DAVIS VARIABLE ACCOUNT FUND INC, 485APOS, 2000-02-28

DAVIS VARIABLE ACCOUNT FUND INC
485APOS, 2000-02-28

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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. 1

AND

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-9293
POST EFFECTIVE AMENDMENT NO. 1

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
1-505-820-3055

-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)
[ ] On______, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On May 1, 2000, 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

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

POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION
STATEMENT NO. 333-76407 UNDER THE SECURITIES ACT OF 1933
AND POST EFFECTIVE AMENDMENT NO. 1 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
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
Performance Data
Annual Report Incorporated by Reference

<PAGE>

DAVIS VALUE PORTFOLIO

(Part of Davis Variable Account Fund, Inc.)

May 1, 2000

This prospectus contains important information. Please read it 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.

OVER 25 YEARS OF RELIABLE INVESTING

1
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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

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.

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 company's
true worth.

o Over the years, Davis Selected Advisers, L.P., has developed a list of ten
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 ten 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 place 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.

3
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o 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 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 Selected Advisers, LP, has been managing portfolios in a similar style
since 1969, including Davis New York Venture Fund.

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., serves as the sub-adviser ("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 similar styles for a number of
years. The performance results presented in the table below 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 BELOW.

The Davis Large Cap Equity Composite performance history includes all accounts
($3.5 million or larger) with investment objectives, policies and strategies
substantially similar (although not necessarily identical) to those used by
Davis Selected Advisers in managing Davis Value Portfolio. Private accounts may
be

4
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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 performance (results net of Davis Value Portfolio's
annual operating expense for the year ended December 31, 1999), against the S&P
500(R) Index. The 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 on your contract will reduce actual performance.
This 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 BELOW FOR DAVIS SELECTED ADVISERS DOES NOT
REPRESENT THE PERFORMANCE OF DAVIS VALUE PORTFOLIO,

DAVIS LARGE CAP EQUITY COMPOSITE RETURNS VS. S & P 500 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 xx% xx% xx% Xx%
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX xx% xx% xx% Xx%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

ADVISER COMPENSATION

The annual Adviser compensation for the fiscal year December 31, 1999 (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.

CHRISTOPHER C. DAVIS serves as President of Davis Value Portfolio. He 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 was the

5
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assistant Portfolio Manager and research analyst working with Shelby M.C. Davis
from September, 1989, to September, 1995.

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

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. The Fund does not intend to make any payments under
this plan at the current time.

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.

TAXES

6
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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 year ending 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.

7
<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%

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%, 4.24% and 11.70%, for Davis Value
Portfolio, Davis Financial Portfolio and Davis Real Estate Portfolio,
respectively.

* Annualized

SEE NOTES TO FINANCIAL STATEMENTS

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

8
<PAGE>

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:

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

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

o FROM THE SEC. The SEC's Public Reference Room in Washington DC. 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 DC 20549-6009.

Investment Company Act File No. 811-9293

<PAGE>

DAVIS FINANCIAL PORTFOLIO

(Part 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.

OVER 25 YEARS OF RELIABLE INVESTING

1
<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

2
<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 conduct extensive research before buying
growing companies at value prices and holding on to them for the long term. We
look for companies with sustainable growth rates selling at modest
price-earnings multiples which we hope will expand as other investors recognize
the company's true worth.

3
<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.

o 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.

o 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.

Davis Selected Advisers, L.P., has been managing portfolios in a similar style
since 1991, including Davis Financial Fund.

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

4
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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 below 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 BELOW.

The Davis Financial Composite performance history includes all accounts ($3.5
million or larger) with investment objectives, policies and strategies
substantially similar (although not necessarily identical) to those used by
Davis Selected Advisers in managing Davis Financial Portfolio. 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 performance (results net of Davis Financial Portfolio's annual
operating expense for the year ended December 31, 1999), against the S&P 500(R)
Index. The 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 PERFORMANCE INFORMATION SET FORTH BELOW FOR DAVIS SELECTED ADVISERS DOES NOT
REPRESENT THE PERFORMANCE OF DAVIS FINANCIAL PORTFOLIO.

5
<PAGE>

DAVIS FINANCIAL COMPOSITE RETURNS VS. S & P 500 INDEX
(For the periods ending 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 xx% xx% xx% Xx%
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX xx% xx% xx% Xx%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

ADVISER COMPENSATION

The annual Adviser compensation for the fiscal year December 31, 1999 (based on
average net assets) was 0.75%,

SENIOR RESEARCH ADVISER AND FOUNDER; PORTFOLIO MANAGERS

CHRISTOPHER C. DAVIS serves as President of Davis Financial Portfolio. He 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 was the assistant Portfolio Manager and research
analyst working with Shelby M.C. Davis from September, 1989, to September, 1995.

KENNETH CHARLES FEINBERG began as a research analyst at Davis Selected Advisers
in December, 1994. He has served as Portfolio Manager of various equity funds
managed by Davis Selected Advisers since May, 1997. He has served as Portfolio
Manager of Davis Value Portfolio and Davis Financial Portfolio since their
inception, July 1, 1999, and also manages other equity funds advised by Davis
Selected Advisers.

