DAVIS INTERNATIONAL SERIES INC, 485APOS, 2000-02-07

DAVIS INTERNATIONAL SERIES INC
485APOS, 2000-02-07

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 205410

-------------------------

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 33-86578
POST-EFFECTIVE AMENDMENT NO. 11

AND

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-8870
AMENDMENT NO. 12

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

Agents For Service: Thomas D. Tays, Esq.
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
1-505-820-3055

-or-

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

It is proposed that this filing will become effective:

[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On ________, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On March 1, 2000, pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On_________, pursuant to paragraph (a)(2) of Rule 485
<PAGE>

Title of Securities being Registered: Common Stock of:

DAVIS INTERNATIONAL TOTAL RETURN FUND

<PAGE>

FORM N-1A
DAVIS INTERNATIONAL TOTAL RETRUN FUND
AN AUTHORIZED PORTFOLIO OF
DAVIS INTERNATIONAL SERIES, INC.
CLASS A, CLASS B CLASS C AND CLASS Y SHARES

POST-EFFECTIVE AMENDMENT NO. 11 TO REGISTRATION
STATEMENT NO. 33-86578 UNDER THE SECURITIES ACT OF 1933
AND AMENDMENT NO. 12 UNDER THE INVESTMENT COMPANY ACT
OF 1940 TO REGISTRATION STATEMENT NO. 811-8870.

CROSS REFERENCE SHEET
---------------------

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

1. Front and Back Cover pages
2. Overview of the Fund:
Investment Objective and Strategy
Determining if this Fund is Right for You
Principal Risks
Past Performance
3. Overview of the Fund: Fees and Expenses of the Fund
4. How We Manage the Fund
5. 1999 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
- -------- ----------------------------------------------------------

<PAGE>

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
-----------------------------------

10. Cover Page
11. Organization of the Company
12. Portfolio Securities
13. Other Investment Practices
14. Investment Restrictions
15. Directors and Officers
16. Directors Compensation Table
17. Certain Shareholders of the Fund
18. Investment Advisory Services
19. Distribution of Company Shares
20. Other Important Service Providers
21. Portfolio Transactions
22. Organization of the Company
23. Purchase of Shares
24. Special Services
25. Exchange of Shares
26. Redemption of Shares
27. Federal Income Taxes
28. Distribution of Company Shares
29. Performance Data
30. 1999 Annual Report

<PAGE>

DAVIS INTERNATIONAL TOTAL RETURN FUND

Prospectus and Application Form

Class A Shares
Class B Shares
Class C Shares

March 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 Objective and Strategy
Determining If This Fund Is Right for You
Principal Risks
Past Performance
Fees and Expenses of the Fund
Financial Highlights

Who Is Responsible for Your Davis Account

How We Manage the Fund

Once You Invest in the Davis Funds

How to Choose a Share Class

How to Open an Account

How to Buy, Sell and Exchange Shares

The Davis Funds: Over 25 Years of Reliable Investing

Other Fund Documents

2
<PAGE>

OVERVIEW OF DAVIS INTERNATIONAL TOTAL RETURN FUND

INVESTMENT OBJECTIVE AND STRATEGY

Davis International Total Return Fund's investment objective is total return
through capital growth and/or income. We pursue this objective by investing
primarily in the common stock of foreign companies.

Fiduciary International, Inc., serves as sub-adviser for Davis International
Total Return Fund and manages its investment portfolio. The sub-adviser seeks to
build a diversified international equity portfolio focusing on growth in an
effort to deliver superior risk-adjusted returns.

The sub-adviser's investment process involves three steps:

1. REGIONAL ALLOCATION. The sub-adviser assesses regions, countries and
currencies on a top-down basis through the evaluation of specific
macro-economic fundamentals.

2. SECTOR AND THEME DEVELOPMENT. The sub-adviser seeks to identify secular and
thematic changes which highlight investment opportunities.

3. ISSUE SELECTION. The sub-adviser evaluates growth stocks within identified
sectors and themes to find those companies which meet its criteria for
investment.

The sub-adviser considers selling a company if the company no longer contributes
to the Fund's investment objective.

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

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 total return through capital growth or income or both.
o You are seeking international diversification.
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 uncomfortable investing in foreign markets.
o You are interested in earning current income.
o You are investing for the short-term (less than five years).

3
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PRINCIPAL RISKS

If you buy shares of Davis International Total Return Fund, you may lose some or
all of the money that you invest. 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 in which we invest.

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. The Fund invests in large and small companies. Investing in
small companies carries greater risk than investing in the stock of larger
companies. Small companies often have less predictable earnings and the
market for their stocks may not be as well developed.

o COUNTRY RISK. Investing in foreign countries involves risks that may cause
the Fund's performance to be more volatile than it would be if we invested
solely in the United States. Foreign economies may not be as strong or as
diversified, foreign political systems may not be as stable, and foreign
financial reporting standards may not be as rigorous as they are in the
United States. In addition, foreign capital markets may not be as well
developed, so securities may be less liquid, transaction costs may be
higher, and investments may be subject to government regulation.

o CURRENCY RISK. The Fund often invests in securities denominated in foreign
currencies. Foreign currencies "float" in value against the U.S. dollar.
When foreign currencies lose value against the U.S. dollar, the value of
the Fund's investments denominated in foreign currencies will lose value
when they are converted to U.S. dollars.

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

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

PAST PERFORMANCE

The bar chart and table below provide an indication of the risks of investing in
Davis International Total Return 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 life of the class compare to those of the Europe, Australia,
Far East Index ("EAFE Index"), an unmanaged benchmark of the total return
performance of large capitalization stocks in selected industrialized foreign
countries. How the Fund has performed in the past is not necessarily an
indication of how the Fund will perform in the future.

4
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DAVIS INTERNATIONAL TOTAL RETURN FUND
TOTAL RETURN
(As of December 31st of Each Year)
CLASS A SHARES

1996 1.51%
1997 (2.08)%
1998 4.16%
1999 18.66%

During the period shown above, the highest quarterly return was 19.55% for the
fourth quarter of 1999, and the worst quarterly return was (16.27)% for the
third quarter of 1998.

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.

DAVIS INTERNATIONAL TOTAL RETURN FUND AVERAGE ANNUAL TOTAL RETURNS
(For the Periods Ending December 31, 1999)

- --------------------------------------------------------------------------------
PAST 1 YEAR LIFE OF FUND
- --------------------------------------------------------------------------------
CLASS A SHARES* 13.00% 7.15%
(SINCE 2/1/95)
- --------------------------------------------------------------------------------
EAFE INDEX 27.30% 14.31%
- --------------------------------------------------------------------------------
CLASS B SHARES* 13.47% 6.94%
(SINCE 2/1/95)
- --------------------------------------------------------------------------------
EAFE INDEX 27.30% 14.31%
- --------------------------------------------------------------------------------
CLASS C SHARES* 16.92% 3.83%
(SINCE 8/19/97)
- --------------------------------------------------------------------------------
EAFE INDEX 27.30% 18.40%
- --------------------------------------------------------------------------------

* Figures reflect sales charges.

FEES AND EXPENSES OF THE FUND

FEES YOU MAY PAY AS A DAVIS INTERNATIONAL TOTAL RETURN FUND SHAREHOLDER
(Paid Directly From Your Investment)

- --------------------------------------------------------------------------------------------------------------------
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 of such shares)
- --------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None None

- --------------------------------------------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

5
<PAGE>

ANNUAL FUND OPERATING EXPENSES FOR FISCAL YEAR ENDING SEPTEMBER 30, 1999
(Deducted from Davis International Total Return Fund's Assets)

- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
- --------------------------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.08% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other Expenses 0.87% 0.98% 0.99%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses* 1.95% 2.98% 2.99%
- --------------------------------------------------------------------------------

*We voluntarily waived a portion of our fees so that the Fund's actual Total
Annual Operating Expenses for the fiscal year ending September 30, 1999 were:
Class A shares--1.47%, Class B shares--2.51%, Class C shares--2.52%. We may
resume collecting our full fees at any time.

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 SHARES IN... 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
CLASS A SHARES $664 $1,058 $1,477 $2,642
- --------------------------------------------------------------------------------
CLASS B SHARES $701 $1,221 $1,767 $2,943*
- --------------------------------------------------------------------------------
CLASS C SHARES $402 $924 $1,572 $3,308
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
IF YOU STILL HOLD YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
AFTER...
- --------------------------------------------------------------------------------
CLASS A SHARES $664 $1,058 $1,477 $2,642
- --------------------------------------------------------------------------------
CLASS B SHARES $301 $921 $1,567 $2,943*
- --------------------------------------------------------------------------------
CLASS C SHARES $302 $924 $1,572 $3,308
- --------------------------------------------------------------------------------

*Class B shares expenses for the 10-year period includes 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
International Total Return Fund from the time each Class of shares was first
offered to the public to September 30, 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 at which
an investor would have earned (or lost) money on an investment in the Fund.

KPMG LLP has audited the information for the fiscal years 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 years.

6
<PAGE>
DAVIS INTERNATIONAL TOTAL RETURN FUND
CLASS A SHARES

<TABLE>
<CAPTION>
EIGHT
YEAR ENDED SEPTEMBER 30, MONTHS ENDED
------------------------------------------------- SEPTEMBER 30,
1999 1998 1997 1996 1995
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.................. $ 9.26 $ 11.38 $ 12.12 $ 11.85 $ 10.00
------- ------- ------- -------- --------
Income (Loss) from Investment Operations
Net Investment Income............... -(5) - - 0.03 0.05
Net Realized and Unrealized
Gains (Losses)..................... 1.43 (2.12) 0.25 0.85 1.80
------- ------- ------- -------- --------
Total from Investment Operations... 1.43 (2.12) 0.25 0.88 1.85
------- ------- ------- -------- --------
Dividends and Distributions
Net Investment Income............... - - - (0.03) -
Distributions from Realized Gains.... - - (0.99) (0.58) -
------- ------- ------- -------- --------
Total Dividends and Distributions.. - - (0.99) (0.61) -
------- ------- ------- -------- --------
Net Asset Value, End of Period.......... $ 10.69 $ 9.26 $ 11.38 $ 12.12 $ 11.85
======= ======= ======= ======== ========

Total Return(1).......................... 15.44% (18.63)% 2.71% 7.87% 18.50%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted)............... $27,202 $26,921 $39,740 $41,545 $ 13,427
Ratio of Expenses
to Average Net Assets............ 1.47%(2) 1.45%(2) 1.67%(2,3) 1.70%(2,3) 1.72%(2)*
Ratio of Net Investment Income
to Average Net Assets............. 0.24% 0.13% 0.03% 0.23% 0.95%*
Portfolio Turnover Rate(4).......... 154% 63% 97% 78% 85%

</TABLE>

(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of class), with all dividends
and distributions reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(2) Had the Adviser not absorbed certain expenses, the ratio of expenses to
average net assets for the years ended September 30, 1999, September 30,
1998, September 30, 1997, September 30, 1996 and the eight months ended
September 30, 1995 would have been 1.95%, 1.86%, 1.93%, 2.24% and 2.88%,
respectively.
(3) The ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement were 1.66% and 1.69% for the
years ended September 30, 1997 and September 30, 1996, respectively. Prior
to 1996, such reductions were reflected in the expense ratios.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(5) Less than $0.005 per share.

