DAVIS NEW YORK VENTURE FUND INC, 497, 1998-12-01

DAVIS NEW YORK VENTURE FUND INC
497, 1998-12-01

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<PAGE>
Filed Pursuant to Rule 497(c)
Registration File No.: 2-29858

[COVER PAGE]

DAVIS NEW YORK VENTURE FUND

Prospectus and Application Form

Class A shares
Class B shares
Class C shares

December 1, 1998

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

(Davis logo)

Over 25 Years of Reliable Investing

<PAGE>

TABLE OF CONTENTS

Overview of the Fund
Investment Objective and Strategy
Determining if this Fund is Right for You
Principal Risks
Past Performance
Fees and Expenses of the Fund
Financial Highlights

Who Is Responsible for Your Davis Account

How We Manage the Fund

Once You Invest in the Fund

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

2
<PAGE>

OVERVIEW OF DAVIS NEW YORK VENTURE FUND

INVESTMENT OBJECTIVE AND STRATEGY

Davis New York Venture Fund's investment objective is growth of capital. The
Fund invests primarily in common stock of U.S. companies with market
capitalizations of at least $5 billion.

Our portfolio managers use the Davis investment philosophy to select common
stock of quality overlooked growth companies at value prices and to hold them
for the long-term. We look for companies with sustainable growth rates selling
at modest price-earnings multiples that we hope will expand as other investors
recognize the company's true worth. We believe that if you combine a
sustainable growth rate with a gradually expanding multiple, these rates
compound and can generate returns that could exceed average returns earned by
investing in large capitalization domestic stocks.

You can find more detailed information about the types of securities that the
Fund buys in the section called HOW WE MANAGE THE FUND.

[SIDEBAR:]
Please see the inside back cover page of this prospectus to learn about the
Davis investment philosophy.

DETERMINING IF THIS FUND IS RIGHT FOR YOU

YOU SHOULD CONSIDER INVESTING IN THIS FUND IF:
o You are seeking long-term growth of capital.
o You are more comfortable with established, well-known companies.
o You are investing for the long-term (five years or more).

YOU SHOULD NOT INVEST IN THIS FUND IF
o You are worried about the possibility of sharp price swings and dramatic
market declines.
o You are interested in earning current income.
o You are investing for the short-term (less than five years).

PRINCIPAL RISKS

If you buy shares of Davis New York Venture Fund, you may lose some or all of
the money that you invest. This section describes what we think are the two
most significant factors that can cause the Fund's performance to suffer.

3
<PAGE>

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 a common stock varies with the success and
failure of its issuer. As a result, the success of the companies in which
the Fund invests largely determines the Fund's performance.

An investment in Davis New York Venture Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

You can find more detailed information about the risks of the Fund's particular
investments in the section called HOW WE MANAGE THE FUND.

PAST PERFORMANCE

The bar chart and the table below provide an indication of the risks of
investing in Davis New York Venture Fund by showing changes in the Fund's
performance from year to year over a 10-year period and by showing how the
Fund's average annual returns for one, five and ten years compare to those of
the S&P 500(R), a widely recognized unmanaged index of stock performance. How
the Fund has performed in the past is not necessarily an indication of how the
Fund will perform in the future.

DAVIS NEW YORK VENTURE FUND
TOTAL RETURN OVER THE LAST 10-YEAR PERIOD
(AS OF DECEMBER 31ST OF EACH YEAR)
CLASS A SHARES

1988 21.38%
1989 34.63%
1990 (2.90%)
1991 40.55%
1992 12.18%
1993 16.09%
1994 (1.93%)
1995 40.56%
1996 26.54%
1997 33.68%

Best Quarter: Q2 '97 16.70%
Worst Quarter: Q3 '90 -12.15%
Year-to-Date* Q3 '98 - 5.46%

4
<PAGE>

* Unannualized.

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 shares
offered by this prospectus will differ from the Class A returns shown in the
chart, depending on the expenses of that class.

DAVIS NEW YORK VENTURE FUND
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1997)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS LIFE OF FUND
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES (since 2/17/69) 27.35% 20.86% 20.49% 14.86%
- ----------------------------------------------------------------------------------------------
S&P 500 INDEX 33.35% 20.23% 18.01% 12.24%
- ----------------------------------------------------------------------------------------------
CLASS B SHARES (since 12/1/94) 29.57% NA NA 31.76%
- ----------------------------------------------------------------------------------------------
S&P 500 INDEX 33.35% NA NA 31.32%
- ----------------------------------------------------------------------------------------------
CLASS C SHARES (since 12/20/94) 32.64% NA NA 31.79%
- ----------------------------------------------------------------------------------------------
S&P 500 INDEX 33.35% NA NA 31.24%
- ----------------------------------------------------------------------------------------------
</TABLE>

5
<PAGE>

FEES AND EXPENSES OF THE FUND

FEES YOU MAY PAY AS A DAVIS NEW YORK VENTURE FUND SHAREHOLDER

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases 4.75% None None
(as a percentage of offering price)
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) 0.75% 4.00% 1.00%
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) you pay on
Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
</TABLE>

ANNUAL FUND OPERATING EXPENSES
FOR FISCAL YEAR ENDED JULY 31, 1998

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.54% 0.54% 0.54%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.23% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other Expenses 0.14% 0.25% 0.17%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.91% 1.79% 1.71%
- --------------------------------------------------------------------------------
</TABLE>

6
<PAGE>

EXPENSE EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example 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 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES $563 $751 $955 $1541
- -------------------------------------------------------------------------------
CLASS B SHARES $582 $863 $1170 $1764
- -------------------------------------------------------------------------------
CLASS C SHARES $274 $539 $928 $2019
- -------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
IF YOU STILL HOLD YOUR 1 YEAR 3 YEARS 5 YEARS 10 YEARS
SHARES AFTER...
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES $563 $751 $955 $1541
- -------------------------------------------------------------------------------
CLASS B SHARES $182 $563 $970 $1764
- -------------------------------------------------------------------------------
CLASS C SHARES $174 $539 $928 $2019
- -------------------------------------------------------------------------------
</TABLE>

7
<PAGE>

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of Davis New
York Venture 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.

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

8
<PAGE>

DAVIS NEW YORK VENTURE FUND
CLASS A SHARES

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31
- -----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $22.91 $15.24 $14.56 $12.04 $12.08
- -----------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------------------------------------------------------------
Net Investment Income .20 .18 .20 .14 .16
- -----------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains 2.26 8.37 1.64 2.95 .54
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.46 8.55 1.84 3.09 .70
- -----------------------------------------------------------------------------------------------------------
Dividends and Distributions
- -----------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income (.23) (.18) (.15) (.12) (.16)
- -----------------------------------------------------------------------------------------------------------
Distributions from Realized Gains (.83) (.70) (1.01) (.45) (.58)
- -----------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (1.06) (.88) (1.16) (.57) (.74)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $24.31 $22.91 $15.24 $14.56 $12.04
- -----------------------------------------------------------------------------------------------------------
Total Return(1) 11.16% 57.83% 13.04% 27.21% 5.99%
- -----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000,000 omitted) $6,458 $4,055 $2,151 $1,595 $1,077
- -----------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets .91% .89% .87% .90% .87%
- -----------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average .80% .98% 1.30% 1.11% 1.19%
Net Assets
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2) 11% 24% 19% 15% 13%
- -----------------------------------------------------------------------------------------------------------
</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.

(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.

9
<PAGE>

DAVIS NEW YORK VENTURE FUND
CLASS B SHARES

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DECEMBER 1,
1994
(INCEPTION
OF CLASS
YEAR ENDED JULY 31 THROUGH
7/31/95)
- ----------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $22.64 $15.08 $14.43 $10.88
- ----------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) .01 .01 .04 (.01)
- ----------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains 2.23 8.29 1.62 3.56
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.24 8.30 1.66 3.55
- ----------------------------------------------------------------------------------------------------------
Dividends and Distributions
- ----------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income (.05) (.04) -- --
- ----------------------------------------------------------------------------------------------------------
Distributions from Realized Gains (.83) (.70) (1.01) --
- ----------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (.88) (.74) (1.01) --
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $24.00 $22.64 $15.08 $14.43
- ----------------------------------------------------------------------------------------------------------
Total Return (1) 10.22% 56.47% 11.81% 32.63%
- ----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000,000 omitted) $3,123 $1,196 $289 $40
- -----------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.79% 1.79%(2) 1.73% 1.78%*
- ----------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average (.08)% .07% .44% .23%*
Net Assets
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(3) 11% 24% 19% 13%
- ----------------------------------------------------------------------------------------------------------
</TABLE>

(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.78% for 1997. Prior to 1996, such
reductions were reflected in the expense 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.

* Annualized.

10
<PAGE>

DAVIS NEW YORK VENTURE FUND
CLASS C SHARES

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DECEMBER 20,
1994
(INCEPTION
OF CLASS)
THROUGH
YEAR ENDED JULY 31 7/31/95)
- ----------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $22.72 $15.12 $14.47 $11.16
- ----------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) .02 .02 .04 (.01)
- ----------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains 2.24 8.32 1.62 3.32
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.26 8.34 1.66 3.31
- ----------------------------------------------------------------------------------------------------------
Dividends and Distributions
- ----------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income (.06) (.04) -- --
- ----------------------------------------------------------------------------------------------------------
Distributions from Realized Gains (.83) (.70) (1.01) --
- ----------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (.89) (.74) (1.01) --
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $24.09 $22.72 $15.12 $14.47
- ----------------------------------------------------------------------------------------------------------
Total Return (1) 10.27% 56.59% 11.78% 29.66%
- ----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000,000 omitted) $1,391 $573 $117 $12
- ----------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.71% 1.73% 1.73% 1.78%*
- ----------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average 0.00% .13% .44% .23%*
Net Assets
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2) 11% 24% 19% 15%
- ----------------------------------------------------------------------------------------------------------
</TABLE>

* Annualized.

11
<PAGE>

WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT

A number of entities provide services to Davis New York Venture Fund. This
section shows how the Fund is organized, the entities that perform these
services, and how these entities are compensated. Additional information on the
organization of the Fund is provided in the Fund's 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 Davis New York Venture Fund's portfolio.
o Manages Davis New York Venture Fund's business affairs.
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 Annual Adviser Fee for fiscal year July 31, 1998 (based on average net
assets): 0.54%

INVESTMENT SUB-ADVISER

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 Davis New York
Venture Fund and other institutional clients.
o Wholly owned subsidiary of Davis Selected Advisers.
o Annual Fee: Davis Selected Advisers pays the fee, not the Fund.

12
<PAGE>

CUSTODIAN AND TRANSFER AGENT

STATE STREET BANK AND TRUST COMPANY
Also referred to as "State Street Bank and Trust"
PO Box 8406
Boston, MA 02266-8406
o Prices the Fund daily.
o Holds share certificates and other assets of the Fund.
o Maintains records of shareholders.
o Issues and cancels share certificates.
o Supervises the payment of dividends.

BOARD OF DIRECTORS

The Fund's Board of Directors has general supervisory responsibilities of the
Fund and supervises the investment adviser's duties.

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 and promotional activities for Davis New York
Venture Fund.
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.

13
<PAGE>

FOUNDER AND CHIEF INVESTMENT OFFICER OF THE ADVISER

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.

PORTFOLIO MANAGERS

CHRISTOPHER C. DAVIS
Responsibilities:
o Vice President of Davis New York Venture Fund.
o Co-Portfolio Manager of the Fund with Kenneth Charles Feinberg since May
1998.
o Also manages or co-manages other equity funds advised by Davis Selected
Advisers.

Other Experience:
o Portfolio Manager of Davis New York Venture Fund from February 1997 to
April 1998.
o Co-Portfolio Manager of Davis New York Venture Fund with Shelby M.C. Davis
from October 1995 to February 1997.
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 Davis New York Venture Fund since May 1998.
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.

14
<PAGE>

[BOXED]

OUR CODE OF ETHICS

We allow the officers and employees of Davis Funds and their 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.

15
<PAGE>

HOW WE MANAGE THE FUND

WHAT WE INVEST IN AND WHY

Davis New York Venture Fund's investment objective is growth of capital. In
keeping with the Davis investment philosophy, our portfolio managers select
common stock that offer the potential for capital growth over the long-term.
The Fund invests primarily in common stock of U.S. companies with market
capitalizations of at least $5 billion, but we may also invest in foreign
companies and U.S. companies with smaller capitalizations.

COMMON STOCK

WHAT THEY ARE. Common stock represents ownership of a company.

HOW WE PICK THEM. 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. Over the years, Davis Selected Advisers
has developed a list of ten characteristics that we believe foster sustainable
long-term growth, minimize risk and enhance the potential for superior
long-term returns. While very few companies have all ten, we search for
companies that demonstrate several of the characteristics that are listed in
the following chart.

16
<PAGE>

[SET OFF OR BOXED]

WHAT WE LOOK FOR IN A COMPANY

1. FIRST-CLASS MANAGEMENT. We believe that great companies are created by
great managers. In visiting companies, we look for managers with a record
of doing what they say they are going to do.
2. MANAGEMENT OWNERSHIP. Just as we invest heavily in our own funds, we look
for companies where individual managers own a significant stake.
3. STRONG RETURNS ON CAPITAL. We want companies that invest their capital
wisely and reap superior returns on those investments.
4. LEAN EXPENSE STRUCTURE. Companies that can keep costs low are able to
compete better, especially in difficult times. A low cost structure
sharply reduces the risk of owning a company's shares.
5. DOMINANT OR GROWING MARKET SHARE IN A GROWING MARKET. A company that is
increasing its share of a growing market has the best of both worlds.
6. PROVEN RECORD AS AN ACQUIRER. When an industry or market downturn occurs,
it is a good idea to own companies that can take advantage of attractive
prices to expand operations through inexpensive acquisitions.
7. STRONG BALANCE SHEET. Strong finances give a company staying power to
weather difficult economic cycles.
8. COMPETITIVE PRODUCTS OR SERVICES. We invest in companies with products
that are not vulnerable to obsolescence.
9. SUCCESSFUL INTERNATIONAL OPERATIONS. A proven ability to expand
internationally reduces the risk of being tied too closely to the U.S.
economic cycle.
10. INNOVATION. The savvy use of technology in any business, from a food
company to an investment bank, can help reduce costs and increase sales.

WHY WE BUY THEM. Davis New York Venture Fund buys common stock to take an
ownership position in companies with growth potential, and then holds that
position long enough to realize the benefits of growth.

The Fund may also invest in foreign securities, primarily as a way of providing
additional opportunities to invest in quality overlooked growth stock.
Investment in foreign securities can also offer the Fund the potential for
economic diversification.

RISKS. 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.

17
<PAGE>

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. Investments in foreign securities involve
additional risk. 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 publicly available
information about-and less government regulation of-securities, securities
markets and issuers.

o COMPANY RISK. The price of a common stock varies with the success and
failure of its issuer. As a result, the success of the companies in which
the Fund invests largely determines the Fund's performance. Investing in
small capitalization companies carries greater risk than investing in stock
of larger companies. Small companies often have less predictable earnings
and the market for their stocks may not be as well developed.

SHORT-TERM INVESTMENTS

WHAT THEY ARE. Short-term investments are fixed-income securities (such as U.S.
government securities, repurchase agreements and commercial paper) that will
only be outstanding for one year or less after Davis New York Venture Fund buys
them.

[SIDEBAR]
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."

HOW WE PICK THEM. Most of the Fund's short-term investments are high-grade
money market instruments and repurchase agreements. The Fund may also hold cash
in interest-bearing bank deposits.

WHY WE BUY THEM. The Fund uses short-term investments to earn interest and
maintain flexibility while we evaluate long-term opportunities. We also may use
short-term investments for temporary defensive purposes; in the event our
portfolio managers anticipate a decline in the stock market, we may reduce our
risk by investing in short-term securities until market conditions improve.
Unlike common stocks, these investments will not appreciate in value when the
market advances. In such a circumstance, the short-term investments will not
contribute to the Fund's capital growth.

18
<PAGE>

RISKS. Short-term investments do not present a lot of risk; issuers are
generally stable, and the time period between the security's purchase and the
payoff date is relatively short, offering little chance for conditions to
deteriorate.

OTHER SECURITIES AND INVESTMENT STRATEGIES

There are other securities which the Fund may invest in, and investment
strategies which the Fund may employ, but they are not principal investment
strategies. These securities and investment strategies are discussed in the
Statement of Additional Information.

ADDITIONAL RISKS FOR THE FUND: 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 utilize systems that may be
affected by Year 2000 transition issues (many computer software systems in use
today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated) and/or by Euro Conversion issues (accurate
pricing of the Company's assets depends upon accurate valuation of securities
denominated in foreign currencies. On January 1, 1999, eleven of the fifteen
member states of the European Union are scheduled to convert to a common
currency, the "euro").

Difficulties with Year 2000 or Euro Conversion issues could have a
negative impact on handling securities trades, payments of interest and
dividends, pricing and account services. Although, at this time, there can be
no assurance that there will be no adverse impact on the Funds, the Service
Providers have advised the Funds that they have been actively working on
necessary changes to their computer systems to prepare for the Year 2000 and
the Euro Conversion and expect that their systems, and those of other parties
they deal with, will be adapted in time for these events. In addition, there
can be no assurance that the companies which the Fund invests in will not
experience difficulties with Year 2000 or Euro Conversion issues which may
negatively effect the market value of those companies.

RISK SPECTRUM

Davis Selected Advisers manages eleven mutual 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. Davis New York
Venture Fund has a risk level we characterize as "medium to high."

[INSERT RISK SPECTRUM GRAPHIC]

19
<PAGE>

[IN BLACK AREA BELOW GRAPHIC]
For more information about any of the other Davis Funds, including charges and
expenses, ask for a prospectus. Read it carefully before investing or sending
money.

20
<PAGE>

HOW WE MANAGE RISK

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. Davis New York Venture Fund has five strategies to minimize
the risk assumed when we invest.

[SET OFF OR BOXED]

FIVE STRATEGIES WE USE TO MINIMIZE RISK

1. WE PURCHASE HIGH-QUALITY GROWTH COMPANIES. Our focus on high-quality
growth companies reduces the likelihood that your investment will be tied
up in a failing company. A high-quality growth company is one that has
achieved a dominant or growing market share, and is led by first class
management.

