DAVIS SERIES INC, 485APOS, 1998-10-21

DAVIS SERIES INC
485APOS, 1998-10-21

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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. 2-57209
POST-EFFECTIVE AMENDMENT NO. 40
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-2679
AMENDMENT NO. 36
DAVIS SERIES, INC.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-505-983-4335

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

-or-

Sheldon R. Stein, Esq.
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
(1-312-580-2014)

It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On ________ pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)
[ ] on _____, 1998 pursuant to paragraph (a) of Rule 485

Title of Securities Being Registered: Common Stock of:
----------------
1. Davis Growth Opportunity Fund
2. Davis Financial Fund

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3. Davis Real Estate Fund
4. Davis Convertible Securities Fund
5. Davis Government Bond Fund
6. Davis Government Money Market Fund

2
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FORM N-1A

DAVIS SERIES, INC. CLASS A, B AND C SHARES

POST-EFFECTIVE AMENDMENT NO. 40 TO REGISTRATION STATEMENT NO. 2-057209 UNDER
THE SECURITIES ACT OF 1933 AND AMENDMENT NO. 36 UNDER THE INVESTMENT COMPANY
ACT OF 1940 TO REGISTRATION STATEMENT NO. 811-2679.

CROSS REFERENCE SHEET
N-1A
ITEM NO. PART A CAPTION OR PLACEMENT: PROSPECTUS FOR CLASS ABC SHARES
- -------- ------------------------------------------------------------

1 Front and Back Cover pages
2, 4 Risk Spectrum;
Overview of the Fund:
Investment Objective and Strategy
Principal Risks
Fund Performance
3 Overview of the Fund: Fees and Expenses
5 Annual Report, Incorporated by Reference
6. Who is Responsible for Your Davis Account
7. Once You Invest in the Fund
How to Open an Account
How to Buy, Sell and Exchange Shares
8 How to Choose a Share Class
9 Overview of the Fund: Financial Highlights

N-1A
ITEM NO. PART A CAPTION OR PLACEMENT: PROSPECTUS FOR CLASS Y SHARES
- -------- ------------------------------------------------------------

1 Front and Back Cover pages
2, 4 Risk Spectrum;
Overview of the Fund:
Investment Objective and Strategy
Principal Risks
Fund Performance
3 Overview of the Fund: Fees and Expenses

3
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5 Annual Report, Incorporated by Reference
6 Who is Responsible for Your Davis Account
7 Once You Invest in the Fund
How to Open an Account
How to Buy, Sell and Exchange Shares
8 Not Applicable
9 Overview of the Fund: Financial Highlights

N-1A PART B CAPTION OR PLACEMENT:
ITEM NO. 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 Purchase of Shares
Special Services
Exchange of Shares
Redemption of Shares
19 Federal Income Taxes
20 Distribution of Company Shares
21 Performance Data
22 Annual Report, Incorporated by Reference

4
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DAVIS SERIES

[COVER PAGE]

Davis Growth Opportunity Fund
Davis Financial Fund
Davis Real Estate Fund
Davis Convertible Securities Fund
Davis Government Bond Fund
Davis Government Money Market Fund
(part of Davis Series, Inc.)

Prospectus and Application Form

Class A
Class B
Class C

May 1, 1998, as amended December xx, 1998.

The Securities and Exchange Commission has not approved or disapproved of the
shares of any Davis Fund - or any other mutual fund - as an investment. The
Securities and Exchange Commission has not determined whether this prospectus
is accurate or complete. Anyone who tells you otherwise is committing a crime.

Davis logo

Over 25 Years of Reliable Investing

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[INSIDE FRONT COVER]

RISK SPECTRUM

Davis Selected Advisers manages the eleven funds in the Davis family. Each fund
has a distinct investment objective and strategy. The following graph shows how
these funds compare to each other in terms of risk. The six funds in the Davis
Series include the least risky (Davis Government Money Market Fund) and the
most risky (Davis Growth Opportunity Fund), and other funds with risk levels
that range from "low" to "medium high."

[INSERT GRAPHIC]

For more complete information about any of the other Davis Funds, including
charges and expenses, ask for a prospectus. Read it carefully before investing
or sending money.

Risks are inherent in all investments. Investing in a mutual fund, even the
most conservative, involves risk, including the risk that you may receive
little or no return on your investment or even that you may lose part or all of
your investment.

An investment in any of the Davis Series Funds is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

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TABLE OF CONTENTS

ABOUT THE FUNDS

OVERVIEW OF EACH DAVIS SERIES FUND

Davis Growth Opportunity Fund
Davis Financial Fund
Davis Real Estate Fund
Davis Convertible Securities Fund
Davis Government Bond Fund
Davis Government Money Market Fund

Investment Objectives and Strategy
Principal Risks
Fund Performance
Fees and Expenses
Financial Highlights

WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT

ONCE YOU INVEST IN ONE OF THE DAVIS SERIES FUNDS

HOW TO CHOOSE A SHARE CLASS

HOW TO OPEN AN ACCOUNT

HOW TO BUY, SELL AND EXCHANGE SHARES

THE DAVIS FUNDS: OVER 25 YEARS OF RELIABLE INVESTING

OTHER FUND DOCUMENTS

3
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ABOUT THE FUNDS

Davis Series, Inc. is an open-end, diversified, management investment company.
The six funds that Davis Series offers in this prospectus accommodate a range
of investment objectives.

The tables that follow provide basic information about each of the six Davis
Series Funds. These tables should help you determine which funds are most
likely to suit your needs. Then you can turn to the detailed descriptions of
those funds in this prospectus.

TYPE OF FUND

- -------------------------------------------------------------------------------
NAME OF FUND PRIMARY GOAL
- -------------------------------------------------------------------------------
Davis Growth Opportunity Fund Growth
- -------------------------------------------------------------------------------
Davis Financial Fund Growth
- -------------------------------------------------------------------------------
Davis Real Estate Fund Growth and income
- -------------------------------------------------------------------------------
Davis Convertible Securities Fund Growth and income
- -------------------------------------------------------------------------------
Davis Government Bond Fund Current income
- -------------------------------------------------------------------------------
Davis Government Money Market Fund Current income with liquidity
- -------------------------------------------------------------------------------

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SNAPSHOT OF INVESTMENT OBJECTIVES

This table will help you identify the Davis Series Funds that are most suited
to your particular financial needs. The left-hand column lists several broad
investment objectives. One or more of the Davis Series Funds is designed to
meet each of the listed objectives, although the way that each fund approaches
the goal will vary. For example, several of the Davis Series Funds offer
concentrated portfolios for investors that prefer to focus their assets in one
industry, but no two funds concentrate in the same industry. Similarly, several
Davis Series Funds buy growth-oriented investments, but each fund uses unique
criteria to build its portfolio.

To use this table, look down the column of objectives and select a goal that
you are trying to attain. Then scan the across the row. Each fund that tries to
meet your goal is identified with [an asterisk]. Each fund that [pursues
contrary goals] is identified with [an "X"].

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
GROWTH
OPPORTUNITY REAL ESTATE CONVERTIBLE GOVERNMENT BOND MONEY MARKET
OBJECTIVE FUND FINANCIAL FUND FUND SECURITIES FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital growth * * * * X X
- ----------------------------------------------------------------------------------------------------------------------
Current income, X X * * * *
regular income, or
liquidity
- ----------------------------------------------------------------------------------------------------------------------
Long-term investment * * * * * X
- ----------------------------------------------------------------------------------------------------------------------
Investments X * * X X X
concentrated in one
industry
- ----------------------------------------------------------------------------------------------------------------------
Diversification away X X * * * *
from traditional
equity securities
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

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OVERVIEW OF DAVIS GROWTH OPPORTUNITY FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Growth Opportunity Fund's investment objective is growth of capital.

WHAT WE BUY. Davis Growth Opportunity Fund invests primarily in common stocks
of "growth companies." Common stock represents ownership of a company.

Most of the fund's common stock is issued by U.S. companies with small or
medium market capitalization's (that is, the market value of all of their
outstanding stock is less than $5 billion). The fund also may invest in stock
of larger U.S. companies and in securities of foreign issuers or securities
that are principally traded in foreign markets.

On occasion, Davis Growth Opportunity Fund uses short-term investments to earn
interest and maintain flexibility while we evaluate long-term opportunities.
These short-term investments may include high-grade money market instruments,
interest-bearing bank deposits, or cash equivalents (such as Treasury bills).
We also may use short-term investments for defensive purposes. In the event our
portfolio manager anticipates a decline in the market for common stocks, we may
reduce our risk by investing in short-term securities until market conditions
improve.

HOW WE SELECT INVESTMENTS. The Davis investment philosophy 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. Ideally, we invest in
companies that are experiencing growing demand for their products and services
in existing markets, introducing new products or services, expanding into new
markets, enjoying reduced competition and reducing costs. Obviously, not all of
our issuers have all of these characteristics.

PRINCIPAL RISKS

There are two principal risks in Davis Growth Opportunity Fund. First, is the
general risk of owning common stocks. Second, is the risk of investing in
growth-oriented stocks of small and mid-sized companies. Investments in foreign
securities may involve additional risk.

COMMON STOCKS GENERALLY. Factors that influence the value of a share of common
stock are primarily general market and economic conditions, and the financial
condition and performance of the issuer.

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 issuer.

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o COMPANY RISK. The price of an equity security varies with the success
and failure of its issuer. As a result, the success of the companies
in which Davis Growth Opportunity Fund invests largely determine the
fund's performance.

GROWTH-ORIENTED STOCKS OF SMALL AND MID-SIZED COMPANIES. For a variety of
reasons, an investment in a small or medium-capitalization growth company is
probably more risky than an investment in a larger, more established company,
and is harder to resell. Growth companies may be involved in industries that
are new, growing, changing, or all three. They tend to pay small dividends, if
any, to their shareholders, and have substantial debt obligations.
Finally, growth companies often have short operating histories.

FOREIGN SECURITIES. Foreign securities are often denominated in foreign
currencies, which means their value will be affected by changes in exchange
rates. In many foreign jurisdictions, there is less information publicly
available about - and less government regulation of - securities, securities
markets and issuers. Davis Growth Opportunity Fund may attempt to reduce
exposure to market and currency fluctuations by trading in currency futures
contracts or options on futures contracts for hedging purposes. When the fund
invests in foreign securities, our operating expenses are likely to be higher
than if we invested exclusively in U.S. securities.

FUND PERFORMANCE

Davis Growth Opportunity Fund began selling shares to the public on May 1,
1984. The following charts and tables will help you understand the fund's
financial condition - including the returns that investors have earned and the
cost of an investment. These historical results do not necessarily indicate the
performance that investors can expect in the future. The value of the fund's
shares may go up or down.

TOTAL RETURN

Total return measures how much the price of an investment in a mutual fund
changes, assuming that all dividend income and capital gain distributions are
reinvested. For any fund, you should evaluate total return in light of the
fund's particular investment objectives and policies, as well as general market
conditions during the reported time periods.

Davis Growth Opportunity Fund's investment performance will vary from year to
year. This chart shows the results that we achieved in the fund's Class B
shares from year to year over the last ten-year period.

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DAVIS GROWTH OPPORTUNITY FUND
TOTAL RETURN OVER THE LAST 10-YEAR PERIOD

1988 10.49%
1989 40.06%
1990 (4.72%)
1991 40.13%
1992 (2.86%)
1993 11.16%
1994 (8.45%)
1995 45.44%
1996 17.86%
1997 26.82%

Davis Growth Opportunity Fund's year-to-date return as of June 30, 1998 was
6.31%. During the ten-year period shown in the chart, the highest quarterly
return was 25.44% (for the quarter ending September 30, 1997), and the lowest
quarterly return was (19.23%) (for the quarter ending September 30, 1990).

The chart does not reflect any sales charges. Total return would have been less
if it reflected those charges. The return for the other classes of Davis Growth
Opportunity Fund shares will differ from the Class B returns shown in the
chart, depending on the expenses of that class.

AVERAGE ANNUAL TOTAL RETURN

The tables below show Davis Growth Opportunity Fund's average annual total
returns for the following periods: one year, five years, ten years, and since
the fund opened (known as the inception date). The tables also compare these
returns to those earned during the same periods for the Standard & Poor's 500
Composite Index, an unmanaged benchmark of the total return performance of
large capitalization stocks. Davis Growth Opportunity Fund is not completely
comparable to the Standard & Poor's 500 Composite Index because we primarily
buy stock in small and medium capitalization companies, although the fund may
also invest in large capitalization common stocks.

8
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DAVIS GROWTH OPPORTUNITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITHOUT MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
(SINCE S&P 500 (SINCE S&P 500 (SINCE S&P 500
12/1/94) INDEX* 5/1/84) INDEX* 8/15/97) INDEX*
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 27.70% 33.35% 26.82% 33.35% NA NA
- ------------------------------------------------------------------------------
5 Years NA NA 17.20% 20.23% NA NA
- ------------------------------------------------------------------------------
10 Years NA NA 16.13% 18.01% NA NA
- ------------------------------------------------------------------------------
Life of Fund 28.39% 31.32% 15.91% 17.63% (5.66%)** 8.42%**
- ------------------------------------------------------------------------------
</TABLE>

DAVIS GROWTH OPPORTUNITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITH MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
(SINCE S&P 500 (SINCE S&P 500 (SINCE S&P 500
12/1/94) INDEX* 5/1/84) INDEX* 8/15/97) INDEX*
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 21.66% 33.35% 22.82% 33.35% NA NA
- ------------------------------------------------------------------------------
5 Years NA NA 16.94% 20.23% NA NA
- ------------------------------------------------------------------------------
10 Years NA NA 16.13% 18.01% NA NA
- ------------------------------------------------------------------------------
Life of Fund 26.37% 31.32% 15.91% 17.63% (6.53%)** 8.42%**
- ------------------------------------------------------------------------------
</TABLE>

*" Standard & Poor's 500," "S&P 500(R)," "S&P(R)," and "500" are registered
trademarks of The McGraw-Hill Companies, Inc.

** Not annualized.

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee you may pay when you buy shares of a mutual fund.
As an investor in Davis Growth Opportunity Fund, you pay this sales charge when
you buy Class A shares, as a percentage of the offering price.

DEFERRED SALES CHARGE. A fee you may pay when you sell shares of a mutual fund.
As an investor in Davis Growth Opportunity Fund, you may pay a deferred sales
charge as a percentage of the net asset value of the shares you sell or the
total cost of the shares, whichever is lower. Davis Growth Opportunity Fund
investors pay a deferred sales charge in the following cases:

9
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o As a Class A shareholder, only if you buy shares valued at $1 million
or more without a sales charge and sell shares within one year of
purchase.
o As a Class B shareholder, if you sell shares within six years of
purchase.
o As a Class C shareholder, if you sell shares within one year of
purchase.

To keep deferred sales charges as low as possible, we will first sell shares in
your account that are not subject to deferred sales charges (if any). We do not
impose a deferred sales charge on shares acquired through dividend
reinvestments or capital gains distributions.

EXCHANGE FEE. The fees some mutual funds charge to sell shares in one fund and
to buy shares in another fund. This fund, like all other Davis Funds, does not
charge an exchange fee.

FEES YOU MAY PAY AS A DAVIS GROWTH OPPORTUNITY FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge you pay
when you buy shares 4.75% None None
- ----------------------------------------------------------------------------
Maximum deferred sales charge
you pay when you sell shares 0.75% 4.00% 1.00%
- ----------------------------------------------------------------------------
Maximum sales charge you pay
on reinvested dividends None None None
- ----------------------------------------------------------------------------
Exchange Fee None None None
- ----------------------------------------------------------------------------
</TABLE>

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Growth Opportunity
Fund's net asset value.

DISTRIBUTION FEES. Fees Davis Growth Opportunity Fund pays to sell and
distribute shares and to provide services to shareholders (also known as a
12b-1 fee). These fees are paid out of the fund's assets on an ongoing basis.
See About the Distributor in the section WHO IS RESPONSIBLE FOR YOUR DAVIS
ACCOUNT.

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

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ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS GROWTH OPPORTUNITY FUND'S ASSETS)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.75% 0.75% 0.75%
- -----------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25% 1.00% 1.00%
- -----------------------------------------------------------------------------
Other Expenses 0.34% 0.38% 0.47%
- -----------------------------------------------------------------------------
Total Annual Operating Expenses* 1.34% 2.13% 2.22%
- -----------------------------------------------------------------------------
</TABLE>

* Annualized

IF I INVEST IN DAVIS GROWTH OPPORTUNITY FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis Growth
Opportunity Fund. It is designed to help you compare investing costs with other
mutual funds.

This example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods. It also
assumes that your investment has a 5% return each year and that the fund's
operating expenses remain the same.

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COST OF INVESTING $10,000 IN DAVIS GROWTH OPPORTUNITY FUND

The top chart assumes that you sell your shares at various times, and the
bottom chart assumes that you continue to hold your shares, avoiding a possible
deferred sales charge. Although your actual costs may be higher or lower, your
costs-based on these assumptions-would be:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS A CLASS B CLASS C
- --------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $60 $62 $33
- --------------------------------------------------------------------
3 Years $88 $97 $69
- --------------------------------------------------------------------
5 Years $117 $134 $119
- --------------------------------------------------------------------
10 Years $201 $217 $255
- --------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------
IF YOU STILL HOLD YOUR CLASS A CLASS B CLASS C
SHARES AFTER...
- --------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $60 $22 $23
- --------------------------------------------------------------------
3 Years $88 $67 $69
- --------------------------------------------------------------------
5 Years $117 $114 $119
- --------------------------------------------------------------------
10 Years $201 $217 $255
- --------------------------------------------------------------------
</TABLE>

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of Davis Growth
Opportunity Fund for the past five years. 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. It assumes that all dividends and capital gains have been reinvested.

This information is unaudited. Davis Growth Opportunity Fund's unaudited
financial statements are included in the semi-annual report, which is available
by request.

12
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The following financial information represents selected data for each share of
Class A capital stock outstanding throughout each period:

CLASS A

<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
ENDED ---------------YEAR ENDED--------------- ENDED
JUNE 30, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 22.49 $ 18.93 $ 17.25 $ 12.83 $ 13.70
------- ------- ------- -------- -------
Income (Loss) From Investment Operations
Net Investment Loss............................... (0.04) (0.10) (0.13) (0.11) (0.01)
Net Gains or Losses on Securities
(both realized and unrealized)................ 1.57 5.34 3.37 6.08 (0.29)
------- ------- ------- -------- -------
Total From Investment Operations........... 1.53 5.24 3.24 5.97 (0.30)
------- ------- ------- -------- -------

Less Distributions
Distributions (from capital gains)................ - (1.68) (1.55) (1.55) (0.57)
Distributions (from paid-in capital).............. - - (0.01) - -
------- ------- ------- -------- -------
Total Distributions......................... - (1.68) (1.56) (1.55) (0.57)
------- ------- ------- -------- -------
Net Asset Value, End of Period....................... $ 24.02 $ 22.49 $ 18.93 $ 17.25 $ 12.83
======= ======= ======= ======== =======

Total Return(1)...................................... 6.80% 27.70% 18.73% 46.65% (2.21)%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).......... $63,877 $48,386 $27,158 $22,890 $12,455
Ratio of Expenses to Average Net Assets........... 1.34%* 1.27% 1.49%(2) 1.51% 1.42%*
Ratio of Net Loss to Average Net Assets.......... (0.33)%* (0.58)% (0.76)% (0.71)% (0.08)%*

Portfolio Turnover Rate(3)........................ 0.61% 19.33% 30.55% 30.07% 37.31%

Average Commission Rate Per Share(4).............. $0.0597 $0.0600 $0.0454 - -
</TABLE>

1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less
than one full year.

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.48% for 1996. Prior to 1996 such
reductions were reflected in the expenses ratios.

3 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.

4 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

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<PAGE>

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

CLASS B

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993(1)
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 21.88 $ 18.58 $ 17.08 $ 12.82 $ 14.67 $ 13.25
------- ------- ------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Loss............................. (0.13) (0.25) (0.27) (0.26) (0.12) (0.07)
Net Gains or Losses on Securities
(both realized and unrealized).............. 1.51 5.23 3.33 6.07 (1.11) 1.54
------- ------- ------- ------- ------- -------
Total From Investment
Operations............................ 1.38 4.98 3.06 5.81 (1.23) 1.47
------- ------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income).......... - - - - - (0.05)
Distributions (from capital gains).............. - (1.68) (1.55) (1.55) (0.62) -
Distributions (from paid-in capital)............ - - (0.01) - - -
------- ------- ------- ------- ------- -------
Total Distributions....................... - (1.68) (1.56) (1.55) (0.62) (0.05)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period..................... $ 23.26 $ 21.88 $ 18.58 $ 17.08 $ 12.82 $ 14.67
======= ======= ======= ======= ======= =======
Total Return(2).................................... 6.31% 26.82% 17.86% 45.44% (8.45)% 11.16%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)........ $68,465 $61,383 $39,343 $35,326 $36,087 $51,762
Ratio of Expenses to Average Net Assets......... 2.13%*(3) 2.09%(3) 2.25%(3) 2.30% 2.15% 2.39%
Ratio of Net Loss to Average Net Assets........ (1.11)%* (1.40)% (1.52)% (1.50)% (0.81)% (0.55)%
Portfolio Turnover Rate(4)...................... 0.61% 19.33% 30.55% 30.07% 37.31% 38.93%
Average Commission Rate Per Share(5)............ $0.0597 $0.0600 $0.0454 - - -
</TABLE>

1 Per share data has been restated to give effect to a 2 for 1 stock split to
shareholders of record as of the close of business of January 7, 1994.