* Annualized
7
<PAGE>

DAVIS INTERNATIONAL TOTAL RETURN FUND
CLASS B SHARES

<TABLE>
<CAPTION>
EIGHT
YEAR ENDED SEPTEMBER 30, MONTHS ENDED
------------------------------------------------- SEPTEMBER 30,
1999 1998 1997 1996 1995
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.................. $ 8.98 $ 11.15 $ 12.00 $ 11.79 $ 10.00
------- ------- ------- -------- --------
Income (Loss) from Investment Operations
Net Investment Income (Loss)......... -(5) - (0.10) (0.03) (0.01)
Net Realized and Unrealized
Gains (Losses)..................... 1.28 (2.17) 0.24 0.82 1.80
------- ------- ------- -------- --------
Total from Investment Operations... 1.28 (2.17) 0.14 0.79 1.79
------- ------- ------- -------- --------
Dividends and Distributions
Distributions from Realized Gains.... - - (0.99) (0.58) -
------- ------- ------- -------- --------
Total Dividends and Distributions. - - (0.99) (0.58) -
------- ------- ------- -------- --------
Net Asset Value, End of Period.......... $ 10.26 $ 8.98 $ 11.15 $ 12.00 $ 11.79
======= ======= ======= ======== ========

Total Return(1).......................... 14.25% (19.46)% 1.77% 7.10% 17.90%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted)............... $ 4,636 $ 5,450 $8,230 $ 8,283 $ 2,002
Ratio of Expenses
to Average Net Assets............ 2.51%(2,3) 2.60%(2) 2.51%(2,3) 2.47%(2,3) 2.46%(2)*
Ratio of Net Investment Income
(Loss) to Average Net Assets...... (0.79)% (1.02)% (0.80)% (0.54)% (0.09)%*
Portfolio Turnover Rate(4)........... 154% 63% 97% 78% 85%
</TABLE>

(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of class), with all dividends
and distributions reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(2) Had the Adviser not absorbed certain expenses, the ratio of expenses to
average net assets for the years ended September 30, 1999, September 30,
1998, September 30, 1997, September 30, 1996 and the eight months ended
September 30, 1995 would have been 2.98%, 3.01%, 2.98%, 3.01% and 3.62%,
respectively.
(3) The ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement were 2.50%, 2.50% and 2.46% for
the years ended September 30, 1999, September 30, 1997 and September 30,
1996, respectively. Prior to 1996, such reductions were reflected in the
expense ratios.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(5) Less than $0.005 per share.

* Annualized

8
<PAGE>

DAVIS INTERNATIONAL TOTAL RETURN FUND
CLASS C SHARES
<TABLE>
<CAPTION>
AUGUST 19, 1997
(INCEPTION
OF CLASS)
YEAR ENDED SEPTEMBER 30, THROUGH
------------------------- SEPTEMBER 30,
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period..................... $ 9.17 $ 11.37 $ 11.50
------- ------- -------
Income (Loss) from Investment Operations
Net Investment Loss..................... -(5) - (0.02)
Net Realized and Unrealized
Gains (Losses)........................ 1.36 (2.20) (0.11)
------- ------- -------
Total from Investment Operations...... 1.36 (2.20) (0.13)
------- ------- -------
Net Asset Value, End of Period............. $ 10.53 $ 9.17 $ 11.37
======= ======= =======

Total Return(1)............................. 14.83% (19.35)% (1.13)%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted).................. $ 302 $ 256 $ 61
Ratio of Expenses
to Average Net Assets............... 2.52%(2),(3) 2.78%(2),(3) 2.62%(2)*
Ratio of Net Investment Income (Loss)
to Average Net Assets................ (0.80)% (1.19)% (2.27)%*
Portfolio Turnover Rate(4)............. 154% 63% 97%
</TABLE>

(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of class), with all dividends
and distributions reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(2) Had the Adviser not absorbed certain expenses, the ratio of expenses to
average net assets for the years ended September 30, 1999, September 30,
1998 and the period ended September 30, 1997 would have been 2.99%, 3.19%
and 3.14%, respectively.
(3) The ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement were 2.51% and 2.77% for the
years ended September 30, 1999 and September 30, 1998, respectively.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(5) Less than $0.005 per share.

* Annualized

9
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WHO IS RESPONSIBLE FOR YOUR DAVIS ACCOUNT

A number of entities provide services to Davis International Total Return Fund.
This section shows how the Fund is organized, the entities that perform these
services, and how these entities are compensated. Additional information on the
organization of the Fund is provided in the Fund's Statement of Additional
Information. For information on how to receive this document, see the back cover
of this prospectus.

INVESTMENT ADVISER

DAVIS SELECTED ADVISERS, LP
Referred to throughout this prospectus as "Davis Selected Advisers"
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
o Provides investment advice for Davis International Total Return 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 September 30, 1999 (based on average net
assets): 1.00%.

INVESTMENT SUB-ADVISERS

DAVIS SELECTED ADVISERS-NY, INC.
Referred to throughout this prospectus as "Davis Selected Advisers-NY"
609 Fifth Avenue
New York, NY 10017
o Performs investment management and research services for Davis
International Total Return 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.

FIDUCIARY INTERNATIONAL, INC.
A wholly owned subsidiary of Fiduciary Trust International
Two World Trade Center
New York, New York, 10048
o Manages Davis International Total Return Fund's day-to-day investment
operations.
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 International Total Return 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

The Fund's Board of Directors has general supervisory responsibilities of the
Davis Funds. The Board monitors and supervises the performance of the investment
adviser, sub-advisers and other service providers, monitors the 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, Arizona 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

SHELBY M.C. DAVIS
Responsibilities:
o Senior Research Adviser of Davis Selected Advisers.
o Founder of Davis Selected Advisers.
o Founder of the Davis Funds.

Other Experience:
o Served as Davis New York Venture Fund's Portfolio Manager from its
inception in 1969 until February 1997.
o Served as Portfolio Manager of a growth and income fund managed by Davis
Selected Advisers from May 1993 until February 1997.

PORTFOLIO MANAGER

SHEILA COCO
Responsibilities:
o Portfolio Manager of Davis International Total Return Fund since March 1,
2000.
o Also serves as Portfolio Manager for other institutional global equity
accounts.

Other Experience:

Ms. Sheila Coco serves as Chairman of Fiduciary Trust International's Global
Investment Committee and is a member of the Investment Policy Committee.

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.

11
<PAGE>

HOW WE MANAGE THE FUND

WHAT WE INVEST IN AND WHY

While the Fund can invest in companies of any size operating anywhere in the
world, without limitation, we focus on companies doing substantial business in
developed markets outside of the United States. During normal market conditions,
at least 65% of the Fund's total assets are invested in the common stock of
foreign companies and in common stock issued by U.S. companies doing substantial
business in foreign markets. Normally, the Fund invests in securities issued by
companies from at least three different non-U.S. countries; however, the Fund
may vary that percentage and invest in companies from fewer than three
countries, depending upon market conditions.

COMMON STOCK OF FOREIGN COMPANIES AND U.S. COMPANIES
DOING SUBSTANTIAL BUSINESS IN FOREIGN MARKETS

Common stock represents ownership of a company.

A company is considered to be either a foreign company or a U.S. company doing
substantial business in foreign markets if it meets at least one of the
following four criteria:

o It is organized under the laws of a foreign country.

o Its common stock is principally traded in securities markets outside of the
United States.

o It earns at least 50% of its revenues or profits outside of the United
States.

o It has at least 50% of its assets outside of the United States.

RISKS. The most significant risks of common stock of foreign companies are
discussed below.

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. The Fund invests in large and small companies. Investing in
small 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.

12
<PAGE>

OTHER SECURITIES AND INVESTMENT STRATEGIES

The Fund invests primarily in the common stock of foreign companies and U.S.
companies doing substantial business in foreign markets. There are other
securities in which the Fund may invest, and investment strategies which the
Fund may employ, but they are not principal investment strategies. These
securities and investment strategies are discussed in the Statement of
Additional Information.

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 foreign companies and U.S. companies doing
substantial business in foreign markets, 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 capital growth portion of the
Fund's investment objective.

RISK SPECTRUM

Davis Selected Advisers manages eleven mutual funds in the Davis family. Each
Fund has a distinct investment objective and strategy. The following graph shows
how these Funds compare to each other in terms of risk. Davis International
Total Return Fund has a risk level we characterize as "high."

- --------------------------------------------------------------------------------
DAVIS FUNDS
LOW MED HIGH
- --------------------------------------------------------------------------------
DAVIS GROWTH OPPORTUNITY FUND o
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------

13
<PAGE>

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

ONCE YOU INVEST IN THE 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 International Total Return 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 the 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 Fund shares are published daily in the
business section of most major newspapers. If you have access to the Internet,
you can also check net asset value on our web site (WWW.DAVISFUNDS.COM).

HOW SECURITIES IN THE PORTFOLIO ARE VALUED

We use current market valuations to price the securities in Davis International
Total Return 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 purchased with a maturity of one year or less are usually
valued at amortized cost.

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

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

Many 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. However, if the Adviser believes
that extraordinary

14
<PAGE>

circumstances have occurred in a foreign market which render the reported prices
unreliable then the Fund may price some portfolio securities at a "fair value"
as determined in conformance with procedures adopted by the Board of Directors.
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 International Total
Return Fund:

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

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

Davis International Total Return Fund usually pays dividends once a year.
Dividends are declared in November or December and capital gains, if any, are
distributed in November or December. Unless you choose otherwise, the Fund
automatically reinvests your dividends and capital gains in additional Fund
shares.

You can request to have your dividends and capital gains paid to you by check,
deposited directly into your bank account, paid to a third party, or sent to an
address other than your address of record.

We also offer a DIVIDEND DIVERSIFICATION PROGRAM, which allows you to have your
dividends and capital gains reinvested in shares of another Davis Fund.

You will receive a statement each year detailing the amount of all dividends and
capital gains paid to you during the previous year. To ensure that these
distributions are reported properly to the U.S. Treasury, you must certify on
your 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 I.D. Number, under-reported dividend or
interest income, or are already subject to backup withholding, Davis
International Total Return 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

15
<PAGE>

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 International Total Return Fund pays dividends, they are taxable
to shareholders as ordinary income. Dividends include both net investment
income and short-term capital gains.

o If Davis International Total Return Fund pays net capital gains, they
generally will be taxed as a long-term capital gain distribution.

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

Investment earnings (dividends and capital gains), whether received in cash or
reinvested in shares, are taxable in the year in which they 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.

Foreign Taxes on Fund Income. Income received by Davis International Total
Return Fund may be subject to foreign income taxes. Foreign taxes increase the
Fund's expenses and decrease the income available to the Fund to pay as
dividends. If it is practical, and if the dollar amount of foreign taxes is
significant, the Fund may "pass through" the amount of all foreign taxes to the
Fund's shareholders. Shareholders may then be able to claim a deduction or
credit against their federal income taxes for their proportionate share of the
Fund's foreign taxes.

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

HOW TO CHOOSE A SHARE CLASS

Before you can buy any shares in Davis International Total Return 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 qualified 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

16
<PAGE>

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 International Total Return 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.