OTHER INFORMATION

PURCHASE AND REDEMPTION OF SHARES

6
<PAGE>

The Fund has adopted a plan under Rule 12b-1 allowing the payment of up to 0.25%
for distribution expenses. The Fund does not intend to make any payments under
this plan at the current time.

7
<PAGE>

PRICING OF 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.

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 year ending December 31, 1999, assuming that all dividends and
capital gains have been reinvested. Some of the information reflects financial
results

8
<PAGE>

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 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
- ---------------------------------
Net Investment Income 0.02
Net Realized and Unrealized Gains (Losses) (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)
Ratio of Net Investment Income to Average Net Assets 0.76%*
Portfolio Turnover Rate(2) 9%

3 Less than $0.005 per share.

* Annualized

SEE NOTES TO FINANCIAL STATEMENTS

9
<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:

o FROM YOUR INSURANCE COMPANY OR YOUR ACCOUNT REPRESENTATIVE. Your insurance
company or account representative can provide you with copies of these
documents.

o VIA THE INTERNET. Visit the SEC web site (www.sec.gov).

Investment Company Act File No. 811-9293

<PAGE>

DAVIS REAL ESTATE PORTFOLIO

(Part of Davis Variable Account Fund, Inc.)

May 1, 2000

This prospectus contains important information. Please read it 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.

OVER 25 YEARS OF RELIABLE INVESTING

1
<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 Managers

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 company's
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.

o 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.

o 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.

4
<PAGE>

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 annual update of the
Fund's prospectus after it has been offered to the public for a full calendar
year.

Davis Selected Advisers, L.P., has been managing portfolios in a similar style
since 1994, including Davis Real Estate Fund.

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., serves as the sub-adviser ("Sub-Advisor") 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 below 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 BELOW.

The Davis Real Estate Composite performance history includes all accounts ($3.5
million or larger) 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. 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 performance (results net of Davis Real Estate
Portfolio's annual operating expense for the year ended December 31, 1999),
against the S&P 500(R)

5
<PAGE>

Index. The 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 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 INDEX
(For the periods ending December 31, 1999)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PAST 1 YEAR PAST 3 YEARS SINCE JANUARY 1,
1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DAVIS REAL ESTATE COMPOSITE xx% xx% Xx%
- ------------------------------------------------------------------------------------------------------
S&P 500 INDEX xx% xx% Xx%
- ------------------------------------------------------------------------------------------------------
</TABLE>

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

ADVISER COMPENSATION

The annual Adviser compensation for the fiscal year December 31, 1999 (based on
average net assets) was 0.75%,

SENIOR RESEARCH ADVISER AND FOUNDER, PORTFOLIO MANAGER

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

6
<PAGE>

The Fund has adopted a plan under Rule 12b-1 allowing the payment of up to 0.25%
for distribution expenses. The Fund does not intend to make any payments under
this plan at the current time.

PRICING OF SHARES

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 Funds.

7
<PAGE>

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Davis Real
Estate Portfolio for the year ending 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.
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 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

SEE NOTES TO FINANCIAL STATEMENTS

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:

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

o VIA THE INTERNET. Visit the SEC web site (www.sec.gov).

Investment Company Act File No. 811-9293

9
<PAGE>

DAVIS VALUE PORTFOLIO
DAVIS FINANCIAL PORTFOLIO
DAVIS REAL ESTATE PORTFOLIO

(Part of Davis Variable Account Fund, Inc.)

May 1, 2000

This prospectus contains important information. Please read it 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.

Over 25 Years of Reliable Investing

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
Chief Investment Officer and 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

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 the
Fund. 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 the Fund's performance to suffer.

o 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
the Fund invests largely determines the Fund's performance.

PERFORMANCE INFORMATION

Davis Selected Advisers, LP, has been managing portfolios in a similar style
since 1969, including Davis New York Venture Fund.

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.

3
<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 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

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 COMPETITION. The financial services industry has become increasingly
competitive.

4
<PAGE>

PERFORMANCE INFORMATION

Davis Selected Advisers, L.P., has been managing portfolios in a similar style
since 1991, including Davis Financial Fund.

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

5
<PAGE>

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.

Davis Selected Advisers, L.P., has been managing portfolios in a similar style
since 1994, including Davis Real Estate Fund.

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.

Davis Selected Advisers-NY, Inc., serves as the sub-adviser ("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.

6
<PAGE>

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 company's
true worth.

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 below 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 BELOW.

The performance histories presented below for Davis Large Cap Equity Composite,
Davis Financial Composite, and Davis Real Estate Composite include all accounts
($3.5 million or larger) 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 Portfolio, respectively. Private accounts 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 performance (results net of the actual expenses of the Funds'
annual operating expenses for the year ended December 31, 1999), against the S&P
500(R) Index. Each Composite performance is

7
<PAGE>

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 PERFORMANCE INFORMATION SET FORTH BELOW 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 INDEX
(For the periods ending December 31, 1999)

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

- -------------------------------------------------------------------------------------------------------------------------
PAST 1 YEAR PAST 3 YEARS PAST 5 YEARS SINCE
JANUARY 1, 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DAVIS FINANCIAL COMPOSITE xx% xx% xx% Xx%
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX 28.59% 28.13% 24.03% Xx%
- -------------------------------------------------------------------------------------------------------------------------
As of December 31, 1999, the composite included xx accounts with aggregate
assets of approximately $xx billion.

