DAVIS INTERNATIONAL SERIES INC, 485BPOS, 2000-01-21

DAVIS INTERNATIONAL SERIES INC
485BPOS, 2000-01-21

Previous: DAVIS INTERNATIONAL SERIES INC, PRES14C, 2000-01-21

Next: CEC RESOURCES LTD, SC 14D1/A, 2000-01-21

<PAGE>

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. 10

AND

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-8870
AMENDMENT NO. 11

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)
[X] On January 21, 2000, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On ________, pursuant to paragraph (a) 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. 10 TO REGISTRATION
STATEMENT NO. 33-86578 UNDER THE SECURITIES ACT OF 1933
AND AMENDMENT NO. 11 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
- -------- ----------------------------------------------------------

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

<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

January 21, 2000

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

Over 25 Years of Reliable Investing

1
<PAGE>
TABLE OF CONTENTS

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

Who Is Responsible for Your Davis Account

How We Manage the Fund

Once You Invest in 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 and in common stock issued by
U.S. companies doing substantial business in foreign markets.

Our portfolio manager uses the Davis investment philosophy in selecting common
stocks of quality, overlooked growth companies at value prices and holding them
for the long-term.

We look for companies with sustainable growth rates selling at modest
price-earnings multiples that we hope will expand as other investors recognize
the company's true worth. We believe investing internationally offers additional
opportunities to purchase quality overlooked growth stocks and to diversify a
portfolio of U.S. securities.

You can find more detailed information about the types of securities that 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).

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.

3
<PAGE>

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
<PAGE>

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)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PAST 1 YEAR LIFE OF FUND
- --------------------------------------------------------------------------------
<S> <C> <C>
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%
- --------------------------------------------------------------------------------
</TABLE>

*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)

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a 4.75% None None
percentage of offering price)
- ---------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) Imposed on Redemptions 0.75% 4.00% 1.00%
(as a percentage of the lesser of the net asset value of the
shares redeemed or the total cost of such shares)
- ---------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None None

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

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 was:
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

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>

(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.

(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>

(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.

(5) Less than $0.005 per share.

* Annualized

9
<PAGE>

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-ADVISER

DAVIS SELECTED ADVISERS-NY, INC.

Referred to throughout this prospectus as "Davis Selected Advisers-NY"
609 Fifth Avenue
New York, NY 10017

o Performs investment management and research services for Davis 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.

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.

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.

10
<PAGE>

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.

INVESTMENT TEAM

The Fund is managed by a team of senior portfolio managers and research analysts
from the research department of Davis Selected Advisers who share ideas and
responsibility for managing the Fund's investments.

OUR CODE OF ETHICS

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

HOW WE MANAGE THE FUND

WHAT WE INVEST IN AND WHY

Davis International Total Return Fund's investment objective is total return
through capital growth or income or both. We pursue this objective by investing
primarily in the common stock of foreign companies and in common stock issued by
U.S. companies doing substantial business in foreign markets.

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

11
<PAGE>

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, as market conditions dictate.

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

WHAT THEY ARE. 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.

HOW WE PICK THEM. The Davis investment philosophy stresses a back-to-basics
approach: we use extensive research to buy growing companies at value prices and
hold on to them for the long-term. Over the years, Davis Selected Advisers has
developed a list of ten characteristics that we believe foster sustainable
long-term growth, minimize risk and enhance the potential for superior long-term
returns. While very few companies have all ten, we search for those possessing
several of the characteristics that are listed in the following chart.

WHY WE BUY THEM. Davis International Total Return Fund buys common stock of
foreign companies and U.S. companies doing substantial business in foreign
markets to take an ownership position in companies with growth potential, and
then holds that position long enough to realize the benefits of growth.

WHAT WE LOOK FOR IN A COMPANY

1. FIRST-CLASS MANAGEMENT. We believe that great companies are created by
great managers. In visiting companies, we look for managers with a record
of doing what they say they are going to do.

2. MANAGEMENT OWNERSHIP. Just as we invest heavily in our own funds, we look
for companies where individual managers own a significant stake.

3. STRONG RETURNS ON CAPITAL. We want companies that invest their capital
wisely and reap superior returns on those investments.

4. LEAN EXPENSE STRUCTURE. Companies that can keep costs low are able to
compete better, especially in difficult times. A low cost structure sharply
reduces the risk of owning a company's shares.

12
<PAGE>

5. DOMINANT OR GROWING MARKET SHARE IN A GROWING MARKET. A company that is
increasing its share of a growing market has the best of both worlds.

