DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
Dear Shareholder:
Over the six month period ended March 31, 1996, the Davis Tax-Free High
Income Fund continued its top risk-adjusted performance, with Class A
shares producing a net asset value total return of 2.65%(1).
Results over the first quarter of 1996 were even more impressive, as your
Fund's Class A shares' net asset value total return of +0.49% made it the
top performer among not only all High-Yield Municipal Debt funds, but also
among all General, Intermediate and Insured Municipal Debt funds
according to The Bond Buyer. In fact, only one other non-Intermediate
Municipal Debt fund posted a positive total return over the first quarter
(2).
As an added benefit to our shareholders, the Fund's Board of Directors has
approved a reduction in your Fund's management fees of 0.10% of average
annual net assets under $250 million and 0.05% of average annual net
assets between $250 million and $500 million. This change is effective
May 1, 1996.
The Davis Tax-Free High Income Fund continues to outperform its peers by
emphasizing long-term risk-adjusted performance. As a result, your
Fund's Class B shares have earned Morningstar's highest rating of Five
Stars over the life of the fund, as well as over the last three years, five
years and ten years (3).
We have produced strong long-term risk-adjusted and absolute
performance in the Davis Tax-Free High Income Fund by employing several
key strategies, including diversifying among nearly 300 positions;
carefully concentrating on the upside potential and downside protection of
each individual investment; and investing in less-followed market
situations that offer extra yield per credit quality and more favorable
risk/return ratios.
Our management philosophy has been particularly effective during the
volatile interest rate environment over the past six months. As reflected
by the US Treasury 30-year "long bond," interest rates in general declined
from a rate of around 6.4% in June, 1995 to an intermediate low of just
below 6% in the first week of January, 1996. Then, in the first quarter of
1996, interest rates rose abruptly to 6.62%, sending the price of the long
bond down by approximately 10.5% and the price of the five-year Treasury
down by 3.7%.
It was during that precipitous bond price decline in the first quarter of
1996 that the Davis Tax-Free High Income Fund outperformed its peers,
demonstrating yet again the prudence of our management philosophy which
emphasizes long-term risk-adjusted returns. Looking forward, we believe
that interest rates will be even more volatile and accordingly are keeping
your Fund positioned to have less interest rate risk.
We have prudently managed credit quality risk by holding upgraded issues
with an average rating of A+ (of the securities that are rated). Over the
past six months, this strategy has been particularly successful because
the yield spread between a AAA insured issue and the same issue that is
uninsured with a BBB rating was a narrow 0.35% to 0.40%. This means we
have been able to invest in less risky investments that have returned
fairly high yields. Once spreads widen, we will look to reposition your
Fund in lower quality credits that will earn extra yield at a reasonable
level of risk.
In general, municipal bonds have underperformed the overall bond market
since about April, 1995 due mainly to concerns about possible
congressional passage of a flat income tax and talk about possible
abolition of the federal tax-free status of municipal bonds. Most of the
municipal bond market's underperformance occurred from March through
June, 1995. Then, during the fourth quarter of 1995, the municipal market
began to outperform as fears of a flat tax passage began to subside.
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
In our view, the flat tax issue is still keeping municipal bond prices below
normal levels relative to US Treasuries. Because we do not believe a flat
tax will be passed, we see municipal bonds outperforming the bond market
in general over the next year.
In summary, because we are concerned over continued interest rate
volatility, we are keeping the Davis Tax-Free High Income Fund positioned
to have low interest rate risk. We are also keeping the credit quality of
your Fund high until credit quality spreads widen out. We believe these
strategies are the most prudent at this time and that we have adequately
positioned your Fund to achieve strong absolute and relative returns over
the next year.
Sincerely,
/s/ Shelby M.C. Davis /s/ B. Clark Stamper
Shelby M.C. Davis B. Clark Stamper
President Portfolio Manager
May 2, 1996
(1) Davis Tax-Free Class A shares' annual average rates of return,
including the maximum front end sales charge of 4.75%, for the one year
ended March 31, 1996 and for the period of December 1, 1994 through
March 31, 1996 (life of Class) were 0.88% and 4.16%, respectively.
Davis Tax-Free Class B shares' net asset value total return over the
period was 2.32%. Annual average rates of return for Davis Tax-Free
High Income Class B shares for the one, five and ten year periods ended
March 31, 1996 are 1.95%, 7.16% and 7.29%, respectively after reduction
for applicable contingent deferred sales charges (see prospectus).
(2) From the Wednesday, April 10, 1996 edition of The Bond Buyer with
Lipper Analytical Services, Inc. listed as the source. Davis Tax-Free
Class A shares' total return over the quarter was +0.49% (Davis Tax-Free
Class B shares' total return was +0.33%) compared to -1.46% for the
average High Yield Municipal Debt fund (44 funds), -1.91% for the average
General Municipal Debt fund (238 funds), -0.63% for the average
Intermediate Municipal Debt fund (138 funds), and -2.29% for the average
Insured Municipal Debt fund (53 funds).
(3) The Morningstar proprietary ratings reflect historical risk-adjusted
performance as of March 31, 1996. The ratings are subject to change
every month. Past performance is no guarantee of future results.
Morningstar ratings are calculated from the funds' three-, five- and
ten-year (or life of fund, whichever is shorter) average annual returns
in excess of 90-day Treasury Bill returns with appropriate fee
adjustments and a risk factor that reflects fund performance below
90-day T-Bill returns. Davis Tax-Free High Income Class B shares
received five stars overall and, also for the three-, five- and ten-year
periods. The fund was rated against 848, 515 and 192 municipal bond
funds for the respective periods. Ten percent of the funds in an
investment category receive five stars, 22.5% receive four stars, 35%
receive three stars, 22.5% receive two stars, and the bottom 10% receive
one star. Star ratings for the other classes may vary, and are available
only for classes with at least three years of performance history.
<TABLE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - (95.87%)
<CAPTION>
Value
Principal (Note 1)
- --------- ------
<S> <C> <C>
ALABAMA - (0.47%)
$ 210,000 Ozark, AL, Medical Clinic Brd. 1st Mtg. Rev. Bds. (United States Hlth. &
Hsg. Foundation, Inc. Prj.), 9.25%, 10/01/99.................................................... $ 226,013
500,000 The Special Care Fac. Fin. Auth. of the City of Pell City, AL, 1st Mtg. Rev.