2 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. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one full year.

3 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.12% for the six months ended June
30, 1998 and 2.08% and 2.24% for 1997 and 1996, respectively. Prior to 1996
such reductions were reflected in the expenses ratios.

4 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.

5 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

14
<PAGE>

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

CLASS C

<TABLE>
<CAPTION>
AUGUST 15, 1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED THROUGH
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
----------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period.................. $ 22.43 $ 25.56
------- -------
Income (Loss) From Investment Operations
Net Investment Loss................................ (0.13) (0.04)
Net Gains or Losses on Securities
(both realized and unrealized)................. 1.55 (1.41)
------- -------
Total From Investment
Operations............................... 1.42 (1.45)
------- -------
Less Distributions
Distributions (from capital gains)................. - (1.68)
------- -------
Total Distributions.......................... - (1.68)
------- -------
Net Asset Value, End of Period........................ $ 23.85 $ 22.43
======= =======
Total Return(1)....................................... 6.33% (5.66)%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)........... $4,358 $2,585

Ratio of Expenses to Average Net Assets........... 2.22%*2 2.19%*

Ratio of Net Loss to Average Net Assets........... (1.20)%* (1.51)%*

Portfolio Turnover Rate(3)......................... 0.61% 19.33%

Average Commission Rate Per Share(4)............... $0.0597 $0.0600
</TABLE>

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.21% and 0.94% for the six months
ended June 30, 1998, for Class C and Y shares, respectively. Prior to 1996
such reductions were reflected in the expenses ratios.

4 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

15
<PAGE>

OVERVIEW OF DAVIS FINANCIAL FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Financial Fund's investment objective is growth of capital.

WHAT WE BUY. Davis Financial Fund invests in common stocks and other equity
securities. During normal market conditions, at least half of the fund's assets
are invested in companies that are "principally engaged" in banking and
financial services. Specifically, our portfolio managers invest at least 25% of
the fund's assets in the banking industry, and at least another 25% in the
financial services industry.

A company is "principally engaged" in banking or financial services if it owns
banking or 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 banking or financial services. Companies in the banking industry
include commercial banks, industrial banks and savings institutions. Companies
in the financial services industry include finance companies, diversified
financial services companies, investment banking firms, securities brokerage
houses, investment advisory companies, leasing companies, insurance companies
and companies providing similar services.

Davis Financial Fund's banking, financial services and other investments may
include securities of foreign issuers or securities that are principally traded
in foreign markets.

On occasion, Davis Financial Fund uses short-term investments to earn interest
and maintain flexibility while we evaluate long-term opportunities. These
short-term investments may include high-grade short-term money market
instruments, interest-bearing bank deposits, or cash equivalents (such as
Treasury bills). We also may use short-term investments for defensive purposes.
In the event our portfolio managers anticipate a decline in the market for
financial securities, we may reduce our risk by investing in short-term
securities until market conditions improve.

HOW WE SELECT INVESTMENTS. The basic Davis investment philosophy is to purchase
the securities of quality overlooked growth companies at value prices and to
hold them for the long-term. At the heart of our approach is the recognition
that managing risk is the key to delivering superior long-term investment
results. We always consider how much could potentially be lost on an investment
before considering how much might be gained. Davis Financial Fund's portfolio
managers apply this philosophy to the financial services sector in the belief
that many of the best insurance, banking and brokerage firms are growth
companies in disguise.

16
<PAGE>

PRINCIPAL RISKS

There are two principal risks in Davis Financial Fund. First, is the general
risk of owning common stocks. Second, is the risk of having a concentrated
portfolio. Investments in foreign securities may involve additional risk.

COMMON STOCKS GENERALLY. Factors that influence the value of a share of common
stock are primarily general market and economic conditions, and the financial
condition and performance of the issuer.

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 issuer.

o COMPANY RISK. The price of an equity security varies with the success
and failure of its issuer. As a result, the success of the companies
invested in by Davis Financial Fund largely determines the fund's
performance.

CONCENTRATED PORTFOLIO. Davis Financial Fund invests primarily in two
industries. Any fund that has a concentrated portfolio is particularly
vulnerable to the risks of its target sector. Risks of investing in the banking
and financial services industries include:

o REGULATORY ACTIONS. Our issuers 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. Banks whose securities Davis Financial Fund
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.

FOREIGN SECURITIES. Foreign securities are often denominated in foreign
currencies, which means their value will be affected by changes in exchange
rates. In many foreign jurisdictions, there is less information publicly
available about - and less government regulation of - securities, securities
markets and issuers. Davis Financial Fund may attempt to reduce exposure to
market and currency fluctuations by trading in currency futures contracts or
options on futures contracts for hedging purposes. When the fund invests in
foreign securities, our operating expenses are likely to be higher than if we
invested exclusively in U.S. securities.

FUND PERFORMANCE

Davis Financial Fund began selling shares to the public on May 1, 1991. The
following charts and tables will help you understand the fund's financial
condition - including the

17
<PAGE>

returns that investors have earned and the cost of an investment. These
historical results do not necessarily indicate the performance that investors
can expect in the future. The value of the fund's shares may go up or down.

TOTAL RETURN

Davis Financial Fund's investment performance will vary from year to year. This
chart shows the results that we achieved in the fund's Class A shares from year
to year since inception.

DAVIS FINANCIAL FUND
TOTAL RETURN SINCE INCEPTION

1991 23.24%*
1992 32.67%
1993 14.87%
1994 (4.55%)
1995 50.51%
1996 31.50%
1997 44.53%

*This number reflects total return from May 1, 1991 (commencement of
operations) through December 31, 1991, and has not been annualized.

Davis Financial Fund's year-to-date return as of June 30, 1998 was 13.08%.
Since inception, the highest quarterly return was 17.11% (for the quarter
ending June 30, 1997), and the lowest quarterly return was (5.83%) (for the
quarter ending March 31, 1994).

The chart does not reflect any sales charges. Total return would have been less
if it reflected those charges. The return for the other classes of Davis
Financial Fund shares offered by this prospectus will differ from the Class A
returns shown in the chart, depending on the expenses of that class.

AVERAGE ANNUAL TOTAL RETURN

The tables below show Davis Financial Fund's average annual total returns for
the following periods: one year, five years, and since the fund opened (known
as the inception date). The tables also compare these returns to those earned
during the same period for the Standard & Poor's 500 Composite Index, an
unmanaged benchmark of the

18
<PAGE>

total return performance of large capitalization stocks. Davis Financial Fund
may not be comparable to the Standard & Poor's 500 Composite Index because the
Index reflects a large number of industry sectors while the Fund concentrates
in the banking and financial sectors.

DAVIS FINANCIAL FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITHOUT MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C** S&P 500
(SINCE S&P 500 (SINCE S&P 500 (SINCE INDEX*
5/1/91) INDEX* 12/27/94) INDEX* 8/12/97)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 44.53% 33.35% 43.25% 33.35% NA NA
- --------------------------------------------------------------------------------
5 Years 25.69% 20.23% NA NA NA NA
- --------------------------------------------------------------------------------
Life of Fund 27.75% 18.12% 39.99% 30.97% 9.45% 5.44%
- --------------------------------------------------------------------------------
</TABLE>

DAVIS FINANCIAL FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITH MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C** S&P 500
(SINCE S&P 500 (SINCE S&P 500 (SINCE INDEX*
5/1/91) INDEX* 12/27/94) INDEX* 8/12/97)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 37.67% 33.35% 39.25% 33.35% NA NA
- --------------------------------------------------------------------------------
5 Years 24.46% 20.23% NA NA NA NA
- --------------------------------------------------------------------------------
Life of Fund 26.84% 18.12% 39.65% 30.97% 8.45% 5.44%
- --------------------------------------------------------------------------------
</TABLE>

*" Standard & Poor's 500," "S&P 500(R)," "S&P(R)," and "500" are registered
trademarks of The McGraw-Hill Companies, Inc.

** Information regarding Class C shares is not annualized.

19
<PAGE>

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee you may pay when you buy shares of a mutual fund.
As an investor in Davis Financial Fund, you pay this sales charge when you buy
Class A shares, as a percentage of the offering price.

DEFERRED SALES CHARGE. A fee you may pay when you sell shares of a mutual fund.
As an investor in Davis Financial Fund, you may pay a deferred sales charge as
a percentage of the net asset value of the shares you sell or the total cost of
the shares, whichever is lower. Davis Financial Fund investors pay a deferred
sales charge in the following cases:

o As a Class A shareholder, only if you buy shares valued at $1 million
or more without a sales charge and sell shares within one year of
purchase.

o As a Class B shareholder, if you sell shares within six years of
purchase.

o As a Class C shareholder, if you sell shares within one year of
purchase.

EXCHANGE FEE. The fees some mutual funds charge to sell shares in one fund to
buy another fund. This fund, like all other Davis Funds, does not charge an
exchange fee.

FEES YOU MAY PAY AS A DAVIS FINANCIAL FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

20
<PAGE>

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Financial Fund's net
asset value.

DISTRIBUTION FEES. Fees Davis Financial Fund pays to sell and distribute shares
and to provide services to shareholders (also known as a 12b-1 fee). These fees
are paid out of the fund's assets on an ongoing basis. See About the
Distributor in the section WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT.

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS FINANCIAL FUND'S ASSETS)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.65% 0.65% 0.65%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.19% 1.00% 1.00%
- ------------------------------------------------------------------------------
Other Expenses 0.26% 0.30% 0.26%
- ------------------------------------------------------------------------------
Total Annual Operating Expenses* 1.10% 1.95% 1.91%
- ------------------------------------------------------------------------------
</TABLE>

* Annualized.

IF I INVEST IN DAVIS FINANCIAL FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis Financial
Fund. It is designed to help you compare investing costs with other mutual
funds.

This example assumes that you invest $10,000 in Davis Financial Fund for the
time periods indicated and then sell all of your shares at the end of those
periods. It also assumes that your investment has a 5% return each year and
that the fund's operating expenses remain the same.

21
<PAGE>

COST OF INVESTING $10,000 IN DAVIS FINANCIAL FUND

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS A CLASS B CLASS C
- -------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $58 $60 $29
- -------------------------------------------------------------------
3 Years $81 $91 $60
- -------------------------------------------------------------------
5 Years $105 $125 $103
- -------------------------------------------------------------------
10 Years $175 $195 $223
- -------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
IF YOU STILL HOLD YOUR SHARES CLASS A CLASS B CLASS C
AFTER...
- -------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $58 $20 $19
- -------------------------------------------------------------------
3 Years $81 $61 $60
- -------------------------------------------------------------------
5 Years $105 $105 $103
- -------------------------------------------------------------------
10 Years $175 $195 $223
- -------------------------------------------------------------------
</TABLE>

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of Davis
Financial Fund for the past five years. 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. It assumes that all dividends and capital gains have been reinvested.

This information is unaudited. Davis Financial Fund's unaudited financial
statements are included in the semi-annual report, which is available by
request.

22
<PAGE>

The following financial information represents selected data for each share of
Class A capital stock outstanding throughout each period.

CLASS A

<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1998 -----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993(2)
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 25.68 $ 18.06 $ 14.50 $ 10.68 $ 11.70 $ 11.20
-------- -------- -------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income.............................. 0.05 0.13 0.14 0.07 0.08 0.07
Net Gains or Losses on Securities
(both realized and unrealized)................ 3.31 7.92 4.44 5.32 (0.61) 1.59
-------- -------- -------- -------- -------- --------
Total From Investment Operations............ 3.36 8.05 4.58 5.39 (0.53) 1.66
-------- -------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment income)............. - (0.13) (0.15) (0.07) (0.08) (0.08)
Distributions (from capital gains)................. - (0.30) (0.87) (1.50) (0.39) (1.08)
Distributions (from paid-in capital)............... - - - - (0.02) -
-------- -------- -------- -------- -------- --------
Total Distributions.......................... -- (0.43) (1.02) (1.57) (0.49) (1.16)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period........................ $ 29.04 $ 25.68 $ 18.06 $ 14.50 $ 10.68 $ 11.70
======== ======== ======== ======== ======== ========
Total Return (1)...................................... 13.08% 44.53% 31.50% 50.51% (4.55)% 14.87%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)........... $451,278 $292,059 $107,579 $79,874 $57,670 $50,778

Ratio of Expenses to Average Net Assets............ 1.10%* 1.07% 1.15% 1.18% 1.24% 1.32%

Ratio of Net Income to Average Net Assets......... 0.41%* 0.77% 0.92% 0.53% 0.67% 0.57%

Portfolio Turnover Rate(3).........................
0.51% 6.23% 25.78% 41.89% 43.95% 70.33%

Average Commission Rate Per Share(4)............... $0.0600 $0.0600 $0.0518 - - -
</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. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one full year.

2 Per share data has been restated to give effect to a 2 for 1 stock split to
shareholders of record as of the close of business on January 7, 1994.

4 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

23
<PAGE>

The following financial information represents selected data for each share of
Class B capital stock outstanding throughout each period.

CLASS B

<TABLE>
<CAPTION>
DECEMBER 27, 1994
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED -----------YEAR ENDED-------- THROUGH
JUNE 30, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994
---------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 25.36 $ 17.91 $ 14.41 $ 10.68 $ 11.22
-------- -------- -------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income (Loss)....................... (0.05) (0.01) 0.01 0.01 0.03
Net Gains or Losses on Securities
(both realized and unrealized)................. 3.25 7.76 4.37 5.22 (0.13)
-------- -------- -------- ------- -------
Total From Investment Operations........... 3.20 7.75 4.38 5.23 (0.10)
-------- -------- -------- ------- -------
Less Distributions
Dividends (from net investment income)............. - - (0.01) - (0.03)
Distributions (from capital gains)................. - (0.30) (0.87) (1.50) (0.39)
Distributions (from paid-in capital)............... - - - - (0.02)
-------- -------- -------- ------- -------
Total Distributions......................... (0.30) (0.88) (1.50) (0.44)
-------- -------- -------- ------- -------
Net Asset Value, End of Period........................ $ 28.56 $ 25.36 $ 17.91 $ 14.41 $ 10.68
======== ======== ======== ======= =======
Total Return (1)...................................... 12.62% 43.25% 30.29% 49.00% (0.90)%

Ratios/Supplemental Data
Net Assets, End of Period(000 omitted)............ $376,549 $193,257 $8,213 $1,762 $28
Ratio of Expenses to Average Net Assets............ 1.95%* 1.97% 2.04% 2.09% 2.04%*
Ratio of Net Income (Loss)to Average Net
Assets .......................................... (0.44)%* (0.12)% 0.19% (0.38)% (0.13)%*

Portfolio Turnover Rate(2)......................... 0.51% 6.23% 25.78% 41.89% 43.95%

Average Commission Rate Per Share(3)............... $0.0600 $0.0600 $0.0518 - -
</TABLE>

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 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

24
<PAGE>

The following financial information represents selected data for each share of
Class C capital stock outstanding throughout each period.

<TABLE>
<CAPTION>
-------------CLASS C--------------
AUGUST 12, 1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED THROUGH
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
----------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period.................. $ 25.71 $ 23.76
------- -------
Income (Loss) From Investment Operations
Net Investment Income (Loss)....................... (0.03) -
Net Gains on Securities
(both realized and unrealized)................. 3.28 2.25
------- -------
Total From Investment Operations........... 3.25 2.25
------- -------
Less Distributions
Dividends (from net investment income)............. - -
Distributions (from capital gains)................. - (0.30)
------- -------
Total Distributions......................... - (0.30)
------- -------
Net Asset Value, End of Period........................ $ 28.96 $ 25.71
======= =======
Total Return (1)...................................... 12.64% 9.45%

Ratios/Supplemental Data
Net Assets, End of Period(000 omitted)............ $74,339 $19,515
Ratio of Expenses to Average Net Assets............ 1.91%* 1.93%*
Ratio of Net Income (Loss) to Average Net
Assets......................................... (0.40)%* (0.09)%*

Portfolio Turnover Rate(2)......................... 0.51% 6.23%

Average Commission Rate Per Share(3)............... $0.0600 $0.0600
</TABLE>

1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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. Sales charges are not reflected in
total returns. Total returns are not annualized for periods of less than
one full year.

3 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

25
<PAGE>

OVERVIEW OF DAVIS REAL ESTATE FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Real Estate Fund's investment objective is total return through a
combination of growth and income.

WHAT WE BUY. During normal market conditions, at least 65% of Davis Real Estate
Fund'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 Fund'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.

Many real estate debt securities are assigned ratings by agencies that evaluate
the quality of publicly offered debt. Our portfolio manager may use up to 30%
of the fund's total net assets to buy real estate securities with low ratings,
known as "high yield, high risk debt securities."

Davis Real Estate Fund may invest in securities of foreign issuers or
securities that are principally traded in foreign markets

On occasion, Davis Real Estate Fund uses short-term investments to earn
interest and maintain flexibility while we evaluate long-term opportunities.
These short-term investments may include high-grade short-term money market
instruments, interest-bearing bank deposits, or cash equivalents (such as
Treasury bills). We also may use short-term investments for defensive purposes.
In the event our portfolio manager anticipates a decline in the market for real
estate securities, we may reduce our risk by investing in short-term securities
until market conditions improve.

26
<PAGE>

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

PRINCIPAL RISKS

There are two principal risks in Davis Real Estate Fund. First, is the risk of
having a concentrated portfolio. Second, is the risk of owning common stocks.
Investing in high yield, high risk debt securities or in foreign securities may
involve additional risk.

CONCENTRATED PORTFOLIO. Davis Real Estate Fund invests primarily in one
industry. Any fund that has a concentrated portfolio is particularly vulnerable
to the risks of its selected industry. Real estate securities are susceptible
to the many risks associated with the direct ownership of real estate,
including:

o declines in property values - because 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

COMMON STOCKS GENERALLY. Factors that influence the value of a share of common
stock are primarily general market and economic conditions, and the financial
condition and performance of the issuer.

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 issuer.

o COMPANY RISK. The price of an equity security varies with the success
and failure of its issuer. As a result, the success of the companies
invested in by Davis Real Estate Fund largely determines the fund's
performance.

HIGH YIELD, HIGH RISK DEBT SECURITIES. There are several agencies that evaluate
and rate debt securities. Two of the most prominent are Standard & Poor's and
Moody's Investors Service.

When they evaluate the quality of a debt instrument, rating agencies look at
factors like the issuer's current financial condition and business prospects,
the value of any collateral that secures the debt and the issuer's history of
paying other debt. Each agency has its own system for "grading" debt. Standard
& Poor's has eleven ratings, ranging from D for securities that are in default
to AAA for securities that are almost certain to be repaid.
Moody's Investors Service has nine ratings, with C being the lowest and Aaa
being the highest.

27
<PAGE>

A security is called "investment grade" if a respected agency assigns it a
favorable credit rating. In contrast, a debt security is considered "high
yield, high risk" if it is rated BB or lower by Standard and Poor's or Ba or
lower by Moody's Investor Services. Securities with these low ratings are also
referred to as "junk bonds." Many institutional investors, such as pension
plans and municipal governments, are only permitted to buy investment grade
debt.

There are four principal risks of owning high yield, high risk debt securities:

o OVERBURDENED ISSUERS. Many issuers only resort to offering junk bonds
when they cannot get financing from more traditional sources, like
banks. These issuers are unlikely to have a cushion from which to make
their payments when their earnings are poor or when the economy in
general is in decline.

o PRIORITY. Issuers of high yield, high risk securities are likely to
have a substantial amount of other debt. Most, if not all, of this
other debt will be "senior" to the junk bonds; an issuer must be
current on its senior obligations before it can pay bondholders. In
addition, some of the other debt may be secured by the issuer's
primary operating assets. If the issuer defaults on those obligations,
the lenders may seize their collateral - possibly forcing the issuer
out of business and into bankruptcy.

o DIFFICULT TO RESELL. Many investors simply do not want junk bonds, and
others are prohibited from buying them.

o VOLATILE PRICES. Prices of high yield, high risk debt securities are
more volatile than prices of higher rated securities. In periods of
economic difficulty or rising interest rates, prices of junk bonds
decline more than prices of investment grade securities.

FOREIGN SECURITIES. Foreign securities are often denominated in foreign
currencies, which means their value will be affected by changes in exchange
rates. In many foreign jurisdictions, there is less information publicly
available about - and less government regulation of - securities, securities
markets and issuers. Davis Real Estate Fund may attempt to reduce exposure to
market and currency fluctuations by trading in currency futures contracts or
options on futures contracts for hedging purposes. When the fund invests in
foreign securities, our operating expenses are likely to be higher than if we
invested exclusively in U.S. securities.

FUND PERFORMANCE

Davis Real Estate Fund began operating on January 3, 1994. The following charts
and tables will help you understand the fund's financial condition including
the returns that investors have earned and the cost of an investment. These
historical results do not necessarily indicate the performance that investors
can expect in the future. The value of the fund's shares may go up or down.

28
<PAGE>

TOTAL RETURN

Davis Real Estate Fund's investment performance will vary from year to year.
This chart shows the results that we achieved in the fund's Class A shares from
year to year since inception.

DAVIS REAL ESTATE FUND
TOTAL RETURN SINCE INCEPTION

1994 8.18%*
1995 17.90%
1996 37.05%
1997 25.08%

*This number reflects total return from January 3, 1994 (commencement of
operations) through December 31, 1994, and has not been annualized.

Davis Real Estate Fund's year-to-date return as of June 30, 1998 was 5.87%.
Since inception, the highest quarterly return was 19.22% (for the quarter
ending December 31, 1996), and the lowest quarterly return was (2.34%) (for the
quarter ending September 30, 1994).