2. WE USE A CONSERVATIVE VALUATION STRATEGY. Once we find companies that meet
our business criteria, we determine how much to pay for their shares. We
follow a price discipline that tells us how much we can reasonably pay for
a stock. While no system can prevent all losses, this conservative
approach helps us avoid the calamitous losses that occur in bear markets.

3. WE HAVE A LONG-TERM VISION. We get to know the managers of the companies
we invest in and understand their goals. We view temporary setbacks as
buying opportunities: when other managers sell stocks in response to bad
news, we evaluate the issuer's long-term prospects.

4. WE DO NOT USE MARKET TIMING. We do not base our decisions to buy and sell
securities on whether we believe the stock market will rise or fall (known
as market timing). However, we can raise the level of cash in the Fund
when stock prices get too high and it becomes difficult to purchase
quality undervalued growth companies.

5. WE MAY MAKE TEMPORARY DEFENSIVE INVESTMENTS. From time to time, Davis New
York Venture Fund may take temporary defensive positions in response to
adverse market, economic or political conditions.

21
<PAGE>

ONCE YOU INVEST IN THE FUND

This section describes: 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

Once you open an account in Davis New York Venture 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 Fund's investments.

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

Net asset values for all the Davis Funds are 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 values 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 Davis New York
Venture Fund:

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 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.

22
<PAGE>

If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time that their
prices are determined and the time the Fund's shares are priced will generally
not be reflected in the Fund's share price.

The value of securities denominated in foreign currencies and traded in foreign
markets will have their value converted into the U.S. dollar equivalents at the
prevailing market rate as computed by State Street Bank and Trust. Fluctuation
in the value of foreign currencies in relation to the U.S. dollar may affect
the net asset value of the Fund's shares even if there has not been any change
in the foreign currency price of the Fund's investments.

HOW WE PAY EARNINGS

There are two ways you can receive payments from Davis New York Venture Fund:

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

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

Davis New York Venture Fund usually pays dividends once a year. Dividends are
declared in November or December and capital gains, if any, are distributed in
November or December. Unless you choose otherwise, the Fund automatically
reinvests your dividends and capital gains 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 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, Davis New
York Venture Fund is required by law to withhold a portion of any distributions
you may receive--and send it to the U.S. Treasury.

23
<PAGE>

(set off)
HOW TO PUT YOUR DIVIDENDS AND CAPITAL GAINS TO WORK

You can have all dividends and capital gains automatically invested in the same
share class of this or other Davis Funds. 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 Davis New York Venture Fund pays dividends, they are taxable to
shareholders as ordinary income. Dividends include both net investment
income and short-term capital gains.

o If Davis New York Venture Fund pays net capital gains, they generally will
be taxed as a long-term capital-gain distribution.

These payments may be taxed at different rates, depending on the length of time
the 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--whether they are received in cash or
reinvested in shares.

Also, keep in mind that when you sell or exchange shares of the 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 Davis New York Venture Fund.

24
<PAGE>

HOW TO CHOOSE A SHARE CLASS

Before you can buy any shares in Davis New York Venture Fund, you need to
decide which class of shares best suits your needs. The 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. Long-term
shareholders of Class B or C shares may pay more than the maximum front-end
sales charge allowed by the National Association of Securities Dealers.

SPECIAL NOTE: Institutions buying $5 million or more may be eligible to buy
Class Y shares of Davis New York Venture 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.

[Set Off]
DISTRIBUTION FEES. The Fund has adopted plans under rule 12b-1 that allow the
Fund to pay distribution and other fees for the distribution of its shares and
for services provided to shareholders. Class A shares pay 0.25% of average
annual net assets while Class B and C shares pay 1.00% of average annual net
assets. Because these fees are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.

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 below).
The term "offering price" includes the front-end sales charge.
o There is no limit on how much you can invest in this share class.
o The Fund pays a distribution fee--up to 0.25% of the average daily net
assets--each year you hold the shares. This fee is lower than the fee you
pay for the other two classes of shares. Lower expenses translate into
higher annual return on net asset value.

CLASS A SHARES SALES CHARGES

25
<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AMOUNT OF PURCHASE SALES CHARGE SALES CHARGE AMOUNT OF SALES CHARGE
(PERCENTAGE OF (PERCENTAGE OF NET RETAINED BY
OFFERING PRICE) AMOUNT INVESTED) THE DEALER
(PERCENTAGE OF
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 None
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

* You pay no front-end sales charge on purchases of $1 million or more, but if
you sell those shares 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, the dealer will be
paid with distribution fees received from the 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. There are several ways you may combine purchases to qualify for a
lower sales charge.

26
<PAGE>

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 purchase.
o WITH CERTAIN GROUPS. If you buy shares through a group organized for a
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 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. Under a
Statement of Intention, you agree to 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 SHARES FRONT-END SALES CHARGE WAIVERS

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

o Shareholders making purchases with dividends or capital gains that are
automatically reinvested.
o Purchases by directors, officers and employees of Davis New York Venture
Fund, its investment adviser or its affiliates, and their immediate
families.
o Purchases by employees and people affiliated with broker-dealer firms
offering Fund shares.
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.

27
<PAGE>

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.

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 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 Fund pays a distribution fee of 1% of the average daily net assets each
year you hold the shares. Higher expenses translate into lower annual
return on net asset value.

CLASS B SHARES DEFERRED SALES CHARGES

<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>

28
<PAGE>

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 the shares within one year of purchase, you must pay a deferred
sales charge of 1%.
o The Fund pays a distribution fee of 1% of the average daily net assets each
year you hold the shares. Higher expenses translate into lower annual
return on net asset value.

DEFERRED SALES CHARGE

As an investor in the 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. 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 the shares within one year of
purchase.
o As a Class B shareholder, if you sell shares within six years of purchase.
The percentage decreases over the six year period.
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 gain distributions.

DEFERRED SALES CHARGE WAIVERS

We will waive deferred sales charges on sales of Class A, B and C shares 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 sometime after the purchase of shares.
o You sell shares under the Automatic Withdrawals 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.

29
<PAGE>

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.

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, and Davis New York Venture Fund 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
Davis Distributors 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 Bank
and Trust. To ensure that the purchase is credited properly, follow these wire
instructions:

30
<PAGE>

State Street Bank and Trust Company
Boston, MA 02210
Attn: Mutual Fund Services
DAVIS NEW YORK VENTURE FUND
Shareholder Name
Shareholder Account Number
Federal Routing Number 011000028
DDA Number 9904-606-2

Generally, the Fund does not issue share certificates for purchases. You can
receive certificates if you are a Class A shareholder who is not participating
in the Automatic Withdrawals Plan. If you are eligible and wish to receive
certificates, you must make the request at the time of purchase.

RETIREMENT PLAN ACCOUNTS

You can invest in Davis New York Venture 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 Davis Distributors.

31
<PAGE>

HOW TO BUY, SELL AND EXCHANGE SHARES

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

EXCHANGE
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
PO 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.

32
<PAGE>

WHEN YOUR TRANSACTIONS ARE PROCESSED

The per-share price for purchases or sales made through our distributor, Davis
Distributors, will be processed on 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 PROGRAM]
MAKING AUTOMATIC INVESTMENTS

An easy way to increase your investments in this or other Davis Funds 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 Fund
shares. 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

33
<PAGE>

Clearing House system. After each automatic investment, you will receive a
transaction confirmation, and the debit should show up on your next bank
statement.

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 Davis Distributors.

You can also use our Dividend Diversification Program to buy more shares in any
Davis Fund. See ONCE YOU INVEST IN THE FUND.

[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 Davis New York Venture Fund
(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. If any of the
shares redeemed were purchased within the last 15 days, payment to you will be
delayed until your purchase check has cleared.

34
<PAGE>

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.

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 Davis New York Venture Fund may make sales payments in securities if Davis
New York Venture Fund's Board of Directors decides that making cash
payments would harm the Fund.

35
<PAGE>

[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 Davis Distributors.

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 and sell them within a year of
purchase.
o You sell Class B shares within six years of purchase.
o You sell Class C shares 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
dealer, you still need to fill out and submit the information under the
Electronic Wire Privilege section of the Application Form.

36
<PAGE>

IF YOU DECIDE TO BUY BACK SHARES YOU SOLD

If you decide to buy back some or all of the shares you sold in this Fund
within 60 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 falls below $250, we may sell your remaining shares in
Davis New York Venture Fund 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 Davis New York Venture 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 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.

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.

37
<PAGE>

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

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

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

38
<PAGE>

[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.

39
<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 Davis Distributors, 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 buy, sell or exchange shares over the telephone, you agree that Davis
New York Venture Fund is 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, the
Fund 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.

40
<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 for more than 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 either
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.

41
<PAGE>

ADDRESS AND PHONE GUIDE

OUR TELEPHONE NUMBER OUR SERVICE PROVIDER'S REGULAR MAILING
1-800-279-0279 ADDRESS
State Street Bank and Trust Company
c/o Davis Funds
PO Box 8406
Boston, MA 02266-8406

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

OUR INTERNET ADDRESS OUR SERVICE PROVIDER'S OVERNIGHT MAILING
http://www.davisfunds.com ADDRESS
State Street Bank and Trust Company
c/o Davis Funds
66 Brooks Drive
Braintree, MA 02184

42
<PAGE>

[BACK COVER]

OTHER FUND DOCUMENTS

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

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

WHERE YOU CAN GET THESE DOCUMENTS:

o BY TELEPHONE. Call Davis Funds toll-free at 1-800-279-0279, Monday-Friday,
7 a.m. to 4 p.m. Mountain Time. You may also call this number for
shareholder inquiries.

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

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

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

DAVIS NEW YORK VENTURE FUND
124 EAST MARCY STREET
SANTA FE, NM 87501
1-800-279-0279

Investment Company Act File No. 811-1701

43
<PAGE>

[COVER PAGE]

DAVIS NEW YORK VENTURE FUND

Prospectus

Class Y shares

December 1, 1998

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

(Davis logo)

Over 25 Years of Reliable Investing

<PAGE>

TABLE OF CONTENTS

Overview of the Fund
Investment Objective and Strategy
Determining if this Fund is Right for You
Principal Risks
Past Performance
Fees and Expenses of the Fund
Financial Highlights

Who Is Responsible for Your Davis Account

How We Manage the Fund

Once You Invest in the Fund

How to Open an Account

How to Buy, Sell and Exchange Shares

The Davis Funds: Over 25 Years of Reliable Investing

OTHER FUND DOCUMENTS

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. You may also call this number for
shareholder inquiries.

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

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

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

DAVIS NEW YORK VENTURE FUND
124 EAST MARCY STREET
SANTA FE, NM 87501
1-800-279-0279

Investment Company Act File No. 811-1701

<PAGE>

[COVER PAGE]

DAVIS GROWTH & INCOME FUND

Prospectus and Application Form
Class A shares
Class B shares
Class C shares

December 1, 1998

(Davis logo)

Over 25 Years of Reliable Investing

<PAGE>

TABLE OF CONTENTS

Overview of the Fund
Investment Objective and Strategy
Determining if this Fund is Right for You
Principal Risks
Past Performance
Fees and Expenses of the Fund
Financial Highlights

Who Is Responsible for Your Davis Account

How We Manage the Fund

Once You Invest in the Fund

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

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

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

WHERE YOU CAN GET THESE DOCUMENTS:

o BY TELEPHONE. Call Davis Funds toll-free at 1-800-279-0279, Monday-Friday,
7 a.m. to 4 p.m. Mountain Time. You may also call this number for
shareholder inquiries.

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

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

DAVIS GROWTH & INCOME FUND
124 EAST MARCY STREET
SANTA FE, NM 87501
1-800-279-0279

Investment Company Act File No. 811-1701

40
<PAGE>

DAVIS GROWTH & INCOME FUND

Prospectus

Class Y shares

December 1, 1998

Over 25 Years of Reliable Investing

<PAGE>

TABLE OF CONTENTS

Overview of the Fund......................................................
Investment Objective and Strategy
Determining if this Fund is Right for You
Principal Risks
Past Performance
Fees and Expenses of the Fund
Financial Highlights

Who Is Responsible for Your Davis Account.................................

How We Manage the Fund....................................................

Once You Invest in the Fund...............................................

How to Open an Account....................................................

How to Buy, Sell and Exchange Shares......................................

The Davis Funds: Over 25 Years of Reliable Investing......................

Other Fund Documents......................................................

2
<PAGE>

OVERVIEW OF DAVIS GROWTH & INCOME FUND

INVESTMENT OBJECTIVE AND STRATEGY

Our portfolio managers use the Davis investment philosophy to select common
stock of quality overlooked growth companies at value prices and to hold them
for the long-term.

You can find more detailed information about the types of securities that Davis
Growth & Income Fund buys in the section called HOW WE MANAGE THE FUND.

[SIDEBAR: ]
Please see the inside back cover page of this prospectus to learn about the
Davis investment philosophy.

DETERMINING IF THIS FUND RIGHT FOR YOU

YOU SHOULD CONSIDER INVESTING IN THIS FUND IF:

YOU SHOULD NOT INVEST IN THIS FUND IF:

o You are worried about the possibility of sharp price swings and dramatic
market declines.
o You are investing for the short term (less than five years).
o You are primarily interested in current income with minimal risk.

3
<PAGE>

PRINCIPAL RISKS

o INTEREST RATE RISK. The value of fixed income securities which the Fund
purchases usually decline when current interest rates increase.

An investment in Davis Growth & Income Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

You can find more detailed information about the risks of the Fund's particular
investments, as well as the role of credit rating agencies, in the section
called HOW WE MANAGE THE FUND.

PAST PERFORMANCE

Davis Growth & Income Fund Class Y shares began selling shares to the public on
May 4, 1998. The past performance of the Fund will be included in the next
annual update of the Fund's prospectus after the shares have been outstanding a
full calendar year.

4
<PAGE>

FEES AND EXPENSES OF THE FUND

FEES YOU MAY PAY AS A DAVIS GROWTH & INCOME FUND SHAREHOLDER

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CLASS Y
- -----------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None
- -----------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None
- -----------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
- -----------------------------------------------------------------------------
Exchange Fee None
- -----------------------------------------------------------------------------
</TABLE>

ANNUAL FUND OPERATING EXPENSES FOR FISCAL YEAR ENDED JULY 31, 1998*

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CLASS Y
- -----------------------------------------------------------------------------
<S> <C>
Management Fees 0.75%
- -----------------------------------------------------------------------------
Distribution (12b-1) Fees None
- -----------------------------------------------------------------------------
Other Expenses 0.39%
- -----------------------------------------------------------------------------
Total Annual Operating Expenses 1.14%
- -----------------------------------------------------------------------------
</TABLE>

* These operating expenses are annualized based on the expenses incurred in the
fiscal period from May 4, 1998 (inception of class) through July 31, 1998.

EXPENSE EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of you shares at the end of those periods. The
example 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..... 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS Y SHARES $116 $362 $628 $1386
- ------------------------------------------------------------------------------
</TABLE>

5
<PAGE>

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Davis Growth &
Income Fund for the period from May 4, 1998 (when the Fund began selling shares
to the public) through July 31, 1998. 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.

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

<TABLE>
<CAPTION>
DAVIS GROWTH & INCOME FUND CLASS Y SHARES

MAY 4, 1998
(INCEPTION OF
CLASS) THROUGH
JULY 31, 1998
<S> <C>
Net Asset Value, Beginning of Period................................. $ 10.00
--------
Income(Loss) From Investment Operations
Net Investment Income........................................... 0.04
Net Realized and Unrealized Loss................................ (0.22)
--------
Total From Investment Operations.............................. (0.18)

Net Asset Value, End of Period...................................... $ 9.82
========
Total Return (1)..................................................... (1.80)%

Ratios/Supplemental Data

Net Assets, End of Period (000 omitted)......................... $6

Ratio of Expenses to Average Net Assets........................ 1.14%*
Ratio of Net Investment Income to Average
Net Assets.................................................... 2.17%*
Portfolio Turnover Rate(2)...................................... 0%
</TABLE>

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

* Annualized

6
<PAGE>

WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT

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 Davis Growth & Income Fund's portfolio.
o Manages Davis Growth & Income Fund's business affairs.
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 Annual Adviser Fee for the period May 4, 1998 through July 31, 1998 (based
on average net assets): 0.75%.

INVESTMENT SUB-ADVISER

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 Davis Growth &
Income Fund and other institutional clients.
o Wholly owned subsidiary of Davis Selected Advisers.
o Annual Fee: Davis Selected Advisers pays the fee, not the Fund.

7
<PAGE>

CUSTODIAN AND TRANSFER AGENT

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

o Prices the Fund daily.
o Holds share certificates and other assets of the Fund.
o Maintains records of shareholders.
o Issues and cancels share certificates.
o Supervises the payment of dividends.

BOARD OF DIRECTORS

The Fund's Board of Directors has general supervisory responsibilities of the
Fund and supervises the investment adviser's duties.

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 and promotional activities for Davis Growth &
Income Fund.
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.

8
<PAGE>

FOUNDER AND CHIEF INVESTMENT OFFICER OF THE ADVISER

SHELBY M.C. DAVIS
Responsibilities:
o Chief Investment Officer of Davis Selected Advisers
o President of all the Davis Funds.

PORTFOLIO MANAGERS

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

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

OUR CODE OF ETHICS

We allow the officers and employees of Davis Funds and their 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.

9
<PAGE>

HOW WE MANAGE THE FUND

WHAT WE INVEST IN AND WHY

COMMON STOCK

WHAT THEY ARE. Common stock represent ownership of a company.

Most of Davis Growth & Income Fund's common stock is issued by U.S. companies
with large market capitalizations (that is, the market value of all of their
outstanding stock exceeds $5 billion).

10
<PAGE>

RISKS. 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.

