<PAGE>
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1999
DAVIS INTERMEDIATE
INVESTMENT GRADE
BOND FUND
[DAVIS FUNDS LOGO]
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
Dear Shareholder,
A NEW PORTFOLIO MANAGER FOR THE FUND
Effective August 1, 1999, Creston A. King, Chartered Financial Analyst, has been
named the portfolio manager of the Davis Intermediate Investment Grade Bond
Fund. Prior to joining Davis Selected Advisers on June 30, 1999, he was a
portfolio manager for another mutual fund company where he received high marks
for managing their bond and money market funds.(1)
Carolyn Spolidoro, the previous portfolio manager, has retired. We would like to
express our appreciation to her for effectively serving our shareholders since
she joined Davis Selected Advisers in 1985.
PERFORMANCE REVIEW
The Davis Intermediate Investment Grade Bond Fund performed in line with its
benchmark for the six months ended September 30, 1999. The Fund's Class A shares
declined .70% (based on net asset value) versus an average decline of .61% for
the 284 funds included in Lipper Analytical Services' intermediate
investment-grade debt category.(2) For the latest one-year period, the Fund
declined 5.59% (based on net asset value) compared to a decline of 1.02% for the
267 intermediate, investment-grade bond funds tracked by Lipper.(3)
The Fund's improved six-month results reflect the ongoing repositioning that
began in October 1998 when the Fund's focus was shifted from investing primarily
in high-yield, lower quality securities to intermediate-term, investment-grade
issues. Investment-grade bonds are those rated in one of the four highest
credit-quality categories by nationally recognized rating organizations or which
we believe to be of comparable credit quality.
The Davis Intermediate Investment Grade Bond Fund purchased A-rated bonds issued
by Household Finance (a subsidiary of Household International) with a 6%
interest rate coupon and a 2004 maturity date and A-rated bonds issued by Philip
Morris with a 6 3/8% coupon and a 2006 maturity. Both issues are noncallable,
meaning they cannot be redeemed by the issuer before maturity.(4)
In addition to the bonds of Household Finance, the Fund holds large positions in
bonds issued by securities firms, banks and insurance carriers, such as
PaineWebber, Lehman Brothers, BankBoston and Liberty Financial.
BENEFITING FROM THE FLIGHT TO QUALITY
This year could turn out to be one of the worst years ever for the bond market
mainly due to rising interest rates, and most types of bonds and bond funds have
generated negative returns. In this environment, fixed-income investors have
generally looked for safety first and yield second. As a result, securities with
higher credit ratings have outperformed securities with lower credit ratings.
The Fund benefited from this flight to quality because we were raising the
portfolio's overall credit quality during this period in line with the Fund's
new focus on investment-grade securities. Currently, the portfolio's average
credit quality is A compared with an average credit quality of BBB a year ago.
Given the uncertain market climate, we have also decreased the overall maturity
of the portfolio. Bonds with shorter maturities tend to move less in price than
longer term bonds when interest rates change. Currently, the portfolio's average
weighted length, taking into account call features and sinking fund provisions
that could shorten the life of bonds we hold, is 6.44 years.
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
By concentrating on higher quality names and shorter maturities, our objective
is to limit risk in the event of further interest rate increases this year or
global financial market difficulties associated with year 2000 (Y2K) computer
disruptions.
FOCUSED ON RISK-ADJUSTED RETURNS
At the heart of our approach is the recognition that managing risk is the key to
delivering superior long-term results. Rather than simply buying the highest
yielding securities that are still investment grade, we search for bonds that
offer the potential for credit quality improvement and thus provide greater
value--that is, higher yields relative to credit quality. We also look for
issues in which we can purchase larger positions in order to improve liquidity
even under adverse market conditions. Our objective always is to help our
shareholders build and preserve wealth through strategies designed to minimize
volatility and optimize long-term, risk-adjusted returns.(5)
Sincerely,
/s/ Shelby M.C. Davis /s/ Creston A. King
- ------------------------ ---------------------
Shelby M.C. Davis Creston A. King
Chief Investment Officer Portfolio Manager
November 12, 1999
- ----------
This Semi-Annual Report is authorized for distribution only when accompanied or
preceded by a current prospectus of Davis Intermediate Investment Grade Bond
Fund which contains more information about risks, fees and expenses. Please read
the prospectus carefully before investing or sending money.
1 The fact that the portfolio manager was successful managing other mutual
funds is not a guarantee that he can achieve similar results with the Davis
Funds. Past performance is not a guarantee of future results.
2 Lipper Analytical Services rankings are based on total returns but do not
consider sales charges.
2
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
3 Total return assumes reinvestment of dividends and capital gain
distributions. Past performance is not a guarantee of future results.
Investment return and principal value will vary so that, when redeemed, an
investor's shares may be worth more or less than when purchased. Below are
the average annual total returns for Davis Intermediate Investment Grade Bond
Fund's Class A shares for periods ending September 30, 1999. Returns for
other classes of shares will vary from the following returns:
<TABLE>
<CAPTION>
* (Without a 4.75% sales charge taken into consideration)
- --------------------------------------------------------------------------------------------
FUND NAME 1 YEAR 5 YEAR 10 YEAR INCEPTION
- --------- ------ ------ ------- ---------
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Davis Intermediate Investment (5.59)% 3.71% 5.17% 7.64% - 05/29/80
Grade Bond Fund A
- --------------------------------------------------------------------------------------------
<CAPTION>
* (With a 4.75% sales charge taken into consideration)
- --------------------------------------------------------------------------------------------
FUND NAME 1 YEAR 5 YEAR 10 YEAR INCEPTION
- --------- ------ ------ ------- ---------
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Davis Intermediate Investment (9.98)% 2.69% 4.67% 7.37% - 05/29/80
Grade Bond Fund A
- --------------------------------------------------------------------------------------------
</TABLE>
4 The Fund's portfolio securities as of September 30, 1999, including the
securities discussed in this letter, are listed in the Schedule of
Investments. Portfolio holdings are subject to change.