Bds. (The Village of Cook Springs, Inc. Prj.) Ser. '93-A, 8.50%, 07/01/08....................... 523,005
------------
749,018
------------
ALASKA - (1.85%)
1,500,000 Alaska Hsg. Fin. Corp., Insured Mtg. Prg. Bds., `90 1st Ser., 7.75%,
12/01/14........................................................................................ 1,539,615
640,000 Alaska Hsg. Fin. Corp., Insured Mtg. Prg. Bds., '90 1st Ser., 7.80%,
12/01/30........................................................................................ 659,283
755,000 Alaska Hsg. Mtg. Obligation, Collateralized Home Mtg. Bds.,
`90 Subser. A-1, 7.30%, 06/01/25................................................................ 750,470
------------
2,949,368
------------
ARIZONA - (3.19%)
190,000 Chandler, AZ, Improvement Dist. No. 51, 7.875%, 01/01/99.......................................... 193,496
1,275,000 City of Tolleson Muni Fin. Corp. Rev. Bds., Ser. of '85, 9.20%, 09/01/05.......................... 1,299,136
230,000 Coconino & Mohave Cntys., AZ, Unified School Dist. No. 6, Cap.
Appreciation Ref. Bds., Zero Cpn., 07/01/02..................................................... 166,115
980,000 The IDA of the City of Casa Grande, AZ, Dev. Rev. Bds. (Five Points
Redevelopment Prj.), Sr. Bds., 8.25%, 12/01/15.................................................. 1,014,604
500,000 The IDA of the City of Sierra Vista, 1st Mtg. Nursing Home Ref. Rev. Bds.
(Sierra Vista Medical Investors, Ltd. Prj.) Ser. '94A, 8.50%, 08/01/10.......................... 520,695
100,000 The IDA of the Cnty. of Pima, AZ, Sngl. Fam. Mtg. Rev. Bds. (GNMA
Mtg.-Backed Sec. Prg.) Ser. '88, 8.125%, 09/01/20............................................... 105,176
15,720,000 Phoenix, AZ, IDA Sngl. Fam. Mtg. Rev. Bds., Ser. '84, Zero Cpn.,
12/01/15........................................................................................ 1,801,826
------------
5,101,048
------------
ARKANSAS - (0.35%)
500,000 Independence Cnty., AR, PCR, (Mississippi Pwr. & Lt. Co. Prj.) '82-A
Ser. B, 9.50%, 07/01/14......................................................................... 555,420
------------
CALIFORNIA - (5.78%)
380,000 California Hlth. Fac. Auth. Insured Hosp. Rev. Bds. (Victor Valley
Community Hosp.) '84 Ser. A, 9.875%, 07/01/12................................................... 385,274
1,485,000 California Hlth. Fac. Auth. Hosp. Rev. Ref. Bds. (Valley Presbyterian Hosp.)
'83 Ser. A, 9.00%, 05/01/12..................................................................... 1,490,703
105,000 California Hsg. Fin. Agy. Multi-Unit Rental Hsg. Rev. Bds. '80 Ser. A,
8.75%, 02/01/10................................................................................. 105,773
200,000 California Hsg. Fin. Agy. Rev. Bds., Cap. Appreciation Home Mtg.,
Ser. B, Zero Cpn., 02/01/99..................................................................... 168,830
610,000 California Hsg. Fin. Agy. Rev. Insured Hsg. Bds., Ser. B, 8.625%, 08/01/15........................ 641,921
100,000 The City of Los Angeles, Multi Fam. Hsg. Ref. Rev. Bds., '91 Ser. A,
7.00%, 05/01/21................................................................................. 104,323
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
CALIFORNIA - Continued
$ 455,000 City of Modesto, CA, Econ. Dev. Rev. Bds. (FHA Insured Mtg. Loan -
Evergreen Convalescent Home Prj.), 10.50%, 08/01/19............................................. $ 470,675
900,000 City of Napa, CA, '92, Ind. Rev. Ref. Bds. (Napa Motel and Restaurant),
8.50%, 12/01/07................................................................................. 920,466
250,000 Cnty. of Marin, Mtg. Rev. Bds., Ser. '84A (FHA Insured Mtg. Loan -
Marion Park Apts. Prj.), Zero Cpn., 04/01/01.................................................... 151,868
1,000,000 Cnty. of Marin, Multifam. Hsg. Rev. Bds., Ser. '84B (Marion Park
Apts. Prj.), Zero Cpn., 04/21/07................................................................ 333,340
250,000 Harbor Dept. of the City of Los Angeles, Rev. Bds., Issue of '85, 8.70%,
09/01/15........................................................................................ 260,275
100,000 Hsg. Auth. of the Cnty. of Santa Clara, Multifam. Hsg. Rev. Bds.,
Ser. '85 C (Fannie Mae Prg./Amberwood Apts. Prj.), 0%/9.375%,
10/01/07........................................................................................ 89,142
195,000 Lancaster - Grand Terrace Huntington Pk., CA, Hsg. Fin. Auth. Res. Mtg.
Rev. Ref. Bds., Ser. B, 7.375%, 01/01/12........................................................ 203,459
1,000,000 Loma Linda, CA, IDR Bds., Medical Pptys. Prj. - Loma Linda University,
10.625%, 11/01/12............................................................................... 1,006,100
295,000 Los Angeles, CA, Community Redevelopment Agy. Res. Mtg. Rev. Bds.,
'85 Ser. A, 8.875%, 05/01/18.................................................................... 307,414
1,155,000 Los Angeles, CA , Mtg. Rev. Bds., FHA Section 8 Insured Mtg. Loan
(Arleta Park Apts.) Ser. A, 9.75%, 03/01/06..................................................... 1,200,565
175,000 Los Angeles, CA, Multi. Fam. Rev. (FHA Insured Multi-Fam. Hsg. Mtg.
Rev. Bds.) Park Parthenia Prj., 7.30%, 07/20/11................................................ 181,484
45,000 Los Angeles, CA, Reg'l. Airports Improvement Corp. Lease Rev. Bds.
