portfolio's investment objective is total return through a
combination of growth and income. During normal market conditions, at least 65%
of Davis Real Estate Portfolio's assets are invested in "real estate
securities," which are securities issued by companies that are "principally
engaged" in the real estate industry. The Fund does not invest directly in real
estate.

A company is "principally engaged" in the real estate industry if it owns real
estate or real estate related assets that constitute at least 50% of the value
of all of its assets, or if it derives at least 50% of its revenues or net
profits from owning, financing, developing, managing, or selling real estate, or
from offering products or services that are related to real estate. Issuers of
real estate securities include real estate investment trusts (known as "REITs"),
brokers, developers, lenders, and companies with substantial real estate
holdings such as paper, lumber, hotel, and entertainment companies.

Most of Davis Real Estate Portfolio's real estate securities are, and will
likely continue to be, interests in REITs. REITs pool investors' funds to make
real estate related investments, such as buying interests in income producing
property or making loans to real estate developers.

We concentrate heavily on valuation, looking for companies that sell at less
than the present value of their expected cash flow over the next few years.

THE DAVIS INVESTMENT PHILOSOPHY

Davis Real Estate Portfolio is managed using the Davis investment philosophy,
which stresses a back-to-basics approach. We use extensive research to buy
growing companies at value prices and hold on to them for the long term. We look
for companies with sustainable growth rates selling at modest price-earnings
multiples that we hope will expand as other investors recognize the companies'
true worth.

3
<PAGE>

PRINCIPAL RISKS OF INVESTING IN DAVIS REAL ESTATE PORTFOLIO

There is a risk that you could lose all or a portion of your investment in Davis
Real Estate Portfolio. The value of your investment in the Fund will vary with
the prices of the securities in which the Fund invests. This section describes
what we think are the most significant factors that can cause Davis Real Estate
Portfolio's performance to suffer.

>> COMPANY RISK. The price of a common stock varies with the success and
failure of its issuer. As a result, the success of the companies in which
Davis Real Estate Portfolio invests largely determines the Fund's
performance.

>> CONCENTRATED REAL ESTATE PORTFOLIO. Davis Real Estate Portfolio invests
primarily in one market sector, and any fund that has a concentrated
portfolio is particularly vulnerable to the risks of its target sector.
Real estate securities are susceptible to the many risks associated with
the direct ownership of real estate, including:

o Declines in property values as a result of changes in the economy or
the surrounding area, or because a particular region has become less
appealing to tenants.

o Increases in property taxes, operating expenses, interest rates, or
competition.

o Overbuilding.

o Changes in zoning laws.

o Losses from casualty or condemnation.

PERFORMANCE INFORMATION

Davis Real Estate Portfolio began selling shares to the public on July 1, 1999.
The past performance of the Fund will be included in the next annual update of
the Fund's prospectus after it has been offered to the public for a full
calendar year.

4
<PAGE>

DAVIS MANAGEMENT

THE ADVISER AND SUB-ADVISER

Davis Selected Advisers, L.P. ("Adviser") serves as the investment adviser for
each of the Davis Funds, including Davis Real Estate Portfolio. The Adviser's
offices are located at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706.
The Adviser provides investment advice for each of the Davis Funds, manages
their business affairs, and provides day-to-day administrative services. The
Adviser also serves as investment adviser for other mutual funds and
institutional clients.

Davis Selected Advisers-NY, Inc. ("Sub-Adviser") serves as the sub-adviser for
each of the Davis Funds, including Davis Real Estate Portfolio. The
Sub-Adviser's offices are located at 609 Fifth Avenue, New York, New York 10017.
The Sub-Adviser provides investment management and research services for the
Davis Funds and other institutional clients, and is a wholly owned subsidiary of
Davis Selected Advisers, L.P. The Sub-Adviser's fee is paid by Davis Selected
Advisers, not Davis Real Estate Portfolio.

THE ADVISER'S PERFORMANCE HISTORY

Davis Real Estate Portfolio was first offered to the public on July 1, 1999, and
does not yet have a performance record covering a full calendar year; however,
Davis Selected Advisers has been managing accounts in similar styles for a
number of years. The performance results presented in the table that follows
should not be considered predictions of the future performance of Davis Real
Estate Portfolio. DAVIS REAL ESTATE PORTFOLIO'S PERFORMANCE MAY BE EITHER HIGHER
OR LOWER THAN THE DAVIS REAL ESTATE COMPOSITE PRESENTED AS FOLLOWS.

The Davis Real Estate Composite performance history includes all accounts with
investment objectives, policies and strategies substantially similar (although
not necessarily identical) to those used by Davis Selected Advisers in managing
Davis Real Estate Portfolio. Mutual funds and private accounts may be included
in the performance history. Private accounts are not subject to certain
investment limitations, diversification requirements, and other restrictions
imposed by the 1940 Act and the Internal Revenue Code, which, if applicable,
might adversely affect the performance results.

The performance history compares the Davis Real Estate Composite on an
annualized asset-weighted basis against the S&P 500(R) Index. Composite
performance is presented net of the Fund's annual operating expenses of 1.00%.
The Adviser is contractually committed to waive fees and/or reimburse the Fund's
expenses to the extent necessary to cap total annual fund operating expenses at
1.00% until May 1, 2001; after that date, there is no assurance that expenses
will be capped. Davis Real Estate Composite performance is computed using an
internal time-weighted rate of return for each account (including every private
account and every mutual fund in the composite), weighted for the relative size
of each account using beginning of period values.

The insurance company's charges would have lowered the Composite Returns
presented below. This calculation, used to measure the performance of a
composite,

<PAGE>

is different from the standardized SEC method used to measure the performance
of a single mutual fund. The S&P 500(R) Index is a widely recognized unmanaged
index of large capitalization stock performance.

THE PERFORMANCE INFORMATION SET FORTH BELOW FOR DAVIS SELECTED ADVISERS DOES
NOT REPRESENT THE PERFORMANCE OF DAVIS REAL ESTATE PORTFOLIO.

DAVIS REAL ESTATE COMPOSITE RETURNS VS. S&P 500(R) INDEX

(For the periods ending December 31, 1999)

<TABLE>
<CAPTION>
- ----------------------------------------- --------------------- ------------------ -----------------
PAST 1 YEAR PAST 3 YEARS PAST 5 YEARS
SINCE JANUARY 1,
1995
- ----------------------------------------- --------------------- ------------------ -----------------
<S> <C> <C> <C>
DAVIS REAL ESTATE COMPOSITE (7.34)% (0.58)% 9.91%
- ----------------------------------------- --------------------- ------------------ -----------------
S&P 500(R)INDEX 21.04% 27.56% 28.51%
- ----------------------------------------- --------------------- ------------------ -----------------
</TABLE>

As of December 31, 1999, the composite included eight accounts with aggregate
assets of $394.4 million.

ADVISER COMPENSATION

The Adviser's compensation for its services (based on average net assets) was
0.75%.