5 There can be not guarantee that the Fund will achieve its goals.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
3
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
SCHEDULE OF INVESTMENTS
At September 30, 1999 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
--------- --------
CORPORATE AND TAXABLE MUNICIPAL BONDS AND NOTES - (79.25%)
<S> <C> <C>
AGRICULTURAL PRODUCTION LIVESTOCK - (0.96%)
$ 500,000 Iowa Select Farms, L.P., Sr. Sub. Notes, 10.75%, 12/01/05 (b).. $ 392,500
----------
AMUSEMENT AND RECREATION SERVICES - (0.55%)
58,000 Discovery Zone Inc., Units, 13.50%, 05/01/02 ++ (c)............ 6,090
150,000 Mayor and City Council of Baltimore, Econ. Dev. Taxable Lease
Rev. Bds. (Arcade Ltd. Partnership Prj.) Series '92, 8.50%,
08/01/02..................................................... 153,849
50,000 Mayor and City Council of Baltimore, Econ. Dev. Taxable Lease
Rev. Bds. (Arcade Ltd. Partnership Prj.) Series '92, 9.50%,
08/01/14 .................................................... 52,946
984,599 Underwater World Mall of America, Sr. Rev. Bds., 13.75%,
03/01/02++ (c) .............................................. 14,769
----------
227,654
----------
AUTO REPAIR, SERVICES AND PARKING - (4.64%)
2,000,000 Ryder System Inc., Notes, Series P, 6.60%, 11/15/05............ 1,901,078
----------
BUSINESS SERVICES - (1.16%)
750,000 Nationwide Credit, Inc., Sr. Notes, 10.25%, 01/15/08........... 453,750
670,700 Technical Equipment Leasing Corp., Jr. Sub. Deb., Series A,
18.375%, 04/01/96++ (c)...................................... 20,121
----------
473,871
----------
COMMUNICATION - (3.14%)
250,000 Nextlink Communications LLC, Sr. Notes, 12.50%, 04/15/06....... 263,750
500,000 Pegasus Media & Communications, Sr. Sub. Notes, Series B,
12.50%, 07/01/05............................................. 542,500
500,000 Sinclair Broadcast Group, Sr. Sub. Notes, 9.00%, 07/15/07...... 478,750
----------
1,285,000
----------
CONSUMER LOANS - (2.35%)
1,000,000 Household Finance Corp., Notes, 6.00%, 05/01/04................ 961,996
----------
DEPOSITORY INSTITUTIONS - (4.79%)
2,000,000 BankBoston, N.A., Sub. Notes, 7.00%, 09/15/07.................. 1,963,390
----------
ELECTRIC, GAS, AND SANITARY SERVICES - (7.45%)
35,000 Commerce Refuse to Energy Auth., Taxable Ref. Rev. Bds.,
'90 Series, 10.50%, 07/01/00................................. 35,351
500,000 Midland Funding Corporation II, Sub. Secured Lease, 13.25%,
07/23/06 .................................................... 597,811
496,011 Panda Funding, Series A-1, 11.625%, 08/20/12................... 498,491
2,000,000 Potomac Capital Invest., Notes, Series D, 6.62%, 12/05/05 (b).. 1,919,340
----------
3,050,993
----------
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT - (0.06%)
558,273 Comptronix Corp., Conv. Sub. Deb., 6.75%, 03/01/02++ (c)....... 23,447
----------
EXECUTIVE, LEGISLATIVE AND GENERAL - (6.66%) 670,000 Adams
Cnty., CO, IDR Series A Pool Gtd. - Executive Life, 9.00%,
11/01/96+.................................................... 5,025
1,000,000 Camden Cnty., GA, JT Dev. Auth., Taxable Rev. Bds., 7.10%,
12/01/12 .................................................... 979,810
620,000 Harrisburg, PA, G.O. Capital Appreciation Bds., Zero Cpn.,
04/01/13 (e) ................................................ 232,419
</TABLE>
4
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
--------- --------
CORPORATE AND TAXABLE MUNICIPAL BONDS AND NOTES - CONTINUED
EXECUTIVE, LEGISLATIVE AND GENERAL - CONTINUED
<S> <C> <C>
$ 640,000 Los Angeles County, CA, Pension Obligation, Capital
Appreciation Bds., Series C, MBIA Insured, Zero Cpn.,
06/30/07 (e) ................................................ $ 372,698
100,000 Louisiana St. Agriculture Fin. Auth., Series `86A, 8.80%,
10/01/96++ .................................................. 750
20,000 Nebraska Invst. Fin. Auth., Agriculture Rev. Bds., Series A,
Gtd. Executive Life, 8.34%, 11/01/93++....................... 150
1,930,000 Orange County, CA, Pension Obligation, Capital Appreciation
Bds., Series A, Zero Cpn., 09/15/13 (e)...................... 701,922
348,320 Pulaski Cnty., AR, Pub. Fac. Brd., Taxable Rev. Bds., 7.25%,
01/01/11 .................................................... 345,923
315,000 York, PA, G.O. Capital Appreciation Bds., Series A,
Zero Cpn., 02/01/17 (e)...................................... 87,894
----------
2,726,591
----------
FOOD STORES - (3.21%)
552,000 Kroger Co., Lease Cert., 6.00%, 04/01/03....................... 543,076
1,000,000 Southland Corp., Sub. Deb., Ser. B, 4.00%, 06/15/04............ 770,000
----------
1,313,076
----------
HEALTH SERVICES - (1.33%)
213,000 Illinois HFA Rev. Bds., Series C, MBIA Insured, 10.30%,
08/15/03 ................................................... 213,515
130,000 San Bernadino CA Assd. Cmntys. Fing. Auth. Health Care Ref.