The chart does not reflect any sales charges. Total return would have been less
if it reflected those charges. The return for the other classes of Davis Real
Estate Fund shares offered by this prospectus will differ from the Class A
returns shown in the chart, depending on the expenses of that class.

AVERAGE ANNUAL TOTAL RETURN

The tables below show Davis Real Estate Fund's average annual total returns for
the following periods: one year and since the fund opened (known as the
inception date). The tables also compare these returns to those earned during
the same period for the Standard & Poor's 500 Composite Index, an unmanaged
benchmark of the total return performance of large capitalization stocks. Davis
Real Estate Fund may not be comparable to the Standard & Poor's 500 Composite
Index because the Index reflects large capitalization industrial companies
rather than real estate companies.

29
<PAGE>

DAVIS REAL ESTATE FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITHOUT MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C** S&P 500
(SINCE S&P 500 (SINCE S&P 500 (SINCE INDEX*
1/3/94) INDEX* 12/27/94) INDEX* 8/12/97)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 25.08% 33.35% 23.88% 33.35% NA NA
- -------------------------------------------------------------------------------
Life of Fund 21.58% 23.05% 25.40% 30.97% 11.12% 5.93%
- -------------------------------------------------------------------------------
</TABLE>

DAVIS REAL ESTATE FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITH MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C** S&P 500
(SINCE S&P 500 (SINCE S&P 500 (SINCE INDEX*
1/3/94) INDEX* 12/27/94) INDEX* 8/12/97)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 19.14% 33.35% 19.88% 33.35% NA NA
- -------------------------------------------------------------------------------
Life of Fund 20.11% 23.05% 24.98% 30.97% 10.12% 5.93%
- -------------------------------------------------------------------------------
</TABLE>

*" Standard & Poor's 500," "S&P 500(R)," "S&P(R)," and "500" are registered
trademarks of The McGraw-Hill Companies, Inc.

** Information regarding Class C shares is not annualized.

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee you may pay when you buy shares of a mutual fund.
As an investor in Davis Real Estate Fund, you pay this sales charge when you
buy Class A shares, as a percentage of the offering price.

DEFERRED SALES CHARGE. A fee you may pay when you sell shares of a mutual fund.
As an investor in Davis Real Estate Fund, you may pay a deferred sales charge
as a percentage of the net asset value of the shares you sell or the total cost
of the shares, whichever is lower. Davis Real Estate Fund investors pay a
deferred sales charge in the following cases:

o As a Class A shareholder, only if you buy shares valued at $1 million
or more without a sales charge and sell shares within one year of
purchase.

30
<PAGE>

o As a Class B shareholder, if you sell shares within six years of
purchase.

o As a Class C shareholder, if you sell shares within one year of
purchase.

EXCHANGE FEE. The fees some mutual funds charge to sell shares in one fund to
buy another fund. This fund, like all other Davis Funds, does not charge an
exchange fee.

FEES YOU MAY PAY AS A DAVIS REAL ESTATE FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge you pay
when you buy shares 4.75% None None
- ------------------------------------------------------------------------------
Maximum deferred sales charge
you pay when you sell shares 0.75% 4.00% 1.00%
- ------------------------------------------------------------------------------
Maximum sales charge you pay
on reinvested dividends None None None
- ------------------------------------------------------------------------------
Exchange Fee None None None
- ------------------------------------------------------------------------------
</TABLE>

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Real Estate Fund's net
asset value.

DISTRIBUTION FEES. Fees Davis Real Estate Fund pays to sell and distribute
shares and to provide services to shareholders (also known as a 12b-1 fee).
These fees are paid out of the fund's assets on an ongoing basis. See About the
Distributor in the section WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT.

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

31
<PAGE>

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS REAL ESTATE FUND'S ASSETS)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.71% 0.71% 0.71%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25% 1.00% 1.00%
- ------------------------------------------------------------------------------
Other Expenses 0.24% 0.32% 0.30%
- ------------------------------------------------------------------------------
Total Annual Operating Expenses* 1.20% 2.03% 2.01%
- ------------------------------------------------------------------------------
</TABLE>

* Annualized

IF I INVEST IN DAVIS REAL ESTATE FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis Real
Estate Fund. It is designed to help you compare investing costs with other
mutual funds.

This example assumes that you invest $10,000 in Davis Real Estate Fund for the
time periods indicated and then sell all of your shares at the end of those
periods. It also assumes that your investment has a 5% return each year and
that the fund's operating expenses remain the same.

COST OF INVESTING $10,000 IN DAVIS REAL ESTATE FUND

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $59 $61 $30
- -------------------------------------------------------------------------------
3 Years $84 $94 $63
- -------------------------------------------------------------------------------
5 Years $110 $129 $108
- -------------------------------------------------------------------------------
10 Years $186 $204 $234
- -------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
IF YOU STILL HOLD YOUR SHARES CLASS A CLASS B CLASS C
AFTER...
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $59 $21 $20
- -------------------------------------------------------------------------------
3 Years $84 $64 $63
- -------------------------------------------------------------------------------
5 Years $110 $109 $108
- -------------------------------------------------------------------------------
10 Years $186 $204 $234
- -------------------------------------------------------------------------------
</TABLE>

32
<PAGE>

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of Davis Real
Estate Fund since inception. 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. It assumes that
all dividends and capital gains have been reinvested.

This information is unaudited. Davis Real Estate Fund's unaudited financial
statements are included in the semi-annual report, which is available by
request.

33
<PAGE>

The following financial information represents selected data for each share of
Class A capital stock outstanding throughout the period.

CLASS A

<TABLE>
<CAPTION>
JANUARY 3, 1994
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED ------------YEAR ENDED---------- THROUGH
JUNE 30, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996(1) 1995 1994
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $ 25.41 $ 21.24 $ 16.44 $ 14.72 $ 14.29
-------- -------- -------- -------- --------
Income From Investment Operations
Net Investment Income................................... 0.37 0.74 0.71 0.82 0.62
Net Gains or Losses on Securities (both realized and
unrealized).......................................... (1.85) 4.51 5.22 1.71 0.55
-------- -------- -------- -------- --------
Total From Investment Operations................. (1.48) 5.25 5.93 2.53 1.17
-------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment income).................. (0.20) (0.74) (0.70) (0.81) (0.62)
Distributions (from capital gains)...................... - (0.27) (0.25) - (0.12)
Distributions (from paid-in capital gains).............. - (0.07) (0.18) - -
-------- -------- -------- -------- --------
Total Distributions............................... (0.20) (1.08) (1.13) (0.81) (0.74)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............................. $ 23.73 $ 25.41 $ 21.24 $ 16.44 $ 14.72
======== ======== ======== ======== ========
Total Return (2)........................................... (5.87)% 25.08% 37.05% 17.70% 8.18%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)................ $214,655 $147,488 $32,507 $29,320 $25,450

Ratio of Expenses to Average Net Assets................. 1.20%*(3) 1.18% 1.32%(3) 1.43% 1.86%*

Ratio of Net Income to Average Net Assets............... 3.33%* 3.40% 3.95% 5.44% 3.98%*

Portfolio Turnover Rate(4).............................. 6.33% 12.50% 18.60% 38.82% 35.80%

Average Commission Rate Per Share(5).................... $0.0600 $0.0600 $0.0600 - -
</TABLE>

1 Per share calculations other than distributions were based on average
shares outstanding during the period.

2 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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. Sales charges are not reflected in
total returns. Total returns are not annualized for periods of less than
one full year.

3 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.19% and 1.31% for the six months
ended June 30, 1998, and for 1996 respectively. Prior to 1996 such
reductions were reflected in the expenses ratios.

5 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

34
<PAGE>

The following financial information represents selected data for each share of
Class B capital stock outstanding throughout the period.

CLASS B

<TABLE>
<CAPTION>
DECEMBER 27, 1994
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED ------------YEAR ENDED-------------- THROUGH
JUNE 30, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 19961 1995 1994
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 25.32 $ 21.19 $ 16.41 $ 14.72 $ 14.73
-------- -------- -------- -------- --------
Income From Investment Operations
Net Investment Income................................. 0.28 0.54 0.56 0.68 0.02
Net Gains or Losses on Securities (both realized and
unrealized)........................................ (1.85) 4.47 5.21 1.70 0.11
-------- -------- -------- -------- --------
Total From Investment Operations............... (1.57) 5.01 5.77 2.38 0.13
-------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment income)................ (0.15) (0.54) (0.63) (0.69) (0.02)
Distributions (from capital gains).................... - (0.27) (0.25) - (0.12)
Dividends (from paid-in capital)...................... - (0.07) (0.11) - -
-------- -------- -------- -------- --------
Total Distributions............................. (0.15) (0.88) (0.99) (0.69) (0.14)
-------- -------- -------- -------- --------
Net Asset Value, End of Period........................... $ 23.60 $ 25.32 $ 21.19 $ 16.41 $ 14.72
======== ======== ======== ======== ========
Total Return (2)......................................... (6.25)% 23.88% 35.99% 16.59% 0.89%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).............. $168,212 $114,283 $10,919 $414 $34

Ratio of Expenses to Average Net Assets............... 2.03%*(2) 2.04% 2.22% 2.39% 2.64%*

Ratio of Net Income to Average Net Assets............. 2.50%* 2.60% 3.46% 4.48% 3.20%*

Portfolio Turnover Rate(4)............................ 6.33% 12.50% 18.60% 38.82% 35.80%

Average Commission Rate Per Share(5).................. $0.0600 $0.0600 $0.0600 - -
</TABLE>

1 Per share calculations other than distributions were based on average
shares outstanding during the period.

3 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.02% for the six months ended June
30, 1998.

5 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

35
<PAGE>

The following financial information represents selected data for each share of
Class C capital stock outstanding throughout the period.

CLASS C

<TABLE>
<CAPTION>
AUGUST 13, 1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED THROUGH
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
----------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period................................. $ 25.49 $ 23.41
------- -------
Income From Investment Operations
Net Investment Income............................................. 0.27 0.18
Net Gains or Losses on Securities (both realized and
unrealized).................................................... (1.84) 2.42
------- -------
Total From Investment Operations........................... (1.57) 2.60
------- -------
Less Distributions
Dividends (from net investment income)............................ (0.15) (0.18)
Distributions (from capital gains)................................ - (0.27)
Dividends (from paid-in capital).................................. - (0.07)
------- -------
Total Distributions......................................... (0.15) (0.52)
------- -------
Net Asset Value, End of Period....................................... $ 23.77 $ 25.49
======= =======
Total Return(1)...................................................... (6.19)% 11.12%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).......................... $28,494 $ 8,322

Ratio of Expenses to Average Net Assets........................... 2.01%*(2) 2.03%*

Ratio of Net Income to Average Net Assets......................... 2.52%* 2.56%*

Portfolio Turnover Rate(3)........................................ 6.33% 12.50%

Average Commission Rate Per Share(4).............................. $0.0600 $0.0600
</TABLE>

1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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. Sales charges are not reflected in
total returns. Total returns are not annualized for periods of less than
one full year.

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.00% for the six months ended June
30, 1998.

4 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

36
<PAGE>

OVERVIEW OF DAVIS CONVERTIBLE SECURITIES FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Convertible Securities Fund's investment objective is total return
through a combination of capital appreciation and current income.

WHAT WE BUY. During normal market conditions, at least 65% of the fund's assets
are invested in convertible securities. Convertible securities are securities
that can be converted into or exchanged for other securities. The most common
types of convertible securities are bonds and preferred stock that the holder
can exchange for common stock of the same issuer.

Convertible securities offer both current income and growth potential. For
current income, we buy convertible debt instruments like bonds, notes and
debentures that entitle the fund to receive regular interest payments.
Similarly, we buy preferred stock that entitles the fund to receive regular
dividend payments. These interest and dividend payments generally exceed the
dividend payments that the issuers of our convertible securities make to
holders of their common stock. Convertible securities have growth potential
because if the underlying common stock begins to increase in value, the holder
of the convertible security can exchange it for common stock and enjoy the
benefits of that growth.

Many convertible debt securities are assigned ratings by agencies that evaluate
the quality of publicly offered debt. Our portfolio manager may use up to 35%
of Davis Convertible Securities Fund's total net assets to buy convertible
securities with low ratings, known as "high yield, high risk debt securities."

Davis Convertible Securities Fund may invest in securities of foreign issuers
or securities that are principally traded in foreign markets

On occasion, Davis Convertible Securities Fund uses short-term investments to
earn interest and maintain flexibility while we evaluate long-term
opportunities. These short-term investments may include high-grade short-term
money market instruments, interest-bearing bank deposits, or cash equivalents
(such as Treasury bills). We also may use short-term investments for defensive
purposes. In the event our portfolio manager anticipates a decline in the
market for convertible securities, we may reduce our risk by investing in
short-term securities until market conditions improve.

HOW WE SELECT INVESTMENTS. First we identify well-managed growth companies
whose securities are selling at attractive prices. Then we try to identify
securities issued by those companies that have the potential to deliver 80% of
the amount that the issuer's common stock appreciates when market conditions
are favorable, but will not drop in value by more than 50% of the amount that
the issuer's common stock declines when market conditions are bad.

37
<PAGE>

PRINCIPAL RISKS

There are two principal risks in Davis Convertible Securities Fund. Convertible
securities have characteristics of both equity and debt, so they present the
risks of common stock ownership as well as the risks that traditional lenders
face. Investing in high yield, high risk debt securities or in foreign
securities may involve additional risk.

COMMON STOCKS GENERALLY. Factors that influence the value of a share of common
stock are primarily general market and economic conditions, and the financial
condition and performance of the issuer.

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 issuer.

o COMPANY RISK. The price of an equity security varies with the success
and failure of its issuer. As a result, the success of the companies
invested in by Davis Convertible Securities Fund largely determines
the fund's performance.

LENDING RISK. The debt component of a convertible security poses three types of
risk:

o INTEREST RATE SENSITIVITY. If a security pays a fixed interest rate,
and market rates increase, the value of the fixed-rate security should
decline.

o CHANGES IN DEBT RATING. If a rating agency gives a convertible
security a low rating, the value of the security will decline because
investors will demand a higher rate of return.

o CREDIT RISK. Like any borrower, the issuer of a convertible debt
security may be unable to make its payments.

HIGH YIELD, HIGH RISK DEBT SECURITIES. There are several agencies that evaluate
and rate debt securities. Two of the most prominent are Standard & Poor's and
Moody's Investors Service.

38
<PAGE>

such as pension plans and municipal governments, are only permitted to buy
investment grade debt.

There are four principal risks of owning high yield, high risk debt securities:

o DIFFICULT TO RESELL. Many investors simply do not want junk bonds, and
others are prohibited from buying them.

FOREIGN SECURITIES. Foreign securities are often denominated in foreign
currencies, which means their value will be affected by changes in exchange
rates. In many foreign jurisdictions, there is less information publicly
available about - and less government regulation of - securities, securities
markets and issuers. Davis Convertible Securities Fund may attempt to reduce
exposure to market and currency fluctuations by trading in currency futures
contracts or options on futures contracts for hedging purposes. When the fund
invests in foreign securities, our operating expenses are likely to be higher
than if we invested exclusively in U.S. securities.

FUND PERFORMANCE

Davis Convertible Securities Fund began selling shares to the public on May 1,
1992. The following charts and tables will help you understand the fund's
financial condition - including the returns that investors have earned and the
cost of an investment. These historical results do not necessarily indicate the
performance that investors can expect in the future. The value of the fund's
shares may go up or down.

TOTAL RETURN

39
<PAGE>

objectives and policies, as well as general market conditions during the
reported time periods.

Davis Convertible Securities Fund's investment performance will vary from year
to year. This chart shows the results that we achieved in the Fund's Class A
shares from year to year since inception.

DAVIS CONVERTIBLE SECURITIES FUND
TOTAL RETURN SINCE INCEPTION

1992 12.98%*
1993 17.26%
1994 (6.72%)
1995 26.68%
1996 29.46%
1997 28.68%

*This number reflects total return from May 1, 1992 (commencement of
operations) through December 31, 1992, and is not annualized.

Davis Convertible Securities Fund's year-to-date return as of June 30, 1998 was
0.26%. Since inception, the highest quarterly return was 14.33% (for the
quarter ending September 30, 1997), and the lowest quarterly return was (3.55%)
(for the quarter ending March 31, 1994).

The chart does not reflect any sales charges. Total return would have been less
if it reflected those charges. The return for the other classes of Davis
Convertible Securities Fund shares offered by this prospectus will differ from
the Class A returns shown in the chart, depending on the expenses of that
class.

AVERAGE ANNUAL TOTAL RETURN

The tables below show Davis Convertible Securities Fund's average annual total
returns for the following periods: one year, five years, and since the fund
opened (known as the inception date). The tables also compare these returns to
those earned during the same period for the Standard & Poor's 500 Composite
Index, an unmanaged benchmark of the total return performance of large
capitalization stocks. Davis Convertible Securities Fund may not be comparable
to the Standard & Poor's 500 Composite Index because the Index reflects large
capitalization industrial companies rather than convertible securities.

40
<PAGE>

DAVIS CONVERTIBLE SECURITIES FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITHOUT MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CLASS A CLASS B CLASS C**
(SINCE S&P 500 (SINCE S&P 500 (SINCE S&P 500
5/1/92) INDEX* 2/3/95) INDEX* 8/12/97) INDEX*
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 28.68% 33.35% 27.35% 33.35% NA NA
- -----------------------------------------------------------------------------
5 Years 18.21% 20.23% NA NA NA NA
- -----------------------------------------------------------------------------
Life of Fund 18.42% 19.25% 26.84% 30.31% 7.38% 5.44%
- -----------------------------------------------------------------------------
</TABLE>

DAVIS CONVERTIBLE SECURITIES FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITH MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CLASS A CLASS B CLASS C**
(SINCE S&P 500 (SINCE S&P 500 (SINCE S&P 500
5/1/92) INDEX* 2/3/95) INDEX* 8/12/97) INDEX*
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 22.56% 33.35% 23.35% 33.35% NA NA
- -----------------------------------------------------------------------------
5 Years 17.07% 20.23% NA NA NA NA
- -----------------------------------------------------------------------------
Life of Fund 17.41% 19.25% 26.18% 30.31% 6.38% 5.44%
- -----------------------------------------------------------------------------
</TABLE>

*" Standard & Poor's 500," "S&P 500(R)," "S&P(R)," and "500" are registered
trademarks of The McGraw-Hill Companies, Inc.

** Information regarding Class C shares is not annualized.

30-DAY SEC YIELD AND DISTRIBUTION RATE

30-DAY SEC YIELD measures income earned by a mutual fund, and DISTRIBUTION RATE
measures the rate that a mutual fund distributes dividends to its shareholders.
If a mutual fund consistently distributes dividends at a faster rate than it
earns income, the net asset value of the fund's shares will decline. All mutual
funds are required to use identical formulas to calculate their 30-day SEC
yield and distribution rate, which gives investors a convenient way to compare
fund results and practices.

To calculate 30-day SEC yield, a mutual fund divides its annualized net
investment income per share earned during a prescribed 30-day period by the
maximum offering price per share on the last day of the period.

41
<PAGE>

Distribution rate is determined by dividing the income dividends per share for
a stated period by the net asset value per share on the last day of that
period.

30-day SEC yield and distribution rate fluctuate daily and will vary with
factors such as interest rates and the quality, length of maturity and type of
investments that the fund holds. You can obtain Davis Convertible Securities
Fund's most recent 30-day SEC yield and distribution rate by calling us
toll-free at 1-800-279-0279, Monday through Friday, 7 a.m. to 4 p.m. Mountain
Time.

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee you may pay when you buy shares of a mutual fund.
As an investor in Davis Convertible Securities Fund, you pay this sales charge
when you buy Class A shares, as a percentage of the offering price.

DEFERRED SALES CHARGE. A fee you may pay when you sell shares of a mutual fund.
As an investor in Davis Convertible Securities Fund, you may pay a deferred
sales charge as a percentage of the net asset value of the shares you sell or
the total cost of the shares, whichever is lower. Davis Convertible Securities
Fund investors pay a deferred sales charge in the following cases:

o As a Class A shareholder, only if you buy shares valued at $1 million
or more without a sales charge and sell shares within one year of
purchase.

o As a Class B shareholder, if you sell shares within six years of
purchase.

o As a Class C shareholder, if you sell shares within one year of
purchase.

EXCHANGE FEE. The fees some mutual funds charge to sell shares in one fund to
buy another fund. This fund, like all other Davis Funds, does not charge an
exchange fee.

42
<PAGE>

FEES YOU MAY PAY AS A DAVIS CONVERTIBLE SECURITIES FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge you pay
when you buy shares 4.75% None None
- --------------------------------------------------------------------------------
Maximum deferred sales charge
you pay when you sell shares 0.75% 4.00% 1.00%
- --------------------------------------------------------------------------------
Maximum sales charge you pay
on reinvested dividends None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
</TABLE>

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Convertible Securities
Fund's net asset value.

DISTRIBUTION FEES. Fees Davis Convertible Securities Fund pays to sell and
distribute shares and to provide services to shareholders (also known as a
12b-1 fee). These fees are paid out of the fund's assets on an ongoing basis.
See About the Distributor in the section WHO IS RESPONSIBLE FOR YOUR DAVIS
ACCOUNT.