SENIOR RESEARCH ADVISER AND FOUNDER, PORTFOLIO MANAGER

SHELBY M.C. DAVIS serves as Senior Research Adviser and Founder of Davis
Selected Advisers. He previously served as Davis New York Venture Fund's
Portfolio Manager from February 1997 and served as President of the Davis Funds
until March 2000. The Davis Funds are a family of mutual funds managed by the
Adviser, including the Davis Value Portfolio, Davis Financial Portfolio, and
Davis Real Estate Portfolio.

ANDREW A. DAVIS has served as Portfolio Manager of Davis Real Estate Portfolio
since its inception, July 1, 1999, and also manages other Davis equity funds.
He has served as Portfolio Manager of various equity funds managed by Davis
Selected Advisers since January 1994.

OTHER INFORMATION

PURCHASE AND REDEMPTION OF SHARES

The Fund has adopted a plan under Rule 12b-1 allowing the payment of up to
0.25% for distribution expenses. If, in the future, the Fund begins making
payments under

<PAGE>

the plan, then these fees would be paid out of the Fund's assets on an ongoing
basis. Over time, these fees would increase the cost of your investment and may
cost you more than paying other types of sales charges. Currently the Fund does
not intend to make any payments under this plan.

PRICING OF SHARES

We use current market valuations to price the securities in the Fund.
Securities that trade on an organized exchange are valued at the last published
sales price on the exchange. If no sales are recorded, the securities are
valued at the average of the closing bid and asked prices on the exchange.
Over-the-counter securities are valued at the average of closing bid and asked
prices. Debt securities purchased with a maturity of one year or less are
usually valued at amortized cost. Longer-term debt securities may be valued by
an independent pricing service. Securities with unavailable market quotations
and other assets are valued at "fair value" as determined by the Board of
Directors.

TAXES

Davis Real Estate Portfolio has elected to be taxed as a "regulated investment
company" under the provisions of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). If the Fund continues to qualify as a regulated
investment company and complies with the appropriate provisions of the Code, it
will pay no federal income taxes on the amounts it distributes.

DIVIDENDS AND DISTRIBUTIONS

Davis Real Estate Portfolio generally declares and pays dividends quarterly,
and short-term and long-term capital gains, if any, annually. All dividends and
capital gains are paid to separate accounts of participating insurance
companies. At the election of these companies, dividends and distributions are
automatically reinvested at net asset value in shares of the Fund.

7
<PAGE>

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Davis Real
Estate Portfolio for the period from July 1, 1999 (commencement of operations)
through December 31, 1999, assuming that all dividends and capital gains have
been reinvested. Some of the information reflects financial results for a single
Fund share. The total returns represent the rate that an investor would have
earned (or lost) money on an investment in the Fund.

The information has been audited by KPMG LLP. KPMG LLP's report, along with the
Fund's financial statements, is included in the annual report, which is
available upon request.

FINANCIAL HIGHLIGHTS

DAVIS REAL ESTATE PORTFOLIO

JULY 1, 1999 (COMMENCEMENT OF

OPERATION) THROUGH DECEMBER 31, 1999

The following financial information represents data for each share of capital
stock outstanding throughout each period:

Net Asset Value, Beginning of Period $ 10.00

Income From Investment Operations
Net Investment Income 0.18
Net Realized and Unrealized Gains (Losses) (1.26)
---------
Total From Investment Operations (1.08)

\
Dividends and Distributions
Dividends from Net Investment Income (0.18)
Return of Capital (0.03)
Total Dividends and Distributions (0.21)
---------

Net Asset Value, End of Period $ 8.71
=========

Total Return(1) (10.79)%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 610
Ratio of Expenses to Average Net Assets 1.00%*(3)
Ratio of Net Investment Income to Average Net Assets 4.41%*
Portfolio Turnover Rate(2) 21%

- -----------------------------------------------------------------------
1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one
year.

3 Had the Adviser not absorbed certain expenses the ratio of expenses to
average net assets would have been 11.70% for Davis Real Estate Portfolio.

* Annualized

8
<PAGE>

OBTAINING ADDITIONAL INFORMATION

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 the
Fund's performance during the last year. A SEMI-ANNUAL REPORT updates
information provided in the Annual Report for the next six months.

The Fund'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:

>> FROM YOUR INSURANCE COMPANY OR YOUR ACCOUNT REPRESENTATIVE. Your Insurance
Company or Account Representative can provide you with copies of these
documents.

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

>> FROM THE SEC. The SEC's Public Reference Room in Washington, D.C. For more
information on the operations of the Public Reference Room call
1-800-SEC-0330. Additional copies of this information can be obtained, for
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.

Investment Company Act File No. 811-9293

<PAGE>

DAVIS VALUE PORTFOLIO
DAVIS FINANCIAL PORTFOLIO
DAVIS REAL ESTATE PORTFOLIO

(Portfolios of Davis Variable Account Fund, Inc.)

May 1, 2000

This prospectus contains important information. Please read it carefully before
investing and keep it for future reference.

These Funds are sold exclusively to insurance company separate accounts for
variable annuity and variable life insurance contracts.

An investment in these Funds is not a deposit in a bank and is neither insured
nor guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. There is a risk that you could lose a portion or all of your
investment.

1
<PAGE>

TABLE OF CONTENTS

DAVIS VALUE PORTFOLIO

Investment Objective and Strategies
Principal Risks of Investing in Davis Value Portfolio
Performance Information

DAVIS FINANCIAL PORTFOLIO

Investment Objective and Strategies

Principal Risks of Investing in Davis Financial Portfolio
Performance Information

DAVIS REAL ESTATE PORTFOLIO

Investment Objective and Strategies
Principal Risks of Investing in Davis Real Estate Portfolio
Performance Information

DAVIS MANAGEMENT

The Adviser and Sub-Adviser
The Davis Investment Philosophy
The Adviser's Performance History
Adviser Compensation
Senior Research Adviser and Founder, Portfolio Managers

OTHER INFORMATION

Purchase and Redemption of Shares
Pricing of Shares
Taxes
Dividends and Distributions
Financial Highlights

OBTAINING ADDITIONAL INFORMATION

2
<PAGE>

DAVIS VALUE PORTFOLIO

INVESTMENT OBJECTIVE AND STRATEGIES

Davis Value Portfolio's investment objective is growth of capital. The Fund
invests primarily in common stock of U.S. companies with market capitalizations
of at least $5 billion, which we believe are of high quality and whose shares
are selling at attractive prices. We select stocks with the intention of
holding them for the long term. We believe that managing risk is the key to
delivering superior long-term investment results; therefore, we consider how
much could potentially be lost on an investment before considering how much
might be gained.

You can find more detailed information about our investment philosophy in the
section called THE DAVIS INVESTMENT PHILOSOPHY.

PRINCIPAL RISKS OF INVESTING IN DAVIS VALUE PORTFOLIO

There is a risk that you could lose all or a portion of your investment in
Davis Value Portfolio. The value of your investment in the Fund will vary with
the prices of the securities in which the Fund invests. This section describes
what we think are the most significant factors that can cause Davis Value
Portfolio's performance to suffer.