& . Improvement Bds. (Granada) Series B, 8.80%, 05/01/17.... 117,081
215,000 Utah St. Hsg. Fin. Agy. Taxable RHA Cmnty. Services, Series B,
9.00%, 07/01/02.............................................. 216,189
----------
546,785
----------
HOTELS AND OTHER LODGING PLACES - (3.48%)
1,448,000 Courtyard By Marriott II, L.P., Sr. Secured Notes, Series B,
10.75%, 02/01/08............................................. 1,426,280
----------
INDUSTRIAL MACHINERY AND EQUIPMENT - (0.05%)
1,950,000 JTS Corporation, Conv. Sub. Deb., 5.25%, 04/29/02++............ 19,500
----------
INSTRUMENTS AND RELATED PRODUCTS - (0.62%)
250,000 Alliance Imaging, Inc., Sr. Sub. Notes, 9.625%, 12/15/05....... 254,063
----------
INSURANCE CARRIERS - (8.32%)
1,500,000 American General Finance, Sr. Notes, Series D, 7.12%, 08/24/05. 1,499,186
2,000,000 Liberty Financial Co., Notes, 6.75%, 11/15/08.................. 1,907,664
----------
3,406,850
----------
MULTI-FAMILY FAMILY MORTGAGE - (0.01%)
195,000 El Paso Hsg. Fin. Corp., Multi-Fam. Res. Loan Program,
Securitized Multi-Fam. Hsg. Rev. Bds., Series `86A, 8.88%,
10/15/96++ .................................................. 1,463
100,000 Louisiana Hsg. Fin. Agy., Taxable Home Mtg., Series `86A,
8.61%, 08/01/96++............................................ 750
----------
2,213
----------
</TABLE>
5
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
--------- --------
CORPORATE AND TAXABLE MUNICIPAL BONDS AND NOTES - CONTINUED
<S> <C> <C>
NONDEPOSITORY INSTITUTIONS - (3.65%)
$ 1,500,000 Beneficial Corp., Sr. Notes, Series H, 6.85%, 09/11/04......... $1,495,751
----------
OIL AND GAS EXTRACTION - (4.67%)
2,000,000 Enron Corp., Notes, 6.725%, 11/17/08........................... 1,911,576
----------
PAPER AND ALLIED PRODUCTS - (0.07%)
2,000,000 Crown Packaging Enterprises, Ltd., Sr. Secured Disc. Notes,
0%/14.00%, 08/01/06 (c) (d).................................. 30,000
----------
PETROLEUM AND COAL PRODUCTS - (2.32%)
250,000 Clark R & M Inc., Sr. Notes, 8.375%, 11/15/07.................. 217,500
250,000 Clark R & M Inc., Sr. Sub. Notes, 8.875%, 11/15/07............. 206,250
500,000 Deeptech International, Inc., Sr. Secured Notes, 12.00%,
12/15/00 .................................................... 524,828
----------
948,578
----------
PRIMARY METAL INDUSTRIES - (0.23%)
100,000 EES Coke Battery Inc., Sr. Secured Notes, Series B, 9.382%,
04/15/07 (c) ................................................ 95,578
----------
SECURITY AND COMMODITY BROKERS - (10.09%)
2,000,000 Lehman Brothers Holdings, Notes, 6.625%, 02/05/06.............. 1,905,554
2,350,000 Paine Webber Group, Inc., Sr. Notes, Series C, 6.73%, 04/03/08 2,227,281
----------
4,132,835
----------
SINGLE FAMILY MORTGAGE - (3.60%)
700,000 Connecticut St. Hsg. Fin. Auth., Taxable Hsg. Mtg. Program,
Series G, 7.625%, 05/15/21................................... 700,672
75,000 Connecticut St. Hsg. Fin. Auth., Taxable Hsg. Mtg. Program,
Series H, 7.875%, 11/15/26................................... 74,143
675,480 Memphis, TN Hlth. Educ. & Hsg. Fac. Brd., Multi Fam. Hsg. Rev.
Securitized, Series '86A, 8.68%, 09/15/96+................... 5,066
226,733 Polk Cnty., FL, HFA REMIC Collateralized Mtg. Bds., Series 1,
CL 2-A, 9.55%, 01/15/11...................................... 230,333
807,000 The Southeast TX Hsg. Fin. Corp. Securitized Multi Fam. Hsg.
Rev. Bds. Series '86A, 8.60%, 09/01/96++..................... 6,053
450,000 Texas St., Dept. Hsg. & Comm. Taxable Mtg. Rev. Ref. Bds.,
Jr. Lien, Ser. B, 9.50%, 03/01/16............................ 458,132
----------
1,474,399
----------
TOBACCO - (2.31%)
1,000,000 Philip Morris Cos. Inc., Notes, 6.375%, 02/01/06............... 945,734
----------
TOOLS - (3.53%)
1,500,000 Black & Decker Holdings Inc., Ser. 144A, 6.55%, 07/01/07 (b)... 1,444,109
----------
TOTAL CORPORATE AND TAXABLE MUNICIPAL BONDS
AND NOTES - (identified cost $38,122,824)......... 32,453,847
-----------
</TABLE>
6
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VALUE
PRINCIPAL/SHARES/UNITS (NOTE 1)
---------------------- --------
GOVERNMENT SECURITIES - (8.85%)
<S> <C> <C>
$ 2,000,000 Federal Home Loan Bank, 5.54%, 10/15/08........................ $1,813,180
2,000,000 Freddie Mac, 5.54%, 10/27/08.................................. 1,812,980
----------
TOTAL GOVERNMENT SECURITIES - (identified cost $4,000,045). 3,626,160
----------
MORTGAGE BACKED SECURITIES - (1.76%)
28,545 First Nationwide Trust, Series `89-AR4-1, 9.50%, 09/25/19...... 28,450
160,101 Freddie Mac, CL 1567 A, 5.40%, 08/15/23........................ 141,534
293,852 Freddie Mac, REMIC, CL 1668 F, 7.5875%, 02/15/14............... 298,792
84,905 Manufacturers Hanover Mortgage Corporation, Mtg. Pass-Through
Certificates, Series A, 11.50%, 04/25/15..................... 86,623
179,000 The Prudential Mortgage Securities Company, Mtg. Pass-Through
Certificates, Series '92-038, CL A-8, Fixed Rate, 6.95%,
11/25/22 .................................................... 165,436
----------
TOTAL MORTGAGE BACKED SECURITIES
- (identified cost $684,020)....................... 720,835
----------
PREFERRED STOCKS - (0.04%)
788 Westmoreland Coal Co., Dep. Shares Conv. Pfd., Series A,
8.50%++ ..................................................... 14,480
----------
TOTAL PREFERRED STOCKS - (identified cost $10,283)........ 14,480
----------
COMMON STOCKS - (0.50%)
135,951 Canyon Resources Corporation* 59,479
260,252 Crown Packaging Enterprises Ltd.*.............................. 2,603
1,161 Nextel Communications Inc., Class A*........................... 78,767
101 Spanish Broadcasting Systems Inc.*(c).......................... 65,650
----------
TOTAL COMMON STOCKS - (identified cost $409,687).......... 206,499
----------
WARRANTS - (0.03%)
869 Empire Gas Corp., expire 07/15/04 (c) ......................... 261
500 Primus Telecommunications, expire 08/01/04 (c)................. 10,000
----------
TOTAL WARRANTS - (identified cost $41).................... 10,261
----------
</TABLE>
7
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
--------- --------
SHORT TERM - (6.45%)
<S> <C> <C>
$ 2,640,000 State Street Corp. Repurchase Agreement, 5.22%, 10/01/99,
dated 09/30/99, repurchase value of $2,640,383
(collateralized by $2,700,000 par value
Federal Home Loan Bank, 5.45%, 01/28/04, market value
$2,723,625) - (identified cost $2,640,000)................... $ 2,640,000
----------
TOTAL INVESTMENTS (identified cost $45,866,900) - (96.88%)(a).. 39,672,082
OTHER ASSETS LESS LIABILITIES - (3.12%)........................ 1,279,506
-----------
NET ASSETS - (100%)............................................ $40,951,588
===========
</TABLE>
- ----------
+ These securities are in default but have made partial payments.