WHAT WE LOOK FOR IN A COMPANY

1. FIRST-CLASS MANAGEMENT. We believe that great companies are created by
great managers. In visiting companies, we look for managers with a record
of doing what they say they are going to do.
2. MANAGEMENT OWNERSHIP. Just as we invest heavily in our own funds, we look
for companies where individual managers own a significant stake.
3. STRONG RETURNS ON CAPITAL. We want companies that invest their capital
wisely and reap superior returns on those investments.
4. LEAN EXPENSE STRUCTURE. Companies that can keep costs low are able to
compete better, especially in difficult times. A low cost structure
sharply reduces the risk of owning a company's shares.
5. DOMINANT OR GROWING MARKET SHARE IN A GROWING MARKET. A company that is
increasing its share of a growing market has the best of both worlds.
6. PROVEN RECORD AS AN ACQUIRER. When an industry or market downturn occurs,
it is a good idea to own companies that can take advantage of low prices
to expand operations through inexpensive acquisitions.
7. STRONG BALANCE SHEET. Strong finances give a company staying power to
weather difficult economic cycles.
8. COMPETITIVE PRODUCTS OR SERVICES. We invest in companies with products
that are not vulnerable to obsolescence.
9. SUCCESSFUL INTERNATIONAL OPERATIONS. A proven ability to expand
internationally reduces the risk of being tied too closely to the U.S.
economic cycle.
10. INNOVATION. The savvy use of technology in any business, from a food
company to an investment bank, can help reduce costs and increase sales.

11
<PAGE>

REAL ESTATE SECURITIES

RISKS. Real estate securities are susceptible to the many risks associated with
the direct ownership of real estate, including:

In addition, since many real estate securities are common stock, they present
the risks that we discuss under the heading COMMON STOCK - RISKS. Many real
estate debt securities are assigned ratings by agencies that evaluate the
quality of publicly offered debt. Davis Growth & Income Fund may buy some real
estate

12
<PAGE>

securities that have low ratings. These securities are considered "high yield,
high-risk" debt, and present more risk than so-called "investment grade"
securities. For information about high yield, high-risk debt, please see
"ADDITIONAL INFORMATION ABOUT HIGH YIELD, HIGH-RISK DEBT SECURITIES."
CONVERTIBLE SECURITIES

HOW WE PICK THEM. First, the Fund's portfolio managers identify attractive
issuers using the ten desired characteristics that we discuss under the heading
Common Stock - How We Pick Them. Then we 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.

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 debt security a low
rating, the value of the security will decline because investors will
demand a higher rate of return. Davis Growth & Income Fund may buy some
convertible securities that are rated lower than "investment grade."

o CREDIT RISK. Like any borrower, the issuer of a debt security may be unable
to make its payments. Securities issued by financially troubled companies
are considered

13
<PAGE>

"high yield, high-risk debt," and present more risk than securities with
higher ratings. For information about high yield, high-risk debt, please
see "ADDITIONAL INFORMATION ABOUT HIGH YIELD, HIGH-RISK DEBT SECURITIES."

BONDS AND OTHER DEBT SECURITIES

HOW WE PICK THEM. Davis Growth & Income Fund searches for debt securities that
are issued by government agencies or by corporations offering maximum yield
relative to credit quality.

RISKS. The prices (and market value) of debt securities fluctuate primarily in
response to two factors:

o INTEREST RATE SENSITIVITY. In general, bond prices decline when interest
rates rise, and rise when interest rates fall. If a bond pays a fixed
interest rate, and market rates increase, the value of the bond should
decline. When interest rates are falling, the value of the bond should
increase.
o CREDIT QUALITY. Some issuers of debt are considered a better credit risk
than others. For example, a security issued by the U.S. Government is
virtually certain to be paid in full and on time. These securities
typically offer lower interest rates to reflect their relative safety. In
contrast, bonds issued by corporate issuers usually involve increased risk
as to the payment of principal and interest.

The Fund may buy "pure debt" securities that have low ratings. By "pure debt"
we mean securities that are exclusively evidence of a loan; they are not also
real estate securities or convertible securities. Securities with low ratings
are considered "high yield, high-risk debt," and present more risk than
so-called "investment grade" securities. For information about high yield,
high-risk debt, please see --ADDITIONAL INFORMATION ABOUT HIGH YIELD, HIGH-RISK
DEBT SECURITIES. ADDITIONAL INFORMATION ABOUT HIGH YIELD, HIGH-RISK DEBT
SECURITIES

14
<PAGE>

WHAT THEY ARE. There are several agencies that evaluate and rate debt
securities. Two of the most prominent are Standard & Poor's and Moody's
Investors Service.

WHY WE BUY THEM. Some of the real estate securities, convertible securities and
bonds that we identify as good investments may happen to be high yield,
high-risk debt.

RISKS. 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.
The Fund will not purchase junk bonds that are in default at the time of
purchase, but there is no guarantee that issuers will always be able to
make their payments.
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.

15
<PAGE>

SHORT-TERM INVESTMENTS

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."

HOW WE PICK THEM. Most of the Fund's short-term investments are high-grade
money market instruments and repurchase agreements. The Fund also may hold cash
in interest-bearing bank deposits.

RISKS. Short-term investments do not present a lot of risk: issuers are
generally stable, and the time period between the security's purchase and the
payoff date is relatively short, offering little chance for conditions to
deteriorate.

OTHER SECURITIES AND INVESTMENT STRATEGIES

ADDITIONAL RISKS FOR THE FUND: 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 utilize systems that may be affected by
Year 2000 transition issues (many computer software systems in use today cannot
distinguish the year 2000 from the year 1900 because of the way dates are
encoded and calculated) and/or by Euro Conversion issues (Accurate pricing of
the Company's assets depends upon accurate valuation of securities denominated
in foreign currencies. On January 1, 1999, eleven of the fifteen

16
<PAGE>

member states of the European Union are scheduled to convert to a common
currency, the "euro").

Difficulties with Year 2000 or Euro Conversion issues could have a negative
impact on handling securities trades, payments of interest and dividends,
pricing and account services. Although, at this time, there can be no assurance
that there will be no adverse impact on the Funds, the Service Providers have
advised the Funds that they have been actively working on necessary changes to
their computer systems to prepare for the Year 2000 and the Euro Conversion and
expect that their systems, and those of other parties they deal with, will be
adapted in time for these events. In addition, there can be no assurance that
the companies which the Fund invests in will not experience difficulties with
Year 2000 or Euro Conversion issues which may negatively effect the market
value of those companies.

RISK SPECTRUM

Davis Selected Advisers manages twelve mutual 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. Davis Growth &
Income Fund has a risk level we characterize as "medium."

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DAVIS FUNDS MED MED
LOW LOW MED HIGH HIGH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DAVIS GROWTH OPPORTUNITY FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS INTERNATIONAL TOTAL RETURN FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS FINANCIAL FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS REAL ESTATE FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS NEW YORK VENTURE FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS GROWTH & INCOME FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS CONVERTIBLE SECURITIES FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS TAX-FREE HIGH INCOME FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS GOVERNMENT BOND FUND X
- ------------------------------------------------------------------------------------------------------------
DAVIS GOVERNMENT MONEY MARKET FUND X
- ------------------------------------------------------------------------------------------------------------
</TABLE>

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

HOW WE MANAGE RISK

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

17
<PAGE>

your investment or even that you may lose part or all of your investment. Davis
Growth & Income Fund has five strategies to minimize the risk assumed when we
invest.

FIVE STRATEGIES WE USE TO MINIMIZE RISK

3. WE HAVE A LONG-TERM VISION. We get to know the managers of the companies
we invest in and understand their goals. We view temporary setbacks as
buying opportunities: when other managers sell stock in response to bad
news, we evaluate the issuer's long-term prospects.

5. WE MAY MAKE TEMPORARY DEFENSIVE INVESTMENTS. From time to time, Davis
Growth & Income Fund may take temporary defensive positions in response to
adverse market, economic or political conditions.

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ONCE YOU INVEST IN THE FUND

This section describes: 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

HOW SECURITIES IN THE PORTFOLIO ARE VALUED

We use current market valuations to value the securities in Davis Growth &
Income Fund:

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The value of securities denominated in foreign currencies and traded in foreign
markets will have their value converted into the U.S. dollar equivalents at the
prevailing market rate as computed by State Street Bank & Trust Company.
Fluctuation in the value of foreign currencies in relation to the U.S. dollar
may affect the net asset value of the Fund's shares even if there has not been
any change in the foreign currency price of the Fund's investments.

HOW WE PAY EARNINGS

There are two ways you can receive payments from Davis Growth & Income Fund:

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

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

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HOW YOUR DIVIDENDS AND CAPITAL GAINS ARE TAXED

o If Davis Growth & Income Fund pays dividends, they are taxable to
shareholders as ordinary income. Dividends include both net investment
income and short-term capital gains.
o If Davis Growth & Income Fund pays net capital gains, they generally will
be taxed as a long-term capital-gain distribution.

These payments may be taxed at different rates, depending on the length of time
the 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--whether they are received in cash or
reinvested in shares.

Also, keep in mind that when you sell or exchange shares of the 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 Davis Growth & Income Fund.

HOW TO OPEN AN ACCOUNT

You can open an account if you invest:

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.

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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, and Davis Growth & Income Fund will not accept
third-party checks.

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
Davis Distributors 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:

RETIREMENT PLAN ACCOUNTS

You can invest in Davis Growth & Income 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

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<PAGE>

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.

HOW TO BUY, SELL AND EXCHANGE SHARES

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

THREE WAYS TO BUY SHARES

State Street Bank and Trust Company
Boston, MA 02210
Attn.: Mutual Fund Services
DAVIS GROWTH & INCOME FUND
Shareholder Name
Shareholder Account Number
Federal Routing Number 011000028
DDA Number 9904-606-2

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<PAGE>

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

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

WHEN YOUR TRANSACTIONS ARE PROCESSED

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

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

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<PAGE>

SPECIAL NOTE FOR WRAP PROGRAM INVESTORS

SELLING SHARES

You may sell back all or part of your shares to Davis Growth & Income Fund
(known as a redemption) at any time, at net asset value. You can sell the
shares by telephone, by mail or through a dealer.

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

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 by 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.

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<PAGE>

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.

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 Davis Growth & Income Fund may make sales payments in securities if Davis
Growth & Income Fund's Board of Directors decides that making cash payments
would harm the Fund.

EXCHANGING SHARES

You can transfer Class Y shares of Davis Growth & Income Fund to Class Y shares
in any other Davis Fund. This is known as an exchange. You can exchange shares
by telephone (to accounts with identical registrations), by dealer or by mail.
The initial exchange must be for at least $5 million for institutions or
government entities or minimums set by wrap program sponsors. Class A
shareholders who are eligible to buy Class Y shares may also exchange their
shares for Class Y shares of the Fund. 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.

For more information on exchanging shares by telephone, see "TRANSACTIONS BY
TELEPHONE" at the end of this section.

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

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<PAGE>

YOU CAN MAKE EXCHANGES AMONG ANY OF THE DAVIS FUNDS:

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

FOR MORE INFORMATION ABOUT ANY OF THE OTHER DAVIS FUNDS, INCLUDING CHARGES AND
EXPENSES, ASK FOR A PROSPECTUS. READ IT CAREFULLY BEFORE INVESTING OR SENDING
MONEY.

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<PAGE>

TRANSACTIONS BY TELEPHONE

When you call Davis Distributors you can make a sale or exchange in two ways:

YOU CAN USE DAVIS DIRECTACCESS TO:

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

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<PAGE>

THE DAVIS FUNDS:
OVER 25 YEARS OF RELIABLE INVESTING

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.

ADDRESS AND PHONE GUIDE

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

OUR MAILING ADDRESS
Davis Distributors
124 East Marcy Street
Santa Fe, NM 87501

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

OTHER FUND DOCUMENTS

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<PAGE>

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. You may also cal this number for
shareholder inquiries.

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 GROWTH & INCOME FUND
124 EAST MARCY STREET
SANTA FE, NM 87501
1-800-279-0279

Investment Company Act File No. 811-1701

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 1, 1998

DAVIS NEW YORK VENTURE FUND
AND
DAVIS GROWTH & INCOME FUND

PART OF
DAVIS NEW YORK VENTURE FUND, INC
124 EAST MARCY STREET
SANTA FE, NEW MEXICO 87501
1-800-279-0279

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE CLASS A, CLASS B AND CLASS C PROSPECTUSES DATED
DECEMBER 1, 1998 AND THE CLASS Y PROSPECTUSES DATED DECEMBER 1, 1998 FOR THE
DAVIS NEW YORK VENTURE FUND AND DAVIS GROWTH & INCOME FUND. THE PROSPECTUSES
MAY BE OBTAINED FROM THE FUND.

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

<PAGE>

TABLE OF CONTENTS

Section I: Investment Strategies and Restrictions

Investment Objective and Policies
Portfolio Securities

Equity Securities
Foreign Securities
Real Estate Securities and REITs
Convertible Securities
Bonds & Other Debt Securities
High Yield, High Risk Debt Securities
Repurchase Agreements

Other Investment Practices
Portfolio Transactions
Investment Restrictions

Section II: Key Persons

Organization of the Company
Directors and Officers
Directors Compensation Schedule
Certain Shareholders of the Fund
Investment Advisory Services
Distribution of Company Shares
Other Important Service Providers

Section III: Purchase, Exchange and Redemption of Shares

Purchase of Shares
General
Alternative Purchase Arrangements
Class A Shares
Class B Shares
Class C Shares
Class Y Shares

Special Services
Prototype Retirement Plans
Automatic Investment Privilege
Dividend Diversification Program
Telephone Privilege

Exchange of Shares
General
By Telephone
Automatic Exchange Program

Redemption of Shares
General

Expedited Redemption Privilege
By Telephone
Automatic Withdrawal Plan
Involuntary Redemption
Subsequent Repurchase

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<PAGE>

Section IV: General Information

Determining the Price of Shares
Year 2000 and Euro Conversion Issues
Dividends and Distributions
Federal Income Taxes
Performance Data

Appendix A: Quality Ratings of Debt Securities
Appendix B: Term and Conditions for a Statement of Intention

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Section I: Investment Strategies and Restrictions

INVESTMENT OBJECTIVES AND POLICIES

Davis New York Venture Fund's investment objective is growth of
capital. Davis Growth & Income Fund's investment objectives are capital growth
and income. There is no assurance that either Fund will achieve its investment
objectives. An investment in the Funds may not be appropriate for all investors
and short-term investing is discouraged.

During normal market conditions Davis New York Venture Fund seeks
growth of capital by investing primarily in equity securities of domestic
companies with market capitalizations of at least $5 billion. The Fund may also
invest in foreign companies and in companies with smaller market
capitalizations.

During normal market conditions Davis Growth & Income Fund seeks
growth of capital by investing approximately 60% of its assets in a manner
similar to Davis New York Venture Fund. To increase current income and to
diversify its portfolio, the remaining 40% of Davis Growth & Income Fund's
assets are invested in a combination of real estate securities, convertible
securities, bonds, and cash. Davis Selected Advisers, L.P. ("Adviser") and/or
Davis Selected Advises - NY, Inc. ("Sub-Adviser") may vary these asset
allocations in response to market conditions. Davis Growth & Income Fund's
investments may include high yield, high risk bonds, and may also invest in
foreign securities.

Either Fund may attempt to reduce market and currency fluctuation
risks by engaging in related hedging transactions. These transactions involve
additional risk considerations.

PORTFOLIO SECURITIES

Both Davis New York Venture Fund and Davis Growth & Income Fund
(collectively the "Funds") may invest in each of the securities described
below. Davis New York Venture Fund focuses its investments in equity
securities. Davis Growth & Income Fund builds a core of equity securities but
also makes substantial investments in the other types of securities.

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

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

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

FOREIGN INVESTMENTS. Foreign securities are either issued by foreign
companies or are principally traded in foreign markets ("foreign securities").
Foreign securities include equity securities, real estate securities,
convertible securities, and bonds. Investments in foreign securities may be
made through the purchase of individual securities on recognized exchanges and
developed over-the-counter markets, through American Depository Receipts
("ADRs") or Global Depository Receipts ("GDRs") covering such securities, and
through U.S. registered investment companies investing primarily in foreign
securities. When the Funds invest in foreign securities, their

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<PAGE>

operating expenses are likely to be higher than that of an investment company
investing exclusively in U.S. securities, since the, custodial and certain
other expenses are expected to be higher.

Primary Risks. Investments in foreign securities may involve a higher
degree of risk than investments in domestic issuers. Foreign securities are
often denominated in foreign currencies, which means that their value will be
affected by changes in exchange rates, as well as other factors that affect
securities prices. There is generally less publicly available information about
foreign securities and securities markets, and there may be less government
regulation and supervision of foreign issuers and securities markets. Foreign
securities and markets may also be affected by political and economic
instabilities, and may be more volatile and less liquid than domestic
securities and markets. Investment risks may include expropriation or
nationalization of assets, confiscatory taxation, exchange controls and
limitations on the use or transfer of assets, and significant withholding
taxes. Foreign economies may differ from the United States favorably or
unfavorably with respect to inflation rates, balance of payments, capital
reinvestment, gross national product expansion, and other relevant indicators.
The 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 only.

REAL ESTATE SECURITIES AND REITS. Real estate securities are issued by
companies which have at least 50% of the value of their assets, gross income,
or net profits attributable to ownership, financing, construction, management
or sale of real estate, or to products or services that are related to real
estate or the real estate industry. Neither Davis New York Venture Fund nor
Davis Growth & Income Fund invest directly in real estate. Real estate
companies include real estate investment trusts ("REITs"), or other securitized
real estate investments, brokers, developers, lenders and companies with
substantial real estate holdings such as paper, lumber, hotel and entertainment
companies. REITs pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to shareholders if it complies with various
requirements relating to its organization, ownership, assets and income and
with the requirement that it distribute to its shareholders at least 95% of its
taxable income (other than net capital gains) for each taxable year. REITs can
generally be classified as Equity REITs, Mortgage REITs and Hybrid REITs.
Equity REITs invest the majority of their assets directly in real property and
derive their income primarily from rents. Equity REITs can also realize capital
gains by selling property that has appreciated in value. Mortgage REITs invest
the majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITs combine the characteristics of
both Equity REITs and Mortgage REITs.