(Los Angeles West Terminal Fuel Corp.), 10.00%, 01/01/01........................................ 50,672
195,000 Redevelopment Agy. of the City of Oakland, Central Dist. Redevelopment
Prj. Tax Allocation Bds., Ser. A, 7.20%, 02/01/09............................................... 198,239
700,000 San Francisco, CA, City & Cnty. Multi. Fam. Hsg. Rev. Bds. (FHA
Insured - Aspen South Hill Apts.) Ser. C, 9.00%, 12/01/26....................................... 719,124
250,000 Valley Hlth. Sys. Rev. Bds. (Ref. & Improvement Prj.) `95 Ser. A,
6.1255%, 05/15/05............................................................................... 248,343
------------
9,237,990
------------
COLORADO - (1.30%)
685,000 Colorado Hsg. Fin. Auth., Sngl. Fam. Mtg. Prg.-Ser.-A-2-FSA-CO.,
8.25%, 08/01/19................................................................................. 704,954
110,000 Denver (City & Cnty.), CO, Sngl. Fam. Mtg. Rev. Bds., Ser. '85A,
Zero Cpn., 09/01/16............................................................................. 12,494
180,000 Hamilton Creek Metro. Dist., Summit Cnty., CO, G.O., 11.25%, 12/01/04<F2>......................... 116,100
770,000 Mesa Cnty., CO, IDR Ref. Bds. (Joy Tech. Inc. Prj.) Ser. '92, 8.50%,
09/15/06........................................................................................ 810,556
430,000 Mesa Cnty., CO, Sngl. Fam. Mtg. Rev. Bds., Ser. 197, 8.875%, 12/01/11............................. 442,754
------------
2,086,858
------------
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
CONNECTICUT - (0.39%)
$ 600,000 Connecticut Dev. Auth., Hlth. Care Rev. Bds. (Corp. for Independent Living
Prj.) Ser. '93B, 8.00%, 07/01/17................................................................ $ 615,636
------------
DELAWARE - (0.67%)
830,000 Delaware Econ. Dev. Rev. Ref. Bds. (Supermarkets General Corp. Prj.)
Ser. '83, 10.875%, 12/01/03..................................................................... 849,912
290,000 Delaware St. Econ. Dev. Community Multi-Fam. Mtg. Rev. Bds.,
Cadis-GNMA-Chestnut Cross, 0%/9.75%, 07/20/20................................................... 220,603
------------
1,070,515
------------
DISTRICT OF COLUMBIA - (0.17%)
250,000 District of Columbia (Washington, D.C.) Rev. Bds. (The Howard University
Issue) Ser. A, 7.875%, 10/01/04................................................................. 266,940
------------
FLORIDA - (6.30%)
1,660,000 Broward Cnty., FL, Hsg. Fin. Auth. Rev. Home Mtg., Ser. A, Cap.
Appreciation, Zero Cpn., 04/01/14............................................................... 265,666
480,000 Charlotte Cnty., FL, IDR Ref. Bds. (Beverly Enterprises - Florida, Inc. Prj.)
Ser. '87, 10.00%, 06/01/11...................................................................... 546,638
6,945,000 City of Tampa, FL, Home Mtg. Rev. Bds., '83 Ser. A, Muni Multiplier
Bds., Zero Cpn., 10/01/14....................................................................... 997,302
1,000,000 Dade Cnty., FL. School Brd. Ctfs. Partn. Rev. Bds., Ser. A, 5.75%,
05/01/09........................................................................................ 1,022,990
725,000 Dade Cnty., FL, Special Hsg. Rev. Bds. (City of Miami Dev. - Indenture
VIII), Ser. A, 11.00%, 07/01/12................................................................. 740,508
1,100,000 Florida Hsg. Fin. Agy. (Southlake Apartments Prj. - D), 8.10%, 10/01/02<F3>....................... 1,133,484
250,000 Florida St. Brd. Educ., Pub. Educ. Rev. Bds., Ser. D, 6.10%, 05/01/01............................. 266,598
115,000 Highlands Cnty., FL, IDA (Beverly Enterprises - Florida, Inc. Prj.) Ser. '91,
9.25%, 07/01/07................................................................................. 127,414
1,000,000 Highlands Cnty. IDA (Florida) 1st Mtg. Hlth. Care Rev. Bds., Ser. '91
(Church of All Faiths, Inc. Prj.), 9.375%, 10/01/21............................................. 700,000
250,000 The Hsg. Fin. Auth. of Dade Cnty. (Florida) Collateralized Mtg. Rev. Bds.,
'84 Ser. H (Lihud Ltd. Apts. Prj.), 10.50%, 06/01/00............................................ 251,658
205,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. '89A (Methodist
Hosp. Prj..), 8.00%, 10/01/06................................................................... 207,809
340,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. '89A (Methodist
Hosp. Prjs.), 8.00%, 10/01/15................................................................... 344,202
245,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. '89B (Methodist
Hosp. Prjs.), 8.00%, 10/01/15................................................................... 248,028
60,000 Leon Cnty., FL, Hsg. Fin. Auth. Sngl. Fam. Mtg. Rev. Bds., Cap.
Appreciation-Multi-Cnty. Prg. '84A, Zero Cpn., 03/01/02......................................... 32,382
60,000 Leon Cnty., FL, Hsg. Fin. Auth. Sngl. Fam. Mtg. Rev. Bds., Cap.
Appreciation-Multi-Cnty. Prg. '84A, Zero Cpn., 09/01/02......................................... 30,739
65,000 Leon Cnty., FL, Hsg. Fin. Auth. Sngl. Fam. Mtg. Rev. Bds., Cap.
Appreciation-Multi-Cnty. Prg. '84A, Zero Cpn., 09/01/03......................................... 30,007
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
FLORIDA - Continued
$ 575,000 Manatee Cnty., FL, Hsg. Fin. Auth. Mtg. Rev. Bds., Cap. Appreciation,
'83 Ser. A, Zero Cpn., 10/01/15................................................................. $ 72,680
75,000 Marion Cnty., FL, IDR (Midland-Ross Corp. Prj.) Ser. '81, 11.875%,
08/01/11........................................................................................ 76,162
500,000 Ocean Highway & Port Auth. Solid Waste/PCR Bds. (Container Corp. of
America Prj.) Ser. '85, 9.375%, 11/01/04........................................................ 516,810
465,000 Orange Cnty., FL, IDA (Beverly Enterprises - Florida, Inc. Prj.) Ser. '91,
9.25%, 08/01/10................................................................................. 515,685
4,200,000 Palm Beach Cnty., FL, Hsg. Fin. Auth. Sngl. Fam. Mtg. Rev. Bds. Cap.
Appreciation, Zero Cpn., 07/01/14............................................................... 596,736
750,000 South Indian River Wtr. Control Dist., Sect. 15A Improvement Bds. (Egret
Landing - Phase I), 8.00%, 11/01/18............................................................. 822,878
470,000 Winter Garden, FL, IDR Ref. Bds. (Beverly Enterprises - Florida, Inc. Prj.)
Ser. '91, 8.75%, 07/01/12....................................................................... 521,442
------------
10,067,818
------------
GEORGIA - (1.08%)
2,830,000 Gwinnett Cnty., GA, Hsg. Auth. Sngl. Fam. Mtg. Rev. Bds. Cap.
Appreciation, Zero Cpn., 04/01/16............................................................... 351,684
600,000 The Hsg. Auth. of Columbus, GA, Multifamily Hsg. Rev. Bds. (Columbus
Gardens Elderly Hsg. Prj.) Ser. '94, 8.25%, 01/01/24............................................ 606,690
750,000 Macon Cnty., GA, Hosp. Ref. Rev. Bds. (Flint River Comm.