++ These securities are in default and are not currently paying interest or
dividends. These securities amounted to $107,573 or 0.26% of the Fund's net
assets as of September 30, 1999.
* Non-income producing security.
(a) Aggregate cost for Federal income tax purposes is $45,866,900.
(b) These securities are subject to Rule 144A. The Board of Directors of the
Fund has determined that there is sufficient liquidity in these securities
to realize current valuations. These securities amounted to $3,755,949 or
9.17% of the Fund's net assets as of September 30, 1999.
(c) Restricted or illiquid securities. See Note 6 of the Notes to Financial
Statements.
(d) Represents a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
(e) As of September 30, 1999, zero coupon bonds represented $1,394,933 or 3.41%
of the Fund's net assets. Because zero coupon bonds pay no interest and
compound semi-annually at the fixed rate at the time of reissuance, their
value is generally more volatile than the value of other debt securities.
At September 30, 1999, unrealized appreciation (depreciation) of securities for
Federal income tax purposes was as follows:
Unrealized appreciation ............................... $ 464,543
Unrealized depreciation ............................... (6,659,361)
-----------
Net unrealized depreciation............................ $(6,194,818)
===========
8
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
At September 30, 1999 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (including repurchase agreements
of $2,640,000) (identified cost $45,866,900) (See accompanying
Schedule of Investments) ........................................... $39,672,082
Cash ................................................................... 42,553
Receivables:
Interest............................................................ 692,551
Capital stock sold.................................................. 66,419
Investments sold.................................................... 537,000
Prepaid expenses........................................................ 54,316
-----------
Total assets..................................................... 41,064,921
-----------
LIABILITIES:
Payable for capital stock reacquired.................................... 34,909
Accrued expenses........................................................ 78,424
-----------
Total liabilities................................................ 113,333
-----------
NET ASSETS (NOTE 7)......................................................... $40,951,588
===========
CLASS A SHARES
Net assets.............................................................. $15,841,675
Shares outstanding...................................................... 4,179,684
Net asset value and redemption price per share.......................... $ 3.79
=======
Maximum offering price per share (100/95.25 of $3.79)*.................. $ 3.98
=======
CLASS B SHARES
Net assets.............................................................. $17,346,078
Shares outstanding...................................................... 4,613,635
Net asset value, offering and redemption price per share................ $ 3.76
=======
CLASS C SHARES
Net assets.............................................................. $ 3,964,743
Shares outstanding...................................................... 1,047,488
Net asset value, offering and redemption price per share................ $ 3.79
=======
CLASS Y SHARES
Net assets.............................................................. $ 3,799,092
Shares outstanding...................................................... 997,315
Net asset value, offering and redemption price per share................ $ 3.81
=======
NET ASSETS CONSIST OF:
Par value of shares of capital stock.................................... $ 541,906
Additional paid-in capital.............................................. 65,526,209
Net unrealized depreciation of investments.............................. (6,194,818)
Deficit in undistributed net income .................................... (91,682)
Accumulated net realized loss on investments ........................... (18,830,027)
-----------
Net assets.......................................................... $40,951,588
===========
</TABLE>
- ----------
* On purchases of $100,000 or more, the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF OPERATIONS
For the six months ended September 30, 1999 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest............................................................ $ 1,760,455
------------
Expenses:
Management fees (Note 3).............................. 122,967
Custodian fees......................................... 21,432
Transfer agent fees
Class A............................................. 20,253
Class B............................................. 16,216
Class C............................................. 4,639
Class Y............................................. 673
Audit fees............................................. 8,050
Legal fees............................................. 5,021
Accounting fees (Note 3)............................... 3,000
Reports to shareholders................................ 10,663
Directors' fees and expenses........................... 13,517
Registration and filing fees (Note 3).................. 27,657
Miscellaneous.......................................... 978
Payments under distribution plan (Note 4):
Class A............................................ 18,533
Class B............................................ 95,664
Class C............................................. 20,118
-----------
Total expenses............................................... 389,381
Expenses paid indirectly (Note 5) .......................... (554)
------------
Net expenses................................................. 388,827
------------
Net investment income..................................... 1,371,628
------------
REALIZED AND UNREALIZED LOSS ON I NVESTMENTS:
Net realized loss from investment transactions......................... (454,864)
Net increase in unrealized depreciation of investments.................. (1,378,215)
------------
Net realized and unrealized loss on investments.................. (1,833,079)
------------
Net decrease in net assets resulting from operations............. $ (461,451)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
OPERATIONS: 1999 MARCH 31,
(UNAUDITED) 1999
------------- ----------
<S> <C> <C>
Net investment income................................... $ 1,371,628 $ 4,264,018
Net realized loss from investment transactions.......... (454,864) (8,546,263)
Net increase in unrealized depreciation of investments.. (1,378,215) (3,486,498)
------------ ------------
Net decrease in net assets resulting from
operations .................................. (461,451) (7,768,743)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A........................................... (612,059) (2,252,956)
Class B........................................... (593,302) (1,473,461)
Class C........................................... (120,551) (249,000)
Class Y........................................... (137,398) (288,601)
Return of capital
Class A........................................... - (412,926)
Class B........................................... - (206,334)
Class C........................................... - (19,154)
Class Y........................................... - (34,481)
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets resulting from
capital share transactions (Note 7)
Class A........................................... (3,424,963) (17,677,428)
Class B........................................... (3,339,441) 4,670,052
Class C........................................... 77,855 2,959,671
Class Y........................................... 134,011 385,554
------------ ------------
Total decrease in net assets............................ (8,477,299) (22,367,807)
NET ASSETS:
Beginning of year....................................... 49,428,887 71,796,694
------------ ------------
End of year............................................. $ 40,951,588 $ 49,428,887
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
For the six months ended September 30, 1999 (Unaudited)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Davis Intermediate Investment Grade Bond Fund, Inc. (formerly Davis High
Income Fund, Inc.) (the Fund) is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company. Its
primary objective is to achieve a high level of current income. The Fund also
seeks capital growth so long as such objective is consistent with its primary
objective. The Fund invests primarily in high-quality, investment-grade bonds.