>> MARKET RISK. The market value of shares of common stock can change rapidly
and unpredictably as a result of political or economic events having
little or nothing to do with the performance of the company.

PERFORMANCE INFORMATION

DAVIS FINANCIAL PORTFOLIO

INVESTMENT OBJECTIVE AND STRATEGIES

Davis Financial Portfolio's investment objective is growth of capital. The Fund
invests primarily in common stock of financial companies. During normal market
conditions, at least 65% of the fund's assets are invested in companies that
are "principally engaged" in financial services.

<PAGE>

A company is "principally engaged" in financial services if it owns financial
services-related assets that constitute at least 50% of the value of all of its
assets, or if it derives at least 50% of its revenues from providing financial
services. Companies in the financial services industry include commercial
banks, industrial banks, savings institutions, finance companies, diversified
financial services companies, investment banking firms, securities brokerage
houses, investment advisory companies, leasing companies, insurance companies,
and companies providing similar services.

Our portfolio managers use the Davis investment philosophy to select common
stock of quality, overlooked, growth companies at value prices and hold them
for the long term. Intensive research allows us to identify financial companies
we believe to be of high quality whose shares are selling at attractive prices.
We believe that managing risk is the key to delivering superior long-term
investment results; therefore, we consider how much could potentially be lost
on an investment before considering how much might be gained.

You can find more detailed information about our investment philosophy in the
section called THE DAVIS INVESTMENT PHILOSOPHY.

PRINCIPAL RISKS OF INVESTING IN DAVIS FINANCIAL PORTFOLIO

There is a risk that you could lose all or a portion of your investment in
Davis Financial Portfolio. The value of your investment in the Fund will vary
with the prices of the securities in which the Fund invests. This section
describes what we think are the most significant factors that can cause Davis
Financial Portfolio's performance to suffer.

>> MARKET RISK. The market value of shares of common stock can change rapidly
and unpredictably as a result of political or economic events having
little or nothing to do with the performance of the company.

o REGULATORY ACTIONS. Financial services companies may suffer a setback
if regulators change the rules under which they operate.

o CHANGES IN INTEREST RATES. Unstable interest rates can have a
disproportionate effect on the financial services industry.

4
<PAGE>

o COMPETITION. The financial services industry has become increasingly
competitive.

PERFORMANCE INFORMATION

DAVIS REAL ESTATE PORTFOLIO

INVESTMENT OBJECTIVE AND STRATEGIES

A company is "principally engaged" in the real estate industry if it owns real
estate or real estate-related assets that constitute at least 50% of the value
of all of its assets, or if it derives at least 50% of its revenues or net
profits from owning, financing, developing, managing, or selling real estate,
or from offering products or services that are related to real estate. Issuers
of real estate securities include real estate investment trusts (known as
"REITs"), brokers, developers, lenders, and companies with substantial real
estate holdings such as paper, lumber, hotel, and entertainment companies.

Most of Davis Real Estate Portfolio's real estate securities are, and likely
will continue to be, interests in REITs. REITs pool investors' funds to make
real estate related investments, such as buying interests in income producing
property or making loans to real estate developers.

Our portfolio manager uses the Davis investment philosophy to select common
stock of quality, overlooked, growth companies at value prices and to hold them
for the long term. We search for REITs and other companies with first-class
management teams who view real estate as a means of producing steady increases
in income and strong returns on capital. We concentrate heavily on valuation,
looking for companies that sell at less than the present value of their
expected cash flow over the next few years.

You can find more detailed information about our investment philosophy in the
section called THE DAVIS INVESTMENT PHILOSOPHY.

PRINCIPAL RISKS OF INVESTING IN DAVIS REAL ESTATE PORTFOLIO

There is a risk that you could lose all or a portion of your investment in
Davis Real Estate Portfolio. The value of your investment in the Fund will vary
with the prices of

<PAGE>

the securities in which the Fund invests. This section describes what we think
are the most significant factors that can cause Davis Real Estate Portfolio's
performance to suffer.

>> MARKET RISK. The market value of shares of common stock can change rapidly
and unpredictably as a result of political or economic events having
little or nothing to do with the performance of the company.

>> COMPANY RISK. The price of a common stock varies with the success and
failure of its issuer. As a result, the success of the companies in which
Davis Real Estate Fund invests largely determines the Fund's performance.

o Declines in property values as a result of changes in the economy or
the surrounding area, or because a particular region has become less
appealing to tenants.

o Increases in property taxes, operating expenses, interest rates, or
competition.

o Overbuilding.

o Changes in zoning laws.

o Losses from casualty or condemnation.

PERFORMANCE INFORMATION

DAVIS MANAGEMENT

THE ADVISER AND SUB-ADVISER

Davis Selected Advisers, L.P. ("Adviser") serves as the investment adviser for
each of the Davis Funds, including Davis Value Portfolio, Davis Financial
Portfolio, and Davis Real Estate Portfolio. The Adviser's offices are located
at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706. The Adviser
provides investment advice for each of the Davis Funds, manages their business
affairs, and provides day-to-day administrative services. The Adviser also
serves as investment adviser for other mutual funds and institutional clients.

<PAGE>

Davis Selected Advisers-NY, Inc. ("Sub-Adviser") serves as the sub-adviser for
each of the Davis Funds, including Davis Value Portfolio, Davis Financial
Portfolio, and Davis Real Estate Portfolio. The Sub-Adviser's offices are
located at 609 Fifth Avenue, New York, New York 10017. The Sub-Adviser provides
investment management and research services for the Davis Funds and other
institutional clients, and is a wholly owned subsidiary of Davis Selected
Advisers, L.P. The Sub-Adviser's fee is paid by Davis Selected Advisers, not
the Funds.

THE DAVIS INVESTMENT PHILOSOPHY

Each of the Davis Funds is managed using the Davis investment philosophy, which
stresses a back-to-basics approach. We use extensive research to buy growing
companies at value prices and hold on to them for the long term. We look for
companies with sustainable growth rates selling at modest price-earnings
multiples that we hope will expand as other investors recognize the companies'
true worth.

We emphasize individual stock selection and believe that the ability to
evaluate management is critical. We routinely visit the managers at their
places of business in order to gain insight into the relative value of
different businesses.

THE ADVISER'S PERFORMANCE HISTORY

Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate
Portfolio were first offered to the public on July 1, 1999, and do not yet have
a performance record covering a full calendar year; however, Davis Selected
Advisers has been managing accounts in similar styles for a number of years.
The performance results presented in the tables that follow should not be
considered predictions of the future performance of the portfolios. THE
PORTFOLIOS' PERFORMANCE MAY BE EITHER HIGHER OR LOWER THAN THE COMPOSITES
PRESENTED AS FOLLOWS.