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

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

CONVERTIBLE SECURITIES. Generally, convertible securities are bonds,
debentures, notes, preferred stocks, warrants or other securities that convert
or are exchangeable into shares of the underlying common stock at a stated
exchange ratio. Usually, the conversion or exchange is solely at the option of
the holder. However, some convertible securities may be convertible or
exchangeable at the option of the issuer or are automatically converted or
exchanged at a time certain, or upon the occurrence of certain events, or have
a combination of these characteristics. Usually a

5
<PAGE>

convertible security provides a long-term call on the issuer's common stock and
therefore tends to appreciate in value as the underlying common stock
appreciates in value. A convertible security may also be subject to redemption
by the issuer after a certain date and under certain circumstances (including a
specified price) established on issue. If a convertible security held by one of
the Funds is called for redemption, that Fund could be required to tender it
for redemption, convert it into the underlying common stock or sell it.

Primary Risks. Convertible bonds, debentures, and notes are varieties
of debt securities, and as such are subject to many of the same risks,
including interest rate sensitivity, changes in debt rating, and credit risk.
In addition, convertible securities are often viewed by the issuer as future
common stock subordinated to other debt and carry a lower rating than the
issuer's non-convertible debt obligations. Thus, convertible securities are
subject to many of the same risks as high yield, high risk securities. A more
complete discussion of these risks is provided below in the sections entitled
"Bonds and Other Debt Securities" and "High Yield, High Risk Debt Securities."

Due to its conversion feature, the price of a convertible security
will normally vary in some proportion to changes in the price of the underlying
common stock. A convertible security will normally also provide a higher yield
than the underlying common stock (but generally lower than comparable
non-convertible securities). Due to their higher yield, convertible securities
generally sell above there "conversion value," which is the current market
value of the stock to be received upon conversion. The difference between this
conversion value and the price of convertible securities will vary over time
depending on the value of the underlying common stocks and interest rates. When
the underlying common stocks decline in value, convertible securities will tend
not to decline to the same extent because the yield acts as a price support.
When the underlying common stocks rise in value, the value of convertible
securities may also be expected to increase but will generally not increase to
the same extent as the underlying common stocks.

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

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

HIGH YIELD, HIGH RISK DEBT SECURITIES. The real estate securities,
convertible securities, bonds, and other debt securities which the Funds may
invest in may include high yield, high risk debt securities rated BB or lower
by Standard & Poor's Corporation ("S&P") or Ba or lower by Moody's Investor
Services ("Moody's") or unrated securities. Securities rated BB or lower by S&P
and Ba or lower by Moody's are referred to in the financial community as "junk
bonds" and may include D rated securities of issuers in default. Ratings
assigned by credit agencies do not evaluate market risks. The Adviser considers
the ratings assigned by S&P or Moody's as one of several factors in its
independent credit analysis of issuers. A brief description of the quality
ratings of these two services is contained in the section entitled "Quality
Ratings of Debt Securities." Davis New York Venture Fund will not purchase
securities rated BB or Ba or lower if the securities are in default at the time
of purchase or if such purchase would then cause 5% or more of the Fund's net
assets to be invested in such lower rated securities. Davis Growth & Income
Fund will not purchase securities rated BB or Ba or lower if the securities are
in default at the time of purchase or if such purchase would then cause more
than 35% of the Fund's net assets to be invested in such lower rated
securities.

Primary Risks. While likely to have some quality and protective
characteristics, high yield, high risk debt securities, whether or not
convertible into common stock, usually involve increased risk as to payment of
principal and

6
<PAGE>

interest. Issuers of such securities may be highly leveraged and may not have
available to them traditional methods of financing. Therefore, the risks
associated with acquiring the securities of such issuers generally are greater
than is the case with higher rated securities. For example, during an economic
downturn or a sustained period of rising interest rates, issuers of high yield
securities may be more likely to experience financial stress, especially if
such issuers are highly leveraged. During such periods, such issuers may not
have sufficient revenues to meet their principal and interest payment
obligations. The issuer's ability to service its debt obligations also may be
adversely affected by specific issuer developments, or the issuer's inability
to meet specific projected business forecasts, or the unavailability of
additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of high yield securities because such
securities may be unsecured and may be subordinated to other creditors of the
issuer.

High yield, high risk debt securities are subject to greater price
volatility than higher rated securities, tend to decline in price more steeply
than higher rated securities in periods of economic difficulty or accelerating
interest rates and are subject to greater risk of non-payment in adverse
economic times. There may be a thin trading market for such securities. This
may have an adverse impact on market price and the ability of the Funds to
dispose of particular issues and may cause the Funds to incur special
securities registration responsibilities, liabilities and costs and liquidity
and valuation difficulties. Unexpected net redemptions may force the Funds to
sell high yield, high risk debt securities without regard to investment merit,
thereby possibly reducing return rates. Such securities may be subject to
redemptions or call provisions which, if exercised when investment rates are
declining, could result in the replacement of such securities with lower
yielding securities, resulting in a decreased return. To the extent that the
Funds invests in bonds that are original issue discount, zero coupon,
pay-in-kind or deferred interest bonds, the Funds may have taxable interest
income in excess of the cash actually received on these issues. In order to
avoid taxation to the Funds, the Funds may have to sell portfolio securities to
meet taxable distribution requirements.

The market values of such securities tend to reflect individual
corporate developments to a greater extent than do higher rated securities,
which react primarily to fluctuations in the general level of interest rates.
Such lower rated securities also tend to be more sensitive to economic and
industry conditions than are higher rated securities. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis regarding
individual lower rated bonds and the high yield, high risk market may depress
the prices for such securities. If the negative factors such as the
aforementioned adversely impact the market value of high yield, high risk
securities, net asset value will be adversely affected.

The high yield, high risk bond market comprised a small piece of the
general bond market until the middle 1980's when issuance increased
dramatically. Since that time, the high yield, high risk bond market has
experienced only one recessionary environment but never has been exposed to a
significant increase in interest rates. During the economic downturn that was
experienced, prices of high yield, high risk bonds declined and defaults rose.
Future economic downturns and/or significant increases in interest rates are
likely to have a negative effect on the high yield, high risk bond market and
consequently on the value of these bonds, as well as increase the incidence of
defaults on such bonds.

High yield, high risk bonds may be issued in a variety of
circumstances. Some of the more common circumstances are issuance by
corporations in the growth stage of their development, in connection with a
corporate reorganization or as part of a corporate takeover. Companies that
issue such high yielding, high risk bonds often are highly leveraged and may
not have available to them more traditional methods of financing. Therefore,
the risk associated with acquiring the bonds of such issuers generally is
greater than is the case with higher rated bonds. For example, during an
economic downturn or recession, highly leveraged issuers of high yield, high
risk bonds may experience financial stress. During such periods, such issuers
may not have sufficient revenues to meet their principal and interest payment
obligations. The issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments, or the issuer's
inability to meet specific projected business forecasts, or the unavailability
of additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of high yielding bonds because such bonds
are generally unsecured and are often subordinated to other creditors of the
issuer. The costs associated with recovering principal and interest once a
security has defaulted may impact the return to holders of the security. If the
Funds experiences unexpectedly large net redemptions, it may be forced to sell
high yield, high risk bonds out of the portfolio without regard to the
investment merits of such sales. This could decrease the Fund's net assets.
Since some of the Fund's expenses are fixed, this could also reduce the Fund's
rate of return.

7
<PAGE>

The Funds may have difficulty disposing of certain high yield, high
risk bonds because there may be a thin trading market for such bonds. Because
not all dealers maintain markets in all high yield, high risk bonds, the Funds
anticipate that such bonds could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market may have an
adverse impact on market price and the ability to dispose of particular issues
and may also make it more difficult to obtain accurate market quotations or
valuations for purposes of valuing the Funds' assets. Market quotations
generally are available on many high yield issues only from a limited number of
dealers and may not necessarily represent firm bid prices of such dealers or
prices for actual sales. In addition, adverse publicity and investor
perceptions may decrease the values and liquidity of high yield, high risk
bonds regardless of a fundamental analysis of the investment merits of such
bonds. To the extent that the Funds purchase illiquid or restricted bonds, it
may incur special securities registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties relating to such bonds.

Bonds may be subject to redemption or call provisions. If an issuer
exercises these provisions when investment rates are declining, the Funds will
be likely to replace such bonds with lower yielding bonds resulting in a
decreased return. Zero coupon, pay-in-kind and deferred interest bonds involve
additional special considerations. Zero coupon bonds are debt obligations that
do not entitle the holder to any periodic payments of interest prior to
maturity or a specified cash payment date when the securities begin paying
current interest (the "cash payment date") and therefore are issued and traded
at a discount from their face amount or par value. The market prices of zero
coupon securities are generally more volatile than the market prices of
securities that pay interest periodically and are likely to respond to changes
in interest rates to a greater degree than do securities paying interest
currently having similar maturities and credit quality. Pay-in-kind bonds pay
interest in the form of other securities rather than cash. Deferred interest
bonds defer the payment of interest to a later date. Zero coupon, pay-in-kind
or deferred interest bonds carry additional risk in that, unlike bonds which
pay interest in cash throughout the period to maturity, the Funds will realize
no cash until the cash payment date unless a portion of such securities are
sold. There is no assurance of the value or the liquidity of securities
received from pay-in-kind bonds. If the issuer defaults, the Funds may obtain
no return at all on its investment. To the extent that the Funds invest in
bonds that are original issue discount, zero coupon, pay-in-kind or deferred
interest bonds, the Funds may have taxable interest income in excess of the
cash actually received on these issues. In order to distribute such income to
avoid taxation to the Funds, the Funds may have to sell portfolio securities to
meet its taxable distribution requirements under circumstances that could be
adverse.

Federal tax legislation limits the tax advantages of issuing certain
high yield, high risk bonds. This could have a materially adverse effect on the
market for high yield, high risk bonds.

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

The Funds will enter into repurchase agreements only when the seller
agrees that the value of the underlying securities, including accrued interest
(if any), will at all times be equal to or exceed the value of the repurchase
agreement. The Funds will not enter into a repurchase agreement maturing in
more than seven days if it would cause more than 15% of the value of their net
assets to be invested in such transactions. Repurchase agreements maturing in
less than seven days are not deemed illiquid securities for the purpose of the
Funds' 15% limitation on illiquid securities.

8
<PAGE>

OTHER INVESTMENT POLICIES
(DAVIS NEW YORK VENTURE FUND AND DAVIS GROWTH & INCOME FUND)

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

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

A forward contract is an obligation to purchase or sell a specific
currency for an agreed price at a future date which is individually negotiated
and privately traded by currency traders and their customers. Such a contract
gives the Funds a position in a negotiated, currently non-regulated market. A
Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). Additionally, when the Adviser or Sub-Adviser believes
that a foreign currency may suffer a substantial decline against the U.S.
dollar, either Fund may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. When the Adviser or
Sub-Adviser believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, either Fund may enter into a forward purchase
contract to buy that foreign currency for a fixed dollar amount in anticipation
of purchasing foreign traded securities ("position hedge"). In this situation
the Funds may, in the alternative, enter into a forward contract in respect to
a different foreign currency for a fixed U.S. dollar amount ("cross hedge").
This may be done, for example, where the Adviser or Sub-Adviser believes that
the U.S. dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. dollar value of the
currency in which portfolio securities of the Fund are denominated.

The Funds may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the U.S. dollar
value of foreign currency-denominated portfolio securities and against
increases in the U.S. dollar cost of such securities to be acquired. As in the
case of other kinds of options, however, the writing of an option on a foreign
currency constitutes only a partial hedge, up to the amount of the premium
received, and the Funds could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to a Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or

9
<PAGE>

purchased by the Funds are traded on U.S. and foreign exchanges or
over-the-counter. Currently, a significant portion or all of the value of an
over-the-counter option may be treated as an illiquid investment and subject to
the restriction on such investments as long as the SEC requires that
over-the-counter options be treated as illiquid. Generally, the Funds would
utilize options traded on exchanges where the options are standardized.

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

The Funds may also purchase securities (debt securities or deposits)
which have their coupon rate or value at maturity determined by reference to
the value of one or more foreign currencies. These strategies will be used for
hedging purposes only. The Funds will hold securities or other options or
futures positions whose values are expected to offset its obligations under the
hedge strategies. Neither Fund will enter into a currency hedging position that
exposes the Fund to an obligation to another party unless it owns either (i) an
offsetting position in securities, options or futures positions or (ii) cash,
receivables and short-term debt securities with a value sufficient to cover its
potential obligations. The Funds will comply with requirements established by
the SEC with respect to coverage of options and futures strategies by mutual
funds, and, if so required, will set aside liquid securities in a segregated
account with its custodian bank in the amount prescribed. The Funds' custodian
will maintain the value of such segregated account equal to the prescribed
amount by adding or removing additional liquid securities to account for
fluctuations in the value of securities held in such account. Securities held
in a segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with similar securities.

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

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

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

The restricted securities which the Funds may purchase include
securities which have not been registered under the 1933 Act but are eligible
for purchase and sale pursuant to Rule 144A ("Rule 144A Securities"). This Rule
permits certain qualified institutional buyers, such as the Funds, to trade in
privately placed securities even though such securities are not registered
under the 1933 Act. The Adviser or Sub-Adviser, under criteria established by
the Funds' Board of Directors, will consider whether Rule 144A securities being
purchased or held by the Funds are illiquid and thus subject to the Funds'
policy limiting investments in illiquid securities. In making this
determination, the Adviser or Sub-Adviser will consider the frequency of trades
and quotes, the number of dealers and potential purchasers, dealer undertakings
to make a market, and the nature of the security and the market place

10
<PAGE>

trades (for example, the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
Securities will also be monitored by the Adviser and Sub-Adviser and, if as a
result of changed conditions, it is determined that a Rule 144A Security is no
longer liquid, the Funds' holding of illiquid securities will be reviewed to
determine what, if any, action is required in light of the policy limiting
investments in such securities. Investing in Rule 144A Securities could have
the effect of increasing the amount of investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.

BORROWING. The Funds may borrow money in for temporary or emergency
purposes. Neither Fund will borrow money with the intent of leveraging their
investments. Borrowing activities are strictly limited as described in the
section entitled, "Investment Restrictions".

LENDING PORTFOLIO SECURITIES. The Funds may lend securities to
broker-dealers or institutional investors for their use in connection with
short sales, arbitrages and other securities transactions. The Funds will not
lend portfolio securities unless the loan is secured by collateral. The Davis
New York Venture Fund will not lend securities if such a loan would cause more
than 20% of the total value of its assets to then be subject to such loans. The
Davis Growth & Income Fund will not lend securities if such a loan would cause
more than 33 1/3% of the total value of its assets (including collateral
received) to then be subject to such loans.

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

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

PORTFOLIO TRANSACTIONS.

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

In placing executions and paying brokerage commissions, the Adviser or
Sub-Adviser considers the financial responsibility and reputation of the broker
or dealer, the range and quality of the services made available to the Funds
and the professional services rendered, including execution, clearance
procedures, wire service quotations and ability to provide supplemental
performance, statistical and other research information for consideration,
analysis and evaluation by the Adviser's or Sub-Adviser's staff. In accordance
with this policy, brokerage

11
<PAGE>

transactions may not be executed solely on the basis of the lowest commission
rate available for a particular transaction. Research services provided to the
Adviser or Sub-Adviser by or through brokers who effect portfolio transactions
for the Funds may be used in servicing other accounts managed by the Adviser
and likewise research services provided by brokers used for transactions of
other accounts may be utilized by the Adviser or Sub-Adviser in performing
services for the Funds. Subject to the requirements of best execution, the
placement of orders by securities firms for shares of the Funds may be taken
into account as a factor in the placement of portfolio transactions.

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

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

The Funds paid the following brokerage commissions:

<TABLE>
<CAPTION>
Fiscal year ended July 31
1998 1997 1996
<S> <C> <C> <C>
Davis New York Venture Fund
brokerage commissions paid $5,092,961 $3,616,808 $1,315,346
amount paid to brokers providing research 86% 87% 97%
brokerage commissions paid
to Shelby Cullom Davis & Co.(1) $441,042 $238,363 $97,362

Davis Growth & Income Fund
brokerage commissions paid $56,658(2) NA NA
amount paid to brokers providing research 96%(2) NA NA
brokerage commissions paid
to Shelby Cullom Davis & Co. (1) $13,500 NA NA
</TABLE>

(1) Shelby Cullom Davis & Co. is a broker-dealer who may be considered an
affiliated person of the Adviser. During the fiscal year ended July 31, 1998,
commissions received represented 8.65% of total commissions paid and 12.64% of
the aggregate dollar amount of transactions involving the payment of
commissions by the Davis New York Venture Fund. During the period from May 1,
1998 (commencement of operations) through July 31, 1998 commissions received
represented 23.83% of total commissions paid and 32.75% of the aggregate dollar
amount of transactions involving the payment of commissions by the Davis Growth
& Income Fund.

(2) For the period from May 1, 1998 (commencement of operations) through
July 31, 1998.

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<PAGE>

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

INVESTMENT RESTRICTIONS

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

Davis New York Venture Fund and Davis Growth & Income Fund have
different fundamental investment restrictions and non-fundamental policies
which are listed below.

DAVIS NEW YORK VENTURE FUND FUNDAMENTAL INVESTMENT RESTRICTIONS

1. Investment Objective. The Fund's investment objective is growth of capital.

2. Diversification. The Fund may not buy the securities of any company if more
than 5% of the value of the Fund's total assets would then be invested in
that company. (U.S. Government Securities, i.e. securities issued by the
U.S. Government or its agencies or instrumentalities and repurchase
agreements involving such securities, are not included in this limitation.)

The Fund may not buy the securities of any company if after such purchase
the Fund would then own more than 10% of such company's voting securities
or any class of such company's securities. For this purpose, all debt
securities are deemed to comprise a single class.

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

4. Commodities and Futures Contracts. The Fund may not buy or sell commodities
or commodity contracts, except contracts in respect to foreign currencies
for hedging (risk reduction) purposes.

5. Options. The Fund may not purchase or write puts, calls, or a combination
thereof ("option transactions"), except that the Fund may (i) write listed
covered call options ("calls") on portfolio securities and purchase call
options to close such transactions (provided that no such call is written
if it would cause more than 25% of the value of the Fund's total assets to
be subject to calls), (ii) purchase warrants issued by a company relating
to its own securities or those of a company it is controlled by or controls
or with which it is under common control and (iii) engage in option
transactions in respect to foreign currencies for hedging purposes.