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS CONVERTIBLE SECURITIES FUND'S ASSETS)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.74% 0.74% 0.74%
- -------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.22% 1.00% 1.00%
- -------------------------------------------------------------------------------
Other Expenses 0.23% 0.32% 0.29%
- -------------------------------------------------------------------------------
Total Annual Operating Expenses* 1.19% 2.06% 2.03%
- -------------------------------------------------------------------------------
</TABLE>

* Annualized

43
<PAGE>

IF I INVEST IN DAVIS CONVERTIBLE SECURITIES FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis
Convertible Securities Fund. It is designed to help you compare investing costs
with other mutual funds.

This example assumes that you invest $10,000 in Davis Convertible Securities
Fund for the time periods indicated and then sell all of your shares at the end
of those periods. It also assumes that your investment has a 5% return each
year and that the fund's operating expenses remain the same.

COST OF INVESTING $10,000 IN DAVIS CONVERTIBLE SECURITIES FUND

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $59 $61 $31
- -------------------------------------------------------------------------------
3 Years $83 $95 $65
- -------------------------------------------------------------------------------
5 Years $110 $131 $111
- -------------------------------------------------------------------------------
10 Years $185 $206 $239
- -------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
IF YOU STILL HOLD YOUR SHARES CLASS A CLASS B CLASS C
AFTER...
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $59 $21 $21
- -------------------------------------------------------------------------------
3 Years $83 $65 $65
- -------------------------------------------------------------------------------
5 Years $110 $111 $111
- -------------------------------------------------------------------------------
10 Years $185 $206 $239
- -------------------------------------------------------------------------------
</TABLE>

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of Davis
Convertible Securities Fund for the past five years. 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. It assumes that all dividends and capital gains have been reinvested.

This information is unaudited. Davis Convertible Securities Fund's unaudited
financial statements are included in the semi-annual report, which is available
by request.

44
<PAGE>

The following financial information represents selected data for each share of
Class A capital stock outstanding throughout the period.

CLASS A

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 25.26 $ 21.22 $ 18.22 $ 15.57 $ 17.45 $ 15.73
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net Investment Income.............................. 0.34 0.67 0.71 0.67 0.67 0.67
Net Gains or Losses on Securities
(both realized and unrealized)................. (0.27) 5.33 4.56 3.42 (1.83) 2.02
-------- -------- -------- -------- -------- --------
Total From Investment
Operations.............................. 0.07 6.00 5.27 4.09 (1.16) 2.69
-------- -------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment income)............. (0.20) (0.67) (0.69) (0.66) (0.67) (0.67)
Distributions (from capital gains)................. - (1.22) (1.54) (0.78) (0.05) (0.30)

Distributions (from paid-in capital)............... - (0.07) (0.04) - - -
-------- -------- -------- -------- -------- --------
Total Distributions......................... (0.20) (1.96) (2.27) (1.44) (0.72) (0.97)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period........................ $ 25.13 $ 25.26 $ 21.22 $ 18.22 $ 15.57 $ 17.45
======== ======== ======== ======== ======== ========
Total Return (1)...................................... 0.26% 28.68% 29.46% 26.68% (6.72)% 17.26%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)........... $147,430 $90,107 $ 42,841 $59,757 $47,844 $44,730
Ratio of Expenses to Average Net Assets............ 1.19%*(2) 1.08%(2) 1.05% 1.14% 1.20% 1.21%
Ratio of Net Income to Average Net Assets......... 3.05%* 3.00% 3.34% 3.87% 4.06% 3.89%

Portfolio Turnover Rate(3)......................... 6.54% 23.68% 43.16% 53.58% 45.15% 62.17%

Average Commission Rate Per Share(4)............... $0.0600 $0.0600 $0.0552 - - -
</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. Sales charges are not reflected in total returns. Total returns are
not annualized for periods of less than one full year.

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.18% and 1.07% for the six months
ended June 30, 1998, and for 1997, respectively. Prior to 1996 such
reductions were reflected in the expenses ratios.

4 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

45
<PAGE>

The following financial information represents selected data for each share of
Class B and Class C capital stock outstanding throughout the period.

<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------- -------------------------------
FEBRUARY 3, 1995 AUGUST 12, 1997
(COMMENCEMENT (COMMENCEMENT
SIX MONTHS OF OPERATIONS) SIX MONTHS OF OPERATIONS)
ENDED YEAR ENDED THROUGH ENDED THROUGH
JUNE 30, 1998 DECEMBER 31, DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997
----------- ---- ---- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.............. $ 25.03 $ 21.05 $18.14 $15.95 $ 25.36 $ 24.91
------- ------- ------ ------ ------- -------
Income From Investment
Operations
Net Investment Income............ 0.24 0.44 0.59 0.54 0.24 0.11
Net Gains or Losses on
Securities (both realized
and unrealized)............... (0.29) 5.26 4.45 2.97 (0.28) 1.72
------- ------- ------ ------ ------- -------
Total From Investment
Operations.............. (0.05) 5.70 5.04 3.51 (0.04) 1.83
------- ------- ------ ------ ------- -------
Less Distributions
Dividends (from net
investment income)............ (0.13) (0.44) (0.56) (0.54) (0.14) (0.11)
Distributions (from
capital gains)................ - (1.22) (1.54) (0.78) - (1.22)

Distributions (from
paid-in capital).............. - (0.06) (0.03) - - (0.05)
------- ------- ------ ------ ------- -------
Total Distributions........ (0.13) (1.72) (2.13) (1.32) (0.14) (1.38)
------- ------- ------ ------ ------- -------
Net Asset Value, End of
Period.............................. $ 24.85 $ 25.03 $21.05 $18.14 $ 25.18 $ 25.36
======= ======= ====== ====== ======= =======
Total Return (1).................... (0.21)% 27.35% 28.21% 25.31% (0.15)% 7.38%

Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)................. $88,348 $35,536 $2,075 $378 $24,802 $6,296
Ratio of Expenses to
Average Net Assets............ 2.06%*(2) 2.11%(2) 2.01%(2) 2.01%* 2.03%* 2.08%*(2)
Ratio of Net Income
to Average Net Assets........ 2.18%* 2.09% 2.40% 3.00%* 2.20%* 2.01%*

Portfolio Turnover Rate(3)....... 6.54% 23.68% 43.16% 53.58% 6.54% 23.68%
Average Commission
Rate Per Share(4)............. $0.0600 $0.0600 $0.0552 - $0.0600 $0.0600
</TABLE>

1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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. Sales charges are not reflected in
total returns. Total returns are not annualized for periods of less than
one full year.

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.05% for Class B shares for the six
months ended June 30, 1998, and 2.10% and 2.00% for Class B shares for 1997
and 1996 respectively and 2.07% for Class C Shares for 1997. Prior to 1996,
such reductions were reflected in the expense ratios.

4 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

46
<PAGE>

OVERVIEW OF DAVIS GOVERNMENT BOND FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Government Bond Fund's investment objective is current income.

WHAT WE BUY. Davis Government Bond Fund invests primarily in "U.S. Government
Securities." There are two basic types of U.S. Government Securities: direct
obligations of the U.S. Treasury, and obligations issued or guaranteed by an
agency or instrumentality of the U.S. Government. U.S. Government Securities
all represent debt obligations (unlike equity securities, which represent
ownership of the issuer).

Obligations that the U.S. Treasury issues or guarantees are generally
considered to offer the highest credit quality available in any security. Many
securities issued by government agencies are not fully guaranteed by the U.S.
Government, and in unusual circumstances may present credit risk.

A portion of Davis Government Bond Fund's securities are mortgage-backed
securities and collateralized mortgage obligations. The fund also invests in
repurchase agreements that are fully secured by U.S. Government Securities, as
well as traditional bills, notes and bonds.

SIDEBAR:

A "MORTGAGE-BACKED SECURITY" represents ownership of a pool of mortgage loans.
As the mortgages are paid off, a portion of the principal and interest payments
are passed through to the owners of the securities. Davis Government Bond Fund
only buys mortgage-backed securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

A "COLLATERALIZED MORTGAGE OBLIGATION" is a debt security that is secured by a
pool of mortgages, mortgage-backed securities, U.S. Government Securities, or
corporate debt obligations. Davis Government Bond Fund only invests in
collateralized mortgage obligations that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

A "REPURCHASE AGREEMENT" is a type of short-term investment that uses
securities as collateral. Like a short-term loan, the borrower sells securities
to the lender. The borrower agrees to buy back the securities at a certain time
- - at a higher price that incorporates an "interest payment."

Davis Government Bond Fund may use short-term investments for defensive"
purposes. In the event our portfolio manager anticipates a decline in the
government bond market, we may reduce our risk by investing in short-term
securities until market conditions improve.

47
<PAGE>

HOW WE SELECT INVESTMENTS. Davis Government Bond Fund does not attempt to
deliver the highest possible current yield to its investors. Instead, the
portfolio manager tries to deliver competitive results with less risk or
volatility than our competitors.

The fund typically holds many different types of U.S. Government Securities
with varying features. We try to buy securities with a range of maturity dates,
interest rates and call (prepayment) provisions. By diversifying among these
features, the fund seeks to capture the higher yield of long-term securities
and the flexibility of short-term securities.

PRINCIPAL RISKS

Because Davis Government Bond Fund principally holds high quality debt
securities, the primary risk of investing in the fund arises from interest rate
volatility. There are two ways that changes in interest rates can affect U.S.
Government Securities.

First, if a bond pays a fixed interest rate, and market rates increase, the
value (and price) of the bond should decline. When interest rates are falling,
the value (and price) of bonds should increase. As a result, an increase in
market rates should reduce the value of the fund's portfolio and a decrease in
rates should have the opposite effect.

Second, changes in market interest rates affect borrowers' decisions about
whether or not to prepay their obligations. Rising interest rates lead to
"extension risk," which occurs when borrowers maintain their existing
obligations until they come due instead of choosing to prepay them. Falling
interest rates lead to "prepayment risk," which occurs when borrowers prepay
their obligations more quickly than usual so that they can refinance at a lower
rate. For example, when market rates fall, borrowers in a pool of mortgages
that makes up a mortgage-backed security may pay off their loans more quickly
than they otherwise would have. A government agency that has the right to
"call" (prepay) a fixed rate security may respond the same way. The pace at
which borrowers prepay affects the yield and the cash flow to holders of
securities and the market value of those securities.

FUND PERFORMANCE

Davis Government Bond Fund began selling shares to the public on May 1, 1984.
The following charts and tables will help you understand the fund's financial
condition - including the returns that investors have earned and the cost of an
investment. These historical results do not necessarily indicate the
performance that investors can expect in the future. The value of the fund's
shares may go up or down.

TOTAL RETURN

Total return measures how much the price of an investment in a mutual fund
changes, assuming that all dividend income and capital gain distributions are
reinvested. For any

48
<PAGE>

fund, you should evaluate total return in light of the fund's particular
investment objectives and policies, as well as general market conditions during
the reported time periods.

Davis Government Bond Fund's investment performance will vary from year to
year. This chart shows the results that we achieved in the fund's Class B
shares from year to year over the last ten-year period.

DAVIS GOVERNMENT BOND FUND
TOTAL RETURN OVER THE LAST 10-YEAR PERIOD

1988 5.70%
1989 9.45%
1990 8.11%
1991 12.36%
1992 4.14%
1993 3.69%
1994 (0.97%)
1995 10.62%
1996 2.78%
1997 7.12%

Davis Government Bond Fund's year-to-date return as of June 30, 1998 was 2.47%.
During the ten-year period shown in the chart, the highest quarterly return was
4.85% (for the quarter ending September 30, 1991), and the lowest quarterly
return was (1.69%) (for the quarter ending March 31, 1990).

The chart does not reflect any sales charges. Total return would have been less
if it reflected those charges. The return for the other classes of Davis
Government Bond Fund shares offered by this prospectus will differ from the
Class B returns shown in the chart, depending on the expenses of that class.

AVERAGE ANNUAL TOTAL RETURN

The tables below show Davis Government Bond Fund's average annual total returns
for the following periods: one year, five years, ten years, and since the fund
opened (known as the inception date). The tables also compare these returns to
those earned during the same period for the Lehman Brothers Intermediate Term
U.S. Treasury Securities Index, an unmanaged index of total return performance.

49
<PAGE>

DAVIS GOVERNMENT BOND FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITHOUT MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LB TREASURY LB TREASURY LB TREASURY
CLASS A SECURITIES CLASS B SECURITIES CLASS C SECURITIES
(SINCE INDEX (SINCE INDEX (SINCE INDEX
12/1/94) 5/1/84) 8/12/97)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 7.92% 7.67% 7.12% 7.67% NA NA
- --------------------------------------------------------------------------------
5 Years NA NA 4.57% 6.32% NA NA
- --------------------------------------------------------------------------------
10 Years NA NA 6.03% 8.10% NA NA
- --------------------------------------------------------------------------------
Life of Fund 7.50% 8.49% 7.11% 9.46% 2.97% NA
- --------------------------------------------------------------------------------
</TABLE>

DAVIS GOVERNMENT BOND FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)
WITH MAXIMUM SALES CHARGE

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LB TREASURY LB TREASURY LB TREASURY
CLASS A SECURITIES CLASS B SECURITIES CLASS C SECURITIES
(SINCE INDEX (SINCE INDEX (SINCE INDEX
12/1/94) 5/1/84) 8/12/97)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 2.75% 7.67% 3.12% 7.67% NA NA
- --------------------------------------------------------------------------------
5 Years NA NA 4.21% 6.32% NA NA
- --------------------------------------------------------------------------------
10 Years NA NA 6.03% 8.10% NA NA
- --------------------------------------------------------------------------------
Life of Fund 5.81% 8.49% 7.11% 9.46% 1.97% NA
- --------------------------------------------------------------------------------
</TABLE>

30-DAY SEC YIELD AND DISTRIBUTION RATE

Distribution rate is determined by dividing the income dividends per share for
a stated period by the net asset value per share on the last day of that
period.

50
<PAGE>

30-day SEC yield and distribution rate fluctuate daily and will vary with
factors such as interest rates and the quality, length of maturity and type of
investments that the fund holds. You can obtain Davis Government Bond Fund's
most recent 30-day SEC yield and distribution rate by calling us toll-free at
1-800-279-0279, Monday through Friday, 7 a.m. to 4 p.m. Mountain Time.

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee you may pay when you buy shares of a mutual fund.
As an investor in Davis Government Bond Fund, you pay this sales charge when
you buy Class A shares, as a percentage of the offering price.

DEFERRED SALES CHARGE. A fee you may pay when you sell shares of a mutual fund.
As an investor in Davis Government Bond Fund, you may pay a deferred sales
charge as a percentage of the net asset value of the shares you sell or the
total cost of the shares, whichever is lower. Davis Government Bond Fund
investors pay a deferred sales charge in the following cases:

o As a Class A shareholder, only if you buy shares valued at $1 million
or more without a sales charge and sell shares within one year of
purchase.

o As a Class B shareholder, if you sell shares within six years of
purchase.

o As a Class C shareholder, if you sell shares within one year of
purchase.

EXCHANGE FEE. The fees some mutual funds charge to sell shares in one fund to
buy another fund. This fund, like all other Davis Funds, does not charge an
exchange fee.

51
<PAGE>

FEES YOU MAY PAY AS A DAVIS GOVERNMENT BOND FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge you
pay when you buy shares 4.75% None None
- --------------------------------------------------------------------------------
Maximum deferred sales
charge you pay when you sell shares 0.75% 4.00% 1.00%
- --------------------------------------------------------------------------------
Maximum sales charge you
pay on reinvested dividends None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
</TABLE>

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Government Bond Fund's
net asset value.

DISTRIBUTION FEES. Fees Davis Government Bond Fund pays to sell and distribute
shares and to provide services to shareholders (also known as a 12b-1 FEE).
These fees are paid out of the fund's assets on an ongoing basis. See About the
Distributor in the section WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT.

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS GOVERNMENT BOND FUND'S ASSETS)

- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
Management Fees 0.50% 0.50% 0.50%
- -------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25% 0.99% 1.00%
- -------------------------------------------------------------------------------
Other Expenses 0.96% 0.94% 0.81%
- -------------------------------------------------------------------------------
Total Annual Operating Expenses* 1.71% 2.43% 2.31%
- -------------------------------------------------------------------------------

* Annualized

52
<PAGE>

IF I INVEST IN DAVIS GOVERNMENT BOND FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis
Government Bond Fund. It is designed to help you compare investing costs with
other mutual funds.

This example assumes that you invest $10,000 in Davis Government Bond Fund for
the time periods indicated and then sell all of your shares at the end of those
periods. It also assumes that your investment has a 5% return each year and
that the fund's operating expenses remain the same.

COST OF INVESTING $10,000 IN DAVIS GOVERNMENT BOND FUND

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $64 $65 $33
- -----------------------------------------------------------------------------
3 Years $99 $106 $72
- -----------------------------------------------------------------------------
5 Years $136 $150 $124
- -----------------------------------------------------------------------------
10 Years $240 $251 $265
- -----------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
IF YOU STILL HOLD YOUR SHARES CLASS A CLASS B CLASS C
AFTER...
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $64 $25 $23
- -----------------------------------------------------------------------------
3 Years $99 $76 $72
- -----------------------------------------------------------------------------
5 Years $136 $130 $124
- -----------------------------------------------------------------------------
10 Years $240 $251 $265
- -----------------------------------------------------------------------------
</TABLE>

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of Davis
Government Bond Fund for the past five years. 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. It assumes that all dividends and capital gains have been reinvested.

This information is unaudited. Davis Government Bond Fund's unaudited financial
statements are included in the semi-annual report, which is available by
request.

53
<PAGE>

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

CLASS A

<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
ENDED YEAR ENDED ENDED
JUNE 30, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 5.87 $ 5.76 $ 6.00 $ 5.79 $ 5.78
------- ------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income................................ 0.15 0.33 0.33 0.39 0.02
Net Gains or Losses on Securities
(both realized and unrealized)..................... 0.02 0.11 (0.14) 0.27 (0.01)
------- ------- ------- ------- -------
Total From Investment Operations.............. 0.17 0.44 0.19 0.66 0.01
------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income)................ (0.17) (0.33) (0.33) (0.36) -
Distributions (from paid-in capital).................. - - (0.10) (0.09) -
------- ------- ------- ------- -------
Total Distributions............................ (0.17) (0.33) (0.43) (0.45) -
------- ------- ------- ------- -------
Net Asset Value, End of Period........................... $ 5.87 $ 5.87 $ 5.76 $ 6.00 $ 5.79
======= ======= ======= ======= =======
Total Return(1).......................................... 2.85% 7.92% 3.40% 11.82% (0.97)%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).............. $18,017 $17,589 $18,129 $21,485 $20,035
Ratio of Expenses to Average Net Assets............... 1.71%* 1.27%(2) 1.77% 1.74% 1.64%*
Ratio of Net Income to Average Net Assets............. 5.17%* 5.82% 5.88% 6.54% 6.22%*

Portfolio Turnover Rate(3)............................ 0.63% 24.35% 45.50% 41.04% 62.17%
</TABLE>

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.26% for 1997. Prior to 1996 such
reductions were reflected in the expenses ratios.

* Annualized

54
<PAGE>

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

CLASS B

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ---------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993(1)
----------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 5.86 $ 5.75 $ 5.98 $ 5.79 $ 6.33 $ 6.61
------- ------- ------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income............................ 0.13 0.29 0.29 0.34 0.31 0.36
Net Gains or Losses on Securities
(both realized and unrealized).............. 0.01 0.11 (0.13) 0.26 (0.37) (0.12)
------- ------- ------- ------- ------- -------
Total From Investment Operations........... 0.14 0.40 0.16 0.60 (0.06) 0.24
------- ------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment
income)..................................... (0.14) (0.29) (0.29) (0.33) (0.37) (0.42)
Distributions (from paid-in capital).............. - - (0.10) (0.08) (0.11) (0.10)
------- ------- ------- ------- ------- -------
Total Distributions......................... (0.14) (0.29) (0.39) (0.41) (0.48) (0.52)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period........................ $ 5.86 $ 5.86 $ 5.75 $ 5.98 $ 5.79 $ 6.33
======= ======= ======= ======= ======= =======
Total Return(2)....................................... 2.47% 7.12% 2.78% 10.62% (0.97)% 3.69%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)........... $13,116 $12,703 $12,959 $15,976 $19,241 $50,080
Ratio of Expenses to Average Net Assets.......... 2.43%*(3) 2.01%(3) 2.53%(3) 2.51% 2.38% 2.37%
Ratio of Net Income to Average Net Assets......... 4.46%* 5.07% 5.13% 5.77% 5.48% 5.52%

Portfolio Turnover Rate(4)......................... 0.63% 24.35% 45.50% 41.04% 62.17% 42.82%
</TABLE>

1 Per share calculations other than distributions were based on average
shares outstanding during the period.

3 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.42% for the six months ended June
30, 1998, and 2.00% and 2.52% for 1997 and 1996, respectively. Prior to
1996 such reductions were reflected in the expenses ratios.

* Annualized

55
<PAGE>

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

CLASS C

<TABLE>
<CAPTION>
AUGUST 19, 1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED THROUGH
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
----------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period...................................... $ 5.88 $ 5.79
--------- ---------
Income (Loss) From Investment Operations
Net Investment Income................................................ 0.14 0.08
Net Gains on Securities (both realized and unrealized).............. - 0.09
---------- ---------
Total From Investment Operations............................... 0.14 0.17
--------- ---------
Less Distributions
Dividends (from net investment income)................................ (0.14) (0.08)
--------- ---------
Total Distributions............................................. (0.14) (0.08)
--------- ---------
Net Asset Value, End of Period............................................ $ 5.88 $ 5.88
========= =========
Total Return(1)........................................................... 2.47% 2.97%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $908 $215

Ratio of Expenses to Average Net Assets............................... 2.31%* 1.97%*(2)

Ratio of Net Income to Average Net Assets............................. 4.57%* 5.11%*

Portfolio Turnover Rate(3) ........................................... 0.63% 24.35%
</TABLE>

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.96% for 1997.

