<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 2-29858
POST-EFFECTIVE AMENDMENT NO. 60
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-1701
AMENDMENT NO. 35
DAVIS NEW YORK VENTURE FUND, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
(1-520-434-3771)
Agents For Service: Thomas D. Tays, Esq.
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, AZ 85706
(520) 434-3771
-or-
Arthur Don, Esq.
D'Ancona & Pflaum
111 East Wacker Drive
Suite 2800
Chicago IL 60601-4205
(1-312-602-2048)
It is proposed that this filing will become effective:
----- Immediately upon filing pursuant to paragraph (b)
----- On _________ , pursuant to paragraph (b)
----- 60 days after filing pursuant to paragraph (a)(1)
X On December 1, 2000, pursuant to paragraph (a) of Rule
----- 485
----- 75 days after filing pursuant to paragraph (a)(2)
<PAGE>
_______ On_______________, pursuant to paragraph (a)(2) of Rule 485
Title of Securities being Registered: Common Stock of:
(1) DAVIS NEW YORK VENTURE FUND
(2) DAVIS GROWTH & INCOME FUND
FORM N-1A
DAVIS NEW YORK VENTURE FUND, INC.
CLASS A, CLASS B AND CLASS C SHARES
POST-EFFECTIVE AMENDMENT NO. 60 TO REGISTRATION
STATEMENT NO. 2-29858 UNDER THE SECURITIES ACT OF 1933
AND AMENDMENT NO. 35 UNDER THE INVESTMENT COMPANY ACT
OF 1940 TO REGISTRATION STATEMENT NO. 811-1701.
CROSS REFERENCE SHEET
---------------------
N-1A
ITEM NO. PART A CAPTION OR PLACEMENT: PROSPECTUS FOR CLASS ABC SHARES
-------- ------------------------------------------------------------
(Both Davis New York Venture Fund and Davis Growth & Income
Fund prospectuses are organized in the same manner.)
1 Front and Back Cover pages
2,4 Risk Spectrum;
Overview of the Fund:
Investment Objective and Strategy
Principal Risks
Fund Performance
3 Overview of the Fund: Fees and Expenses
5 2000 Annual Report
6. Who is Responsible for Your Davis Account
7. Once You Invest in the Fund
How to Open an Account
How to Buy, Sell and Exchange Shares
8 How to Choose a Share Class
9 Overview of the Fund: Financial Highlights
N-1A
ITEM NO. PART A CAPTION OR PLACEMENT: PROSPECTUS FOR CLASS Y SHARES
-------- -----------------------------------------------------------
(Both Davis New York Venture Fund and Davis Growth & Income
Fund prospectuses are organized in the same manner.)
1 Front and Back Cover pages
2,4 Risk Spectrum;
<PAGE>
Overview of the Fund:
Investment Objective and Strategy
Principal Risks
Fund Performance
3 Overview of the Fund:Fees and Expenses
5 2000 Annual Report
6 Who is Responsible for Your Davis Account
7 Once You Invest in the Fund
How to Open an Account
How to Buy, Sell and Exchange Shares
8 Not Applicable
9 Overview of the Fund: Financial Highlights
N-1A
ITEM NO. PART B CAPTION OR PLACEMENT:
-------- ----------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
(a single SAI covers both Davis New York Venture Fund and
Davis Growth & Income Fund. The single SAI covers Class A,
B, C and Y shares)
10 Cover Page
11 Organization of the Company
12 Portfolio Securities
Other Investment Practices
Investment Restrictions
13 Directors and Officers
Directors Compensation Table
14 Certain Shareholders of the Fund
15 Investment Advisory Services
Distribution of Company Shares
Other Important Service Providers
16 Portfolio Transactions
17 Organization of the Company
18 Purchase of Shares
Telephone Privilege
Exchange of Shares
Redemption of Shares
19 Federal Income Taxes
20 Distribution of Company Shares
21 Performance Data
22 Annual Report Incorporated by Reference
<PAGE>
Draft 9,28,00
DAVIS NEW YORK VENTURE FUND
Prospectus and Application Form
Class A shares
Class B shares
Class C shares
December 1, 2000
The Securities and Exchange Commission has not approved or disapproved of these
securities. The Securities and Exchange Commission has not determined whether
this prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.
Over 25 Years Of Reliable Investing
1
<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 Davis Funds
Privacy Notice
How to Choose a Share Class
How to Open an Account
How to Buy, Sell and Exchange Shares
Davis Funds: Over 25 Years of Reliable Investing
Other Fund Documents
2
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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
capitalization 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 companies' 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. We consider selling a company
if the company no longer exhibits the characteristics that we believe foster
sustainable long-term growth, minimize risk and enhance the potential for
superior long-term returns.
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. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. This section
describes what we think are the most significant factors that can cause the
Fund's performance to suffer.
o MARKET RISK. The market value of shares of common stock can change rapidly
and unpredictably as a result of political or economic events having little
or nothing to do with the performance of the companies we invest in.
o COMPANY RISK. The price of a common stock varies with the success or
failure of the company issuing the stock. 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.
3
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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
year-to-year performance and by showing how the Fund's average annual returns
for one, five and 10 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
1990 (2.90%)
1991 40.55%
1992 12.18%
1993 16.09%
1994 (1.93%)
1995 40.56%
1996 26.54%
1997 33.68%
1998 14.73%
1999 XX.XX%
DURING THE PERIOD SHOWN ABOVE, THE HIGHEST QUARTERLY RETURN WAS XX% FOR THE XX
QUARTER OF XX, AND THE WORST QUARTERLY RETURN WAS XX% FOR THE XX QUARTER OF XX.
YEAR-TO-DATE PERFORMANCE AS OF 10/31/00 (UNANNUALIZED) WAS XX.XX%.
The bar 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.
4
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DAVIS NEW YORK VENTURE FUND
AVERAGE ANNUAL TOTAL RETURNS
(For the periods ended December 31, 1999)
--------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS LIFE
OF CLASS
--------------------------------------------------------------------------------
CLASS A sHARES* XX% XX% XX% XX%
(SINCE 2/17/69)
--------------------------------------------------------------------------------
S&P 500 INDEX XX% XX% XX% XX%
--------------------------------------------------------------------------------
CLASS B SHARES* XX% XX NA XX%
(SINCE 12/1/94)
--------------------------------------------------------------------------------
S&P 500 INDEX XX% XX NA XX%
--------------------------------------------------------------------------------
CLASS C SHARES* XX% XX NA XX%
(SINCE 12/20/94)
--------------------------------------------------------------------------------
S&P 500 INDEX XX% XX NA XX%
--------------------------------------------------------------------------------
* Figures reflect sales charges.
FEES AND EXPENSES OF THE FUND
FEES YOU MAY PAY AS A DAVIS NEW YORK VENTURE FUND SHAREHOLDER
(Paid Directly from Your Investment)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a 4.75% None None
percentage of offering price)
-------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) Imposed on Redemptions 0.75% 4.00% 1.00%
(as a percentage of the lesser of the net asset value of the
shares redeemed or the total cost o such shares)
-------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends None None None
-------------------------------------------------------------------------------------------------------------------
Exchange Fee None None None
-------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES FOR FISCAL YEAR ENDING JULY 31, 2000
(Deducted from the Fund's Assets)
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
--------------------------------------------------------------------------------
Management Fees 0.XX% 0.XX% 0.XX%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25% 1.00% 1.00%
--------------------------------------------------------------------------------
Other Expenses 0.XX% 0.XX% 0.XX%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.XX% 1.XX% 1.XX%
--------------------------------------------------------------------------------
5
<PAGE>
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. 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:
--------------------------------------------------------------------------------
IF YOU SELL YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
IN...
--------------------------------------------------------------------------------
CLASS A SHARES $xxx $xx $xxx $xxxx
--------------------------------------------------------------------------------
CLASS B SHARES $xx $xxx $xxxx $xxxx*
--------------------------------------------------------------------------------
CLASS C SHARES $xxx $xxx $xxx $xxxx
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
IF YOU STILL HOLD YOUR 1 YEAR 3 YEARS 5 YEARS 10 YEARS
SHARES AFTER...
--------------------------------------------------------------------------------
CLASS A SHARES $xxx $xxx $xxx $xxxx
--------------------------------------------------------------------------------
CLASS B SHARES $xxx $xxx $xxx $xxxx*
--------------------------------------------------------------------------------
CLASS C SHARES $xxx $xxx $xxx $xxxx
--------------------------------------------------------------------------------
* Class B shares expenses for the 10 year period include 2 years of Class A
shares expenses, since Class B shares automatically convert to Class A shares
after 8 years.
FINANCIAL HIGHLIGHTS
These tables are designed to show you the financial performance of Davis New
York Venture Fund for the past five years, assuming that all dividends and
capital gains have been reinvested. Some of the information reflects financial
results for a single Fund share. The total returns represent the rate that an
investor would have earned (or lost) money on an investment in the Fund.
KPMG LLP has audited the information for fiscal years 1998, 1999, and 2000. KPMG
LLP's report, along with the Fund's financial statements, is included in the
annual report, which is available upon request. Another accounting firm audited
the information for the previous fiscal years.
6
<PAGE>
DAVIS NEW YORK VENTURE FUND
CLASS A SHARES
xxx
DAVIS NEW YORK VENTURE FUND
CLASS B SHARES
xxx
DAVIS NEW YORK VENTURE FUND
CLASS C SHARES
XXX
7
<PAGE>
WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT
A number of entities provide services to Davis New York Venture Fund. This
section describes 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 the Statement of Additional
Information, see the back cover of this prospectus.
INVESTMENT ADVISER
DAVIS SELECTED ADVISERS, LP
Referred to throughout this prospectus as "Davis Selected Advisers"
2949 East Elvira Road
Suite 101
Tucson, Arizona 85706
o Provides investment advice for Davis New York Venture Fund's portfolio.
o Manages the 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, 2000 (based on average net
assets): 0.xx%.
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.
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
Referred to throughout this prospectus as "State Street Bank and Trust" PO Box
8406 Boston, MA 02266-8406
o Prices Davis New York Venture 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
Davis Funds' board of directors has general supervisory responsibilities of
Davis Funds. The directors monitor and supervise the performance of the
investment adviser, sub-advisers and other service providers, monitors Davis
Funds' business and investment activities, and determines whether or not to
renew agreements with the adviser and sub-adviser.
DISTRIBUTOR
8
<PAGE>
DAVIS DISTRIBUTORS, LLC
Referred to throughout this prospectus as "Davis Distributors"
2949 East Elvira Road
Suite 101
Tucson, AZ 85706
o Oversees purchases of shares and promotional activities for Davis Funds
and other mutual funds managed by Davis Selected Advisers.
o Wholly owned subsidiary of Davis Selected Advisers.
SENIOR RESEARCH ADVISER AND FOUNDER OF THE ADVISER
SHELBY M.C. DAVIS
Responsibilities:
o Senior Research Adviser of Davis Selected Advisers.
o Founder of Davis Selected Advisers.
Other Experience:
o Served as a Portfolio Manager of Davis New York Venture Fund from its
inception in February 1969 until February 1997.
o Served as a 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 President and a Portfolio Manager of Davis New York Venture Fund since
o October 1995.
o Also manages other equity funds advised by Davis Selected Advisers.
o President of Davis New York Venture Fund, Inc.
Other Experience:
o Assistant Portfolio Manager and research analyst working with Shelby M.C.
Davis from September 1989 to September 1995.
KENNETH CHARLES FEINBERG
Responsibilities:
o A Portfolio Manager of Davis New York Venture Fund since May 1998.
o Also manages other equity funds advised by Davis Selected Advisers.
Other Experience:
o Research analyst at Davis Selected Advisers since December 1994.
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 Code of Ethics.
HOW WE MANAGE THE FUND
9
<PAGE>
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.
For more details concerning current investments and market outlook, please see
the most recent annual or semi-annual report.
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 those possessing
several of the characteristics that are listed in the following chart.
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.
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.
10
<PAGE>
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.
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 companies we are investing in. 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 the company issuing the stock. 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.
11
<PAGE>
OTHER SECURITIES AND INVESTMENT STRATEGIES
The Fund invests primarily in the common stock of large capitalization domestic
companies. There are other securities in which the Fund may invest, and other
investment strategies which the Fund may employ, but they are not principal
investment strategies. The Statement of Additional Information discusses these
securities and investment strategies.
The Fund uses short-term investments to 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 market values of common stock of large capitalization domestic companies, 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 and the short-term investments will not
contribute to the Fund's investment objective.
RISK SPECTRUM
Davis Selected Advisers manages nine 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 FUNDS
LOW MED HIGH
-------------------------------------------------------------------------------
DAVIS GROWTH OPPORTUNITY FUND o
-------------------------------------------------------------------------------
DAVIS INTERNATIONAL TOTAL RETURN FUND o
-------------------------------------------------------------------------------
DAVIS FINANCIAL FUND o
-------------------------------------------------------------------------------
DAVIS REAL ESTATE FUND o
-------------------------------------------------------------------------------
DAVIS NEW YORK VENTURE FUND o
-------------------------------------------------------------------------------
DAVIS GROWTH & INCOME FUND o
-------------------------------------------------------------------------------
DAVIS CONVERTIBLE SECURITIES FUND o
-------------------------------------------------------------------------------
DAVIS GOVERNMENT BOND FUND o
-------------------------------------------------------------------------------
DAVIS GOVERNMENT MONEY MARKET FUND o
-------------------------------------------------------------------------------
For more information about any of the other Davis Funds, including risks, fees
and expenses, ask for a prospectus. Read it carefully before investing or
sending money.
ONCE YOU INVEST IN DAVIS FUNDS
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.
12
<PAGE>
Net asset values for all Davis Funds are determined each business day. A
business day is 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 Funds 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 price 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 may be valued by an independent pricing service. In
particular, the Fund relies on a professional pricing service that has
experience in valuing securities with limited resale markets so as to
obtain prices that reflect the market as accurately as possible.
o Discount securities purchased with a maturity of one year or less are
usually valued at amortized cost.
o Securities with unavailable market quotations and other assets are valued
at "fair value"--which is determined by the Board of Directors.
If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time 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 net asset value of the Fund's
shares may change on days when shareholders will not be able to purchase or
redeem the Fund's shares.
The value of securities denominated in foreign currencies and traded in foreign
markets will have their value converted into the U.S. dollar equivalents at the
prevailing market rate as computed by State Street Bank and Trust. 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. Dividends are distributions to shareholders of net investment
income and short-term capital gains on investments.
o CAPITAL GAINS. Capital gains are 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 usually
distributed in November or December. Unless you choose otherwise, the Fund
automatically reinvests your dividends and capital gains in additional Fund
shares.
13
<PAGE>
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 Davis Funds Application Form or on the IRS Form W-9 that your Tax
Identification Number is correct and you are not subject to backup withholding.
Backup withholding is required for taxpayers who are subject to back taxes for
failure to report all interest and dividends.
If you fail to report a correct Taxpayer Identification 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.
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, the same class of shares, and have a minimum initial value of $250. 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 10
days' notice. To participate in this program, fill out the cross-reinvest
information in the appropriate section of the Application Form. Once your
account has been opened and you wish to establish this program, call for more
information.
HOW YOUR DIVIDENDS AND CAPITAL GAINS ARE TAXED
o If Davis New York Venture Fund pays dividends, the dividends 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, the net capital
gains 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), whether received in cash or
reinvested in shares, are taxable in the year in which thy were declared, not
the year they are paid.
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 dividends and capital
gains which may be received from Davis New York Venture Fund.
PRIVACY NOTICE
The Funds and the Adviser collect nonpublic personal information about you from
the following sources;
1. Information we receive from you on applications or other forms; and
2. Information about your transactions with the Funds
14
<PAGE>
The Funds and the Adviser may disclose nonpublic personal information about you
to the following types of third parties: Financial service providers, such as
broker-dealers of record and our transfer agent.
We restrict access to nonpublic personal information about you to those
employees who need to know that information to provide products or services to
you. We maintain physical, electronic, and procedural safeguards that comply
with federal standards to guard your nonpublic personal information.
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 four classes of
shares: A, B, C and Y. Class Y shares, which are offered through a separate
prospectus, are available only to institutional investors. 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.
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 up to 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 ongoing
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
asset value--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
--------------------------------------------------------------------------------
AMOUNT OF PURCHASE SALES CHARGE SALES CHARGE AMOUNT OF SALES
(PERCENTAGE OF (PERCENTAGE OF NET CHARGE RETAINED BY
OFFERING PRICE) AMOUNT INVESTED) THE DEALER
(PERCENTAGE OF
OFFERING PRICE)
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--------------------------------------------------------------------------------
Under $100,000 4.75% 5.0% 4.0%
--------------------------------------------------------------------------------
$100,000 - $250,000 3.5% 3.6% 3.0%
--------------------------------------------------------------------------------
$250,000 - $500,000 2.5% 2.6% 2.0%
--------------------------------------------------------------------------------
$500,000 - $750,000 2.0% 2.0% 1.75%
--------------------------------------------------------------------------------
$750,000 - $1 million 1.0% 1.0% 0.75%
--------------------------------------------------------------------------------
$1 million or more* None None None
--------------------------------------------------------------------------------
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*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:
-------------------------------------------------------------------------------
PURCHASE AMOUNT COMMISSION
-------------------------------------------------------------------------------
First $3 million 0.75%
-------------------------------------------------------------------------------
Next $2 million 0.50%
-------------------------------------------------------------------------------
Over $5 million 0.25%
-------------------------------------------------------------------------------
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.
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 trust 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, with the exception of purchases into Davis Government Money
Market Fund. 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 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, 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.
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<PAGE>
CLASS A SHARES FRONT-END SALES CHARGE WAIVERS
We do not impose 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 Funds, their
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.
o State and local governments.
o Shareholders making purchases in certain accounts offered by securities
firms which have entered into contracts with the Fund and which charge fees
based upon assets in the account.
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 front-end 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 1.00% of the average daily net asset
value each year you hold the shares. Higher expenses translate into lower
annual return on net asset value.
CLASS B SHARES DEFERRED SALES CHARGES
--------------------------------------------------------------------------------
SALES MADE AFTER PURCHASE AMOUNT OF DEFERRED SALES CHARGE
--------------------------------------------------------------------------------
Year 1 4%
--------------------------------------------------------------------------------
Years 2-3 3%
--------------------------------------------------------------------------------
Years 4-5 2%
--------------------------------------------------------------------------------
Year 6 1%
--------------------------------------------------------------------------------
Years 7-8 None
--------------------------------------------------------------------------------
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 front-end
sales charge:
o You buy the shares at net asset value (no front-end 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 1.00%.
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<PAGE>
o The Fund pays a distribution fee of 1.00% of the average daily net asset
value 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 the amount of your account value represented
by an increase in net asset value over the initial purchase price, or on shares
acquired through dividend reinvestments or capital gain distributions.
To determine whether the deferred sales charge applies to a redemption, the Fund
redeems shares in the following order:
o Shares acquired by reinvestment of dividends and capital gain
distributions,
o Shares which are no longer subject to the deferred sales charge,
o Shares which have increased in value beyond their original cost,
o Shares held the longest, but still subject to the deferred sales charge.
DEFERRED SALES CHARGE WAIVERS
We will waive deferred sales charges on sales of Class A, B and C shares if:
o You sell Class A 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 after the purchase of shares,
o You sell shares under the Automatic Withdrawal Plan if the aggregate value
of the redeemed shares does not exceed 12% of the account's value*,
o You sell shares under a qualified retirement plan or IRA that constitute a
tax-free return of contributions to avoid a penalty,
o Your Fund sells the remaining shares in your account under an Involuntary
Redemption,
o You qualify for an exception relating to defined contribution plans. These
exceptions are described in the Statement of Additional Information,
o You are a director, officer or employee of Davis Selected Advisers or one
of its affiliates (or a family member of a director, officer or employee).
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<PAGE>
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.
* An Automatic Withdrawal Plan may be established as either a percentage or a
fixed dollar amount, either way. the shares which may be redeemed without a
sales charge are recalculated as a percentage of the current market value of the
account as of the date of each withdrawal. If established as a percentage no
sales charge will be incurred regardless of market fluctuations. If established
as a fixed dollar amount a sales charge may be incurred if the market value of
the account decreases. If you redeem shares in addition to those redeemed
pursuant to the Automatic Withdrawal Plan, a deferred sales charge may be
imposed on those shares and on any subsequent redemptions within a 12-month
period, regardless of whether such redemptions are pursuant to an Automatic
Withdrawal Plan.
If you have any additional questions about choosing a share class, please call
us toll-free at 1-800-279-0279, during business hours, 9 a.m. to 6 p.m. Eastern
Standard Time. If you still are not sure about which class is best for you,
contact your financial advisor.
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.
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 at the address stated
below. You must sign the Application Form. Include a check made payable to DAVIS
FUNDS or, in the case of a retirement account, the custodian or trustee. All
purchases by check should be in U.S. dollars. DAVIS FUNDS WILL NOT ACCEPT
THIRD-PARTY CHECKS.
2. BY DEALER. You may have your dealer order and pay for the shares. In this
case, you must pay your dealer directly. Your dealer will then order the shares
from our distributor, Davis Distributors. Please note that your dealer may
charge a service fee or commission for buying these shares.
3. BY WIRE. You may wire federal funds directly to our service provider, State
Street Bank and Trust. Before you wire an initial investment, you must call
Davis Distributors and obtain an account number and Application Form. A customer
service representative will assist you with your initial investment by wire.
After the initial wire purchase is made, you will need to return the Application
Form to State Street Bank and Trust. To ensure that the purchase is credited
properly, follow these wire instructions:
State Street Bank and Trust Company
Boston, MA 02210
Attn: Mutual Fund Services
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 for any Fund other than Davis Government Money Market Fund
if you are a Class A shareholder who is not
20
<PAGE>
participating in the Automatic Withdrawal Plan. If you are eligible and wish to
receive certificates, please submit a letter of instruction with your
Application Form. Once your account has been established, the shareholder(s) may
request that certificates be sent to the address of record by calling our
customer service department.
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 Simplified Employee Pension (SEP) IRAs
o 403(b) Plans
State Street Bank and Trust acts as custodian (service provider) for the
retirement plans and charges the participant a $10 maintenance fee each year
regardless of the number of plans established 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.
21
<PAGE>
HOW TO BUY, SELL AND EXCHANGE SHARES
Once you have established an account with Davis Funds, you can add to--or
withdraw from--your investment. 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.
An exchange occurs when you sell shares in one Davis Fund to buy shares in
another Davis Fund in the same class of shares in response to changes in your
goals or in market conditions.
THREE WAYS TO BUY, SELL AND EXCHANGE SHARES
1. BY TELEPHONE. Call 1-800-279-0279. You can speak directly with a Davis Funds
representative during our business hours (9:00 a.m. to 6:00 p.m. Eastern
Standard Time) 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.
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.
22
<PAGE>
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 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, the class of shares you wish to buy and your
account number.
When you buy shares through a dealer, you may be charged a service fee or
commission for performing the transaction.
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
5th and 28th if the institution that services your bank account is a member of
the Automated Clearing House system. After each automatic investment, you will
receive a transaction confirmation, and the debit should show up on your next
bank statement.
To sign up for the Automatic Investment Plan, fill out the appropriate section
of the Application Form. After your account has been opened and you wish to
establish this plan, you must submit a letter of instruction signed by the
account owner(s). 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 DAVIS FUNDS.
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 the redemption request. You may be required to have the owners'
signatures medallion-guaranteed (see "Medallion Signature Guarantee" below).
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 recently purchased, payment to you
23
<PAGE>
will be delayed until your purchase check has cleared, up to a maximum of 15
days from the date of purchase.
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
1.00% 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 You will need a medallion signature guarantee on a stock power or
redemption request for sales paid by check totaling more than $100,000.
However, if your address of record has changed in the last 30 days, or if
you wish to send redemption proceeds to a third party, you will need a
medallion signature guarantee for all sales.
o If a certificate was issued for the shares you wish to sell, the
certificate must be sent by certified mail to State Street Bank and Trust
and accompanied by a letter of instruction signed by the owner(s).
o A sale may produce a gain or loss. Gains may be subject to tax.
MEDALLION SIGNATURE GUARANTEE. A written endorsement from an eligible guarantor
institution that the signature(s) on the written request is(are) valid. Eligible
guarantors include federally insured financial institutions, registered
broker-dealers, or participants in a recognized medallion signature guarantee
program. Davis Funds cannot accept guarantees from institutions that do not
provide reimbursement in cases of fraud. No other form of signature verification
can be accepted.
STOCK POWER. A letter of instruction 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. Any transfer of ownership requires that all
shareholders have their signatures medallion-guaranteed.
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 its
Board of Directors decides that making cash payments would harm the Fund.