The performance histories presented as follows for Davis Large Cap Equity
Composite, Davis Financial Composite, and Davis Real Estate Composite include
all accounts with investment objectives, policies and strategies substantially
similar (although not necessarily identical) to those used by Davis Selected
Advisers in managing the Davis Value Portfolio, Davis Financial Portfolio, or
Davis Real Estate

7
<PAGE>

Portfolio, respectively. Mutual funds and private accounts also may be included
in the performance histories. Private accounts are not subject to certain
investment limitations, diversification requirements, and other restrictions
imposed by the 1940 Act and the Internal Revenue Code, which, if applicable,
might adversely affect the performance results.

The performance histories compare the Davis Large Cap Equity Composite, Davis
Financial Composite, and Davis Real Estate Composite on an annualized
asset-weighted basis against the S&P 500(R) Index. Composite performance is
presented net of the Funds' annual operating expenses of 1.00%. The Adviser is
contractually committed to waive fees and/or reimburse the Funds' expenses to
the extent necessary to cap total annual fund operating expenses at 1.00% until
May 1, 2001; after that date, there is no assurance that expenses will be
capped. Each Composite performance is computed using an internal time-weighted
rate of return for each account (including every private account and every
mutual fund in the composite), weighted for the relative size of each account
using beginning of period values.

The insurance company's charges would have lowered the Composite Returns
presented as follows. The calculation used to measure the performance of a
composite is different from the standardized SEC method used to measure the
performance of a single mutual fund. The S&P 500(R) Index is a widely
recognized unmanaged index of large capitalization stock performance.

THE PERFORMANCE INFORMATION SET FORTH AS FOLLOWS FOR DAVIS SELECTED ADVISERS
DOES NOT REPRESENT THE PERFORMANCE OF DAVIS VALUE PORTFOLIO, DAVIS FINANCIAL
PORTFOLIO, OR DAVIS REAL ESTATE PORTFOLIO.

DAVIS LARGE CAP EQUITY COMPOSITE RETURNS VS. S&P 500(R) INDEX

(For the periods ending December 31, 1999)

<TABLE>
<CAPTION>
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SINCE JANUARY 1,
1970
----------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
DAVIS LARGE CAP EQUITY COMPOSITE 17.90% 26.55% 18.72% 14.95%
S&P 500(R)INDEX 21.04% 28.51% 18.17% 13.69%
</TABLE>

As of December 31, 1999, the composite included 28 accounts with aggregate
assets of $23.7 billion.

DAVIS FINANCIAL COMPOSITE RETURNS VS. S&P 500(R) INDEX
(For the periods ending December 31, 1999)

<TABLE>
<CAPTION>
PAST 1 YEAR PAST 3 YEARS PAST 5 YEARS SINCE JANUARY 1,
1970
----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
DAVIS FINANCIAL COMPOSITE (0.84)% 18.04% 26.81% 21.77%
S&P 500(R)INDEX 21.04% 27.56% 28.51% 19.66%
</TABLE>

As of December 31, 1999, the composite included six accounts with aggregate
assets of approximately $919.7 million.

<PAGE>

DAVIS REAL ESTATE COMPOSITE RETURNS VS. S&P 500(R) INDEX
(For the periods ending December 31, 1999)

<TABLE>
<CAPTION>
PAST 1 YEAR PAST 3 YEARS PAST 5 YEARS
SINCE JANUARY
1, 1995
---------------- ------------------ -------------
<S> <C> <C> <C>
DAVIS REAL ESTATE COMPOSITE (7.34)% (0.58)% 9.91%
S&P 500(R)INDEX 21.04% 27.56% 28.51%
</TABLE>

As of December 31, 1999, the Davis Real Estate Composite included eight
accounts with aggregate assets of $394.4 million.

ADVISER COMPENSATION

The Adviser's compensation for its services (based on average net assets) was
as follows:

Davis Value Portfolio 0.75%
Davis Financial Portfolio 0.75%
Davis Real Estate Portfolio 0.75%

SENIOR RESEARCH ADVISER AND FOUNDER, PORTFOLIO MANAGERS

SHELBY M.C. DAVIS serves as Senior Research Adviser and Founder of Davis
Selected Advisers. He previously served as Davis New York Venture Fund's
Portfolio Manager from its inception until February 1997 and served as
President of the Davis Funds until March 2000. The Davis Funds are a family of
mutual funds managed by the Adviser, including the Davis Value Portfolio, Davis
Financial Portfolio, and Davis Real Estate Portfolio.

CHRISTOPHER C. DAVIS has served as Portfolio Manager of Davis Value Portfolio
and Davis Financial Portfolio with Kenneth Charles Feinberg since inception of
the Funds, July 1, 1999, and also manages other equity funds advised by Davis
Selected Advisers. He has served as Portfolio Manager of various equity funds
managed by Davis Selected Advisers since October 1995. Mr. Davis served as
Assistant Portfolio Manager and research analyst working with Shelby M.C. Davis
from September 1989 through September 1995.

KENNETH CHARLES FEINBERG has served as Portfolio Manager of Davis Value
Portfolio and Davis Financial Portfolio with Christopher C. Davis since the
inception of the Funds, July 1, 1999, and also manages other equity funds
advised by Davis Selected Advisers. He has served as Portfolio Manager of
various equity funds managed by Davis Selected Advisers since May 1997. Mr.
Feinberg started with Davis Selected Advisers as a research analyst in December
1994.

<PAGE>

OTHER INFORMATION

PURCHASE AND REDEMPTION OF SHARES

We ordinarily effect orders to purchase and redeem shares at the Funds' next
computed net asset value after we have received an order. Life insurance
companies participating in the Funds serve as our designee for receiving orders
of separate accounts that invest in the Funds.

The Funds have adopted a plan under Rule 12b-1 allowing the payment of up to
0.25% for distribution expenses. If, in the future, the Funds begin making
payments under the plan, then these fees would be paid out of the Funds' assets
on an ongoing basis. Over time, these fees would increase the cost of your
investment and may cost you more than paying other types of sales charges.
Currently the Funds do not intend to make any payments under this plan.

PRICING OF SHARES

We use current market valuations to price the securities in each of the Funds.
Securities that trade on an organized exchange are valued at the last published
sales price on the exchange. If no sales are recorded, the securities are
valued at the average of the closing bid and asked prices on the exchange.
Over-the-counter securities are valued at the average of closing bid and asked
prices. Debt securities purchased with a maturity of one year or less are
usually valued at amortized cost. Longer-term debt securities may be valued by
an independent pricing service. Securities with unavailable market quotations
and other assets are valued at "fair value" as determined by the Board of
Directors.

If any of the Funds' securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time their
prices are determined and the time the Funds' shares are priced will generally
not be reflected in the Funds' share prices. The net asset value of the Funds'
shares may change on days when shareholders will not be able to purchase or
redeem the Funds' shares.

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 and Trust Company, our
custodian bank. 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.

TAXES

Each of the Funds have elected to be taxed as a "regulated investment company"
under the provisions of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If the Funds continue to qualify as regulated investment
companies and comply with the appropriate provisions of the Code, they will pay
no federal income taxes on the amounts they distribute.

<PAGE>

Because the Funds' shareholders are insurance companies (such as the one that
issues your contract), no discussion of the federal income tax consequences to
shareholders is included herein. For information about the federal income tax
consequences of purchasing the contracts, see the prospectus for your contract.