The Fund offers shares in four classes, Class A, Class B, Class C and Class Y.
The Class A shares are sold with a front-end sales charge and the Class B and
Class C shares are sold at net asset value and may be subject to a contingent
deferred sales charge upon redemption. Class Y shares are sold at net asset
value and are not subject to any contingent deferred sales charge. Class Y
shares are only available to certain qualified investors. Income, expenses
(other than those attributable to a specific class) and gains and losses are
allocated daily to each class of shares based upon the relative proportion of
net assets represented by each class. Operating expenses directly attributable
to a specific class are charged against the operations of that class. All
classes have identical rights with respect to voting (exclusive of each Class'
distribution arrangement), liquidation and distributions. The following is a
summary of significant accounting policies followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION.
Portfolio securities may be valued on the basis of prices provided by an
independent pricing service or broker when such prices are believed to reflect
the fair market value of such securities. (Pricing agents generally take into
account institutional size trading in similar groups of securities). Securities
not priced in this manner will be priced at the last published sales price if
traded on that day and, if not traded, at the mean between the most recent
quoted bid and asked prices provided by investment dealers. The pricing service
and valuation procedures are reviewed and subject to approval by the Board of
Directors. If no quotations are available, securities will be valued at fair
value as determined in good faith by the Board of Directors. Short-term
obligations are valued at amortized cost, which approximates value.
FEDERAL INCOME TAXES.
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore, no provision
for federal income or excise tax is required. At September 30, 1999, the Fund
had approximately $18,375,000 of capital loss carryovers available to offset
future capital gains, if any, which expire between 2000 and 2008.
SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME.
Securities transactions are accounted for on the trade date (date the
order to buy or sell is executed) with realized gain or loss on the sale of
securities being determined based upon identified cost. Dividend income is
recorded on the ex-dividend date and interest income is recorded on the accrual
basis. Discounts and premiums on debt securities are amortized over the lives of
the respective securities in accordance with the requirements of the Internal
Revenue Code.
12
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the six months ended September 30, 1999 (Unaudited)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS.
Dividends and distributions to shareholders are recorded on the
ex-dividend date. The character of the distributions made during the year from
net investment income may differ from its ultimate characterization for federal
income tax purposes. Also, due to the timing of distributions, the fiscal year
in which amounts are distributed may differ from the fiscal year in which income
or gain was recorded by the Fund. The Fund adjusts the classification of
distributions to shareholders to reflect the differences between financial
statement amounts and distributions determined in accordance with income tax
regulations.
USE OF ESTIMATES IN FINANCIAL STATEMENTS.
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of income and expenses during the reporting period. Actual
results may differ from these estimates.
NOTE 2 - PURCHASES AND SALES OF SECURITIES.
Purchases and sales of investment securities (excluding short term
securities) during the six months ended September 30, 1999, were $3,816,330 and
$11,354,447, respectively.
NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
The Fund pays advisory fees for investment management and advisory
services under a management agreement with Davis Selected Advisers, L.P. (the
"Adviser"). The management agreement provides for a fee at the annual rate of
0.55% of all average net assets.
The Adviser is paid for registering Fund shares for sale in various
states. The fee for the six months ended September 30, 1999, amounted to $6,498.
State Street Bank & Trust Co. is the Fund's primary transfer agent. The Adviser
is also paid for certain transfer agent services. The fee for these services for
the six months ended September 30, 1999, amounted to $3,087. State Street Bank &
Trust Co. is the Fund's primary accounting provider. Fees for such services are
included in the custodian fee. The Adviser is also paid for certain accounting
services. Such fee amounted to $3,000 for the six months ended September 30,
1999. Certain directors and officers of the Fund are also directors and officers
of the general partner of Davis Selected Advisers, L.P.
Davis Selected Advisers-NY, Inc. ("DSA-NY"), a wholly-owned subsidiary of
the Adviser, acts as sub-adviser to the Fund. The Fund pays no fees directly to
DSA-NY.
13
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the six months ended September 30, 1999 (Unaudited)
================================================================================
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES
CLASS A SHARES
Class A shares of the Fund are sold at net asset value plus a sales charge
and are redeemed at net asset value (without a contingent deferred sales
charge).