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.
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. Shares will be
purchased at the current price, into the same Davis Fund, and into the same
account. You must send a letter to our service provider, State Street Bank and
Trust, along with a check for the repurchased shares.
24
<PAGE>
IF YOUR ACCOUNT FALLS BELOW $250
If your account balance falls below $250 as a result of a redemption or
exchange, we may sell your remaining shares in this 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.
MAKING AUTOMATIC WITHDRAWALS
If your account balance is more than $10,000, you can sell a set dollar or
percentage amount each month or quarter. 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. When you participate in this plan, known as the AUTOMATIC
WITHDRAWAL PLAN, shares are sold so that you will receive payment by one of
three methods:
o You may receive funds at the address of record provided that this address
has been unchanged for a period of not less than 30 days. These funds are
sent by check on or after the 25th day of the month.
o You may also choose to receive funds by Automated Clearing House (ACH), to
the banking institution of your choice. You may elect an ACH draft date
between the 5th and the 28th days of the month. You must complete the
appropriate section of the Application Form. Once your account has been
established, you must submit a letter of instruction with a medallion
signature guarantee to execute an Automatic Withdrawal Plan by ACH.
o You may have funds sent by check to a third party at an address other than
the address of record. You must complete the appropriate section of the
Application Form. Once your account has been established, you must submit a
letter of instruction with a medallion signature guarantee to designate a
third party payee.
You may stop automatic withdrawals at any time without charge or penalty by
calling Davis Distributors or by notifying the service agent in writing.
WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT
You may be eligible to have your sale proceeds electronically transferred to a
commercial bank account. This is known as an ELECTRONIC WIRE PRIVILEGE. There is
a $5 charge by State Street Bank and Trust for wire service, and receiving banks
may also charge for this service. Payment through Automated Clearing House will
usually arrive at your bank two banking days after the sale. Payment by wire is
usually credited to your bank account on the next business day after the sale.
While State Street Bank and Trust will accept electronic wire sales by telephone
or dealer, you still need to fill out and submit the information under the
Electronic Wire Privilege section of the Application Form. Once your account has
been opened and you have not previously established the Electronic Wire
Privilege, you must submit a letter of instruction with a medallion signature
guarantee signed by all registered owners at the time of the wire sale. If you
are currently an investor with a non-retirement account and have already
established this privilege, you may call our customer service department to
execute a wire sale by telephone.
EXCHANGING SHARES
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<PAGE>
You can sell shares of Davis New York Venture Fund to buy 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 for a non-retirement
account (unless you are participating in the Automatic Exchange Program).
Exchanges are normally performed on the same day of the request if received in
good order by 4 p.m. Eastern Time.
Shares in different Davis Funds may be exchanged at relative net asset value.
However, if any Davis Fund shares being exchanged are subject to a deferred
sales charge, Statement of Intention, or other limitation, the limitation will
continue to apply to the shares received in the exchange. When you exchange
shares in a Davis Fund for shares in Davis Government Money Market Fund, the
holding period for any deferred sales charge does not continue during the time
that you own Davis Government Money Market Fund shares. For example, Class B
shares are subject to a declining sales charge for six years. Any period that
you are invested in shares of Davis Government Money Market Fund will be added
to the six-year declining sales charge period.
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 wish to
exchange shares for which you hold share certificates, these certificates must
be sent by certified mail to State Street Bank and Trust accompanied by a letter
of instruction signed by the owner(s). If your shares are being sold for cash,
this is known as a redemption. Please see the section WHAT YOU NEED TO KNOW
BEFORE YOU SELL YOUR SHARES for restrictions that might apply to this type of
transaction.
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.
There are limits to the number of exchanges you can make each year. Currently,
four exchanges between Funds are allowed during a 12-month period. You may make
an unlimited number of exchanges out of Davis Government Money Market Fund.
Automatic exchanges are excluded from this provision. 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
GOVERNMENT BOND FUND
Davis Government Bond Fund
GOVERNMENT MONEY MARKET FUND
Davis Government Money Market Fund
26
<PAGE>
For more information about any of the other Davis Funds, including risks, fees
and expenses, ask for a prospectus. Read it carefully before investing or
sending money.
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. Once your account has been
established, you may contact our customer service department to establish this
program.
TELEPHONE TRANSACTIONS
A benefit of investing through Davis Funds is that you can use our automated
telephone system to buy, sell or exchange shares. If you do not wish to have
this option activated for your account, complete 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 (9:00 a.m. to
6:00 p.m. Eastern Standard 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.
If you wish to sell shares by telephone and receive a check in the mail:
o The maximum amount that can be issued is $100,000.
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 Distributors.
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
Funds are not liable for following telephone instructions believed to be genuine
(that is, directed by the account holder or registered representative on file).
We use certain procedures to confirm that your instructions are genuine,
including a request for personal identification 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 telephone.
INTERNET TRANSACTIONS
You can use our web site: www.davisfunds.com to review your account balance and
recent transactions. Your account may qualify for the privilege to purchase,
sell or exchange shares online through the Internet. You may also request
confirmation statements and tax summary information be mailed to the address on
file. Please review our web site for more complete information. . If you do not
wish to have this option activated for your account, please contact our customer
service department.
To access your accounts, you will need the name of the fund in which you are
invested, an account number and your social security number. Davis Funds
provides written confirmation of your initial access and any time you buy, sell
or exchange shares. You must also establish a unique and confidential Personal
Identification Number (PIN). This PIN is required each time you access your
Davis account online.
27
<PAGE>
When you transact over the Internet, you agree that Davis Funds are not liable
for processing instructions believed to be genuine.
YOU CAN USE DAVIS DIRECT ACCESS TO:
>> GET THE PRICE, TOTAL RETURN, AND FUND DESCRIPTION FOR ANY DAVIS FUND,
>> CHECK YOUR ACCOUNT BALANCE AND OTHER ACCOUNT INFORMATION,
>> BUY, SELL AND EXCHANGE SHARES,
>> GET THE MAILING ADDRESS AND WIRE INSTRUCTIONS FOR ANY DAVIS FUND,
>> REQUEST LITERATURE ABOUT ANY DAVIS FUND.
28
<PAGE>
DAVIS FUNDS:
OVER 25 YEARS OF RELIABLE INVESTING
Davis Selected Advisers, investment adviser of 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, Senior Research Adviser and Founder of Davis Selected
Advisers. The Davis strategy is still followed today by the third generation of
family members: Christopher C. Davis and Andrew A. Davis serve as Portfolio
Managers for many funds and institutional accounts managed by Davis Selected
Advisers.
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
Davis Funds, please call us or visit our Web site.
29
<PAGE>
ADDRESS AND TELEPHONE GUIDE
OUR TELEPHONE NUMBER: OUR SERVICE PROVIDER'S REGULAR MAILING ADDRESS:
1-800-279-0279 State Street Bank and Trust Company
c/o Davis Funds
PO Box 8406
Boston, MA 02266-8406
OUR MAILING ADDRESS:
Davis Funds
2949 East Elvira Road
Suite 101
Tucson, AZ 85706
OUR INTERNET ADDRESS: OUR SERVICE PROVIDER'S OVERNIGHT MAILING ADDRESS:
http://www.davisfunds.com State Street Bank and Trust Company
c/o Davis Funds
66 Brooks Drive
Braintree, MA 02184
30
<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. An ANNUAL REPORT discusses the
market conditions and investment strategies that significantly affected Fund
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.
Davis 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 through
Friday, 9 a.m. to 6 p.m. Eastern Standard Time. You may also call this
number for account 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 1-202-942-8090. Additional copies of this information can
be obtained, for a duplicating fee, by electronic request at
[email protected] or 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 FUNDS
2949 EAST ELVIRA ROAD
SUITE 101
TUCSON, AZ 85706
1-800-279-0279
Investment Company Act File No. 811-1701
<PAGE>
Draft 09.27.00
DAVIS NEW YORK VENTURE FUND
Prospectus
Class Y shares
December 1, 2000
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.
Over 25 Years Of Reliable Investing
1
<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 Davis Funds
Privacy Notice
How to Open an Account
How to Buy, Sell and Exchange Shares
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
capitalization 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 companies' 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. We consider selling a company
if the company no longer exhibits the characteristics that we believe foster
sustainable long-term growth, minimize risk and enhance the potential for
superior long-term returns.
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. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. This section
describes what we think are the most significant factors that can cause the
Fund's performance to suffer.
o MARKET RISK. The market value of shares of common stock can change rapidly
and unpredictably as a result of political or economic events having little
or nothing to do with the performance of the companies we invest in.
o COMPANY RISK. The price of a common stock varies with the success or
failure of the company issuing the stock. 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.
3
<PAGE>
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
year-to-year performance and by showing how the Fund's average annual returns
for one year and since inception 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 THREE-YEAR PERIOD
(As of December 31st of each year)
CLASS Y SHARES
1997 33.68%
1998 14.73%
1999 xx.xx%
During the period shown above, the highest quarterly return was xx% for the xx
quarter of xx, and the worst quarterly return was xx% for the xx quarter of xx.
Year-to-date performance as of 10/31/00 (unannualized) was xx.xx%.
4
<PAGE>
DAVIS NEW YORK VENTURE FUND AVERAGE ANNUAL TOTAL RETURNS
(For the periods ending December 31, 1999)
-------------------------------------------------------------------------------
1 YEAR LIFE OF CLASS
(SINCE 10/2/96)
-------------------------------------------------------------------------------
Class Y shares xx% Xx%
-------------------------------------------------------------------------------
S&P 500 Index Xx% xx%
-------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
FEES YOU MAY PAY AS A DAVIS NEW YORK VENTURE FUND SHAREHOLDER
(Paid Directly from Your Investment)
-------------------------------------------------------------------------------
CLASS Y
SHARES
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES FOR FISCAL YEAR ENDING JULY 31, 2000
(Deducted from the Fund's Assets)
-------------------------------------------------------------------------------
CLASS Y
SHARES
-------------------------------------------------------------------------------
Management Fees 0.xx%
-------------------------------------------------------------------------------
Distribution (12b-1) Fees None
-------------------------------------------------------------------------------
Other Expenses 0.xx%
-------------------------------------------------------------------------------
Total Annual Operating Expenses 0.xx%
-------------------------------------------------------------------------------
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. The example also assumes that your investment has a 5.00% 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:
-------------------------------------------------------------------------------
IF YOU SELL YOUR 1 YEAR 3 YEARS 5 YEARS 10 YEARS
SHARES IN...
-------------------------------------------------------------------------------
CLASS Y SHARES $xx $xxx $xxx $xx
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
5
<PAGE>
This table is designed to show you the financial performance of Davis New York
Venture Fund for the period from October 2, 1996 (when the Fund began selling
Class Y shares to the public) through July 31, 2000, assuming that all dividends
and capital gains have been reinvested. Some of the information reflects
financial results for a single Fund share. The total returns represent the rate
that an investor would have earned (or lost) money on an investment in the Fund.
KPMG LLP has audited the information for the fiscal years ended 2000, 1999 and
1998. KPMG LLP's report, along with the Fund's financial statements, is included
in the annual report, which is available upon request. Another firm audited the
information for the previous fiscal year.
6
<PAGE>
DAVIS NEW YORK VENTURE FUND
CLASS Y SHARES
7
<PAGE>
WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT
A number of entities provide services to Davis New York Venture Fund. This
section describes 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 the Statement of Additional
Information, see the back cover of this prospectus.
INVESTMENT ADVISER
DAVIS SELECTED ADVISERS, LP
Referred to throughout this prospectus as "Davis Selected Advisers"
2949 East Elvira Road
Suite 101
Tucson, Arizona 85706
o Provides investment advice for Davis New York Venture Fund's portfolio.
o Manages the 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, 2000 (based on average net
assets): 0.xx%.
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.
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
Referred to throughout this prospectus as "State Street Bank and Trust"
PO Box 8406
Boston, MA 02266-8406
o Prices Davis New York Venture 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
Davis Funds' board of directors has general supervisory responsibilities of
Davis Funds. The directors monitor and supervise the performance of the
investment adviser, sub-advisers and other service providers, monitors Davis
Funds' business and investment activities, and determines whether or not to
renew agreements with the adviser and sub-adviser.
DISTRIBUTOR
8
<PAGE>
DAVIS DISTRIBUTORS, LLC
Referred to throughout this prospectus as "Davis Distributors"
2949 East Elvira Road
Suite 101
Tucson, AZ 85706
o Oversees purchases of shares and promotional activities for Davis Funds and
other mutual funds managed by Davis Selected Advisers.
o Wholly owned subsidiary of Davis Selected Advisers.
SENIOR RESEARCH ADVISER AND FOUNDER OF THE ADVISER
SHELBY M.C. DAVIS
Responsibilities:
o Senior Research Adviser of Davis Selected Advisers.
o Founder of Davis Selected Advisers.
Other Experience:
o Served as a Portfolio Manager of Davis New York Venture Fund from its
inception in February 1969 until February 1997.
o Served as a 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 President and a Portfolio Manager of Davis New York Venture Fund since
October 1995.
o Also manages other equity funds advised by Davis Selected Advisers.
o President of Davis New York Venture Fund, Inc.
Other Experience:
o Assistant Portfolio Manager and research analyst working with Shelby
M.C. Davis from September 1989 to September 1995.
KENNETH CHARLES FEINBERG
Responsibilities:
o A Portfolio Manager of Davis New York Venture Fund since May 1998.
o Also manages other equity funds advised by Davis Selected Advisers.
Other Experience:
o Research analyst at Davis Selected Advisers since December 1994.
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 Code of Ethics.
HOW WE MANAGE THE FUND
9
<PAGE>
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.
For more details concerning current investments and market outlook, please see
the most recent annual or semi-annual report.
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 those possessing
several of the characteristics that are listed in the following chart.
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.
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.
10
<PAGE>
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.
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 companies we are investing in. 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 the company issuing the stock. 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.
11
<PAGE>
OTHER SECURITIES AND INVESTMENT STRATEGIES
The Fund invests primarily in the common stock of large capitalization domestic
companies. There are other securities in which the Fund may invest, and other
investment strategies which the Fund may employ, but they are not principal
investment strategies. The Statement of Additional Information discusses these
securities and investment strategies.
The Fund uses short-term investments to 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 market values of common stock of large capitalization domestic companies, 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 and the short-term investments will not
contribute to the Fund's investment objective.
RISK SPECTRUM
Davis Selected Advisers manages nine 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 FUNDS
LOW MED HIGH
--------------------------------------------------------------------------------
DAVIS GROWTH OPPORTUNITY FUND o
--------------------------------------------------------------------------------
DAVIS INTERNATIONAL TOTAL RETURN FUND o
--------------------------------------------------------------------------------
DAVIS FINANCIAL FUND o
--------------------------------------------------------------------------------
DAVIS REAL ESTATE FUND o
--------------------------------------------------------------------------------
DAVIS NEW YORK VENTURE FUND o
--------------------------------------------------------------------------------
DAVIS GROWTH & INCOME FUND o
--------------------------------------------------------------------------------
DAVIS CONVERTIBLE SECURITIES FUND o
--------------------------------------------------------------------------------
DAVIS GOVERNMENT BOND FUND o
--------------------------------------------------------------------------------
DAVIS GOVERNMENT MONEY MARKET FUND o
--------------------------------------------------------------------------------
For more information about any of the other Davis Funds, including risks, fees
and expenses, ask for a prospectus. Read it carefully before investing or
sending money.
ONCE YOU INVEST IN DAVIS FUNDS
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.
12
<PAGE>
Net asset values for all Davis Funds are determined each business day. A
business day is 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 Funds 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 price 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 may be valued by an independent pricing service. In
particular, the Fund relies on a professional pricing service that has
experience in valuing securities with limited resale markets so as to
obtain prices that reflect the market as accurately as possible.
o Discount securities purchased with a maturity of one year or less are
usually valued at amortized cost.
o Securities with unavailable market quotations and other assets are valued
at "fair value"--which is determined by the Board of Directors.
If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time 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 net asset value of the Fund's
shares may change on days when shareholders will not be able to purchase or
redeem the Fund's shares.
The value of securities denominated in foreign currencies and traded in foreign
markets will have their value converted into the U.S. dollar equivalents at the
prevailing market rate as computed by State Street Bank and Trust. 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. Dividends are distributions to shareholders of net investment
income and short-term capital gains on investments.
o CAPITAL GAINS. Capital gains are 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 usually
distributed in November or December. Unless you choose otherwise, the Fund
automatically reinvests your dividends and capital gains in additional Fund
shares.
13
<PAGE>
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 Davis Funds Application Form or on the IRS Form W-9 that your Tax
Identification Number is correct and you are not subject to backup withholding.
Backup withholding is required for taxpayers who are subject to back taxes for
failure to report all interest and dividends.
If you fail to report a correct Taxpayer Identification 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.
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 the same class of shares. 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 10 days' notice. To participate in this
program, fill out the cross-reinvest information in the appropriate section of
the Application Form. Once your account has been opened and you wish to
establish this program, call for more information.
HOW YOUR DIVIDENDS AND CAPITAL GAINS ARE TAXED
o If Davis New York Venture Fund pays dividends, the dividends 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, the net capital
gains 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), whether received in cash or
reinvested in shares, are taxable in the year in which thy were declared, not
the year they are paid.
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 dividends and capital
gains which may be received from Davis New York Venture Fund.
14
<PAGE>
PRIVACY NOTICE
The Funds and the Adviser collect nonpublic personal information about you from
the following sources;
1. Information we receive from you on applications or other forms; and
2. Information about your transactions with the Funds
The Funds and the Adviser may disclose nonpublic personal information about you
to the following types of third parties: Financial service providers, such as
broker-dealers of record and our transfer agent.
We restrict access to nonpublic personal information about you to those
employees who need to know that information to provide products or services to
you. We maintain physical, electronic, and procedural safeguards that comply
with federal standards to guard your nonpublic personal information.
HOW TO OPEN AN ACCOUNT
You can open an account if:
o You invest at least $5 million for an institution (trust company, bank
trust, endowment, pension plan, foundation) acting on behalf of its own
account or one or more clients.
o You invest at least $5 million for a government entity (a state, county,
city, department, authority or similar government agency).
o You invest with an account established under a "wrap account" or other
fee-based program that is sponsored and maintained by a registered
broker-dealer approved by our distributor, Davis Distributors.
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.
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 at the address stated
below. You must sign the Application Form. Include a check made payable to DAVIS
FUNDS or, in the case of a retirement account, the custodian or trustee. All
purchases by check should be in U.S. dollars. DAVIS FUNDS WILL NOT ACCEPT
THIRD-PARTY CHECKS.
2. BY DEALER. You may have your dealer order and pay for the shares. In this
case, you must pay your dealer directly. Your dealer will then order the shares
from our distributor, Davis Distributors. Please note that your dealer may
charge a service fee or commission for buying these shares.
3. BY WIRE. You may wire federal funds directly to our service provider, State
Street Bank and Trust. Before you wire an initial investment, you must call
Davis Distributors and obtain an account number and Application Form. A customer
service representative will assist you with your initial investment by wire.
After the initial wire purchase is made, you will need to return the Application
Form to State Street Bank and Trust. To ensure that the purchase is credited
properly, follow these wire instructions:
15
<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
HOW TO BUY, SELL AND EXCHANGE SHARES
Once you have established an account with Davis Funds, you can add to -- or
withdraw from -- your investment. 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.
An exchange occurs when you sell shares in one Davis Fund to buy shares in
another Davis Fund in the same class of shares in response to changes in your
goals or in market conditions.
THREE WAYS TO BUY, SELL AND EXCHANGE SHARES
1. BY TELEPHONE. Call 1-800-279-0279. You can speak directly with a Davis Funds
representative during our business hours (9:00 a.m. to 6:00 p.m. Eastern
Standard Time) 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.
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
4:00 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.
16
<PAGE>
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 4:00 p.m. Eastern Time.
o Promptly transmit the order to State Street Bank and Trust.
BUYING MORE SHARES
When you purchase shares by mail, send a check made payable to 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, your account number and that the investment should
be made in Class Y shares.
When you buy shares through a dealer, you may be charged a service fee or
commission for performing the transaction.
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. 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 the redemption request. You may be required to have the owners'
signatures medallion-guaranteed (see "Medallion Signature Guarantee").
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 recently purchased, payment to you will be delayed until
your purchase check has cleared, up to a maximum of 15 days from the date of
purchase.
17
<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
1.00% 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 You will need a medallion signature guarantee on a stock power or
redemption request for sales paid by check totaling more than $100,000.
However, if your address of record has changed in the last 30 days, or if
you wish to send redemption proceeds to a third party, you will need a
medallion signature guarantee for all sales.
o A sale may produce a gain or loss. Gains may be subject to tax.
MEDALLION SIGNATURE GUARANTEE. A written endorsement from an eligible guarantor
institution that the signature(s) on the written request is(are) valid. Eligible
guarantors include federally insured financial institutions, registered
broker-dealers, or participants in a recognized medallion signature guarantee
program. Davis Funds cannot accept guarantees from institutions that do not
provide reimbursement in cases of fraud. No other form of signature verification
can be accepted.
STOCK POWER. A letter of instruction 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. Any transfer of ownership requires that all
shareholders have their signatures medallion-guaranteed.
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 its
Board of Directors decides that making cash payments would harm the Fund.
WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT
You may be eligible to have your sale proceeds electronically transferred to a
commercial bank account. This is known as an ELECTRONIC WIRE PRIVILEGE. There is
a $5 charge by State Street Bank and Trust for wire service, and receiving banks
may also charge for this service. Payment through Automated Clearing House will
usually arrive at your bank two banking days after the sale. Payment by wire is
usually credited to your bank account on the next business day after the sale.
While State Street Bank and Trust will accept electronic wire sales by telephone
or dealer, you still need to fill out and submit the information under the
Electronic Wire Privilege section of the Application Form. Once your account has
been opened and you have not previously established the Electronic Wire
Privilege, you must submit a letter of instruction with a medallion signature
guarantee signed by all registered owners at the time of the wire sale. If you
are currently an investor with a non-retirement account and have already
established this privilege, you may call our customer service department to
execute a wire sale by telephone.
EXCHANGING SHARES
18
<PAGE>
You can sell Class Y shares of Davis New York Venture Fund to buy Class Y shares
in any other Davis Fund. 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 $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 in good order by
4:00 p.m. Eastern Time.
When you exchange shares by mail, you must send our service provider, State
Street Bank and Trust, a written request for the exchange. No medallion
signature guarantee is required unless shares are also being sold for cash,
which is known as a redemption. Please see the section WHAT YOU NEED TO KNOW
BEFORE YOU SELL YOUR SHARES for restrictions that might apply to this type of
transaction.
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.
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
GOVERNMENT BOND 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 risks, fees
and expenses, ask for a prospectus. Read it carefully before investing or
sending money.
TELEPHONE TRANSACTIONS
A benefit of investing through Davis Funds is that you can use our telephone
system to buy, sell or exchange shares. If you do not wish to have this option
activated for your account, you must note this on your Application Form.
When you call Davis Distributors, you can perform a transaction with Davis Funds
in two ways:
19
<PAGE>
o Speak directly with a representative during business hours (9:00 a.m. to
6:00 p.m. Eastern Standard 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.
When you buy, sell or exchange shares over the telephone, you agree that Davis
Funds are not liable for following telephone instructions believed to be genuine
(that is, directed by the account holder or registered representative on file).
We use certain procedures to confirm that your instructions are genuine,
including a request for personal identification 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 telephone.
INTERNET TRANSACTIONS
You can use our web site: www.davisfunds.com to review your account balance and
recent transactions. Your account may qualify for the privilege to purchase,
sell or exchange shares online through the Internet. You may also request
confirmation statements and tax summary information be mailed to the address on
file. Please review our web site for more complete information. . If you do not
wish to have this option activated for your account, please contact our customer
service department.
To access your accounts, you will need the name of the fund in which you are
invested, an account number and your social security number. Davis Funds
provides written confirmation of your initial access and any time you buy, sell
or exchange shares. You must also establish a unique and confidential Personal
Identification Number (PIN). This PIN is required each time you access your
Davis account online.
When you transact over the Internet, you agree that Davis Funds are not liable
for processing instructions believed to be genuine.
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.
20
<PAGE>
DAVIS FUNDS:
OVER 25 YEARS OF RELIABLE INVESTING
Davis Selected Advisers, investment adviser of 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, Senior Research Adviser and Founder of Davis Selected
Advisers. The Davis strategy is still followed today by the third generation of
family members: Christopher C. Davis and Andrew A. Davis serve as Portfolio
Managers for many funds and institutional accounts managed by Davis Selected
Advisers.
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
Davis Funds, please call us or visit our web site.