DIVIDENDS AND DISTRIBUTIONS

Davis Value Portfolio and Davis Financial Portfolio generally declare and pay
dividends and short-term and long-term capital gains, if any, annually. Davis
Real Estate Portfolio generally declares and pays dividends quarterly, and
short-term and long-term capital gains, if any, annually. All dividends and
capital gains are paid to separate accounts of participating insurance
companies. At the election of these companies, dividends and distributions are
automatically reinvested at net asset value in shares of the Funds.

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of Davis Value
Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio, assuming
that all dividends and capital gains have been reinvested. Some of the
information reflects financial results for a single Fund share. The total
returns represent the rate that an investor would have earned (or lost) money
on an investment in the Fund.

The information has been audited by KPMG LLP. KPMG LLP's report, along with the
Fund's financial statements, is included in the annual report, which is
available upon request.

11
<PAGE>

DAVIS VARIABLE ACCOUNT FUND, INC.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
DAVIS VALUE DAVIS FINANCIAL DAVIS REAL ESTATE
PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- -----------------
JULY 1, 1999 JULY 1, 1999 JULY 1, 1999
(COMMENCEMENT OF (COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) OPERATIONS) OPERATIONS)
THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1999 1999
--------------------- --------------------- ---------------------

The following financial information represents data for each share of capital
stock outstanding throughout each period:

<S> <C> <C> <C>
Net Asset Value, Beginning of Period .. $ 10.00 $ 10.00 $ 10.00
--------- --------- ---------
Income From Investment Operations

Net Investment Income .............. 0.01 0.02 0.18

Net Realized and Unrealized
Gains (Losses) ............... 0.25 (0.74) (1.26)
--------- --------- ---------
Total From Investment Operations ... 0.26 (0.72) (1.08)

Dividends and Distributions
Dividends from Net Investment
Income ......................... (0.01) (0.02) (0.18)
Return of Capital .................. (3) (3) (0.03)
--------- --------- ---------
Total Dividends and Distributions (0.01) (0.02) (0.21)
--------- --------- ---------

Net Asset Value, End of Period ........ $ 10.25 $ 9.26 $ 8.71
========= ========= =========

Total Return(1) ....................... 2.64% (7.17)% (10.79)%

Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) ................... $ 12,668 $3,471 610
Ratio of Expenses to Average Net
Assets .......................... 1.00%(4) 1.00%*(4) 1.00%*(4)
Ratio of Net Investment Income to
Average Net Assets .............. 0.43%* 0.76%* 4.41%*
Portfolio Turnover Rate(2) ............ 5.00% 9.00% 21.00%
</TABLE>

1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Total returns are not annualized for periods of less than one
year.

3 Less than $0.005 per share.

4 Had the Adviser not absorbed certain expenses, the ratio of expenses to
average net assets would have been 2.29%, 4.24% and 11.70%, for Davis
Value Portfolio, Davis Financial Portfolio and Davis Real Estate
Portfolio, respectively.

* Annualized

12
<PAGE>

OBTAINING ADDITIONAL INFORMATION

For more information about the Funds, 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 Funds and
their management and operations. An ANNUAL REPORT discusses the market
conditions and investment strategies that significantly affected the Funds'
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.

The Funds' 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:

>> FROM YOUR INSURANCE COMPANY OR YOUR ACCOUNT REPRESENTATIVE. Your Insurance
Company or Account Representative can provide you with copies of these
documents.

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

>> FROM THE SEC. The SEC's Public Reference Room in Washington, D.C. For more
information on the operations of the Public Reference Room, call
1-800-SEC-0330. Additional copies of this information can be obtained, for
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.

Investment Company Act File No. 811-9293

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 2000

DAVIS VALUE PORTFOLIO,

DAVIS FINANCIAL PORTFOLIO,

AND

DAVIS REAL ESTATE PORTFOLIO

PART OF

DAVIS VARIABLE ACCOUNT FUND, INC.

2949 EAST ELVIRA ROAD, SUITE 101

TUCSON, ARIZONA 85706

1-800-279-0279

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 MAY 1, 2000. THIS
STATEMENT OF ADDITIONAL INFORMATION INCORPORATES THE PROSPECTUS BY REFERENCE.
THE PROSPECTUSES MAY BE OBTAINED FROM INSURANCE COMPANIES INVESTING IN THE
FUND.

THE FUNDS' MOST RECENT ANNUAL REPORT AND SEMI-ANNUAL REPORT TO SHAREHOLDERS ARE
SEPARATE DOCUMENTS SUPPLIED WITH THIS STATEMENT OF ADDITIONAL INFORMATION. THE
ANNUAL REPORT, ACCOMPANYING NOTES AND REPORT OF INDEPENDENT AUDITORS APPEARING
IN THE ANNUAL REPORT ARE INCORPORATED BY REFERENCE IN THIS STATEMENT OF
ADDITIONAL INFORMATION.

<PAGE>

TABLE OF CONTENTS

PAGE

Section I: Investment Strategies and Restrictions ....................3

Investment Objective and Policies..........................3
Portfolio Securities.......................................3

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

Other Investment Policies..................................7
Portfolio Transactions ...................................10
Investment Restrictions...................................12

Section II: Key Persons...............................................14

Organization of the Company...............................14
Directors and Officers....................................15
Directors' Compensation Schedule..........................16
Certain Shareholders of the Funds.........................17
Investment Advisory Services..............................17
Administrative and Service Fees...........................18
Distribution of Company Shares............................19
Other Important Service Providers.........................19

Section III: General Information.......................................21

Determining the Price of Shares...........................21
Federal Income Taxes......................................21
Performance Data..........................................22

<PAGE>

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
Portfolio 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.

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.

<PAGE>

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.

The Glass-Steagal Act which formerly limited the ability of banks to
engage in other financial services has been repealed. Broadening bank powers,
including the ability to engage in the securities and insurance businesses, as
well multi-state operations could expose banks to well-established competitors
in new areas of operations. The increased competition may result in 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.

4
<PAGE>

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, self-liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code, and failing to
maintain exemption from registration under the Investment Company Act of 1940
("1940 Act"). 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. While not primary 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, exchange controls and
limitations on the use or transfer of assets, and significant withholding
taxes. Foreign

5
<PAGE>

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, each
of the Funds may invest in bonds and other debt securities 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.

<PAGE>

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. The Funds may also
invest in other investment companies (or companies exempted under section
3(c)(7) of the 1940 Act) which themselves primarily invest in temporary
defensive investments. Investments in other investment companies are limited by
the 1940 Act.