During the six months ended September 30, 1999, Davis Distributors, LLC,
the Fund's Underwriter (the "Underwriter" or "Distributor") received $8,958 from
commissions earned on sales of Class A shares of the Fund of which $1,474 was
retained by the Underwriter and the remaining $7,484 was re-allowed to
investment dealers. The Underwriter paid the costs of prospectuses in excess of
those required to be filed as part of the Fund's registration statement, sales
literature and other expenses assumed or incurred by it in connection with such
sales.
The Underwriter is reimbursed for amounts paid to dealers as a service fee
with respect to Class A shares sold by dealers which remain outstanding during
the period. The service fee is reimbursed at the annual rate up to 1/4 of 1% of
the average net assets maintained by the responsible dealers. The Underwriter is
not reimbursed for accounts for which the Underwriter pays no service fees to
other firms. The service fee for Class A shares of the Fund for the six months
end September 30, 1999, was $18,533.
CLASS B SHARES
Class B shares of the Fund are sold at net asset value and are redeemed at
net asset value less a contingent deferred sales charge if redeemed within six
years of purchase.
The Fund pays a distribution fee to reimburse the Distributor for
commission advances on the sale of the Fund's Class B shares. The National
Association of Securities Dealers, Inc., ("NASD") limits the percentage of the
Fund's average annual net assets attributable to Class B shares which may be
used to reimburse the Distributor. The limit is 1%, of which 0.75% may be used
to pay distribution expenses and 0.25% may be used to pay shareholder service
fees. The NASD rule also limits the aggregate amount the Fund may pay for
distribution-related services to 6.25% of gross sales since inception of the
Rule 12b-1 plan plus interest at 1% over the prime rate on unpaid amounts. The
Distributor intends to seek full payment (plus interest at prime plus 1%) of
distribution charges that exceed the 1% annual limit in some future period or
periods when the plan limits have not been reached.
For the six months ended September 30, 1999, Class B shares of the Fund
made distribution plan payments which included distribution fees of $72,218 and
service fees of $23,446.
Commission advances by the Distributor for the six months ended September
30, 1999, on the sale of Class B shares of the Fund amounted to $40,813, of
which $35,076 was reallowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the Fund in
the amount of $717,849, representing the cumulative commission advances by the
Distributor on the sale of the Fund's Class B shares, plus interest, reduced by
cumulative distribution fees paid by the Fund and cumulative contingent deferred
sales charges paid by redeeming shareholders. The Fund has no contractual
obligation to pay any such distribution charges and the amount, if any, timing
and condition of such payment are solely within the discretion of the Directors
who are not interested persons of the Fund or the Distributor.
14
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED For the six months ended September 30,
1999 (Unaudited)
================================================================================
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
CLASS B SHARES - CONTINUED
A contingent deferred sales charge is imposed upon redemption of certain
Class B shares of the Fund within six years of the original purchase. The charge
is a declining percentage starting at 4% of the lesser of net asset value of the
shares redeemed or the total cost of such shares. For the six months ended
September 30, 1999 the Distributor received contingent deferred sales charges of
$54,221 from redemptions of Class B shares of the Fund.
CLASS C SHARES
Class C shares of the Fund are sold at net asset value and are redeemed at
net asset value less a contingent deferred sales charge of 1% if redeemed within
one year of purchase. The Fund pays the Distributor 1% of the Fund's average
annual net assets attributable to Class C shares, of which 0.75% may be used to
pay distribution expenses and 0.25% may be used to pay shareholder service fees.
During the six months ended September 30, 1999, Class C shares of the Fund
made distribution payments of 20,118. During the six months ended September 30,
1999, the Distributor received $3,791 in contingent deferred sales charges from
redemptions of Class C shares of the Fund.
NOTE 5 - CUSTODIAN FEES
Under an agreement with the custodian bank, custodian fees are reduced for
earnings on cash balances maintained at the custodian by the Fund. Such
reductions amounted to $554 during the six months ended September 30, 1999.
NOTE 6 - RESTRICTED AND ILLIQUID SECURITIES
Restricted securities are not registered under the Securities Act of 1933
and may have contractual restrictions on resale. They are valued under methods
approved by the Board of Directors as reflecting fair value. Securities may be
considered illiquid if they lack a readily available market or if valuation has
not changed for a certain period of time. The aggregate value of restricted or
illiquid securities is $265,916, or 0.65% of the Fund's net assets as of
September 30, 1999. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
ACQUISITION COST VALUATION PER UNIT
SECURITY DATE PER UNIT AS OF SEPTEMBER 30, 1999
- -------- ---------- -------- ------------------------
<S> <C> <C> <C>
Technical Equipment Leasing Corp.,
Jr. Sub. Deb., Series A,
18.375%, 04/01/96 06/15/84 $100.00 $3.00
</TABLE>
15
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the six months ended September 30, 1999 (Unaudited)
================================================================================
NOTE 7 - CAPITAL STOCK
At September 30, 1999, there were 1,000,000,000 shares of capital stock ($0.05
par value per share) authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
CLASS A SIX MONTHS
ENDED
SEPTEMBER 30, 1999
(UNAUDITED)
------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed............................................... 205,219 $ 789,046
Shares issued in reinvestment of distributions.................. 80,159 307,502
----------- ------------
285,378 1,096,548
Shares redeemed................................................. (1,173,934) (4,521,511)
----------- ------------
Net decrease............................................. (888,556) $ (3,424,963)
=========== ============
<CAPTION>
YEAR ENDED
MARCH 31, 1999
-------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed............................................... 2,005,727 $ 8,951,909
Shares issued in reinvestment of distributions.................. 323,428 1,432,650
----------- ------------
2,329,155 10,384,559
Shares redeemed................................................. (6,508,378) (28,061,987)
----------- ------------
Net decrease............................................. (4,179,223) $(17,677,428)
=========== ============
<CAPTION>
CLASS B SIX MONTHS
ENDED
SEPTEMBER 30, 1999
(UNAUDITED)
-------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed............................................... 836,616 $ 3,187,401
Shares issued in reinvestment of distributions.................. 61,775 235,078
----------- ------------
898,391 3,422,479
Shares redeemed................................................. (1,776,086) (6,761,920)
----------- ------------