21
<PAGE>
ADDRESS AND TELEPHONE GUIDE
<TABLE>
<S> <C>
OUR TELEPHONE NUMBER: OUR INTERNET ADDRESS:
1-800-279-0279 http://www.davisfunds.com
OUR MAILING ADDRESS:
Davis Funds
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
OUR SERVICE PROVIDER'S REGULAR MAILING ADDRESS: OUR SERVICE PROVIDER'S OVERNIGHT MAILING
State Street Bank and Trust Company ADDRESS:
c/o Davis Funds c/o Davis Funds
PO Box 8406 66 Brooks Drive
Boston, MA 02266-8406 Braintree, MA 02184
</TABLE>
22
<PAGE>
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. An ANNUAL REPORT discusses the
market conditions and investment strategies that significantly affected Fund
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.
Davis 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 through
Friday, 9:00 a.m. to 6:00 p.m. Eastern Standard Time. You may also call
this number for account 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 1-202-942-8090. Additional copies of this information can
be obtained, for a duplicating fee, by electronic request at
[email protected] or 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 FUNDS
2949 EAST ELVIRA ROAD, SUITE 101
TUCSON, AZ 85706
1-800-279-0279
Investment Company Act File No. 811-1701
23
<PAGE>
Draft 09/28/00
DAVIS GROWTH & INCOME FUND
Prospectus and Application Form
Class A shares
Class B shares
Class C shares
December 1, 2000
The Securities and Exchange Commission has not approved or disapproved of these
securities. The Securities and Exchange Commission has not determined whether
this prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.
Over 25 Years Of Reliable Investing
<PAGE>
TABLE OF CONTENTS
Overview of the Fund
Investment Objectives 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 Davis Funds
Privacy Notice
How to Choose a Share Class
How to Open an Account
How to Buy, Sell and Exchange Shares
Davis Funds: Over 25 Years of Reliable Investing
Other Fund Documents
2
<PAGE>
OVERVIEW OF DAVIS GROWTH & INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGY
Davis Growth & Income Fund's investment objectives are capital growth and
income. We strive to meet these objectives by using a conservative investment
strategy. Ordinarily, most of the Fund's assets are invested in the common stock
of growing companies. However, since the stock market can decline and the value
of individual stocks can suffer in response to uncontrollable and unpredictable
events, we balance Davis Growth & Income Fund's portfolio by buying real estate
securities, convertible securities and bonds. These investments may not respond
to changes in market and general economic conditions in the same ways that
common stocks respond. As a result, they may retain their value better than
common stock, particularly during a general decline in the stock market. In
addition, real estate securities, convertible securities and bonds may earn more
income than common stock. In the current market environment, we expect that
distributions from current income will be low.
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.
Please see the inside back cover page of this prospectus to learn about the
Davis investment philosophy.
Davis Growth & Income Fund's portfolio managers constantly evaluate market
conditions and the Fund's mix of assets to ensure that the Fund owns an
appropriate blend of growth-oriented and income-oriented investments.
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.
DETERMINING IF THIS FUND IS RIGHT FOR YOU
YOU SHOULD CONSIDER INVESTING IN THIS FUND IF:
o You are risk-sensitive, but would like to invest in growing companies.
o You are primarily interested in growth-oriented investments, but want
current income.
o You are looking for a diversified fund to weather varied market cycles.
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 investing for the short-term (less than five years).
o You are primarily interested in current income with minimal risk.
3
<PAGE>
PRINCIPAL RISKS
If you buy shares of Davis Growth & Income Fund, you may lose some or all of the
money that you invest. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. This section
describes what we think are the most significant factors that can cause the
Fund's performance to suffer.
o MARKET RISK. The market value of shares of common stock, real estate
securities, convertible securities, and bonds can change rapidly and
unpredictably as a result of political or economic events having little or
nothing to do with the performance of the companies we invest in.
o COMPANY RISK. The price individual securities varies with the success or
failure of the company issuing the stock. As a result, the success of the
companies in which the Fund invests largely determines the Fund's
performance.
o REAL ESTATE RISK. The value of real estate securities which the Fund may
purchase is subject to risks associated with the ownership of real estate.
These risks are described in the section called HOW WE MANAGE THE FUND.
o INTEREST RATE RISK. The value of fixed-income securities which the Fund
purchases usually declines when current interest rates increase.
o CREDIT RISK. The value of fixed income securities which the Fund purchases
may decline if the issuer of the security experiences difficulty in making
timely interest and principal payments. The Fund may purchase high yield
high-risk debt securities.
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
The bar chart and the table below provide an indication of the risks of
investing in Davis Growth & Income Fund by showing the Fund's average annual
returns for one year and since May 1, 1998 (commencement of operations) 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 GROWTH & INCOME FUND TOTAL RETURN
(As of December 31st)
CLASS A SHARES
1999 xx
During the period shown above, the highest quarterly return was xx% for the xx
quarter of 1999, and the worst quarterly return was xx% for the xx quarter of
1999. Year-to-date performance as of 10/31/00 (unannualized) was xx.xx%.
The bar 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.
4
<PAGE>
DAVIS GROWTH & INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
(For the periods ended December 31,2000)
------------------------------------------------------------------------------
PAST 1 YEAR LIFE
OF CLASS
(SINCE 05/01/98)
------------------------------------------------------------------------------
CLASS A sHARES* Xx% Xx%
------------------------------------------------------------------------------
CLASS B SHARES* Xx% Xx%
------------------------------------------------------------------------------
CLASS C SHARES* Xx% Xx%
------------------------------------------------------------------------------
S&P 500 INDEX Xx% Xx%
------------------------------------------------------------------------------
* Figures reflect sales charges.
5
<PAGE>
FEES AND EXPENSES OF THE FUND
FEES YOU MAY PAY AS A DAVIS GROWTH & INCOME FUND SHAREHOLDER
(Paid Directly from Your Investment)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a 4.75% None None
percentage of offering price)
-----------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) Imposed on Redemptions 0.75% 4.00% 1.00%
(as a percentage of the lesser of the net asset value of the
shares redeemed or the total cost of such shares)
-----------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None None
-----------------------------------------------------------------------------------------------------------------------
Exchange Fee None None None
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES FOR FISCAL YEAR ENDING JULY 31, 2000
(Deducted from the Fund's Assets)
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
-------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.xx% 1.00% 1.00%
-------------------------------------------------------------------------------
Other Expenses 0.xx% 0.xx% 0.xx%
-------------------------------------------------------------------------------
Total Annual Operating Expenses Xx% Xxx% Xxx%
-------------------------------------------------------------------------------
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. 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:
-------------------------------------------------------------------------------
IF YOU SELL YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
IN...
-------------------------------------------------------------------------------
CLASS A SHARES $xxx $xxx $xxxx $xxxx
-------------------------------------------------------------------------------
CLASS B SHARES $xxx $xxx $xxxx $xxxx*
-------------------------------------------------------------------------------
CLASS C SHARES $xxx $xxx $xxxx $xxxx
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
IF YOU STILL HOLD YOUR 1 YEAR 3 YEARS 5 YEARS 10 YEARS
SHARES AFTER...
-------------------------------------------------------------------------------
CLASS A SHARES $xxx $xxx $xxxx $xxxx
-------------------------------------------------------------------------------
CLASS B SHARES $xxx $xxx $xxxx $xxxx*
-------------------------------------------------------------------------------
CLASS C SHARES $xxx $xxx $xxxx $xxxx
-------------------------------------------------------------------------------
* Class B shares expenses for the 10-year period include 2 years of Class A
shares expenses, since Class B shares automatically convert to Class A shares
after 8 years.
6
<PAGE>
FINANCIAL HIGHLIGHTS
These tables are designed to show you the financial performance of Davis Growth
& Income Fund for fiscal year 2000 and the period from May 1, 1998 (when the
Fund began selling shares to the public) through July 31, 1999, assuming that
all dividends and capital gains have been reinvested. Some of the information
reflects financial results for a single Fund share. The total returns represent
the rate that an investor would have earned (or lost) money on an investment in
the Fund.
This information has been derived from the financial statements audited by KPMG
LLP, independent accountants, whose report - along with the Fund's financial
statements - is included in the Fund's most recent annual report to
shareholders, which is available upon request.
7
<PAGE>
DAVIS GROWTH & INCOME FUND
CLASS A AND B SHARES
8
<PAGE>
DAVIS GROWTH & INCOME FUND
CLASS C SHARES
9
<PAGE>
WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT
A number of entities provide services to Davis Growth & Income Fund. This
section describes 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 the Statement of Additional
Information, see the back cover of this prospectus.
INVESTMENT ADVISER
DAVIS SELECTED ADVISERS, LP
Referred to throughout this prospectus as "Davis Selected Advisers"
2949 East Elvira Road
Suite 101
Tucson, Arizona 85706
o Provides investment advice for Davis Growth & Income Fund's portfolio.
o Manages the 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, 2000 (based on average net
assets): 0.xx%.
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.
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
Referred to throughout this prospectus as "State Street Bank and Trust"
PO Box 8406
Boston, MA 02266-8406
o Prices Davis Growth & Income 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.
10
<PAGE>
BOARD OF DIRECTORS
Davis Funds' board of directors has general supervisory responsibilities of the
Davis Funds. The directors monitor and supervise the performance of the
investment adviser, sub-advisers and other service providers, monitors Davis
Funds' business and investment activities, and determines whether or not to
renew agreements with the adviser and sub-adviser.
DISTRIBUTOR
DAVIS DISTRIBUTORS, LLC
Referred to throughout this prospectus as "Davis Distributors"
2949 East Elvira Road
Suite 101
Tucson, AZ 85706
o Oversees purchases of shares and promotional activities for Davis Funds
and other mutual funds managed by Davis Selected Advisers.
o Wholly owned subsidiary of Davis Selected Advisers.
SENIOR RESEARCH ADVISER AND FOUNDER OF THE ADVISER
SHELBY M.C. DAVIS
Responsibilities:
o Senior Research Adviser of Davis Selected Advisers.
o Founder of Davis Selected Advisers.
Other Experience:
o Served as a Portfolio Manager of Davis New York Venture Fund from its
inception in February 1969 until February 1997.
o Served as a 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 President and a Portfolio Manager of Davis Growth & Income Fund. Also
o manages other equity funds advised by Davis Selected Advisers.
Other Experience:
* A Portfolio Manager of Davis New York Venture Fund from October 1995 to the
present.
o Assistant Portfolio Manager and research analyst working with Shelby
M.C. Davis from September 1989 to September 1995.
11
<PAGE>
ANDREW A. DAVIS
Responsibilities:
o Vice President and a Portfolio Manager of Growth & Income Fund.
o A Portfolio Manager of Davis Convertible Securities Fund and Davis Real
Estate Fund since inception of each in 1994.
o Also manages other equity funds advised by Davis Selected Advisers.
Other Experience:
o Vice President 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 Code of Ethics.
HOW WE MANAGE THE FUND
WHAT WE INVEST IN AND WHY
Davis Growth & Income Fund's investment objectives are capital growth and
income. In keeping with the Fund's conservative approach to investing, our
portfolio managers balance the Fund's holdings of common stock with real estate
securities, convertible securities and bonds.
Real estate securities, convertible securities and bonds may be less susceptible
to changes in the stock market than common stocks. As a result, these securities
may retain their value better than common stock, particularly during a general
decline in the stock market. An additional benefit of the Fund's asset mix is
that the common stock in which the Fund invests offer the potential for capital
growth over the long-term, while the real estate securities, convertible
securities and bonds generate current income.
During normal market conditions, approximately 60% of Davis Growth & Income
Fund's assets are common stock. Most of the remaining 40% of the Fund's holdings
generally are real estate securities, convertible securities, bonds and cash
equivalents. The Fund may vary these percentages as market conditions dictate.
Generally, there is no restriction on how much of the Fund's assets our
portfolio managers can invest in any particular type of security. However, some
of the securities that the Fund buys are considered "high yield, high-risk"
investments because they do not have favorable credit ratings. The Fund cannot
devote more than 35% of its assets to such investments.
For more details concerning current investments and market outlook, please see
the most recent annual or semi-annual report.
12
<PAGE>
COMMON STOCK
WHAT THEY ARE. Common stock represents 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).
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 those possessing
several of the characteristics that are listed in the following chart.
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.
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.
13
<PAGE>
WHY WE BUY THEM. Davis Growth & Income 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.
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 companies we are investing in. 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 the company issuing the stock. 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.
REAL ESTATE SECURITIES
WHAT THEY ARE. Real estate securities are issued by companies that are
"principally engaged" in the real estate industry. A company is "principally
engaged" in the real estate industry if it owns real estate or real
estate-related assets that constitute at least 50% of the value of all of its
assets, or if it derives at least 50% of its revenues or net profits from
owning, financing, developing, managing, or selling real estate, or from
offering products or services that are related to real estate. Issuers of real
estate securities include real estate investment trusts (known as "REITs"),
brokers, developers, lenders and companies with substantial real estate holdings
such as paper, lumber, hotel and entertainment companies.
Most of the Fund's real estate securities are, and likely will continue to be,
interests in REITs. REITs pool investors' funds to make real estate-related
investments, such as buying interests in income-producing property or making
loans to real estate developers. The Fund does not invest directly in real
estate.
HOW WE PICK THEM. Davis Growth & Income Fund focuses on REITs and other
companies with first-class management teams who view real estate as a means of
producing steady increases in income and strong returns on capital. We
concentrate heavily on valuation, looking for companies that sell at less than
the present value of their expected cash flow over the next few years.
WHY WE BUY THEM. Real estate securities contribute to both aspects of the Fund's
investment goals because they offer both growth potential and current income.
These securities also contribute to the Fund's diversification strategy. The
values of real estate securities typically do not fluctuate at the same time or
for the same reasons as values of traditional common stock, so real estate
investments may offer a cushion when the stock market is in a slump. Similarly,
the price (and market value) of a real estate security that promises regular
payments may be more stable than the price of a common stock that pays little or
no dividends.
RISKS. Real estate securities are susceptible to the many risks associated with
the direct ownership of real estate, including:
o Declines in property values - because of changes in the economy or the
surrounding area or because a particular region has become less
appealing to tenants.
14
<PAGE>
o Increases in property taxes, operating expenses, interest rates, or
competition.
o Overbuilding.
o Changes in zoning laws.
o Losses from casualty or condemnation.
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 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
WHAT THEY ARE. Convertible securities are securities that can be converted into
or exchanged for other securities. The most common types of convertible
securities are bonds and preferred stock that the holder can exchange for common
stock of the same issuer.
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 we believe 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.
WHY WE BUY THEM. Convertible securities contribute to both aspects of the Fund's
investment goals because they offer both current income and growth potential.
These securities also contribute to the Fund's strategy of holding assets other
than common stock.
For current income, Davis Growth & Income Fund buys convertible debt instruments
like bonds, notes and debentures that entitle the Fund to receive regular
interest payments. Similarly, we buy preferred stock that entitles the Fund to
receive regular dividend payments. These interest and dividend payments
generally exceed the dividend payments that the issuers of our convertible
securities make to holders of their common stock.
Convertible securities have growth potential because if the underlying common
stock begins to increase in value, the holder of the convertible security can
exchange it for common stock and enjoy the benefits of that growth.
RISKS. Convertible securities have characteristics of both equity and debt, so
they present the risks of common stock ownership (discussed in the section
called COMMON STOCK - RISKS) as well as the risks that traditional lenders face.
The debt component of a convertible security poses three types of risk:
o INTEREST RATE SENSITIVITY. If a security pays a fixed interest rate, and
market rates increase, the value of the fixed-rate security should decline.
o CHANGES IN DEBT RATING. If a rating agency gives a 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."
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<PAGE>
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 "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
WHAT THEY ARE. Issuers such as corporations and federal, state and local
governments sell bonds and other debt securities to borrow money. Some debt
securities (often referred to as "coupon bonds") give the holder current income.
Like the borrower on an ordinary loan, the issuer of a coupon bond makes
periodic interest payments to the holders (i.e., the lenders), and agrees to
repay the principal amount borrowed (the price of the bond) when the security
matures. Other debt securities (referred to as "zero coupon bonds") do not
require periodic interest payments, but have the equivalent of a balloon
interest payment when the security matures. In other words, when a zero coupon
bond matures, the issuer pays the holder more money than the issuer borrowed.
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.
WHY WE BUY THEM. The Fund buys debt securities primarily for current income from
regular interest payments. An additional advantage of these securities is that
they diversify the Fund's portfolio, providing some cushion against a fall in
the value of our common stock holdings.
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 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.
ADDITIONAL INFORMATION ABOUT HIGH YIELD, HIGH-RISK DEBT SECURITIES
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.
In evaluating the quality of a debt instrument, rating agencies look at factors
such as the issuer's current financial condition and business prospects, the
value of any collateral that secures the debt and the issuer's history of paying
other debt. Each agency has its own system for "grading" debt. Standard & Poor's
has eleven ratings, ranging from D for securities that are in default to AAA for
securities that are almost certain to be repaid. Moody's Investors Service has
nine ratings, with C being the lowest and Aaa being the highest.
A security is called "investment-grade" if a respected agency assigns it a
favorable credit rating. In contrast, a debt security is considered "high yield,
high-risk" if it is rated BB or lower by Standard and
16
<PAGE>
Poor's, or Ba or lower by Moody's Investors Service. Securities with these low
ratings are also referred to as "junk bonds." Many institutional investors, such
as pension plans and municipal governments, are only permitted to buy
investment-grade debt.
WHY WE BUY THEM. Davis Growth & Income Fund does not specifically seek out high
yield, high-risk debt. However, some of the real estate securities, convertible
securities and bonds that we identify as good investments may happen to fall
into that category.
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, such as 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.
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 Growth & Income Fund buys
them.
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.
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.
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.
17
<PAGE>
OTHER SECURITIES AND INVESTMENT STRATEGIES
There are other securities in which the Fund may invest, and other 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.
RISK SPECTRUM
Davis Selected Advisers manages nine 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 FUNDS
LOW MED HIGH
--------------------------------------------------------------------------------
DAVIS GROWTH OPPORTUNITY FUND o
--------------------------------------------------------------------------------
DAVIS INTERNATIONAL TOTAL RETURN FUND o
--------------------------------------------------------------------------------
DAVIS FINANCIAL FUND o
--------------------------------------------------------------------------------
DAVIS REAL ESTATE FUND o
--------------------------------------------------------------------------------
DAVIS NEW YORK VENTURE FUND o
--------------------------------------------------------------------------------
DAVIS GROWTH & INCOME FUND o
--------------------------------------------------------------------------------
DAVIS CONVERTIBLE SECURITIES FUND o
--------------------------------------------------------------------------------
DAVIS GOVERNMENT BOND FUND o
--------------------------------------------------------------------------------
DAVIS GOVERNMENT MONEY MARKET FUND o
--------------------------------------------------------------------------------
For more information about any of the other Davis Funds, including risks, fees
and expenses, ask for a prospectus. Read it carefully before investing or
sending money.
ONCE YOU INVEST IN DAVIS FUNDS
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 Growth & Income 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.
Net asset values for all Davis Funds are determined each business day. A
business day is 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 Funds 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).
18
<PAGE>
HOW SECURITIES IN THE PORTFOLIO ARE VALUED
We use current market valuations to price the securities in Davis Growth &
Income 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 may be valued by an independent pricing service. In
particular, the Fund relies on a professional pricing service that has
experience in valuing securities with limited resale markets so as to
obtain prices that reflect the market as accurately as possible.
o Discount securities purchased with a maturity of one year or less are
usually valued at amortized cost.
o Securities with unavailable market quotations and other assets are valued
at "fair value"--which is determined by the Board of Directors.
If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time 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 net asset value of the Fund's
shares may change on days when shareholders will not be able to purchase or
redeem the Fund's shares.
The value of securities denominated in foreign currencies and traded in foreign
markets will have their value converted into the U.S. dollar equivalents at the
prevailing market rate as computed by State Street Bank and Trust. 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:
>> DIVIDENDS. Dividends are distributions to shareholders of net investment
income and short-term capital gains on investments.
>> CAPITAL GAINS. Capital gains are profits received by the Fund from the sale
of securities held for the long-term, which are then distributed to
shareholders.
Davis Growth & Income Fund usually pays quarterly dividends and generally
distributes capital gains, if any, 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
19
<PAGE>
must certify on your Davis Funds Application Form or on the IRS Form W-9 that
your Tax Identification Number is correct and you are not subject to backup
withholding. Backup withholding is required for the taxpayers who are subject to
back taxes for failure to report all interest and dividends.
If you fail to report a correct Taxpayer Identification Number, under-reported
dividend or interest income, or are already subject to backup withholding, Davis
Growth & Income Fund is required by law to withhold a portion of any
distributions you may receive--and send it to the U.S. Treasury.
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, the same class of shares, and have a minimum initial value of $250. 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 10
days' notice. To participate in this program, fill out the cross-reinvest
information in the appropriate section of the Application Form. Once your
account has been opened and you wish to establish this program, call for more
information.
HOW YOUR DIVIDENDS AND CAPITAL GAINS ARE TAXED
o If Davis Growth & Income Fund pays dividends, the dividends 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, the net capital gains
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), whether received in cash or
reinvested in shares, are taxable in the year in which thy were declared, not
the year they are paid.
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 dividends and capital
gains which may be received from Davis Growth & Income Fund.
PRIVACY NOTICE
The Funds and the Adviser collect nonpublic personal information about you from
the following sources;
1. Information we receive from you on applications or other forms; and
2. Information about your transactions with the Funds
The Funds and the Adviser may disclose nonpublic personal information about you
to the following types of third parties: Financial service providers, such as
broker-dealers of record and our transfer agent.
We restrict access to nonpublic personal information about you to those
employees who need to know that information to provide products or services to
you. We maintain physical, electronic, and procedural safeguards that comply
with federal standards to guard your nonpublic personal information.
HOW TO CHOOSE A SHARE CLASS
20
<PAGE>
Before you can buy any shares in Davis Growth & Income Fund, you need to decide
which class of shares best suits your needs. The Fund offers four classes of
shares: A, B, C and Y. Class Y shares, which are offered through a separate
prospectus, are available only to institutional investors. 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 Growth & Income 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.
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 up to 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 ongoing
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
asset value--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
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
AMOUNT OF PURCHASE SALES CHARGE SALES CHARGE AMOUNT OF SALES
(PERCENTAGE OF (PERCENTAGE OF NET CHARGE 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 - $250,000 3.5 % 3.6% 3.0%
----------------------------------------------------------------------------------------------------------------
$250,000 - $500,000 2.5 % 2.6% 2.0%
----------------------------------------------------------------------------------------------------------------
$500,000 - $750,000 2.0 % 2.0% 1.75%
----------------------------------------------------------------------------------------------------------------
$750,000 - $1 million 1.0 % 1.0% 0.75%
----------------------------------------------------------------------------------------------------------------
$1 million or more* None None None
----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
*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:
--------------------------------------------------------------------------------
PURCHASE AMOUNT COMMISSION
--------------------------------------------------------------------------------
First $3 million 0.75%
--------------------------------------------------------------------------------
Next $2 million 0.50%
--------------------------------------------------------------------------------
Over $5 million 0.25%
--------------------------------------------------------------------------------
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.
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 trust 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, with the exception of purchases into Davis Government Money
Market Fund. 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 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, 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.
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<PAGE>
CLASS A SHARES FRONT-END SALES CHARGE WAIVERS
We do not impose 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 Funds, their
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.
o State and local governments.
o Shareholders making purchases in certain accounts offered by securities
firms which have entered into contracts with the Fund and which charge fees
based upon assets in the account.
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 front-end 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 1.00% of the average daily net asset
value each year you hold the shares. Higher expenses translate into lower
annual return on net asset value.
CLASS B SHARES DEFERRED SALES CHARGES
-------------------------------------------------------------------------------
SALES MADE AFTER PURCHASE AMOUNT OF DEFERRED SALES CHARGE
-------------------------------------------------------------------------------
Year 1 4%
-------------------------------------------------------------------------------
Years 2-3 3%
-------------------------------------------------------------------------------
Years 4-5 2%
-------------------------------------------------------------------------------
Year 6 1%
-------------------------------------------------------------------------------
Years 7-8 None
-------------------------------------------------------------------------------
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 front-end
sales charge:
o You buy the shares at net asset value (no front-end 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 1.00%.
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<PAGE>
o The Fund pays a distribution fee of 1.00% of the average daily net asset
value 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 the amount of your account value represented
by an increase in net asset value over the initial purchase price, or on shares
acquired through dividend reinvestments or capital gain distributions.
To determine whether the deferred sales charge applies to a redemption, the Fund
redeems shares in the following order:
o Shares acquired by reinvestment of dividends and capital gain
distributions,
o Shares which are no longer subject to the deferred sales charge,
o Shares which have increased in value beyond their original cost,
o Shares held the longest, but still subject to the deferred sales charge.