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 or Sub-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 their 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 are not always
effective and their use may expose the Funds to other risks, such as liquidity
and counterparty risk. The Adviser or Sub-Adviser exercises its professional
judgement as to whether the reduction in currency risk justifies the expense
and exposure to liquidity and counterparty risk. In past years, the Adviser and
Sub-Adviser have typically not used these techniques to any significant extent.
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
with respect to a foreign currency different from 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 their 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 or the Sub-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

<PAGE>

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 or Sub-Adviser believes
that a foreign currency may suffer a substantial decline against the U.S.
dollar, each Fund may enter 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 or
Sub-Adviser believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, each Fund 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 with respect
to a different foreign currency for a fixed U.S. dollar amount ("cross hedge").
This may be done, for example, where the Adviser or Sub-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 their 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 their 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 their 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

8
<PAGE>

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.

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 their 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 or Sub-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 or Sub-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

<PAGE>

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 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, payment
of bona fide Fund expenses and placement of orders by securities firms for Fund
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 or dealer
markups, 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, payment of bona fide expenses of the Funds
(such as sub-transfer agency or sub-accounting fees) which they would otherwise
have to pay in cash, 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.

The Funds have approved a policy which allows them to use commissions
to purchase research. The Funds will not use markups to purchase research. 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

10
<PAGE>

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.

11
<PAGE>

The Funds paid the following brokerage commissions during the period
from July 1, 1999 (inception of operations) through December 31, 1999:

Davis Value Portfolio
Brokerage commissions paid: $11,320
Amount paid to brokers providing research: 74%
Brokerage commissions paid
to Shelby Cullom Davis & Co.: $37

Davis Financial Portfolio
Brokerage commissions paid: $4,004
Amount paid to brokers providing research: 82%
Brokerage commissions paid
to Shelby Cullom Davis & Co.: $N/A

Davis Real Estate Portfolio
Brokerage commissions paid: $1,956
Amount paid to brokers providing research: 97%
Brokerage commissions paid
to Shelby Cullom Davis & Co.: $N/A

Shelby Cullom Davis & Co. is a broker-dealer who may be considered an
affiliated person of the Adviser. During the period ended December 31, 1999,
commissions received represented:

<TABLE>
<CAPTION>
% of % of aggregate dollar amount of
Fund Commissions Paid transactions involving the payment of commissions
- ---- ---------------- -------------------------------------------------
<S> <C> <C>
Davis Value Portfolio 0.339% 0.51%
Davis Financial Portfolio N/A N/A
Davis Real Estate Portfolio N/A N/A
</TABLE>

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

12
<PAGE>

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 commodities, 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 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:

13
<PAGE>

(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 1940 Act. 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
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 has
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.

14
<PAGE>

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 1940 Act, 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 supervises the business and management 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 Series, Inc., Davis International Series, Inc. and Davis Variable
Account Fund, 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; 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.

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, LLLP; Of Counsel to
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.; Member, Investment Committee for Microgeneration Technology Fund, UTECH
Funds; Retired Chairman and President, Public Service Company of New Mexico.

D. JAMES GUZY (3/7/36), P.O. Box 128, Glenbrook NV 89413. 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), Alliance Technology Fund (a
mutual fund) and Micro Component Technology, Inc.

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.

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;
Director, Modine Manufacturing, Inc.; Director, Chicago Bridge & Iron Company,
M.V.; former Treasurer, Amoco Corporation.

<PAGE>

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

CHRISTOPHER C. DAVIS (7/13/65),* 609 Fifth Avenue, New York NY 10017. Director
of each of the Davis Funds and the Selected Funds; Chief Executive Officer,
President, or Vice President of each of the Davis Funds and 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.

KENNETH C. EICH (8/14/53), 2949 East Elvira Road, Suite 101 Tucson, Arizona
85706. 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, LLC; former
President and Chief Executive Officer of First of Michigan Corporation; former
Executive Vice President and Chief Financial Officer of Oppenheimer Management
Corporation.

SHARRA L. REED (9/25/66), 2949 East Elvira Road, Suite 101 Tucson, Arizona
85706. Vice President, Treasurer and Assistant Secretary of the Company and
each of the Davis Funds and Selected Funds; Vice President of Venture Advisers,
Inc.

THOMAS D. TAYS (3/7/57), 2949 East Elvira Road, Suite 101 Tucson, Arizona 85706.
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, LLC; 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; Member, D'Ancona & Pflaum LLC, the Company's counsel.

ARTHUR DON (9/24/53), 111 East Wacker Drive, Suite 2800, Chicago IL 60601.
Assistant Secretary of the Company and each of the Davis Funds and Selected
Funds; Member, D'Ancona & Pflaum LLC, the Company's 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.

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 period from July 1, 1999 (inception of operations) through
December 31, 1999, 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 $330 $30,800
Marc P. Blum 310 29,900
Jerry D. Geist 300 29,900
D. James Guzy 255 24,650
G. Bernard Hamilton 300 31,500
LeRoy E. Hoffberger** 300 29,000
Laurence W. Levine 300 29,000
Christian R. Sonne 300 29,000
Marsha Williams 255 38,650

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

** Mr. Hoffberger retired as a Director as of January 1, 2000, but still
serves in a non-voting emeritus status.

<PAGE>

CERTAIN SHAREHOLDERS OF THE FUNDS

As of March 27, 2000, officers and Directors owned less than 1% of the
outstanding shares of each of the Funds.

The following table sets forth as of March 27, 2000, the name and holdings
of each person known by the Company to be a record owner of more than 5% of the
outstanding shares of any the Funds. Other than as indicated below, the Funds
are not aware of any shareholder that beneficially owns in excess of 25% of the
Funds' total outstanding shares.

PERCENT OF SHARES
NAME AND ADDRESS OUTSTANDING
- ---------------- -----------------

DAVIS VALUE PORTFOLIO

Guardian Ins & Annuity Co Inc. 93.12%
Guardian Separate A/C E
3900 Burgess Place 3-S EQ Acctng
Bethlehem, PA 18017-9097

Davis Selected Advisers, L.P. 6.69%
Attn: John Gilding
124 E Marcy St
P.O. Box 1688
Santa Fe, NM 87504-1688

DAVIS FINANCIAL PORTFOLIO

Guardian Ins & Annuity Co Inc. 86.35%
Guardian Separate A/C E
3900 Burgess Place 3-S EQ Acctng
Bethlehem, PA 18017-9097

Davis Selected Advisers, L.P. 11.35%
Attn: John Gilding
124 E Marcy St
P.O. Box 1688
Santa Fe, NM 87504-1688

DAVIS REAL ESTATE PORTFOLIO

Davis Selected Advisers, L.P. 62.18%
Attn: John Gilding
124 E Marcy St
P.O. Box 1688
Santa Fe, NM 87504-1688

Guardian Ins & Annuity Co Inc. 37.53%
Guardian Separate A/C E
3900 Burgess Place 3-S EQ Acctng
Bethlehem, PA 18017-9097

<PAGE>

INVESTMENT ADVISORY SERVICES

Davis Selected Advisers, L.P. (the "Adviser") whose principal office is at
2949 East Elvira Road, Suite 101Tucson, Arizona 85706, serves as the investment
adviser of the Funds. Venture Advisers, Inc. is the Adviser's sole general
partner. Shelby M.C. Davis is Senior Research Adviser and Founder 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, Inc., Davis Series, Inc.,
Davis International Series, Inc., (collectively with the Funds, 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 those of most other mutual funds, but are not necessarily higher
than those paid by funds with similar objectives.