17
<PAGE>

CLASS A SHARES SALES CHARGES
<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------------------------------------
AMOUNT OF PURCHASE SALES CHARGE SALES CHARGE AMOUNT OF SALES CHARGE
(PERCENTAGE OF OFFERING (PERCENTAGE OF NET AMOUNT RETAINED BY THE DEALER
PRICE) INVESTED) (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>

*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 trusteed or
fiduciary accounts and Individual Retirement Accounts (IRAs) of a single
employer, the purchases will be treated as a single purchase.

o UNDER A STATEMENT OF INTENTION. If you enter a Statement of Intention and
agree to buy Class A shares of $100,000 or more over a 13-month period, all
of the shares you buy during that period will be counted as a single
purchase, with the exception of purchases into the 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

18
<PAGE>

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.

CLASS A SHARES FRONT-END SALES CHARGE WAIVERS

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

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

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

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

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

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

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

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.

19
<PAGE>

CLASS B SHARES

Class B shares may be best for you if you are willing to pay a higher
distribution fee than Class A shares for eight years in order to avoid paying a
front-end sales charge:

o You buy the shares at net asset value (no initial 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 initial 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%.

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.

20
<PAGE>

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 amounting to, in a
12-month period, up to 12% of the value of the account when you began
participating in the Plan.

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

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

21
<PAGE>

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

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

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

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

HOW TO OPEN AN ACCOUNT

You can open an account if you invest at least:

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

o $250 for a retirement plan account.

THREE WAYS YOU CAN OPEN AN ACCOUNT

1. BY MAIL. Fill out the Application Form included in this prospectus and mail
it to our service provider, State Street Bank and Trust. Both you and your
dealer must sign the form. Include a check made payable to the DAVIS FUNDS
or, in the case of a retirement account, to 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.

22
<PAGE>

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 INTERNATIONAL TOTAL RETURN 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
Withdrawals 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 International Total Return 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.

23
<PAGE>

HOW TO BUY, SELL AND EXCHANGE SHARES

Once you have opened 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 International Total
Return 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 (7:00 a.m. to 4:00 p.m.
Mountain 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.

24
<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 p.m. Eastern Time.

o Promptly transmit the order to State Street Bank and Trust.

BUYING MORE SHARES

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

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

25
<PAGE>

You may sell back all or part of your shares to Davis International Total Return
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 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%
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 $50,000. In
addition, 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
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.

26
<PAGE>

SPECIAL SALE SITUATIONS

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

o Davis International Total Return 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. You must send a
letter to our service provider, State Street Bank and Trust, along with a check
for the repurchased shares.

IF YOUR ACCOUNT FALLS BELOW $250

If your account balance falls below $250 as a result of a redemption or
exchange, we may sell your remaining shares in Davis International Total Return
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. 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

27
<PAGE>

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

You can sell shares of Davis International Total Return 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 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.

28
<PAGE>

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). A transaction in which shares are sold
for cash 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 the 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

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 charges and
expenses, ask for a prospectus. Read it carefully before investing or sending
money.

29
<PAGE>

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 opened,
you may contact our customer service department to establish this program.

TRANSACTIONS BY TELEPHONE

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 (7:00 a.m. to
4:00 p.m. Mountain Time).

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

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

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

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

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

30
<PAGE>

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.

31
<PAGE>

[INSIDE BACK COVER]

THE DAVIS FUNDS:
OVER 25 YEARS OF RELIABLE INVESTING

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

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

Our investment approach has been refined for more than 25 years by his son,
Shelby M.C. Davis, 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 either
Portfolio Manager or Co-Portfolio Manager for many Davis Funds.

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

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

32
<PAGE>

ADDRESS AND PHONE GUIDE

OUR TELEPHONE NUMBER: OUR SERVICE PROVIDER'S REGULAR
1-800-279-0279 MAILING ADDRESS:
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, Arizona 85706

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

33
<PAGE>

[BACK COVER]

OTHER FUND DOCUMENTS

WHERE YOU CAN GET THESE DOCUMENTS:

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

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

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

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

DAVIS FUNDS
2949 EAST ELVIRA ROAD, SUITE 101
TUCSON, ARIZONA 85706
1-800-279-0279

Investment Company Act File No. 811-8870

22
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 2000

DAVIS INTERNATIONAL TOTAL RETURN FUND

PART OF
DAVIS INTERNATIONAL SERIES, 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 PROSPECTUS DATED MARCH 1,
2000 AND THE CLASS Y PROSPECTUS DATED MARCH 1, 2000. THE PROSPECTUSES MAY BE
OBTAINED FROM THE FUND.

THE 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...........................4
- -------------------------------------------------

Investment Objective and Policies..............................4
Portfolio Securities...........................................4
Other Investment Policies......................................8
Portfolio Transactions........................................13
Investment Restrictions.......................................15

Section II: Key Persons....................................................18
- -----------------------

Organization of the Company...................................18
Directors and Officers........................................19
Directors' Compensation Schedule..............................21
Certain Shareholders of the Fund..............................21
Investment Advisory Services..................................23
Distribution of Company Shares................................24
Other Important Service Providers.............................28

Section III: Purchase, Exchange and Redemption of Shares...................29
- --------------------------------------------------------

Purchase of Shares............................................29
Alternative Purchase Arrangements............30
Class A Shares...............................31
Class B Shares...............................34
Class C Shares...............................35
Class Y Shares...............................36

Special Services..............................................37
Prototype Retirement Plans.......................37
Automatic Investment Privilege...................37
Dividend Diversification Program.................37
Telephone Privilege..............................38

Exchange of Shares............................................38
General..........................................38
By Telephone.....................................39
Automatic Exchange Program.......................39

2
<PAGE>

Redemption of Shares..........................................39
General..........................................39
Expedited Redemption Privilege...................40
By Telephone.....................................41
Automatic Withdrawals Plan.......................41
Involuntary Redemptions..........................42
Subsequent Repurchases...........................42

Section IV: General Information............................................42
- -------------------------------

Determining the Price of Shares...............................42
Dividends and Distributions...................................44
Federal Income Taxes..........................................44
Performance Data..............................................46

Appendix: Term and Conditions for a Statement of Intention.................48

3
<PAGE>

Section I: Investment Strategies and Restrictions
- --------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

Davis International Total Return Fund ("Fund") is managed by Davis
Selected Advisers, L.P. ("Adviser") and sub-advised by Davis Selected
Advisers-NY, Inc. ("DSA-NY") and Fiduciary International, Inc. ("Sub-Adviser").
The Adviser pays all of the sub-advisory fees.

The Fund's investment objective is total return through capital growth
and/or income. The Fund pursues this objective by investing primarily in common
stocks of foreign companies. The Fund may also make significant investments in
U.S. companies doing substantial business in foreign markets and has the ability
to invest in fixed-income securities to earn current income or diversify the
Fund's assets. There is no assurance that the Fund will achieve its investment
objective. An investment in the Fund may not be appropriate for all investors,
investing in international markets involves special risks, and short-term
investing is discouraged.

The Fund has the flexibility to invest on a worldwide basis in
companies of any size, regardless of country of organization or place of
principal business activity. During normal market conditions, at least 65% of
the Fund's total assets are invested in the common stock of foreign companies
and in common stock issued by U.S. companies doing substantial business in
foreign markets. At the current time the Fund expects to invest primarily in
foreign companies. Normally, the Fund invests in securities issued by companies
from at least three different non-U.S. countries; however, the Fund may vary
that percentage and invest in companies from fewer than three countries,
depending upon market conditions.

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

While the Fund may at times invest in companies doing significant
business in lesser-developed emerging markets or in the U.S., its focus is upon
companies doing substantial business in developed markets outside of the U.S.

PORTFOLIO SECURITIES

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

The Fund may invest in issues with smaller capitalizations. The equity
of smaller companies are subject to additional risks. Smaller companies are
usually less established and

4
<PAGE>

less diversified than larger companies, and have fewer resources available to
take advantage of opportunities or overcome challenges.

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

INTERNATIONAL EQUITY SECURITIES. International equity securities
represent ownership of a company. International equity securities come in many
forms, but the form that the Fund typically owns is common stock. International
equity securities are equity securities issued either by foreign companies or by
U.S. companies doing substantial business in foreign markets. International
equity securities are:

(1) Issued by companies organized under the laws of a foreign country;
(2) Principally traded in securities markets outside of the U.S.;
(3) Issued by companies earning at least 50% of their revenues or
profits outside of the U.S.; or
(4) Issued by companies having at least 50% of their assets outside of
the U.S.

Investments in international equity 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
investment companies investing primarily in international equity securities.

Primary Risks. Investments in international equity securities may
involve a higher degree of risk than investments in domestic issuers.
International equity securities are often denominated in foreign currencies,
which means that their value will be affected by changes in exchange rates, as
well as other factors that affect securities prices. There is generally less
publicly available information about international equity securities and
securities markets, and there may be less government regulation and supervision
of foreign issuers and securities markets. International equity 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.

Foreign Currencies. International equity securities are often
denominated in foreign currencies, which means that their value will be affected
by changes in exchange rates, as well as other factors that affect securities
prices. The U.S. dollar value of a foreign security denominated in a foreign
currency decreases when the value of the U.S. dollar rises against the foreign
currency, and, conversely, the U.S. dollar value of the security rises when the
value of the U.S. dollar falls against such currency. The Fund may invest in
foreign currency contracts in an attempt to hedge against such currency
fluctuations.

5
<PAGE>

Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. It will do so from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(commonly known as the "spread") between the price at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.

Less Developed Trading Markets. The markets for trading international
equity securities are generally not as developed or efficient as those in the
United States. While growing in volume, they usually have substantially less
volume than the New York Stock Exchange, and securities of some foreign
companies are less liquid and more volatile than securities of comparable United
States companies. Similarly, volume and liquidity in most foreign
over-the-counter markets is less than in the United States and, at times,
volatility of price can be greater than in the United States. Commissions on
foreign stock exchanges are generally higher than negotiated commissions on
United States exchanges, although the Fund will endeavor to achieve the most
favorable net results on its portfolio transactions. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the United States.

Foreign Withholding Taxes. The dividends and interest payable on
certain of the Fund's foreign portfolio securities may be subject to foreign
withholding taxes, thus reducing the net amount of income available for
distribution to the Fund's shareholders.

Higher Expenses. Investors should understand that the expense ratio of
the Fund can be expected to be higher than investment companies investing in
domestic securities since, among other things, the cost of maintaining the
custody of international equity securities is higher and the purchase and sale
of portfolio securities may be subject to higher transaction charges, such as
stamp duties and turnover taxes.

Developing and Emerging Markets. Although the Fund focuses upon
companies doing substantial business in developed markets outside of the U.S.,
the Fund may make investments in companies doing substantial business in
developing or emerging market countries, which involve exposure to economic
structures that are generally less diverse and mature than in developed
countries such as the United States and Western Europe, and to political systems
that may be less stable. A "developing country" can be considered to be a
country that is in a less mature stage of the industrialization cycle than
countries with more developed markets. An "emerging market country" can be
considered to be a country that is in a less mature stage of the
industrialization cycle than developing countries. Currently, investing in many
emerging markets may not be desirable or feasible because of the lack of
adequate custody arrangements for the Fund's assets, overly burdensome
repatriation and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or other reasons. As
opportunities to invest in securities in emerging markets develop, the Fund may
expand and further broaden the group of emerging markets in which it invests. In
the past, markets of developing countries have been

6
<PAGE>

more volatile than the markets of developed countries; however, such markets
have often provided higher rates of return to investors.