DEFERRED SALES CHARGE WAIVERS
We will waive deferred sales charges on sales of Class A, B and C shares if:
o You sell Class A 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 after the purchase of shares,
o You sell shares under the Automatic Withdrawal Plan if the aggregate value
of the redeemed shares does not exceed 12% of the account's value*,
o You sell shares under a qualified retirement plan or IRA that constitute a
tax-free return of contributions to avoid a penalty,
o Your Fund sells the remaining shares in your account under an Involuntary
Redemption,
o You qualify for an exception relating to defined contribution plans. These
exceptions are described in the Statement of Additional Information,
o You are a director, officer or employee of Davis Selected Advisers or one
of its affiliates (or a family member of a director, officer or employee).
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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.
*An Automatic Withdrawal Plan may be established as either a percentage or a
fixed dollar amount, either way. the shares which may be redeemed without a
sales charge are recalculated as a percentage of the current market value of the
account as of the date of each withdrawal. If established as a percentage no
sales charge will be incurred regardless of market fluctuations. If established
as a fixed dollar amount a sales charge may be incurred if the market value of
the account decreases. If you redeem shares in addition to those redeemed
pursuant to the Automatic Withdrawal Plan, a deferred sales charge may be
imposed on those shares and on any subsequent redemptions within a 12-month
period, regardless of whether such redemptions are pursuant to an Automatic
Withdrawal Plan.
If you have any additional questions about choosing a share class, please call
us toll-free at 1-800-279-0279, during business hours, 9 a.m. to 6 p.m. Eastern
Standard Time. If you still are not sure about which class is best for you,
contact your financial advisor.
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.
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 at the address stated
below. You must sign the Application Form. Include a check made payable to DAVIS
FUNDS or, in the case of a retirement account, the custodian or trustee. All
purchases by check should be in U.S. dollars. DAVIS FUNDS WILL NOT ACCEPT
THIRD-PARTY CHECKS.
2. BY DEALER. You may have your dealer order and pay for the shares. In this
case, you must pay your dealer directly. Your dealer will then order the shares
from our distributor, Davis Distributors. Please note that your dealer may
charge a service fee or commission for buying these shares.
3. BY WIRE. You may wire federal funds directly to our service provider, State
Street Bank and Trust. Before you wire an initial investment, you must call
Davis Distributors and obtain an account number and Application Form. A customer
service representative will assist you with your initial investment by wire.
After the initial wire purchase is made, you will need to return the Application
Form to State Street Bank and Trust. To ensure that the purchase is credited
properly, follow these wire instructions:
State Street Bank and Trust Company
Boston, MA 02210
Attn: Mutual Fund Services
DAVIS GROWTH & INCOME 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 for any Fund other than Davis Government Money Market Fund
if you are a Class A shareholder who is not participating in the Automatic
Withdrawal Plan. If you are eligible and wish to receive certificates, please
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submit a letter of instruction with your Application Form. Once your account has
been established, the shareholder(s) may request that certificates be sent to
the address of record by calling our customer service department.
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 Simplified Employee Pension (SEP) IRAs
o 403(b) Plans
State Street Bank and Trust acts as custodian (service provider) for the
retirement plans and charges the participant a $10 maintenance fee each year
regardless of the number of plans established 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.
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HOW TO BUY, SELL AND EXCHANGE SHARES
Once you have established an account with Davis Funds, you can add to--or
withdraw from--your investment. 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.
An exchange occurs when you sell shares in one Davis Fund to buy shares in
another Davis Fund in the same class of shares in response to changes in your
goals or in market conditions.
THREE WAYS TO BUY, SELL AND EXCHANGE SHARES
1. BY TELEPHONE. Call 1-800-279-0279. You can speak directly with a Davis Funds
representative during our business hours (9:00 a.m. to 6:00 p.m. Eastern
Standard Time) 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.
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.
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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 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, the class of shares you wish to buy and your
account number.
When you buy shares through a dealer, you may be charged a service fee or
commission for performing the transaction.
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
5th and 28th if the institution that services your bank account is a member of
the Automated Clearing House system. After each automatic investment, you will
receive a transaction confirmation, and the debit should show up on your next
bank statement.
To sign up for the Automatic Investment Plan, fill out the appropriate section
of the Application Form. After your account has been opened and you wish to
establish this plan, you must submit a letter of instruction signed by the
account owner(s). 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 DAVIS FUNDS.
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 Growth & Income 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 the redemption request. You may be required to have the owners'
signatures medallion-guaranteed (see "Medallion Signature Guarantee" below).
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 recently purchased, payment to you
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<PAGE>
will be delayed until your purchase check has cleared, up to a maximum of 15
days from the date of purchase.
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
1.00% 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 You will need a medallion signature guarantee on a stock power or
redemption request for sales paid by check totaling more than $100,000.
However, if your address of record has changed in the last 30 days, or if
you wish to send redemption proceeds to a third party, you will need a
medallion signature guarantee for all sales.
o If a certificate was issued for the shares you wish to sell, the
certificate must be sent by certified mail to State Street Bank and Trust
and accompanied by a letter of instruction signed by the owner(s).
o A sale may produce a gain or loss. Gains may be subject to tax.
MEDALLION SIGNATURE GUARANTEE. A written endorsement from an eligible guarantor
institution that the signature(s) on the written request is(are) valid. Eligible
guarantors include federally insured financial institutions, registered
broker-dealers, or participants in a recognized medallion signature guarantee
program. Davis Funds cannot accept guarantees from institutions that do not
provide reimbursement in cases of fraud. No other form of signature verification
can be accepted.
STOCK POWER. A letter of instruction 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. Any transfer of ownership requires that all
shareholders have their signatures medallion-guaranteed.
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 its
Board of Directors decides that making cash payments would harm the Fund.
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.
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. Shares will be
purchased at the current price, into the same Davis Fund, and into the same
account. You must send a letter to our service provider, State Street Bank and
Trust, along with a check for the repurchased shares.
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IF YOUR ACCOUNT FALLS BELOW $250
If your account balance falls below $250 as a result of a redemption or
exchange, we may sell your remaining shares in this 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.
MAKING AUTOMATIC WITHDRAWALS
If your account balance is more than $10,000, you can sell a set dollar or
percentage amount each month or quarter. 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. When you participate in this plan, known as the AUTOMATIC
WITHDRAWAL PLAN, shares are sold so that you will receive payment by one of
three methods:
o You may receive funds at the address of record provided that this address
has been unchanged for a period of not less than 30 days. These funds are
sent by check on or after the 25th day of the month.
o You may also choose to receive funds by Automated Clearing House (ACH), to
the banking institution of your choice. You may elect an ACH draft date
between the 5th and the 28th days of the month. You must complete the
appropriate section of the Application Form. Once your account has been
established, you must submit a letter of instruction with a medallion
signature guarantee to execute an Automatic Withdrawal Plan by ACH.
o You may have funds sent by check to a third party at an address other than
the address of record. You must complete the appropriate section of the
Application Form. Once your account has been established, you must submit a
letter of instruction with a medallion signature guarantee to designate a
third party payee.
You may stop automatic withdrawals at any time without charge or penalty by
calling Davis Distributors or by notifying the service agent in writing.
WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT
You may be eligible to have your sale proceeds electronically transferred to a
commercial bank account. This is known as an ELECTRONIC WIRE PRIVILEGE. There is
a $5 charge by State Street Bank and Trust for wire service, and receiving banks
may also charge for this service. Payment through Automated Clearing House will
usually arrive at your bank two banking days after the sale. Payment by wire is
usually credited to your bank account on the next business day after the sale.
While State Street Bank and Trust will accept electronic wire sales by telephone
or dealer, you still need to fill out and submit the information under the
Electronic Wire Privilege section of the Application Form. Once your account has
been opened and you have not previously established the Electronic Wire
Privilege, you must submit a letter of instruction with a medallion signature
guarantee signed by all registered owners at the time of the wire sale. If you
are currently an investor with a non-retirement account and have already
established this privilege, you may call our customer service department to
execute a wire sale by telephone.
EXCHANGING SHARES
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You can sell shares of Davis Growth & Income Fund to buy 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 for a non-retirement
account (unless you are participating in the Automatic Exchange Program).
Exchanges are normally performed on the same day of the request if received in
good order by 4 p.m. Eastern Time.
Shares in different Davis Funds may be exchanged at relative net asset value.
However, if any Davis Fund shares being exchanged are subject to a deferred
sales charge, Statement of Intention, or other limitation, the limitation will
continue to apply to the shares received in the exchange. When you exchange
shares in a Davis Fund for shares in Davis Government Money Market Fund, the
holding period for any deferred sales charge does not continue during the time
that you own Davis Government Money Market Fund shares. For example, Class B
shares are subject to a declining sales charge for six years. Any period that
you are invested in shares of Davis Government Money Market Fund will be added
to the six-year declining sales charge period.
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 wish to
exchange shares for which you hold share certificates, these certificates must
be sent by certified mail to State Street Bank and Trust accompanied by a letter
of instruction signed by the owner(s). If your shares are being sold for cash,
this is known as a redemption. Please see the section WHAT YOU NEED TO KNOW
BEFORE YOU SELL YOUR SHARES for restrictions that might apply to this type of
transaction.
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.
There are limits to the number of exchanges you can make each year. Currently,
four exchanges between Funds are allowed during a 12-month period. You may make
an unlimited number of exchanges out of Davis Government Money Market Fund.
Automatic exchanges are excluded from this provision. 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
GOVERNMENT BOND FUND
Davis Government Bond Fund
GOVERNMENT MONEY MARKET FUND
Davis Government Money Market Fund
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For more information about any of the other Davis Funds, including risks, fees
and expenses, ask for a prospectus. Read it carefully before investing or
sending money.
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. Once your account has been
established, you may contact our customer service department to establish this
program.
TELEPHONE TRANSACTIONS
A benefit of investing through Davis Funds is that you can use our automated
telephone system to buy, sell or exchange shares. If you do not wish to have
this option activated for your account, complete 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 (9:00 a.m. to
6:00 p.m. Eastern Standard 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.
If you wish to sell shares by telephone and receive a check in the mail:
o The maximum amount that can be issued is $100,000.
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 Distributors.
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
Funds are not liable for following telephone instructions believed to be genuine
(that is, directed by the account holder or registered representative on file).
We use certain procedures to confirm that your instructions are genuine,
including a request for personal identification 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 telephone.
INTERNET TRANSACTIONS
You can use our web site: www.davisfunds.com to review your account balance and
recent transactions. Your account may qualify for the privilege to purchase,
sell or exchange shares online through the Internet. You may also request
confirmation statements and tax summary information be mailed to the address on
file. Please review our web site for more complete information. . If you do not
wish to have this option activated for your account, please contact our customer
service department.
To access your accounts, you will need the name of the fund in which you are
invested, an account number and your social security number. Davis Funds
provides written confirmation of your initial access and any time you buy, sell
or exchange shares. You must also establish a unique and confidential Personal
Identification Number (PIN). This PIN is required each time you access your
Davis account online.
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When you transact over the Internet, you agree that Davis Funds are not liable
for processing instructions believed to be genuine.
YOU CAN USE DAVIS DIRECT ACCESS TO:
>> GET THE PRICE, TOTAL RETURN, AND FUND DESCRIPTION FOR ANY DAVIS FUND,
>> CHECK YOUR ACCOUNT BALANCE AND OTHER ACCOUNT INFORMATION,
>> BUY, SELL AND EXCHANGE SHARES,
>> GET THE MAILING ADDRESS AND WIRE INSTRUCTIONS FOR ANY DAVIS FUND,
>> REQUEST LITERATURE ABOUT ANY DAVIS FUND.
33
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[INSIDE BACK COVER]
DAVIS FUNDS:
OVER 25 YEARS OF RELIABLE INVESTING
Davis Selected Advisers, investment adviser of 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, Senior Research Adviser and Founder of Davis Selected
Advisers. The Davis strategy is still followed today by the third generation of
family members: Christopher C. Davis and Andrew A. Davis serve as Portfolio
Managers for many funds and institutional accounts managed by Davis Selected
Advisers.
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
Davis Funds, please call us or visit our Web site.
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<PAGE>
ADDRESS AND TELEPHONE GUIDE
OUR TELEPHONE NUMBER: OUR SERVICE PROVIDER'S REGULAR MAILING ADDRESS:
1-800-279-0279 State Street Bank and Trust Company
c/o Davis Funds
PO Box 8406
Boston, MA 02266-8406
OUR MAILING ADDRESS:
Davis Funds
2949 East Elvira Road
Suite 101
Tucson, AZ 85706
OUR INTERNET ADDRESS: OUR SERVICE PROVIDER'S OVERNIGHT MAILING ADDRESS:
http://www.davisfunds.com State Street Bank and Trust Company
c/o Davis Funds
66 Brooks Drive
Braintree, MA 02184
35
<PAGE>
[BACK COVER]
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. An ANNUAL REPORT discusses the
market conditions and investment strategies that significantly affected Fund
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.
Davis 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 through
Friday, 9 a.m. to 6 p.m. Eastern Standard Time. You may also call this
number for account 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 1-202-942-8090. Additional copies of this information can
be obtained, for a duplicating fee, by electronic request at
[email protected] or 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 FUNDS
2949 EAST ELVIRA ROAD
SUITE 101
TUCSON, AZ 85706
1-800-279-0279
Investment Company Act File No. 811-1701
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<PAGE>
Draft 09.27.00
DAVIS GROWTH & INCOME FUND
Prospectus
Class Y shares
December 1, 2000
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.
Over 25 Years Of Reliable Investing
1
<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 Davis Funds
Privacy Notice
How to Open an Account
How to Buy, Sell and Exchange Shares
Davis Funds: Over 25 Years of Reliable Investing
Other Fund Documents
2
<PAGE>
OVERVIEW OF DAVIS GROWTH & INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGY
Davis Growth & Income Fund's investment objectives are capital growth and
income. We strive to meet these objectives by using a conservative investment
strategy. Ordinarily, most of the Fund's assets are invested in the common stock
of growing companies. However, since the stock market can decline and the value
of individual stocks can suffer in response to uncontrollable and unpredictable
events, we balance Davis Growth & Income Fund's portfolio by buying real estate
securities, convertible securities and bonds. These investments may not respond
to changes in market and general economic conditions in the same ways that
common stocks respond. As a result, they may retain their value better than
common stock, particularly during a general decline in the stock market. In
addition, real estate securities, convertible securities and bonds may earn more
income than common stock. In the current market environment, we expect that
distributions from current income will be low.
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.
Please see the inside back cover page of this prospectus to learn about the
Davis investment philosophy.
Davis Growth & Income Fund's portfolio managers constantly evaluate market
conditions and the Fund's mix of assets to ensure that the Fund owns an
appropriate blend of growth-oriented and income-oriented investments.
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.
DETERMINING IF THIS FUND IS RIGHT FOR YOU
YOU SHOULD CONSIDER INVESTING IN THIS FUND IF:
o You are risk-sensitive, but would like to invest in growing companies.
o You are primarily interested in growth-oriented investments, but want
current income.
o You are looking for a diversified fund to weather varied market cycles.
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 investing for the short-term (less than five years).
o You are primarily interested in current income with minimal risk.
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PRINCIPAL RISKS
If you buy shares of Davis Growth & Income Fund, you may lose some or all of the
money that you invest. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. This section
describes what we think are the most significant factors that can cause the
Fund's performance to suffer.
o MARKET RISK. The market value of shares of common stock, real estate
securities, convertible securities, and bonds can change rapidly and
unpredictably as a result of political or economic events having little or
nothing to do with the performance of the companies we invest in.
o COMPANY RISK. The price individual securities varies with the success or
failure of the company issuing the stock. As a result, the success of the
companies in which the Fund invests largely determines the Fund's
performance.
o REAL ESTATE RISK. The value of real estate securities which the Fund may
purchase is subject to risks associated with the ownership of real estate.
These risks are described in the section called HOW WE MANAGE THE FUND.
o INTEREST RATE RISK. The value of fixed-income securities which the Fund
purchases usually declines when current interest rates increase.
o CREDIT RISK. The value of fixed income securities which the Fund purchases
may decline if the issuer of the security experiences difficulty in making
timely interest and principal payments. The Fund may purchase high yield
high-risk debt securities.
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
The bar chart and the table below provide an indication of the risks of
investing in Davis Growth & Income Fund by showing the Fund's average annual
returns for one year and since May 1, 1998 (commencement of operations) 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 GROWTH & INCOME FUND TOTAL RETURN
(As of December 31st)
CLASS Y SHARES
1999 xx
During the period shown above, the highest quarterly return was xx% for the xx
quarter of 1999, and the worst quarterly return was xx% for the xx quarter of
1999. Year-to-date performance as of 10/31/00 (unannualized) was xx.xx%.
DAVIS GROWTH & INCOME FUND
4
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
(For the periods ended December 31,2000)
--------------------------------------------------------------------------
PAST 1 YEAR LIFE
OF CLASS
(SINCE 05/04/98)
--------------------------------------------------------------------------
CLASS Y sHARES* XX% XX%
--------------------------------------------------------------------------
S&P 500 INDEX XX% XX%
--------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
FEES YOU MAY PAY AS A DAVIS GROWTH & INCOME FUND SHAREHOLDER
(Paid Directly from Your Investment)
--------------------------------------------------------------------------------
CLASS Y
SHARES
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES FOR FISCAL YEAR ENDING JULY 31, 2000
(Deducted from the Fund's Assets)
--------------------------------------------------------------------------------
CLASS Y
SHARES
--------------------------------------------------------------------------------
Management Fees 0.xx%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees None
--------------------------------------------------------------------------------
Other Expenses 0.xx%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.xx%
--------------------------------------------------------------------------------
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. The example also assumes that your investment has a 5.00% 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:
--------------------------------------------------------------------------------
IF YOU SELL YOUR 1 YEAR 3 YEARS 5 YEARS 10 YEARS
SHARES IN...
--------------------------------------------------------------------------------
CLASS Y SHARES $xx $xxx $xxx $xx
--------------------------------------------------------------------------------
5
<PAGE>
FINANCIAL HIGHLIGHTS
This table is designed to show you the financial performance of Davis Growth &
Income Fund for fiscal year 2000 and the period from May 4, 1998 (when the Fund
began selling shares to the public) through July 31, 1999, assuming that all
dividends and capital gains have been reinvested. Some of the information
reflects financial results for a single Fund share. The total returns represent
the rate that an investor would have earned (or lost) money on an investment in
the Fund.
This information has been derived from the financial statements audited by KPMG
LLP, independent accountants, whose report - along with the Fund's financial
statements - is included in the Fund's most recent annual report to
shareholders, which is available upon request.
DAVIS GROWTH & INCOME FUND
CLASS Y SHARES
6
<PAGE>
WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT
A number of entities provide services to Davis Growth & Income Fund. This
section describes 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 the Statement of Additional
Information, see the back cover of this prospectus.
INVESTMENT ADVISER
DAVIS SELECTED ADVISERS, LP
Referred to throughout this prospectus as "Davis Selected Advisers"
2949 East Elvira Road
Suite 101
Tucson, Arizona 85706
o Provides investment advice for Davis Growth & Income Fund's portfolio.
o Manages the 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, 2000 (based on average net
assets): 0.xx%.
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.
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
REFERRED TO THROUGHOUT THIS PROSPECTUS AS "STATE STREET BANK AND TRUST"
PO Box 8406
Boston, MA 02266-8406
o Prices Davis Growth & Income 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.
7
<PAGE>
BOARD OF DIRECTORS
Davis Funds' board of directors has general supervisory responsibilities of the
Davis Funds. The directors monitor and supervise the performance of the
investment adviser, sub-advisers and other service providers, monitors Davis
Funds' business and investment activities, and determines whether or not to
renew agreements with the adviser and sub-adviser.
DISTRIBUTOR
DAVIS DISTRIBUTORS, LLC
Referred to throughout this prospectus as "Davis Distributors"
2949 East Elvira Road
Suite 101
Tucson, AZ 85706
o Oversees purchases of shares and promotional activities for Davis Funds and
other mutual funds managed by Davis Selected Advisers.
o Wholly owned subsidiary of Davis Selected Advisers.
Senior Research Adviser and Founder of the Adviser
SHELBY M.C. DAVIS
Responsibilities:
o Senior Research Adviser of Davis Selected Advisers.
o Founder of Davis Selected Advisers.
Other Experience:
o Served as a Portfolio Manager of Davis New York Venture Fund from its
inception in February 1969 until February 1997.
o Served as a 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 President and a Portfolio Manager of Davis Growth & Income Fund.
o Also manages other equity funds advised by Davis Selected Advisers.
Other Experience:* A Portfolio Manager of Davis New York Venture Fund from
October 1995 to the present.
o Assistant Portfolio Manager and research analyst working with Shelby M.C.
Davis from September 1989 to September 1995.
8
<PAGE>
ANDREW A. DAVIS
Responsibilities:
o Vice President and a Portfolio Manager of Growth & Income Fund.
o A Portfolio Manager of Davis Convertible Securities Fund and Davis Real
Estate Fund since inception of each in 1994.
o Also manages other equity funds advised by Davis Selected Advisers.
Other Experience:
o Vice President 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 Code of Ethics.
HOW WE MANAGE THE FUND
WHAT WE INVEST IN AND WHY
Davis Growth & Income Fund's investment objectives are capital growth and
income. In keeping with the Fund's conservative approach to investing, our
portfolio managers balance the Fund's holdings of common stock with real estate
securities, convertible securities and bonds.
Real estate securities, convertible securities and bonds may be less susceptible
to changes in the stock market than common stocks. As a result, these securities
may retain their value better than common stock, particularly during a general
decline in the stock market. An additional benefit of the Fund's asset mix is
that the common stock in which the Fund invests offer the potential for capital
growth over the long-term, while the real estate securities, convertible
securities and bonds generate current income.
During normal market conditions, approximately 60% of Davis Growth & Income
Fund's assets are common stock. Most of the remaining 40% of the Fund's holdings
generally are real estate securities, convertible securities, bonds and cash
equivalents. The Fund may vary these percentages as market conditions dictate.
Generally, there is no restriction on how much of the Fund's assets our
portfolio managers can invest in any particular type of security. However, some
of the securities that the Fund buys are considered "high yield, high-risk"
investments because they do not have favorable credit ratings. The Fund cannot
devote more than 35% of its assets to such investments.
For more details concerning current investments and market outlook, please see
the most recent annual or semi-annual report.
9
<PAGE>
COMMON STOCK
WHAT THEY ARE. Common stock represents 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).
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 those possessing
several of the characteristics that are listed in the following chart.
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.
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.
10
<PAGE>
WHY WE BUY THEM. Davis Growth & Income 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.
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 companies we are investing in. 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 the company issuing the stock. 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.
REAL ESTATE SECURITIES
WHAT THEY ARE. Real estate securities are issued by companies that are
"principally engaged" in the real estate industry. A company is "principally
engaged" in the real estate industry if it owns real estate or real
estate-related assets that constitute at least 50% of the value of all of its
assets, or if it derives at least 50% of its revenues or net profits from
owning, financing, developing, managing, or selling real estate, or from
offering products or services that are related to real estate. Issuers of real
estate securities include real estate investment trusts (known as "REITs"),
brokers, developers, lenders and companies with substantial real estate holdings
such as paper, lumber, hotel and entertainment companies.
Most of the Fund's real estate securities are, and likely will continue to be,
interests in REITs. REITs pool investors' funds to make real estate-related
investments, such as buying interests in income-producing property or making
loans to real estate developers. The Fund does not invest directly in real
estate.
HOW WE PICK THEM. Davis Growth & Income Fund focuses on REITs and other
companies with first-class management teams who view real estate as a means of
producing steady increases in income and strong returns on capital. We
concentrate heavily on valuation, looking for companies that sell at less than
the present value of their expected cash flow over the next few years.
WHY WE BUY THEM. Real estate securities contribute to both aspects of the Fund's
investment goals because they offer both growth potential and current income.
These securities also contribute to the Fund's diversification strategy. The
values of real estate securities typically do not fluctuate at the same time or
for the same reasons as values of traditional common stock, so real estate
investments may offer a cushion when the stock market is in a slump. Similarly,
the price (and market value) of a real estate security that promises regular
payments may be more stable than the price of a common stock that pays little or
no dividends.
RISKS. Real estate securities are susceptible to the many risks associated with
the direct ownership of real estate, including:
o Declines in property values - because of changes in the economy or the
surrounding area or because a particular region has become less appealing
to tenants.
11
<PAGE>
o Increases in property taxes, operating expenses, interest rates, or
competition.
o Overbuilding.
o Changes in zoning laws.
o Losses from casualty or condemnation.