Hospital - Paracelsus Healthcare Corp. Prj.) Ser. '91, 9.00%, 03/01/11.......................... 773,880
------------
1,732,254
------------
ILLINOIS - (8.37%)
350,000 Bensenville, IL, IDR Bds., Insured - Allied Roofers Supply Prj., 10.25%,
08/01/03........................................................................................ 358,803
900,000 Chicago, IL, G.O. Ref. Bds., Ser. B, 7.25%, 01/01/06.............................................. 926,415
200,000 Cook Cnty., IL, Community Cons. School Dist. No. 064 Park Ridge,
School Fire Prevention and Safety Bds., Utilities G.O., Ser. '88, 7.00%,
12/01/99........................................................................................ 200,936
275,000 Cnty. of Cook, IL, Sngl. Mtg. Rev. Bds., '83 Ser. A, Zero Cpn., 07/01/15.......................... 33,061
1,000,000 Des Plaines, IL, Hosp. Fac. Rev. Ref. Bds. (Holy Fam. Hosp.), 9.25%,
01/01/14........................................................................................ 1,024,080
150,000 Illinois Hlth. Fac. Auth. Rev. (Hlth. Fac. Rev. Ref. Bds.) Methodist Med.
Ctr. of Illinois, 8.00%, 10/01/14............................................................... 152,822
1,495,000 Illinois Hlth. Fac. Auth. Rev. (Hlth. Fac. Rev. Ref. Bds. Ser. A) Methodist
Med. Ctr. of Illinois, 9.625%, 10/01/10......................................................... 1,529,848
80,000 Illinois Hlth. Fac. Auth. Rev. (Hlth. Fac. Rev. Ref. Bds.) Mercy Hosp.
Ctr. of Chicago, IL, 9.50%, 01/01/15............................................................ 81,865
730,000 Illinois Hsg. Dev. Auth. Multi Fam. Hsg. Bds., `82 Ser. C, 5.00%,
07/01/25........................................................................................ 466,448
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
ILLINOIS - Continued
$ 1,380,000 Northwest Subordinated Muni Jt. Action Wtr. Agy, IL, Wtr. Supply
Sys. Rev. Bds., 6.50%, 05/01/15................................................................. $ 1,475,965
1,100,000 Public Bldg. Commission of Chicago, Cook Cnty., IL, Bldg. Rev. Bds.,
Ser. B of '87 Cmnty. College Dist. No. 508, 8.75%, 01/01/07..................................... 1,158,212
1,000,000 St. Clair Cnty., IL, Pub. Bldg., Community Bldg. Rev. Bds., 8.00%,
12/01/05........................................................................................ 1,020,580
450,000 State of Illinois Civic Ctr. Bds. (Dedicated Tax Rev. Bds.) Ser. `91,
9.15%, 12/15/99................................................................................. 465,350
1,475,000 Taylorville, IL, Econ. Dev. Rev. Bds. (Kroger Co. Prj.), 11.75%, 04/01/07......................... 1,506,609
1,295,000 Urbana, IL, Econ. Dev. Rev. Bds. (Kroger Co. Prj.), 11.50%, 03/01/07.............................. 1,307,665
191,000 Village of Sauget, IL, IDR Bds. (The Pillsbury Co. Prj.) Ser. '80, 8.375%,
05/01/05........................................................................................ 191,256
500,000 Village of Sherman, IL, 1st Mtg. Rev. Bds. (Villa Vianney, Inc.) Ser. '95A,
8.375%, 07/01/25................................................................................ 504,340
1,000,000 Village of Wataga, IL, 1st Mtg. Hlth. Fac. Rev. Bds. (First Humanics Corp.
- Galesburg, IL Prj.) Ser. '86, 6.00%, 09/01/16<F2>............................................. 960,000
------------
13,364,255
------------
INDIANA - (1.22%)
500,000 Carmel, IN, Retirement Rental Hsg. Rev. Ref. Bds. (Beverly Enterprises -
Indiana, Inc. Prj.) Ser. '92, 8.75%, 12/01/08................................................... 550,325
363,823 Elwood, IN, Econ. Dev. Rev. (K-Mart Co. - S. S. Kresge Co. Prj.), 8.50%,
10/15/00........................................................................................ 356,026
405,000 The Hosp. Auth. of the City of Fort Wayne, IN, Hosp. Rev. Ref. Bds.
(Ancilla Sys. Inc.) Ser. `86, 7.00%, 07/01/18................................................... 408,592
570,000 Indiana Bond Bank, Ser. '85 A Bds., 9.625%, 02/01/06.............................................. 593,592
35,000 Indianapolis, IN, Econ. Dev. (GNMA Coll - Bethany Indpt. Care), 9.15%,
08/20/16........................................................................................ 39,166
------------
1,947,701
------------
IOWA - (0.23%)
375,880 Creston, IA, IDR (S.S. Kresge Co. - K-Mart Inc.), 8.50%, 08/01/00................................. 377,143
------------
KANSAS - (3.43%)
160,000 City of Wichita, KS, Sngl. Fam. Mtg. Rev. Bds., '85 Ser. A, 9.00%,
07/01/08........................................................................................ 165,427
1,410,000 Kansas City, KS, Crawford Cnty., Tax-Exempt Muni Multiplier Rev. Bds.,
Zero Cpn., 04/01/16............................................................................. 153,154
1,420,000 Kansas City, KS, Hosp. Rev. Bds., Ser. '74, 8.10%, 12/01/04....................................... 1,456,295
205,000 Liberal, KS, Swr. Util. Sys. Rev. Ref. Bds., 8.80%, 10/01/99...................................... 209,753
305,000 Liberal, KS, Swr. Util. Sys. Rev. Ref. Bds., 8.90%, 04/01/00...................................... 312,323
675,000 Saline Cnty., KS, Sngl. Fam. Mtg. Rev. Cap. Accumulator Bds.,
Ser. '82 A, Zero Cpn., 11/01/14................................................................. 82,256
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
KANSAS - Continued
$ 3,000,000 Wtr. Dist. No. 1 of Johnson Cnty., KS, Wtr. Rev. Ref. Bds., Ser. '86,
7.25%, 12/01/02................................................................................. $ 3,098,310
------------
5,477,518
------------
KENTUCKY - (0.72%)
195,000 Cntys. of Jefferson, Oldham and Bullitt, KY, Home Mtg. Rev. Bds, Ser. '84,
10.75%, 11/01/14................................................................................ 200,918
250,000 Floyd, KY, Gas Sys. Rev. Ref. Bds., Ser. '91A, 8.00%, 09/01/12.................................... 279,175
200,000 Jefferson Cnty., KY, Cap. Prjs. Corp. Rev. Bds. Lease - Ser. B, Zero Cpn.,