Many of the risks described above relating to international equity
securities generally will be greatest for emerging markets, lesser for
developing markets and least for developed countries. For instance, economies in
individual emerging or developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource,
self-sufficiency and balance of payments positions. Many emerging and developing
markets have experienced substantial rates of inflation for many years.
Inflation and rapid fluctuations in inflation rates have had and may continue to
have very negative effects on the economies and securities markets of certain
developing markets. Economies in emerging and developing markets are generally
heavily dependent upon international trade and, accordingly, have been and may
continue to be affected adversely by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be affected adversely by economic conditions in the
countries with which they trade.

The securities markets of emerging and developing countries, if
existent, are substantially smaller, less developed, less liquid and more
volatile than the securities markets of the United States and other more
developed countries. Disclosure, regulatory and accounting standards in many
respects are less stringent than in the United States and other developed
markets. There also may be a lower level of monitoring and regulation of
developing markets and the activities of investors in such markets, and
enforcement of existing regulations has been extremely limited.

Brokerage commissions, custodial services and other costs relating to
investment in foreign markets are generally more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, in possible liability to the purchaser. Emerging markets may
lack clearing facilities equivalent to those in developed countries.
Accordingly, settlements can pose additional risks in such markets and
ultimately can expose the Fund to the risk of losses resulting from the Fund's
inability to recover from a counterparty.

The risk also exists that an emergency situation may arise in one or
more emerging markets. In the event of such an emergency, trading of securities
may cease or may be substantially curtailed and prices for the Fund's portfolio
securities in such markets may not be readily available. The Fund's portfolio
securities in the affected markets will be valued at fair market value as
determined in good faith by, or under the direction of, the Board of Directors.

7
<PAGE>

Investment in certain emerging market securities is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude foreign investment in certain emerging market securities and
increase the costs and expenses of the Fund. Emerging markets may require
governmental approval for the repatriation of investment income or the proceeds
of sales of securities by foreign investors. In addition, if a deterioration
occurs in an emerging market's balance of payments, the market could impose
temporary restrictions on foreign capital remittances.

Investments may include securities issued by companies which have
undergone or are currently undergoing privatization.

Due to changes in the world economy and the political, economic and
investment climate in particular countries, the status of a country or its
securities markets as emerging, developing or developed can be expected to
change over time, sometimes rapidly. The Sub-Adviser will consider such changes
in determining the potential risks and rewards of investing in a given country.

OTHER INVESTMENT POLICIES

DEBT SECURITIES. Usually the Fund will be invested principally in
international equity securities. However, there is no limitation on the type of
securities in which the Fund may invest, nor on the amount of assets that may be
invested for growth or income or both. At times when the Sub-Adviser believes
the Fund's objective would be better achieved by holding a larger proportion of
debt securities, holdings of such securities will be increased and may represent
a larger portion of the portfolio. The value of debt securities is sensitive to
interest rate changes as well as the financial strength of the debtor. When
interest rates go down, debt securities in the portfolio tend to appreciate in
value. Conversely, when interest rates go up, such securities tend to depreciate
in value. Generally, the debt securities in which the Fund invests are
investment-grade securities, but it may invest up to 5% of net assets in
securities below investment-grade (so called "junk bonds"). Debt securities
issued by foreign companies and U.S. companies doing substantial business in
foreign markets are subject to the foreign market and currency risks discussed
above.

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

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements,
but normally will not enter into repurchase agreements maturing in more than
seven days. A repurchase agreement, as referred to herein, involves a sale of
securities to a Fund, with the concurrent agreement of the seller (a bank or
securities dealer which the Adviser determines to be financially sound at the
time of the transaction) to repurchase the securities at the same price plus an
amount equal to accrued interest at an agreed-upon interest rate, within a
specified time, usually less than one week, but, on occasion, at a later time.
The repurchase obligation of the seller is, in effect, secured by the underlying
securities. In the event of a bankruptcy or other

8
<PAGE>

default of a seller of a repurchase agreement, the Fund 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 Fund
seek to enforce their rights thereto; (b) possible loss of all or a part of the
income during this period; and (c) expenses of enforcing its rights.

The Fund 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 Fund will not enter into a repurchase agreement maturing in more
than seven days if it would cause more than 15% of the value of its net assets
to be invested in such transactions. Repurchase agreements maturing in less than
seven days are not deemed illiquid securities for the purpose of the Fund's 15%
limitation on illiquid securities.

FOREIGN CURRENCY HEDGING. To attempt to reduce exposure to currency
fluctuations, the Fund may trade in forward foreign currency exchange contracts
(forward contracts), currency futures contracts and options thereon and
securities indexed to international equity securities. These techniques may only
be used for hedging purposes and not for speculation. For example, 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 international equity securities held by the Fund, or to
hedge a currency risk involved in an anticipated purchase of international
equity securities. Cross-hedging may also be utilized, that is, entering into a
hedge transaction in respect to a different foreign currency than the one in
which a trade is to be made or in which a portfolio security is principally
traded. There is no limitation on the amount of assets that may be committed to
currency hedging.

Currency hedging transactions may be utilized as a tool to reduce
currency fluctuation risks due to a current or anticipated position in
international equity securities. The successful use of currency hedging
transactions usually depends on the Sub-Adviser's ability to forecast currency
exchange rate movements. Should 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 Fund 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 Fund
than if they had not entered into such contracts. When taking a position in an
anticipatory hedge (when the Fund purchase a futures contract or other similar
instrument to gain market exposure in anticipation of purchasing the underlying
securities at a later date), the Fund is required to set aside cash or
high-grade liquid securities to fully secure the obligation.

FORWARD CONTRACTS. 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 Fund a position in a

9
<PAGE>

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

CURRENCY FUTURES CONTRACTS. The Fund 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 Fund will be traded on U.S. or foreign exchanges or over-the-counter.

FOREIGN CURRENCY OPTIONS. The Fund 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 Fund 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 Fund 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 Fund would
utilize options traded on exchanges where the options are standardized.

LIQUIDITY RISKS. The Fund's ability to dispose of its positions in
futures contracts, options and forward contracts will depend on the availability
of liquid markets in such instruments. Markets in options and futures with
respect to currencies are still developing. It is impossible to predict the
amount of trading interest that may exist in various types of futures

10
<PAGE>

contracts, options and forward contracts. If a secondary market does not exist
with respect to an option purchased or written by the Fund 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 Fund
would have to be exercised in order for the Fund to realize any profit, and (ii)
the Fund may not be able to sell currencies covering an option written by the
Fund until the option expires or it delivers the underlying futures currency
upon exercise. Therefore, no assurance can be given that the Fund will be able
to utilize these instruments effectively for the purposes set forth above. The
Fund's ability to engage in currency hedging transactions may be limited by tax
considerations.

TAX CONSIDERATIONS. The Fund's 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 Fund as ordinary or capital
and the timing and amount of any income or loss to the Fund. This, in turn,
could affect the character, timing and amount of distributions by the Fund to
shareholders. The Fund may be limited in its foreign currency transactions by
tax considerations.

LIMITATIONS ON CURRENCY HEDGING TRANSACTIONS. Currency hedging
transactions will be used for hedging purposes only. The Fund may either hedge
its existing investments ("true hedging") or lock in an exchange rate on
anticipated purchases ("anticipatory hedging"). The Fund will comply with
requirements established by the SEC with respect to coverage of options and
futures strategies by registered investment companies, and, if so required, will
designate liquid securities or cash on its books or in a segregated account with
its custodian bank in the amount prescribed.. Securities designated on the
Fund's books or held in a segregated account cannot be sold while the futures or
option strategy is outstanding, unless they are replaced with similar
securities.

INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund may invest up to 10%
of its total assets through other listed and unlisted investment companies. The
Fund will comply with applicable investment limitations imposed by the
Investment Company Act of 1940. Such investments may involve the payment of
premiums above the value of the portfolio securities held by such other
investment companies. The return on such investment may be reduced both by the
Fund's own expenses, including its Advisory fees, and the management fees and
expenses of the other investment company. However, due to legal currency,
liquidity or other restrictions, investments in some countries may be currently
limited and marketable investments may be made more readily by investing in
investment companies primarily investing in securities of these countries.

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

The restricted securities which the Fund may purchase include
securities which have not been registered under the 1933 Act but are eligible
for purchase and sale pursuant to Rule 144A

11
<PAGE>

("Rule 144A Securities"). This Rule permits certain qualified institutional
buyers, such as the Fund, to trade in privately placed securities even though
such securities are not registered under the 1933 Act. The Sub-Adviser, under
criteria established by the Fund's Board of Directors, will consider whether
Rule 144A Securities being purchased or held by the Fund are illiquid and thus
subject to the Fund's policy limiting investments in illiquid securities. In
making this determination, the 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 Sub-Adviser and, if as a result of
changed conditions, it is determined that a Rule 144A Security is no longer
liquid, the Fund's 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 Fund may borrow money in for temporary or emergency
purposes. The Fund will not 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 Fund may lend securities to
broker-dealers or institutional investors for their use in connection with short
sales, arbitrages and other securities transactions. The Fund will not lend
portfolio securities unless the loan is secured by collateral. The Fund will not
lend securities if such a loan would cause more than 33 1/3% of the total value
of its assets (including collateral received) to then be subject to such loans.

WARRANTS. The Fund may invest up to 5% of its net assets in warrants. A
warrant is an option to buy a stated number of shares of common stock at a
specified price any time during the life of the warrant. If the stock underlying
the warrant is trading at a higher price than the warrant exercise price, the
warrant has value; if the stock is trading at a lower price, it has no value and
if such lower price exists at expiration of the warrant, it will expire
worthless.

PURCHASING AND SELLING EQUITY OPTIONS. The Fund may purchase and sell
equity options for the solely for hedging purposes. Hedging transactions
include, but are not limited to, writing covered calls, purchasing protective
puts, and buying calls in anticipation of purchasing the underlying securities.

WRITING COVERED CALLS. The Fund may write covered call options on a
portion of its portfolio securities and purchase call options in closing
transactions. As a matter of current operating policy, the Fund does not intend
to write a covered call option on its portfolio securities if it would cause
more than 5% of the Fund's net assets to be subject to such options.

A covered call option gives the purchaser of the option the right to
buy the underlying security at the price specified in the option (the "exercise
price") at any time until the option expires, generally within three to nine
months, in return for the payment to the writer upon the issuance of the option
of an amount called the "premium." A commission may be charged in

12
<PAGE>

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,
the Fund forgoes, 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 obligation is terminated upon exercise of the call option, its
expiration 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 the payment of a brokerage
commission. During the remaining term of the option, if the Fund cannot enter
into a closing purchase transaction, it 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 the Fund would continue to experience such
decline.

PURCHASING CALL AND/OR PUT OPTIONS. Purchasing a call on a stock would
give the Fund the right to buy the stock as described above. This would give the
Fund a position in a security for a significantly lower price than purchasing
the stock outright. Purchasing a put would give the Fund a right to sell the
stock at a specified price at any time until the option expires. Ownership of a
put can be a hedge against a decline in the price of a security which the Fund
owns. However, the risk of purchasing an option, whether a call or a put, is
that the option could expire without any gain to the Fund. The Fund would then
have lost the premium it paid for the option and any related brokerage expense.