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

- -------------------------------------------------------------------------------------------------------
PAST 1 YEAR PAST 3 YEARS SINCE JANUARY 1,
1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DAVIS REAL ESTATE COMPOSITE Xx% Xx% Xx%
- -------------------------------------------------------------------------------------------------------
S&P 500 INDEX Xx% Xx% Xx%
- -------------------------------------------------------------------------------------------------------
</TABLE>

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

ADVISER COMPENSATION

The annual Adviser compensation for the fiscal year December 31, 1999 (based on
average net assets) was as follows:

8
<PAGE>

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

SENIOR RESEARCH ADVISER AND FOUNDER, AND PORTFOLIO MANAGERS

CHRISTOPHER C. DAVIS serves as President of Davis Value Portfolio and Davis
Financial Portfolio. He has served as Portfolio Manager of Davis Value Portfolio
and Davis Financial Portfolio with Kenneth Charles Feinberg since their
inception, 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 was the
assistant Portfolio Manager and research analyst working with Shelby M.C. Davis
from September, 1989, to September, 1995.

KENNETH CHARLES FEINBERG began as a research analyst at Davis Selected Advisers
in December, 1994. He has served as Portfolio Manager of various equity funds
managed by Davis Selected Advisers since May, 1997. He has served as Portfolio
Manager of Davis Value Portfolio and Davis Financial Portfolio since their
inception, July 1, 1999, and also manages other equity funds advised by Davis
Selected Advisers.

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. The Funds do not intend to make any payments
under this plan at the current time.

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

9
<PAGE>

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 price. 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.

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 for the
past five years, 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.

10
<PAGE>

DAVIS VARIABLE ACCOUNT FUND, INC.
FINANCIAL HIGHLIGHTS

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

DAVIS DAVIS DAVIS
VALUE FINANCIAL REAL ESTATE
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------

JULY 1,1999 JULY 1, 1999 JULY 1, 1999
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
THROUGH THROUGH THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1999 DECEMBER 31, 1999
----------------- ----------------- -----------------
<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% 9% 21%

</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.
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%, 4.24% and 11.70%, for Davis Value
Portfolio, Davis Financial Portfolio and Davis Real Estate Portfolio,
respectively.
* Annualized

SEE NOTES TO FINANCIAL STATEMENTS

11
<PAGE>

These tables are designed to show you the financial performance of Davis New
York Venture Fund for the past five years, 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.

KPMG LLP has audited the information for the fiscal year 1998. KPMG LLP's
report, along with the Fund's financial statements, is included in the annual
report, which is available upon request. Another firm audited the information
for the previous fiscal years.

Insert Financial Highlights

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:

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

o VIA THE INTERNET. Visit the SEC web site (www.sec.gov).

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.,

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

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

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

Section II: Key Persons....................................................16
- ------------------------
Organization of the Company....................................16
Directors and Officers.........................................16
Directors' Compensation Schedule...............................18
Certain Shareholders of the Funds..............................19
Investment Advisory Services...................................20
Administrative and Service Fees................................17
Distribution of Company Shares.................................22
Other Important Service Providers..............................25

Section III: General Information...........................................35
- ---------------------------------
Determining the Price of Shares................................35
Federal Income Taxes...........................................37
Performance Data...............................................37

2
<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 Fund
is growth of capital. It invests primarily in common stocks and other equity
securities and will concentrate investments in companies principally engaged in
the financial services industry, including banking, insurance, and other
financial services described below. Davis Financial Portfolio generally will
invest a minimum of 65% of its total assets in investments in the financial
services industry. The Fund's principal risks are market risk and company risk.
Because Davis Financial Portfolio concentrates its investments in the financial
services industry, it may be affected by economic or regulatory developments in,
or related to, that market sector. The Fund may also invest in foreign
securities.

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

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

PORTFOLIO SECURITIES

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

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

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

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

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.

3
<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 increased
competition and a decline in the number of publicly-traded regional banks.

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

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

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

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.

6
<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

7
<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, either 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, either 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. Neither 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 its foreign currency transactions by tax considerations.

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

The restricted securities which the Funds may purchase include securities
which have not been registered under the 1933 Act but are eligible for purchase
and sale pursuant to Rule 144A ("Rule 144A Securities"). This Rule permits
certain qualified institutional buyers, such as the Funds, to trade in privately
placed securities even though such securities are not registered under the 1933
Act. The Adviser 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

9
<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 Funds shares may
be taken into account as a factor in placement of portfolio transactions. In
seeking the Funds' investment objectives, the Funds may trade to some degree in
securities for the short term if the Adviser or Sub-Adviser believes that such
trading is advisable.