08/15/07........................................................................................ 89,420
1,100,000 Owensboro, KY, Elec. Light & Pwr. Rev. Bds., Ser. B, Zero Cpn.,
01/01/09........................................................................................ 287,199
500,000 Owensboro, KY, Elec. Light & Pwr. Rev. Bds., Ser. B, Zero Cpn.,
01/01/09........................................................................................ 144,345
150,000 The Turnpike Auth. of Kentucky Toll Road Rev. Bds., `86 Ser. A,
8.125%, 07/01/98................................................................................ 154,509
------------
1,155,566
------------
LOUISIANA - (2.57%)
500,000 Ascension Parish, LA, PCR Bds., (Shell Oil Co. Prj.), 6.75%, 06/01/05............................. 501,570
220,000 Jefferson Parish, LA, Home Mtg. Rev. Bds. Cap. Appreciation, Zero Cpn.,
09/01/02........................................................................................ 112,915
220,000 Jefferson Parish, LA, Home Mtg. Rev. Bds. Cap. Appreciation, Zero Cpn.,
03/01/03........................................................................................ 106,850
1,000,000 Lake Charles Non-Profit Hsg. Dev. Corp. Mtg. Rev. Ref. Bds., Ser. '90A
and Ser. '90B, 7.875%, 02/15/25................................................................. 1,003,150
1,085,000 Louisiana Hsg. Fin. Agy. Mtg. Rev. (Multi Fam. Mtg. Rev Bds.), Zero
Cpn., 01/01/26.................................................................................. 58,655
1,500,000 Louisiana Pub. Fac. Auth. Rev. Ref. Bds., Ser. '93 (Schwegmann Westside
Expressway, Inc. Prj.), 8.00%, 10/01/09<F3>...................................................... 1,631,850
220,000 Louisiana Pub. Fac. Auth. Supplemental Student Loan Rev. Variable Rate
Demand Bds., (Statewide Prg.) Ser. '84C, 8.125%, 12/01/99....................................... 237,710
400,000 Parish of Orleans, New Orleans, LA, Hsg. Dev. Corp. of 1st Lien Rev.
Bds., Ser. `79 (Tulane Ave. Prj. - Section 8 Asst.), 7.875%, 06/01/10........................... 400,900
50,000 Sales Tax School Bds., Parish School Brd. of the Parish of Jefferson, State of
LA, Ser. '86A, 7.00%, 02/01/08.................................................................. 50,693
------------
4,104,293
------------
MAINE - (0.63%)
970,000 Maine Pub. Utility Financing Bank, Pub. Utility Rev. Bds., Ser. '91 (Maine
Pub. Svc. Co. Prj.), 7.875%, 04/01/21........................................................... 1,000,972
------------
MARYLAND - (1.71%)
600,000 Cmnty. Dev. Admin. of the State of MD, FHA-Insured Hsg. Mtg. Rev. Bds.,
'80 Ser. B, 10.625%, 01/01/24................................................................... 606,168
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
MARYLAND - Continued
$ 960,000 Cmnty. Dev. Admin. of the State of MD, Hsg. Mtg. Rev. Bds., `81 Ser. A,
14.00%, 01/01/22................................................................................ $ 972,509
25,000 Hsg. Auth. of Prince George's Cnty. (Maryland) GNMA Collateralized Sngl.
Fam. Mtg. Rev. Bds., '89 Ser. A, 8.10%, 10/01/20................................................ 25,850
95,000 Maryland State Community Dev. Admin. Hsg. Mtg. Rev. Bds., FHA
Insured, 10.50%, 01/01/12....................................................................... 95,967
1,000,000 Upper Potomac River Comm., MD, PCR Bds., Westvaco Corp. Prj., 9.125%, 08/01/15.................... 1,033,810
------------
2,734,304
------------
MASSACHUSETTS - (4.04%)
250,000 Lawrence, MA, IDR Bds., (New Balance Realty Trust Prj.), 10.00%,
10/01/03........................................................................................ 255,213
115,000 Massachusetts Educ. Loan Auth., Educ. Loan Rev. Bds., Issue C, Ser. '85A,
7.875%, 06/01/031............................................................................... 22,020
275,000 Massachusetts Educ. Loan Auth., Educ. Loan Rev. Bds., Issue D, Ser. '89A,
7.65%, 01/01/07................................................................................. 294,921
705,000 Massachusetts Hsg. Fin. Agy. Multi-Fam. Hsg. Bds., '85 Ser. A, 0%/9.5%,
07/01/12........................................................................................ 699,360
600,000 Massachusetts State G.O., 10.50%, 08/01/03........................................................ 615,150
320,000 Massachusetts State G.O., 9.75%, 09/01/03......................................................... 326,304
125,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds. (New England
School of Law), 8.30%, 07/01/03................................................................. 126,324
125,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds. (New England
School of Law), 8.30%, 07/01/04................................................................. 126,324
1,000,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds., St. Anne's Hosp.
Issue, Ser. A, 9.375%, 07/01/14................................................................. 993,350
1,075,000 Massachusetts Ind. Fin. Agy. IDR Ref. Bds. (Beverly Enterprises -
Mass./Gloucester & Lexington Prjs.) Ser. `92, 8.00%, 05/01/02................................... 1,125,826
185,000 Massachusetts Ind. Fin. Agy., IDR Bds. (Boston Beer), 11.50%,
07/15/07........................................................................................ 205,006
1,000,000 Massachusetts Ind. Fin. Agy. Rev. Bds., Provider Lease Prg., `89 Ser. A,
8.75%, 07/15/09................................................................................. 1,058,330
500,000 Massachusetts Ind. Fin. Agy. Rev. Bds., Glenmeadow Retirement Cmnty.,
8.625%, 02/15/26................................................................................ 496,890
------------
6,445,018
------------
MICHIGAN - (1.03%)
100,000 Cnty. of Oakland, State of Michigan Bds., Clinton-Oakland Sys., Paint
Creek Inceptor Sewage Disposal Bds., 7.00%, 05/01/01102,222
750,000 The Econ. Dev. Corp. of the City of Westland, MI, Contract Sec'd. Rev. Bds.