6. PROVEN RECORD AS AN ACQUIRER. When an industry or market downturn occurs,
it is a good idea to own companies that can take advantage of attractive
prices to expand operations through inexpensive acquisitions.

7. STRONG BALANCE SHEET. Strong finances give a company staying power to
weather difficult economic cycles.

8. COMPETITIVE PRODUCTS OR SERVICES. We invest in companies with products that
are not vulnerable to obsolescence.

9. SUCCESSFUL INTERNATIONAL OPERATIONS. A proven ability to expand
internationally reduces the risk of being tied too closely to a single
country's economic cycle.

10. INNOVATION. The savvy use of technology in any business, from a food
company to an investment bank, can help reduce costs and increase sales.

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.

OTHER SECURITIES AND INVESTMENT STRATEGIES

13
<PAGE>

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 MED MED
LOW LOW MED HIGH 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 INTERMEDIATE INVESTMENT GRADE o
BOND FUND
- --------------------------------------------------------------------------------
DAVIS TAX-FREE HIGH INCOME FUND o
- --------------------------------------------------------------------------------
DAVIS GOVERNMENT BOND FUND o
- --------------------------------------------------------------------------------
DAVIS GOVERNMENT MONEY MARKET FUND o
- --------------------------------------------------------------------------------

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

HOW WE MANAGE RISK

Risks are inherent in all investments. Investing in a mutual fund, even the most
conservative, involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Davis International Total Return Fund has six strategies to minimize
the risk assumed when we invest.

SIX STRATEGIES WE USE TO MINIMIZE RISK

14
<PAGE>

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

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

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

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

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

6. WE EMPHASIZE DIVERSIFICATION. We diversify the Fund across individual
companies, industry sectors, and different countries. This reduces price
volatility and minimizes the losses the Fund experiences when a company or
industry sector declines in market value.

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.

15
<PAGE>

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 (gradually reduced) cost.

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

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

16
<PAGE>

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

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.

17
<PAGE>

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
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.

18
<PAGE>

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.

19
<PAGE>

CLASS A SHARES SALES CHARGES

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

20
<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.

21
<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.

22
<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.

23
<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.

24
<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.

25
<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.

26
<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

27
<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.

28
<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

29
<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.

30
<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 FUNDS
Davis Intermediate Investment Grade Bond Fund
Davis Tax-Free High Income Fund
Davis Government Bond Fund

GOVERNMENT MONEY MARKET FUND
Davis Government Money Market Fund

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

31
<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(Trademark) 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.

32
<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.

33
<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.

34
<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

35
<PAGE>

[BACK COVER]

OTHER FUND DOCUMENTS

WHERE YOU CAN GET THESE DOCUMENTS:

o 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.

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

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

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

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

Investment Company Act File No. 811-8870

25
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
JANUARY 21, 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 JANUARY
21, 2000 AND THE CLASS Y PROSPECTUS DATED JANUARY 21, 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's ("Fund") investment objective is
total return through capital growth or income or both. The Fund pursues this
objective by investing primarily in common stocks of foreign companies and U.S.
companies doing substantial business in foreign markets. The Fund also 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.
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, as market conditions
dictate.

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 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.

4
<PAGE>

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.

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

5
<PAGE>

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 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

6
<PAGE>

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.

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

7
<PAGE>

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 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 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 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.

8
<PAGE>

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 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 negotiated, currently non-regulated
market. A Fund may enter into a forward contract, for example, when it enters
into a contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). Additionally, when the Adviser 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

9
<PAGE>

foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. When the 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
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 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

10
<PAGE>

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 ("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 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

11
<PAGE>

determination, the Adviser will consider the frequency of trades and quotes, the
number of dealers and potential purchasers, dealer undertakings to make a
market, and the nature of the security and the market place trades (for example,
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of transfer). The liquidity of Rule 144A Securities will also be
monitored by the Adviser and, 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 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

12
<PAGE>

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 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 Adviser believes that such trading is advisable.

In placing executions and paying brokerage commissions, the 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
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 Adviser by or through
brokers who effect portfolio transactions for the Fund may be used in servicing
other accounts managed by the Adviser and likewise research services provided by
brokers used for transactions of other accounts may be utilized by the Adviser
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.