The aggregate advisory fees paid by each of the Funds to the Adviser
for the period from July 1, 1999 (inception of operations) through December 31,
1999 were:

Davis Value Portfolio $24,434
Davis Financial Portfolio $ 7,252
Davis Real Estate Portfolio $ 1,902

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 1940 Act, 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 under federal and state securities laws. Each Fund
reimburses the Adviser for providing certain services including accounting and
administrative services and shareholder services. Such reimbursements are
detailed below for the period from July 31, 1999 (inception of operations)
through December 31, 1999:

18
<PAGE>

Davis Value Portfolio
Accounting and administrative services: $4,000
Shareholder services: $8

Davis Financial Portfolio
Accounting and administrative services: $4,000
Shareholder services: $8

Davis Real Estate Portfolio
Accounting and administrative services: $4,000
Shareholder services: $8

CODE OF ETHICS. The Adviser and the Funds have 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. Such employees may
invest in securities, including securities which may be purchased or held by
the Funds. A copy of the Code of Ethics is on public file with, and available
from, the Securities and Exchange Commission.

ADMINISTRATIVE AND SERVICE FEES

The Davis Selected Advisers or its affiliates may 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
amount of the fee is negotiated with each insurance company. 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
fees 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 1940 Act. 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' 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

<PAGE>

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.

THE DISTRIBUTOR. Davis Distributors, LLC, ("the Distributor"), 2949
East Elvira Road, Suite 101Tucson, Arizona 85706, 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 LLC, 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.

<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 Bank and Trust is generally the value next computed after State
Street Bank and Trust 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.
Customer 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. Fixed-income securities may be
valued on the basis of prices provided by a pricing service. Investments in
short-term securities (purchased with a maturity of one year 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.

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 has
qualified as a regulated investment company and expects to remain qualified as
such. 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

<PAGE>

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 is
treated as a separate issuer.

Each Fund is 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.

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.

<PAGE>

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

The cumulative total return and the average annual total return (each
is defined below) with respect to each of the Funds for the periods indicated
below is as follows:

<TABLE>
<CAPTION>
Cumulative Average Annual
Total Return(1) Total Return(2)
------------- -------------
<S> <C> <C>
Davis Value Portfolio
Period from July 1, 1999 through December 31, 1999 (life of portfolio) 2.64% N/A%

Davis Financial Portfolio
Period from July 1, 1999 through December 31, 1999 (life of portfolio) (7.17)% N/A%

Davis Real Estate Portfolio
Period from July 1, 1999 through December 31, 1999 (life of portfolio) (10.79)% N/A%
</TABLE>

(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 Funds' portfolio. Average annual total return is calculated 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.

<PAGE>

30 DAY SEC YIELD

The 30-Day SEC Yield (defined below) of Davis Real Estate Portfolio for
the period ended December 31, 1999 was 4.76%

"30-Day SEC Yield" is computed in accordance with a standardized method
prescribed by the rules of the Securities and Exchange Commission. 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.

The Funds' Annual Report and Semi-Annual Report contain additional
performance information and will be made available upon request and without
charge by calling your Insurance Company or Account Representative.

<PAGE>

FORM N-1A

DAVIS VARIABLE ACCOUNT FUND, INC.

POST-EFFECTIVE AMENDMENT NO. 2 UNDER THE SECURITIES ACT OF 1933

REGISTRATION STATEMENT NO. 333-76407

AND

POST-EFFECTIVE AMENDMENT NO. 2 UNDER THE INVESTMENT COMPANY ACT OF 1940

REGISTRATION NO. 811-9293

PART C

OTHER INFORMATION

Item 23. Exhibits:

(a) Articles of Incorporation. Articles of Incorporation. Incorporated by
reference to Exhibit (a) of Registrants registration statement
333-76407 filed on Edgar 04.16.99.

(b) By-laws. Incorporated by reference to Exhibit (b) of Registrants
registration statement 333-76407 filed on Edgar 04.16.99.

(d) (1) Investment Advisory Contracts. Incorporated by reference to
Exhibit (d)(1), of Registrants registration statement 333-76407 filed
on Edgar 04.16.99.

(d) (2) Sub-Advisory Agreement with Davis Selected Advisers-NY, Inc.
Incorporated by reference to Exhibit (d)(2) of Registrants
registration statement 333-76407 filed on Edgar 04.16.99.

(e) Underwriting Contracts. Distributor's Agreement. Incorporated by
reference to Exhibit (a) of Registrants registration statement
333-76407 filed on Edgar 04.16.99.

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

(g) Custodian Agreement. Incorporated by reference to Exhibit (g) of
Registrants registration statement 333-76407 filed on Edgar 06.29.99.

(h) (1) Other Material Contracts. Transfer Agency and Service Agreement
Incorporated by reference to Exhibit (h)(1) of Registrants
registration statement 333-76407 filed on Edgar 06.29.99.

(h) (2) Form of Participation Agreement. Incorporated by reference to
Exhibit (h)(2) of Registrants registration statement 333-76407 filed
on Edgar 04.16.99.

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

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

<PAGE>

(k) Omitted Financial Statements. Not applicable.

(l) Initial Capital Agreements. Not applicable.

(m) Rule 12b-1 Plan. Incorporated by reference to Exhibit (m) of
Registrants registration statement 333-76407 filed on Edgar 06.29.99.

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

(o) Reserved.

(p) Code of Ethics. Code of Ethics as amended January 29, 2000.
Incorporated by reference to Exhibit (p) of Registrants registration
statement 333-76407 filed on Edgar 02.28.00.

(q) (1) Other Exhibits. Powers of Attorney of the Registrant, Officers and
Board of Directors appointing Sheldon Stein and Arthur Don as
attorneys-in-fact. Incorporated by reference to Exhibit (p) of
Registrants registration statement 333-76407 filed on Edgar 06.29.99.

*(q) (2) Power of Attorney of the Registrant dated March 20, 2000.

*Filed Herein.

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

Davis Distributors, LLC (the Fund's principal underwriter) and Davis
Selected Advisers-NY, Inc. (the Fund's sub-adviser) are wholly owned
subsidiaries of Davis Selected Advisers, L.P, (the Fund's Investment Adviser).

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 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

2
<PAGE>

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 LLC, 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 (3/20/37), 4135 North Steers Head Road, Jackson Hole WY
83001. Senior Research Advisor and Founder of Davis Selected Advisers, L.P. and
the Davis Funds.

ANDREW A. DAVIS (6/25/63), 124 East Marcy Street, Santa Fe NM 87501. Director
and either a President or Vice President of 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.;

CHRISTOPHER C. DAVIS (7/13/65), 609 Fifth Avenue, New York NY 10017. Director
and President, Vice President or Chief Executive Officer of 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.