Net decrease............................................. (877,695) $ (3,339,441)
=========== ============
<CAPTION>
YEAR EN DED
MARCH 31, 1999
-------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed............................................... 4,921,797 $ 21,526,190
Shares issued in reinvestment of distributions.................. 169,369 735,895
----------- ------------
5,091,166 22,262,085
Shares redeemed................................................. (4,172,871) (17,592,033)
----------- ------------
Net increase............................................. 918,295 $ 4,670,052
=========== ============
</TABLE>
16
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED For the six months ended
September 30, 1999 (Unaudited)
================================================================================
NOTE 7 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
CLASS C
SIX MONTHS
ENDED
SEPTEMBER 30, 1999
(UNAUDITED)
-------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed............................................... 400,610 $1,536,016
Shares issued in reinvestment of distributions.................. 14,340 54,839
----------- -----------
414,950 1,590,855
Shares redeemed................................................. (395,362) (1,513,000)
----------- -----------
Net increase............................................. 19,588 $ 77,855
=========== ==========
<CAPTION>
YEAR ENDED
MARCH 31, 1999
------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed............................................... 1,508,715 $ 6,727,226
Shares issued in reinvestment of distributions.................. 29,525 126,622
----------- -----------
1,538,240 6,853,848
Shares redeemed................................................. (915,471) (3,894,177)
----------- -----------
Net increase............................................. 622,769 $ 2,959,671
=========== ==========
<CAPTION>
CLASS Y
SIX MONTHS
ENDED
SEPTEMBER 30, 1999
(UNAUDITED)
-------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed............................................... 60 $ 233
Shares issued in reinvestment of distributions.................. 34,793 133,895
----------- -----------
34,853 134,128
Shares redeemed................................................. (30) (117)
----------- -----------
Net increase............................................. 34,823 $ 134,011
=========== ==========
<CAPTION>
YEAR ENDED
MARCH 31, 1999
-------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed............................................... 21,392 $ 92,938
Shares issued in reinvestment of distributions.................. 72,773 318,206
----------- -----------
94,165 411,144
Shares redeemed................................................. (5,628) (25,590)
----------- -----------
Net increase............................................. 88,537 $ 385,554
=========== ==========
</TABLE>
17
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
FINANCIAL HIGHLIGHTS
================================================================================
The following represents selected data for a share of capital stock outstanding
throughout each period.
<TABLE>
<CAPTION>
SIX MONTHS
CLASS A ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
1999 -----------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period................. $ 3.95 $ 4.76 $ 4.71 $4.84 $ 4.86 $ 5.14
------ ------ ------ ------ ------ ------
Income (Loss) From Investment
Operations
Net Investment Income.............. 0.12 0.28 0.34 0.39 0.43 0.46
Net Realized and Unrealized Gains or
Losses............................ (0.15) (0.75) 0.13 (0.06) 0.03 (0.24)
------ ------ ------ ------ ------ ------
Total From Investment Operations (0.03) (0.47) 0.47 0.33 0.46 0.22
------ ------ ------- ------- ------ ------
Dividends and Distributions
Dividends from Net Investment Income (0.13) (0.28) (0.34) (0.39) (0.43) (0.46)
Returns of Capital.................. - (0.06) (0.08) (0.07) (0.05) (0.04)
------ ------ ------ ------ ------ ------
Total Dividends and Distributions (0.13) (0.34) (0.42) (0.46) (0.48) (0.50)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period........ $ 3.79 $ 3.95 $ 4.76 $ 4.71 $ 4.84 $ 4.86
====== ====== ====== ====== ====== ======
Total Return (1)...................... (0.70)% (10.41)% 10.40% 7.08% 9.93% 4.69%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted) .......................... $15,842 $20,029 $44,058 $47,890 $53,816 $56,405
Ratio of Expenses to Average Net
Assets ............................ 1.39%* 1.36% 1.40%(2) 1.48%(2) 1.51% 1.53%
Ratio of Net Investment Income to
Average Net Assets................ 6.49%* 6.88% 7.11% 8.13% 8.92% 9.49%
Portfolio Turnover Rate (3)........... 8.96% 87.21% 71.54% 66.10% 118.34% 98.94%
</TABLE>
1 Assumes hypothetical initial investment on the business day before the first
day of the fiscal period, with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not
annualized for periods of less than one full year.
2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.39% and 1.47% for the years ended
March 31, 1998 and March 31, 1997, respectively. Prior to 1997, such
reductions were reflected in the expense ratios.
3 The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
18
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
FINANCIAL HIGHLIGHTS
================================================================================
The following represents selected data for a share of capital stock outstanding
throughout each period.
<TABLE>
<CAPTION>
CLASS B
DECEMBER 5, 1994
SIX MONTHS (INCEPTION
ENDED OF CLASS)
SEPTEMBER 30, YEAR ENDED MARCH 31, THROUGH
1999 ------------------------------------------ MARCH 31,
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 3.92 $ 4.73 $ 4.68 $ 4.81 $ 4.85 $ 4.80
------- ------- -------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income................. 0.11 0.24 0.33 0.36 0.40 0.11
Net Realized and Unrealized Gains or
Losses ............................. (0.15) (0.75) 0.10 (0.07) - 0.05
------- ------- -------- ------- ------- -------
Total From Investment Operations.. (0.04) (0.51) 0.43 0.29 0.40 0.16
------- ------- -------- ------- ------- -------
Dividends and Distributions
Dividends from Net Investment Income.. (0.12) (0.24) (0.33) (0.36) (0.40) (0.11)
Returns of Capital.................... - (0.06) (0.05) (0.06) (0.04) -
------- ------- -------- ------- ------- -------
Total Dividends and Distributions. (0.12) (0.30) (0.38) (0.42) (0.44) (0.11)
Net Asset Value, End of Period.......... $ 3.76 $ 3.92 $ 4.73 $ 4.68 $ 4.81 $ 4.85
======= ======= ======== ======= ======= =======
Total Return (1)........................ (1.11)% (11.20)% 9.53% 6.26% 8.68% 3.39%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted) ............................ $17,346 $21,522 $21,624 $10,217 $6,599 $1,900
Ratio of Expenses to Average Net
Assets ............................. 2.12%(2)* 2.20%(2) 2.16%(2) 2.30%(2) 2.32% 2.36%*
Ratio of Net Investment Income to
Average Net Assets................. 5.77%* 6.05% 6.35% 7.28% 8.11% 8.66%*
Portfolio Turnover Rate (3)........... 8.96% 87.21% 71.54% 66.10% 118.34% 98.94%
</TABLE>
1 Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.11% for the six months ended
September 30, 1999 and 2.19%, 2.15%, and 2.29% for the years ended March 31,
1999, March 31, 1998 and March 31, 1997, respectively. Prior to 1997, such
reductions were reflected in the expense ratios.