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 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
WHAT THEY ARE. Convertible securities are securities that can be converted into
or exchanged for other securities. The most common types of convertible
securities are bonds and preferred stock that the holder can exchange for common
stock of the same issuer.
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 we believe 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.
WHY WE BUY THEM. Convertible securities contribute to both aspects of the Fund's
investment goals because they offer both current income and growth potential.
These securities also contribute to the Fund's strategy of holding assets other
than common stock.
For current income, Davis Growth & Income Fund buys convertible debt instruments
like bonds, notes and debentures that entitle the Fund to receive regular
interest payments. Similarly, we buy preferred stock that entitles the Fund to
receive regular dividend payments. These interest and dividend payments
generally exceed the dividend payments that the issuers of our convertible
securities make to holders of their common stock.
Convertible securities have growth potential because if the underlying common
stock begins to increase in value, the holder of the convertible security can
exchange it for common stock and enjoy the benefits of that growth.
RISKS. Convertible securities have characteristics of both equity and debt, so
they present the risks of common stock ownership (discussed in the section
called COMMON STOCK - RISKS) as well as the risks that traditional lenders face.
The debt component of a convertible security poses three types of risk:
o INTEREST RATE SENSITIVITY. If a security pays a fixed interest rate, and
market rates increase, the value of the fixed-rate security should decline.
o CHANGES IN DEBT RATING. If a rating agency gives a 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."
12
<PAGE>
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 "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
WHAT THEY ARE. Issuers such as corporations and federal, state and local
governments sell bonds and other debt securities to borrow money. Some debt
securities (often referred to as "coupon bonds") give the holder current income.
Like the borrower on an ordinary loan, the issuer of a coupon bond makes
periodic interest payments to the holders (i.e., the lenders), and agrees to
repay the principal amount borrowed (the price of the bond) when the security
matures. Other debt securities (referred to as "zero coupon bonds") do not
require periodic interest payments, but have the equivalent of a balloon
interest payment when the security matures. In other words, when a zero coupon
bond matures, the issuer pays the holder more money than the issuer borrowed.
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.
WHY WE BUY THEM. The Fund buys debt securities primarily for current income from
regular interest payments. An additional advantage of these securities is that
they diversify the Fund's portfolio, providing some cushion against a fall in
the value of our common stock holdings.
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 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.
ADDITIONAL INFORMATION ABOUT HIGH YIELD, HIGH-RISK DEBT SECURITIES
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.
In evaluating the quality of a debt instrument, rating agencies look at factors
such as the issuer's current financial condition and business prospects, the
value of any collateral that secures the debt and the issuer's history of paying
other debt. Each agency has its own system for "grading" debt. Standard & Poor's
has eleven ratings, ranging from D for securities that are in default to AAA for
securities that are almost certain to be repaid. Moody's Investors Service has
nine ratings, with C being the lowest and Aaa being the highest.
A security is called "investment-grade" if a respected agency assigns it a
favorable credit rating. In contrast, a debt security is considered "high yield,
high-risk" if it is rated BB or lower by Standard and
13
<PAGE>
Poor's, or Ba or lower by Moody's Investors Service. Securities with these low
ratings are also referred to as "junk bonds." Many institutional investors, such
as pension plans and municipal governments, are only permitted to buy
investment-grade debt.
WHY WE BUY THEM. Davis Growth & Income Fund does not specifically seek out high
yield, high-risk debt. However, some of the real estate securities, convertible
securities and bonds that we identify as good investments may happen to fall
into that category.
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, such as 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.
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 Growth & Income Fund buys
them.
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.
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.
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.
14
<PAGE>
OTHER SECURITIES AND INVESTMENT STRATEGIES
There are other securities in which the Fund may invest, and other 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.
RISK SPECTRUM
Davis Selected Advisers manages nine 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 FUNDS
LOW MED HIGH
-------------------------------------------------------------------------------
DAVIS GROWTH OPPORTUNITY FUND o
-------------------------------------------------------------------------------
DAVIS INTERNATIONAL TOTAL RETURN FUND o
-------------------------------------------------------------------------------
DAVIS FINANCIAL FUND o
-------------------------------------------------------------------------------
DAVIS REAL ESTATE FUND o
-------------------------------------------------------------------------------
DAVIS NEW YORK VENTURE FUND o
-------------------------------------------------------------------------------
DAVIS GROWTH & INCOME FUND o
-------------------------------------------------------------------------------
DAVIS CONVERTIBLE SECURITIES FUND o
-------------------------------------------------------------------------------
DAVIS GOVERNMENT BOND FUND o
-------------------------------------------------------------------------------
DAVIS GOVERNMENT MONEY MARKET FUND o
-------------------------------------------------------------------------------
For more information about any of the other Davis Funds, including risks, fees
and expenses, ask for a prospectus. Read it carefully before investing or
sending money.
ONCE YOU INVEST IN DAVIS FUNDS
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 Growth & Income 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.
Net asset values for all Davis Funds are determined each business day. A
business day is 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.
15
<PAGE>
The net asset values of all Davis Funds 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 price the securities in Davis Growth &
Income 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 may be valued by an independent pricing service. In
particular, the Fund relies on a professional pricing service that has
experience in valuing securities with limited resale markets so as to
obtain prices that reflect the market as accurately as possible.
o Discount securities purchased with a maturity of one year or less are
usually valued at amortized cost.
o Securities with unavailable market quotations and other assets are valued
at "fair value"--which is determined by the Board of Directors.
If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time 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 net asset value of the Fund's
shares may change on days when shareholders will not be able to purchase or
redeem the Fund's shares.
The value of securities denominated in foreign currencies and traded in foreign
markets will have their value converted into the U.S. dollar equivalents at the
prevailing market rate as computed by State Street Bank and Trust. 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. Dividends are distributions to shareholders of net investment
income and short-term capital gains on investments.
o CAPITAL GAINS. Capital gains are profits received by the Fund from the sale
of securities held for the long-term, which are then distributed to
shareholders.
Davis Growth & Income Fund usually pays quarterly dividends and generally
distributes capital gains, if any, 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.
16
<PAGE>
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 Davis Funds Application Form or on the IRS Form W-9 that your Tax
Identification Number is correct and you are not subject to backup withholding.
Backup withholding is required for the taxpayers who are subject to back taxes
for failure to report all interest and dividends.
If you fail to report a correct Taxpayer Identification Number, under-reported
dividend or interest income, or are already subject to backup withholding, Davis
Growth & Income Fund is required by law to withhold a portion of any
distributions you may receive--and send it to the U.S. Treasury.
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, the same class of shares. 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 10 days' notice. To participate in this
program, fill out the cross-reinvest information in the appropriate section of
the Application Form. Once your account has been opened and you wish to
establish this program, call for more information.
HOW YOUR DIVIDENDS AND CAPITAL GAINS ARE TAXED
o If Davis Growth & Income Fund pays dividends, the dividends 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, the net capital gains
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), whether received in cash or
reinvested in shares, are taxable in the year in which thy were declared, not
the year they are paid.
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 dividends and capital
gains which may be received from Davis Growth & Income Fund.
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PRIVACY NOTICE
The Funds and the Adviser collect nonpublic personal information about you from
the following sources;
1. Information we receive from you on applications or other forms; and
2. Information about your transactions with the Funds
The Funds and the Adviser may disclose nonpublic personal information about you
to the following types of third parties: Financial service providers, such as
broker-dealers of record and our transfer agent.
We restrict access to nonpublic personal information about you to those
employees who need to know that information to provide products or services to
you. We maintain physical, electronic, and procedural safeguards that comply
with federal standards to guard your nonpublic personal information.
HOW TO OPEN AN ACCOUNT
You can open an account if:
o You invest at least $5 million for an institution (trust company, bank
trust, endowment, pension plan, foundation) acting on behalf of its own
account or one or more clients.
o You invest at least $5 million for a government entity (a state, county,
city, department, authority or similar government agency).
o You invest with an account established under a "wrap account" or other
fee-based program that is sponsored and maintained by a registered
broker-dealer approved by our distributor, Davis Distributors.
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.
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 at the address stated
below. You must sign the Application Form. Include a check made payable to DAVIS
FUNDS or, in the case of a retirement account, the custodian or trustee. All
purchases by check should be in U.S. dollars. DAVIS FUNDS WILL NOT ACCEPT
THIRD-PARTY CHECKS.
2. BY DEALER. You may have your dealer order and pay for the shares. In this
case, you must pay your dealer directly. Your dealer will then order the shares
from our distributor, Davis Distributors. Please note that your dealer may
charge a service fee or commission for buying these shares.
3. BY WIRE. You may wire federal funds directly to our service provider, State
Street Bank and Trust. Before you wire an initial investment, you must call
Davis Distributors and obtain an account number and Application Form. A customer
service representative will assist you with your initial investment by wire.
After the initial wire purchase is made, you will need to return the Application
Form to State Street Bank and Trust. To ensure that the purchase is credited
properly, follow these wire instructions:
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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
HOW TO BUY, SELL AND EXCHANGE SHARES
Once you have established an account with Davis Funds, you can add to -- or
withdraw from -- your investment. 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.
An exchange occurs when you sell shares in one Davis Fund to buy shares in
another Davis Fund in the same class of shares in response to changes in your
goals or in market conditions.
THREE WAYS TO BUY, SELL AND EXCHANGE SHARES
1. BY TELEPHONE. Call 1-800-279-0279. You can speak directly with a Davis Funds
representative during our business hours (9:00 a.m. to 6:00 p.m. Eastern
Standard Time) 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.
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
4:00 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:
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<PAGE>
o Receive your order before 4:00 p.m. Eastern Time.
o Promptly transmit the order to State Street Bank and Trust.
BUYING MORE SHARES
When you purchase shares by mail, send a check made payable to 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, your account number and that the investment should
be made in Class Y shares.
When you buy shares through a dealer, you may be charged a service fee or
commission for performing the transaction.
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 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 the redemption request. You may be required to have the owners'
signatures medallion-guaranteed (see "Medallion Signature Guarantee").
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 recently purchased, payment to you will be delayed until
your purchase check has cleared, up to a maximum of 15 days from the date of
purchase.
20
<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
1.00% 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 You will need a medallion signature guarantee on a stock power or
redemption request for sales paid by check totaling more than $100,000.
However, if your address of record has changed in the last 30 days, or if
you wish to send redemption proceeds to a third party, you will need a
medallion signature guarantee for all sales.
o A sale may produce a gain or loss. Gains may be subject to tax.
MEDALLION SIGNATURE GUARANTEE. A written endorsement from an eligible guarantor
institution that the signature(s) on the written request is(are) valid. Eligible
guarantors include federally insured financial institutions, registered
broker-dealers, or participants in a recognized medallion signature guarantee
program. Davis Funds cannot accept guarantees from institutions that do not
provide reimbursement in cases of fraud. No other form of signature verification
can be accepted.
STOCK POWER. A letter of instruction 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. Any transfer of ownership requires that all
shareholders have their signatures medallion-guaranteed.
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 its
Board of Directors decides that making cash payments would harm the Fund.
WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT
You may be eligible to have your sale proceeds electronically transferred to a
commercial bank account. This is known as an ELECTRONIC WIRE PRIVILEGE. There is
a $5 charge by State Street Bank and Trust for wire service, and receiving banks
may also charge for this service. Payment through Automated Clearing House will
usually arrive at your bank two banking days after the sale. Payment by wire is
usually credited to your bank account on the next business day after the sale.
While State Street Bank and Trust will accept electronic wire sales by telephone
or dealer, you still need to fill out and submit the information under the
Electronic Wire Privilege section of the Application Form. Once your account has
been opened and you have not previously established the Electronic Wire
Privilege, you must submit a letter of instruction with a medallion signature
guarantee signed by all registered owners at the time of the wire sale. If you
are currently an investor with a non-retirement account and have already
established this privilege, you may call our customer service department to
execute a wire sale by telephone.
EXCHANGING SHARES
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You can sell Class Y shares of Davis Growth & Income Fund to buy Class Y shares
in any other Davis Fund. 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 $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 in good order by
4:00 p.m. Eastern Time.
When you exchange shares by mail, you must send our service provider, State
Street Bank and Trust, a written request for the exchange. No medallion
signature guarantee is required unless shares are also being sold for cash,
which is known as a redemption. Please see the section WHAT YOU NEED TO KNOW
BEFORE YOU SELL YOUR SHARES for restrictions that might apply to this type of
transaction.
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.
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
GOVERNMENT BOND 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 risks, fees
and expenses, ask for a prospectus. Read it carefully before investing or
sending money.
TELEPHONE TRANSACTIONS
A benefit of investing through Davis Funds is that you can use our telephone
system to buy, sell or exchange shares. If you do not wish to have this option
activated for your account, you must note this on your Application Form.
When you call Davis Distributors, you can perform a transaction with Davis Funds
in two ways:
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<PAGE>
o Speak directly with a representative during business hours (9:00 a.m. to
6:00 p.m. Eastern Standard 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.
When you buy, sell or exchange shares over the telephone, you agree that Davis
Funds are not liable for following telephone instructions believed to be genuine
(that is, directed by the account holder or registered representative on file).
We use certain procedures to confirm that your instructions are genuine,
including a request for personal identification 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 telephone.
INTERNET TRANSACTIONS
You can use our web site: www.davisfunds.com to review your account balance and
recent transactions. Your account may qualify for the privilege to purchase,
sell or exchange shares online through the Internet. You may also request
confirmation statements and tax summary information be mailed to the address on
file. Please review our web site for more complete information. . If you do not
wish to have this option activated for your account, please contact our customer
service department.
To access your accounts, you will need the name of the fund in which you are
invested, an account number and your social security number. Davis Funds
provides written confirmation of your initial access and any time you buy, sell
or exchange shares. You must also establish a unique and confidential Personal
Identification Number (PIN). This PIN is required each time you access your
Davis account online.
When you transact over the Internet, you agree that Davis Funds are not liable
for processing instructions believed to be genuine.
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.
23
<PAGE>
DAVIS FUNDS:
OVER 25 YEARS OF RELIABLE INVESTING
Davis Selected Advisers, investment adviser of 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, Senior Research Adviser and Founder of Davis Selected
Advisers. The Davis strategy is still followed today by the third generation of
family members: Christopher C. Davis and Andrew A. Davis serve as Portfolio
Managers for many funds and institutional accounts managed by Davis Selected
Advisers.
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
Davis Funds, please call us or visit our web site.
24
<PAGE>
ADDRESS AND TELEPHONE GUIDE
<TABLE>
<S> <C>
OUR TELEPHONE NUMBER: OUR INTERNET ADDRESS:
1-800-279-0279 http://www.davisfunds.com
OUR MAILING ADDRESS:
Davis Funds
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
OUR SERVICE PROVIDER'S REGULAR MAILING ADDRESS: OUR SERVICE PROVIDER'S OVERNIGHT MAILING 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
</TABLE>
25
<PAGE>
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. An ANNUAL REPORT discusses the
market conditions and investment strategies that significantly affected Fund
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.
Davis 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 through
Friday, 9:00 a.m. to 6:00 p.m. Eastern Standard Time. You may also call
this number for account 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 1-202-942-8090. Additional copies of this information can
be obtained, for a duplicating fee, by electronic request at
[email protected] or 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 FUNDS
2949 EAST ELVIRA ROAD, SUITE 101
TUCSON, AZ 85706
1-800-279-0279
Investment Company Act File No. 811-1701
26
<PAGE>
Draft 09/27/00
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 1, 2000
DAVIS NEW YORK VENTURE FUND
AND
DAVIS GROWTH & INCOME FUND
PART OF
DAVIS NEW YORK VENTURE FUND, INC.
2949 EAST ELVIRA ROAD, SUITE 101
TUCSON, ARIZONA 85706
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, 2000 AND THE CLASS Y PROSPECTUSES DATED DECEMBER 1, 2000 FOR THE DAVIS NEW
YORK VENTURE FUND AND DAVIS GROWTH & INCOME FUND. THIS STATEMENT OF ADDITIONAL
INFORMATION INCORPORATES THE PROSPECTUSES BY REFERENCE. 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
PAGE
Section I: Investment Strategies and Restrictions ...........................xx
Investment Objectives and Policies...............................xx
Portfolio Securities.............................................xx
Equity Securities
Foreign Securities
Real Estate Securities and REITs
Convertible Securities
Bonds and Other Debt Securities
High Yield, High-Risk Debt Securities
Other Investment Policies........................................xx
Portfolio Transactions ..........................................xx
Investment Restrictions..........................................xx
Section II: Key Persons......................................................xx
Organization of the Funds........................................xx
Directors and Officers...........................................xx
Directors' Compensation Schedule.................................xx
Certain Shareholders of the Funds................................xx
Investment Advisory Services.....................................xx
Distribution of Fund Shares......................................xx
Other Important Service Providers................................xx
Section III: Classes of Shares, Purchases, Exchanges and Redemptions..........xx
Selecting the Appropriate Class of Shares........................xx
Class A Shares....................................xx
Class B Shares....................................xx
Class C Shares....................................xx
Class Y Shares....................................38
How to Purchase Shares....................................... xx
Special Services................................................xx
Prototype Retirement Plans..........................xx
Automatic Investment Program........................xx
Dividend Diversification Program....................xx
Telephone Privilege.................................xx
Exchange of Shares...............................................xx
General.............................................xx
By Telephone........................................xx
Automatic Exchange Program..........................xx
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Redemption of Shares.............................................xx
General.............................................xx
Electronic Wire Privilege...........................xx
By Telephone........................................xx
Automatic Withdrawal Plan...........................xx
Involuntary Redemptions.............................xx
Subsequent Repurchases..............................xx
Section IV: General Information..............................................xx
Determining the Price of Shares..................................xx
Dividends and Distributions......................................xx
Federal Income Taxes.............................................xx
Performance Data.................................................xx
Appendix A: Quality Ratings of Debt Securities................................xx
Appendix B: Term and Conditions for a Statement of Intention..................xx
3
<PAGE>
SECTION I: INVESTMENT STRATEGIES AND RESTRICTIONS
--------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives, principal investment policies and the main risks of
Davis New York Venture Fund and Davis Growth & Income Fund ("Funds") are
descried in the Funds' prospectuses. This Statement of Additional Information
contains supplemental information about those policies and risks and the types
of securities that the Adviser can select for the funds. Additional information
is also provided about the strategies that the Funds may use to try to achieve
their objectives.
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 objective. An
investment in the Funds may not be appropriate for all investors, and short-term
investing is discouraged. Neither Fund's investment objective is a fundamental
and may be changed by the Board of Directors without a vote of shareholders. .
the Funds' prospectuses would be amended prior to any change in their investment
objective and shareholders would be promptly notified of the change.
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. (the "Adviser") and/or Davis Selected
Advisers-NY, Inc. (the "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. The Fund is not required to use all of the investment
techniques and strategies described in this Statement of Additional Information.
Whether or not the Funds use a given investment technique at a given time
depends upon the professional judgement of the Adviser.
PORTFOLIO SECURITIES
Both 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 described below.
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 predominantly 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 is subject to
additional risks. Smaller companies are usually less established and less
diversified than larger companies, and have fewer resources available to take
advantage of opportunities or overcome challenges.
4
<PAGE>
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 SECURITIES. Foreign securities are either issued by foreign companies or
are principally traded in foreign markets ("foreign securities"). Foreign
securities include equity securities, real estate securities, convertible
securities, and bonds. Investments in foreign securities may be made through the
purchase of individual securities on recognized exchanges and developed
over-the-counter markets, through American Depository Receipts ("ADRs") or
Global Depository Receipts ("GDRs") covering such securities, and through
U.S.-registered investment companies investing primarily in foreign securities.
When the Funds invest in foreign securities, their operating expenses are likely
to be higher than that of an investment company investing exclusively in U.S.
securities, since the custodial and certain other expenses are expected to be
higher.
Primary Risks. Investments in foreign securities may involve a higher degree of
risk than investments in domestic issuers. Foreign securities are often
denominated in foreign currencies, which means that their value will be affected
by changes in exchange rates, as well as by other factors that affect securities
prices. There is generally less publicly available information about foreign
securities and securities markets, and there may be less government regulation
and supervision of foreign issuers and securities markets. Foreign securities
and markets may also be affected by political and economic instabilities, and
may be more volatile and less liquid than domestic securities and markets.
Investment risks may include expropriation or nationalization of assets,
confiscatory taxation, exchange controls and limitations on the use or transfer
of assets, and significant withholding taxes. Foreign economies may differ from
the United States favorably or unfavorably with respect to inflation rates,
balance of payments, capital reinvestment, gross national product expansion, and
other relevant indicators. The Funds may attempt to reduce exposure to market
and currency fluctuations by trading in currency futures contracts or options on
futures contracts for hedging purposes only.
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, overbuilding and
increased competition, increases in property taxes and operating expenses,
changes in zoning laws, casualty or condemnation losses, fluctuations in rental
income, changes in neighborhood values, the appeal of properties to tenants and
increases in interest rates.
Equity REITs may be affected by changes in the value of the underlying property
owned by the trusts, while mortgage REITs may be affected by the quality of
credit extended. Equity and mortgage REITs are dependent upon management skill,
may not be diversified and are subject to project financing risks. Such trusts
are also subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation and the possibility of failing to qualify for tax-free
pass-through of income under the Internal Revenue Code, and failing to maintain
exemption from registration under the Investment Company Act of 1940 ("1940
Act"). Changes in interest rates may also affect the value of the debt
securities in the Fund's portfolio. By investing in REITs indirectly through
either of the Funds, a shareholder will bear not only his or
5
<PAGE>
her 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. 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.
Convertible securities generally rank senior to common stock in a corporation's
capital structure and therefore are subject to less risk than common stock in
case of the issuer's bankruptcy or liquidation.
Primary Risks. Convertible securities have many of the features of both debt
securities and equity securities, and are subject to many of the same risks. The
risk factors which most strongly effect a convertible security usually depend
upon whether or not the current market value of the convertible security
approximates or exceeds the market value of the common stock which the
convertible security could be converted into. When the market value of the
underlying common stock is low compared to the market value of the convertible
security, the convertible security will behave more like a debt security, and
the convertible security's price will likely increase when interest rates fall
and decrease when interest rates rise. When the market value of the underlying
common stock is approximately equal to or is less than the market value of the
convertible security, the convertible security will behave more like an equity
security. In that case, its price will tend to fluctuate directly with the price
of the underlying common stock and may the convertible security may sell at a
premium over the market value of the underlying common stock. 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."
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 in which the Funds may invest 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 Investors Service
("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."
Lower-rated securities tend to offer higher yields than investment-grade
securities to compensate for the additional risk. The Funds typically do not
seek out high yield, high-risk securities primarily for the higher yields they
offer, but because companies issuing convertible securities or real estate
securities with the equity features which we desire may happen to have debt
which is lower rated. To the extend they can be converted into common stock,
convertible
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securities may be less subject to some of the risks described below than
non-convertible high yield bonds since common stock may be more liquid and less
affected by some of these risk factors.
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 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 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
avoid taxation, 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 rarely been tested in
recessionary environments. During economic downturns prices of high yield,
high-risk bonds have 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.
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, they may incur special
securities registration responsibilities, liabilities and costs, and liquidity
and valuation difficulties relating to such bonds.
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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 current interest 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 their investment.
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.
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. The Funds may also invest
in other investment companies (or companies exempted under section 3(c)(7) of
the 1940 Act) which themselves primarily invest in temporary defensive
investments. Investments in other investment companies are limited by the 1940
Act.
REPURCHASE AGREEMENTS. The Funds may enter into repurchase agreements.
Repurchase agreements involve an agreement to purchase a security and to sell
that security back to the original owner at an agreed-upon price. The resale
price reflects th purchase price plus an agreed-upon incremental amount, which
is unrelated to the coupon rate or maturity of the purchased security. The
repurchase obligation of the seller is, in effect, secured by the underlying
securities. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Funds could experience both delays in liquidating the
underlying securities and losses, including: (a) possible decline in the value
of the collateral during the period while the Funds seek to enforce their rights
thereto; (b) possible loss of all or a part of the income during this period;
and (c) expenses of enforcing their rights.
The Funds will enter into repurchase agreements only when the seller agrees that
the value of the underlying securities, including accrued interest (if any),
will at all times be equal to or exceed the value of the repurchase agreement.
The Funds may enter into tri-party repurchase agreements in which a third party
custodian bank issues the cash upon purchase of the securities used as
collateral, and also holds the securities. The majority of these transactions
run from day to day and delivery pursuant to the resale typically occurs within
one to seven days of the purchase. The Funds normally will not enter into
repurchase agreements maturing in more than seven days.