KENNETH C. EICH (8/14/53), 2949 East Elvira Road, Suite 101, Tucson AZ 85706.
Vice President of each of the Davis Funds and Selected Funds; Chief Operating
Officer, Venture Advisers, Inc.; Vice President, Davis Selected Advisers-NY,
Inc.; President, Davis Distributors LLC;

3
<PAGE>

GARY TYC (05/27/56), 2949 East Elvira Road, Suite 101, Tucson AZ 85706. 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 LLC; former Vice President of Oppenheimer
Management Corporation.

THOMAS D. TAYS (03/07/57), 2949 East Elvira Road, Suite 101, Tucson AZ 85706.
Vice President and Secretary of each of the Davis Funds and Selected Funds;
Vice President and Secretary, Venture Advisers, Inc., Davis Selected
Advisers-NY, Inc., and Davis Distributors LLC.

Item 27. Principal Underwriter

(a) Davis Distributors, LLC, a wholly owned subsidiary of the Adviser,
located at 2949 East Elvira Road, Tucson AZ 85706, is the principal underwriter
for the Registrant and also acts as principal underwriter for Davis New York
Venture 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>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
<S> <C> <C>
Kenneth C. Eich President Vice President
2949 East Elvira Road
Suite 101
Tucson AZ 85706

Gary P. Tyc Vice President, Treasurer and None
2949 East Elvira Road Assistant Secretary
Suite 101
Tucson AZ 85706

Thomas D. Tays Vice President and Secretary Vice President and Secretary
2949 East Elvira Road
Suite 101
Tucson AZ 85706
</TABLE>

Item 28. Location of Accounts and Records

Accounts and records are maintained at the offices of Davis Selected
Advisers, L.P., 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706, 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

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.

4
<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 Chicago and State of Illinois on the 24th day of
April, 2000.

DAVIS VARIABLE ACCOUNT FUND, INC.

*By: /s/ Sheldon Stein
------------------------------
Sheldon Stein
Attorney-in-Fact

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.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Christopher C. Davis* Chief Executive Officer April 24, 2000
- --------------------------------
Christopher C. Davis

Sharra L. Reed* Principal Financial Officer
- -------------------------------- and Treasurer April 24, 2000
Sharra L. Reed
</TABLE>

*By: /s/ Sheldon Stein
-------------------------------
Sheldon Stein
Attorney-in-Fact

*Sheldon Stein signs this document on behalf of the Registrant and each of the
foregoing officers pursuant to the powers of attorney filed as Exhibit (p)
filed on Edgar 06/29/99, and Exhibit (q)(2) of this filing.

/s/ Sheldon Stein
-------------------------------------
Sheldon Stein
Attorney-in-Fact

<PAGE>

DAVIS VARIABLE ACCOUNT FUND, INC.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on April 24, 2000 by the following
persons in the capacities indicated.

Signature Title
--------- -----

Wesley E. Bass. Jr.* Director
- --------------------------
Wesley E. Bass, Jr.

Jeremy H. Biggs* Director
- --------------------------
Jeremy H. Biggs

Marc P. Blum* Director
- --------------------------
Marc P. Blum

Andrew A. Davis* Director
- --------------------------
Andrew A. Davis

Christopher C. Davis* Director
- --------------------------
Christopher C. Davis

Jerry D. Geist* Director
- --------------------------
Jerry D. Geist

D. James Guzy* Director
- --------------------------
D. James Guzy

G. Bernard Hamilton* Director
- --------------------------
G. Bernard Hamilton

Laurence W. Levine* Director
- --------------------------
Laurence W. Levine

Christian R. Sonne* Director
- --------------------------
Christian R. Sonne

Marsha Williams* Director
- --------------------------
Marsha Williams

*Sheldon Stein signs this document on behalf of each of the foregoing persons
pursuant to the powers of attorney filed as Exhibit (p) filed on Edgar 06/29/99

/s/ Sheldon Stein
-------------------------------
Sheldon Stein
Attorney-in-Fact

<PAGE>

EXHIBIT LIST

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

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

(q)(2) Power of Attorney of the Registrant dated March 20, 2000.

<PAGE>
EXHIBIT
ITEM 23 (i)

[LETTERHEAD OF D'ANCONA & PFLAUM LLC]

April 24, 2000

Davis Variable Account Fund, Inc.
124 East Marcy Street
Santa Fe, New Mexico 87501

Dear Ladies and Gentlemen:

We have acted as counsel for Davis Variable Account Fund, Inc. (the
"Company") in connection with the registration under the Securities Act of 1933
(the "Act") of an indefinite number of shares of common stock in the series of
the Company designated as Davis Value Portfolio, Davis Financial Portfolio, and
Davis Real Estate Portfolio (collectively, the "Shares") in registration
statement No. 333-76407 on Form N-1A (the "Registration Statement").

In this connection we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate and
other records, certificates and other papers as we deemed it necessary to
examine for the purpose of this opinion, including the Articles of
Incorporation and bylaws of the Company, actions of the Board of Directors
authorizing the issuance of Shares and the Registration Statement.

Based on the foregoing examination, we are of the opinion that upon
the issuance and delivery of the Shares in accordance with the Articles of
Incorporation and the actions of the Board of Directors authorizing the
issuance of the Shares, and the receipt by the Company of the authorized
consideration therefor, the Shares so issued will be validly issued, fully paid
and nonassessable.

We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under section 7 of the Act.

Very truly yours,

D'Ancona & Pflaum LLC

By: /s/ Sheldon R. Stein
-------------------------------
Sheldon R. Stein, Member

<PAGE>

EXHIBIT (j)

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Davis Variable Account Fund, Inc.

We consent to the use of our report dated February 4, 2000 incorporated by
reference in this Registration Statement of Davis Variable Account Fund, Inc.
and to the references to our firm under the headings "Financial Highlights" in
each of the Prospectuses for Davis Variable Account Fund, Inc. and "Auditors"
in the Statement of Additional Information.

/s/ KPMG, LLP
-------------------------------
/s/ KPMG LLP

Denver, Colorado
April 24, 2000

<PAGE>

EXHIBIT (q)(2)

DAVIS VARIABLE ACCOUNT FUND, INC.

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
constitutes and appoints Sheldon R. Stein and Arthur Don, and each of them, as
the undersigned's attorneys-in-fact, each with the power of substitution, for
him or her in any and all capacities, to sign any post-effective amendments to
the registration statement under the Securities Act of 1933 (Registration No.
333-76407) and/or the Investment Company Act of 1940 (Registration No.
811-9293), whether on Form N-1A or any successor forms thereof, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission and all other applicable state or
federal regulatory authorities. Each of the undersigned hereby ratifies and
confirms all that each of the aforenamed attorneys-in-fact, or his substitute
or substitutes, may do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney as of the date listed below.

OFFICERS:

/s/Christopher C. Davis Date: March 20, 2000
- -------------------------------- --------------------------------
Christopher C.. Davis
Chief Executive Officer

/s/Sharra L. Reed Date: March 20, 2000
- -------------------------------- --------------------------------
Sharra L. Reed
Treasurer, Chief Financial Officer and Chief Accounting Officer