(Weyerhauser Co. Contract Rev.), 9.80%, 12/01/00................................................ 753,023
65,000 Kentwood, MI, Econ. Dev. Corp. Rev. Bds. (Hanover-Kent, Inc. - K-Mart
Corp.), 7.85%, 09/01/01......................................................................... 62,369
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
MICHIGAN - Continued
$ 570,000 Livonia, MI, Pub. Schools Dist., School Dist. Ser. I, Cap. Appreciation
Crossover Ref. Bds., Zero Cpn., 05/01/09........................................................ $ 275,242
180,000 Michigan State Hsg. Dev. Auth., Sngl.-Fam. Insured Hsg. Bds., '86 Ser. A,
8.00%, 10/01/06................................................................................. 183,800
1,000,000 Michigan State Hsg. Dev. Auth., Section 8 Asst. Mtg. Rev. Bds., Ser. I,
Zero Cpn., 04/01/14............................................................................. 196,660
70,000 Southgate, MI, Econ. Dev. Corp. Rev. Bds. (Syfield Dev. Prj. - Kroger Co.)
Ser. A, 10.50%, 11/15/05.......................................................................... 72,167
------------
1,645,483
------------
MINNESOTA - (1.45%)
345,000 Minneapolis, MN, Community Dev. Agy. Rev. Bds. (River Bluff Prj.),
11.375%, 06/01/09............................................................................... 354,453
280,000 Minneapolis, MN, Community Dev. Agy. Rev. Bds. (West Bank
Homes Prj.), 11.75%, 10/01/08................................................................... 289,523
250,000 Minnesota Hsg. Fin. Agy. Sngl. Fam. Mtg. Bds., '87 Ser. C, 8.40%,
08/01/01........................................................................................ 260,420
275,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. `84-N, Sunwood
Inn/Bandana Square Ltd., 10.00%, 12/01/14....................................................... 283,338
275,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. K, Jackson Str.
Shops Ltd., 9.50%, 12/01/14..................................................................... 257,368
855,000 Sandstone, MN, 1st Mtg. FHA (Sandstone Area Nursing Home), 10.00%,
01/15/13.......................................................................................... 866,354
------------
2,311,456
------------
MISSISSIPPI - (3.48%)
2,235,000 Claiborne Cnty., MS, PCR (Middle South Energy, Inc. Prj.) Ser. C,
9.875%, 12/01/14................................................................................ 2,537,775
1,100,000 Claiborne Cnty., MS, PCR (Middle South Energy, Inc. Prj.) Ser. E,
9.50%, 04/01/16................................................................................. 1,133,330
810,000 Clarksdale, MS, Ind. Rev. Bds. (BAH Pptys/Archer-Daniels), 11.75%,
06/01/11........................................................................................ 817,468
1,000,000 Mississippi Hosp. Equip. & Fac. Auth. Rev. Bds. (Rush Medical
Foundation Prj.) Ser. '91A, 8.75%, 01/01/16..................................................... 1,097,190
------------
5,585,763
------------
MISSOURI - (1.69%)
1,005,000 The IDA of the City of Joplin, MO, Hosp. Fac. Ref. and Improvements Rev.
Bds. (Tri-State Osteopathic Hosp. Assoc. Prj.) Ser. '91, 8.25%, 12/15/14........................ 1,064,607
150,000 The IDA of the City of Kansas City, MO, Econ. Dev. Rev. Ref. Bds.
(Encore Nursing Ctr. Partners, Ltd.-85 Prj.) Ser. '92, 8.00%, 12/01/02.......................... 155,046
250,000 The IDA of the City of West Plains, MO, IDR Ref. Bds. (Beatrice Cos., Inc.
Prj.) Ser. '84, 8.75%, 08/01/07................................................................. 250,803
240,000 Liberty, MO, IDA IDR Ref. Bds. (K-Mart Corp. Prj.), 6.80%, 11/01/04............................... 191,611
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
MISSOURI - Continued
$ 210,000 Missouri Hsg. Dev. Commission, Hsg. Dev. Bds. (Federally Insured Mtg.
Loans) Ser. July 1, 1975, 8.00%, 07/01/17....................................................... $ 214,196
1,000,000 St. Louis Cnty., MO, Sngl. Fam. Mtg. Rev. Bds., 9.25%, 10/01/16................................... 218,900
75,000 State Environmental Improvement and Energy Res. Auth. (Missouri)
Floating/Fixed Rate PCR Bds. (Assoc. Elec. Cooperative Inc. Prj.)
Ser. '84G, 8.25%, 11/15/14...................................................................... 77,768
475,000 Stoddard Cnty., MO, IDA Ind. Rev. Bds (Wal-Mart Bldg. Prj. Gtd. -
Wal-Mart Stores Inc.), 11.75%, 06/01/06......................................................... 492,076
------------
2,665,007
------------
MONTANA - (0.04%)
75,000 Montana Brd. of Hsg., Sngl. Fam. Prg. Bds., '85 Ser. A
(Federally Insured or Guaranteed Mtg. Loans), 0%/9.75%, 06/01/13............................... 65,415
------------
NEVADA - (0.32%)
500,000 State of Nevada Muni Bd. Bank Prj. No. 18 & 19, 8.40%, 09/01/01................................... 512,810
------------
NEW HAMPSHIRE - (0.34%)
500,000 New Hampshire Higher Educ. & Hlth. Fac. Auth. Rev. Bds. (NH Catholic
Charities Issue) Ser. '91, 8.40%, 08/01/11...................................................... 537,105
------------
NEW JERSEY - (6.10%)
100,000 Camden Cnty., NJ, Muni Util. Auth. Swr. Rev. Ref. Bds., 5.125%,
07/15/17........................................................................................ 92,372
460,000 Jersey City, NJ, Swr. Auth, Swr. Rev. Ref. Bds., 9.00%, 01/01/06.................................. 471,035
3,135,000 The Mercer Cnty. Improvement Auth., Mercer Cnty., NJ, Solid Waste
Rev. Bds. (Res. Recovery Prj., Ref. Ser. B of '92), Zero Cpn., 04/01/14......................... 787,763
1,375,000 The Mercer Cnty. Improvement Auth., Mercer Cnty., NJ, Solid Waste
Rev. Bds. (Res. Recovery Prj., Ref. Ser. B of '92), Zero Cpn., 04/01/16......................... 296,368
445,000 New Jersey Econ. Dev. Auth., Econ. Dev. Bds. (Polymeric Resources Corp.