HEDGING FOREIGN CURRENCY RISKS. To attempt to reduce exposure to currency
fluctuations, the Funds may trade in forward foreign currency exchange contracts
(forward contracts), currency futures contracts and options thereon and
securities indexed to foreign securities. These techniques are not always
effective and their use may expose the Funds to other risks, such as liquidity
and counterparty risk. The Adviser or Sub-Adviser exercises its professional
judgement as to whether the reduction in currency risk justifies the expense and
exposure to liquidity and counterparty risk. In past years, the Adviser and
Sub-Adviser have typically not used these techniques to any significant extent.
These techniques may be used to lock in an exchange rate in connection with
transactions in securities denominated or traded in foreign currencies, to hedge
the currency risk in foreign securities held by the Funds and to hedge a
currency risk involved in an anticipated purchase of foreign securities.
Cross-hedging may also be utilized, that is, entering into a hedge transaction
with respect to a foreign currency different from the one in
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which a trade is to be made or in which a portfolio security is principally
traded. There is no limitation on the amount of assets that may be committed to
currency hedging. However, the Funds will not engage in a futures transaction if
it would cause the aggregate of initial margin deposits and premiums paid on
outstanding options on futures contracts to exceed 5% of the value of their
total assets (excluding in calculating such 5% any in-the-money amount of any
option). Currency hedging transactions may be utilized as a tool to reduce
currency fluctuation risks due to a current or anticipated position in foreign
securities. The successful use of currency hedging transactions usually depends
on the Adviser's or the Sub-Adviser's ability to forecast interest rate and
currency exchange rate movements. Should interest or exchange rates move in an
unexpected manner, the anticipated benefits of futures contracts, options or
forward contracts may not be achieved or losses may be realized and thus the
Funds could be in a worse position than if such strategies had not been used.
Unlike many exchange-traded futures contracts, there are no daily price
fluctuation limits with respect to options on currencies and forward contracts,
and adverse market movements could therefore continue to an unlimited extent
over a period of time. In addition, the correlation between movements in the
prices of such instruments and movements in the price of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses. Unanticipated changes in currency prices may result in
poorer overall performance for the Funds than if they had not entered into such
contracts. When taking a position in an anticipatory hedge (when the Funds
purchase a futures contract or other similar instrument to gain market exposure
in anticipation of purchasing the underlying securities at a later date), the
Funds are required to set aside cash or high-grade liquid securities to fully
secure the obligation.
A forward contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. Such a contract gives the Funds
a position in a negotiated, currently non-regulated market. A Fund may enter
into a forward contract, for example, when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security ("transaction hedge").
Additionally, when the Adviser or Sub-Adviser believes that a foreign currency
may suffer a substantial decline against the U.S. dollar, either Fund may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. When the Adviser or Sub-Adviser believes
that the U.S. dollar may suffer a substantial decline against a foreign
currency, either Fund may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount in anticipation of purchasing foreign
traded securities ("position hedge"). In this situation the Funds may, in the
alternative, enter into a forward contract with respect to a different foreign
currency for a fixed U.S. dollar amount ("cross hedge"). This may be done, for
example, where the Adviser or Sub-Adviser believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated.
The Funds may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
currency-denominated portfolio securities and against increases in the U.S.
dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the Funds
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates although, in the event of rate movements adverse to a Fund's position, it
may forfeit the entire amount of the premium plus related transaction costs.
Options on foreign currencies to be written or purchased by the Funds are traded
on U.S. and foreign exchanges or over-the-counter. Currently, a significant
portion or all of the value of an over-the-counter option may be treated as an
illiquid investment and subject to the restriction on such investments as long
as the SEC requires that over-the-counter options be treated as illiquid.
Generally, the Funds would utilize options traded on exchanges where the options
are standardized.
The Funds may enter into contracts for the purchase or sale for future delivery
of foreign currencies ("currency futures contracts") and may purchase and write
put and call options to buy or sell currency futures contracts. A "sale" of a
currency futures contract means the acquisition of a contractual obligation to
deliver the foreign currencies called for by the contract at a specified price
on a specified date. A "purchase" of a currency futures contract means the
incurring of a contractual obligation to acquire the foreign currencies called
for by the contract at a specified price on a specified date. Options on
currency futures contracts to be purchased by the Funds will be traded on U.S.
or foreign exchanges or over-the-counter.
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The Funds may also purchase securities (debt securities or deposits) which have
their coupon rate or value at maturity determined by reference to the value of
one or more foreign currencies. These strategies will be used for hedging
purposes only. The Funds will hold securities or other options or futures
positions whose values are expected to offset their obligations under the hedge
strategies. Neither Fund will enter into a currency hedging position that
exposes the Fund to an obligation to another party unless it owns either (i) an
offsetting position in securities, options or futures positions, or (ii) cash,
receivables and short-term debt securities with a value sufficient to cover its
potential obligations. The Funds will comply with requirements established by
the SEC with respect to coverage of options and futures strategies by mutual
funds, and, if so required, will set aside liquid securities in a segregated
account with their custodian bank in the amount prescribed. The Funds' custodian
will maintain the value of such segregated account equal to the prescribed
amount by adding or removing additional liquid securities to account for
fluctuations in the value of securities held in such account. Securities held in
a segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with similar securities.
The Funds' ability to dispose of their positions in futures contracts, options
and forward contracts will depend on the availability of liquid markets in such
instruments. Markets in options and futures with respect to currencies are still
developing. It is impossible to predict the amount of trading interest that may
exist in various types of futures contracts, options and forward contracts. If a
secondary market does not exist with respect to an option purchased or written
by the Funds over-the-counter, it might not be possible to effect a closing
transaction in the option (i.e., dispose of the option) with the result that (i)
an option purchased by the Funds would have to be exercised in order for the
Funds to realize any profit, and (ii) the Funds may not be able to sell
currencies covering an option written by the Funds until the option expires or
it delivers the underlying futures currency upon exercise. Therefore, no
assurance can be given that the Funds will be able to utilize these instruments
effectively for the purposes set forth above. The Funds' ability to engage in
currency hedging transactions may be limited by tax considerations.
The Funds' transactions in forward contracts, options on foreign currencies and
currency futures contracts will be subject to special tax rules under the
Internal Revenue Code that, among other things, may affect the character of any
gains or losses of the Funds as ordinary or capital and the timing and amount of
any income or loss to the Funds. This in turn could affect the character, timing
and amount of distributions by the Funds to shareholders. The Funds may be
limited in their foreign currency transactions by tax considerations. Certain
foreign currency exchange contracts in which the Funds may invest are treated as
"Section 1256 contracts" under the Internal Revenue Code. In general, the
Internal Revenue Code treats gains or losses relating to Section 1256 contracts
are characterized as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from Section 1256 contracts
that are forward contracts generally are treated as ordinary income of loss. In
addition, Section 1256 contracts held by the Funds at the end of each taxable
year are "marked-to-market," and unrealized gains or losses are treated as
though they were realized. These contracts also may be marked-to-market for
purposes of determining the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to the
Internal Revenue Code. An election can by made by a Fund to exempt those
transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into may result in "straddles" for
federal income tax purposes. The straddle rules may affect the character and
timing of gains (or losses) recognized by a Fund on straddle positions.
Generally, a loss sustained on the disposition of a position making up a
straddle is allowed only to the extent that the loss exceeds any unrecognized
gains in the offsetting positions an making up the straddle. A disallowed loss
is generally allowed at he point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Currency gains and losses are offset against market gains and losses on each
trade before determining a net "Section 988" gain or loss under the Internal
Revenue Code for that trade, which may increase or decrease the amount of a
Fund's investment income available for distribution to its shareholders.
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
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certain qualified institutional buyers, such as the Funds, to trade in privately
placed securities even though such securities are not registered under the 1933
Act. The Adviser or Sub-Adviser, under criteria established by the Funds' Board
of Directors, will consider whether Rule 144A Securities being purchased or held
by the Funds are illiquid and thus subject to the Funds' policy limiting
investments in illiquid securities. In making this determination, the Adviser or
Sub-Adviser will consider the frequency of trades and quotes, the number of
dealers and potential purchasers, dealer undertakings to make a market, and the
nature of the security and the market place trades (for example, the time needed
to dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A Securities will also be monitored by the
Adviser 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 for temporary or emergency purposes.
Neither Fund will borrow money with the intent of leveraging its investments.
Borrowing activities are strictly limited as described in the section entitled
"Investment Restrictions".
LENDING PORTFOLIO SECURITIES. The Funds may lend their portfolio securities to
certain types of eligible borrowers approved by the Board of Directors. The
Funds may engage in securities lending to earn additional income or to raise
cash for liquidity purposes. The Funds must receive collateral for a loan. Under
current applicable regulatory requirements (which are subject to change), on
each business day the loan collateral must be at least equal to the value of the
loaned securities. The collateral must consist of cash, bank letters of credit,
securities of the U.S. government or its agencies or instrumentalities, or other
cash equivalents in which a Fund is permitted to invest.
When they loan securities, the Funds still own the securities, receive amounts
equal to the dividends or interest on loaned securities, and are subject to
gains or losses on those securities.. The Funds also receive one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and/or
(c)interest on any short-term debt instruments purchased with such loan
collateral. Either type of interest may be shared with the borrower. The Fund
may also pay reasonable finder's, custodian and administrative fees in
connection with these loans. The terms of the Funds' loans must meet applicable
tests under the Internal Revenue Code and must permit the Funds to reacquire
loaned securities on five days' notice or in time to vote on any important
matter.
CALL OPTIONS. For income purposes, the Funds may write covered call options on
their portfolio securities and purchase call options in closing transactions.
The Funds may suffer an opportunity loss if the value of the underlying security
should rise above the strike price of the call option before the option expires.
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
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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 of seeking to place portfolio transactions with brokers or
dealers who will execute transactions as efficiently as possible and at the most
favorable price. Subject to this policy, research services, payment of bona fide
fund expenses, and placement of orders by securities firms for Funds shares may
be taken into account as a factor in placement of portfolio transactions. In
seeking the Funds' investment objectives, the Funds may trade to some degree in
securities for the short-term if the Adviser or Sub-Adviser believes that such
trading is advisable.
The Adviser and Sub-Adviser seek to place portfolio transactions with brokers or
dealers who will execute transactions as efficiently as possible and at the most
favorable net price. In placing executions and paying brokerage commissions or
dealer markups, the Adviser and Sub-Adviser consider the financial
responsibility and reputation of the broker or dealer, the range and quality of
the services made available to clients, research services, the payment of bona
fide client expenses (e.g. sub-transfer agency or sub-accounting fees) which the
Funds would otherwise have to pay in cash, and the sale of fund shares. At times
the Funds may pay a higher price to receive research services.
The Funds have approved a policy which allows them to use commissions to
purchase research. The Funds will not use markups to purchase research. In
accordance with this policy, brokerage transactions may not be executed solely
on the basis of the lowest commission rate available for a particular
transaction. Research services provided to the Adviser or Sub-Adviser by or
through brokers who effect portfolio transactions for the Funds may be used in
servicing other accounts managed by the Adviser, and likewise research services
provided by brokers used for transactions of other accounts may be utilized by
the Adviser or Sub-Adviser in performing services for the Funds. Subject to the
requirements of best execution, the placement of orders by securities firms for
shares of the Funds may be taken into account as a factor in the placement of
portfolio transactions.
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 Adviser and Sub-Adviser consider many factors when allocating securities
among their clients, including the client's investment style, applicable
restrictions, availability of securities, available cash and other current
holdings. The Adviser and Sub-Adviser attempt to allocate investment
opportunities among clients in a fair and equitable manner. However, clients are
not ensured of participating equally or at all in particular investment
allocations due to the factors noted above.
The Adviser's and Sub-Adviser's trading desk prioritizes incoming orders of
similar purchases and sales of securities between institutional and managed
accounts/wrap orders. The Adviser's and Sub-Adviser's trading desk typically
executes orders for institutional clients, including mutual funds, private
accounts, sub-advised accounts, and others. Program sponsors typically execute
orders for wrap accounts. The Adviser's and Sub-Adviser's trading desk
coordinates the timing of orders to prevent the Adviser and Sub-Adviser from
"bidding against" themselves on such orders.
The Adviser and Sub-Adviser serve as investment advisers for a number clients,
which are patterned after model portfolios or patterned after designated mutual
funds managed by the Adviser. The portfolio holdings and transactions of these
clients are similar to, but not exactly the same as, the model portfolios or
designated mutual
12
<PAGE>
funds. The Adviser and Sub-Adviser may not purchase or sell a given security on
behalf of all clients (even clients managed in a similar style), and it may not
execute a purchase of securities or a sell of securities in all participating
clients at the same time.
The Adviser and Sub-Adviser frequently follow the practice of aggregating orders
of various institutional clients (including mutual funds) for execution, if the
Adviser and Sub-Adviser believe that this will result in the best net price and
most favorable execution. In such event, the allocation will be made by the
Adviser and Sub-Adviser in the manner considered to be most equitable and
consistent with its fiduciary obligations to all such clients. In certain cases
where the aggregate order is executed in a series of transactions at various
prices on a given day, each participating client's proportionate share of such
order reflects the average price and commission rate paid or received with
respect to the total order placed on that day. In some instances, this procedure
could adversely affect a given client but the Registrant believes that any
disadvantage in the procedure would be outweighed by the increased selection
available and the increased opportunity to engage in volume transactions.
There are occasions when the Adviser and Sub-Adviser depart from the trading
procedures described above. The factors that the Adviser and Sub-Adviser
consider in exercising their judgment include, but are not limited to, the need
for confidentiality of the purchase or sale, market liquidity of the securities
in issue, the particular events or circumstances that prompt the purchase or
sale of the securities, and operational efficiencies. Even when transaction are
executed on the same day clients may not receive the same transaction prices as
the model portfolios or designated mutual funds they are patterned after if they
are not aggregated; such prices may be better or worse.
The Funds paid the following brokerage commissions:
Fiscal year ended July 31:
2000 1999 1998
---- ---- ----
Davis New York Venture Fund
---------------------------
Brokerage commissions paid: $xxx $9,528,174 $5,092,961
Amount paid to brokers providing research: xx% 91% 86%
Brokerage commissions paid
to Shelby Cullom Davis & Co.:(1) $xx $ 546,972 $ 441,042
Davis Growth & Income Fund
Brokerage commissions paid: $xx $ 101,066 $ 56,658(2)
Amount paid to brokers providing research: xx% 99% 96%(2)
Brokerage commissions paid
to Shelby Cullom Davis & Co.:(1) $6,300 $ 13,500 NA
(1) Shelby Cullom Davis & Co. is a broker-dealer who may be considered an
affiliated person of the Adviser. During the period ended July 31, 2000,
commissions received represented:
<TABLE>
<CAPTION>
% of % of aggregate dollar amount of
Fund Commissions Paid transactions involving the payment of commisions
---- ---------------- ------------------------------------------------
<S> <C> <C>
Davis New York Venture xx% xx%
Davis Growth & Income xx% xx%
</TABLE>
(2) For the period from May 1, 1998 (commencement of operations) through July
31, 1998.
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 Funds operate in accordance with the investment objectives, policies and
restrictions described in their prospectuses and this Statement of Additional
Information.
13
<PAGE>
The Funds have adopted the fundamental investment policies set forth below,
which may not be changed without a shareholder vote. Where necessary, an
explanation beneath a fundamental policy describes the Fund's practices with
respect to that policy, as allowed by current law. If the law governing a policy
changes, the Fund's practices may change accordingly without a shareholder vote.
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.
Except for the fundamental investment policies regarding illiquid securities and
borrowing, all percentage restrictions apply as of the time of an investment
without regard to any later fluctuations in the value of portfolio securities or
other assets. All references to the assets of the Fund are in terms of current
market value.
(1) DIVERSIFICATION. The Fund may not make any investment that is inconsistent
with its classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy. To remain classified as a
----------------------------------------------
diversified investment company under the 1940 Act, the Fund must conform with
the following: With respect to 75% of its total assets, a diversified investment
company may not invest more than 5% of its total assets, determined at market or
other fair value at the time of purchase, in the securities of any one issuer,
or invest in more than 10% of the outstanding voting securities of any one
issuer, determined at the time of purchase. These limitations do not apply to
investments in securities issued or guaranteed by the United States ("U.S.")
government or its agencies or instrumentalities.
(2) CONCENTRATION. The Fund may not concentrate its investments in the
securities of issuers primarily engaged in any particular industry.
Further Explanation of Concentration Policy. The Fund may not invest 25% or more
--------------------------------------------
of its total assets, taken at market value, in the securities of issuers
primarily engaged in any particular industry (other than securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities).
(3) ISSUING SENIOR SECURITIES. The Fund may not issue senior securities, except
as permitted under applicable law, including the 1940 Act and published SEC
staff positions.
Further Explanation of Issuing Senior Securities. The Fund may not issue senior
-------------------------------------------------
securities nor sell short more than 5% of its total assets, except as provided
by the 1940 Act and any rules, regulations or orders issued thereunder. This
limitation does not apply to selling short against the box. The 1940 Act defines
a "Senior Security" as any bond, debenture, note, or similar obligation
constituting a security and evidencing indebtedness.
(4) BORROWING. The Fund may not borrow money, except to the extent permitted by
applicable law, including the 1940 Act and published SEC staff positions.
Further Explanation of Borrowing Policy. The Fund may borrow from banks and
----------------------------------------
enter into reverse repurchase agreements in an amount up to 33 1/3% of its total
assets, taken at market value. The Fund may also borrow up to an additional 5%
of its total assets from banks or others. The Fund may borrow only as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. The Fund may purchase additional securities so long as
borrowings do not exceed 5% of its total assets. The Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities. In the event that market fluctuations cause borrowing
to exceed the limits stated above, the Adviser would act to remedy the situation
as promptly as possible (normally within 3 business days), although it is not
required to dispose of portfolio holdings immediately if the Fund would suffer
losses as a result.
14
<PAGE>
(5) UNDERWRITING. The Fund may not underwrite securities of other issuers except
to the extent permitted by applicable law, including the 1940 Act and published
SEC staff positions.
Further Explanation of Underwriting Policy. The Fund may not underwrite
-------------------------------------------
securities of other issuers, except insofar as the Fund may be deemed to be an
underwriter in connection with the disposition of its portfolio securities.
(6) INVESTMENTS IN COMMODITIES AND REAL ESTATE. The Fund may not purchase or
sell commodities or real estate, except to the extent permitted by applicable
law, including the 1940 Act and published SEC staff positions.
Further Explanation of Policy Restricting Investments in Commodities and Real
-----------------------------------------------------------------------------
Estate. The Fund may purchase or sell financial futures contracts, options on
-------
financial futures contracts, currency contracts, and options on currency
contracts as described in its prospectus and Statement of Additional
Information. The Fund may not purchase or sell real estate, except that the Fund
may invest in securities that are directly or indirectly secured by real estate,
or securities issued by issuers that invest in real estate.
(7) MAKING LOANS. The Fund may not make loans to other persons, except as
allowed by applicable law, including the 1940 Act and published SEC staff
positions.
Further Explanation of Lending Policy. The acquisition of investment securities
--------------------------------------
or other investment instruments is not deemed to be the making of a loan.
To generate income and offset expenses, the Fund may lend portfolio securities
to broker-dealers and other financial institutions which the Adviser believes to
be creditworthy in an amount up to 33 1/3% of its total assets, taken at market
value. While securities are on loan, the borrower will pay the Fund any income
accruing on the security. The Fund may invest any collateral it receives in
additional portfolio securities, such as U.S. Treasury notes, certificates of
deposit, other high-grade, short-term obligations or interest-bearing cash
equivalents. The Fund is still subject to gains or losses due to changes in the
market value of securities which it has lent.
When the Fund lends its securities, it will require the borrower to give the
Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.
NON-FUNDAMENTAL RESTRICTIONS
In addition to the foregoing restrictions, the Funds have each adopted the
following non-fundamental policies which may be changed without shareholder
approval:
Illiquid Securities. The Fund may not purchase illiquid securities if more than
--------------------
15% of the value of the Fund's total assets would be invested in such
securities.
High Yield, High Risk 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.
Futures Contracts. The Funds will not engage in a futures transaction if it
------------------
would cause the aggregate of initial margin deposits and premiums paid on
outstanding options on futures contracts to exceed 5% of the value of their
total assets (excluding in calculating such 5% any in-the-money amount of any
option).
15
<PAGE>
SECTION II: KEY PERSONS
------------------------
ORGANIZATION OF THE FUNDS
DAVIS NEW YORK VENTURE FUND, INC. Davis New York Venture Fund, Inc. is an
open-end, diversified, management investment company incorporated in Maryland in
1968 and registered under the 1940 Act. Davis New York Venture Fund, Inc. is a
series investment company which may issue multiple series, each of which would
represent an interest in its separate portfolio. Davis New York Venture Fund,
Inc. 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 Davis New
York Venture Fund, Inc. 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 series or classes in the
future and may at any time discontinue the offering of any series or 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 Funds can elect all of the Directors of the Funds. 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 Funds, will not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each series
affected by such matter. Rule 18f-2 further provides that a series shall be
deemed to be affected by a matter unless it is clear that the interests of each
series in the matter are identical or that the matter does not affect any
interest of such series. Rule 18f-2 exempts the selection of independent
accountants and the election of Board members from the separate voting
requirements of the Rule.
In accordance with Maryland law and the Funds' By-laws, the Funds do not hold
regular annual shareholder meetings. Shareholder meetings are held when they are
required under the 1940 Act or when otherwise called for special purposes.
Special shareholder meetings may be called upon the written request of
shareholders of at least 25% of the voting power that could be cast at the
meeting.
DIRECTORS AND OFFICERS
The Board of Directors supervises the business and management of the Funds. The
Board approves all significant agreements between the Funds, and those companies
that furnish services to the Funds. The names and addresses of the Directors and
officers are set forth below, together with their principal business
affiliations and occupations for the last five years. As indicated below,
certain Directors and officers hold similar positions with the following Funds
that are managed by the Adviser: Davis New York Venture Fund, Inc., Davis
Series, Inc., Davis International Series, Inc. and Davis Variable Account Fund,
Inc. (collectively the "Davis Funds"). As indicated below, certain Directors and
officers may also hold similar positions with the following Funds that are
managed by the Adviser: Selected American Shares, Inc., Selected Special Shares,
Inc., and Selected Capital Preservation Trust (collectively the "Selected
Funds").
16
<PAGE>
WESLEY E. BASS, JR. (8/21/31), 710 Walden Road, Winnetka, IL 60093. Director of
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 each of the Davis Funds; Director of the Van Eck
Chubb 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
each of the Davis Funds except Davis International Series, Inc.; Chief Executive
Officer, World Total Return Fund, LLP; Counsel to Gordon, Feinblatt, Rothman,
Hoffberger and Hollander, LLC (attorneys); Director, Mid-Atlantic Realty Trust.
JERRY D. GEIST (5/23/34), 931 San Pedro Drive S.E., Albuquerque, NM 87108.
Director of each of the Davis Funds except Davis International Series, Inc.;
Chairman, Santa Fe Center Enterprises; Chairman, Energy & Technology Company,
Ltd.; Director, CH2M-Hill, Inc.; Member, Investment Committee for
Microgeneration Technology Fund, UTECH Funds; Retired Chairman and President,
Public Service Company of New Mexico.
D. JAMES GUZY (3/7/36), P.O. Box 128, Glenbrook, NV 89413. Director of each of
the Davis Funds except Davis International Series, Inc.; Chairman, PLX
Technology, Inc. (a manufacturer of semi-conductor circuits); Director, Intel
Corp. (a manufacturer of semi-conductor circuits), Cirrus Logic Corp. (a
manufacturer of semi-conductor circuits), Alliance Technology Fund (a mutual
fund) and Micro Component Technology, Inc.; Novellus Systems, Inc.
(a manufacturer of semi-conductor equipment).
G. BERNARD HAMILTON (3/18/37), Avanti Partners, P.O. Box 1119, Richmond, VA
23218. Director of each of the Davis Funds; Managing General Partner, Avanti
Partners, L.P.
LAURENCE W. LEVINE (4/9/31), Walsh & Levine, 40 Wall Street, 24th Floor, NY,
10005. Director of 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 (5/6/36), 207 West Lake Road, Tuxedo Park, NY 10987. Director
of 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 &
Co. (investment banker).
MARSHA WILLIAMS (3/28/51), 725 Landwehr Road, Northbrook, IL 60062. Director of
each of the Davis Funds (except Davis International Series, Inc.) and the
Selected Funds; Chief Administrative Officer of Crate & Barrel; Director, Modine
Manufacturing, Inc.; Director, Chicago Bridge & Iron Company, M.V.; former Vice
President and Treasurer, Amoco Corporation.