* Annualized

56
<PAGE>

OVERVIEW OF DAVIS GOVERNMENT MONEY MARKET FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Government Money Market Fund's objective is to achieve as high a level of
current income as is consistent with the principle of preservation of capital
and maintenance of liquidity.

WHAT WE BUY. Davis Government Money Market Fund invests exclusively in "U.S.
Government Securities" and repurchase agreements secured by U.S. Government
Securities.

There are two basic types of U.S. Government Securities: direct obligations of
the U.S. Treasury, and obligations issued or guaranteed by an agency or
instrumentality of the U.S. Government. U.S. Government Securities all
represent debt obligations (unlike equity securities, which represent ownership
of the issuer).

A "repurchase agreement" is a type of short-term investment that uses
securities as collateral. Like a short-term loan, the borrower sells securities
to the lender. The borrower agrees to buy back the securities at a certain time
- - at a higher price that incorporates an "interest payment." Davis Government
Money Market Fund only invests in repurchase agreements when the underlying
securities are U.S. Government Securities.

HOW WE SELECT INVESTMENTS. Davis Government Money Market Fund favors securities
issued or secured by U.S. Government agencies because those securities
typically pay a higher rate than securities issued or secured directly by the
U.S. Treasury. We maintain liquidity and preserve capital by carefully
monitoring the duration of our investments. Our portfolio has a dollar weighted
average maturity of 90 days or less.

PRINCIPAL RISKS

Because Davis Government Money Market Fund invests exclusively in U.S.
Government Securities, it incurs a minimum of credit risk. U.S. Government
Securities are among the safest investments you can make, and are an excellent
means of preserving principal. However, there is always some risk that the
issuer of a security held by the fund will fail to make a payment when it is
due. Some of the agency-issued securities in the fund's portfolio are not fully
guaranteed by the U.S. Government, and in unusual circumstances may present
credit risk.

The primary risk of investing in Davis Government Money Market Fund is interest
rate volatility. If a bond pays a fixed interest rate, and market rates
increase, the value (and price) of the bond should decline. When interest rates
are falling, the value (and price) of bonds should increase. As a result, an
increase in market rates should reduce the value of the fund's portfolio and a
decrease in rates should have the opposite effect.

57
<PAGE>

In order to minimize the effect of interest rates on the fund's securities, we
only buy securities that will mature in 397 days or less, or that meet other
stringent requirements. In addition, the dollar weighted average maturity for
the portfolio as a whole is 90 days or less.

Although Davis Government Money Market Fund seeks to preserve the value of your
investment at $1.00 per share, investors can lose money. An investment in the
fund is not a bank deposit and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.

FUND PERFORMANCE

Davis Government Money Market Fund began selling shares to the public on May 1,
1984. The following charts and tables will help you understand the fund's
financial condition - including the returns that investors have earned and the
cost of an investment. These historical results do not necessarily indicate the
performance that investors can expect in the future.

TOTAL RETURN

Davis Government Money Market Fund's investment performance will vary from year
to year. This chart shows the results that we achieved in the fund's Class A
shares from year to year over the last ten-year period.

58
<PAGE>

DAVIS GOVERNMENT MONEY MARKET FUND
TOTAL RETURN OVER THE LAST 10-YEAR PERIOD

Year ended 9/30/88 5.74%
Year ended 9/30/89 7.51%
3 months ended 12/31/89 7.09%*
1990 6.58%
1991 4.78%
1992 2.70%
1993 2.01%
1994 3.48%
1995 5.25%
1996 4.80%
1997 5.02%

* Annualized

Davis Government Money Market Fund's year-to-date return as of June 30, 1998
was 2.49%.

7-DAY YIELD AND EFFECTIVE YIELD

7-DAY YIELD measures income earned by a money market fund, and EFFECTIVE YIELD
measures income earned assuming that all earnings are reinvested in the fund.
All money market funds are required to use identical formulas to calculate
their 7-day yield and effective yield, which gives investors a convenient way
to compare fund results.

To calculate 7-day yield, a money market fund determines its annualized net
income during a specified 7 day period as a percentage of the offering price
for the fund's shares.

To calculate effective yield, a money market fund determines its annualized net
income during a specified 7 day period, assuming that all earnings are
reinvested in fund shares, as a percentage of the offering price for the fund's
shares.

Yields fluctuate daily and will vary with factors such as interest rates and
the quality, length of maturity and type of investments in the portfolio. You
can obtain Davis Government Money Market Fund's most recent 7-day yield and
effective yield by calling us toll-free at 1-800-279-0279, Monday through
Friday, 7 a.m. to 4 p.m. Mountain Time.

59
<PAGE>

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee you may pay when you buy shares of a mutual fund.
Investors in Davis Government Money Market Fund do not pay front-end sales
charges.

DEFERRED SALES CHARGE. A fee you may pay when you sell shares of a mutual fund.
Davis Government Money Market Fund investors do not pay deferred sales charges.

EXCHANGE FEE. The fees some mutual funds charge to sell shares in one fund to
buy another fund. This fund, like all other Davis Funds, does not charge an
exchange fee.

FEES YOU MAY PAY AS A DAVIS GOVERNMENT MONEY MARKET FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge you pay
when you buy shares None None None
- --------------------------------------------------------------------------------
Maximum deferred sales charge
you pay when you sell shares None None None
- --------------------------------------------------------------------------------
Maximum sales charge you pay
on reinvested dividends None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
</TABLE>

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Government Money Market
Fund's net asset value.

DISTRIBUTION FEES. Fees a mutual fund may pay a third party to sell and
distribute shares and to provide services to shareholders (also known as a
12b-1 fee). Davis Government Money Market Fund does not pay distribution fees.
See About the Distributor in the section WHO IS RESPONSIBLE FOR YOUR DAVIS
ACCOUNT.

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

60
<PAGE>

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS GOVERNMENT MONEY MARKET FUND'S ASSETS)

- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Management Fees 0.48% 0.48% 0.48%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees None None None
- --------------------------------------------------------------------------------
Other Expenses 0.08% 0.08% 0.08%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses* 0.56% 0.56% 0.56%
- --------------------------------------------------------------------------------

*Annualized

IF I INVEST IN DAVIS GOVERNMENT MONEY MARKET FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis
Government Money Market Fund. It is designed to help you compare investing
costs with other mutual funds.

This example assumes that you invest $10,000 in Davis Government Money Market
Fund for the time periods indicated and then sell all of your shares at the end
of those periods. It also assumes that your investment has a 5% return each
year and that the fund's operating expenses remain the same. Since the Davis
Government Money Market Fund does not impose any sales charges, your investing
costs will be the same whether you hold your shares for a particular period of
time or sell your shares within that time period. Although your actual costs
may be higher or lower, your costs-based on these assumptions-would be:

COST OF INVESTING $10,000 IN DAVIS GOVERNMENT MONEY MARKET FUND

- -------------------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN, OR CLASS A CLASS B CLASS C
STILL HOLD YOUR SHARES AFTER,...
- -------------------------------------------------------------------------------
1 Year $6 $6 $6
- -------------------------------------------------------------------------------
3 Years $18 $18 $18
- -------------------------------------------------------------------------------
5 Years $31 $31 $31
- -------------------------------------------------------------------------------
10 Years $70 $70 $70
- -------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of Davis
Government Money Market Fund for the past five years. Some of the information
reflects financial results for a single fund share. The total returns represent
the rate that an investor would

61
<PAGE>

have earned (or lost) money on an investment in the fund. It assumes that all
dividends and capital gains have been reinvested.

This information is unaudited. Davis Government Money Market Fund's unaudited
financial statements are included in the semi-annual report, which is available
by request.

The following financial information represents selected data for each share of
Class A, B and C capital stock outstanding throughout each period.

CLASSES A, B & C

<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income............................ .025 .049 .047 .051 .034 .020

Less Distributions
Dividends (from net investment income)... (.025) (.049) (.047) (.051) (.034) (.020)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= =======
Total Return(1)....................................... 2.49% 5.02% 4.80% 5.25% 3.48% 2.01%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)......... $472,002 $464,459 $411,416 $360,290 $240,727 $39,531

Ratio of Expenses to Average Net Assets......... 0.56%* 0.57% 0.66% 0.73% 0.64% 1.15%

Ratio of Net Income to Average Net Assets........ 5.02%* 4.92% 4.72% 5.13% 3.43% 1.98%
</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 full
year.

* Annualized

62
<PAGE>

WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT

A number of entities provide services to the six Davis Series Funds. This
section shows how each fund is organized, the entities that perform these
services, and how these entities are compensated. Additional information on the
organization of each fund is provided in the Davis Series Statement of
Additional Information. For information on how to receive this document, see
the back cover of this prospectus.

INVESTMENT ADVISER

DAVIS SELECTED ADVISERS, LP
Referred to throughout this prospectus as "Davis Selected Advisers"
124 East Marcy Street
Santa Fe, NM 87501

o Provides investment advice for each of the Davis Series Funds.

o Manages the business affairs of each Davis Series Fund.

o Provides day-to-day administrative services.

o Serves as investment adviser for all of the Davis Funds, other mutual
funds and other institutional clients.

o Each Davis Series Fund pays an annual adviser fee (based on average
net assets). For specific information about the adviser fee that any
Davis Series Fund pays, please refer to description of that fund under
the heading "Fees and Expenses."

INVESTMENT SUB-ADVISERS

DAVIS SELECTED ADVISERS-NY, INC.
Referred to throughout this prospectus as "Davis Selected Advisers-NY"
609 Fifth Avenue
New York, NY 10017

o Performs investment management and research services for the Davis
Series Funds and other institutional clients.

o Wholly owned subsidiary of Davis Selected Advisers.

o Annual Fee: Davis Selected Advisers pays the fee, not the various
funds.

TANAKA CAPITAL MANAGEMENT, INC.
230 Park Avenue, Suite 1432
New York, NY 10169

o Performs research and other portfolio services for Davis Growth
Opportunity Fund.

o Makes investment decisions for Davis Growth Opportunity Fund.

o Provides day-to-day administrative services for Davis Growth
Opportunity Fund.

o Annual Fee: Davis Selected Advisers pays the fee, not Davis Growth
Opportunity Fund.

63
<PAGE>

DISTRIBUTOR

DAVIS DISTRIBUTORS, LLC
Referred to throughout this prospectus as "Davis Distributors"
124 East Marcy Street
Santa Fe, NM 87501

o Oversees purchases of shares for the Davis Series Funds, and
promotional activities for all of the Davis Series Funds.

o Wholly owned subsidiary of Davis Selected Advisers.

o Serves as distributor for all of the Davis Funds and other mutual
funds managed by Davis Selected Advisers.

BOARD OF DIRECTORS

The Board of Directors of each individual Davis Series Fund has general
supervisory responsibilities of the fund and supervises the investment
adviser's duties.

CUSTODIAN AND TRANSFER AGENT

STATE STREET BANK AND TRUST COMPANY
Also referred to as "State Street Bank and Trust"
P.O. Box 8406
Boston, MA 02266-8406

o Prices each Davis Series Fund daily.

o Holds share certificates and other assets of the various Davis Series
Funds.

o Maintains records of each fund's shareholders.

o Issues and cancels share certificates.

o Supervises the payment of dividends.

[SET OFF]
ABOUT THE DISTRIBUTOR

Many mutual funds, including the Davis Series Funds (other than Davis
Government Money Market Fund), have adopted plans under Rule 12b-1 of the
Investment Company Act of 1940-the key law that regulates mutual funds-which
allows the fund to charge a fee to cover promotional costs. Under this rule,
the Davis Series Funds are allowed to reimburse Davis Distributors for its
expenses for all three classes of shares. This fee includes costs for sales and
marketing activities.

While Davis Government Money Market Fund does have a distribution plan, it does
not pay Davis Distributors or anyone else to promote the fund's shares.
Instead, Davis

64
<PAGE>

Selected Advisers uses its own assets, including the advisory fee, to promote
Davis Government Money Market Fund's shares.

For all of the Davis Series Funds other than Davis Government Money Market
Fund, distribution fees for Class A shares are limited to an annual rate of
0.25% of the average daily net asset value of a fund's Class A shares.
Distribution fees for Class B and Class C shares-primarily to compensate
dealers for selling the shares-are limited to an annual rate of 1% of the
average daily net asset value of Class B and Class C shares.

Davis Distributors also uses part of the fee for all three share classes to
compensate brokers for providing account services to shareholders, including
maintaining shareholder accounts, answering shareholder inquiries and providing
other personal services to shareholders.

Distribution fees may also be used to reimburse Davis Distributors for
specified expenses incurred to market the Davis Series Funds to the extent that
these expenses exceed the portion of the sales loads that Davis Distributors
retains.

Long-term shareholders of mutual funds that pay distribution fees may pay more
than the maximum front-end sales charge allowed by the National Association of
Securities Dealers.

YEAR 2000 AND EURO CONVERSION

Like all financial service providers, the Adviser, Sub-Adviser,
Distributor, and third parties providing investment advisory, administrative,
transfer agent, custodial and other services ("Service Providers") utilize
systems that may be affected by change from the year 1999 to the year 2000.
Specifically, older computer software systems in use today cannot distinguish
the year 2000 from the year 1900 because of the way dates are encoded and
calculated. Also, on January 1, 1999, eleven of the fifteen members states of
the European Union are scheduled to convert to a common currency called the
"Euro". Difficulties with Year 2000 and Euro Conversion issues could have a
negative impact on handling securities trades, payments of interest and
dividends, pricing and account services. In response to these potential
problems, the Service Providers have advised the Funds that they are actively
working on necessary computer system changes in preparation for the Year 2000
and Euro Conversions. The Funds have been informed that the Service Providers'
computer systems and those of third parties with whom they work, will be
adapted in time for these two events. Nonetheless, there remains the
possibility that companies in which the Funds invest may experience
difficulties with Year 2000 and Euro Conversions which may negatively effect
their market value.

65
<PAGE>

WHO THE PORTFOLIO MANAGERS ARE

SHELBY M.C. DAVIS
Responsibilities:

o Chief Investment Officer of Davis Selected Advisers.

o President of all the Davis Funds.

Other Experience:

o Served as Davis New York Venture Fund's Portfolio Manager from its
inception in 1969 until February 1997.

o Served as Portfolio Manager of a growth and income fund managed by
Davis Selected Advisers from May 1993 until February 1997.

FOR THE GROWTH OPPORTUNITY FUND
GRAHAM Y. TANAKA
Responsibilities:

o Portfolio Manager of the Growth Opportunity Fund since January 1987.

o CEO and controlling shareholder of Tanaka Capital Management since
1990.

FOR THE FINANCIAL FUND
CHRISTOPHER C. DAVIS
Responsibilities:

o Manager or Co-Portfolio Manager of the fund since inception.

o Also manages or co-manages other equity funds advised by Davis
Selected Advisers.

Other Experience:

o Assistant portfolio manager and research analyst working with Shelby
M.C. Davis from September 1989 to September 1995.

KENNETH CHARLES FEINBERG
Responsibilities:

o Co-Portfolio Manager of the fund since May 1997.

o Also co-manages other equity funds advised by Davis Selected Advisers.

Other Experience:

o Research analyst at Davis Selected Advisers since December 1994.

o Assistant Vice President of Investor Relations for Continental Corp.
from 1988 to 1994.

FOR THE REAL ESTATE FUND
ANDREW A. DAVIS
Responsibilities:

o Manager or Co-Portfolio Manager of the fund since inception.

o Also manages or co-manages other Davis equity funds.

66
<PAGE>

Other Experience:

o Vice President and head of convertible securities research at
PaineWebber, Incorporated for six years.

FOR THE CONVERTIBLE SECURITIES FUND
ANDREW A. DAVIS

Mr. Davis has been Manager or Co-Portfolio Manager of the fund since inception.
The rest of Mr. Davis' background and experience are described above under the
heading "For the Real Estate Fund."

FOR THE GOVERNMENT BOND FUND
CAROLYN H. SPOLIDORO
Responsibilities:

o Manager of the fund since 1995.

o Also manages other Davis bond funds.

Other Experience:

o Has worked for Davis Selected Advisers since 1985.

FOR THE DAVIS GOVERNMENT MONEY MARKET FUND
CAROLYN H. SPOLIDORO

Ms. Spolidoro has been Manager of the fund since 1987. The rest of Ms.
Spolidoro's background and experience are described above under the heading
"For the Government Bond Fund."

[BOXED]
OUR CODE OF ETHICS

We allow the officers and employees of the Davis Series Funds, Davis Selected
Advisers and its affiliates to buy and sell securities for their own personal
accounts. However, in order to do so, they must agree to a number of
restrictions, listed in our company Code of Ethics.

67
<PAGE>

ONCE YOU INVEST IN ONE OF THE DAVIS SERIES FUNDS

This section describes what happens to your money once it is invested: how your
investment is valued, how you earn money on your investment and how the
government may tax these earnings.

HOW YOUR SHARES ARE VALUED

As an investor in any Series Fund, you are entitled to buy and sell shares on
any business day. The share price of your investment changes depending on the
total value of the investments owned by the particular fund in which you
invest.

Each business day, we determine the value of each Davis Fund's shares by adding
up the total value of the fund's investments plus other assets (such as cash),
subtracting the fund's liabilities, and dividing the result by the total number
of fund shares outstanding. This share figure is known as the net asset value
(NAV).

Net asset value for all of the Davis Funds is determined each day the Funds are
open for business. A business day is defined as any day the New York Stock
Exchange is open for trading. We calculate net asset value either at the close
of the Exchange or at 4 p.m. Eastern Time, whichever comes first.

The net asset value of all Davis Fund shares are published daily in the
business section of most major newspapers. If you have access to the Internet,
you can also check net asset value on our web site (WWW.DAVISFUNDS.COM).

HOW SECURITIES IN THE PORTFOLIO ARE VALUED

We use current market valuations to value the securities in the individual
Davis Series Funds:

o 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.

o Over-the-counter securities are valued at the average of closing bid
and asked prices.

o Debt securities maturing in 60 days or less are usually valued at an
amortized (gradually reduced) cost.

o Longer-term debt securities may be valued by an independent pricing
service.

o Securities with unavailable market quotations and other assets are
valued at "fair value"-which is determined or directed by the Board of
Directors of the fund that holds them.

Normally, the share price of Davis Government Money Market Fund does not
fluctuate. However, if there are unusually rapid changes in interest rates that
the fund's Board of

68
<PAGE>

Directors believes will cause a material deviation between
the amortized cost of the fund's debt securities and the market value of those
securities, the Board will consider taking temporary action to maintain a fixed
price or to prevent material dilution or other unfavorable consequences to fund
shareholders. This temporary action could include withholding dividends, paying
dividends out of surplus, realizing gains or losses, or using market valuation
to calculate net asset value rather than amortized cost.

[SIDEBAR]
QUOTATIONS
The bid price is the highest price a prospective buyer is prepared to pay for a
security. The asked price is the lowest price acceptable to a prospective
seller. The average of these two prices is known as a quote or quotation.

OVER THE COUNTER SECURITIES
Over the counter securities are not listed or traded on an organized exchange.
They are bought and sold by dealers connected by telephones and computer
networks.

NET INVESTMENT INCOME
Net investment income is income received by a fund from company dividends and
interest on securities investments, minus management fees and all other
expenses.

HOW WE PAY EARNINGS

There are two ways you can receive payments from a Davis Series Fund:

o DIVIDENDS. Distributions to shareholders of net investment income and
short term capital gains on investments.

o CAPITAL GAINS. Profits received by a fund from the sale of securities
held for the long-term, which are then distributed to shareholders.

If you would like information about when a particular Davis Series Fund pays
dividends and distributes capital gains, if any, please call 1-800-279-2279.

Unless you choose otherwise, each Davis Series Fund automatically reinvests
your dividends in additional fund shares. You can request to have your
dividends and capital gains paid to you by check, deposited directly into your
bank account, paid to a third party or sent to an address other than your
address of record.

We also offer a Dividend Diversification Program, which allows you to have your
dividends and capital gains reinvested in shares of another Davis Fund.

You will receive a statement each year detailing the amount of all dividends
and capital gains paid to you during the previous year. To ensure that these
distributions are reported properly to the U.S. Treasury, you must certify on
your Application Form (or on Form W-9) that your Taxpayer Identification Number
is correct and you are not subject to

69
<PAGE>

backup withholding (which means that you are paying back taxes for failing to
report all interest and dividends).

If you fail to report a correct Taxpayer I.D. Number, under-reported dividend
or interest income, or are already subject to backup withholding, the Davis
Funds are required by law to withhold a portion of any distributions you may
receive-and send it to the U.S. Treasury.

(SET OFF)
HOW TO PUT YOUR DIVIDENDS AND CAPITAL GAINS TO WORK

You can have all dividends from any Davis Fund automatically invested in the
same share class of any other Davis Fund. To be eligible for this DIVIDEND
DIVERSIFICATION PROGRAM, all accounts involved must be registered under the
same name and have a minimum initial value of $250. All future investments must
total $25 or more. Shares are purchased at the chosen fund's net asset value on
the dividend payment date. You can make changes to your selection or withdraw
from the program with 60 days notice. To participate in this program, fill out
the cross-reinvest information in the appropriate section of the Application
Form.