Prj. - '94 Ser.), 9.00%, 12/01/19............................................................... 463,961
265,000 New Jersey Econ. Dev. Auth., Econ. Dev. Sr. Rev. Bds. (Lakewood of
Voorhees FHA Insured Prj.) Ser. A, 8.875%, 01/15/20............................................. 273,255
1,350,000 New Jersey Econ. Dev. Auth., Econ. Dev. Rev. Bds. (Borg-Warner - Baker
Protective Svcs. Prj.) Ser. '83, 9.95%, 12/01/03................................................ 1,379,349
3,480,000 New Jersey Econ. Dev. Auth., Econ. Dev. Rev. Ref. Bds. (Holt Hauling &
Warehousing) Ser. G, 8.40%, 12/15/15............................................................ 3,575,839
395,000 New Jersey Econ. Dev. Auth., Econ. Dev. Rev. Bds. (Sun Chemical Corp.),
7.50%, 11/01/09................................................................................. 395,198
70,000 New Jersey Econ. Dev. Auth., Mtg. Rev. Ref. Bds. (Geriatric and Medical
Svcs., Inc. Prj.) Ser. '92, 9.00%, 07/01/96..................................................... 70,930
75,000 New Jersey Econ. Dev. Auth., Mtg. Rev. Ref. Bds. (Geriatric and Medical
Svcs., Inc. Prj.) Ser. '92, 9.00%, 07/01/97..................................................... 78,644
80,000 New Jersey Econ. Dev. Auth., Mtg. Rev. Ref. Bds. (Geriatric and Medical
Svcs., Inc. Prj.) Ser. '92, 9.00%, 07/01/98..................................................... 86,469
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
NEW JERSEY - Continued
$ 300,000 New Jersey Econ. Dev. Auth. Rev., Sr. Mtg. Bds. (Holt Hauling and
Warehousing) Ser. D, 10.25%, 09/15/14........................................................... $ 313,296
1,000,000 New Jersey Econ. Dev. Auth. Rev., Sr. Mtg. Bds. (Sealy Mattress Mfg. Co.),
9.50%, 10/01/02................................................................................. 1,064,560
385,000 New Jersey Hsg. and Mtg. Fin. Agy., Home Buyer Rev. Bds., '89 Ser. D,
7.70%, 10/01/29................................................................................. 399,799
------------
9,748,838
------------
NEW MEXICO - (0.14%)
120,000 Albuquerque, NM, Hlth. Care Sys. Rev. Bds., (Lovelace Medical Foundation
Prj.), 12.00%, 03/01/11......................................................................... 120,708
20,000 City of Albuquerque, NM, Hlth. Care Sys. Rev. Bds. (Lovelace Medical
Foundation Prj.) Ser. '83A, 10.25%, 03/01/11.................................................... 20,400
110,000 New Mexico Mtg. Fin. Auth. Sngl. Fam. Mtg. Prg. Rev. Bds., 7.00%,
07/01/14........................................................................................ 79,101
------------
220,209
------------
NEW YORK - (3.30%)
500,000 Battery Park City Auth., POD III Hsg. Rev. Bds., Ser. '84 (FHA-Insured
Mtg.), 10.00%, 06/01/23......................................................................... 508,750
2,580,000 Clifton Park, NY, IDA IDR Bds. (Caldor Inc. Prj.) Ser. A, 11.25%,
12/01/12........................................................................................ 2,643,107
925,000 New York State Hsg. Fin. Agy., Multi-Fam. Insured Mtg. Rev. Hsg. Bds.,
'85 Ser. A, 10.00%, 11/15/25.................................................................... 947,811
395,000 New York State Med. Care Fac. Fin. Agy., New York Hosp. FHA Insured
Mtg. Bds., Ser. A, 6.90%, 08/15/34.............................................................. 426,347
225,000 New York State Med. Care Fac. Fin. Agy., St. Luke's - Roosevelt Hosp.
Ctr. FHA - Insured Mtg. Rev. Bds., `89 Ser. B, 6.875%, 02/15/99................................. 240,795
190,000 New York State Mtg. Agy. Rev. Bds., 7th Ser., 8.625%, 04/01/11.................................... 194,495
300,000 Steuben Cnty., NY, IDA Rev. Bds., Ser. '84 (Corning Glass Works),
9.00%, 11/01/04................................................................................. 304,134
------------
5,265,439
------------
NORTH CAROLINA - (0.52%)
95,000 North Carolina Med. Care Comm. Hosp. Rev. Ref. Bds. (Duke University
Hosp. Prj.) Ser. '85A, 8.625%, 06/01/10......................................................... 96,927
200,000 North Carolina Med. Care Comm. Hosp. Rev. Ref. Bds. (Moore Memorial
Hosp. Prj.), 9.10%, 10/01/99.................................................................... 206,694
500,000 Piedmont Hlth. Dev. Auth., Inc., 1st Mtg. Ref. Rev. Bds. (Nash Grove
Manor Inc. Fac., Nashville, North Carolina) Ser. '93A, 8.00%, 01/01/13.......................... 520,870
------------
824,491
------------
NORTH DAKOTA - (0.16%)
400,000 North Dakota State Hsg. Fin. Agy., Sngl. Fam. Mtg. Rev. Bds., Cap.
Appreciation - Ser. A, Zero Cpn., 07/01/08...................................................... 153,132
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
NORTH DAKOTA - Continued
$ 135,000 North Dakota State Hsg. Fin. Agy., Sngl. Fam. Mtg. Rev. Bds., Pacs. -
Ser. A, 0%/9.625%, 07/01/17..................................................................... $ 111,378
------------
264,510
------------
OHIO - (5.31%)
865,000 Belmont Cnty., OH, Hlth. Sys. Rev. (East Ohio Reg'l Hosp.) Ser. '85,
9.50%, 01/01/05................................................................................. 884,212
2,720,000 Cnty. of Clark, OH, Hosp. Ref. Rev. Bds., Ser. '85 (The Community Hosp.)
Ser. '85B, 9.375%, 04/01/08..................................................................... 2,813,894
1,000,000 Cnty. of Cuyahoga, OH, IDR Ref. Bds. (Joy Tech. Inc. Prj.) Ser. '92, 8.75%,
09/15/07........................................................................................ 1,068,320
375,000 Cnty. of Montgomery, OH, Hosp. Fac. Rev. Ref. Bds., Ser. `87 (Dayton
Osteopathic Hosp. Prj.), 7.40%, 12/01/08........................................................ 381,698
1,330,000 Ohio Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. Cap. Appreciation,
Ser. '85 A, Zero Cpn., 01/15/15................................................................. 208,730
70,000 Ohio Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. (GNMA Mtg.-Backed Sec.
Prg.) '90 Ser. C, Zero Cpn., 09/01/02........................................................... 43,653
575,000 Ohio Wtr. Dev. Auth., State of Ohio, Wtr. Dev. Rev. Ref. Bds., 9.25%,
12/01/12........................................................................................ 597,230
610,000 Ohio Wtr. Dev. Auth., State of Ohio, Wtr. Dev. Rev. Ref. Bds., '85 Ref.
and Improvement Ser., 9.375%, 12/01/18.......................................................... 633,924
1,800,000 Ohio Wtr. Dev. Auth., State of Ohio, Collateralized PCR Ref. Bds., Ser. '95
(The Cleveland Elec. Illuminating Co. Prj.), 7.70%, 08/01/25.................................... 1,856,016
------------
8,487,677
------------
OKLAHOMA - (2.36%)
195,000 Cherokee Nation of Oklahoma, Rev. Bds., Ser. '92, 7.75%, 07/01/12<F3>............................. 204,994
1,500,000 Trustees of the Oklahoma Ordnance Works Auth. IDR Ref. Bds. (A.P.