In placing executions and paying brokerage commissions 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: $xxx
Amount paid to brokers providing research: xx%
Brokerage commissions paid
to Shelby Cullom Davis & Co.:(1) $xx

Davis Financial Portfolio
Brokerage commissions paid: $xxx
Amount paid to brokers providing research: xx%
Brokerage commissions paid
to Shelby Cullom Davis & Co.:(1) $xx

Davis Real Estate Portfolio
Brokerage commissions paid: $xxx
Amount paid to brokers providing research: xx%
Brokerage commissions paid
to Shelby Cullom Davis & Co.:(1) $xx

(1) 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:

% of % of aggregate dollar amount of
Fund Commissions Paid transactions involving the payment of commissions
- ---- ----------- ------------------------------------------------------
<S> <C> <C>
Davis Value Portfolio xx% xx%
Davis Financial Portfolio xx% xx%
Davis Real Estate Portfolio xx% xx%
</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 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 have
identical voting, dividend, liquidation and other rights, and the same terms and
conditions as any other shares except that (i) each dollar of net asset value
per share is entitled to one vote, (ii) the expenses related to a particular
class, such as those related to the distribution of each class and the transfer
agency expenses of each class are borne solely by each such class, and (iii)
each class of shares votes separately with respect to provisions of the Rule
12b-1 Distribution Plan, which pertains to a particular class, and other matters
for which separate class voting is appropriate under applicable law. Each
fractional share has the same rights, in proportion, as a full share. Shares do
not have cumulative voting rights; therefore, the holders of more than 50% of
the voting power of the Company can elect all of the directors of the Company.

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

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.

15
<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 101Tucson, 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 101Tucson, 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 101Tucson, 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 $xx $xx
Marc P. Blum xx xx
Jerry D. Geist xx xx
D. James Guzy xx xx
G. Bernard Hamilton xx xx
LeRoy E. Hoffberger** xx xx
Laurence W. Levine xx xx
Christian R. Sonne xx xx
Marsha Williams xx xx

*Complex Compensation is the aggregate compensation paid, for service as a
Director, by all mutual funds with the same investment adviser. There are nine
registered investment companies in the complex.
**Mr. Hoffberger retired as a Director as of January 1, 2000, but still serves
in a non-voting emeritus status.

16
<PAGE>

CERTAIN SHAREHOLDERS OF THE FUNDS

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

The following table sets forth as of April xx, 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 XX

DAVIS FINANCIAL PORTFOLIO XX

DAVIS REAL ESTATE PORTFOLIO XX

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, 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 that 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 $xx
Davis Financial Portfolio $xx
Davis Real Estate Portfolio $xx

17
<PAGE>

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:

Davis Value Portfolio
- ---------------------
Accounting and administrative services: $xx
Shareholder services: $xx

Davis Financial Portfolio
- --------------------------
Accounting and administrative services: $xx
Shareholder services: $xx

Davis Real Estate Portfolio
- ---------------------------
Accounting and administrative services: $xx
Shareholder services: $xx

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 SERVICER 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.

18
<PAGE>

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' Class A shares, servicing its shareholders and maintaining
its shareholder accounts, producing sales literature, printing prospectuses for
prospective investors, and other marketing purposes. In addition, to the extent
that any investment advisory fees paid by the Company may be deemed to be
indirectly financing any activity which is primarily intended to result in the
sale of Company shares within the meaning of Rule 12b-1, the Distribution Plan
authorizes the payment of such fees.

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.

19
<PAGE>

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.

20
<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

21
<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.

22
<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:

Cumulative Average Annual
Davis Value Portfolio Total Return(1) Total Return(2)
- --------------------- ------------- -------------
<S> <C> <C>
Period from July 1, 1999 through December 31, 1999 (life of portfolio)....... xx% xx%

Davis Financial Portfolio

Period from July 1, 1999 through December 31, 1999 (life of portfolio)....... xx% xx%

Davis Real Estate Portfolio

Period from July 1, 1999 through December 31, 1999 (life of portfolio)....... xx% xx%

</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 separately
for each class in accordance with the standardized method prescribed by the
Securities and Exchange Commission by determining the average annual
compounded rates of return over the periods indicated, that would equate
the initial amount invested to the ending redeemable value, according to
the following formula:

P(1+T)n = ERV

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

T = average annual total return.

n = number of years.

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

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

23
<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 xx%

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

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

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

b = expenses accrued for the period.

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

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

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

OTHER FUND STATISTICS

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

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

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. 1 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 333-76407

AND

POST-EFFECTIVE AMENDMENT NO. 1 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) filed on Edgar
04.16.99.

(b) By-laws. Incorporated by reference to Exhibit (b) filed on
Edgar 04.16.99.

(d)(1) Investment Advisory Contracts. Incorporated by reference to
Exhibit (d)(1), filed on Edgar 04.16.99.

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

(e) Underwriting Contracts. Distributor's Agreement. Incorporated
by reference to Exhibit (a) filed on Edgar 04.16.99.

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

(g) Custodian Agreement. Incorporated by reference to Exhibit (g)
Filed on Edgar 06.29.99.

(h)(1) Other Material Contracts. Transfer Agency and Service
Agreement Incorporated by reference to Exhibit (h)(1) filed
on Edgar 06.29.99.

1
<PAGE>

(h)(2) Form of Participation Agreement. Incorporated by reference to
Exhibit (h)(2) 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..

(k) Omitted Financial Statements. Not applicable.

(l) Initial Capital Agreements. Not applicable.

(m) Rule 12b-1 Plan. Incorporated by reference to Exhibit (m)
filed on Edgar 06.29.99.

(n) Financial Data Schedule. Not applicable.

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

**(p) Code of Ethics. Code of Ethics

(q) 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) filed on Edgar 06.29.99.

*to be filed by amendment prior to being declared effective.