PORTFOLIO TRANSACTIONS

The Sub-Adviser is responsible for the placement of portfolio
transactions, subject to the supervision of the Board of Directors. The Fund has
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 and placement of
orders by securities firms for Fund shares may be taken into account as a factor
in placement of portfolio transactions. In seeking the Fund's investment
objectives, the Fund may trade to some degree in securities for the short term
if the Sub-Adviser believes that such trading is advisable.

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

13
<PAGE>

the Fund may be used in servicing other accounts managed by the Sub-Adviser and
likewise research services provided by brokers used for transactions of other
accounts may be utilized by the Sub-Adviser in performing services for the Fund.
Subject to the requirements of best execution, the placement of orders by
securities firms for shares of the Fund may be taken into account as a factor in
the placement of portfolio transactions.

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

The Sub-Adviser believes 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 Sub-Adviser by corroborating
data and enabling the 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 Sub-Adviser
researches, at its own expense, each security included in, or being considered
for inclusion in, the Fund's portfolios. As any particular research obtained by
the Sub-Adviser may be useful to the Fund, the Board of Directors or its
Committee on Brokerage, in considering the reasonableness of the commissions
paid by the Fund, will not attempt to allocate, or require the Sub-Adviser to
allocate, the relative costs or benefits of research.

The Fund paid the following brokerage commissions:

Fiscal year ended September 30,
1999 1998 1997
---- ---- ----
Davis International Total Return Fund
brokerage commissions paid $284,731 $168,045 $315,153
Amount paid to brokers providing research 56% 68% 97%
Brokerage commissions paid
to Shelby Cullom Davis & Co.: (1) $ 1,080 N/A N/A

(1) Shelby Cullom Davis & Co. is a broker-dealer who may be considered an
affiliated person of the Adviser. During the fiscal year ended September 30,
1999, commissions received represented 0.38% of total commissions paid, and
0.54% of the aggregate dollar amount of transactions involving the payment of
commissions by the Davis International Total Return Fund.

Because of the Fund's 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 is 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

14
<PAGE>

Adviser, if the commissions are fair and reasonable and comparable to
commissions charged by non-affiliated qualified brokerage firms for similar
services. In fiscal year ended September 30, 1999 the Fund's turnover was 154%.
Turnover was unusually high because the Fund's investment portfolio was
restructured after the Adviser assumed responsibility for day to day management
of the investment portfolio. In fiscal year September 30, 2000 turnover may
again be high as the Sub-Adviser restructures the portfolio. The Fund
anticipates that, during normal market conditions, its annual portfolio turnover
rate will be less than 100%.

15
<PAGE>

INVESTMENT RESTRICTIONS

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

DAVIS INTERNATIONAL TOTAL RETURN FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
- ---------------------------------------------------------------------------

1. Commodities. The Fund may not purchase or sell commodities or
commodity contracts, except contracts in respect to financial
futures or currencies.

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

3. Diversification of Fund Investments.

(a) Fund Assets. With respect to 75% of the value of its total
assets, the Fund may not buy the securities of any company if
more than 5% of the value of the Fund's total assets would
then be invested in that company. Securities issued by the
U.S. Government or its agencies or instrumentalities and
repurchase agreements involving such securities ("U.S.
Government Securities"), are not subject to this limitation.

(b) Securities of Issuers. With respect to 75% of the value of
its total assets, the Fund may not purchase the securities of
any company if after such purchase the Fund would then own
more than 10% of such company's voting securities. U.S.
Government Securities are not subject to this limitation.

4. Industries. The Fund may not purchase the securities of
companies in any one industry if 25% or more of the value of
the Fund's total assets would then be invested in companies
having their principal business activity in the same industry.
U.S. Government Securities are not subject to this limitation.
Securities issued by foreign governments and their agencies
and instrumentalities will be subject to this limitation only
so long as and to the extent that the Securities and Exchange
Commission requires their inclusion in such industry
investment limitations.

5. Senior Securities; Borrowing. The Fund may not issue senior
securities except as permitted under the Investment Company
Act of 1940. The Fund may not pledge or hypothecate any of its
assets, except in connection with permitted borrowing in

16
<PAGE>

amounts not exceeding 33 1/3% of the value of the Fund's total
assets at the time of borrowing. Transfers of assets in
connection with currency transactions are not subject to these
limitations if appropriately covered.

6. Underwriting. The Fund does not engage in the underwriting of
securities. (This does not preclude it from selling restricted
securities in its portfolio.)

7. Lending Money or Securities. The Fund may not lend money,
except that it may buy debt securities publicly distributed or
traded or privately placed and may enter into repurchase
agreements. The Fund may lend its portfolio securities subject
to having 100% collateral in cash or U.S. Government
Securities. The Fund will not lend securities if such a loan
would cause more than 20% of the total value of its net assets
to then be subject to such loans.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
- ---------------------------------------

These policies and the Fund's investment objective set forth in the
Prospectus may be changed by the Board of Directors without shareholder
approval.

1. Borrowing. The Fund may not purchase securities when money
borrowed exceeds 5% of its total assets.

2. Futures Contracts. The Fund may not purchase a futures contract or
an option thereon, except in respect to currencies and then only
if, with respect to positions in futures or options on futures
which do not represent bona fide hedging, the aggregate initial
margin and premiums on such positions would not exceed 5% of the
Fund's total assets (excluding from such calculation any
in-the-money amount of any option).

3. Illiquid and Restricted Securities.

(a) The Fund may not purchase illiquid securities (including
restricted securities which are illiquid and repurchase
agreements maturing in more than seven days) if, as a result,
more than 15% of its net assets would be invested in such
securities.
`
(b) The Fund may not purchase a restricted security if it would
cause more than 10% of total assets to be invested in such
securities. For this purpose all securities eligible for resale
under Rule 144A under the Securities Act of 1933 are not included
in this 10% limitation (but are subject to the overall 15%
limitation if they are illiquid as determined by the Sub-Adviser
under criteria established by the Board of Directors).

4. Investment Companies. The Fund may not purchase securities of
open-end or closed-end investment companies except in
compliance with the Investment Company Act of 1940.

17
<PAGE>

5. Margin. The Fund may not purchase securities on margin, except
(i) for use of short-term credit necessary for clearance of
purchases of portfolio securities, and (ii) it may make margin
deposits in connection with currency transactions or other
permissible investments.

6. Mortgaging. The Fund may not mortgage, pledge, hypothecate or,
in any manner, transfer any security owned by the Fund as
security for indebtedness except as may be necessary in
connection with permissible borrowings and other permissible
investments or investments for currency transactions and then
such mortgaging, pledging or hypothecating may not exceed 33
1/3% of the Fund's total assets at the time of borrowing or
investment.

7. Oil and Gas Programs; Real Estate Limited Partnership. The Fund
may not purchase participations or other direct interests or
enter into leases with respect to oil, gas, or other mineral
exploration or development programs. The Fund may not purchase
real estate limited partnership interests.

8. Ownership of Portfolio Securities by Officers and Directors. The
Fund may not purchase or retain the securities of any issuer if
those officers and directors of the Fund, and of the Adviser or
Sub-Adviser, who each own beneficially more than 0.5% of the
outstanding securities of such issuer, together own beneficially
more than 5% of such securities.

9. Short Sales. The Fund may not effect short sales of securities.
This restriction does not apply to currency transactions.

10. Unseasoned Issuers. The Fund may not purchase a security (other
than obligations issued or guaranteed by the U.S., any state or
local government, or any foreign government, their agencies or
instrumentalities) if, as a result, more than 5% of the value of
the Fund's total assets would be invested in the securities of
issuers which at the time of purchase had been in operation for
less than three years (for this purpose, the period of operation
of any issuer shall include the period of operation of any
predecessor or unconditional guarantor of such issuer). This
restriction does not apply to securities of pooled investment
vehicles or mortgage or asset-backed securities.

11. Warrants. The Fund may not invest in warrants if, as a result
thereof, more than 2% of the value of the total assets of the
Fund would be invested in warrants which are not listed on the
New York Stock Exchange, the American Stock Exchange, or a
recognized foreign exchange, or more than 5% of the value of
the total assets of the Fund would be invested in warrants
whether or not so listed. For purposes of these percentage
limitations, the warrants will be valued at the lower of cost
or market and warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.

18
<PAGE>

12. Options. The Fund may not purchase or write options except that
the Fund may (i) write listed covered call options on portfolio
securities and purchase call options to close such transactions
(provided that no such call is written if it would cause more
than 25% of the value of the Fund's total assets to be subject to
such calls), (ii) purchase options (provided that no such
transaction would cause more than 2% of its total assets or more
than 5% of its net assets to be invested in premiums for such
options) or, (iii) engage in option transactions in respect to
foreign currencies.

PLEASE NOTE: Except for limitations on borrowing and illiquid securities, all
percentage restrictions, whether fundamental or non-fundamental, apply as of the
time of an investment without regard to any later fluctuations in the value of
portfolio securities or other assets.

Section II: Key Persons
- ------------------------

ORGANIZATION OF THE COMPANY

THE COMPANY. Davis International Series, Inc. ("Company") is an
open-end, diversified, management investment company incorporated in Maryland in
1994 and registered under the Investment Company Act of 1940. The Company is a
series investment company which may issue multiple series, each of which would
represent an interest in its separate portfolio. The Company currently offers
one series, Davis International Total Return Fund (the "Fund").

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

19
<PAGE>

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

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

DIRECTORS AND OFFICERS

The Company's Board of Directors is responsible for the management and
supervision of the Company and the Fund. The Board approves all significant
agreements between the Company, on behalf of the Fund, and those companies that
furnish services to the Fund. The names and addresses of the directors and
officers of the Company are set forth below, together with their principal
business affiliations and occupations for the last five years.

As indicated below, certain directors and officers of the Company hold
similar positions with the following Funds that are managed by the Adviser:
Davis New York Venture Fund, Inc., and Davis Series, Inc. (collectively the
"Davis Funds.")

JEREMY H. BIGGS (8/16/35),* Two World Trade Center, 94th Floor, New
York NY 10048. Director and Chairman of the Company and each of the Davis Funds;
Consultant to the Adviser; Director of the Van Eck Funds; 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. The Sub-Adviser is a wholly owned subsidiary of Fiduciary Trust
Company International.

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

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

KEITH R. KROEGER (5/13/36), 255 King Street, Chappaqua, NY 10514.
Director of the Company, Partner, Kroeger, Woods Associates, Architects.

THE VERY REVEREND JAMES R. LEO (8/24/33), 2121 Alpine Place, #201,
Cincinnati OH 45206. Director of the Company; Executive Director of Capital
Ideas, Inc.; formerly Dean of Christ Church Cathedral from 1991 until 1998;
formerly Dean of the American Cathedral in Paris from 1980 until 1991.

20
<PAGE>

RICHARD M. MURRAY (11/21/22), La Prov Corporation, Liaison Office of
Grupo Nacional Provincial, Mexico, One Penn Plaza, New York NY 10019. Director
of the Company; Retired since 1987; Liaison Office of Grupo Nacional Provincial,
Mexico; currently Vice Chairman, La Prov Corporation; Director, United Americas
Insurance Company, N.Y.; Director, Firemark Global Insurance Fund; Director,
International Insurance Society, Inc.