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

7. Unseasoned Issuers. The Fund may not buy the securities of companies in
continuous operation for less than three years (including predecessors) if
more than 5% of the value of the Fund's total assets would then be invested
in such securities.

8. Other Investment Companies. The Fund may not buy securities of other
registered investment companies, except: (i) shares of investment companies
investing primarily in foreign securities so long as such purchase does not
cause the Fund to (a) have more than 5% of the value of its total assets
invested in any one such

13
<PAGE>

company, (b) have more than 10% of the value of its total assets invested
in the aggregate of all such companies, or (c) own more than 3% of the
total outstanding voting stock of any such company; or (ii) as a part of a
merger, consolidation, reorganization or acquisition of assets. An investor
of the Fund may incur duplicate fees if shares of investment companies are
purchased.

9. Short Selling, Margin, and Arbitrage. The Fund may not sell short, buy on
margin or engage in arbitrage transactions. This restriction does not apply
to transactions in respect to foreign currencies for hedging purposes.

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

11. Investing for Control. The Fund does not invest for the purpose of
exercising control or management of other companies.

12. Borrowing. The Fund may not borrow money except from banks for
extraordinary or emergency purposes in amounts not exceeding 10% of the
value of the Fund's total assets (excluding the amount borrowed) at the
time of borrowing. The Fund may not pledge or hypothecate any of its
assets, except in connection with permitted borrowing in amounts not
exceeding 15% of the value of the Fund's total assets (excluding the amount
borrowed) at the time of such borrowing. (These restrictions do not apply
to the use of margin deposits in connection with transactions in foreign
currencies for hedging purposes.)

13. Affiliated Ownership. The Fund may not buy or continue to hold securities
if any officers or directors of the Fund, the Adviser or the Adviser's
General Partner own too many of the same securities. This would happen if
any of these individuals own 1/2 of 1% or more of the securities and all
such individuals who own that much or more own 5% of such securities.

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

15. Lending Money or Securities. The Fund may not lend money, except that it
may buy debt securities customarily acquired by institutional investors.
These debt securities may comprise all or a portion of an issue of
"restricted" debt securities. The Fund may also buy debt securities which
have been sold to the public and may enter into repurchase agreements. The
Fund may lend its portfolio securities subject to having 100% collateral in
cash or U.S. Government Securities. The Fund will not lend securities if
such a loan would cause more than 20% of the total value of its assets to
then be subject to such loans.

DAVIS NEW YORK VENTURE FUND NON-FUNDAMENTAL POLICIES. In addition to the
foregoing restrictions, Davis New York Venture Fund is subject to certain other
non-fundamental policies which may be changed without shareholder approval
including the following:

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

DAVIS GROWTH & INCOME FUND FUNDAMENTAL INVESTMENT RESTRICTIONS

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

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

14
<PAGE>

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

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

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

6. Lending. The Fund may not lend money, except that it may buy debt
securities customarily acquired by institutional investors. These debt
securities may comprise all or a portion of an issue of "restricted" debt
securities. The Fund may also buy debt securities which have been sold to
the public and may enter into repurchase agreements. The Fund may lend its
portfolio securities subject to having 100% collateral in cash, U.S.
Government Securities, or other liquid securities. The Fund will not lend
securities if such a loan would cause more than 33 1/3% of the total value
of its assets (including collateral received) to then be subject to such
loans.

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

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

DAVIS GROWTH & INCOME FUND NON-FUNDAMENTAL POLICIES. In addition to the
foregoing restrictions, Davis Growth & Income Fund is subject to certain other
non-fundamental policies, which may be changed without shareholder approval
including the following:

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

2. Pledging Assets. The Fund may not pledge or hypothecate any of its assets,
except in connection with permitted borrowing. This restriction does not
apply to the use of margin deposits in connection with futures or options
transactions.

3. High Yield, High Risk Securities. The Fund may not purchase securities
rated BB or Ba or lower if such purchase would then cause more than 35% of
the Fund's net assets to be invested in such securities.

4. Covered Calls. The Fund may not sell covered calls if, after giving effect
to the sale, the market value of the Fund's portfolio securities subject to
options would exceed 10% of the value of the Fund's total assets.

5. Warrants. The Fund may not purchase warrants if, after giving effect to the
purchase, more than 5% of total assets would be invested in warrants.

15
<PAGE>

Section II: Key Persons

ORGANIZATION OF THE COMPANY

THE COMPANY. Davis New York Venture Fund, Inc. ("Company") is an
open-end, diversified, management investment company incorporated in Maryland
in 1968 and registered under the Investment Company Act of 1940. The Company is
a series investment company which may issue multiple series, each of which
would represent an interest in its separate portfolio. The Company currently
offers two series, the Davis New York Venture Fund and the Davis Growth &
Income Fund (a "Fund" or the "Funds"). On November 1, 1995 the Company changed
its name from New York Venture Fund, Inc., to Davis New York Venture Fund, Inc.

FUND SHARES. The Funds may issue shares in different classes. The
Funds shares are currently divided into four classes, Class A, Class B, Class
C, and Class Y shares. The Board of Directors may offer additional classes in
the future and may at any time discontinue the offering of any class of shares.
Each share, when issued and paid for in accordance with the terms of the
offering, is fully paid and non-assessable. Shares have no preemptive or
subscription rights and are freely transferable. Each of the funds' shares
represent an interest in the assets of the fund issuing the share and have
identical voting, dividend, liquidation and other rights and the same terms and
conditions as any other shares except that (i) each dollar of net asset value
per share is entitled to one vote, (ii) the expenses related to a particular
class, such as those related to the distribution of each class and the transfer
agency expenses of each class are borne solely by each such class and (iii)
each class of shares votes separately with respect to provisions of the Rule
12b-1 Distribution Plan, which pertains to a particular class, and other
matters for which separate class voting is appropriate under applicable law.
Each fractional share has the same rights, in proportion, as a full share.
Shares do not have cumulative voting rights; therefore, the holders of more
than 50% of the voting power of the Company can elect all of the directors of
the Company. Due to the differing expenses of the classes, dividends of Class B
and Class C shares are likely to be lower than for Class A shares, and are
likely to be higher for Class Y shares than for any other class of shares. For
more information about Class Y shares, call the Distributor at 1-800-279-0279
to obtain the Class Y prospectus.

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

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

DIRECTORS AND OFFICERS

The Company's Board of Directors is responsible for the management and
supervision of the Funds. The Board approves all significant agreements between
the Company, on behalf of the Funds, and those companies that furnish services
to the Funds. The names and addresses of the directors and officers of the
Funds are set forth below, together with their principal business affiliations
and occupations for the last five years. The asterisk following the names of
Jeremy H. Biggs, Andrew A. Davis and Christopher C. Davis indicates that they
are considered to be "interested persons" of the Company, as defined in the
Investment Company Act. As indicated below, certain directors and officers of
the Company hold similar positions with the following funds that are managed by
the Adviser: Davis Investment Grade Bond Fund, Inc., Davis Tax-Free High Income
Fund, Inc., Davis Series, Inc. and Davis International Series, Inc.
(collectively the "Davis Funds").

16
<PAGE>

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

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

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

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

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

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

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

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

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

SHELBY M.C. DAVIS (3/20/37),** 4135 North Steers Head Road, Jackson Hole, WY
83001. President of the Fund and each of the Davis Funds; President of Selected
American Shares, Inc., Selected Special Shares, Inc. and Selected Capital
Preservation Trust; Director, Chairman and Chief Executive Officer, Venture
Advisers, Inc.; Director, Davis Selected Advisers-NY, Inc.; Employee of Capital
Ideas, Inc. (financial consulting firm); Consultant to Fiduciary Trust Company
International; Director, Shelby Cullom Davis Financial Consultants, Inc.

ANDREW A. DAVIS (6/25/63),* ** 124 East Marcy Street, Santa Fe, NM 87501.
Director and Vice President of the Company and each of the Davis Funds (except
Davis International Series, Inc.), Selected American Shares, Inc., Selected
Special Shares, Inc. and Selected Capital Preservation Trust; Director and
President, Venture Advisers, Inc.; Director and Vice President, Davis Selected
Advisers-NY, Inc.; Consultant to Capital Ideas, a private financial consultant.
Former Vice President and head of convertible security research, PaineWebber,
Incorporated.

17
<PAGE>

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

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

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

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

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

SHELDON R. STEIN (11/29/28), 30 North LaSalle Street, Suite 2900, Chicago, IL
60602, Assistant Secretary of the Company and each of the Davis Funds, Selected
American Shares, Inc., Selected Special Shares, Inc. and Selected Capital
Preservation Trust; Partner D'Ancona & Pflaum, the Company's legal counsel.

ARTHUR DON (9/24/53), 30 North LaSalle Street, Suite 2900, Chicago, IL 60602,
Assistant Secretary of the Company and each of the Davis Funds, Selected
American Shares, Inc., Selected Special Shares, Inc. and Selected Capital
Preservation Trust; Partner D'Ancona & Pflaum, the Company's legal counsel.

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

DIRECTORS COMPENSATION SCHEDULE

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

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

Wesley E. Bass $20,400 $45,600
Marc P. Blum 18,600 42,000
Jerry D. Geist 18,600 42,000
D. James Guzy 18,600 42,000
G. Bernard Hamilton 18,600 47,000
LeRoy E. Hoffberger 18,600 42,000
Laurence W. Levine 18,600 42,000
Christian R. Sonne 18,600 42,000

18
<PAGE>

* Complex compensation is the aggregate compensation paid, for services as a
Director, by all mutual funds with the same investment adviser. There are
five registered investment companies in the complex.
** Shelby M.C. Davis is the father of Andrew A. Davis and Christopher C. Davis.

CERTAIN SHAREHOLDERS OF THE FUND

As of September 2, 1998, officers and directors owned the following
percentages of each Class of shares issued by the Funds

Class A Class B Class C Class Y
Davis New York Venture Fund 1.08% * * 2.89%
Davis Growth & Income Fund 60.13% * * *

* indicates that officers and directors owned less than 1% of the outstanding
shares of the indicated Class of shares.

The following table sets forth, as of September 2, 1998 the name and
holdings of each person known by the Company to be a record owner of more than
5% of the outstanding shares of any Class of either of its Funds. The Fund is
not aware of any shareholder that beneficially owns in excess of 25% of the
Fund's total outstanding shares.

PERCENT OF CLASS
NAME AND ADDRESS OUTSTANDING
- ---------------- -----------

DAVIS NEW YORK VENTURE FUND
CLASS A SHARES

Merrill Lynch Pierce Fenner & Smith 19.58%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484

DAVIS NEW YORK VENTURE FUND
CLASS B SHARES

Merrill Lynch Pierce Fenner & Smith 31.84%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484

DAVIS NEW YORK VENTURE FUND
CLASS C SHARES

Merrill Lynch Pierce Fenner & Smith 47.84%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484

DAVIS NEW YORK VENTURE FUND
CLASS Y SHARES

Merrill Lynch Pierce Fenner & Smith 60.61%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484

DAVIS GROWTH & INCOME FUND
CLASS A SHARES
Shelby Cullom Davis & Co. 49.24%
Investment #3
609 5th Avenue, 11th Floor

19
<PAGE>

New York, New York 10017-1021

Christopher C. Davis 9.84%
9 East 81st Street
New York, New York 10028-0205

20
<PAGE>

DAVIS GROWTH & INCOME FUND
CLASS B SHARES
Merrill Lynch Pierce Fenner & Smith 16.59%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484

DAVIS GROWTH & INCOME FUND
CLASS C SHARES
Merrill Lynch Pierce Fenner & Smith 21.19%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484

DAVIS GROWTH & INCOME FUND
CLASS Y SHARES
Merrill Lynch Pierce Fenner & Smith 99.49%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484

The Directors and Officers of the funds as a group, owned the following
percentages of the outstanding shares of each Class of both Funds' shares:

DAVIS NEW YORK VENTURE FUND
CLASS A SHARES 1.08%
CLASS B SHARES under 1%
CLASS C SHARES under 1%
CLASS Y SHARES under 2.89%

DAVIS GROWTH & INCOME FUND
CLASS A SHARES 60.13%
CLASS B SHARES under 1%
CLASS C SHARES under 1%
CLASS Y SHARES under 1%

INVESTMENT ADVISORY SERVICES

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

ADVISORY AGREEMENT. Pursuant to the Advisory Agreement, each fund pays
the Adviser a fee according to a separate negotiated fee schedule. Advisory
fees are allocated among each Class of shares in proportion to each Classes'
relative total net assets.

The Davis New York Venture Fund pays the Adviser a fee at the annual
rate based on average net assets, as follows: 0.75% on the first $250 million;
0.65% on the next $250 million; 0.55% on the next $2.5 billion; 0.54% on

21
<PAGE>

the next $1 billion; 0.53% on the next $1 billion; 0.52% on the next $1
billion; 0.51% on the next $1 billion; and 0.50% of average net assets in
excess of $7 billion. The aggregate advisory fees paid by the Davis New York
Venture Fund to the Adviser for fiscal years ended July 31, 1998, 1997, and
1996, were $47,535,606, $22,385,196, and $12,351,657 respectively

The Davis Growth & Income Fund pays the Adviser a fee at the annual
rate based on average net assets, as follows: 0.75% on the first $250 million;
0.65% on the next $250 million; 0.55% on total net assets over $500 million.
The aggregate advisory fees paid by Davis Growth & Income Fund to the Adviser
for the period May 1, 1998 (inception of operations) through July 31, 1998, was
$102,832.

These fees are higher than that of most other mutual funds but is not
necessarily higher than that paid by funds with similar objectives. Under the
Sub-Advisory Agreement with DSA-NY, the Adviser pays all of DSA-NY's direct and
indirect costs of operations. All the fees paid to DSA-NY are paid by the
Adviser and not the Funds.

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

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

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

<TABLE>
<CAPTION>
Fiscal year ended July 31
1998 1997 1996
<S> <C> <C> <C>
Davis New York Venture Fund
Accounting and administrative services $ 416,664 $127,087 $ 65,004
Qualifying shares for sale with state agencies $ 14,004 $ 13,169 $ 12,000
Shareholder services $1,024,000 $151,226 $141,804
</TABLE>

<TABLE>
<CAPTION>
For the period from May 1, 1998 (inception
of operations) through July 31, 1998
<S> <C>
Davis Growth & Income Fund
Accounting and administrative services $1,500
Qualifying shares for sale with state agencies $3,249
Shareholder services $1,649
</TABLE>

CODE OF ETHICS. The Adviser has adopted a Code of Ethics which
regulates the personal securities transactions of the Adviser's investment
personnel, other employees, and affiliates, with access to information
regarding securities transactions of the Funds. The Code of Ethics requires
investment personnel to disclose personal securities holdings upon commencement
of employment and all subsequent trading activity to the Adviser's Compliance
Officer. Investment personnel are prohibited from engaging in any securities
transactions, including the purchase of securities in a private offering,
without the prior consent of the Compliance Officer.

22
<PAGE>

Additionally, such personnel are prohibited from purchasing securities in an
initial public offering and are prohibited from trading in any securities (i)
for which the fund has a pending buy or sell order, (ii) which the fund is
considering buying or selling, or (iii) which the fund purchased or sold within
seven calendar days.

DISTRIBUTION OF COMPANY SHARES

DISTRIBUTION PLANS. Class A, Class B, and Class C shares have each
adopted Distribution Plans under which each fund reimburses the Distributor for
some of its distribution expenses. The Distribution Plans were approved by the
Funds' Board of Directors in accordance with Rule 12b-1 under the Investment
Company Act of 1940. Rule 12b-1 regulates the manner in which a mutual fund may
assume costs of distributing and promoting the sale of its shares. Payments
pursuant to a Distribution Plan are included in the operating expenses of the
Class.

CLASS A SHARES. Payments under the Class A Distribution Plan are
limited to an annual rate of 0.25% of the average daily net asset value of the
Class A shares. Such payments are made to reimburse the Distributor for the
fees it pays to its salespersons and other firms for selling the Funds' Class A
shares, servicing its shareholders and maintaining its shareholder accounts.
Where a commission is paid for purchases of $1 million or more of Class A
shares and as long as the limits of the Distribution Plan have not been
reached, such payment is also made from 12b-1 distribution fees received from
the Funds. Normally, such fees are at the annual rate of 0.25% of the average
net asset value of the accounts serviced and maintained on the books of each
fund. Payments under the Class A Distribution Plan may also be used to
reimburse the Distributor for other distribution costs (excluding overhead) not
covered in any year by any portion of the sales charges the Distributor
retains.

CLASS B SHARES. Payments under the Class B Distribution Plan are
limited to an annual rate of 1% of the average daily net asset value of the
Class B shares. In accordance with current applicable rules, such payments are
also limited to 6.25% of gross sales of Class B shares plus interest at 1% over
the prime rate on any unpaid amounts. The Distributor pays broker/dealers up to
4% in commissions on new sales of Class B shares. Up to an annual rate of 0.75%
of the average daily net assets is used to reimburse the Distributor for these
commission payments. Most or all of such commissions are reallowed to
salespersons and to firms responsible for such sales. No commissions are paid
by the Company with respect to sales by the Distributor to officers, directors,
and full-time employees of the fund, the Distributor, the Adviser, the
Adviser's general partner, or DSA-NY. Up to 0.25% of average net assets is used
to reimburse the Distributor for the payment of service and maintenance fees to
its salespersons and other firms for shareholder servicing and maintenance of
its shareholder accounts.

CLASS C SHARES. Payments under the Class C Distribution Plan are also
limited to an annual rate of 1% of the average daily net asset value of the
Class C shares, and are subject to the same 6.25% and 1% limitations applicable
to the Class B Distribution Plan. The entire amount of payments may be used to
reimburse the Distributor for the payments of commissions, service, and
maintenance fees to its salespersons and other firms for selling new Class C
shares, shareholder servicing and maintenance of its shareholder accounts.