**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

2
<PAGE>

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

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 of 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, 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:

NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
- ---------------- ----------- ---------------

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
2949 East Elvira Road Secretary
Suite 101
Tucson AZ 85706

Item 28. Location of Accounts and Records

Accounts and records are maintained at the offices of Davis Selected
Advisers-NY, Inc., 124 East Marcy Street, Santa Fe, New Mexico 87501, after
April 1, 2000 they will be 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.

4
<PAGE>

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.

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 25th day of
February, 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.

Signature Title Date
--------- ----- ----

Shelby M.C. Davis* President, Chief Executive Officer February 25, 2000
- ------------------
Shelby M.C. Davis

Sharra L. Reed* Principal Financial Officer
- --------------- and Treasurer February 25, 2000
Sharra L. Reed

*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.

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

5
<PAGE>

DAVIS VARIABLE ACCOUNT FUND, INC.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on February 25, 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

6
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EXHIBIT LIST

(p) Code of Ethics. Code of Ethics

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Exhibit 23(p)

CODE OF ETHICS

DAVIS SELECTED ADVISERS, L.P.
DAVIS SELECTED ADVISERS-NY, INC.
DAVIS DISTRIBUTORS, LLC
AND THE CLIENTS FOR WHICH THEY SERVE AS INVESTMENT ADVISER

AS AMENDED JANUARY 29, 2000

PREAMBLE
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The interests of our clients, and the interests of shareholders of the funds we
advise, are, at all times, our highest priority. In order to maintain this
priority, all personal securities transactions are conducted in a manner
consistent with this Code of Ethics (the "Code"). We are committed to
maintaining the integrity of our business by exercising vigilance in the
avoidance of all actual or potential conflicts of interest or abuses of our
position of trust and responsibility. The Code should be read in conjunction
with this Preamble.

SECTION 1: DEFINITIONS
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All definitions shall be interpreted pursuant to the Investment Company Act of
1940 (the "1940 Act") and its Rule 17j-1, and the Investment Advisers Act and
its Rule 204-(2).

(A) "Adviser" means Davis Selected Advisers, L.P. ("DSA"), Davis Selected
Advisers-NY, Inc. ("DSANY"), and Davis Distributors, LLC ("DDLLC"), and any firm
which controls, is controlled by, or is under common control with DSA, and any
other firm adopting this Code.

(B) "Access Person" means any director, officer, general partner, or Advisory
Person of the Adviser or a Fund. Access Person shall not include:

(1) disinterested Directors who are Access Persons solely by reason of
being a Director of a Fund; or

(2) Officers of a Fund who are Access Persons solely by reason of being an
Officer of a Fund;

if such Disinterested Directors and Officers do not, in connection with their
regular functions or duties, obtain information regarding the purchase or sale
of a security by that Fund prior to disclosure in a regular meeting of
Directors.*

(1) any employee of the Adviser or a Fund who, in connection with his/her
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a Covered Security by a Client, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales;

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(2) any natural person in a control relationship to the Adviser or a Fund
who obtains information concerning recommendations made to such company with
regard to the purchase of a Covered Security; or

(3) any person who obtains information concerning any recommendations or
executions of Client transactions in Covered Securities and has been designated
by the Compliance Officer as an Advisory Person.*

* This Code requires the Compliance Officer to maintain a list of all Access
Persons and Advisory Persons and to provide these persons with notice of their
status.

(D) "Security held or to be Acquired by a Client" means:

(1) any Covered Security which, within the most recent 15 days:

(a) is or has been held by a Client; or

(b) is being or has been seriously considered for purchase by a Client;
and

(2) any option to purchase or sell, and any security convertible into or
exchangeable for, a Covered Security described in part (i) of this section.

A Covered Security is seriously considered for purchase by a Client when a
recommendation to purchase or sell a Covered Security has been communicated to a
portfolio manager for a Client and the portfolio manager is considering the
recommendation. A Covered Security is not being seriously considered for
purchase by a Client solely by reason of that Covered Security being subject to
normal review procedures applicable to portfolio securities of the Client, or
normal review procedures which are part of a general industrial or business
study, review, survey or research or monitoring of securities markets.

(E) "Beneficial Owner" shall be determined in the same manner as it would be in
determining whether a person is subject to the provisions of Section 16 of the
Securities Exchange Act of 1934 and the rules and regulations thereunder. (The
meaning of the term "Beneficial Owner" is summarized and illustrated in Appendix
A attached to this Code.)

(F) "Client" means any party for whom the Adviser provides investment advisory
services. Clients include Funds, whether or not the Adviser serves as the
primary investment adviser or serves as sub-adviser.

(G) "Compliance Officer" shall mean an Adviser's designated Compliance Officer
or, in the case of such designated Compliance Officer's unavailability or
inability to act, any officer of the Adviser designated to act in such
circumstances.

(H) "Control" shall have the same meaning as set forth in Section 2(a)(9) of the
1940 Act.

(I) "Covered Security" means a security as defined in Section 2(a)(36) of the
1940 Act , except that it does not include: (1) direct obligations of the
Government of the United States, (2) banker's acceptances, bank certificates of
deposit, commercial paper, and high quality short-term debt instruments,
including repurchase agreements; and (3) shares issued by open-end funds
registered under the 1940 Act.

(J) "Disinterested Director" means a director of a Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19) of the
1940 Act.