HOW YOUR DIVIDENDS AND CAPITAL GAINS ARE TAXED

o If you invest in a fund that pays dividends, the dividends are taxable
to shareholders as ordinary income. Dividends include both net
investment income and short-term capital gains.

o If you invest in a fund that pays net capital gains, they generally
will be taxed as a long-term capital gains distribution.

These payments may be taxed at different rates, depending on the length of time
your fund holds its assets. More information is provided in the instructions
that come with your tax return.

Investment earnings (dividends and capital gains) are taxable in the year in
which they were declared, not paid- regardless of whether they are received in
cash or reinvested in shares.

Also, keep in mind that when you sell or exchange shares of any mutual fund, it
may result in a taxable gain or loss.

We recommend that you consult with a tax adviser about any dividends and
capital gains you may receive from any Davis Series Fund.

70
<PAGE>

HOW TO CHOOSE A SHARE CLASS

Before you can buy shares in any Davis Series Fund, you need to decide which
class of shares best suits your needs. Each Davis Series Fund offers three
classes of shares: A, B and C. Each class is subject to different expenses and
sales charges.

You may choose to buy one class of shares rather than another, depending on the
amount of the purchase and the expected length of time of investment.

SPECIAL NOTE: Institutions buying $5 million or more of any Davis Fund may be
eligible to buy Class Y shares of that fund, offered through a separate
prospectus. With Class Y shares, you pay no sales charges or distribution fees.
To find out more about Class Y shares, contact your sales representative or our
distributor, Davis Distributors, at 1-800-279-0279.

CLASS A SHARES

CLASS A SHARES MAY BE BEST FOR YOU IF YOU ARE A LONG-TERM INVESTOR WHO IS
WILLING TO PAY THE ENTIRE SALES CHARGE AT THE TIME OF PURCHASE. IN RETURN, YOU
PAY A LOWER DISTRIBUTION FEE THAN THE TWO OTHER SHARE CLASSES.

o You buy Class A shares at their net asset value per share plus a sales
charge, which is 4.75% for any investment below $100,000 (see chart on
the following page).

o There is no limit on how much you can invest in this share class.

o The Davis Series Funds (other than Davis Government Money Market Fund)
pay a distribution fee - up to 0.25% of the average daily net asset
value each year you hold the shares. This fee is lower than the other
two classes of shares. Lower expenses translate into higher annual
return on your investment. More information on distribution fees is
provided under WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT.

SIDEBAR: Investors who buy Class A shares of Davis Government Money Market Fund
do not pay front-end sales charges.

71
<PAGE>

CLASS A SALES CHARGES
(FOR ALL DAVIS SERIES FUNDS EXCEPT DAVIS GOVERNMENT MONEY MARKET FUND)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT OF SALES
CHARGE RETAINED
SALES CHARGE SALES CHARGE BY THE DEALER
(PERCENTAGE OF (PERCENTAGE OF (PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE) AMOUNT INVESTED) OFFERING PRICE)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under $100,000 4.75% 5.0% 4.0%
- ----------------------------------------------------------------------------------------
$100,000 to under $250,000 3.5% 3.6% 3.0%
- ----------------------------------------------------------------------------------------
$250,000 to under $500,000 2.5% 2.6% 2.0%
- ----------------------------------------------------------------------------------------
$500,000 to under $750,000 2.0% 2.0% 1.75%
- ----------------------------------------------------------------------------------------
$750,000 to under $1 million 1.0% 1.0% 0.75%
- ----------------------------------------------------------------------------------------
$1 million or more* None None 0%
- ----------------------------------------------------------------------------------------
</TABLE>

*You pay no front-end sales charge on purchases of $1 million or more, but if
you sell those shares (in any Davis Series Fund other than Davis Government
Money Market Fund) within the first year you may pay a deferred sales charge of
0.75%. Davis Distributors may pay the dealer a commission during the first year
after purchase at the following rates:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PURCHASE AMOUNT COMMISSION
- -------------------------------------------------------------------------------
<S> <C>
First $3 million 0.75%
- -------------------------------------------------------------------------------
Next $2 million 0.50%
- -------------------------------------------------------------------------------
Over $5 million 0.25%
- -------------------------------------------------------------------------------
</TABLE>

If a commission is paid for purchases of $1 million or more in any Davis Series
Fund, the dealer will be paid with distribution fees received from that fund.
If distribution fee limits have already been reached for the year, Davis
Distributors itself will pay the commissions.

As the chart above shows, the sales charge gets smaller as your purchase amount
increases. Here are several ways you may combine purchases to qualify for a
lower sales charge:

YOU CAN COMBINE PURCHASES OF CLASS A SHARES

o WITH OTHER FAMILY MEMBERS. If you buy shares for yourself, your spouse
and any children under the age of 21, all the shares you buy will be
counted as a single account.

o WITH CERTAIN GROUPS. If you buy shares through a group organized for
the purpose other than to buy mutual fund shares, the purchases will
be treated as a single purchase.

o THROUGH EMPLOYEE BENEFIT PLANS. If you buy shares through trusteed or
fiduciary accounts and Individual Retirement Accounts (IRAs) of a
single employer, the purchases will be treated as a single purchase.

o UNDER A STATEMENT OF INTENTION. If you enter a Statement of Intention
and agree to buy Class A shares of $100,000 or more over a 13-month
period, all of the shares you

72
<PAGE>

buy during that period will be counted as a single purchase. Before
entering a Statement of Intention, please read the terms and
conditions in the Statement of Additional Information. A Statement of
Intention is an agreement under which you permit our service provider,
State Street Bank and Trust, to hold fund shares in escrow to
guarantee payment of any sales charges that may be due if you
ultimately invest less than you agreed to invest over the covered
13-month period.

o UNDER RIGHTS OF ACCUMULATION. If you notify your dealer or our
distributor, Davis Distributors, you can include the Class A, B and C
shares you already own (except shares of Davis Government Money Market
Fund) when calculating the price for your current purchase.

o WITH CLASS A SHARES OF OTHER DAVIS FUNDS. If you buy Class A shares of
this or any other Davis Fund except Davis Government Money Market
Fund, all of the shares you buy will be counted as a single purchase.
This includes shares purchased under a Statement of Intention or
Rights of Accumulation.

CLASS A FRONT-END SALES CHARGE WAIVERS

We will not charge a sales charge on purchases of Class A shares for:

o Investments in Davis Government Money Market Fund.

o Shareholders making purchases with dividends or capital gains that are
automatically reinvested.

o Purchases by directors, officers and employees of any Davis Fund, the
investment adviser of any Davis Fund or its affiliates, and their
immediate families.

o Purchases by employees and people affiliated with broker-dealer firms
offering shares in any Davis Fund.

o Financial institutions acting as fiduciaries making single purchases
of $250,000 or more.

o Employee benefit plans making purchases through a single account
covering at least 250 participants.

o Wrap accounts offered by securities firms, fee-based investment
advisers or financial planners.

o State and local governments.

[SIDEBAR]
Wrap accounts are investment programs offered by broker-dealers who place a
client's funds with one or more investment advisers and charge a fee for their
services.

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<PAGE>

CLASS B SHARES

CLASS B SHARES MAY BE BEST FOR YOU IF YOU ARE WILLING TO PAY A HIGHER
DISTRIBUTION FEE THAN CLASS A SHARES FOR EIGHT YEARS IN ORDER TO AVOID PAYING A
FRONT-END SALES CHARGE.

o You buy the shares at net asset value (no sales charge).

o You can invest up to $250,000 in Class B shares.

o If you sell Class B shares in any of the Davis Series Funds except
Davis Government Money Market Fund within six years of purchase, you
must pay a deferred sales charge. This charge decreases over time as
you own the shares. (see chart below).

o After you hold Class B shares for eight years, they are automatically
converted into Class A shares without paying a front-end sales charge.
Class A shares pay a lower distribution fee.

o The Davis Series Funds (other than Davis Government Money Market Fund)
pay a distribution fee of 1% of the average daily net asset value each
year you hold the shares. Higher expenses translate into lower annual
return on your investment. More information on distribution fees is
provided under WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT.

SIDEBAR: Investors who buy Class B shares of Davis Government Money Market Fund
will not pay deferred sales charges.

CLASS B DEFERRED SALES CHARGES
(FOR ALL DAVIS SERIES FUNDS EXCEPT DAVIS GOVERNMENT MONEY MARKET FUND)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SALES MADE AFTER PURCHASE AMOUNT OF DEFERRED SALES CHARGE
- -------------------------------------------------------------------------------
<S> <C>
Year 1 4%
- -------------------------------------------------------------------------------
Years 2-3 3%
- -------------------------------------------------------------------------------
Years 4-5 2%
- -------------------------------------------------------------------------------
Year 6 1%
- -------------------------------------------------------------------------------
Years 7-8 None
- -------------------------------------------------------------------------------
</TABLE>

CLASS C SHARES

CLASS C SHARES MAY BE BEST FOR YOU IF YOU ARE WILLING TO PAY A HIGHER
DISTRIBUTION FEE THAN CLASS A SHARES PAY IN ORDER TO AVOID PAYING A SALES
CHARGE.

o You buy the shares at net asset value (no sales charge).

o You cannot invest more than $1 million in Class C shares.

o If you sell Class C shares in any of the Davis Series Funds other than
Davis Government Money Market Fund within one year of purchase, you
must pay a deferred sales charge of 1%.

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<PAGE>

SIDEBAR: Investors who buy Class C shares of Davis Government Money Market Fund
will not pay deferred sales charges.

DEFERRED SALES CHARGE WAIVERS

We will waive deferred sales charges on sales of Class A, B and C shares of any
Davis Series Fund if:

o You sell shares that were acquired through reinvestment of dividends
or capital gains.

o You sell shares that were not subject to a commission at the time of
purchase (the amount of purchase totaled $1 million or more and the
shares were held for more than a year).

o You (or a registered joint owner) die or have been determined to be
totally disabled some time after the purchase of shares.

o You sell shares under the Automatic Withdrawal Plan amounting to, in a
12-month period, up to 12% of the value of the account when you began
participating in the Plan.

o You sell shares under a qualified retirement plan or IRA that
constitute a tax-free return of contributions to avoid a penalty.

o Your fund sells the remaining shares in your account under an
Involuntary Redemption.

o You qualify for an exception relating to defined contribution plans.
These exceptions are described in the Statement of Additional
Information.

o You are a director, officer or employee of Davis Selected Advisers or
one of its affiliates (or a family member of a director, officer or
employee).

If the net asset value of the shares that you sell has increased since you
purchased them, any deferred sales charge will be based on the original cost of
the shares.

[BOXED]
If you have any additional questions about choosing a share class, please call
us toll-free at 1-800-279-0279, Monday through Friday, 7 a.m. to 4 p.m.
Mountain Time. If you still are not sure about which class is best for you,
contact your financial adviser.

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<PAGE>

HOW TO OPEN AN ACCOUNT

You can open an account if you invest at least:

o $1,000 for a non-retirement plan account.

o $250 for a retirement plan account.

[CHART]
THREE WAYS YOU CAN OPEN AN ACCOUNT:

1. BY MAIL. Fill out the Application Form included in this prospectus and
mail it to our service provider, State Street Bank and Trust. Both you
and your dealer must sign the form. Include a check made payable to the
DAVIS FUNDS or, in the case of a retirement account, the custodian or
trustee. All purchases by check should be in U.S. dollars. The Davis
Funds will not accept third-party checks.

2. BY DEALER. You may have your dealer order and pay for the shares. In this
case, you must pay your dealer directly. Your dealer will then order the
shares from our distributor, Davis Distributors. Please note that your
dealer may charge a service fee or commission for buying these shares.

3. BY WIRE. You may wire federal funds directly to our service provider,
State Street Bank and Trust. Before you wire an initial investment, you
must call our distributor, Davis Distributors, at 1-800-279-0279 to let
them know the fund and share class you will be buying. After the initial
wire purchase is made, you will need to fill out a Plan Adoption
Agreement or Application Form and return it to State Street. To ensure
that the purchase is credited properly, follow these wire instructions:

State Street Bank and Trust Company,
Boston, MA 02210
Attn.: Mutual Fund Services
[NAME OF DAVIS FUND THAT YOU ARE BUYING]
Shareholder Name,
Shareholder Account Number,
Federal Routing Number 011000028,
DDA Number 9904-606-2

Generally, the Davis Funds do not issue share certificates for purchases. You
can receive certificates for any fund other than Davis Government Money Market
Fund if you are a Class A shareholder who is not participating in the Automatic
Withdrawal Plan. If you are eligible and wish to receive certificates, you must
make the request at the time of purchase.

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<PAGE>

RETIREMENT PLAN ACCOUNTS

You can invest in any Davis Series Fund using any of these types of retirement
plan accounts:

o Deductible IRAs
o Non-deductible IRAs
o Roth IRAs
o Educational IRAs
o Simple IRAs
o Profit-Sharing Plans
o Money-Purchase Plans
o Simplified Employee Pension Plans
o 403(b) Plans

State Street Bank and Trust acts as custodian (service provider) for the
retirement plans and charges the participant $10 to open each account and a
maintenance fee of $10 each year (per Social Security number). These fees are
automatically deducted from each account, unless you elect to pay the fee
directly. To open a retirement plan account, you must fill out a special
application form. You can request this form by calling 1-800-279-0279.

77
<PAGE>

HOW TO BUY, SELL AND EXCHANGE SHARES

Once you have opened an account with Davis, you can add to--or subtract
from--your initial purchase. This section provides an overview of the types of
transactions you can perform as a shareholder of a Davis Series Fund. This
includes how to initiate these transactions and the charges that you may incur
(if any) when buying, selling and exchanging shares.

[SIDEBAR:]
An exchange is when you sell shares in one Davis Fund to buy shares in another
Davis Fund in response to changes in your goals or in market conditions.

(CHART)
THREE WAYS TO BUY, SELL AND EXCHANGE SHARES

1. BY TELEPHONE. Call 1-800-279-0279. You can speak directly with a Davis
representative during our business hours or use our automated telephone system
any time day or night.

2. BY MAIL. Send the request to our service provider, State Street Bank and
Trust.

Regular Mail
State Street Bank and Trust Company
c/o Davis Funds
P.O. Box 8406
Boston, MA 02266-8406

Overnight Mail
State Street Bank and Trust Company
c/o Davis Funds
66 Brooks Drive
Braintree, MA 02184

3. BY DEALER. Contact a dealer, who will then make the transaction through our
distributor, Davis Distributors. Please note that your dealer may charge a
service fee or commission for each transaction.

Generally, the fund does not issue share certificates for purchases. Each time
you add to or withdraw from your account, you will receive a statement showing
the details of the transaction--along with any other transactions you made
during the current year.

78
<PAGE>

WHEN YOUR TRANSACTIONS ARE PROCESSED

The per-share price for purchases or sales made through our distributor, Davis
Distributors, will be processed the same day if the order is received before 4
p.m. Eastern Time. If State Street Bank and Trust requires additional documents
to complete the purchase or sale, the transaction price will be determined at
the close of business after all required documents are received.

For your transaction to be counted on the day you place your order with your
broker-dealer or other financial institution, they must:

o Receive your order before 4 p.m. Eastern Time.
o Promptly transmit the order to State Street Bank and Trust.

BUYING MORE SHARES

You can buy more shares at any time, by mail or through a dealer. The minimum
purchase amount is $25.

When you purchase shares by mail, send a check made payable to the DAVIS FUNDS
for the amount of purchase to our service provider, State Street Bank and
Trust. If you have the purchase form from your most recent statement, include
it with the check. If you do not have a purchase form, include a letter with
your check stating the name of the fund and the class of shares you wish to
buy. If you know your account number, include it on the check.

When you buy shares through a dealer, you may be charged a service fee or
commission for performing the transaction.

[SET OFF - SPECIAL PROGRAMS]
MAKING AUTOMATIC INVESTMENTS

An easy way to increase your investments in any Davis Fund is to sign up for
the AUTOMATIC INVESTMENT PLAN. Under this plan, you arrange for a set amount of
money to be taken from your bank account and invested in shares of a Davis
Fund. The minimum amount you can invest each month is $25. The account minimums
of $1,000 for non-retirement accounts and $250 for retirement accounts will be
waived if you meet the minimum requirement within a year.

Purchases can be processed electronically on any day of the month between the
fourth and 28th days if the institution that services your bank account is a
member of the Automated Clearing House system. After each automatic investment,
you will receive a transaction confirmation, and the debit should show up on
your next bank statement.

79
<PAGE>

To sign up for the Automatic Investment Plan, fill out the appropriate section
of the Application Form. You can stop automatic investments at any time by
calling the Davis Funds at 1-800-279-0279.

You can also use our Dividend Diversification Program to buy more shares in any
Davis Fund. See ONCE YOU INVEST IN ONE OF THE DAVIS SERIES FUNDS.

[SIDEBAR]
The Automated Clearing House system is used by most banks for electronic
transfers of money into and out of your bank account - and is regulated by the
Federal Reserve.

SELLING SHARES

You may sell back all or part of your shares to the Davis Series Fund in which
you invest (known as a redemption) at any time, at net asset value minus any
sales charges that may be due. You can sell the shares by telephone, by mail,
or through a dealer.

When you sell shares by mail, indicate the number of shares or dollar amount
you wish to redeem and send the request to our service provider, State Street
Bank and Trust. If more than one person owns the shares you wish to sell, all
owners must sign a request.

When you sell shares through a dealer, you may be charged a service fee or
commission for performing the transaction.

Redemption proceeds are usually paid to you in cash within seven days after
State Street Bank and Trust receives your proper sale request. You will not be
allowed to sell shares that have been paid for by check until the shares have
been in your account for fifteen days.

[BOXED]
CHECK WRITING PRIVILEGE FOR DAVIS GOVERNMENT MONEY MARKET FUND. You can request
the ability to use your Davis Government Money Market Fund account as a
checking account if:

o You hold Class A shares
o You are not investing through a retirement plan or an IRA

Davis Government Money Market Fund investors with check writing privileges can
write checks for $100 or more from their accounts, subject to some rules
prescribed by State Street Bank and Trust.

Writing a check is a way of selling shares and directing the proceeds to a
third party. When a Money Market Fund check is presented to State Street Bank
and Trust for

80
<PAGE>

payment, the bank will redeem a sufficient number of shares in your account to
cover the amount of the check. If you have recently exchanged shares in any
Davis Fund for shares in Davis Government Money Market Fund, the full amount of
your Money Market Fund account may not be available to cover your checks until
the exchange is complete and all related fees are paid. For more information,
see "--Exchanging Shares" below.

To qualify for CHECK WRITING PRIVILEGES, fill out the appropriate section in
your Application Form.

You can find more information about check writing privileges in the Statement
of Additional Information for the Series Funds. The Davis Funds and State
Street Bank and Trust reserve the right to modify or terminate the check
writing service at any time.

WHAT YOU NEED TO KNOW BEFORE YOU SELL YOUR SHARES

o You will always receive cash for sales that total less than $250,000
or 1% of the Fund's net asset value during any 90-day period. Any
sales above the cash limit may be paid in securities and would mean
you would have to pay brokerage fees.

o Ordinarily, you only need a medallion signature guarantee on a share
certificate, stock power, or redemption request for sales of more than
$50,000. However, if you have made any changes to the Application Form
since your account was opened, or if your address of record has
changed in the last 30 days, you will need a medallion signature for
all sales.

o If a certificate was issued for the shares you wish to sell, the
certificate must be signed by the owner(s) and sent to State Street
Bank and Trust along with the redemption request.

o A sale may produce a gain or loss. Gains may be subject to tax.

MEDALLION SIGNATURE GUARANTEE
A written confirmation from an eligible guarantor institution, such as a
securities broker-dealer or a commercial bank, that the signature(s) on the
account is(are) valid. Unfortunately, no other form of signature verification
can be accepted.

STOCK POWER
A letter signed by the owner of the shares that gives State Street Bank and
Trust permission to transfer ownership of the shares to another person or
group.

81
<PAGE>

SPECIAL SALE SITUATIONS

o The Securities and Exchange Commission can suspend payment of sales
under certain emergency circumstances if the New York Stock Exchange
is closed for reasons other than customary closings and holidays.

o Any Davis Series Fund may make sales payments in securities if the
fund's Board of Directors decides that making cash payments would harm
the fund.

[SET OFF - SPECIAL PROGRAM]
MAKING AUTOMATIC WITHDRAWALS

If you hold more than $10,000 in your account, you can sell a set dollar amount
each month or quarter. When you participate in this program, known as the
AUTOMATIC WITHDRAWALS PLAN, shares are sold so that you will receive the
payment around the 25th day of the month. Note that because withdrawals are
sales, they may produce a gain or loss. If you purchase additional shares at
the same time that you make a withdrawal, you may have to pay taxes and a sales
load. Gains may be subject to tax. To sign up for the Automatic Withdrawals
Plan, fill out the appropriate section of the Application Form.

You may stop automatic withdrawals at any time without charge or penalty by
calling the Davis Funds at 1-800-279-0279.

SPECIAL NOTE: WHEN YOU MAKE A SALE OR WITHDRAWAL, A DEFERRED SALES CHARGE MAY
BE IMPOSED IF:

o YOU BUY $1 MILLION OR MORE OF CLASS A SHARES IN ANY FUND EXCEPT DAVIS
GOVERNMENT MONEY MARKET FUND, AND SELL THEM WITHIN A YEAR OF PURCHASE.

o YOU SELL CLASS B SHARES IN ANY FUND EXCEPT DAVIS GOVERNMENT MONEY
MARKET FUND WITHIN SIX YEARS OF PURCHASE.

o YOU SELL CLASS C SHARES IN ANY FUND EXCEPT DAVIS GOVERNMENT MONEY
MARKET FUND WITHIN ONE YEAR OF PURCHASE.