13
<PAGE>

On occasions when the Adviser deems the purchase or sale of a security to
be in the best interests of a Fund as well as other fiduciary accounts, the
Adviser may aggregate the securities to be sold or purchased for a Fund with
those to be sold or purchased for other accounts in order to obtain the best net
price and most favorable execution. In such event, the allocation will be made
by the Adviser in the manner considered to be most equitable and consistent with
its fiduciary obligations to all such fiduciary accounts, including the Fund
involved. In some instances, this procedure could adversely affect a Fund but
the Adviser 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 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 Adviser by corroborating data and
enabling the Adviser to consider the views, information and analyses of other
research staffs. Such views, information and analyses include such matters as
communicating with persons having special expertise on certain companies,
industries, areas of the economy and/or securities prices, obtaining written
materials on these or other areas which might affect the economy and/or
securities prices, obtaining quotations on securities prices and obtaining
information on the activities of other institutional investors. The Adviser
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 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 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 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

14
<PAGE>

management of the investment 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

16
<PAGE>

borrowing in 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 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
are borne solely by each such class, and (iii) each class of shares votes
separately with respect to provisions of the Rule 12b-1 Distribution Plan, which
pertains to a particular class, and other matters for which separate class
voting is appropriate under applicable law. Each fractional share has the same
rights, in proportion, as a full share. Shares do not have cumulative voting
rights; therefore, the holders of more than 50% of the voting power of the
Company can elect all of the directors of the Company. Due to the differing
expenses of the classes, dividends of Class B and Class C shares are likely to
be lower than for Class A shares, and are likely to be higher for Class Y shares
than for any other class of shares. For more information about Class Y shares,
call the Distributor at 1-800-279-0279 to obtain the Class Y prospectus.

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., Davis Intermediate Investment Grade Bond
Fund, Inc., Davis Tax-Free High Income 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.

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 Intermediate Investment Grade Bond Fund, Inc., Davis
Tax-Free High Income 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.

ADVISORY AGREEMENT. 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

23
<PAGE>

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 are paid by the
Adviser and not the Fund.

The Advisory Agreement also makes 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 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 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:

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 has adopted a Code of Ethics which regulates
the personal securities transactions of the Adviser's investment personnel,
other employees, and affiliates, with access to information regarding securities
transactions of the 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 Compliance Officer. Investment
personnel are prohibited from engaging in any securities transactions, including
the

24
<PAGE>

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 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,

25
<PAGE>

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:
Percent of
Dollar Amount 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.

KRC INVESTMENT ADVISERS, LLC. KRC Investment Advisers, LLC ("KRC"), a
registered investment adviser owned and managed by members of the immediate and
extended family of LeRoy E. Hoffberger, a retired Director of the the Davis
Funds (but never a director of the Company), has entered into a service
agreement (the "Services Agreement") with the Distributor which provides
payments to KRC under the Fund's Rule 12b-1 Plan. Under the Services Agreement,
KRC will provide shareholder maintenance services to clients, with respect to
shares of the Company, and the Distributor will pay KRC a fee at the annual rate
of 0.25% of average net assets of the accounts of clients maintained and
serviced by KRC. Payments made by the Distributor under the Services Agreement
will be reimbursed by the Company under its Rule 12b-1 Plan. Those payments will
be made in connection with shareholder maintenance services provided by that
investment adviser to its clients who are shareholders of the Company which
include, among others, Mr. Hoffberger and members of his immediate and extended
family and trusts of which they are beneficiaries or trustees. The cost of these
services and advisory services provided by KRC are borne by the clients. Mr.
Hoffberger does not have any ownership interest in or otherwise have any control
of KRC.

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.

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 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 Intermediate Investment Grade Bond Fund and
Davis Financial Fund and Davis Convertible Securities Fund, (valued at the
applicable current offering price) and invest $5,000 in the Fund's shares, the
sales charge on your investment would be 3-1/2%, not 4-3/4%.

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

(5) ISSUANCE OF SHARES AT NET ASSET VALUE. There are many situations where
the sales charge will not apply to the purchase of Class A shares, as discussed
in the Prospectus. A sales charge is not imposed on these transactions either
because of the purchaser deals directly with the 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.

40
<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.

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 sixty days or less) are
valued at amortized cost unless the Board of Directors determines that such cost
is not a fair value. Assets for which there are no quotations available will be
valued at a fair value as determined by or at the direction of the Board of
Directors.

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 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

44
<PAGE>

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 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.

45
<PAGE>

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:

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%

46
<PAGE>

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.

<PAGE>

FORM N-1A

DAVIS INTERNATONAL SERIES, INC.

POST-EFFECTIVE AMENDMENT NO. 10 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 33-86578

AND

AMENDMENT NO. 11 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

<PAGE>

EXHIBIT
ITEM 23 (I)

[LETTERHEAD OF D'ANCONA & PFLAUM]

January 13, 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
January 20, 2000