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(K) "Fund" means each investment company for whom the Adviser serves as the
primary investment adviser and manages the investment company's daily business
affairs. Currently, this includes the Davis Funds and the Selected Funds.

(L) "Limited Offering" means an offering that is exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2), Section 4(6), Rule 505, or
Rule 506,

(M) "Purchase or Sale of a Covered Security" includes, inter alia, the writing
of an option to purchase or sell a Covered Security.

SECTION 2: UNLAWFUL ACTIONS
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No Access Person, in connection with the purchase or sale of any Security Held
or to be acquired by a Client shall

(A) employ any device, scheme or artifice to defraud a Client;

(B) make any untrue statement of a material fact (or omit to state a material
fact necessary in order to make the statements made not misleading) to a DSA
employee making investment decisions or to a DSA officer investigating
securities transactions;

(C) engage in any act, practice or course of business that operates or would
operate as a fraud or deceit to a Client; or

(D) engage in any manipulative practice with respect to a Client.

SECTION 3: PROHIBITED PURCHASES AND SALES
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(A) Pre-Clearing. No Access Person shall, directly or indirectly, purchase or
sell any Covered Security (or any security sold in a Limited Offering) in which
such person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership without the prior approval of the Compliance
Officer. The Compliance Officer shall pre-clear his personal transactions in any
Covered Security (or any security sold in a Limited Offering) with a senior
officer designated by DSA.

(B) Initial Public Offerings. No Access Person shall acquire any Securities in
an initial public offering.

(C) Seven Day Trading Window. No Access Person shall, directly or indirectly,
purchase or sell any Covered Security in which he or she has, or by reason of
such transaction acquires, any direct or indirect beneficial ownership, and
which to his or her actual knowledge at the time of such purchase or sale is
being seriously considered for purchase or sale by or for a Client, or is the
subject of a pending buy or sell order by a Client, or is programmed for
purchase or sale by or for a Client; or was purchased or sold by or for a Client
within the seven (7) calendar day period preceding or following the purchase or
sale by such Access Person.

(D) Sanctions. Upon discovering a violation of Section 3(A) of this Code, the
Compliance Officer shall impose a fine in an amount he or she deems appropriate.
Upon discovering a violation of Sections 2, 3(B) or 3(C) of this Code, the
Adviser and the Board of Directors of any Fund affected by such violation may
impose such sanctions as each deems appropriate, including, inter alia, monetary
sanctions, a letter of censure or suspension or termination of the

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employment of the violator, civil referral to the SEC or other civil regulatory
authorities, or criminal referral.

(E) For purposes of the prohibitions in Section 3 of this Code on purchases and
sales of certain Securities, "directly or indirectly" shall be deemed to include
within such prohibitions any transaction involving any other substantially
similar Covered Securities of the same issuer, and any derivatives of such
Covered Security.

SECTION 4: EXEMPTED TRANSACTIONS
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(A) Blue Chip Exemption. The prohibitions of Section 3(A) of this Code shall not
apply to any purchase or sale, or series of related transactions, involving less
than $50,000 of the securities of a company listed either on a national
securities exchange or traded over the counter and having a market
capitalization exceeding $5 billion. A series of transactions in the securities
of a company shall be deemed to be related if occurring within seven days, and
shall be deemed not to be related if occurring more than 14 days apart.

(B) The prohibitions of Section 3 of this Code shall not apply to:

(1) No Control. Purchases or sales effected for any account over which the
Access Person has no direct or indirect influence or control.

(2) Automatic Dividend Reinvestment Plan. Purchases that are part of an
automatic dividend reinvestment plan.

(3) Pro Rata Rights. Purchases effected upon the exercise of rights issued
by an issuer pro rata to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such rights so
acquired.

(4) Systematic Investment Plan. Purchases effected through a systematic
investment plan involving the automatic investment of a predetermined amount on
predetermined dates, provided the Compliance Officer has been previously
notified by the employee that he or she (or his or her spouse) will be
participating in the plan.

(5) Gifts. Subject to the provisions of Section 7, the giving or receiving
of any security as a gift.

(6) Futures Contracts, Options on Futures Contracts. Any purchase or sale
involving futures contracts on broad securities indices, such as the S&P, or
interest rate futures contracts, or options on such futures contracts.

SECTION 5: LIMITED OFFERINGS
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In reviewing requests for approval of a transaction by an Access Person
involving a limited offering, the Compliance Officer shall take into account,
among other factors, whether the investment opportunity should be reserved for a
Client, and whether the opportunity is being offered to such Access Person by
virtue of his or her position with the Adviser.

An Advisory Person who has been authorized to acquire Securities in a limited
offering shall be required to disclose such investment when that Advisory Person
plays a part in any Fund's subsequent consideration of an

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investment in the issuer. Any such consideration of an investment in the issuer
shall be subject to review by Advisory Persons with no personal interest in the
issuer.

SECTION 6: DISGORGEMENT BY ACCESS PERSONS OF CERTAIN SHORT-TERM TRADING PROFITS
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(A) No Access Person shall profit from the purchase and sale, or sale and
purchase, of the same (or equivalent) securities within 60 calendar days. Any
profits realized by such Access Person on such short-term trades shall be
disgorged.

(B) Any profits realized by an Access Person on trades made in violation of
Section 3(C) of this Code (the Seven Day Trading Window) shall be disgorged.