CARRYOVER PAYMENTS. If, due to the foregoing payment limitations,
either fund is unable to pay the Distributor the 4% commission on new sales of
Class B shares, or the 1% commission on new sales of Class C shares, the
Distributor intends, but is not obligated, to accept new orders for shares and
pay commissions in excess of the payments it receives from the fund. The
Distributor intends to seek full payment from the Funds of any excess amounts
with interest at 1% over the prime rate at such future date, when and to the
extent such payments on new sales would not be in excess of the limitations.
The Funds are not obligated to make such payments; the amount (if any), timing
and condition of any such payments are solely within the discretion of the
directors of the Company, who are not interested persons of the Distributor or
the Company and have no direct or indirect financial interest in the Class B or
C Distribution Plans (the "Independent Directors"). If either Fund terminates
its Class B share or Class C share Distribution Plan, the Distributor will ask
the Independent Directors to take whatever action they deem appropriate with
regard to the payment of any excess amounts. As of July 31, 1998 the cumulative
totals of these carryover payments were:

23
<PAGE>

<TABLE>
<CAPTION>
Dollar Amount Percent of Net Assets
------------- ---------------------
<S> <C> <C>
Davis New York Venture Fund
Class B shares $93,577,161 3.00%
Class C shares $ 34,472 0.002%
Davis Growth & Income Fund
Class B shares $ 651,671 3.33%
Class C shares $ 48,166 0.87%
</TABLE>

ADDITIONAL INFORMATION CONCERNING THE DISTRIBUTION PLANS. In addition,
to the extent that any investment advisory fees paid by the Company may be
deemed to be indirectly financing any activity which is primarily intended to
result in the sale of Company shares within the meaning of Rule 12b-1, the
Distribution Plans authorize the payment of such fees.

The Distribution Plans continue annually so long as they are approved
in the manner provided by Rule 12b-1 or unless earlier terminated by vote of
the majority of the Independent Directors or a majority of a Fund's outstanding
Class of shares. The Distributor is required to furnish quarterly written
reports to the Board of Directors detailing the amounts expended under the
Distribution Plans. The Distribution Plans may be amended provided that all
such amendments comply with the applicable requirements then in effect under
Rule 12b-1. Currently, Rule 12b-1 provides that as long as the Distribution
Plans are in effect, the Company must commit the selection and nomination of
candidates for new Independent Directors to the sole discretion of the existing
Independent Directors.

DEALER COMPENSATION. As described herein, dealers or others may
receive different levels of compensation depending on which class of shares
they sell. The Distributor may make expense reimbursements for special training
of a dealer's registered representatives or personnel of dealers and other
firms who provide sales or other services in respect to the funds and/or its
shareholders, or to defray the expenses of meetings, advertising or equipment.
Any such amounts may be paid by the Distributor from the fees it receives under
the Class A, Class B and Class C Distribution Plans.

In addition, the Distributor may, from time to time, pay additional
cash compensation or other promotional incentives to authorized dealers or
agents who sell shares of the Funds. In some instances, such cash compensation
or other incentives may be offered only to certain dealers or agents who employ
registered representatives who have sold or may sell significant amounts of
shares of the Funds and/or the other Davis Funds managed by the Adviser during
a specified period of time.

Shares of the Funds may also be sold through banks or bank-affiliated
dealers. Any determination that such banks or bank-affiliated dealers are
prohibited from selling shares of the Funds under the Glass-Steagall Act would
have no material adverse effects on the funds. State securities laws may
require such firms to be licensed as securities dealers in order to sell shares
of the Fund.

KRC INVESTMENT ADVISERS, LLC. KRC Investment Advisers, LLC ("KRC"), a
registered investment adviser owned and managed by members of the immediate and
extended family of LeRoy E. Hoffberger, a Director of the Company, has entered
into a service agreement (the "Services Agreement") with the Distributor which
provides payments to KRC under the Funds Rule 12b-1 Plan. Under the Services
Agreement, KRC will provide shareholder maintenance services to clients, in
respect of shares of the Company, and the Distributor will pay KRC a fee at the
annual rate of 0.25% of average net assets of the accounts of clients
maintained and serviced by KRC. Payments made by the Distributor under the
Services Agreement will be reimbursed by the Company under its Rule 12b-1 Plan.
Those payments will be made in connection with shareholder maintenance services
provided by that investment adviser to its clients who are shareholders of the
Company which include, among others, Mr. Hoffberger and members of his
immediate and extended family and trusts of which they are beneficiaries or
trustees. The cost of these services and advisory services provided by KRC are
borne by the clients. Mr. Hoffberger does not have any ownership interest in or
otherwise have any control of KRC.

24
<PAGE>

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

The Distributor or the Adviser, in its capacity as distributor,
received total sales charges (which the Funds do not pay) on the sale of Class
A shares:

<TABLE>
<CAPTION>
Fiscal year ended July 31st
1998 1997 1996
<S> <C> <C> <C>
Davis New York Venture Fund $38,272,705 $16,907,761 $11,092,007
Amount reallowed to dealers $32,490,924 $14,249,725 $ 9,343,681
Davis Growth & Income Fund $ 360,457* NA NA
Amount reallowed to dealers $ 303,403* NA NA
</TABLE>

* for the period from May 1, 1998 (commencement of operations) through
July 31, 1998.

The Distributor or the Adviser, in its capacity as distributor, also
received compensation on redemptions and repurchases of shares. For the fiscal
year ended July 31, 1998, the Distributor received $2,999 for Class A shares,
$2,310,146 for Class B shares, and $311,622 for Class C shares as compensation
on redemptions and repurchases from the Davis New York Venture Fund. For the
period from May 1, 1998 (commencement of operations) through July 31, 1998, the
Distributor received $704 for Class B shares and $258 for Class C shares as
compensation on redemptions and repurchases from the Davis Growth & Income
Fund.

The Distributor or the Adviser, in its capacity as distributor,
received the following amounts as reimbursements under the Distribution plans.
Most of these sums were reallowed to selling broker-dealers.

<TABLE>
<CAPTION>
Fiscal year ended
1998 1997 1996
<S> <C> <C> <C>
Davis New York Venture Fund
Class B Shares $15,527,658 $4,580,590 $1,172,979
Class C Shares $ 9,471,710 $2,868,760 $ 570,693

Davis Growth & Income Fund
Class B Shares $21,106* NA NA
Class C Shares $ 6,973* NA NA
</TABLE>

* For the period from May 1, 1998 (commencement of operations) through
July 31, 1998.

OTHER IMPORTANT SERVICE PROVIDERS

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

25
<PAGE>

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

COUNSEL. D'Ancona & Pflaum, 30 N. LaSalle Street, Suite 2900, Chicago,
IL. 60602, serves as counsel to the Company and also serves as counsel for
those members of the Board of Directors who are not affiliated with the
Adviser.

Section III: Purchase, Redeem and Exchanging Shares

PURCHASE OF SHARES

CLASS A, B, AND C SHARES. You can purchase Class A, Class B, or Class
C shares of either fund from any dealer or other person having a sales
agreement with the Distributor. Class Y shares are offered only to certain
qualified purchasers, as described below.

There are three ways to make an initial investment of Class A, Class
B, or Class C shares in the Funds. One way is to fill out the Application Form
included in the Prospectus and mail it to State Street Bank and Trust Company
("State Street") at the address on the Form. The dealer must also sign the
Form. Your dealer or sales representative will help you fill out the Form. All
purchases made by check (minimum $1,000, except $250 for retirement plans)
should be in U.S. dollars and made payable to THE DAVIS FUNDS, or in the case
of a retirement account, the custodian or trustee. THIRD PARTY CHECKS WILL NOT
BE ACCEPTED. When purchases are made by check, redemptions will not be allowed
until the investment being redeemed has been in the account for 15 calendar
days.

The second way to make an initial investment is to have your dealer
order and remit payment for the shares on your behalf. The dealer can also
order the shares from the Distributor by telephone or wire. You can also use
this method for additional investments of at least $1,000.

The third way to purchase shares is by wire. Shares may be purchased
at any time by wiring federal funds directly to State Street. Prior to an
initial investment by wire, the shareholder should telephone Davis
Distributors, LLC at 1-800-279-0279 to advise them of the investment and class
of shares and to obtain an account number and instructions. A completed Plan
Adoption Agreement or Application Form should be mailed to State Street after
the initial wire purchase. To assure proper credit, the wire instructions
should be made as follows:

State Street Bank and Trust Company,
Boston, MA 02210
Attn.: Mutual Fund Services
DAVIS NEW YORK VENTURE FUND; or
DAVIS GROWTH & INCOME FUND
Shareholder Name,
Shareholder Account Number,
Federal Routing Number 011000028,
DDA Number 9904-606-2

After your initial investment, you can make additional investments of
at least $25. Simply mail a check payable to "The Davis Funds" to State Street
Bank and Trust Company, c/o The Davis Funds, P.O. Box 8406, Boston, MA
02266-8406. For overnight delivery, please send your check to State Street Bank
and Trust Company, c/o the Davis Funds, 66 Brooks Drive, Braintree, MA. 02184.
THIRD PARTY CHECKS WILL NOT BE ACCEPTED. The check should be accompanied by a
form which State Street will provide after each purchase. If you do not have a
form, you should tell State Street that you want to invest the check in shares
of the applicable fund. If you know your account number, you should also
provide it to State Street.

26
<PAGE>

CERTIFICATES. The Company does not issue certificates for Class A
shares unless you request a certificate each time you make a purchase.
Certificates are not issued for Class B or Class C shares or for accounts using
the Automatic Withdrawal Plan.. The Company does not issue certificates for
Class Y shares. Instead, shares purchased are automatically credited to an
account maintained for you on the books of the Company by State Street. You
will receive a statement showing the details of the transaction and any other
transactions you had during the current year each time you add to or withdraw
from your account.

ALTERNATIVE PURCHASE ARRANGEMENTS

Each fund offers four classes of shares. With certain exceptions
described below, Class A shares are sold with a front-end sales charge at the
time of purchase and are not subject to a sales charge when they are redeemed.
Class B shares are sold without a sales charge at the time of purchase, but are
subject to a deferred sales charge if they are redeemed within six years after
purchase. Class B shares will automatically convert to Class A shares eight
years after the end of the calendar month in which the shareholder's order to
purchase was accepted. Class C shares are purchased at their net asset value
per share without the imposition of a front-end sales charge but are subject to
a 1% deferred sales charge if redeemed within one year after purchase and do
not have a conversion feature. Class Y shares are offered to (i) trust
companies, bank trusts, pension plans, endowments or foundations acting on
behalf of their own account or one or more clients for which such institution
acts in a fiduciary capacity and investing at least $5,000,000 at any one time
("Institutions"); (ii) any state, county, city, department, authority or
similar agency which invests at least $5,000,000 at any one time ("Governmental
Entities"); and (iii) any investor with an account established under a "wrap
account" or other similar fee-based program sponsored and maintained by a
registered broker-dealer approved by the Distributor ("Wrap Program
Investors"). Class Y shares are sold at net asset value without the imposition
of Rule 12b-1 charges.

Depending on the amount of the purchase and the anticipated length of
time of the investment, investors may choose to purchase one Class of shares
rather than another. Investors who would rather pay the entire cost of
distribution at the time of investment, rather than spreading such cost over
time, might consider Class A shares. Other investors might consider Class B or
Class C shares, in which case 100% of the purchase price is invested
immediately. The Company will not accept any purchase of Class B shares in the
amount of $250,000 or more per investor. Such purchase must be made in Class A
shares. Class C shares may be more appropriate for the short-term investor. The
Company will not accept any purchase of Class C shares when Class A shares may
be purchased at net asset value.

CLASS A SHARES. Class A shares are sold at their net asset value plus
a sales charge. The amounts of the sales charges are shown in the following
table.

<TABLE>
<CAPTION>
Customary
Sales Charge Charge as Concession to Your
as Percentage Approximate Percentage Dealer as Percentage
Amount of Purchase of Offering Price of Amount Invested of Offering Price
- ------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C>
$99,999 or less................................ 4-3/4% 5.0% 4%
$100,000 to $249,999........................... 3-1/2% 3.6% 3%
$250,000 to $499,999........................... 2-1/2% 2.6% 2%
$500,000 to $749,999........................... 2% 2.0% 1-3/4%
$750,000 to $999,999........................... 1% 1.0% 3/4 of 1%
$1,000,000 or more............................. 0% 0.0% 0%*
</TABLE>

* On purchases of $1 million or more, the investor pays no front-end sales
charge but a contingent deferred sales charge of 0.75% is imposed if shares
purchased at net asset value without a sales load are redeemed within the first
year after purchase. The Distributor may pay the financial service firm a
commission during the first year after such purchase at an annual rate as
follows:

<TABLE>
<CAPTION>
Purchase Amount Commission
--------------- ----------
<S> <C>
First $3,000,000................................................ .75%
Next $2,000,000................................................ .50%

27
<PAGE>

Over $5,000,000................................................ .25%
</TABLE>

Where a commission is paid for purchases of $1 million or more, such
payment will be made from 12b-1 distribution fees received from the Company
and, in cases where the limits of the distribution plan in any year have been
reached, from the Distributor's own resources.

REDUCTION OF CLASS A SALES CHARGE. There are a number of ways to reduce the
sales charge imposed on the purchase of the funds' Class A shares, as described
below. These reductions are based upon the fact that there is less sales effort
and expense involved in respect to purchases by affiliated persons and
purchases made in large quantities. If you claim any reduction of sales
charges, you or your dealer must so notify the Distributor (or State Street, if
the investment is mailed to State Street) when the purchase is made. Enough
information must be given to verify that you are entitled to such right.

(1) FAMILY OR GROUP PURCHASES. Certain purchases made by or for more
than one person may be considered to constitute a single purchase, including
(i) purchases for family members, including spouses and children under 21, (ii)
purchases by trust or other fiduciary accounts and purchases by Individual
Retirement Accounts for employees of a single employer and (iii) purchases made
by an organized group of persons, whether incorporated or not, if the group has
a purpose other than buying shares of mutual funds. For further information on
group purchase reductions, contact the Adviser or your dealer.

(2) STATEMENTS OF INTENTION. Another way to reduce the sales charge is
by signing a Statement of Intention ("Statement"). See Appendix B: "Terms and
Conditions of a Statement of Intention." If you enter into a Statement of
Intention you (or any "single purchaser") may state that you intend to invest
at least $100,000 in the funds Class A shares over a 13-month period. The
amount you say you intend to invest may include Class A shares which you
already own, valued at the offering price, at the end of the period covered by
the Statement. A Statement may be backdated up to 90 days to include purchases
made during that period, but the total period covered by the Statement may not
exceed 13 months.

Shares having a value of 5% of the amount you state you intend to
invest will be held "in escrow" to make sure that any additional sales charges
are paid. If any of the funds shares are in escrow pursuant to a Statement and
such shares are exchanged for shares of another Davis Fund, the escrow will
continue with respect to the acquired shares.

No additional sales charge will be payable if you invest the amount
you have indicated. Each purchase under a Statement will be made as if you were
buying the total amount indicated at one time. For example, if you indicate
that you intend to invest $100,000, you will pay a sales charge of 3-1/2% on
each purchase.

If you buy additional amounts during the period to qualify for an even
lower sales charge, you will be charged such lower charge. For example, if you
indicate that you intend to invest $100,000 and actually invest $250,000, you
will, by retroactive adjustment, pay a sales charge of 2-1/2%.

If during the 13-month period you invest less than the amount you have
indicated, you will pay an additional sales charge. For example, if you state
that you intend to invest $250,000 and actually invest only $100,000, you will,
by retroactive adjustment, pay a sales charge of 3-1/2%. The sales charge you
actually pay will be the same as if you had purchased the shares in a single
purchase.

A Statement does not bind you to buy, nor does it bind the Adviser to
sell, the shares covered by the Statement.

(3) RIGHTS OF ACCUMULATION. Another way to reduce the sales charge is
under a right of accumulation. This means that the larger purchase entitled to
a lower sales charge does not have to be in dollars invested at one time. The
larger purchases that you (or any "single purchaser") make at any one time can
be determined by adding to the amount of a current purchase the value of Fund
shares (at offering price) already owned by you.

28
<PAGE>

For example, if you owned $100,000 worth (at offering price) of shares
(including Class A, B and C shares of all Davis Funds, except Davis Government
Money Market Fund) and invest $5,000 in additional shares, the sales charge on
that $5,000 investment would be 3-1/2%, not 4-3/4%.

(4) COMBINED PURCHASES WITH OTHER DAVIS FUNDS. Your ownership or
purchase of Class A shares of other Davis Funds may also reduce your sales
charges in connection with the purchase of the Fund's Class A shares. This
applies to all three situations for reduction of sales charges discussed above.

If a "single purchaser" decides to buy a funds Class A shares as well
as Class A shares of any of the other Davis Funds (other than shares of Davis
Government Money Market Fund) at the same time, these purchases will be
considered a single purchase for the purpose of calculating the sales charge.
For example, a single purchaser can invest at the same time $100,000 in Davis
New York Venture Fund's Class A shares and $150,000 in the Class A shares of
Davis Investment Grade Bond Fund and pay a sales charge of 2-1/2%, not 3-1/2%.

Similarly, a Statement of Intention for the Fund's Class A shares and
for the Class A shares of the other Davis Funds (other than Davis Government
Money Market Fund) may be aggregated. In this connection, the Company's Class A
shares and the Class A shares of the other Davis Funds which you already own,
valued at the current offering price at the end of the period covered by your
Statement of Intention, may be included in the amount you have stated you
intend to invest pursuant to your Statement.

Lastly, the right of accumulation also applies to the Class A, Class B
and Class C shares of the other Davis Funds (other than Davis Government Money
Market Fund) which you own. Thus, the amount of current purchases of the Fund's
Class A shares which you make may be added to the value of the Class A shares
of the other Davis Funds (valued at their current offering price) already owned
by you in determining the applicable sales charge. For example, if you owned
$100,000 worth of shares of Davis Investment Grade Bond Fund and Davis
Financial Fund and Davis Convertible Securities Fund, (valued at the applicable
current offering price) and invest $5,000 in the Fund's shares, the sales
charge on your investment would be 3-1/2%, not 4-3/4%.

In all the above instances where you wish to assert this right of
combining the shares you own of the other Davis Funds, you or your dealer must
notify the Distributor (or State Street, if the investment is mailed to State
Street) of the pertinent facts. Enough information must be given to permit
verification as to whether you are entitled to a reduction in sales charges.