17
<PAGE>
ANDREW A. DAVIS (6/25/63),* 124 East Marcy Street, Santa Fe, NM 87501. Director
of each of the Davis Funds (except Davis International Series, Inc.) and the
Selected Funds; President or Vice President of each of the Davis Funds and
Selected Funds; Director and President, Davis Investments, LLC.; Director and
Vice President, Davis Selected Advisers-NY, Inc.
CHRISTOPHER C. DAVIS (7/13/65),* 609 Fifth Avenue, New York, NY 10017. Director
of each of the Davis Funds and the Selected Funds; Chief Executive Officer,
President, or Vice President of each of the Davis Funds and Selected Funds;
Director, Chairman and Chief Executive Officer, Davis Investments, LLC;
Director, Chairman, Chief Executive Officer, Davis Selected Advisers-NY, Inc.;
Chairman and Director, Shelby Cullom Davis Financial Consultants, Inc.; Employee
of Shelby Cullom Davis & Co., a registered broker/dealer; Director, Kings Bay
Ltd., an offshore investment management company.
KENNETH C. EICH (8/14/53), 2949 East Elvira Road, Suite 101Tucson, Arizona
85706. Vice President of each of the Davis Funds and Selected Funds; Chief
Operating Officer, Davis Investments, LLC; Vice President, Davis Selected
Advisers-NY, Inc.; President, Davis Distributors, LLC; former President and
Chief Executive Officer of First of Michigan Corporation; former Executive Vice
President and Chief Financial Officer of Oppenheimer Management Corporation.
SHARRA L. REED (9/25/66), 2949 East Elvira Road, Suite 101Tucson, Arizona 85706.
Vice President, Treasurer and Assistant Secretary of each of the Davis Funds and
Selected Funds; Vice President of Davis Investments, LLC
THOMAS D. TAYS (3/7/57), 2949 East Elvira Road, Suite 101Tucson, Arizona 85706.
Vice President and Secretary of each of the Davis Funds and Selected Funds; Vice
President and Secretary, Davis Investments, LLC, Davis Selected Advisers-NY,
Inc., and Davis Distributors, LLC; former Vice President and Special Counsel of
U.S. Global Investors, Inc.
SHELDON R. STEIN (11/29/28), 111 East Wacker Drive, Suite 2800, Chicago IL
60601. Assistant Secretary of each of the Davis Funds and Selected Funds;
Member, D'Ancona & Pflaum LLC, the Funds' counsel.
ARTHUR DON (9/24/53), 111 East Wacker Drive, Suite 2800, Chicago IL 60601.
Assistant Secretary of each of the Davis Funds and Selected Funds; Member,
D'Ancona & Pflaum LLC, the Funds' counsel.
*Jeremy H. Biggs, Andrew A. Davis and Christopher C. Davis are considered to be
"interested persons" of the Funds, as defined in the Investment Company Act.
Andrew A. Davis and Christopher C. Davis are brothers.
The Funds do not pay salaries to any of its officers. The Adviser performs
certain services on behalf of the Funds and is reimbursed by the Funds for the
costs of providing these services.
18
<PAGE>
DIRECTORS' COMPENSATION SCHEDULE
During the fiscal year ended July 31, 2000, the compensation paid to the
Directors who are not considered to be interested persons of the Funds was as
follows:
AGGREGATE FUND TOTAL
NAME COMPENSATION COMPLEX COMPENSATION*
---- ------------ ---------------------
Wesley E. Bass $xx $xx
Marc P. Blum xx xx
Jerry D. Geist xx xx
D. James Guzy xx xx
G. Bernard Hamilton xx xx
LeRoy E. Hoffberger** xx xx
Laurence W. Levine xx xx
Christian R. Sonne xx xx
Marsha Williams xx x
* Complex compensation is the aggregate compensation paid, for services as a
Director, by all mutual funds with the same investment adviser. There are
seven registered investment companies in the complex.
** Mr. Hoffberger retired as a Director as of January 1, 2000, but still
serves in a non-voting emeritus status.
CERTAIN SHAREHOLDERS OF THE FUNDS
As of November xx, 2000, 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 xx% * * xx%
Davis Growth & Income Fund xx% * * *
* Indicates that officers and directors as a group owned less than 1% of the
outstanding shares of the indicated Class of shares.
The following table sets forth as of November xx, 2000, the name and holdings of
each person known by the Funds to be a record owner of more than 5% of the
outstanding shares of any Class of either of its Funds. Other than as indicated
below, the Funds are not aware of any shareholder that beneficially owns in
excess of 25% of the Funds' total outstanding shares.
19
<PAGE>
PERCENT OF CLASS
NAME AND ADDRESS OUTSTANDING
---------------- -----------
DAVIS NEW YORK VENTURE FUND
CLASS A SHARES
Merrill Lynch Pierce Fenner & Smith xx%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
DAVIS NEW YORK VENTURE FUND
CLASS B SHARES
Merrill Lynch Pierce Fenner & Smith xx%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
DAVIS NEW YORK VENTURE FUND
CLASS C SHARES
Merrill Lynch Pierce Fenner & Smith xx%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
DAVIS NEW YORK VENTURE FUND
CLASS Y SHARES
Merrill Lynch Pierce Fenner & Smith xx%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Mitra & Co. xx%
c/o Marshall & Ilsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201-2977
Boston Safe Deposit & Trust Co. xx%
TTEE For the Southwest Airlines
Pilots' Retirement Savings Plan
One Cabot Road 028-0036
Medord, MA 02155-5141
Wellesley College xx%
Attn: Catherine Feddersen
40 Grove Street, Suite 150
Wellesley, MA 02482-7700
20
<PAGE>
PERCENT OF CLASS
NAME AND ADDRESS OUTSTANDING
---------------- -----------
DAVIS GROWTH & INCOME FUND
CLASS A SHARES
Shelby Cullom Davis & Co. xx%
Investment #3
609 5th Avenue, 11th Floor
New York, NY 10017-1021
Christopher C. Davis xx%
9 East 81st Street
New York, NY 10028-0205
DAVIS GROWTH & INCOME FUND
CLASS B SHARES
Merrill Lynch Pierce Fenner & Smith xx%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
DAVIS GROWTH & INCOME FUND
CLASS C SHARES
Merrill Lynch Pierce Fenner & Smith xx%
4800 Deerlake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
DAVIS GROWTH & INCOME FUND
CLASS Y SHARES
Naidot & Co. xx%
c/o Bessemer Trust Company
100 Woodbridge Center Drive
Woodbridge, NJ 07095
INVESTMENT ADVISORY SERVICES
Davis Selected Advisers, L.P. (the "Adviser") whose principal office is at 2949
East Elvira Road, Suite 101Tucson, Arizona 85706, serves as the investment
adviser of both Funds. Davis Investments, LLC is the Adviser's sole general
partner. Christopher C. Davis is Chief Executive Officer of the Adviser and the
sole member of the general partner. Subject to the direction and supervision of
the Board of Directors, the Adviser manages the investment and business
operations of the Funds. Davis Distributors, LLC ("the Distributor"), a
subsidiary of the Adviser, serves as the distributor or principal underwriter of
the Funds' shares. Davis Selected Advisers-NY, Inc. ("DSA-NY"), a wholly owned
subsidiary of the Adviser, performs investment management, research and other
services for the Funds on behalf of the Adviser under a Sub-Advisory Agreement
with the Adviser. The Adviser acts as investment adviser for, Davis Series,
Inc., Davis International Series, Inc., Davis Variable Account Fund, Inc.
(collectively with the Funds, the "Davis Funds"), Selected American Shares,
Inc., Selected Special Shares, Inc. and Selected Capital Preservation Trust
(collectively the "Selected Funds"). The Adviser also provides advisory services
to other parties including private accounts, off-shore funds, a hedge fund, and
wrap accounts. The Distributor 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 Class's 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 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 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.
These fees may be higher than those of most other mutual funds, but are not
necessarily higher than those paid by funds with similar objectives.
21
<PAGE>
The aggregate advisory fees paid by each of the Funds to the Adviser for the
periods indicated were:
For fiscal year ended July 31:
2000 1999 1998
---- ---- ----
Davis New York Venture Fund $xx $66,033,452 $47,535,606
Davis Growth & Income Fund $ $ 744,256 $ 103,832*
* 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.
The Adviser has entered into a Sub-Advisory Agreement with its wholly owned
subsidiary, Davis Selected Advisers-NY, Inc. ("DSA-NY"), where DSA-NY performs
research and other services on behalf of the Adviser. Under the Agreement, the
Adviser pays all of DSA-NY' s direct and indirect costs of operation. All of the
fees paid to DSA-NY are paid by the Adviser and not the Funds.
The Advisory Agreement also makes provisions for portfolio transactions and
brokerage policies of the Funds which are discussed above under "Portfolio
Transactions."
In accordance with the provisions of the 1940 Act, the Advisory Agreement and
Sub-Advisory Agreement will terminate automatically upon assignment, and are
subject to cancellation upon 60 days' written notice by the Board of Directors,
the vote of the holders of a majority of the Funds' outstanding shares, or the
Adviser. The continuance of the Advisory Agreement and Sub-Advisory Agreement
must be approved at least annually by the Funds' Board of Directors or by the
vote of holders of a majority of the outstanding shares of the Funds. In
addition, any new agreement, or the continuation of the existing agreement, must
be approved by a majority of Directors who are not parties to the agreements or
interested persons of any such party.
Pursuant to the Advisory Agreement, the Adviser, subject to the general
supervision of the Funds' Board of Directors, provides management and investment
advice, and furnishes statistical, executive and clerical personnel,
bookkeeping, office space, and equipment necessary to carry out its investment
advisory functions and such corporate managerial duties as requested by the
Board of Directors of the Funds. The Funds bear all expenses other than those
specifically assumed by the Adviser under the Advisory Agreement, including
preparation of its tax returns, financial reports to regulatory authorities,
dividend determinations, transaction and accounting matters related to its
custodian bank, transfer agency, custodial and shareholder services, and
qualification of its shares under federal and state securities laws. Each Fund
reimburses the Adviser for providing certain services including accounting and
administrative services, qualifying shares for sale with state agencies, and
shareholder services. Such reimbursements are detailed below:
<TABLE>
<CAPTION>
Fiscal year ended July 31:
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Davis New York Venture Fund
---------------------------
Accounting and administrative services: $ xx $ 399,996 $ 416,664
Qualifying shares for sale with state agencies: $xx $ 14,004 $ 14,004
Shareholder services: $xx $ ,323,871 $ 1,024,000
Davis Growth & Income Fund
--------------------------
Accounting and administrative services: $xx $ 6,000 $ 1,500*
Qualifying shares for sale with state agencies: $xx $ 12,996 $ 3,249*
Shareholder services: $xx $ 11,343 $ 1,649*
</TABLE>
* The aggregate reimbursements paid by Davis Growth & Income Fund to the Adviser
for the period May 1, 1998 (inception of operations) through July 31, 1998.
CODE OF ETHICS. The Adviser and the Funds have adopted a Code of Ethics which
regulates the personal securities transactions of the Adviser's investment
personnel, other employees, and affiliates with access to information regarding
securities transactions of the Funds. Such employees may invest in securities,
including securities which
22
<PAGE>
may be purchased or held by the Funds. A copy of the Code of Ethics is on public
file with, and available from, the Securities and Exchange Commission.
DISTRIBUTION OF FUND 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 1940 Act. Rule 12b-1
regulates the manner in which a mutual fund may assume costs of distributing and
promoting the sale of its shares. Payments pursuant to a Distribution Plan are
included in the operating expenses of the Class.
CLASS A SHARES. Payments under the Class A Distribution Plan may be up 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 Funds with respect to sales by the Distributor to officers, directors, and
full-time employees of the Funds, 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 who are not
interested persons of the Distributor or the Funds, 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, 2000 the cumulative totals of these carryover
payments were:
Dollar Amount Percent of Class Net Assets
------------- ---------------------------
Davis New York Venture Fund
Class B shares $xx xx%
Davis Growth & Income Fund
23
<PAGE>
Class B shares $xx xx%
ADDITIONAL INFORMATION CONCERNING THE DISTRIBUTION PLANS. In addition, to the
extent that any investment advisory fees paid by the Funds may be deemed to be
indirectly financing any activity which is primarily intended to result in the
sale of Fund 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 the 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 Funds 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 with respect to the Funds and/or their
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.
FUND SUPERMARKETS. The Funds participate in various "Fund Supermarkets" in which
a broker-dealer offers many mutual funds to the sponsor's clients without
charging the clients a sales charge. The Funds pay the supermarket sponsor a
negotiated fee for distributing the Funds' shares and for continuing services
provided to their shareholders.
A portion of the supermarket sponsor's fee (that portion related to sales,
marketing, or distribution of Funds shares) is paid with fees authorized under
the Distribution Plans.
A portion of the supermarket sponsor's fee (that portion related to shareholder
services such as new account set-up, shareholder accounting, shareholder
inquiries, transaction processing, and shareholder confirmations and reporting)
is paid as a shareholder servicing fee of the Funds. The Funds would typically
be paying these shareholder servicing fees directly, were it not that the
supermarket sponsor holds all customer accounts in a single omnibus account with
the Funds. The amount of shareholder servicing fees which the Funds may pay to
supermarket sponsors may not exceed the lesser of (a) 1/10 of 1 percent of net
assets held by such supermarket sponsors per year, or (b) the shareholder
servicing costs saved by the Funds with the omnibus account (determined in the
reasonable judgement of the Adviser).
If the supermarket sponsor's fees exceed the sum available from the Distribution
Plans and shareholder servicing fees, then the Adviser pays the remainder out of
its profits.
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 retired Director, 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
24
<PAGE>
services to clients with respect to shares of the Funds, 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 Funds under
their 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 Funds 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.
THE DISTRIBUTOR. Davis Distributors, LLC ("the Distributor"), 2949 East Elvira
Road, Suite 101Tucson, Arizona 85706 is a wholly owned subsidiary of the
Adviser, and pursuant to a Distributing Agreement acts as principal underwriter
of the Funds' shares on a continuing basis. By the terms of the Distributing
Agreement, the Distributor pays for all expenses in connection with the
preparation, printing, and distribution of advertising and sales literature for
use in offering the Funds' shares to the public, including reports to
shareholders to the extent they are used as sales literature. The Distributor
also pays for the preparation and printing of prospectuses other than those
forwarded to existing shareholders. The continuance and assignment provisions of
the Distributing Agreement are the same as those of the Advisory Agreement.
The Distributor received the following amounts in total sales charges (which the
Funds do not pay) on the sale of Class A shares:
<TABLE>
<CAPTION>
Fiscal year ended July 31:
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Davis New York Venture Fund: $xx $17,227,229 $38,272,705
Amount reallowed to dealers: $xx $14,556,853 $32,490,924
Davis Growth & Income Fund: $xx $ 198,941 $ 360,457*
Amount reallowed to dealers: $xx $ 167,245 $ 303,403*
</TABLE>
*For the period from May 1, 1998 (commencement of operations) through July 31,
1998.
The Distributor received compensation on redemptions and repurchases of shares
in the following amounts: :
Fiscal year ended July 31, 2000:
Davis New York Venture Fund
Class A shares $ xx
Class B shares $ xx
Class C shares $ xx
Davis Growth & Income Fund
Class A shares $ xx
Class B shares $ xx
Class C shares $ xx
The Distributor received the following amounts as reimbursements under the
Distribution plans:
Fiscal year ended July 31:
2000 1999 1998
---- ---- ----
Davis New York Venture Fund
Class A shares $xx $15,106,683 $11,710,409
Class B shares $xx $36,587,825 $20,695,694
Class C shares $xx $15,962,857 $ 9,471,710
Davis Growth & Income Fund
Class A shares $xx $ 56,774 $ 25,387*
Class B shares $xx $ 283,511 $ 28,141*
Class C shares $xx $ 94,486 $ 6,973*
* For the period from May 1, 1998 (commencement of operations) through July 31,
1998.
25
<PAGE>
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 Funds' assets. The Custodian maintains all of the instruments representing
the Funds'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 Funds' assets in payment of the Funds' expenses,
pursuant to instructions of officers or resolutions of the Board of Directors.
The Custodian also provides certain fund accounting and transfer agent services.
AUDITORS. KPMG LLP ("KPMG"), 707 17th Street, Suite 2300, Denver, Colorado
80202, serves as independent auditors for each of the Funds. The auditors
consult on financial accounting and reporting matters, and meet with the Audit
Committee of the Board of Directors. In addition, KPMG reviews federal and state
income tax returns and related forms.
COUNSEL. D'Ancona & Pflaum LLC, 111 East Wacker Drive, Suite 2800, Chicago,
Illinois 60601, serves as counsel to the Funds and also serves as counsel for
those members of the Board of Directors who are not affiliated with the Adviser.
SECTION III: CLASSES OF SHARES, PURCHASES, EXCHANGES AND REDEMPTIONS
SELECTING THE APPROPRIATE CLASS OF SHARES
Both Funds offer 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, or
sales charge, 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 Funds 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
Funds 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
26
<PAGE>
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:
Purchase Amount Commission
First $3,000,000................................ .75%
Next $2,000,000................................ .50%
Over $5,000,000................................ .25%
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 Funds 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 with 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 Bank and
Trust if the investment is mailed to State Street Bank and Trust) 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
(except purchases into Davis Government Money Market Fund) 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 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 or
Distributor to sell, the shares covered by the Statement.
27
<PAGE>
(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.
For example, if you owned $100,000 worth (at offering price) of shares
(including Class A, B and C shares of all Davis Funds), 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 Funds' Class A shares. This applies to all
three situations for reduction of sales charges discussed above.
If a "single purchaser" decides to buy a Fund's Class A shares as well as Class
A shares of any of the other Davis Funds 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 Financial 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 may be aggregated. In this connection,
the Funds' 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 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.
In all of 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 Bank and Trust, if the investment is mailed to
State Street Bank and Trust) 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) 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.
(6) SALES AT NET ASSET VALUE. There are situations where the sales charge will
not apply to the purchase of Class A shares. A sales charge is not imposed
on these transactions either because the purchaser deals directly with the
Fund (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. However, if investors effect purchases in
Fund shares through a broker or agent, the broker or agent may charge a
fee. 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 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 eligible employees or participants (the Fund may, at its
discretion, waive this 250 participant minimum; for example, the 250
participant minimum may be waived for certain financial institutions
providing transfer agent and/or
28
<PAGE>
administrative services, or for 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, "rabbi trusts", or other nonqualified plans; (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 Fund's 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; (7) Class A shares amounting to less than $5,000,000
purchased by any state, county, city, department, authority or similar
agency. and (8) Shareholders making purchases in certain accounts offered
by securities firms which have entered into contracts with the Fund and
which charge fees based upon assets in the account. The Fund may also issue
Class A shares at net asset value incident to a merger with or acquisition
of assets of an investment company. 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.
SPECIAL NOTE FOR WRAP PROGRAM INVESTORS
Be aware that both Class A and Class Y shares are available at net asset value
to your sponsor. However, Class A shares are subject to additional expenses, and
sponsors of wrap programs who buy Class A shares are generally entitled to
commissions. If your sponsor has selected Class A shares, you should discuss
these charges and weigh the benefits of any services to be provided by the
sponsor against the higher expenses paid by Class A shareholders. For more
information on these fees and expenses, you can request the prospectus covering
Class A shares by calling Davis Distributors.
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 Funds are made
available to Retirement Plan Participants such as 401K or 403B Plans at net
asset value with the waiver of Contingent Deferred Sales Charge ("CDSC") if:
29
<PAGE>
(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 Funds'
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
(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 record-kept on a daily basis by Merrill Lynch or an independent
record keeper 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 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 Funds to
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liquidate a shareholder's account if the aggregate net asset value of the shares
held in such account falls below an established minimum amount.
Shares in different Davis Funds may be exchanged at relative net asset value;
however, if any Davis Fund shares being exchanged are subject to a sales charge,
Statement of Intention, or other limitation, the limitation will continue to
apply to the shares received in the exchange. When an investor exchanges Class B
or Class C shares in a Davis Fund for shares in Davis Government Money Market
Fund, the holding period for any deferred sales charge does not continue during
the time that the investor owns Davis Government Money Market Fund shares. For
example, Class B shares are subject to a declining sales charge for six years.
Any period that an investor owns shares of Davis Government Money Market Fund
will be added to the six-year declining sales charge period. Class A shares sold
at net asset value subject to a deferred sales charge will continue to age while
invested in Davis Government Money Market Fund shares.
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 Funds' 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.
Wrap Program Investors should be aware that both Class A and Class Y shares are
made available by the Funds 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.
HOW TO PURCHASE 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
Bank and Trust") at the address on the Form. Your dealer or sales representative
will help you fill out the Form. The dealer must also sign 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, to 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.
The third way to purchase shares is by wire. Shares may be purchased at any time
by wiring federal funds directly to State Street Bank and Trust. 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 amount, class of shares
and obtain an account number. A completed Application Form should be mailed to
State Street Bank and Trust 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
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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 purchase form
which State Street Bank and Trust will provide with each confirmation statement.
If you do not have a purchase form, include a letter with your check stating the
name of the Fund, the class of shares you wish to buy and your account number.
CERTIFICATES. The Funds do 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 Funds do not issue certificates for Class Y shares. Instead, shares
purchased are automatically credited to an account maintained for you on the
books of the Funds by State Street Bank and Trust. 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. If you are
eligible and wish to receive certificates, please submit a letter of instruction
with your Application Form. Once your account has been established, the
shareholder(s) may request that certificates be sent to the address of record by
calling our customer service department.
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SPECIAL SERVICES
PROTOTYPE RETIREMENT PLANS. The Distributor and certain qualified dealers have
available prototype retirement plans (e.g. profit sharing, money purchase,
Simplified Employee Pension ("SEP") plans, model 403(b) and 457 plans for
charitable, educational and governmental entities) sponsored by the Funds 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 Funds and other Davis Funds as their investment
vehicle. State Street Bank and Trust acts as custodian or trustee for certain
retirement plans, and charges the participant an annual maintenance fee of $10
per social security number regardless of the number of plans established. The
maintenance fee will be redeemed automatically at year-end from your account,
unless you elect to pay the fee directly prior to that time.
AUTOMATIC INVESTMENT PROGRAM. You may arrange for automatic monthly investing
whereby State Street Bank and Trust 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 program the account balance will meet the
minimum investment requirements within twelve months of the initial investment.
For banking 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 5th and the 28th. After each automatic investment, you will receive
a transaction confirmation from State Street Bank and Trust and the debit should
be reflected on your next bank statement. You may terminate the Automatic
Investment Program at any time. If you desire to utilize this program, you may
complete the appropriate section of the Application Form. Once you have
established your account, you may use the Account Service Form to establish this
program or submit a letter of instruction signed by the account owner(s). Class
Y shares are not eligible to participate in the Automatic Investment Program.
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. 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
complete the appropriate section of the Application Form. Once you have
established your account, you may use the Account Service Form to establish this
program or submit a letter of instruction signed by the account owner(s). 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 Funds 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.
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, call our customer service department for details.
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
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exchanged only for shares of the same class of another Davis Fund, some Class A
shareholders maybe eligible to purchase Class Y shares and exchange their shares
for Class Y shares of the same 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 (and $250 for retirement accounts) 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 Bank and Trust a written
unconditional request for the exchange and follow the instructions regarding
delivery of share certificates contained in the section on "Redemption of
Shares." An unconditional request does not specify an exchange date, price or
other condition for the execution of the exchange. 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
Funds reserve 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 and the same share class. Please see the discussion of procedures
with respect to telephone instructions in the section entitled "Telephone
Privilege," as such procedures are also applicable to exchanges.
AUTOMATIC EXCHANGE PROGRAM. The Funds also offers an automatic monthly exchange
program. All accounts established or utilized under this program must have the
same registration and the same share class, 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
complete the appropriate section of the Application Form. Once you have
established your account, you may use the Account Service Form or a letter of
instruction signed by the account owner(s) to establish this program.
REDEMPTION OF SHARES
GENERAL. You can redeem, or sell back to the Funds, 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
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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 Bank and Trust 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 sent to State Street Bank and Trust with the a letter of instruction signed
by all account owner(s).
For the protection of all shareholders, the Funds also require that signatures
appearing on a letter of instruction, stock power or redemption request where
the proceeds would be more than $100,000 mailed to the address of record, must
be medallion signature-guaranteed by an eligible guarantor institution, such as
a securities broker-dealer, or a commercial bank. In some situations where
corporations, trusts, or estates are involved, additional documents such as a
certified copy of the corporate resolution, 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 or does not reimburse in
the case of fraud. 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 $100,000 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.
Redemption proceeds are normally paid to you within seven days after State
Street Bank and Trust 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 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 a
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 Bank and Trust rather than having a dealer arrange for a
repurchase.