3 The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
19
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
FINANCIAL HIGHLIGHTS
================================================================================
The following represents selected data for a share of capital stock outstanding
throughout each period.
CLASS C
<TABLE>
<CAPTION>
AUGUST 12, 1997
SIX MONTHS (INCEPTION
ENDED OF CLASS)
SEPTEMBER 30, YEAR ENDED THROUGH
1999 MARCH 31, MARCH 31,
(UNAUDITED) 1999 1998
----------- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period ....................... $ 3.94 $ 4.76 $ 4.71
------ ------ ------
Income (Loss) From Investment Operations
Net Investment Income .................... 0.11 0.24 0.16
Net Realized and Unrealized Gains or Losses (0.14) (0.76) 0.10
------ ------ ------
Total From Investment Operations ...... (0.03) (0.52) 0.26
------ ------ ------
Dividends and Distributions
Dividends from Net Investment Income ...... (0.12) (0.24) (0.16)
Returns of Capital ........................ -- (0.06) (0.05)
------ ------ ------
Total Dividends and Distributions ..... (0.12) (0.30) (0.21)
Net Asset Value, End of Period .............. $ 3.79 $ 3.94 $ 4.76
====== ====== ======
Total Return (1) ............................ (0.83)% (11.34)% 5.61%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) .. $3,965 $4,055 $1,928
Ratio of Expenses to Average Net Assets ... 2.18%* 2.18% 2.09%(2)*
Ratio of Net Investment Income to
Average Net Assets ...................... 5.70%* 6.06% 6.42%*
Portfolio Turnover Rate (3) ............... 8.96% 87.21% 71.54%
</TABLE>
1 Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.08% for the period ended March 31,
1998.
3 The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
20
<PAGE>
DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.
FINANCIAL HIGHLIGHTS
================================================================================
The following represents selected data for a share of capital stock outstanding
throughout each period.
CLASS Y
<TABLE>
<CAPTION>
MARCH 20, 1997
SIX MONTHS (INCEPTION
ENDED YEAR ENDED OF CLASS)
SEPTEMBER 30, MARCH 31, THROUGH
1999 --------------------- MARCH 31,
(UNAUDITED) 1999 1998 1997
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .................... $ 3.97 $ 4.79 $ 4.72 $ 4.74
------ ------ ------ ------
Income (Loss) From Investment Operations
Net Investment Income ................. 0.13 0.29 0.34 --
Net Realized and Unrealized
Gains or Losses ...................... (0.15) (0.76) 0.14 (0.02)
------ ------ ------ ------
Total From Investment Operations ... (0.02) (0.47) 0.48 (0.02)
------ ------ ------ ------
Dividends and Distributions
Dividends from Net Investment Income ... (0.14) (0.29) (0.34) --
Returns of Capital ..................... -- (0.06) (0.07) --
------ ------ ------ ------
Total Dividends and Distributions .. (0.14) (0.35) (0.41) --
Net Asset Value, End of Period ........... $ 3.81 $ 3.97 $ 4.79 $ 4.72
====== ====== ====== ======
Total Return (1).......................... (0.47)% (10.16)% 10.64% (0.42)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $3,799 $3,823 $4,187 $7
Ratio of Expenses to Average Net Assets 0.99%* 1.00% 1.05%2 1.21%2*
Ratio of Net Investment Income to
Average Net Assets ................... 6.89%* 7.24% 7.46% 8.89%*
Portfolio Turnover Rate (3)............. 8.96% 87.21% 71.54% 66.10%
</TABLE>
1 Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Total returns are not annualized for periods of less than one
full year.
2 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.04% and 1.20% for the year ended
March 31, 1998 and for the period ended March 31, 1997, respectively.
3 The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
21
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DAVIS INTERMEDIATE INVESTMENT
GRADE BOND FUND, INC.
124 East Marcy Street, Santa Fe, New Mexico 87501
================================================================================
DIRECTORS OFFICERS
Wesley E. Bass, Jr. Jeremy H. Biggs
Jeremy H. Biggs Chairman
Marc P. Blum Shelby M.C. Davis
Andrew A. Davis President
Christopher C. Davis Kenneth C. Eich
Jerry D. Geist Vice President
D. James Guzy Sharra L. Reed
G. Bernard Hamilton Vice President, Treasurer
LeRoy E. Hoffberger & Assistant Secretary
Laurence W. Levine Thomas D. Tays
Christian R. Sonne Vice President & Secretary
Marsha Williams Andrew A. Davis
Vice President
Christopher C. Davis
Vice President
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-0279
DISTRIBUTOR
Davis Distributors, LLC
124 East Marcy Street
Santa Fe, New Mexico 87501
TRANSFER AGENT & CUSTODIAN
State Street Bank & Trust Company
c/o The Davis Funds
P. O. Box 8406
Boston, MA 02266-8406
AUDITORS
KPMG LLP
707 Seventeenth Street, Suite 2300
Denver, CO 80202
COUNSEL
D'Ancona & Pflaum
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
================================================================================
FOR MORE INFORMATION ABOUT DAVIS INTERMEDIATE INVESTMENT GRADE BOND FUND, INC.,
INCLUDING MANAGEMENT FEE, CHARGES AND EXPENSES, SEE THE CURRENT PROSPECTUS WHICH
MUST PRECEDE OR ACCOMPANY THIS REPORT.
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SEMI-ANNUAL REPORT
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-0279
[DAVIS FUNDS LOGO]