(5) ISSUANCE OF SHARES AT NET ASSET VALUE. There are many situations
where the sales charge will not apply to the purchase of Class A shares, as
discussed in the Prospectus. A sales charge is not imposed on these
transactions either because of the purchaser deals directly with the funds (as
in employee purchases) or because a responsible party (such as a financial
institution) is providing the necessary services usually provided by a
registered representative. In addition, the Fund occasionally may be provided
with an opportunity to purchase substantially all the assets of a public or
private investment company or to merge another such company into the Fund. This
offers the Fund the opportunity to obtain significant assets. No dealer
concession is involved. It is industry practice to effect such transactions at
net asset value as it would adversely affect the Fund's ability to do such
transactions if the Fund had to impose a sales charge.

(6) PURCHASES FOR EMPLOYEE BENEFIT PLANS. Trusteed or other fiduciary
accounts and Individual Retirement Accounts ("IRA") of a single employer are
treated as purchases of a single person. Purchases of and ownership by an
individual and such individual's spouse under an IRA are combined with their
other purchases and ownership.

(7) SALES AT NET ASSET VALUE. The sales charge will not apply to: (1)
Class A shares purchased through the automatic reinvestment of dividends and
distributions; (2) Class A shares purchased by directors, officers, and
employees of any fund for which the Adviser acts as investment adviser or
officers and employees of the Adviser, Sub-Adviser, or Distributor, including
former directors and officers and any spouse, child, parent, grandparent,
brother or sister ("immediate family members") of all of the foregoing, and any
employee benefit or payroll deduction plan established by or for such persons;
(3) Class A shares purchased by any registered representatives, principals, and
employees (and any immediate family member) of securities dealers having a
sales agreement with the Distributor; (4) initial purchases of Class A shares
totaling at least $250,000 but less than $5,000,000, made at

29
<PAGE>

any one time by banks, trust companies, and other financial institutions on
behalf of one or more clients for which such institution acts in a fiduciary
capacity; (5) Class A shares purchased by any single account covering a minimum
of 250 participants (this 250 participant minimum may be waived for certain fee
based mutual fund marketplace programs) and representing a defined benefit
plan, defined contribution plan, cash or deferred plan qualified under 401(a)
or 401(k) of the Internal Revenue Code or a plan established under section
403(b), 457 or 501(c)(9) of such Code or "rabbi trusts"; (6) Class A shares
purchased by persons participating in a "wrap account" or similar fee-based
program sponsored and maintained by a registered broker-dealer approved by the
Funds Distributor or by investment advisors or financial planners who place
trades for their own accounts or the accounts of their clients and who charge a
management, consulting, or other fee for their services; and clients of such
investment advisors or financial planners who place trades for their own
accounts if the accounts, are linked to the master account of such investment
advisor or financial planner, on the books and records of the broker or agent;
and (7) Class A shares amounting to less than $5,000,000 purchased by any
state, county, city, department, authority or similar agency. Investors may be
charged a fee if they effect purchases in fund shares through a broker or
agent. The Funds may also issue Class A shares at net asset value incident to a
merger with or acquisition of assets of an investment company.

CLASS B SHARES. Class B shares are offered at net asset value, without
a front-end sales charge. The Distributor receives and usually reallows
commissions to firms responsible for the sale of such shares. With certain
exceptions described below, the Funds impose a deferred sales charge of 4% on
shares redeemed during the first year after purchase, 3% on shares redeemed
during the second or third year after purchase, 2% on shares redeemed during
the fourth or fifth year after purchase and 1% on shares redeemed during the
sixth year after purchase. However, on Class B shares of the Funds which are
acquired in exchange from Class B shares of other Davis Funds which were
purchased prior to December 1, 1994, the Funds will impose a deferred sales
charge of 4% on shares redeemed during the first calendar year after purchase;
3% on shares redeemed during the second calendar year after purchase; 2% on
shares redeemed during the third calendar year after purchase; and 1% on shares
redeemed during the fourth calendar year after purchase; and, no deferred sales
charge is imposed on amounts redeemed after four calendar years from purchase.
Class B shares will be subject to a maximum Rule 12b-1 fee at the annual rate
of 1% of the class's average daily net asset value. The Funds will not accept
any purchase of Class B shares in the amount of $250,000 or more per investor.

Class B shares that have been outstanding for eight years will
automatically convert to Class A shares without imposition of a front-end sales
charge. The Class B shares so converted will no longer be subject to the higher
expenses borne by Class B shares. Because the net asset value per share of the
Class A shares may be higher or lower than that of the Class B shares at the
time of conversion, although the dollar value will be the same, a shareholder
may receive more or less Class A shares than the number of Class B shares
converted. Under a private Internal Revenue Service Ruling, such a conversion
will not constitute a taxable event under the federal income tax law. In the
event that this ceases to be the case, the Board of Directors will consider
what action, if any, is appropriate and in the best interests of the Class B
shareholders. In addition, certain Class B shares held by certain defined
contribution plans automatically convert to Class A shares based on increases
of plan assets.

CLASS B SPECIAL DISTRIBUTION ARRANGEMENTS. Class B shares of the Fund
are made available to Retirement Plan Participants such as 401K or 403B Plans
at NAV with the waiver of Contingent Deferred Sales Charge ("CDSC") if:

(i) the Retirement Plan is recordkept on a daily valuation basis by
Merrill Lynch and, on the date the Retirement Plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Retirement Plan has
less than $3 million in assets invested in broker/dealer funds not
advised or managed by Merrill Lynch Asset Management, L.P. ("MLAM")
that are made available pursuant to a Services Agreement between
Merrill Lynch and the fund's principal underwriter or distributor and
in funds advised or managed by MLAM (collectively, the "Applicable
Investments"); or

(ii) the Retirement Plan is recordkept on a daily valuation basis by an
independent recordkeeper whose services are provided through a
contract of alliance arrangement with Merrill Lynch, and on the date
the Retirement Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement, the Retirement Plan has less than $3 million in
assets, excluding money market funds, invested in Applicable
Investments; or

30
<PAGE>

(iii) the Retirement Plan has less than 500 eligible employees, as
determined by the Merrill Lynch plan conversion manager, on the date
the Retirement Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement.

Retirement Plans recordkept on a daily basis by Merrill Lynch or an
independent recordkeeper under a contract with Merrill Lynch that are currently
investing in Class B shares of the Davis Mutual Funds convert to Class A shares
once the Retirement Plan has reached $5 million invested in Applicable
Investments. The Retirement Plan will receive a Retirement Plan level share
conversion. The Funds may make similar exceptions for other financial
institutions sponsoring or administering similar benefit plans.

CLASS C SHARES. Class C shares are offered at net asset value without
a sales charge at the time of purchase. Class C shares redeemed within one year
of purchase will be subject to a 1% charge upon redemption. Class C shares do
not have a conversion feature. The Funds will not accept any purchases of Class
C shares when Class A shares may be purchased at net asset value.

The Distributor will pay a commission to the firm responsible for the
sale of Class C shares. No other fees will be paid by the Distributor during
the one-year period following purchase. The Distributor will be reimbursed for
the commission paid from 12b-1 fees paid by the Funds during the one-year
period. If Class C shares are redeemed within the one-year period after
purchase, the 1% redemption charge will be paid to the Distributor. After Class
C shares have been outstanding for more than one year, the Distributor will
make quarterly payments to the firm responsible for the sale of the shares in
amounts equal to 0.75% of the annual average daily net asset value of such
shares for sales fees and 0.25% of the annual average daily net asset value of
such shares for service and maintenance fees.

CONTINGENT DEFERRED SALES CHARGES. Any contingent deferred sales
charge ("CDSC") imposed upon the redemption of Class A, Class B or Class C
shares is a percentage of the lesser of (i) the net asset value of the shares
redeemed or (ii) the original cost of such shares. No CDSC is imposed when you
redeem amounts derived from (a) increases in the value of shares redeemed above
the net cost of such shares or (b) certain shares with respect to which the
Funds did not pay a commission on issuance, including shares acquired through
reinvestment of dividend income and capital gains distributions. Upon request
for a redemption, shares not subject to the CDSC will be redeemed first.
Thereafter, shares held the longest will be the first to be redeemed.

The CDSC on Class A, B, and C shares that are subject to a CDSC will
be waived if the redemption relates to the following: (a) in the event of the
total disability (as evidenced by a determination by the federal Social
Security Administration) of the shareholder (including registered joint owner)
occurring after the purchase of the shares being redeemed; (b) in the event of
the death of the shareholder (including a registered joint owner); (c) for
redemptions made pursuant to an automatic withdrawal plan in an amount, on an
annual basis, up to 12% of the value of the account at the time the shareholder
elects to participate in the automatic withdrawal plan; (d) for redemptions
from a qualified retirement plan or IRA that constitute a tax-free return of
excess contributions to avoid tax penalty; (e) on redemptions of shares sold to
directors, officers, and employees of any fund for which the Adviser acts as
investment adviser, or officers and employees of the Adviser, Sub-Adviser, or
Distributor, including former directors and officers and immediate family
members of all of the foregoing, and any employee benefit or payroll deduction
plan established by or for such persons; and (f) on redemptions pursuant to the
right of the Company to liquidate a shareholder's account if the aggregate net
asset value of the shares held in such account falls below an established
minimum amount.

CLASS Y SHARES. Class Y shares are offered through a separate
Prospectus to (i) trust companies, bank trusts, endowments, pension plans or
foundations ("Institutions) acting on behalf of their own account or one or
more clients for which such Institution acts in a fiduciary capacity and
investing at least $5,000,000 at any one time; (ii) any state, county, city,
department, authority or similar agency which invests at least $5,000,000
("Government Entities"); and (iii) any investor with an account established
under a "wrap account" or other similar fee-based program sponsored and
maintained by a registered broker-dealer approved by the Fund's Distributor
("Wrap Program Investors"). Wrap Program Investors may only purchase Class Y
shares through the sponsors of such programs who have entered into agreements
with Davis Distributors, LLC.

31
<PAGE>

Wrap Program Investors should be aware that both Class A and Class Y
shares are made available by the Fund at net asset value to sponsors of wrap
programs. However, Class A shares are subject to additional expenses under the
Fund's Rule 12b-1 Plan and sponsors of wrap programs utilizing Class A shares
are generally entitled to payments under the Plan. If the sponsor has selected
Class A shares, investors should discuss these charges with their program's
sponsor and weigh the benefits of any services to be provided by the sponsor
against the higher expenses paid by Class A shareholders.

SPECIAL SERVICES

PROTOTYPE RETIREMENT PLANS. The Distributor and certain qualified
dealers have available prototype retirement plans (e.g. 401(k), profit sharing,
money purchase, Simplified Employee Pension ("SEP") plans, model 403(b) and 457
plans for charitable, educational and governmental entities) sponsored by the
Company for corporations and self-employed individuals. The Distributor and
certain qualified dealers also have prototype Individual Retirement Account
("IRA") plans (deductible IRAs, non-deductible IRAs, including "Roth IRAs", and
educational IRAs) and SIMPLE IRA plans for both individuals and employers.
These plans utilize the shares of the Company and other Davis Funds as their
investment vehicle. State Street acts as custodian or trustee for such plans,
and charges the participant $10 to establish each account and an annual
maintenance fee of $10 per social security number. Such fees will be redeemed
automatically at year end from your account, unless you elect to pay the fee
directly prior to such time.

AUTOMATIC INVESTMENT PLAN. You may arrange for automatic monthly
investing whereby State Street will be authorized to initiate a debit to your
bank account of a specific amount (minimum $25) each month which will be used
to purchase the Funds shares. The account minimums of $1,000 for non-retirement
accounts and $250 for retirement accounts will be waived, if pursuant to the
automatic investment plan, the account balance will meet the minimum investment
requirements within twelve months of the initial investment. For institutions
that are members of the Automated Clearing House system (ACH), such purchases
can be processed electronically on any day of the month between the 4th and
28th day of each month. After each automatic investment, you will receive a
transaction confirmation, and the debit should be reflected on your next bank
statement. You may terminate the Automatic Investment Plan at any time. If you
desire to utilize this plan, you may use the appropriate designation on the
Application Form. Class Y shares are not eligible to participate in the
Automatic Investment Plan.

DIVIDEND DIVERSIFICATION PROGRAM. You may also establish a dividend
diversification program which allows you to have all dividends and any other
distributions automatically invested in shares of one or more of the Davis
Funds, subject to state securities law requirements and the minimum investment
requirements set forth below. You must receive a current prospectus for the
other fund or funds prior to investment. Shares will be purchased at the chosen
fund's net asset value on the dividend payment date. A dividend diversification
account must be in the same registration as the distributing fund account and
must be of the same class of shares. All accounts established or utilized under
this program must have a minimum initial value, and all subsequent investments
must be at least $25. This program can be amended or terminated at any time,
upon at least 60 days' notice. If you would like to participate in this
program, you may use the appropriate designation on the Application Form. Class
Y shares are not eligible to participate in the Dividend Diversification
Program.

TELEPHONE PRIVILEGE. Unless you have provided in your application that
the telephone privilege is not to be available, the telephone privilege is
automatically available under certain circumstances for exchanging shares and
for redeeming shares. BY EXERCISING THE TELEPHONE PRIVILEGE TO SELL OR EXCHANGE
SHARES, YOU AGREE THAT THE DISTRIBUTOR SHALL NOT BE LIABLE FOR FOLLOWING
TELEPHONE INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE. Reasonable procedures
will be employed to confirm that such instructions are genuine and if not
employed, the Company may be liable for unauthorized instructions. Such
procedures will include a request for personal identification (account or
social security number) and tape recording of the instructions. You should be
aware that during unusual market conditions we might have difficulty in
accepting telephone requests, in which case you should contact us by mail.

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<PAGE>

EXCHANGE OF SHARES

GENERAL. The exchange privilege is a convenient way to buy shares in
other Davis Funds in order to respond to changes in your goals or in market
conditions. If such goals or market conditions change, the Davis Funds offer a
variety of investment objectives that includes common stock funds, tax-exempt,
government and corporate bond funds, and a money market fund. However, the
Funds are intended as long-term investments and are not intended for short-term
trades. Shares of a particular class of a fund may be exchanged only for shares
of the same class of another Davis Fund except that Class A shareholders who
are eligible to purchase Class Y shares may exchange their shares for Class Y
shares of the Fund. All of the Davis Funds offer Class A, Class B, Class C and
Class Y shares. The shares to be received upon exchange must be legally
available for sale in your state. For Class A, Class B or Class C shares the
net asset value of the initial shares being acquired must meet the required
minimum of $1,000 unless such exchange is under the Automatic Exchange Program
described below. For Class Y shares the net asset value of the initial shares
being acquired must be at least $5,000,000 for Institutions and Government
Entities or minimums set by wrap program sponsors.

Shares may be exchanged at relative net asset value without any
additional charge. However, if any shares being exchanged are subject to an
escrow or segregated account pursuant to the terms of a Statement of Intention
or a CDSC, such shares will be exchanged at relative net asset value, but the
escrow or segregated account will continue with respect to the shares acquired
in the exchange. In addition, the terms of any CDSC, or redemption fee
applicable at the time of exchange, will continue to apply to any shares
acquired upon exchange.

Before you decide to make an exchange, you must obtain the current
prospectus of the desired fund. Call your broker or the Distributor for
information and a prospectus for any of the other Davis Funds registered in
your state. Read the prospectus carefully. If you decide to exchange your
shares, contact your broker/dealer, the Distributor, or send State Street a
written unconditional request for the exchange and follow the instructions
regarding delivery of share certificates contained in the section on
"Redemption of Shares." A medallion signature guarantee is not required for
such an exchange. However, if shares are also redeemed for cash in connection
with the exchange transaction, a medallion signature guarantee may be required.
A medallion signature guarantee is 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. Your dealer may charge an
additional fee for handling an exercise of the exchange privilege.

An exchange involves both a redemption and a purchase, and normally
both are done on the same day. However, in certain instances such as where a
large redemption is involved, the investment of redemption proceeds into shares
of other Davis Funds may take up to seven days. For federal income tax
purposes, exchanges between funds are treated as a sale and purchase.
Therefore, there will usually be a recognizable capital gain or loss due to an
exchange. An exchange between different classes of the same fund is not a
taxable event.

The number of times you may exchange shares among the Davis Funds
within a specified period of time may be limited at the discretion of the
Distributor. Currently, more than four exchanges out of a fund during a
twelve-month period are not permitted without the prior written approval of the
Distributor. The Company reserves the right to terminate or amend the exchange
privilege at any time upon 60 days' notice.

BY TELEPHONE. You may exchange shares by telephone into accounts with
identical registrations. Please see the discussion of procedures in respect to
telephone instructions in the section entitled "Telephone Privilege," as such
procedures are also applicable to exchanges.

AUTOMATIC EXCHANGE PROGRAM. The Company also offers an automatic
monthly exchange program. All accounts established or utilized under this
program must have the same registration and a minimum initial value of at least
$250. All subsequent exchanges must have a value of at least $25. Each month,
shares will be simultaneously redeemed and purchased at the chosen fund's
applicable price. If you would like to participate in this program, you may use
the appropriate designation on the Application Form.

REDEMPTION OF SHARES

33
<PAGE>

GENERAL. You can redeem, or sell back to the Company, all or part of
your shares at any time at net asset value less any applicable sales charges.
You can do this by sending a written request to State Street Bank and Trust
Company, c/o The Davis Funds, P.O. Box 8406, Boston, MA 02266-8406, indicating
how many of your shares or what dollar amount you want to redeem. If more than
one person owns the shares to be redeemed, all owners must sign the request.
The signatures on the request must correspond to the account from which the
shares are being redeemed.

Sometimes State Street needs more documents to verify authority to
make a redemption. This usually happens when the owner is a corporation,
partnership or fiduciary (such as a trustee or the executor of an estate) or if
the person making the request is not the registered owner of the shares.

If shares to be redeemed are represented by a certificate, the
certificate must be signed by the owner or owners and must be sent to State
Street with the request.