THEODORE B. SMITH, JR. (12/23/32), John Hassall, Inc., Westbury, Long
Island NY 11590. Director of the Company; Chairman, President and CEO of John
Hassall, Inc.; Managing Director John Hassall, Ltd.; Chairman of John Hassall
Japan, Ltd.; Chairman of Cantrock Realty; Chairman of McCallum Die; Trustee,
Deputy Mayor and Commissioner of Public Services for the Incorporated Village of
Mill Neck.

SHELBY M.C. DAVIS (3/20/37),** 4135 North Steers Head Road, Jackson
Hole WY 83001. President of the Company and each of the Davis Funds; President
of Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust; Director, Senior Research Adviser, and Founder,
Venture Advisers, Inc.; Employee of Capital Ideas, Inc. (financial consulting
firm); Director, Shelby Cullom Davis Financial Consultants, Inc.

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

KENNETH C. EICH (8/14/53), 2949 East Elvira Road, Suite 101Tucson,
Arizona 85706. Vice President of the Company and each of the Davis Funds,
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust; Chief Operating Officer, Venture Advisers, Inc.;
Vice President, Davis Selected Advisers - NY, Inc.; President of Davis
Distributors, LLC; former President and Chief Executive Officer of First of
Michigan Corporation; former Executive Vice President and Chief Financial
Officer of Oppenheimer Management Corporation.

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

THOMAS D. TAYS (3/7/57), 2949 East Elvira Road, Suite 101Tucson,
Arizona 85706. Vice President and Secretary of the Company and each of the Davis
Funds, Selected American Shares, Inc. Selected Special Shares, Inc. and Selected
Capital Preservation Trust; Vice President and Secretary, Venture Advisers,
Inc., Davis Selected Advisers-NY, Inc., and Davis Distributors, 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 60601-4205. Assistant Secretary of the Company and each of the Davis Funds,
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust; Member, D'Ancona & Pflaum LLC, the Company's
counsel.

ARTHUR DON (9/24/53), 111 East Wacker Drive, Suite 2800, Chicago IL
60601-4205. Assistant Secretary of the Company and each of the Davis Funds,
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust; Member, D'Ancona & Pflaum LLC, the Company's
counsel.

* Jeremy H. Biggs, and Christopher C. Davis are considered to be "interested
persons" of the Company, as defined in the Investment Company Act.

** Shelby M.C. Davis is the father of Andrew A. Davis and Christopher C. Davis.

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

21
<PAGE>

DIRECTORS' COMPENSATION SCHEDULE

During the fiscal year ended September 30, 1999, the compensation paid
to the directors who are not considered to be interested persons of the Company
was as follows:

AGGREGATE FUND TOTAL COMPLEX
NAME COMPENSATION COMPENSATION*
- ---- ------------ -------------
G. Bernard Hamilton $ 6,250 $ 74,250
Keith R. Kroeger 6,250 6,250
The Very Reverend James R. Leo 6,250 6,250
Richard M. Murray 6,250 6,250
Theodore B. Smith, Jr. 6,250 6,250

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

CERTAIN SHAREHOLDERS OF THE FUND

As of December 31, 1999, officers and directors owned the following
percentages of each Class of shares issued by the Fund:

Class A Class B Class C Class Y
------- ------- ------- -------
Davis International Total
Return Fund 4.18% * * *

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

The following table sets forth, as of December 31, 1999 the name and
holdings of each person known by the Company to be a record owner of more than
5% of the outstanding shares of any Class of either of its Funds. Owning 47.29%
of the Fund's Class A shares, Shelby Cullom Davis & Co. may be considered a
"controlling person under the Investment Company Act of 1940.

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

DAVIS INTERNATIONAL TOTAL RETURN FUND
Class A shares
- --------------
Shelby Cullom Davis & Co. 47.29%
Investment #3
609 Fifth Avenue, 11th Floor
New York, NY 10017-1021

Davis Selected Advisers, L.P. 10.26%
Attn: John Gilding
2949 East Elvira Road
Tucson, AZ 85706

SAC & Co. 10.44%

22
<PAGE>

80452131
12E 49th Street, 41st Floor
New York, NY 10017

Class B shares N/A
- --------------

Class C shares
- --------------
State Street Bank & Trust Co. 16.26%
Custodian for IRA of Robert C. Mann
4916 Westbriar Drive
Fort Worth, TX 76109-3217

Shirlieann Adams 9.71%
119 Heritage Lane
Madison, AL 35758-7974

Laura A. H. Schechter 16.76%
Steven A. Schechter JT TEN
217 Seaway Ct.
Longmont, CO 80503-7871

INVESTMENT ADVISORY SERVICES

Davis Selected Advisers, L.P. (the "Adviser") whose principal office is
at 2949 East Elvira Road, Suite 101Tucson, Arizona 85706, serves as the
investment adviser of the Fund. Venture Advisers, Inc. is the Adviser's sole
general partner. Shelby M.C. Davis is Senior Research Adviser and Founder of the
Adviser and the controlling shareholder of the general partner. Subject to the
direction and supervision of the Board of Directors, the Adviser manages the
investment and business operations of the Fund. Davis Distributors, LLC ("the
Distributor"), a subsidiary of the Adviser, serves as the distributor or
principal underwriter of the Fund's shares. Davis Selected Advisers-NY, Inc.,
("DSA-NY") a wholly owned subsidiary of the Adviser, performs research and other
services for the Fund on behalf of the Adviser under a Sub-Advisory Agreement
with the Adviser. The Adviser also acts as investment adviser for Davis New York
Venture Fund, Inc., Davis Series, Inc., (collectively with the Fund, the "Davis
Funds"), Selected American Shares, Inc., Selected Special Shares, Inc. and
Selected Capital Preservation Trust (collectively the "Selected Funds"). The
Distributor also acts as the principal underwriter for the Davis Funds and the
Selected Funds.

Fiduciary International, Inc. ("Sub-Adviser") serves as Sub-Adviser to
the Fund under a Sub-Advisory Agreement with the Adviser. The Sub-Adviser
manages the day to day investment operations of the Fund, subject to the
Adviser's overall supervision. All of the fees paid to the Sub-Adviser are paid
by the Adviser and not the Fund. The Sub-Adviser is a is a wholly owned
subsidiary of Fiduciary Trust Company International ("FTCI") and is registered
as an investment adviser under the Investment Advisers Act of 1940. Both the
Sub-Adviser and FTCI maintain their principal offices at Two World Trade Center,
New York, New York, 10048.

23
<PAGE>

As of December 31, 1999, FTCI served as the investment adviser to a number of
institutional and private accounts with aggregate assets of approximately $50
billion.

ADVISORY AND SUB-ADVISORY AGREEMENTS. Pursuant to the Advisory
Agreement, the 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 Fund pays the Adviser a fee at the annual rate based on average net
assets, as follows: 1.00% on the first $250 million; 0.90% on the next $250
million; and 0.80% of average net assets in excess of $500 million. The
aggregate advisory fees paid by the Fund to the Adviser for the years ended
September 30, 1999, 1998 and 1997 were $350,101, $401,648 and $471,571,
respectively.

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

The Advisory Agreement and sub-advisory agreements also make provisions
for portfolio transactions and brokerage policies of the Fund which are
discussed above under "Portfolio Transactions."

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

Pursuant to the Advisory Agreement, the Adviser, subject to the general
supervision of the Fund's 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 Fund. The Fund bears 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. The 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:

24
<PAGE>

Fiscal year ended September 30,
1999 1998 1997
------- ------- -------
DAVIS INTERNATIONAL TOTAL RETURN FUND,
- --------------------------------------
Accounting and administrative services $ 8,004 $ 8,004 $ 7,337
Qualifying shares for sale with state agencies $12,000 $12,000 $12,000
Shareholder services $ 5,190 $ 7,890 $ 3,336

CODE OF ETHICS. The Adviser and Sub-Adviser have adopted separate Codes
of Ethics which regulate the personal securities transactions of the Adviser's
and Sub-Adviser's investment personnel, other employees, and affiliates, with
access to information regarding securities transactions of the Fund. The Code of
Ethics requires investment personnel to disclose personal securities holdings
upon commencement of employment and all subsequent trading activity to the
Adviser's or Sub-Adviser's Compliance Officer. Investment personnel are
prohibited from engaging in any securities transactions, including the purchase
of securities in a private offering, without the prior consent of the Compliance
Officer. Additionally, such personnel are prohibited from purchasing securities
in an initial public offering and are prohibited from trading in any securities
(i) for which the Fund has a pending buy or sell order, (ii) which the Fund is
considering buying or selling, or (iii) which the Fund purchased or sold within
seven calendar days.

DISTRIBUTION OF COMPANY SHARES

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

CLASS A SHARES. Payments under the Class A Distribution Plan 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 Fund's 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 Fund. 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 the 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

25
<PAGE>

sales. No commissions are paid by the Company with respect to sales by the
Distributor to officers, directors, and full-time employees of the Fund, the
Distributor, the Adviser, the Adviser's general partner, or DSA-NY. Up to 0.25%
of average net assets is used to reimburse the Distributor for the payment of
service and maintenance fees to its salespersons and other firms for shareholder
servicing and maintenance of its shareholder accounts.

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

CARRYOVER PAYMENTS. If, due to the foregoing payment limitations, the
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 Fund 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 Fund is not
obligated to make such payments; the amount (if any), timing and condition of
any such payments are solely within the discretion of the Directors of the
Company, who are not interested persons of the Distributor or the Company and
have no direct or indirect financial interest in the Class B or C Distribution
Plans (the "Independent Directors"). If the 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 September 30, 1999 the cumulative totals of
these carryover payments were:

DOLLAR AMOUNT PERCENT OF CLASS NET ASSETS
------------- ---------------------------
Davis International Total
Return Fund Class B shares $238,725 5.15%

26
<PAGE>

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

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

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

In addition, the Distributor may, from time to time, pay additional
cash compensation or other promotional incentives to authorized dealers or
agents who sell shares of the Fund. 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 Fund and/or the other Davis Funds managed by the Adviser during a
specified period of time.

Shares of the Fund 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 Fund under the Glass-Steagall Act would
have no material adverse effects on the Fund. 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 Fund shares) is paid with fees authorized
under the Distribution Plans.

27
<PAGE>

A portion of the supermarket sponsor's fee (that portion related to
shareholder services such as new account set-up, shareholder accounting,
shareholder inquires, 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 serving fees, then the Adviser pays the
remainder out of its profits.

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 Fund 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 Fund 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.

28
<PAGE>

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

Fiscal year ended September 30,
1999 1998 1997
---- ---- ----
Davis International Total Return Fund $9,425 $50,573 $67,467
Amount reallowed to dealers $7,787 $42,471 $57,120

The Distributor or the Adviser, in its capacity as distributor,
received compensation on redemptions and repurchases of shares:

Fiscal year ended September 30, 1999
Davis International Total Return Fund
Class A shares N/A
Class B shares $21,271
Class C shares $ 79

The Distributor or the Adviser, in its capacity as distributor,
received the following amounts as reimbursements under the Distribution plans.

Fiscal year ended September 30,
1999 1998 1997
---- ---- ----
Davis International Total Return Fund
Class A shares $21,977 $46,112 $57,960
Class B shares $56,168 $67,266 $79,903
Class C shares $ 2,934 $ 1,804 $ 59

OTHER IMPORTANT SERVICE PROVIDERS

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

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

COUNSEL. D'Ancona & Pflaum LLC, 111 East Wacker Drive, Suite 2800,
Chicago, Illinois 60601, serves as counsel to the Company and also serves as
counsel for those members of the Board of Directors who are not affiliated with
the Adviser.