[SET OFF - SPECIAL SHAREHOLDER PROGRAM]
WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT

If you are an investor with a non-retirement account, you can have your sale
proceeds electronically transferred to a commercial bank account. This is known
as an ELECTRONIC WIRE PRIVILEGE. To sign up for this option, simply fill out
the appropriate section of the Application Form. There is a $5 charge by State
Street Bank and Trust for wire service, and receiving banks may also charge for
this service. Payment by Automated Clearing House will usually arrive at your
bank two banking days after your call. Payment by wire is usually credited to
your bank account on the next business day after you call. While State Street
Bank and Trust will also accept electronic wire sales by telephone, fax or

82
<PAGE>

dealer, you still need to fill out and submit the information under the
Electronic Wire Privilege section of the Application Form.

IF YOU DECIDE TO BUY BACK SHARES YOU SOLD

If you decide to buy back some or all of the shares you sold in any Davis
Series Fund within 30 days of sale and notify us in writing, you can take
advantage of the SUBSEQUENT REPURCHASE PRIVILEGE. With this privilege, which
you can use only once, you will not be charged a sales charge, and any deferred
sales charge you paid on the original sale will be returned to your account.
You must send a letter to our service provider, State Street Bank and Trust,
along with a check for the repurchased shares.

IF YOUR ACCOUNT FALLS BELOW $250

If your account balance in any Davis Series Fund falls below $250, the fund may
sell your remaining shares at net asset value. We will first notify you by
mail, giving you at least 60 days notice that an INVOLUNTARY REDEMPTION may
take place. If you can increase your account balance to above $250 during the
notice period, the involuntary redemption will be canceled.

EXCHANGING SHARES

You can transfer shares of any Davis Fund to shares in the same class of any
other Davis Fund without having to pay a sales charge. This is known as an
exchange. You can exchange shares by telephone, by mail or through a dealer.
The initial exchange must be for at least $1,000 (unless you are participating
in the Automatic Exchange Program). Exchanges are normally performed on the
same day of the request if received by 4 p.m. Eastern Time.
However, if your exchange involves a large sale, the transfer may take one to
seven days.

When you exchange shares in a Davis Fund for shares in Davis Government Money
Market Fund, State Street Bank and Trust may segregate a portion of your Money
Market Fund account to cover any sales charges that you may owe for the
original shares. Any part of your Money Market Fund account that is segregated
will not be available to cover any checks that you write on that account until
all fees are paid.

When you exchange shares by mail, you must send our service provider, State
Street Bank and Trust, a written request for the exchange. If you hold share
certificates, the certificates must by signed by the owner(s) and sent to State
Street Bank and Trust along with the exchange request. No medallion signature
guarantee is required unless shares are also being sold for cash and would
otherwise require a medallion signature guarantee.

When you exchange shares through a dealer, you may be charged a service fee or
commission for performing the transaction.

83
<PAGE>

Before you decide to make an exchange, you must obtain the current prospectus
of the desired fund. For federal income tax purposes, exchanges between funds
are treated as a sale and a purchase. Therefore, there will usually be a
recognizable capital gain or loss due to an exchange.

There are limits to the number of exchanges you can make each year. Currently,
four exchanges are allowed during a 12-month period. Davis Distributors must
approve any exchanges above the limit in writing.

YOU CAN MAKE EXCHANGES AMONG ANY OF THE DAVIS FUNDS WITHOUT HAVING TO PAY ANY
SALES CHARGE.

EQUITY FUNDS
Davis New York Venture Fund
Davis Growth Opportunity Fund
Davis Financial Fund
Davis International Total Return Fund
Davis International Growth Fund

GROWTH & INCOME FUNDS
Davis Growth & Income Fund
Davis Real Estate Fund
Davis Convertible Securities Fund

BOND FUNDS
Davis Intermediate Investment Grade Bond Fund
Davis Tax-Free High Income Fund
Davis Government Bond Fund

GOVERNMENT MONEY MARKET FUND
Davis Government Money Market Fund

[SET OFF - SPECIAL SHAREHOLDER PROGRAM]
MAKING AUTOMATIC EXCHANGES

You can elect to make automatic monthly exchanges if all accounts involved are
registered under the same name and have a minimum initial value of $250. You
must exchange at least $25 to participate in this program, known as the
AUTOMATIC EXCHANGE PROGRAM. To sign up for this program, fill out the
appropriate section of the Application Form.

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<PAGE>

TRANSACTIONS BY TELEPHONE

A benefit of investing through Davis Funds is that you can use our telephone
system to sell or exchange shares. If you do not wish to have this option
activated for your account, mark in the box in the appropriate section of the
Application Form.

When you call 1-800-279-0279, you can perform a transaction with Davis Funds in
two ways:

o Speak directly with a representative during business hours (7 a.m. to
4 p.m. Mountain Time).

o If you have a TouchTone(TM) telephone, you can use the automated
telephone system, known as DAVIS DIRECT ACCESS, 24 hours a day, seven
days a week.

[SET OFF]
YOU CAN USE DAVIS DIRECT ACCESS TO:

o GET THE PRICE, TOTAL RETURN, AND FUND DESCRIPTION FOR ANY DAVIS FUND.

o CHECK YOUR ACCOUNT BALANCE AND OTHER ACCOUNT INFORMATION.

o BUY, SELL AND EXCHANGE SHARES.

o GET THE MAILING ADDRESS AND WIRE INSTRUCTIONS FOR ANY DAVIS FUND.

o REQUEST LITERATURE ABOUT ANY DAVIS FUND.

If you wish to sell shares by phone and receive a check in the mail:

o The maximum amount that can be issued is $25,000.

o The check can only be issued to the registered account owner.

o The check must be sent to the address on file with Davis.

o Your current address must be on file for 30 days.

When you sell or exchange shares over the telephone, you agree that the Davis
Funds are not liable for following telephone instructions believed to be
genuine (that is, directed by the account holder). We use certain procedures to
confirm that your instructions are genuine, including a request for personal
identification (your account or Social Security number) and a tape recording of
the conversation. If these procedures are not used, we may be liable for
unauthorized instructions.

Be aware that during unusual market conditions, Davis Funds may not be able to
accept all requests by phone.

85
<PAGE>

[INSIDE BACK COVER]

THE DAVIS FUNDS:
OVER 25 YEARS OF RELIABLE INVESTING

Davis Selected Advisers, investment adviser of the Davis Funds, has a history
of investing for the long-term. Since our founding in 1969, we have been
dedicated to delivering superior investment performance and service to our
clients.

WE ARE LONG-TERM INVESTORS. We analyze high-quality growth companies that have
been overlooked, buy their stock at value prices, and hold the shares for the
long-term. This strategy was first developed by legendary Wall Street investor
Shelby Cullom Davis, a leading financial adviser to governors and presidents.

Our investment approach has been refined over the last 25 years by his son,
Shelby M.C. Davis, who is now Chief Investment Officer of Davis Selected
Advisers. The Davis strategy is still followed today by the third generation of
family members: Christopher C. Davis and Andrew A. Davis serve as Portfolio
Manager or Co-Portfolio Manager for many Davis Funds.

WE ARE FELLOW SHAREHOLDERS. The Davis family, directors and employees not only
manage the company's mutual funds but also invest in them. Together, we have
invested over $1 billion of our own money side-by-side with our shareholders.

Please take the time to read this prospectus carefully and, if you decide to
invest with us, keep it as a reference guide. If you need more information
about the Davis Funds, please call us or visit our Web site.

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<PAGE>
ADDRESS AND PHONE GUIDE

OUR TELEPHONE NUMBER OUR INTERNET ADDRESS
1-800-279-0279 http://www.davisfunds.com

OUR MAILING ADDRESS
Davis Funds
124 East Marcy Street
Santa Fe, New Mexico 87501

OUR SERVICE PROVIDER'S REGULAR OUR SERVICE PROVIDER'S OVERNIGHT
MAILING ADDRESS MAILING ADDRESS
State Street Bank and Trust Company State Street Bank and Trust Company
c/o Davis Funds c/o Davis Funds
P.O. Box 8406 66 Brooks Drive
Boston, MA 02266-8406 Braintree, MA 02184

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<PAGE>

[BACK COVER]

OTHER FUND DOCUMENTS

For more information about any Davis Fund, request a free copy of the Statement
of Additional Information or the Annual and Semi-Annual Reports.

A STATEMENT OF ADDITIONAL INFORMATION provides more detailed information about
the fund and its management and operations. An ANNUAL REPORT discusses the
market conditions and investment strategies that significantly affected fund
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months. The Statement of
Additional Information and Annual Report for the six Davis Series Funds 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 BY TELEPHONE. Call Davis Funds toll-free at 1-800-279-0279,
Monday-Friday, 7 a.m. to 4 p.m. Mountain Time.

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

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

o BY MAIL. Specify the document you are requesting when writing to us.

DAVIS FUNDS
124 EAST MARCY STREET
SANTA FE, NEW MEXICO 87501
1-800-279-0279

Investment Company Act File No. 811-2679

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<PAGE>

DAVIS SERIES

[COVER PAGE]

Davis Growth Opportunity Fund
Davis Financial Fund
Davis Real Estate Fund
Davis Convertible Securities Fund
Davis Government Bond Fund
Davis Government Money Market Fund
(part of Davis Series, Inc.)

Prospectus

Class Y shares

May 1, 1998, as amended December xx, 1998

Davis logo

Over 25 Years of Reliable Investing

<PAGE>

[INSIDE FRONT COVER]

RISK SPECTRUM

[INSERT GRAPHIC]

For more complete information about any of the other Davis Funds, including
charges and expenses, ask for a prospectus. Read it carefully before investing
or sending money.

An investment in any of the Davis Series Funds is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

2
<PAGE>

TABLE OF CONTENTS

ABOUT THE FUNDS

OVERVIEW OF EACH DAVIS SERIES FUND

Davis Growth Opportunity Fund
Davis Financial Fund
Davis Real Estate Fund
Davis Convertible Securities Fund
Davis Government Bond Fund
Davis Government Money Market Fund

Investment Objectives and Strategy
Principal Risks
Fund Performance
Fees and Expenses
Financial Highlights

WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT

ONCE YOU INVEST IN ONE OF THE DAVIS SERIES FUNDS

HOW TO BUY, SELL AND EXCHANGE SHARES

THE DAVIS FUNDS: OVER 25 YEARS OF RELIABLE INVESTING

OTHER FUND DOCUMENTS

3
<PAGE>

ABOUT THE FUNDS

Davis Series, Inc. is an open-end, diversified, management investment company.
The six funds that Davis Series offers in this prospectus accommodate a range
of investment objectives.

TYPE OF FUND

- ------------------------------------------------------------------------------
NAME OF FUND PRIMARY GOAL
- ------------------------------------------------------------------------------
Davis Growth Opportunity Fund Growth
- ------------------------------------------------------------------------------
Davis Financial Fund Growth
- ------------------------------------------------------------------------------
Davis Real Estate Fund Growth and income
- ------------------------------------------------------------------------------
Davis Convertible Securities Fund Growth and income
- ------------------------------------------------------------------------------
Davis Government Bond Fund Current income
- ------------------------------------------------------------------------------
Davis Government Money Market Fund Current income with liquidity
- ------------------------------------------------------------------------------

4
<PAGE>

SNAPSHOT OF INVESTMENT OBJECTIVES

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
GROWTH
OPPORTUNITY FINANCIAL REAL ESTATE CONVERTIBLE GOVERNMENT MONEY MARKET
OBJECTIVE FUND FUND FUND SECURITIES FUND BOND FUND FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital growth * * * * X X
- ------------------------------------------------------------------------------------------------------------
Current income, X X * * * *
regular income, or
liquidity
- ------------------------------------------------------------------------------------------------------------
Long-term investment * * * * * X
- ------------------------------------------------------------------------------------------------------------
Investments X * * X X X
concentrated in one
industry
- ------------------------------------------------------------------------------------------------------------
Diversifi-cation away X X * * * *
from traditional
equity securities
- ------------------------------------------------------------------------------------------------------------
</TABLE>

5
<PAGE>

OVERVIEW OF DAVIS GROWTH OPPORTUNITY FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Growth Opportunity Fund's investment objective is growth of capital.

WHAT WE BUY. Davis Growth Opportunity Fund invests primarily in common stocks
of "growth companies." Common stock represents ownership of a company.

PRINCIPAL RISKS

COMMON STOCKS GENERALLY. Factors that influence the value of a share of common
stock are primarily general market and economic conditions, and the financial
condition and performance of the issuer.

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 issuer.

6
<PAGE>

FUND PERFORMANCE

Davis Growth Opportunity Fund began selling shares to the public on September
18, 1997. The following charts and tables will help you understand the fund's
financial condition - including the returns that investors have earned and the
cost of an investment. These historical results do not necessarily indicate the
performance that investors can expect in the future. The value of the fund's
shares may go up or down.

TOTAL RETURN

Davis Growth Opportunity Fund's investment performance will vary from year to
year. This chart shows the results that we achieved in the fund's Class Y
shares since inception.

7
<PAGE>

DAVIS GROWTH OPPORTUNITY FUND
CLASS Y SHARES
TOTAL RETURN

1997 (10.98%)*

*This number reflects total return from September 18, 1997, (commencement of
operations) through December 31, 1997, and has not been annualized.

Davis Growth Opportunity Fund's year-to-date return as of June 30, 1998 was
(6.93%). During the period shown in the chart, the highest quarterly return was
2.72% (for the quarter ending September 30, 1997, and the lowest quarterly
return was (13.34%) (for the quarter ending December 31, 1997).

The return for the other classes of Davis Growth Opportunity Fund shares will
differ from the Class Y returns shown in the chart, depending on the expenses
of that class.

AVERAGE ANNUAL TOTAL RETURN

The tables below show Davis Growth Opportunity Fund's average annual total
returns for the period from September 18, 1997 to December 31, 1997. The tables
also compare these returns to those earned during the same periods for the
Standard & Poor's 500 Composite Index, an unmanaged benchmark of the total
return performance of large capitalization stocks. Davis Growth Opportunity
Fund is not completely comparable to the Standard & Poor's 500 Composite Index
because we primarily buy stock in small and medium capitalization companies,
although the fund may also invest in large capitalization common stocks.

8
<PAGE>

DAVIS GROWTH OPPORTUNITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(FROM SEPTEMBER 18, 1997 TO DECEMBER 31, 1997)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CLASS Y S&P 500
(SINCE INDEX**
9/18/97)
- ------------------------------------------------------------------------------
<S> <C> <C>
September 18, 1997 to (10.98%)* 3.30%*
December 31, 1997
- ------------------------------------------------------------------------------
</TABLE>

* Non-Annualized

** "Standard & Poor's 500," "S&P 500(R)," "S&P(R)," and "500" are registered
trademarks of The McGraw-Hill Companies, Inc.

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee some mutual funds charge to buy shares of a
mutual fund.

DEFERRED SALES CHARGE. A fee some mutual funds charge to sell shares of a
mutual fund.

EXCHANGE FEE. A fee some mutual funds charge to sell shares in one fund and to
buy shares in another fund.

FEES YOU MAY PAY AS A DAVIS GROWTH OPPORTUNITY FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS Y
- -------------------------------------------------------------------------------
<S> <C>
Maximum sales charge you pay when you buy shares None
- -------------------------------------------------------------------------------
Maximum deferred sales charge you pay when you sell shares None
- -------------------------------------------------------------------------------
Maximum sales charge you pay on reinvested dividends None
- -------------------------------------------------------------------------------
Exchange Fee None
- -------------------------------------------------------------------------------
</TABLE>

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

9
<PAGE>

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Growth Opportunity
Fund's net asset value.

DISTRIBUTION FEES. Fees some mutual funds pay to sell and distribute shares and
to provide services to shareholders (also known as a 12b-1 fee).

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS GROWTH OPPORTUNITY FUND'S ASSETS)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
CLASS Y
- ----------------------------------------------------------------------------
<S> <C>
Management Fees 0.75%
- ----------------------------------------------------------------------------
Distribution (12b-1) Fees None
- ----------------------------------------------------------------------------
Other Expenses 0.20%
- ----------------------------------------------------------------------------
Total Annual Operating Expenses* 0.95%
- ----------------------------------------------------------------------------
</TABLE>

* Annualized

IF I INVEST IN DAVIS GROWTH OPPORTUNITY FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis Growth
Opportunity Fund. It is designed to help you compare investing costs with other
mutual funds.

10
<PAGE>

This example assumes that you invest $10,000 in Davis Growth Opportunity Fund
for the time periods indicated and then sell all of your shares at the end of
those periods. It also assumes that your investment has a 5% return each year
and that the fund's operating expenses remain the same. Although your actual
costs may be higher or lower, your costs-based on these assumptions-would be:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS Y
- ------------------------------------------------------------------------
<S> <C>
1 Year $10
- ------------------------------------------------------------------------
3 Years $30
- ------------------------------------------------------------------------
5 Years $53
- ------------------------------------------------------------------------
10 Years $117
- ------------------------------------------------------------------------
</TABLE>

FINANCIAL HIGHLIGHTS

The following table is designed to show you the financial performance of Davis
Growth Opportunity Fund since inception. 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. It assumes that all dividends and capital gains have been reinvested.

This information is unaudited. Davis Growth Opportunity Fund's unaudited
financial statements are included in the semi-annual report, which is available
by request.

The following financial information represents selected data for each share of
Class Y capital stock outstanding throughout the period.

11
<PAGE>

CLASS Y

<TABLE>
<CAPTION>
SEPTEMBER 18, 1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED THROUGH
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
----------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period.................. $ 22.52 $ 27.19
--------- ---------
Income (Loss) From Investment Operations
Net Investment Loss................................ - -
Net Gains or Losses on Securities
(both realized and unrealized)................. 1.56 (2.99)
--------- ---------
Total From Investment
Operations............................... 1.56 (2.99)
--------- ---------
Less Distributions
Distributions (from capital gains)................. - (1.68)
--------- ---------
Total Distributions.......................... - (1.68)
--------- ---------
Net Asset Value, End of Period........................ $ 24.08 $ 22.52
========= =========
Total Return1 ........................................ 6.93% (10.98)%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)........... $164 $94

Ratio of Expenses to Average Net Assets........... 0.95%*2 1.01%*

Ratio of Net Loss to Average Net Assets........... 0.07%* (0.33)%*

Portfolio Turnover Rate(3)......................... 0.61% 19.33%

Average Commission Rate Per Share(4)............... $0.0597 $0.0600
</TABLE>

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 0.94% for the six months ended June
30, 1998.

4 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

12
<PAGE>

OVERVIEW OF DAVIS FINANCIAL FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Financial Fund's investment objective is growth of capital.

Davis Financial Fund's banking, financial services and other investments may
include securities of foreign issuers or securities that are principally traded
in foreign markets.

13
<PAGE>

PRINCIPAL RISKS

COMMON STOCKS GENERALLY. Factors that influence the value of a share of common
stock are primarily general market and economic conditions, and the financial
condition and performance of the issuer.

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 issuer.

o REGULATORY ACTIONS. Our issuers 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.

FOREIGN SECURITIES. Foreign securities are often denominated in foreign
currencies, which means their value will be affected by changes in exchange
rates. In many foreign jurisdictions, there is less information publicly
available about - and less government regulation of - securities, securities
markets and issuers. Davis Financial Fund may attempt to reduce exposure to
market and currency fluctuations by trading in currency futures contracts or
options on futures contracts for hedging purposes. When the fund invests in
foreign securities, our operating expenses are likely to be higher than if we
invested exclusively in U.S. securities.

14
<PAGE>

FUND PERFORMANCE

Davis Financial Fund began selling shares to the public on March 10, 1997. The
following charts and tables will help you understand the fund's financial
condition - including the returns that investors have earned and the cost of an
investment. These historical results do not necessarily indicate the
performance that investors can expect in the future. The value of the fund's
shares may go up or down.

TOTAL RETURN

Davis Financial Fund's investment performance will vary from year to year. This
chart shows the results that we achieved in the fund's Class Y shares since
inception.

DAVIS FINANCIAL FUND
TOTAL RETURN SINCE INCEPTION

1997 28.66%*

*This number reflects total return from March 10, 1997, (commencement of
operations) through December 31, 1997, and has not been annualized.

Davis Financial Fund's year-to-date return as of June 30, 1998 was 13.25%.
Since inception, the highest quarterly return was 17.22% (for the quarter
ending June 30, 1997), and the lowest quarterly return was (7.38%) (for the
quarter ending March 31, 1997).

AVERAGE ANNUAL TOTAL RETURN

The tables below show Davis Financial Fund's average annual total returns for
the period from March 10, 1997 to December 31, 1997. The tables also compare
these returns to those earned during the same period for the Standard & Poor's
500 Composite Index, an unmanaged benchmark of the total return performance of
large capitalization stocks. Davis Financial Fund may not be comparable to the
Standard & Poor's 500 Composite Index because the Index reflects a large number
of industry sectors while the Fund concentrates in the banking and financial
sectors.

15
<PAGE>

DAVIS FINANCIAL FUND
AVERAGE ANNUAL TOTAL RETURNS
(FROM MARCH 10, 1997 TO DECEMBER 31, 1997)

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
CLASS Y
(SINCE S&P 500
3/10/97) INDEX**
- ---------------------------------------------------------------------
<S> <C> <C>
March 10, 1997 to December 28.66%* 21.37%*
31, 1997
- ---------------------------------------------------------------------
</TABLE>

* Non-Annualized
** "Standard & Poor's 500," "S&P 500(R)," "S&P(R)," and "500" are registered
trademarks of The McGraw-Hill Companies, Inc.