SECTION 7: GIFTS
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In addition to those provisions of the NASD Rules of Fair Practice or similar
ethical rules relating to the receipt of gifts and other benefits, all Access
Persons are prohibited from receiving any gift, gratuity, favor award or other
item or benefit having a market value in excess of $100 per person, per year,
from or on behalf of any person or entity that does, or seeks to do, business
with or on behalf of the Adviser or its Clients. Business-related entertainment
such as meals, tickets to the theater or a sporting event which are infrequent
and of a non-lavish nature are excepted from this prohibition.

SECTION 8: SERVICE AS A DIRECTOR
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Access Persons are prohibited from serving on the boards of directors of
publicly traded companies unless the Compliance Officer determines, in writing,
that such service is not inconsistent with the interests of the Clients and
their shareholders. If the Compliance Officer has approved such service, and
such Access Person is also an Advisory Person, that Advisory Person shall be
isolated, through "Chinese Wall" procedures, from persons making investment
decisions with respect to such issuer.

SECTION 9: REPORTING
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(A) Initial and Annual Disclosure. Except as provided in paragraph (e), every
Access Person shall:

(1) Report all personal holdings of Covered Securities within 10 days of
becoming an Access person; and

(2) Report all personal holdings of Covered Securities as of December 31st
(or other date acceptable to the Compliance Officer) within 30 days of calendar
year-end.

(B) Duplicate Confirmation Statements. Every Access Person shall instruct the
broker, dealer or bank with or through whom a Covered Security transaction is
effected in which every Access Person has, or by reason of such transaction
acquires or sells, any direct or indirect beneficial ownership in the Covered
Security, to furnish the Compliance Officer duplicate copies of transaction
confirmations and statements of account at the same time such confirmations and
statements of account are sent to the Access Person.

(C) Quarterly Reporting. Every Access Person shall report within 10 days after
the end of each calendar quarter to the Compliance Officer all Covered
Securities transactions taking

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place during the preceding calendar quarter in an account of which the Access
Person is a Beneficial Owner. If the Access Person did not execute any such
transactions during the preceding calendar quarter, he shall report such fact to
the Compliance Officer.

(D) Opening Brokerage Accounts. Prior to the opening of an account for the
purpose of executing transactions in Covered Securities, every Access Person
shall obtain the written consent of the Compliance Officer.

(E) Non-Discretionary Accounts. No person shall be required to make a report
with respect to any account over which such person does not have any direct or
indirect influence or control.

(F) Non-Admission Statement. Any such disclosure report may contain a statement
that the report shall not be construed as an admission by the person making such
report that he or she has any direct or indirect beneficial ownership in the
Covered Security to which the report relates.

SECTION 10: ADMINISTRATION OF THE CODE
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(A) Appointment of a Compliance Officer. DSA shall appoint a Compliance Officer
and shall keep a record for five years of the persons serving as Compliance
Officer and their dates of service.

(B) Administration of the Code. The Compliance Officer shall administer the Code
and shall use reasonable diligence and institute procedures reasonably necessary
to review reports submitted by Access Persons and to prevent violations of the
Code.

(C) Record of Violations of the Code. The Compliance Officer shall maintain a
record of all violations of the Code, and of any action taken as a result of the
violation, which shall be maintained for five years in an easily accessible
place.

(D) List of Access and Advisory Persons. The Compliance Officer shall prepare a
list of the Access Persons and Advisory Persons, shall update the list as
necessary, and shall maintain a record (for 5 years) of former lists of Access
and Advisory Persons.

(E) Notice of Status as Access or Advisory Person. The Compliance Officer shall
notify each Access and Advisory Person of their status, provide them with a copy
of this Code, and obtain an acknowledgment from such person of receipt thereof.

(F) Notice of Amendments to the Code. Amendments to this Code shall be provided
to each Access and Advisory Person, who shall acknowledge receipt thereof.

(G) Exemptions to the Code. The Board of Directors of the Funds may exempt any
person from application of any Section(s) of this Code. A written memorandum
shall specify the Section(s) of this Code from which the person is exempted and
the reasons therefore.

(H) Quarterly Directors' Report. The Compliance Officer shall compile a
quarterly report to be presented to the Board of Directors of each of the Funds.
Such report shall discuss compliance with this Code, and shall provide details
with respect to any failure to comply and the actions taken by the Adviser upon
discovery of such failure.

(I) Annual Directors' Report. Not less than once a year the Compliance Officer
shall furnish to Directors of each of the Funds, and the Directors shall
consider, a written report that:

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(1) Describes any issues arising under the Code since the last report to
the Directors, including, but not limited to, information about material
violations of the Code and sanctions imposed in response to the material
violations. The annual written report may incorporate by reference information
included in written quarterly reports previously presented to the Directors; and

(2) Certifies that DSA has adopted procedures reasonably necessary to
prevent Access Persons from violating the Code.

SECTION 11: ADOPTION OF CODE BY ENTITIES OTHER THAN DSA
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The Compliance Officer of DSA shall ensure that all firms controlling,
controlled by, or under common control with DSA that employ persons who obtain
information concerning recommendations or executions of Covered Security
transactions of any Client have adopted the Code or have imposed similar ethical
constraints on their personnel.