29
<PAGE>

Section III: Purchase, Exchange and Redemption of Shares
- --------------------------------------------------------

PURCHASE OF SHARES

CLASS A, B, AND C SHARES. You can purchase Class A, Class B, or Class C
shares of the 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 Fund. One way is to fill out the Application Form
included in the Prospectus and mail it to State Street Bank and Trust Company
("State Street") at the address on the Form. 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. You can also use this
method for additional investments of at least $1,000.

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

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

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

30
<PAGE>

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

ALTERNATIVE PURCHASE ARRANGEMENTS

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

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

31
<PAGE>

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

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

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

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 Company and,
in cases where the limits of the distribution plan in any year have been
reached, from the Distributor's own resources.

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

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

(2) STATEMENTS OF INTENTION. Another way to reduce the sales charge is
by signing a Statement of Intention ("Statement"). See the Appendix: "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 Fund Class A shares over a 13-month period. The amount you
say you intend to invest may include Class A shares which you already

32
<PAGE>

own, valued at the offering price, at the end of the period covered by the
Statement. A Statement may be backdated up to 90 days to include purchases made
during that period, but the total period covered by the Statement may not exceed
13 months.

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

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

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

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

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

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

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

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

If a "single purchaser" decides to buy a Fund Class A shares as well as
Class A shares of any of the other Davis Funds (other than shares of Davis
Government Money Market Fund) at

33
<PAGE>

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 International Total Return Fund's
Class A shares and $150,000 in the Class A shares of Davis New York Venture Fund
and pay a sales charge of 2-1/2%, not 3-1/2%.

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

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

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

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

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

(7) SALES AT NET ASSET VALUE. The sales charge will not apply to: (1)
Class A shares purchased through the automatic reinvestment of dividends and
distributions; (2) Class A shares

34
<PAGE>

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

CLASS B SHARES. Class B shares are offered at net asset value, without
a front-end sales charge. The Distributor receives and usually reallows
commissions to firms responsible for the sale of such shares. With certain
exceptions described below, the Fund 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 Fund which are acquired
in exchange from Class B shares of other Davis Funds which were purchased prior
to December 1, 1994, the Fund 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 Fund 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

35
<PAGE>

the time of conversion, although the dollar value will be the same, a
shareholder may receive more or less Class A shares than the number of Class B
shares converted. Under a private Internal Revenue Service Ruling, such a
conversion will not constitute a taxable event under the federal income tax law.
In the event that this ceases to be the case, the Board of Directors will
consider what action, if any, is appropriate and in the best interests of the
Class B shareholders. In addition, certain Class B shares held by certain
defined contribution plans automatically convert to Class A shares based on
increases of plan assets.

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

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

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

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

Retirement Plans recordkept on a daily basis by Merrill Lynch or an
independent recordkeeper under a contract with Merrill Lynch that are currently
investing in Class B shares of the Davis Mutual Fund 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 Fund 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 Fund 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

36
<PAGE>

the Fund 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 Fund did
not pay a commission on issuance, including shares acquired through reinvestment
of dividend income and capital gains distributions. Upon request for a
redemption, shares not subject to the CDSC will be redeemed first. Thereafter,
shares held the longest will be the first to be redeemed.

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

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

Wrap Program Investors should be aware that both Class A and Class Y
shares are made available by the Fund at net asset value to sponsors of wrap
programs. However, Class A shares

37
<PAGE>

are subject to additional expenses under the Fund's Rule 12b-1 Plan and sponsors
of wrap programs utilizing Class A shares are generally entitled to payments
under the Plan. If the sponsor has selected Class A shares, investors should
discuss these charges with their program's sponsor and weigh the benefits of any
services to be provided by the sponsor against the higher expenses paid by Class
A shareholders.

SPECIAL SERVICES

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

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

DIVIDEND DIVERSIFICATION PROGRAM. You may also establish a dividend
diversification program which allows you to have all dividends and any other
distributions automatically invested in shares of one or more of the Davis
Funds, subject to state securities law requirements and the minimum investment
requirements. You must receive a current prospectus for the other Fund or Funds
prior to investment. Shares will be purchased at the chosen Fund's net asset
value on the dividend payment date. A dividend diversification account must be
in the same registration as the distributing fund account and must be of the
same class of shares. All accounts established or utilized under this program
must have a minimum initial value, and all subsequent investments must be at
least $25. This program can be amended or terminated at any time, upon at least
60 days' notice. If you would like to participate in this program, you may use

38
<PAGE>

the appropriate designation on the Application Form. Class Y shares are not
eligible to participate in the Dividend Diversification Program.

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

EXCHANGE OF SHARES

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

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

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

39
<PAGE>

medallion signature guarantee is a written confirmation from an eligible
guarantor institution, such as a securities broker-dealer or a commercial bank,
that the signature(s) on the account is (are) valid. Unfortunately, no other
form of signature verification can be accepted. Your dealer may charge an
additional fee for handling an exercise of the exchange privilege.

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

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

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

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

REDEMPTION OF SHARES

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

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

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

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<PAGE>

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

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

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

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

EXPEDITED REDEMPTION PRIVILEGE. Investors with accounts other than
prototype retirement plans and IRAs may instruct State Street to establish
banking instructions for the purpose of a future expedited redemption. Class Y
shareholders are not eligible for the expedited redemption privilege. Expedited
redemption privilege allows the shareholder to instruct State

41
<PAGE>

Street to forward redemption proceeds to their checking or savings account at
the their commercial banking institution.

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

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

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

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

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

AUTOMATIC WITHDRAWALS PLAN. Under the Automatic Withdrawals Plan, you
can indicate to State Street how many dollars you would like to receive each
month or each quarter. Your account must have a value of at least $10,000 to
start a plan. On shares that are redeemed you will receive the payment you have
requested approximately on the 25th day of the month. Withdrawals involve
redemption of shares and may produce gain or loss for income tax purposes.
Shares of the Fund initially acquired by exchange from any of the other Davis
Funds will remain subject to an escrow or segregated account to which any of the
exchanged shares were subject. If you utilize this program, any applicable CDSCs
will be imposed on such shares redeemed. Purchase of additional shares
concurrent with withdrawals may be disadvantageous to you because of tax and
sales load consequences. If the amount you withdraw exceeds the dividends on
your shares, your account will suffer depletion. You may terminate your
Automatic Withdrawals Plan at any time without charge or penalty. The Company
reserves the

42
<PAGE>

right to terminate or modify the Automatic Withdrawals Plan at any time. Class Y
shares are not eligible for the Automatic Withdrawals Plan.

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

SUBSEQUENT REPURCHASES. After some or all of your shares are redeemed
or repurchased, you may decide to put back all or part of your proceeds into the
same Class of a Fund's shares. Any such shares will be issued without sales
charge at the net asset value next determined after you have returned the amount
of your proceeds. In addition, any applicable CDSC assessed on such shares will
be returned to the account. Shares will be deemed to have been purchased on the
original purchase date for purposes of calculating the CDSC and the conversion
period. This can be done by sending State Street or the Distributor a letter,
together with a check for the reinstatement amount. The letter must be received,
together with the payment, within 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
the Fund is determined daily as of the earlier of the close of the New York
Stock Exchange (the "Exchange") or 4:00 p.m., Eastern time, on each day that the
Exchange is open for trading.

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

The Company does not price its shares or accept orders for purchases or
redemptions on days when the New York Stock Exchange is closed. Such days
currently include New Year's

43
<PAGE>

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.

Because 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. However, if the Adviser believes
that extraordinary circumstances have occurred in a foreign market which render
the reported prices unreliable then the Fund may price some portfolio securities
at a "fair value" as determined in conformance with procedures adopted by the
Board of Directors. 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 & Trust Company.
Fluctuation in the value of foreign currencies in relation to the U.S. dollar
may affect the net asset value of the Fund's shares even if there has not been
any change in the foreign currency price of the Fund's investments.

Investments in short-term securities (maturing in 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.

DIVIDENDS AND DISTRIBUTIONS

There are two sources of income, net income and realized capital gains
paid to you by the Fund. 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

44
<PAGE>

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 Withdrawals Plan. The reinvestment of dividends
and distributions is made at net asset value (without any initial or contingent
deferred sales charge) on the payment date.

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

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 Fund and its 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 Fund.

The Fund intends 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 Fund intends 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.

FOREIGN TAXES ON FUND INCOME. Income received by the Fund from its
foreign investments may be subject to withholding and other foreign taxes. If
the Fund is liable for foreign income taxes, and if the dollar amount of such
taxes is significant, the Fund intends to meet the requirements of the Code to
"pass through" the amount of such taxes to the Fund's shareholders, but there
can be no assurance that the Fund will be able to do so or will elect to do

45
<PAGE>

so. To the extent that foreign taxes are passed through to shareholders of the
Fund, shareholders will be required to treat as amounts distributed to them, and
may be able to claim a deduction or credit for, their pro rata share of such
taxes. Each shareholder will be notified within 60 days after the close of each
taxable year of the Fund whether the foreign taxes paid by the Fund will "pass
through" for that year, and, if so, the amount of each shareholder's pro-rata
share (by country) of the foreign taxes paid by the Fund and the dividend paid
by the Fund which represents income derived from foreign sources.

The United States has entered into tax treaties with many foreign
countries which may reduce or eliminate these taxes. It is impossible to
determine in advance the effective rate of foreign tax to which the Fund will be
subject, since the amount of the Fund's assets to be invested in foreign
countries will vary.

If the Fund is liable for foreign income taxes and if more than 50% of
the value of the Fund's total assets at the close of its taxable year consists
of the stock or securities of foreign corporations, the Fund may elect to "pass
through" to the Fund's shareholders the amount of foreign income taxes paid by
the Fund. Pursuant to such election, shareholders would be required to (i)
include in gross income their pro-rata shares of foreign taxes paid by the Fund,
and (ii) treat their pro-rata share of these taxes as paid by them. Shareholders
would then be permitted to either deduct their pro-rata share of foreign taxes
in computing their taxable income or use it as a foreign tax credit against
Federal income taxes. No deduction for foreign taxes could be claimed by a
shareholder who does not itemize deductions, and the amount of foreign taxes for
which any shareholder may claim a credit in any year may be subject to
limitations under the Code. Shareholders who are not liable for Federal income
taxes, such as retirement plans qualified under Section 401 of the Code, will
not be affected by any "pass through" of foreign tax payments.

TAXATION OF FOREIGN SHAREHOLDERS. The foregoing discussion relates only
to U.S. Federal income tax law as it affects shareholders who are U.S. citizens
or residents or U.S. corporations. The effects of Federal income tax law on
shareholders who are non-resident aliens or foreign corporations may be
substantially different. Foreign investors should consult their counsel for
further information as to the particular U.S. tax consequences to them of an
investment in the Fund.

PERFORMANCE DATA

From time to time, the Fund may advertise information regarding its
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 the periods indicated
below is as follows:

46
<PAGE>

<TABLE>
<CAPTION>
Cumulative Average Annual
Davis International Total Return Fund Total Return 1 Total Return 2
- ------------------------------------- ------------- --------------
<S> <C> <C>
Class A Shares
One year ended September 30, 1999 9.98% 9.98%
Period from February 1, 1995 through September 30, 1999 (life of class) 17.47% 3.51%

Class B Shares
One year ended September 30, 1999 10.25% 10.25%
Period from February 1, 1995 through September 30, 1999 (life of class) 16.25% 3.28%

Class C Shares
One year ended September 30, 1999 13.83% 13.83%
Period from August 19, 1997 through September 30, 1999 (life of class) (8.43)% (4.08)%
</TABLE>

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

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

47
<PAGE>

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.