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee some mutual funds charge to buy shares of a
mutual fund.

DEFERRED SALES CHARGE. A fee some mutual funds charge to sell shares of a
mutual fund.

EXCHANGE FEE. A fee some mutual funds charge to sell shares in one fund and to
buy another fund.

FEES YOU MAY PAY AS A DAVIS FINANCIAL FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------
<S> <C>
Maximum sales charge you pay when you buy shares None
- ------------------------------------------------------------------------------
Maximum deferred sales charge you pay when you sell shares None
- ------------------------------------------------------------------------------
Maximum sales charge you pay on reinvested dividends None
- ------------------------------------------------------------------------------
Exchange Fee None
- ------------------------------------------------------------------------------
</TABLE>

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Financial Fund's net
asset value.

16
<PAGE>

DISTRIBUTION FEES. Fees some mutual funds pay to sell and distribute shares and
to provide services to shareholders (also known as a 12b-1 fee).

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS FINANCIAL FUND'S ASSETS)

- -------------------------------------------------------------------------------
CLASS Y
- -------------------------------------------------------------------------------
Management Fees 0.65%
- -------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- -------------------------------------------------------------------------------
Other Expenses 0.10%
- -------------------------------------------------------------------------------
Total Annual Operating Expenses* 0.75%
- -------------------------------------------------------------------------------

* Annualized

IF I INVEST IN DAVIS FINANCIAL FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis Financial
Fund. It is designed to help you compare investing costs with other mutual
funds.

- ------------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS Y
- ------------------------------------------------------------------------
1 Year $8
- ------------------------------------------------------------------------
3 Years $24
- ------------------------------------------------------------------------
5 Years $42
- ------------------------------------------------------------------------
10 Years $93
- ------------------------------------------------------------------------

17
<PAGE>

FINANCIAL HIGHLIGHTS

The following table is designed to show you the financial performance of Davis
Financial Fund since inception. 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. It
assumes that all dividends and capital gains have been reinvested.

This information is unaudited. Davis Financial Fund's unaudited financial
statements are included in the semi-annual report, which is available by
request.

The following financial information represents selected data for each share of
Class Y capital stock outstanding throughout the period.

18
<PAGE>

CLASS Y

<TABLE>
<CAPTION>
MARCH 10, 1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED THROUGH
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
----------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period.................. $ 25.66 $ 20.32
--------- ---------
Income (Loss) From Investment Operations
Net Investment Loss................................ 0.07 0.09
Net Gains or Losses on Securities
(both realized and unrealized)................. 3.33 5.74
--------- ---------
Total From Investment
Operations............................... 3.40 5.83
--------- ---------
Less Distributions
Dividends (from net investment income)............. - (0.19)
Distributions (from capital gains)................. - (0.30)
--------- ---------
Total Distributions.......................... - (0.49)
--------- ---------
Net Asset Value, End of Period........................ $ 29.06 $ 25.66
========= =========
Total Return(1) ....................................... 13.25% 28.66%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)........... $10,169 $3,805

Ratio of Expenses to Average Net Assets........... 0.75%* 0.79%*

Ratio of Net Loss to Average Net Assets........... 0.76%* 1.06%*

Portfolio Turnover Rate(2)......................... 0.51% 6.23%

Average Commission Rate Per Share(3)............... $0.600 $0.0600
</TABLE>

3 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

19
<PAGE>

OVERVIEW OF DAVIS REAL ESTATE FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Real Estate Fund's investment objective is total return through a
combination of growth and income.

Davis Real Estate Fund may invest in securities of foreign issuers or
securities that are principally traded in foreign markets

20
<PAGE>

HOW WE SELECT INVESTMENTS. Davis Real Estate Fund focuses on 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.

PRINCIPAL RISKS

There are two principal risks in Davis Real Estate Fund. First, is the risk of
having a concentrated portfolio. Second, is the risk of owning common stocks.
Investing in high yield, high-risk debt securities or in foreign securities may
involve additional risk.

o declines in property values - because 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

COMMON STOCKS GENERALLY. Factors that influence the value of a share of common
stock are primarily general market and economic conditions, and the financial
condition and performance of the issuer.

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 issuer.

21
<PAGE>

HIGH YIELD, HIGH-RISK DEBT SECURITIES. There are several agencies that evaluate
and rate debt securities. Two of the most prominent are Standard & Poor's and
Moody's Investors Service.

A security is called "investment grade" if a respected agency assigns it a
favorable credit rating. In contrast, a debt security is considered "high
yield, high-risk" if it is rated BB or lower by Standard and Poor's or Ba or
lower by Moody's Investor Services. Securities with these low ratings are also
referred to as "junk bonds." Many institutional investors, such as pension
plans and municipal governments, are only permitted to buy investment grade
debt.

There are four principal risks of owning high yield, high-risk debt securities:

o PRIORITY. Issuers of high yield, high-risk securities are likely to
have a substantial amount of other debt. Most, if not all, of this
other debt will be "senior" to the junk bonds; an issuer must be
current on its senior obligations before it can pay bondholders. In
addition, some of the other debt may be secured by the issuer's
primary operating assets. If the issuer defaults on those obligations,
the lenders may seize their collateral - possibly forcing the issuer
out of business and into bankruptcy.

o DIFFICULT TO RESELL. Many investors simply do not want junk bonds, and
others are prohibited from buying them.

o VOLATILE PRICES. Prices of high yield, high-risk debt securities are
more volatile than prices of higher rated securities. In periods of
economic difficulty or rising interest rates, prices of junk bonds
decline more than prices of investment grade securities.

22
<PAGE>

FOREIGN SECURITIES. Foreign securities are often denominated in foreign
currencies, which means their value will be affected by changes in exchange
rates. In many foreign jurisdictions, there is less information publicly
available about - and less government regulation of - securities, securities
markets and issuers. Davis Real Estate Fund may attempt to reduce exposure to
market and currency fluctuations by trading in currency futures contracts or
options on futures contracts for hedging purposes. When the fund invests in
foreign securities, our operating expenses are likely to be higher than if we
invested exclusively in U.S. securities.

FUND PERFORMANCE

Davis Real Estate Fund began selling Class Y shares to the public on November
8, 1996. The following charts and tables will help you understand the fund's
financial condition - including the returns that investors have earned and the
cost of an investment. These historical results do not necessarily indicate the
performance that investors can expect in the future. The value of the fund's
shares may go up or down.

TOTAL RETURN

Davis Real Estate Fund's investment performance will vary from year to year.
This chart shows the results that we achieved in the fund's Class Y shares from
year to year since inception.

DAVIS REAL ESTATE FUND
TOTAL RETURN SINCE INCEPTION

1996 12.89%*
1997 25.29%

*This number reflects total return from November 8, 1996 (commencement of
operations) through December 31, 1996, and has not been annualized.

Davis Real Estate Fund's year-to-date return as of June 30, 1998 was (5.71%).
Since inception, the highest quarterly return was 13.14% (for the quarter
ending September 30, 1997), and the lowest quarterly return was 1.39% (for the
quarter ending December 31, 1997).

23
<PAGE>

AVERAGE ANNUAL TOTAL RETURN

DAVIS REAL ESTATE FUND
AVERAGE ANNUAL TOTAL RETURNS
(FROM NOVEMBER 8, 1996 TO DECEMBER 31, 1997)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
CLASS Y
(SINCE S&P 500
11/8/96) INDEX*
- -------------------------------------------------------------------
<S> <C> <C>
1 Year 25.29% 33.35%
- -------------------------------------------------------------------
Life of Fund 35.36% 30.50%
- -------------------------------------------------------------------
</TABLE>

* "Standard & Poor's 500," "S&P 500(R)," "S&P(R)," and "500" are registered
trademarks of The McGraw-Hill Companies, Inc.

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee some mutual funds charge to buy shares of a
mutual fund.

DEFERRED SALES CHARGE. A fee some mutual funds charge to sell shares of a
mutual fund.

EXCHANGE FEE. A fee some mutual funds charge to sell shares in one fund and to
buy another fund.

24
<PAGE>

FEES YOU MAY PAY AS A DAVIS REAL ESTATE FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Real Estate Fund's net
asset value.

DISTRIBUTION FEES. Fees some mutual funds pay to sell and distribute shares and
to provide services to shareholders (also known as a 12b-1 fee).

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS REAL ESTATE FUND'S ASSETS)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------
<S> <C>
Management Fees 0.71%
- ------------------------------------------------------------------------
Distribution (12b-1) Fees None
- ------------------------------------------------------------------------
Other Expenses 0.10%
- ------------------------------------------------------------------------
Total Annual Operating Expenses* 0.81%
- ------------------------------------------------------------------------
</TABLE>

* Annualized

25
<PAGE>

IF I INVEST IN DAVIS REAL ESTATE FUND, WHAT WILL IT COST ME?

Here is an example of what your costs might be if you invest in Davis Real
Estate Fund. It is designed to help you compare investing costs with other
mutual funds.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS Y
- ------------------------------------------------------------------------
<S> <C>
1 Year $8
- ------------------------------------------------------------------------
3 Years $26
- ------------------------------------------------------------------------
5 Years $45
- ------------------------------------------------------------------------
10 Years $100
- ------------------------------------------------------------------------
</TABLE>

FINANCIAL HIGHLIGHTS

The following table is designed to show you the financial performance of Davis
Real Estate Fund since inception. 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. It
assumes that all dividends and capital gains have been reinvested.

This information is unaudited. Davis Real Estate Fund's unaudited financial
statements are included in the semi-annual report, which is available by
request.

The following financial information represents selected data for each share of
Class Y capital stock outstanding throughout the period.

[INSERT TABLE]

26
<PAGE>

CLASS Y

<TABLE>
<CAPTION>
NOVEMBER 8,1996
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED YEAR ENDED THROUGH
JUNE 30, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996
----------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................................. $ 25.56 $ 21.37 $ 19.29
--------- --------- ---------
Income From Investment Operations
Net Investment Income............................................. 0.42 0.79 0.13
Net Gains or Losses on Securities (both realized and
Unrealized................................................... (1.87) 4.54 2.35
--------- --------- ---------
Total From Investment Operations........................... (1.45) 5.33 2.48
--------- --------- ---------
Less Distributions
Dividends (from net investment income)............................ (0.22) (0.79) (0.13)
Distributions (from capital gains)................................ - (0.27) (0.25)
Dividends (from paid-in capital).................................. - (0.08) (0.02)
--------- --------- ---------
Total Distributions......................................... (0.22) (1.14) (0.40)
--------- --------- ---------
Net Asset Value, End of Period....................................... $ 23.89 $ 25.56 $ 21.37
========= ========= =========
Total Return1........................................................ (5.71)% 25.29% 12.89%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).......................... $37,145 $27,147 $18,165

Ratio of Expenses to Average Net Assets........................... 0.81%* 1.00% 1.18%*

Ratio of Net Income to Average Net Assets......................... 3.71%* 3.47% 4.22%*

Portfolio Turnover Rate(2)........................................ 6.33% 12.50% 18.60%

Average Commission Rate Per Share(3).............................. $0.0600 $0.0600 $0.0600
</TABLE>

3 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of
related shares purchased and sold.

* Annualized

27
<PAGE>

OVERVIEW OF DAVIS CONVERTIBLE SECURITIES FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Convertible Securities Fund's investment objective is total return
through a combination of capital appreciation and current income.

Davis Convertible Securities Fund may invest in securities of foreign issuers
or securities that are principally traded in foreign markets

28
<PAGE>

PRINCIPAL RISKS

There are two principal risks in Davis Convertible Securities Fund. Convertible
securities have characteristics of both equity and debt, so they present the
risks of common stock ownership as well as the risks that traditional lenders
face. Investing in high yield, high-risk debt securities or in foreign
securities may involve additional risk.

COMMON STOCKS GENERALLY. Factors that influence the value of a share of common
stock are primarily general market and economic conditions, and the financial
condition and performance of the issuer.

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 issuer.

LENDING RISK. The debt component of a convertible security poses three types of
risk:

o INTEREST RATE SENSITIVITY. If a security pays a fixed interest rate,
and market rates increase, the value of the fixed-rate security should
decline.

o CHANGES IN DEBT RATING. If a rating agency gives a convertible
security a low rating, the value of the security will decline because
investors will demand a higher rate of return.

o CREDIT RISK. Like any borrower, the issuer of a convertible debt
security may be unable to make its payments.

HIGH YIELD, HIGH-RISK DEBT SECURITIES. There are several agencies that evaluate
and rate debt securities. Two of the most prominent are Standard & Poor's and
Moody's Investors Service.

29
<PAGE>

such as pension plans and municipal governments, are only permitted to buy
investment grade debt.

There are four principal risks of owning high yield, high-risk debt securities:

o DIFFICULT TO RESELL. Many investors simply do not want junk bonds, and
others are prohibited from buying them.

FOREIGN SECURITIES. Foreign securities are often denominated in foreign
currencies, which means their value will be affected by changes in exchange
rates. In many foreign jurisdictions, there is less information publicly
available about - and less government regulation of - securities, securities
markets and issuers. Davis Convertible Securities Fund may attempt to reduce
exposure to market and currency fluctuations by trading in currency futures
contracts or options on futures contracts for hedging purposes. When the fund
invests in foreign securities, our operating expenses are likely to be higher
than if we invested exclusively in U.S. securities.

FUND PERFORMANCE

Davis Convertible Securities Fund began selling shares to the public on
November 13, 1996. The following charts and tables will help you understand the
fund's financial condition - including the returns that investors have earned
and the cost of an investment. These historical results do not necessarily
indicate the performance that investors can expect in the future. The value of
the fund's shares may go up or down.

TOTAL RETURN

30
<PAGE>

objectives and policies, as well as general market conditions during the
reported time periods.

Davis Convertible Securities Fund's investment performance will vary from year
to year. This chart shows the results that we achieved in the Fund's Class Y
shares from year to year since inception.

DAVIS CONVERTIBLE SECURITIES FUND
TOTAL RETURN SINCE INCEPTION

1996 7.01%*
1997 28.80%

*This number reflects total return from November 13, 1996 (commencement of
operations) through December 31, 1996, and is not annualized.

Davis Convertible Securities Fund's year-to-date return as of June 30, 1998 was
0.39%. Since inception, the highest quarterly return was 14.39% (for the
quarter ending September 30, 1997), and the lowest quarterly return was 0.44%
(for the quarter ending December 31, 1997).

AVERAGE ANNUAL TOTAL RETURN

The tables below show Davis Convertible Securities Fund's average annual total
returns for the following periods: one year and since the fund opened (known as
the inception date). The tables also compare these returns to those earned
during the same period for the Standard & Poor's 500 Composite Index, an
unmanaged benchmark of the total return performance of large capitalization
stocks. Davis Convertible Securities Fund may not be comparable to the Standard
& Poor's 500 Composite Index because the Index reflects large capitalization
industrial companies rather than convertible securities.

DAVIS CONVERTIBLE SECURITIES FUND
AVERAGE ANNUAL TOTAL RETURNS
(FROM NOVEMBER 13, 1996 TO DECEMBER 31, 1997)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------
CLASS Y
(SINCE S&P 500
11/13/96) INDEX*
- ------------------------------------------------------------------
<S> <C> <C>
1 Year 28.80% 33.35%
- ------------------------------------------------------------------
Life of Fund 32.78% 31.07%
- ------------------------------------------------------------------
</TABLE>

31
<PAGE>

* "Standard & Poor's 500," "S&P 500(R)," "S&P(R)," and "500" are registered
trademarks of The McGraw-Hill Companies, Inc.

30-DAY SEC YIELD AND DISTRIBUTION RATE

30-DAY SEC YIELD measures income earned by a mutual fund and DISTRIBUTION RATE
measures the rate that a mutual fund distributes dividends to its shareholders.
If a mutual fund consistently distributes dividends at a faster rate than it
earns income, the net asset value of the fund's shares will decline. All mutual
funds are required to use identical formulas to calculate their 30-day SEC
yield and distribution rate, which gives investors a convenient way to compare
fund results and practices.

Distribution rate is determined by dividing the income dividends per share for
a stated period by the net asset value per share on the last day of that
period.

FEES AND EXPENSES

[DESIGN NOTE: The following explanations must be next to the fee chart.]

FRONT-END SALES CHARGE. A fee some mutual funds charge to buy shares of a
mutual fund.

DEFERRED SALES CHARGE. A fee some mutual funds charge to sell shares of a
mutual fund.

EXCHANGE FEE. A fee some mutual funds charge to sell shares in one fund and to
buy another fund.

32
<PAGE>

FEES YOU MAY PAY AS A DAVIS CONVERTIBLE SECURITIES FUND SHAREHOLDER
(PAID DIRECTLY FROM YOUR INVESTMENT)

[NOTE TO DESIGN TEAM: the following explanations must go next to the "Operating
Expenses" table.]

MANAGEMENT FEES. Costs to manage a mutual fund's portfolio and to administer
its business affairs. This fee is a percentage of Davis Convertible Securities
Fund's net asset value.

DISTRIBUTION FEES. Fees some mutual funds pay to sell and distribute shares and
to provide services to shareholders (also known as a 12b-1 fee).

OTHER EXPENSES. The most significant fees in this category are those to
attorneys, accountants, directors and the custodian and transfer agent (State
Street Bank and Trust Company).

TOTAL ANNUAL OPERATING EXPENSES. The percentage of the fund's average net
assets that are used each year to pay expenses (also known as the expense
ratio).

ANNUAL FUND OPERATING EXPENSES
FOR SIX MONTHS ENDED JUNE 30, 1998
(DEDUCTED FROM DAVIS CONVERTIBLE SECURITIES FUND'S ASSETS)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS Y
- -------------------------------------------------------------------------------
<S> <C>
Management Fees 0.74%
- -------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- -------------------------------------------------------------------------------
Other Expenses 0.13%
- -------------------------------------------------------------------------------
Total Annual Operating Expenses* 0.87%
- -------------------------------------------------------------------------------
</TABLE>

* Annualized

IF I INVEST IN DAVIS CONVERTIBLE SECURITIES FUND, WHAT WILL IT COST ME?

33
<PAGE>

Here is an example of what your costs might be if you invest in Davis
Convertible Securities Fund. It is designed to help you compare investing costs
with other mutual funds.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
IF YOU SELL YOUR SHARES IN... CLASS Y
- ------------------------------------------------------------------------
<S> <C>
1 Year $9
- ------------------------------------------------------------------------
3 Years $28
- ------------------------------------------------------------------------
5 Years $48
- ------------------------------------------------------------------------
10 Years $107
- ------------------------------------------------------------------------
</TABLE>

FINANCIAL HIGHLIGHTS

The following table is designed to show you the financial performance of Davis
Convertible Securities Fund since inception. 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. It assumes that all dividends and capital gains have been reinvested.

This information is unaudited. Davis Convertible Securities Fund's unaudited
financial statements are included in the semi-annual report, which is available
by request.

The following financial information represents selected data for each share of
Class Y capital stock outstanding throughout the period.

[INSERT TABLE]

CLASS Y

<TABLE>
<CAPTION>
NOVEMBER 13, 1996
(COMMENCEMENT
SIX MONTHS YEAR OF OPERATIONS)
ENDED ENDED THROUGH
JUNE 30, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996
----------- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period............................ $ 25.34 $ 21.29 $ 21.39
--------- --------- ---------
Income From Investment Operations
Net Investment Income.......................... 0.40 0.69 0.07
Net Gains on Securities
(both realized and unrealized).............. (0.30) 5.35 1.44
--------- --------- ---------
Total From Investment Operations........ 0.10 6.04 1.51
--------- --------- ---------
Less Distributions

34
<PAGE>

Dividends (from net investment income)......... (0.21) (0.69) (0.06)
Distributions (from capital gains)............. - (1.22) (1.54)

Distributions (from paid-in capital)........... - (0.08) (0.01)
--------- --------- ---------
Total Distributions...................... (0.21) (1.99) (1.61)
--------- --------- ---------
Net Asset Value, End of Period.................... $ 25.23 $ 25.34 $ 21.29
========= ========= =========
Total Return (1).................................. 0.39% 28.80% 7.01%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)....... $37,817 $36,543 $33,006
Ratio of Expenses to Average Net Assets........ 0.87%*(2) 0.95% 0.98%*
Ratio of Net Income to Average Net Assets..... 3.37%* 3.09% 3.11%*

Portfolio Turnover Rate(3)..................... 6.54% 23.68% 43.16%

Average Commission Rate Per Share(4)........... $0.0600 $0.0600 $0.0552
</TABLE>

1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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. Sales charges are not reflected in
total returns. Total returns are not annualized for periods of less than
one full year.

2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 0.86% for the six months ended June
30, 1998.

4 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.

* Annualized

35
<PAGE>

OVERVIEW OF DAVIS GOVERNMENT BOND FUND

INVESTMENT OBJECTIVES AND STRATEGY

Davis Government Bond Fund's investment objective is current income.

SIDEBAR:

Davis Government Bond Fund may use short-term investments for defensive
purposes. In the event our portfolio manager anticipates a decline in the
government bond market, we may reduce our risk by investing in short-term
securities until market conditions improve.

36
<PAGE>

PRINCIPAL RISKS

FUND PERFORMANCE

As of June 30, 1998, Davis Government Bond Fund has not yet issued any Class Y
shares.