ELECTRONIC WIRE PRIVILEGE. You may be eligible to have your sale proceeds
electronically transferred to a commercial bank account. This is known as an
ELECTRONIC WIRE PRIVILEGE. There is a $5 charge by State Street Bank and Trust
for wire service, and receiving banks may also charge for this service. Payment
through Automated Clearing House will usually arrive at your bank two banking
days after the sale. Payment by wire is usually credited to your bank account on
the next business day after the sale.
While State Street Bank and Trust will accept electronic wire sales by telephone
or dealer, you still need to fill out and submit the information under the
Electronic Wire Privilege section of the Application Form. Once your account has
been opened and you have not previously established the Electronic Wire
Privilege, you must submit a letter of instruction with a medallion signature
guarantee signed by all registered owners at the time of the wire sale. If you
are currently an investor with a non-retirement account and have already
established this privilege, you may call our customer service department to
execute a wire sale by telephone.
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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(s);
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 WITHDRAWAL PLAN. Under the Automatic Withdrawal Plan, you can instruct
State Street Bank and Trust to sell a set dollar or percentage amount each month
or each quarter. Your account must have a value of at least $10,000 to start a
plan.
When you participate in this plan, shares are sold so that you will receive
payment by one of three methods:
First, you may receive funds at the address of record provided that this address
has been unchanged for a period of not less than 30 days. These funds are sent
by check on or after the 25th day of the month.
Second, you may also choose to receive funds by Automated Clearing House (ACH)
to the banking institution of your choice. You may elect an ACH draft date
between the 5th and the 28th days of the month. You must complete the
appropriate section of the Application Form. Once your account has been
established, you must submit a letter of instruction with a medallion signature
guarantee.
Third, you may have funds sent by check to a third party at an address other
than the address of record. You must complete the appropriate section of the
Application Form. Once your account has been established, you must submit a
letter of instruction with a medallion signature guarantee to designate a third
party payee.
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 Withdrawal Plan at any time without charge or penalty. The Funds
reserve the right to terminate or modify the Automatic Withdrawal Plan at any
time. Class Y shares are not eligible for the Automatic Withdrawal Plan.
INVOLUNTARY REDEMPTIONS. To relieve the Funds of the cost of maintaining
uneconomical accounts, the Funds 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 Funds 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 Bank and Trust or the
Distributor a letter of instruction signed by the account owner(s), together
with a check for the reinstatement amount. The letter must be received, together
with the payment, within 60 days after the redemption or repurchase. You can
only use this privilege once.
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
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determined daily as of the earlier of the close of the New York Stock Exchange
(the "Exchange") or 4:00 p.m., Eastern time, on each day that the Exchange is
open for trading.
The price per share for purchases or redemptions made directly through State
Street Bank and Trust is generally the value next computed after State Street
Bank and Trust receives the purchase order or redemption request. 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 Bank and
Trust. The broker-dealer or financial institution is responsible for promptly
transmitting purchase orders or redemption requests to State Street Bank and
Trust 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 Bank
and Trust 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 Funds do not price its shares or accept orders for purchases or redemptions
on days when the New York Stock Exchange is closed. Such days currently include
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Certain brokers and certain designated intermediaries on their behalf may accept
purchase and redemption orders. The Distributor will be deemed to have received
such an order when the broker or the designee has accepted the order. Customer
orders are priced at the net asset value next computed after such acceptance.
Such order may be transmitted to the Fund or its agents several hours after the
time of the acceptance and pricing.
VALUATION OF PORTFOLIO SECURITIES. Portfolio securities are normally valued
using current market valuations. Securities traded on a national securities
exchange are valued at the last published sales price on the exchange, or in the
absence of recorded sales, at the average of closing bid and asked prices on
such exchange. Over-the-counter securities are valued at the average of closing
bid and asked prices. Fixed-income securities may be valued on the basis of
prices provided by a pricing service. Investments in short-term securities
(purchased with a maturity of one year or less) are valued at amortized cost
unless the Board of Directors determines that such cost is not a fair value.
Assets for which there are no quotations available will be valued at a fair
value as determined by or at the direction of the Board of Directors.
To the extent that the Funds' securities are traded in markets that close at
different times, events affecting portfolio values that occur between the time
that their prices are determined and the time the Funds' shares are priced will
generally not be reflected in the Funds' share price. The value of securities
denominated in foreign currencies and traded in foreign markets will have their
value converted into the U.S. dollar equivalents at the prevailing market rate
as computed by State Street Bank & Trust Company. Fluctuation in the value of
foreign currencies in relation to the U.S. dollar may affect the net asset value
of the Funds' shares even if there has not been any change in the foreign
currency price of the Funds' investments.
DIVIDENDS AND DISTRIBUTIONS
There are two sources of income, net income and realized capital gains, paid 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 of receiving all dividends and distributions in
cash, of having all dividends and distributions reinvested, or of having income
dividends paid in cash and capital gain distributions reinvested. Reinvestment
of all dividends and distributions is automatic for accounts utilizing the
Automatic Withdrawal 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.
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For the protection of the shareholder, upon receipt of the second dividend check
which has been returned to State Street Bank and Trust 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.
Davis New York Venture Fund usually pays dividends and distributions, if any,
once a year. Davis Growth & Income Fund usually pays quarterly dividends and
distributes capital gains, if any, once a year. However, the Board of Directors
reserves the right to suspend payments or to make additional payments.
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.
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. 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 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.
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.
CUMULATIVE TOTAL RETURN AND AVERAGE ANNUAL TOTAL RETURN
The cumulative total return and the average annual total return (each is defined
below) with respect to each class of shares for each Fund for the periods
indicated below is as follows:
<TABLE>
<CAPTION>
Cumulative Average Annual
Davis New York Venture Fund Total Return 1 Total Return 2
--------------------------- ------------- -------------
<S> <C> <C>
Class A Shares
One year ended July 31, 2000.............................................. xx% xx%
Five years ended July 31, 2000............................................ xx% xx%
Ten years ended July 31, 2000............................................. xx% xx%
Period from February 17, 1969 through July 31, 2000 (life of class)....... xx% xx%
Class B Shares
One year ended July 31, 2000.............................................. xx% xx%
Five years ended July 31, 2000............................................ xx% xx%
Period from December 1, 1994 through July 31, 2000 (life of class)........ xx% xx%
Class C Shares
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
One year ended July 31, 2000.............................................. xx% xx%
Five years ended July 31, 2000............................................ xx% xx%
Period from December 20, 1994 through July 31, 2000 (life of class)....... xx% xx%
Class Y Shares
One year ended July 31, 2000.............................................. xx% xx%
Period from October 2, 1996 through July 31, 2000 (life of class)......... xx% xx%
Davis Growth & Income Fund
Class A Shares
One year ended July 31, 2000.............................................. xx% xx%
Period from May 1, 1998 through July 31, 2000 (life of class)............. xx% xx%
Class B Shares
One year ended July 31, 2000.............................................. xx% xx%
Period from May 4, 1998 through July 31, 2000 (life of class)............. xx% xx%
Class C Shares
One year ended July 31, 2000.............................................. xx% xx%
Period from May 4, 1998 through July 31, 2000 (life of class)............. xx% xx%
Class Y Shares
One year ended July 31, 2000.............................................. xx% xx%
Period from May 4, 1998 through July 31, 2000 (life of class)............. xx% xx%
</TABLE>
1 "Cumulative Total Return" is a measure of a Fund's performance encompassing
all elements of return. Total return reflects the change in share price over a
given period and assumes all distributions are taken in additional Fund shares.
Total return is determined by assuming a hypothetical investment at the
beginning of the period, deducting a maximum front-end or applicable contingent
deferred sales charge, adding in the reinvestment of all income dividends and
capital gains, calculating the ending value of the investment at the net asset
value as of the end of the specified time period and subtracting the amount of
the original investment, and by dividing the original investment. This
calculated amount is then expressed as a percentage by multiplying by 100.
Periods of less than one year are not annualized.
2 "Average Annual Total Return" represents the average annual compounded rate of
return for the periods presented. Periods of less than one year are not
annualized. Average annual total return measures both the net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments in the Funds' portfolio. Average
annual total return is calculated separately for each class in accordance with
the standardized method prescribed by the Securities and Exchange Commission by
determining the average annual compounded rates of return over the periods
indicated, that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made
at the beginning of such period.
This calculation (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates, and (ii) deducts (a) the
maximum front-end or applicable contingent deferred sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory fees, charged as expenses to all shareholder accounts.
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 September 30, 2000 is as
follows:
Class A shares. xx%
Class B shares. xx
Class C shares. xx
Class Y shares. xx%
"30-Day SEC Yield" is computed in accordance with a standardized method
prescribed by the rules of the Securities and Exchange Commission and is
calculated separately for each class. 30-Day SEC Yield is a measure of the net
investment income per share (as defined) earned over a specified 30-day period
expressed as a percentage of the maximum offering price of the Funds' shares at
the end of the period. Such yield figure was determined by dividing the net
investment income per share on the last day of the period, according to the
following formula:
40
<PAGE>
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 Funds' performance for any future period.
In advertising and sales literature the Funds may publish various statistics
describing its investment portfolio such as the Funds' average Price to Book and
Price to Earnings ratios, beta, alpha, R-squared, standard deviation, etc.
The Funds' Annual Report and Semi-Annual Report contain additional performance
information and will be made available upon request and without charge by
calling Davis Funds toll-free at 1-800-279-0279, Monday through Friday, 7 a.m.
to 4 p.m. Mountain Time.
41
<PAGE>
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.
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.
42
<PAGE>
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.
43
<PAGE>
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
Bank and Trust 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 Bank and Trust 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 Bank and Trust will redeem an appropriate number of the escrowed shares
in order to realize such difference.
5. I hereby irrevocably constitute and appoint State Street Bank and Trust 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 Bank and Trust 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.
44
<PAGE>
FORM N-1A
DAVIS NEW YORK VENTURE FUND, INC.
POST-EFFECTIVE AMENDMENT NO. 60 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 2-29858
AND
AMENDMENT NO. 35 UNDER THE INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-1701
PART C
OTHER INFORMATION
-----------------
Item 23. Exhibits:
---------
(a)(1) Articles of Incorporation. Amended and Restated Articles of
Incorporation of Davis New York Venture Fund, Inc.,
incorporated by reference to Exhibit (1) of Registrant's
registration statement 2-29858, filed on Edgar 04/04/96.
(a)(2)* Articles of Amendment of Articles of Incorporation, limiting
liability of directors and officers, effective October 20,
1988.
(a)(3)* Articles of Amendment, regarding stock classification, net
asset value calculation and shareholder voting, dated August
29, 1994.
(a)(4)* Articles of Amendment, changing name from New York Venture
Fund, Inc., to Davis New York Venture Fund, Inc., effective
October 1, 1995.
(a)(5) Articles Supplementary to Articles of Incorporation,
designating the Davis Growth & Income Fund, incorporated by
reference to Exhibit 23(a)(3) of Registrant's registration
statement 2-29858, filed on Edgar 11/30/99.
(b) By-laws. Amended and Restated Bylaws, incorporated by
reference to Exhibit (2) of Registrant's registration
statement 2-29858, filed on Edgar 12/01/97.
(c) Instruments Defining Rights of Security Holders. Not
applicable.
1
<PAGE>
(d)(1) Investment Advisory Contracts. Investment Advisory
Agreement, incorporated by reference to Exhibit (5) of
Registrant's registration statement 2-29858, filed on Edgar
04/04/96.
(d)(2)* Proposed Investment Advisory Agreement with Davis Selected
Advisers, L.P., dated January 1, 2001.
(d)(3) Amendment of Investment Advisory Agreement, revising fee
schedule, dated December 1, 1996, incorporated by reference
to Exhibit 5(b) of Registrant's registration statement
2-29858, filed on Edgar 10/01/96.
(d)(4) Second Amendment of Investment Advisory Agreement, adding
the Davis Growth & Income Fund, incorporated by reference to
Exhibit 5(d) of Registrant's registration statement 2-29858,
filed on Edgar 02/13/98.
(d)(5) Sub-Advisory Agreement between Davis Selected Advisers,
L.P., and Davis Selected Advisers - NY, Inc., incorporated
by reference to Exhibit 5(c) of Registrant's registration
statement 2-29858, filed on Edgar 10/01/96.
(d)(6)* Proposed Sub-Advisory Agreement between Davis Selected
Advisers, L.P., and Davis Selected Advisers - NY, Inc.,
dated January 1, 2001.
(e)(1) Underwriting Contracts. Distributing Agreement, as amended
effective December 1, 1996, incorporated by reference to
Exhibit (6) of Registrant's registration statement 2-29858,
filed on Edgar 10/01/96.
(e)(2) Transfer and Assumption Agreement dated July 31, 1997,
incorporated by reference to Exhibit (6)(b) of Registrant's
registration statement 2-29858, filed on Edgar 08/07/97.
(e)(3)* Form of Dealer Agreement between principal underwriter and
distributing broker-dealers.
(f) Bonus or Profit Sharing Contracts. Not applicable.
(g)(1)* Custodian Agreements. Custodian Contract, dated September 5,
2000.
2
<PAGE>
(h)(1)* Other Material Contracts. Transfer Agency and Service
Agreement, dated March 10, 1998.
(h)(2) Amendment to Transfer Agency and Service Agreement, adding
the Davis Growth & Income Fund, incorporated by reference to
Exhibit (8)(d) to Registrant's Post-Effective Amendment
filed on Edgar 05/01/98.
(i)** Legal Opinion. Opinion and Consent of Counsel, (D'Ancona &
Pflaum LLC).
(j)(1)** Other Opinions. Consent of Current Auditors, KPMG LLP.
(k) Omitted Financial Statements. Incorporated from the Annual
Report.
(l) Initial Capital Agreements. Not applicable.
(m)(1) Rule 12b-1 Plan. Distribution Plan for Class A shares, as
amended, incorporated by reference to Exhibit (15)(a) of
Registrant's registration statement 2-29858 filed on Edgar
08/07/97.
(m)(2) Distribution Plan for Class B shares, incorporated by
reference to Exhibit 15 (b) of Registrant's registration
statement 2-29858, filed on Edgar 04/04/96.
(m)(3) Distribution Plan for Class C shares, incorporated by
reference to Exhibit 15 (c) of Registrant's registration
statement 2-29858, filed on Edgar 04/04/96.
(n) Rule 18f-3 Plan. Plan pursuant to Rule 18f-3, as amended,
incorporated by reference to Exhibit (18)(b) of Registrant's
registration statement 2-29858, filed on Edgar 08/07/97.
(o) Reserved.
(p)* Code of Ethics. Code of Ethics as amended January 29, 2000.
(q)(1) Other Exhibits. Powers of Attorney of the Registrant,
Officers and Board of Directors of Davis New York Venture
Fund, and Davis Growth & Income Fund, appointing Sheldon
Stein and Arthur Don as attorneys-in-fact, filed on Edgar
09/29/98.
3
<PAGE>
(q)(2)* Other Exhibits. Powers of Attorney of Christopher C. Davis
and Sharra L. Reed as officers of the Registrant, appointing
Sheldon Stein and Arthur Don as attorneys-in-fact, dated
March 30, 2000.
(q)(3)* Other Exhibits. Agreement Respecting Names, changing name
from New York Venture Fund, Inc., to Davis New York Venture
Fund, Inc., dated October 1, 1995.
* Filed herein
** To be filed by amendment prior to being declared effective
Item 24. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------
Not applicable
Item 25. Indemnification
---------------
Registrant's Articles of Incorporation indemnifies its directors, officers and
employees to the full extent permitted by Section 2-418 of the Maryland General
Corporation Law, subject only to the provisions of the Investment Company Act of
1940. The indemnification provisions of the Maryland General Corporation Law
(the "Law") permit, among other things, corporations to indemnify directors and
officers unless it is proved that the individual (1) acted in bad faith or with
active and deliberate dishonesty, (2) actually received an improper personal
benefit in money, property or services, or (3) in the case of a criminal
proceeding, had reasonable cause to believe that his act or omission was
unlawful. The Law was also amended to permit corporations to indemnify directors
and officers for amounts paid in settlement of stockholders' derivative suits.
In addition, the Registrant's directors and officers are covered under a policy
to indemnify them for loss (subject to certain deductibles) including costs of
defense incurred by reason of alleged errors or omissions, neglect or breach of
duty. The policy has a number of exclusions including alleged acts, errors, or
omissions which are finally adjudicated or established to be deliberate,
dishonest, malicious or fraudulent or to constitute willful misfeasance, bad
faith, gross negligence or reckless disregard of their duties in respect to any
registered investment company. This coverage is incidental to a general policy
carried by the Registrant's adviser.
In addition to the foregoing indemnification, Registrant's Articles of
Incorporation exculpate directors and officers with respect to monetary damages
except to the extent that an individual actually received an improper benefit in
money property or services or to the extent that a final adjudication finds that
the individual acted with active and deliberate dishonesty.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Davis Selected Advisers, L.P. ("DSA") and subsidiary companies comprise a
financial services organization whose business consists primarily of providing
investment management services
4
<PAGE>
as the investment adviser and manager for investment companies registered under
the Investment Company Act of 1940, unregistered domestic and off-shore
investment companies, and as an investment adviser to institutional and
individual accounts. DSA also serves as sub-investment adviser to other
investment companies. Davis Distributors LLC, a wholly-owned subsidiary of DSA,
is a registered broker-dealer. Davis Selected Advisers - NY, Inc., another
wholly-owned subsidiary, provides investment management services to various
registered and unregistered investment companies, pension plans, institutions
and individuals.
Other business of a substantial nature that directors or officers of DSA are or
have been engaged in the last two years:
SHELBY M.C. DAVIS (3/20/37), 4135 North Steers Head Road, Jackson Hole, WY
83001. Senior Research Analyst and Founder, Davis Selected Advisers, L.P.,
Director, Chairman and Chief Executive Officer, Venture Advisers, Inc.;
Director, Shelby Cullom Davis Financial Consultants, Inc.
ANDREW A. DAVIS (6/25/63), 124 East Marcy Street, Santa Fe, NM 87501. Director
and President or Vice President of each of the Davis Funds (except Davis
International Series, Inc.) and the Selected Funds; President, Davis
Investments, LLC; Director and Vice President, Davis Selected Advisers-NY, Inc.
CHRISTOPHER C. DAVIS (7/13/65),* **609 Fifth Avenue, New York, NY 10017.
Director and Chief Executive Officer, President, and/or Vice President of each
of the Davis Funds and the Selected Funds; Director, Chairman and Chief
Executive Officer, Davis Investments, LLC.; Director, Chairman, Chief Executive
Officer, Davis Selected Advisers-NY, Inc.; Chairman and Director, Shelby Cullom
Davis Financial Consultants, Inc.; Employee of Shelby Cullom Davis & Co., a
registered broker/dealer; Director, Kings Bay Ltd., an offshore investment
management company.
KENNETH C. EICH (8/14/53), 2949 East Elvira Road, Suite 101, Tucson, AZ 85706.
Vice President of each of the Davis Funds and Selected Funds; Chief Operating
Officer, Davis Investments, LLC and Venture Advisers, Inc.; Vice President,
Davis Selected Advisers-NY, Inc.; President, Davis Distributors LLC;
5
<PAGE>
GARY TYC (05/27/56), 2949 East Elvira Road, Suite 101, Tucson, AZ 85706. Vice
President, Chief Financial Officer Treasurer, and Assistant Secretary of Davis
Investments, LLC and Venture Advisers, Inc.; Vice President, Treasurer, &
Assistant Secretary of Davis Selected Advisers - NY, Inc.; Vice President,
Treasurer, & Assistant Secretary of Davis Distributors LLC;
THOMAS D. TAYS, 2949 East Elvira Road, Suite 101, Tucson, AZ 85706. Vice
President, Chief Legal Officer and Secretary, Davis Investments, LLC, Venture
Advisers, Inc., Davis Selected Advisers-NY, Inc., and Davis Distributors LLC.
Item 27. Principal Underwriter
---------------------
(a) Davis Distributors, LLC, a wholly owned subsidiary of the Adviser,
located at 2949 East Elvira Road, Suite 101, Tucson, AZ 85706, is the
principal underwriter for each of the Davis Funds and Selected Funds: Davis
New York Venture Fund Inc., Davis Series, Inc., Davis Variable Account Fund,
Inc., Davis International Series, Inc., Selected American Shares, Inc.,
Selected Special Shares, Inc., and Selected Capital Preservation Trust.
(b) Management of the Principal Underwriters:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
---------------- ----------- ---------------
<S> <C> <C>
Kenneth C. Eich President Vice President
2949 East Elvira Road,
Suite 101
Tucson, AZ 85706
Gary P. Tyc Vice President, Treasurer and None
2949 East Elvira Road, Assistant Secretary
Suite 101
Tucson, AZ 85706
Thomas D. Tays Vice President and Secretary Vice President and Secretary
2949 East Elvira Road,
Suite 101
Tucson, AZ 85706
Sharra Reed Assistant Treasurer Vice President, Treasurer and
2949 East Elvira Road,
Suite 101 Assistant Secretary.
Tucson, AZ 85706
</TABLE>
(c) Not applicable.
6
<PAGE>
Item 28. Location of Accounts and Records
--------------------------------
Accounts and records are maintained at the offices of Davis Selected Advisers,
L.P., 2949 East Elvira Road, Suite 101, Tucson, AZ 85706, and at the offices of
the Registrant's custodian, State Street Bank and Trust Company, One Heritage
Drive, North Quincy, Massachusetts 02107, and the Registrant's transfer agent
State Street Bank and Trust, c/o Service Agent, BFDS, Two Heritage Drive,
Seventh Floor, North Quincy, Massachusetts 02107.
Item 29. Management Services
------------------
-
Not applicable
Item 30. Undertakings
------------
Registrant undertakes to furnish each person to whom a prospectus is delivered
with a copy of Registrant's latest annual report to shareholders upon request
and without charge.
DAVIS NEW YORK VENTURE FUND, INC.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Chicago and State of Illinois on the 28th day of September, 2000.
DAVIS NEW YORK VENTURE FUND, INC.
*By: /s/ Arthur Don
----------------------------------
Arthur Don
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated.
Signature Title Date
--------- ----- ----
Christopher C. Davis* President, Chief Executive Officer September 28, 2000
---------------------
Christopher C. Davis
Sharra L. Reed* Principal Financial Officer
--------------------- and Treasurer September 28, 2000
Sharra L. Reed
7
<PAGE>
* By: /s/ Arthur Don
----------------------------------
Arthur Don
Attorney-in-Fact
*Arthur Don signs this document on behalf of the Registrant and each of the
foregoing officers pursuant to the powers of attorney filed as Exhibit (q)(2) to
Registrant's current Post-Effective Amendment No. 60 to Registrant's
Registration Statement.
/s/ Arthur Don
----------------------------------
Arthur Don
Attorney-in-Fact
8
<PAGE>
DAVIS NEW YORK VENTURE FUND, INC.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed on September 28, 2000, by the following persons in the
capacities indicated.
Signature Title
--------- -----
Wesley E. Bass. Jr.* Director
----------------------------------
Wesley E. Bass, Jr.
Jeremy H. Biggs* Director
----------------------------------
Jeremy H. Biggs
Marc P. Blum* Director
----------------------------------
Marc P. Blum
Andrew A. Davis* Director
----------------------------------
Andrew A. Davis
Christopher C. Davis* Director
----------------------------------
Christopher C. Davis
Jerry D. Geist* Director
----------------------------------
Jerry D. Geist
D. James Guzy* Director
----------------------------------
D. James Guzy
G. Bernard Hamilton* Director
----------------------------------
G. Bernard Hamilton
Laurence W. Levine* Director
----------------------------------
Laurence W. Levine
Christian R. Sonne* Director
----------------------------------
Christian R. Sonne
Marsha Williams** Director
----------------------------------
Marsha Williams
*Arthur Don signs this document on behalf of each of the foregoing persons
pursuant to the powers of attorney filed as Exhibit (p) to Registrant's
Post-Effective Amendment No. 59 to Registrant's Registration Statement.
9
<PAGE>
/s/Arthur Don
------------------------------------
Arthur Don
Attorney-in-Fact
10
<PAGE>
EXHIBIT LIST
23(a)2 Articles of Amendment, regarding D & O liability
23(a)3 Articles of Amendment, regarding stock classification
23(a)4 Articles of Amendment, regarding name change
23(d)(2) Proposed Advisory Agreement, January 1, 2001
23(d)(6) Proposed Sub-Advisory Agreement, January 1, 2001
23(e)3 Form of Dealer Agreement between principal underwriter and distributing
broker-dealers
23(g)1 Custodian Agreement, September 5, 2000
23(h)1 Transfer Agency and Service Agreement
23(p) Code of Ethics
23(q)(2) Powers of Attorney
23(q)(3) Agreement Respecting Names
11