For the protection of all shareholders, the Company also requires that
signatures appearing on a share certificate, stock power or redemption request
where the proceeds would be more than $50,000, must be medallion signature
guaranteed by an eligible guarantor institution, such as a securities
broker-dealer, or a commercial bank. A medallion signature guarantee is also
required in the event that any modification to the Company's application is
made after the account is established, including the selection of the Expedited
Redemption Privilege. In some situations such as where corporations, trusts, or
estates are involved, additional documents may be necessary to effect the
redemption. The transfer agent may reject a request from any of the foregoing
eligible guarantors, if such guarantor does not satisfy the transfer agent's
written standards or procedures, or if such guarantor is not a member or
participant of a medallion signature guarantee program. This provision also
applies to exchanges when there is also a redemption for cash. A medallion
signature guarantee on redemption requests where the proceeds would be $50,000
or less is not required, provided that such proceeds are being sent to the
address of record and, in order to ensure authenticity of an address change,
such address of record has not been changed within the last 30 days. All
notifications of address changes must be in writing.

Redemption proceeds are normally paid to you within seven days after
State Street receives your proper redemption request. Payment for redemptions
can be suspended under certain emergency conditions determined by the
Securities and Exchange Commission or if the New York Stock Exchange is closed
for other than customary or holiday closings. If any of the shares redeemed
were just bought by you, payment to you may be delayed until your purchase
check has cleared (which usually takes up to 15 days from the purchase date).
You can avoid any redemption delay by paying for your shares with a bank wire
or federal funds.

Redemptions are ordinarily paid to you in cash. However, the Company's
Board of Directors is authorized to decide if conditions exist making cash
payments undesirable, (although the Board has never reached such a decision).
If the Board of Directors should decide to make payments other than in cash,
redemptions could be paid in securities, valued at the value used in computing
a fund's net asset value. There would be brokerage costs incurred by the
shareholder in selling such redemption proceeds. We must, however, redeem
shares solely in cash up to the lesser of $250,000 or 1% of the Fund's net
asset value, whichever is smaller, during any 90-day period for any one
shareholder.

Your shares may also be redeemed through participating dealers. Under
this method, the Distributor repurchases the shares from your dealer, if your
dealer is a member of the Distributor's selling group. Your dealer may, but is
not required to, use this method in selling back your shares and may place
repurchase request by telephone or wire. Your dealer may charge you a service
fee or commission. No such charge is incurred if you redeem your own shares
through State Street rather than having a dealer arrange for a repurchase.

EXPEDITED REDEMPTION PRIVILEGE. Expedited Redemption Privilege:
Investors with accounts other than prototype retirement plans and IRAs may
instruct State Street to establish banking instructions for the purpose of a
future expedited redemption. Class Y shareholders are not eligible for the
expedited redemption privilege. Expedited redemption privilege allows the
shareholder to instruct State Street to forward redemption proceeds to their
checking or savings account at the their commercial banking institution.

34
<PAGE>

Shareholders may establish expedited redemption privilege by (a)
completion of the expedited redemption privilege section at the time the
account is established, (b) written instruction signed by all shareholders with
their signature medallion guaranteed, or (c) completion of the Davis Funds
Account Service Form by all shareholders with their signature(s) medallion
guaranteed. In each case, the shareholders must submit a copy of a voided check
or encoded deposit slip. With the voided check or encoded deposit slip, State
Street can verify the correct banking instructions.

Once the expedited redemption privilege is established, proceeds may
be sent via expedited redemption privilege by notifying Davis Distributors by
(a) telephone request from the registered shareholder(s) (b) telephone request
from the registered representative of a Qualified Dealer, or (c) written
request signed by the registered shareholder.

Redemption proceeds may be delivered by federal funds wire or by
Automated Clearing House (ACH). Proceeds delivered by federal funds wire should
be received the business day following the redemption transaction. There is a
$5.00 charge by State Street for federal funds wire service and the receiving
bank may charge for this service. Proceeds delivered by ACH should be received
within two business days following the redemption transaction. State Street
does not charge for this service. Certain financial institutions may not accept
proceeds by either of these methods except by arrangement with its
correspondent bank or unless such institution is a member of the Federal
Reserve System.

BY TELEPHONE. You can redeem shares by telephone and receive a check
by mail, but please keep in mind:

The check can only be issued for up to $25,000;
The check can only be issued to the registered owner (who
must be an individual);
The check can only be sent to the address of record; and
Your current address of record must have been on file for 30 days.

AUTOMATIC WITHDRAWALS PLAN. Under the Automatic Withdrawals Plan, you
can indicate to State Street how many dollars you would like to receive each
month or each quarter. Your account must have a value of at least $10,000 to
start a plan. On shares that are redeemed you will receive the payment you have
requested approximately on the 25th day of the month. Withdrawals involve
redemption of shares and may produce gain or loss for income tax purposes.
Shares of the funds initially acquired by exchange from any of the other Davis
Funds will remain subject to an escrow or segregated account to which any of
the exchanged shares were subject. If you utilize this program, any applicable
CDSCs will be imposed on such shares redeemed. Purchase of additional shares
concurrent with withdrawals may be disadvantageous to you because of tax and
sales load consequences. If the amount you withdraw exceeds the dividends on
your shares, your account will suffer depletion. You may terminate your
Automatic Withdrawals Plan at any time without charge or penalty. The Company
reserves the right to terminate or modify the Automatic Withdrawals Plan at any
time. Class Y shares are not eligible for the Automatic Withdrawal Plan.

INVOLUNTARY REDEMPTIONS. To relieve the Company of the cost of
maintaining uneconomical accounts, the Company may effect the redemption of
shares at net asset value in any account if the account, due to shareholder
redemptions, has a value of less than $250. At least 60 days prior to such
involuntary redemption, the Company will mail a notice to the shareholder so
that an additional purchase may be effected to avoid such redemption.

SUBSEQUENT REPURCHASES. After some or all of your shares are redeemed
or repurchased, you may decide to put back all or part of your proceeds into
the same Class of a fund's shares. Any such shares will be issued without sales
charge at the net asset value next determined after you have returned the
amount of your proceeds. In addition, any applicable CDSC assessed on such
shares will be returned to the account. Shares will be deemed to have been
purchased on the original purchase date for purposes of calculating the CDSC
and the conversion period. This can be done by sending State Street or the
Distributor a letter, together with a check for the reinstatement amount. The
letter must be received, together with the payment, within 30 days after the
redemption or repurchase. You can only use this privilege once.

35
<PAGE>

Section IV: General Information

DETERMINING THE PRICE OF SHARES

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

The price per share for purchases or redemptions made directly through
State Street is generally the value next computed after State Street receives
the purchase order or redemption request. In order for your purchase order or
redemption request to be effective on the day you place your order with your
broker-dealer or other financial institution, such broker-dealer or financial
institution must (i) receive your order before 4:00 p.m. Eastern time and (ii)
promptly transmit the order to State Street. The broker-dealer or financial
institution is responsible for promptly transmitting purchase orders or
redemption requests to State Street so that you may receive the same day's net
asset value. Note that in the case of redemptions and repurchases of shares
owned by corporations, trusts, or estates, or of shares represented by
outstanding certificates, State Street may require additional documents to
effect the redemption and the applicable price will be determined as of the
close of the next computation following the receipt of the required
documentation or outstanding certificates. See "Redemption of Shares."

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

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

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

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

YEAR 2000 AND EURO CONVERSION ISSUES

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

36
<PAGE>

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

EURO CONVERSION ISSUES. Accurate pricing of the Company's assets
depends upon accurate valuation of securities denominated in foreign
currencies. On January 1, 1999, eleven of the fifteen member states of the
European Union are scheduled to convert to a common currency, the "euro."
Conversion to the euro may present Service Providers with technical challenges
to adapt information technology and other systems to accommodate
euro-denominated transactions. The euro conversion also may affect market risk
with respect to the foreign securities which the Company invests in.

Difficulties with Year 2000 or Euro Conversion issues could have a
negative impact on handling securities trades, payments of interest and
dividends, pricing and account services. Although, at this time, there can be
no assurance that there will be no adverse impact on the Funds, the Service
Providers have advised the Funds that they have been actively working on
necessary changes to their computer systems to prepare for the Year 2000 and
the Euro Conversion and expect that their systems, and those of other parties
they deal with, will be adapted in time for these events. In addition, there
can be no assurance that the companies which the Funds invest in will not
experience difficulties with Year 2000 or Euro Conversion issues which may
negatively effect the market value of those companies.

DIVIDENDS AND DISTRIBUTIONS

There are two sources of income, net income and realized capital gains
made to you by the Funds. You will receive confirmation statements for
dividends declared and shares purchased through reinvestment of dividends. You
will also receive confirmations after each purchase and after each redemption.
Different classes of shares may be expected to have different expense ratios
due to differing distribution services fees and certain other expenses. Classes
with higher expense ratios will pay correspondingly lower dividends than
Classes with lower expense ratios. For tax purposes, information concerning
distributions will be mailed annually to shareholders.

Shareholders have the option to receive all dividends and
distributions in cash, to have all dividends and distributions reinvested, or
to have income dividends paid in cash and capital gain distributions
reinvested. Reinvestment of all dividends and distributions is automatic for
accounts utilizing the Automatic Withdrawals Plan. The reinvestment of
dividends and distributions is made at net asset value (without any initial or
contingent deferred sales charge) on the payment date.

For the protection of the shareholder, upon receipt of the second
dividend check which has been returned to State Street as undeliverable,
undelivered dividends will be invested in additional shares at the current net
asset value and the account designated as a dividend reinvestment account.

Information concerning distributions will be mailed to shareholders
annually. Shareholders have the option to receive all dividends and
distributions in cash, to have all dividends and distributions reinvested, or
to have income dividends paid in cash and capital gain distributions
reinvested. The reinvestment of dividends and distributions is made at net
asset value (without any sales charge) on the dividend payment date. Upon
receipt of the second dividend check which has been returned to State Street as
undeliverable, undelivered dividends will be invested in additional shares at
the current net asset value and the account designated as a dividend
reinvestment account.

FEDERAL INCOME TAXES

This section is not intended to be a full discussion of all the
aspects of the federal income tax law and its effects on the Funds and their
shareholders. Shareholders may be subject to state and local taxes on
distributions. Each investor should consult his or her own tax adviser
regarding the effect of federal, state, and local taxes on any investment in
the Funds.

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<PAGE>

The Funds intend to continue to qualify as a regulated investment
company under the Internal Revenue Code (the "Code"), and if so qualified, will
not be liable for federal income tax to the extent its earnings are
distributed, except in respect to realization of the "built-in gains" as
described below. If, for any calendar year, the distribution of earnings
required under the Code exceeds the amount distributed, an excise tax, equal to
4% of the excess, will be imposed on the applicable fund. The Funds intend to
make distributions during each calendar year sufficient to prevent imposition
of the excise tax.

Distributions of net investment income and net realized short-term
capital gains will be taxable to shareholders as ordinary income. Distributions
of net long-term capital gains (other than the built-in gains as discussed
below) will be taxable to shareholders as long-term capital gain regardless of
how long the shares have been held. Distributions will be treated the same for
tax purposes whether received in cash or in additional shares. Dividends
declared in the last calendar month to shareholders of record in such month and
paid by the end of the following January are treated as received by the
shareholder in the year in which they are declared. A gain or loss for tax
purposes may be realized on the redemption of shares. If the shareholder
realizes a loss on the sale or exchange of any shares held for six months or
less and if the shareholder received a capital gain distribution during that
period, then the loss is treated as a long-term capital loss to the extent of
such distribution.

On October 12, 1990, Davis New York Venture Fund acquired by merger
the investment portfolio of Mulford Securities Corp., a private investment
company which, on the date of the merger, owned securities with a fair market
value in excess of their cost ("Mulford built-in gains"). For a period of ten
years after the merger, to the extent that the Fund realizes any net Mulford
built-in gains in any year, the fund will incur a capital gains tax and will
distribute to shareholders only the excess of the amount of the net gains
realized over the amount of the tax. Such distributions will be taxable as
ordinary income. (The Fund will be reimbursed for the tax it pays through an
escrow established for this purpose under the terms of the merger.)

PERFORMANCE DATA

From time to time, the Funds may advertise information regarding their
performance. Such information will be calculated separately for each class of
shares. These performance figures are based upon historical results and are not
intended to indicate future performance.

TOTAL RETURN AND AVERAGE ANNUAL TOTAL RETURN

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

<TABLE>
<CAPTION>
Cumulative
Davis New York Venture Fund Total Return 1 Average Annual Total Return 2
- --------------------------- ------------ ---------------------------
<S> <C> <C>
Class A Shares
One year ended July 31, 1998.........................................5.88% 5.88%
Five years ended July 31, 1998.....................................154.58% 20.55%
Ten years ended July 31, 1998......................................499.28% 19.59%
Period from February 17, 1969 through July 31, 1998
(life of class) ..................................................5860.85% 14.88%

Class B Shares
One year ended July 31, 1998.........................................6.22% 6.22%
Period from December 1, 1994 through July 31, 1998 (life of class).153.82% 28.93%

Class C Shares
One year ended July 31, 1998.........................................9.27% 9.27%
Period from December 20, 1994 through July 31, 1998
(life of class) ...................................................150.34% 28.91%

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<PAGE>

Class Y Shares
One year ended July 31, 1998........................................11.48% 11.48%
Period from October 2, 1996 through July 31, 1998 (life of class)...61.32% 29.91%

Davis Growth & Income Fund

Class A Shares
Period from May 1, 1998 through July 31, 1998 (life of class)......(6.57%) (6.57%)

Class B Shares
Period from May 4, 1998 through July 31, 1998 (life of class)......(6.02%) (6.02%)

Class C Shares
Period from May 4, 1998 through July 31, 1998 (life of class)......(3.08%) (3.08%)

Class Y Shares
Period from May 4, 1998 through July 31, 1998 (life of class)......(1.80%) (1.80%)
</TABLE>

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

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

P(1+T)n = ERV

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

T = average annual total return

n = number of years

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

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

39
<PAGE>

30 DAY SEC YIELD

The 30 Day SEC Yield (defined below) with respect to each class of
shares of the Davis Growth & Income Fund for the period ended June 30, 1998, is
as follows:

Class A shares 1.92%
Class B shares 1.33%
Class C shares 1.37%
Class Y shares 2.44%

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

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

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

b = expenses accrued for the period.

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

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

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

OTHER FUND STATISTICS

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

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

The Funds' 1998 Annual Report contains additional performance
information and will be made available upon request and without charge by
calling Davis Funds toll-free at 1-800-279-0279, Monday-Friday, 7 a.m. to 4
p.m. Mountain Time.

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APPENDIX A

QUALITY RATINGS OF DEBT SECURITIES

MOODY'S CORPORATE BOND RATINGS

Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are unlikely to impair
the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than Aaa
securities.

A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade-obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e. they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements as their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments, or of maintenance of
other terms of the contract over any longer period of time, may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

STANDARD & POOR'S CORPORATE BOND RATINGS

AAA - Debt rated `AAA' has the highest rating assigned by Standard and Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA - Debt rated `AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A - Debt rated `A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB - Debt rated `BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

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BB - Debt rated `BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The `BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied `BBB-' rating.

B - Debt rated `B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The `B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied `BB' or `BB-'
rating.

CCC - Debt rated `CCC' has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The `CCC' rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied `B' or `B-' rating.

CC - The rating `CC' is typically applied to debt subordinated to senior debt
that is assigned an actual or implied `CCC' rating.

C - The rating `C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied `CCC-' debt rating. The `C' rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

CI - The rating `CI' is reserved for income bonds on which no interest is being
paid.

D - Debt rated `D' is in payment default. The `D' rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The `D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

MOODY'S COMMERCIAL PAPER RATINGS

Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1 (superior capacity), Prime-2 (strong capacity) and
Prime-3 (acceptable capacity). In assigning ratings to an issuer which
represents that its commercial paper obligations are supported by the credit of
another entity or entities, Moody's evaluates the financial strength of the
indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment.

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

The S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from `A' for the highest
quality to `D' for the lowest. Issues assigned an `A' rating are regarded as
having the greatest capacity for timely payment. Within the `A' category, the
numbers 1, 2 and 3 indicate relative degrees of safety. The addition of a plus
sign to the category A-1 denotes that the issue is determined to possess
overwhelming safety characteristics.

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APPENDIX B

TERMS AND CONDITIONS FOR A STATEMENT OF INTENTION (CLASS A SHARES ONLY)

TERMS OF ESCROW:

1. Out of my initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified in this Statement will be held in escrow by State
Street in the form of shares (computed to the nearest full share at the public
offering price applicable to the initial purchase hereunder) registered in my
name. For example, if the minimum amount specified under this statement is
$100,000 and the public offering price applicable to transactions of $100,000
is $10 a share, 500 shares (with a value of $5,000) would be held in escrow.

2. In the event I should exchange some or all of my shares to those of another
mutual fund for which Davis Distributors, LLC, acts as distributor, according
to the terms of this prospectus, I hereby authorize State Street to escrow the
applicable number of shares of the new fund, until such time as this Statement
is complete.

3. If my total purchases are at least equal to the intended purchases, the
shares in escrow will be delivered to me or to my order.

4. If my total purchases are less than the intended purchases, I will remit to
Davis Distributors, LLC, the difference in the dollar amount of sales charge
actually paid by me and the sales charge which I would have paid if the total
purchase had been made at a single time. If remittance is not made within 20
days after written request by Davis Distributors, LLC, or my dealer, State
Street will redeem an appropriate number of the escrowed shares in order to
realize such difference.

5. I hereby irrevocably constitute and appoint State Street my attorney to
surrender for redemption any or all escrowed shares with full power of
substitution in the premises.

6. Shares remaining after the redemption referred to in Paragraph No. 4 will be
credited to my account.

7. The duties of State Street are only such as are herein provided being purely
ministerial in nature, and it shall incur no liability whatever except for
willful misconduct or gross negligence so long as it has acted in good faith.
It shall be under no responsibility other than faithfully to follow the
instructions herein. It may consult with legal counsel and shall be fully
protected in any action taken in good faith in accordance with advice from such
counsel. It shall not be required to defend any legal proceedings which may be
instituted against it in respect of the subject matter of this Agreement unless
requested to do so and indemnified to its satisfaction against the cost and
expense of such defense.

8. If my total purchases are more than the intended purchases and such total is
sufficient to qualify for an additional quantity discount, a retroactive price
adjustment shall be made for all purchases made under such Statement to reflect
the quantity discount applicable to the aggregate amount of such purchases
during the thirteen-month period.