OTHER FUND STATISTICS

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

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

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

48
<PAGE>

APPENDIX

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

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

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

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

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

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

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

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

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

49
<PAGE>

FORM N-1A

DAVIS INTERNATONAL SERIES, INC.

POST-EFFECTIVE AMENDMENT NO. 11 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 33-86578

AND

AMENDMENT NO. 12 UNDER THE INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-8870

PART C

OTHER INFORMATION
-----------------

Item 23. Exhibits:

(a)(1) Articles of Incorporation. Articles of Incorporation,
incorporated by reference to Exhibit 1 to Registrant's
Pre-Amendment No. 2, File No. 33-86578.

(a)(2) Articles Supplementary to Articles of Incorporation.
Incorporated by reference to exhibit 1(b) to Registrant's
Post-Effective Amendment No. 5, File No. 33-86578.

(a)(3) Articles Supplementary to Articles of Incorporation,
designating the Davis International Growth Fund.
Incorporated by reference to exhibit (a)(3) to
Registrant's Post-Effective Amendment No. 7, File No.
33-86578.

(b) By-laws. Amended and Restated Bylaws (as of 10/06/98).
Incorporated by reference to exhibit 23(b) to Registrant's
Post-Effective Amendment No. 10, File No. 33-86578.

(d)(1) Investment Advisory Contracts. incorporated by reference
to Exhibit 5 (a) to Registrant's Pre-Effective Amendment
No. 2, File No. 33-86578.

(d)(2) Sub-Advisory Agreement with Davis Selected Advisers-NY,
Inc. incorporated by reference to Exhibit 5(c) to
Registrant's Pre-Effective Amendment No. 2 File No.
33-86578

1
<PAGE>

(e)(1) Underwriting Contracts. Distributor's Agreement,
incorporated by reference to Exhibit 6 to Registrant's
Pre-Effective Amendment No. 2, File No. 33-86578.

(e)(2) Transfer and Assumption Agreement to the Underwriting
Contract. Incorporated by reference to exhibit No. 6(b) to
Registrant's Post-Effective Amendment No. 5, File No.
33-86578.

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

(g)(1) Custodian Agreement. Incorporated by reference to Exhibit
(8) to Registrant's Registration Statement on Form N-1A,
File No. 33-86578.

(g)(2) Amendment to Custodian Contract, adding Davis
International Growth Fund. To be filed before Davis
International Growth Fund is offered to the public.

(h)(1) Other Material Contracts. Transfer Agency and Service
Agreement, incorporated by reference to Exhibit (9) to
Registrant's Registration Statement on Form N-1A, File No.
33-86578.

(h)(2) Amendment to Transfer Agency and Service Agreement, adding
the Davis International Growth Fund. To be filed before
Davis International Growth Fund is offered to the public.

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

(j)* Other Opinions. Consent of Current Auditors. KPMG, LLP.

(k) Omitted Financial Statements. Not Applicable.

(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)
Registrant's Post-Effective Amendment No. 5, File No.
33-86578.

(m)(2) Distribution Plan for Class B shares, incorporated by
reference to Exhibit 15(b) to Registrant's Amendment No.
2, File No. 33-86578.

2
<PAGE>

(m)(3) Distribution Plan for Class C shares, incorporated by
reference to exhibit 15(c) Registrant's Post-Effective
Amendment No. 5, File No. 33-86578.

(n) Financial Data Schedule. Not applicable

(o) Rule 18f-3 Plan. Plan pursuant to Rule 18f-3, as amended,
incorporated by reference to exhibit 18(b) Registrant's
Post-Effective Amendment No. 5, File No. 33-86578.

(p) Other Exhibits. Powers of Attorney of the Registrant,
Officers and Board of Directors appointing Sheldon Stein
and Arthur Don as attorneys-in-fact. Incorporated by
reference to exhibit 15(c) Registrant's Post-Effective
Amendment No. 7, File No. 33-86578.

* Filed Herein

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

3
<PAGE>

individual actually received an improper benefit in
money property or services or to the extent that a final adjudication finds that
the individual acted with active and deliberate dishonesty.

Item 26. Business and Other Connections of Investment Adviser

Davis Selected Advisers, L.P. ("DSA ") and subsidiary companies comprise a
financial services organization whose business consists primarily of providing
investment management services as the investment adviser and manager for
investment companies registered under the Investment Company Act of 1940,
unregistered off-shore investment companies, and as an investment adviser to
institutional and individual accounts. DSA also serves as sub-investment adviser
to other investment companies. Davis Distributors, L.L.C., 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, 4135 North Steers Head Road, Jackson Hole, WY 83001.
Director, Chairman and Chief Executive Officer, Venture Advisers, Inc.;
Director, Davis Selected Advisers-NY, Inc.; Employee of Capital Ideas, Inc.
(financial consulting firm); Consultant to Fiduciary Trust Company
International; Director, Shelby Cullom Davis Financial Consultants, Inc.

ANDREW A. DAVIS, 124 East Marcy Street, Santa Fe, NM 87501. Director and
President, Venture Advisers, Inc.; Director and Vice President, Davis Selected
Advisers-NY, Inc.; Consultant to Capital Ideas, a private financial consultant.

CHRISTOPHER C. DAVIS, 609 Fifth Ave, New York, NY 10017. Vice Chairman, Venture
Advisers, Inc.; Director, Chairman, Chief Executive Officer, Davis Selected
Advisers-NY, Inc.; Chairman and Director, Shelby Cullom Davis Financial
Consultants, Inc.; employee of Shelby Cullom Davis & Co., a registered
broker/dealer; Director, Rosenwald, Roditi and Company, Ltd., an offshore
investment management company.

KENNETH C. EICH, 2949 East Elvira Road, Suite 101Tucson, Arizona 85706. Chief
Operating Officer, Venture Advisers, Inc.; Vice President, Davis Selected
Advisers-NY, Inc.; President, Davis Distributors, L.L.C. Former President and
Chief Executive Officer of First of Michigan Corporation. Former Executive Vice
President and Chief Financial Officer of Oppenheimer Management Corporation.

GARY TYC, 2949 East Elvira Road, Suite 101Tucson, Arizona 85706. Vice President,
Chief Financial Officer Treasurer, and Assistant Secretary of Venture Advisers,
Inc.; Vice President, Treasurer, & Assistant Secretary of Davis Selected
Advisers - NY, Inc.; Vice President, Treasurer, & Assistant Secretary of Davis
Distributors, L.L.C. Former Vice President of Oppenheimer Management
Corporation.

4
<PAGE>

THOMAS D. TAYS, 2949 East Elvira Road, Suite 101Tucson, Arizona 85706. Vice
President and Secretary, Venture Advisers, Inc., Davis Selected Advisers-NY,
Inc., and Davis Distributors, L.L.C. Former Vice President and Special Counsel
of U.S. Global Investors, Inc.

Item 27. Principal Underwriter

(a) Davis Distributors, LLC, a wholly owned subsidiary of the Adviser,
located at 2949 East Elvira Road, Suite 101Tucson, Arizona 85706, is the
principal underwriter for the Registrant and also acts as principal
underwriter for Davis New York Venture Fund, Inc., Davis Tax-Free High Income
Fund, Inc., Davis Intermediate Investment Grade Bond Fund, Inc., Davis
Series, Inc., Selected American Shares, Inc., Selected Special Shares, Inc.
and Selected Capital Preservation Trust.

(b) Management of the Principal Underwriters:

NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
- ---------------- ----------- ---------------
<S> <C> <C>
Kenneth C. Eich President Vice President
2949 East Elvira Road, Suite
101Tucson, Arizona 85706

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

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

Item 28. Location of Accounts and Records

Accounts and records are maintained at the offices of Davis Selected
Advisers-NY, Inc., 124 East Marcy Street, Santa Fe, New Mexico 87501, after June
1, 2000 they will be maintained at the offices of Davis Selected Advisers, L.P.,
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706, and at the offices of
the Registrant's custodian, State Street Bank and Trust Company, One Heritage
Drive, North Quincy, Massachusetts 02107, and the Registrant's transfer agent
State Street Bank and Trust, c/o Service Agent, BFDS, Two Heritage Drive, 7th
Floor, North Quincy, Massachusetts 02107.

Item 29. Management Services

Not applicable

Item 30. Undertakings

5
<PAGE>

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.

6
<PAGE>

DAVIS INTERNATIONAL SERIES, 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 18th day of
January, 2000.

DAVIS INTERNATIONAL SERIES, INC.

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

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

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

Shelby M.C. Davis* President, Chief Executive Officer January 18, 2000
- ------------------
Shelby M.C. Davis

Sharra L. Reed* Principal Financial Officer
- -------------- and Treasurer January 18, 2000
Sharra L. Reed

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

*Sheldon Stein signs this document on behalf of the Registrant and each of the
foregoing officers pursuant to the powers of attorney filed as Exhibit (p) to
Registrant's Post-Effective Amendment number 8 to Registrant's Registration
Statement.

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

7
<PAGE>

DAVIS INTERNATONAL SERIES, INC.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on January 18, 2000 by the following
persons in the capacities indicated.

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

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

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

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

Keith R. Kroeger* Director
- -------------------------------
Keith R. Kroeger

The Very Reverend James R. Leo* Director
- -------------------------------
The Very Reverend James R. Leo

Richard M. Murray* Director
- -------------------------------
Richard M. Murray

Theodore B. Smith, Jr.* Director
- -------------------------------
Theodore B. Smith, Jr.

*Sheldon Stein signs this document on behalf of each of the foregoing persons
pursuant to the powers of attorney filed as Exhibit (p) to Registrant's current
Post-Effective Amendment No 8 to Registrant's Registration Statement.

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

8
<PAGE>

EXHIBIT LIST

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

(j) Other Opinions. Consent of Auditors. KPMG, LLP.

<PAGE>

EXHIBIT
ITEM 23 (I)

[LETTERHEAD OF D'ANCONA & PFLAUM]

February 3, 2000

Davis International Total Return Fund, Inc.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706

Ladies and Gentlemen:

We have acted as counsel for Davis International Total Return Fund, Inc.
(the "Company") in connection with the registration under the Securities Act of
1933 (the "Act") of an indefinite number of shares of beneficial interest in the
series of the Company designated as Davis International Total Return Fund (the
"Shares") in registration statement No. 33-86578 on Form N-1A (the "Registration
Statement").

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

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

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

Very truly yours,

D'Ancona & Pflaum

By
------------------------------
Sheldon R. Stein, Partner

<PAGE>

EXHIBIT
ITEM 23 (J)

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Davis International Series, Inc.

We consent to the use of our report dated November 5, 1999 incorporated by
reference in this Registration Statement of Davis International Total Return
Fund, an authorized series of Davis International Series, Inc. and to the
references to our firm under the headings "Financial Highlights" in the
Prospectuses for Davis International Total Return Fund Class A, Class B and
Class C and for Class Y shares and "Auditors" in the Statement of Additional
Information.

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

Denver, Colorado
February 3, 2000