SECTION 12: MATERIAL CHANGES TO THE CODE
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(A) All material changes to the Code must be approved by a majority of the Board
of Directors (including independent directors voting separately) of Funds at
their next regular meeting (and in no event more than 6 months after material
change). DSA shall provide the Directors with a certification that DSA has
adopted procedures reasonably necessary to prevent Access Persons from violating
the Code. The Directors shall base their approval on a determination that the
Code contains provisions reasonably necessary to prevent Access persons from
violating Section 2 of this Code.

(B) A copy of each version of the Code shall be maintained for five years in an
easily accessible place.

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CODE OF ETHICS

DAVIS SELECTED ADVISERS, L.P.
DAVIS SELECTED ADVISERS-NY, INC.
DAVIS DISTRIBUTORS, LLC
AND THE CLIENTS FOR WHICH THEY SERVE AS INVESTMENT ADVISER

AS AMENDED JANUARY 29, 2000

INITIAL & ANNUAL CODE OF ETHICS CERTIFICATION
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I acknowledge that I have received a copy and read the Code of Ethics, as
amended January 29, 2000, for Davis Selected Advisers, L.P., Davis Selected
Advisers-NY, Inc., Davis Distributors, LLC, other entities adopting this Code
and the Funds and clients for which they serve as investment adviser. I
understand my responsibilities under this Code of Ethics and agree to comply
with all of its terms and conditions. I will retain a copy of this Code of
Ethics for future reference.

I hereby certify that I have complied with the requirements of the Code of
Ethics of Davis Selected Advisers, L.P., Davis Selected Advisers-NY, Inc., Davis
Distributors, LLC, and the clients for which they serve as investment adviser,
as amended January 29, 2000, and that I have disclosed or reported all personal
securities transactions required to be disclosed or reported pursuant to such
Code of Ethics.

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Print Name Signature

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Date

RETURN TO HUMAN RESOURCES DEPARTMENT.

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CODE OF ETHICS

DAVIS SELECTED ADVISERS, L.P.
DAVIS SELECTED ADVISERS-NY, INC.
DAVIS DISTRIBUTORS, LLC
AND THE CLIENTS FOR WHICH THEY SERVE AS INVESTMENT ADVISER

AS AMENDED JANUARY 29, 2000

INITIAL & ANNUAL CODE OF ETHICS CERTIFICATION
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I acknowledge that I have received a copy and read the Code of Ethics, as
amended January 29, 2000, for Davis Selected Advisers, L.P., Davis Selected
Advisers-NY, Inc., Davis Distributors, LLC, other entities adopting this Code,
and the Funds and clients for which they serve as investment adviser. I
understand my responsibilities under this Code of Ethics and agree to comply
with all of its terms and conditions. I will retain a copy of this Code of
Ethics for future reference.

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Print Name Signature

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Date

EMPLOYEE COPY.

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CODE OF ETHICS

DAVIS SELECTED ADVISERS, L.P.
DAVIS SELECTED ADVISERS-NY, INC.
DAVIS DISTRIBUTORS, LLC
AND THE CLIENTS FOR WHICH THEY SERVE AS INVESTMENT ADVISER

AS AMENDED JANUARY 29, 2000

BENEFICIAL OWNERSHIP
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For purposes of the Code of Ethics, a beneficial owner of a security includes
any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or indirect
pecuniary interest in such security.

You have a pecuniary interest in a security if you have the opportunity,
directly or indirectly, to profit or share in the profit derived from a
transaction in such security. You are deemed to have a pecuniary interest in any
securities held by members of your immediate family sharing your household.
"Immediate family" means your son or daughter (including any legally adopted
child) or any descendants of either, your stepson or stepdaughter, your father
or mother or any ancestor of either, your stepfather or stepmother, and your
spouse. Also, you are deemed to have a pecuniary interest in securities held by
a partnership of which you are a general partner, and beneficial ownership of
the securities held by such partnership will be attributed to you in proportion
to the greater of your capital account or interest in the partnership at the
time of any transaction in such securities. You are also deemed to have a
pecuniary interest in the portfolio securities held by a corporation if you are
a controlling shareholder of such corporation and have or share investment
control over such portfolio securities. Additionally, certain
performance-related fees received by brokers, dealers, banks, insurance
companies, investment companies, investment advisors, trustees and others may
give rise to pecuniary interests in securities over which such persons have
voting or investment control.

Securities owned of record or held in your name are generally considered to be
beneficially owned by you if you have a pecuniary interest in such securities.
Beneficial ownership may include securities held by others for your benefit
regardless of record ownership (e.g., securities held for you or members of your
immediate family by agents, custodians, brokers, trustees, executors or other
administrators; securities owned by you but which have not been transferred into
your name on the books of a company; and securities which you have pledged) if
you have or share a pecuniary interest in such securities.

With respect to ownership of securities held in trust, beneficial ownership
includes the ownership of securities as a trustee in instances either where you
as trustee have, or where a member of your immediate family has, a pecuniary
interest in the securities held by the trust (e.g., by virtue of being a
beneficiary of the trust).

The final determination of beneficial ownership is a question to be determined
in light of the facts of a particular case. Thus, while you may include security
holdings of other members of your family, you may nonetheless disclaim
beneficial ownership of such securities. Any uncertainty as to whether you are
the beneficial owner of a security should be brought to the attention of the
Compliance Officer.

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