Green Ind., Inc. Prj.) Ser. '92, 8.50%, 05/01/08................................................ 1,564,230
1,975,000 Tulsa IDA Hosp. Rev. Bds. (St. John's Med. Ctr. Prj.) Ser. A, 6.25%,
02/15/17........................................................................................ 1,996,567
------------
3,765,791
------------
PENNSYLVANIA - (5.10%)
240,000 Allegheny Cnty., PA, Residential Fin. Auth. Sngl. Fam. Mtg. Rev. Bds.,
'83-Ser.-B, Zero Cpn., 10/01/15................................................................. 29,342
495,000 Allegheny Cnty. Hosp. Dev. Auth. Hosp. Rev. Ref. Bds., Ser. '85-A (St.
Margaret Memorial Hosp. Prj.), 9.30%, 07/01/99.................................................. 506,390
1,505,000 Allegheny Cnty. Hosp. Dev. Auth. Hosp. Rev. Ref. Bds., Ser. '85-A (St.
Margaret Memorial Hosp. Prj.), 9.80%, 07/01/10.................................................. 1,540,232
85,000 Berks Cnty., PA, IDA IDR (Borg-Warner/Baker Protection Svcs., Inc.)
Ser. '81, 11.10%, 07/01/01...................................................................... 86,125
2,045,000 Berks Cnty., PA, IDA (Supermarkets General Corp. Prj.), 10.50%, 11/01/03.......................... 2,096,043
80,000 Bucks Cnty., PA, IDA Mtg. Rev. (Geriatric and Medical Svcs., Inc. Prj.)
Ser. '92, 9.00%, 07/01/98....................................................................... 87,020
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
PENNSYLVANIA _ Continued
$ 95,000 Chester Cnty., PA, IDA Mtg. Rev. Ref. Bds. (Geriatric and Medical
Svcs., Inc. Prj.) Ser. '92, 9.00%, 07/01/98..................................................... $ 102,284
35,000 Horsham Twp., PA, Sewer Rev. Ref. Bds., 6.00%, 01/01/98........................................... 36,179
980,000 Lehigh Cnty., PA, IDA IDR Ref. Bds. (Allentown Interstate Motel Assoc.
Prj.), Ser. '93, 8.00%, 08/01/12................................................................ 996,601
810,000 Luzerne Cnty., PA, Hsg. Corp. Rev. Bds., 8.125%, 12/01/08......................................... 806,379
345,000 Mercer Cnty., PA, IDA, Gumberg Assoc. - Pine Grove Square, The Kroger
Co., Ind. Dev. 1st Mtg. Rev. Bds., 13.00%, 06/01/07............................................. 359,035
100,000 Montgomery Cnty. (Pennsylvania) IDA Mtg. Rev. Ref. Bds., Ser. '92A
(Geriatric and Medical Svcs., Inc. Prj.), 9.00%, 07/01/99....................................... 105,536
230,000 Pennsylvania Hsg. Fin. Agy., Moderate Rehab. Rev. Bds., 9.00%, 08/01/01........................... 235,235
250,000 Pennsylvania Hsg. Fin. Agy., Sngl. Fam. Mtg. Rev. Bds., Ser. O, 8.125%,
10/01/07........................................................................................ 256,688
280,000 Pennsylvania Hsg. Fin. Agy., Sngl. Fam. Mtg. Rev. Bds., Ser. R, 8.125%,
10/01/19........................................................................................ 287,490
320,000 Philadelphia, PA. Hosp. Rev. Bds., 5.875%, 07/01/08............................................... 334,637
250,000 Warren Cnty., PA, IDA Specialized Dev. Rev. Ref. Bds. (Beverly Enterprises -
Pennsylvania, Inc. Prj.) Ser. '91, 9.00%, 11/01/12.............................................. 275,188
------------
8,140,404
------------
RHODE ISLAND - (0.16%)
250,000 Rhode Island Hlth. & Educational Bldg. Corp. Rev. Bds., 9.50%, 07/01/16........................... 255,793
------------
SOUTH CAROLINA - (1.55%)
400,000 Certificates of Participation, Ser. '90A, South Carolina School Financing
Corp. (School Dist. No. 2 of Sumter Cnty., SC Prj.), 8.125%, 04/01/10........................... 428,352
2,000,000 City of Charleston, SC, Waterworks and Sewer Sys. Ref. Rev. Bds.,
Ser. '86A, 7.00%, 01/01/15...................................................................... 2,044,160
------------
2,472,512
------------
SOUTH DAKOTA - (0.02%)
30,000 South Dakota Bldg. Auth., Rev. Ref. Bds., Ser. of Feb. '84, 10.50%,
09/01/00........................................................................................ 34,113
------------
TENNESSEE - (2.59%)
200,000 Anderson Cnty., TN, Hlth. & Educational Fac. Bd., 1st Mtg. Ref. Rev. Bds.
(Lake City Hlth. Care Ctr. Ltd. Fac.) Ser. '91, 9.00%, 11/01/11................................. 208,360
205,000 Dover, TN, Hlth. & Educ. Fac., IDR (Wessex Corp. Dover Prj.), 9.50%,
09/01/11........................................................................................ 213,216
465,216 Dyer Cnty., TN, Ind. Dev. Brd. IDR Bds. (S.S. Kresge Co. - K-Mart Corp.),
8.10%, 11/01/00................................................................................. 456,437
1,185,000 Lewisburg, TN, IDR Bds. (Mead Corp. Prj.), 7.875%, 02/01/00....................................... 1,193,307
465,000 McMinn Cnty., TN, Ind. Dev. Brd. Rev. Bds., (S.S. Kresge Co.), 8.00%,
11/01/00........................................................................................ 465,256
470,000 New Tazewell, TN, Hlth. Educational & Hsg. Fac. Brd. IDR Bds. (Wessex
Corp. New Tazewell Prj.) Ser. '87, 10.00%, 06/01/17............................................. 482,065
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
TENNESSEE - Continued
$ 700,000 Scott County, TN, IDR (Fruehauf Corp. Prj.) Ser. '88, 10.75%, 01/01/09............................ $ 721,567
395,000 Sevier Cnty., TN, Ind. Dev. Brd. IDR Bds. (The Kroger Co. and Super X
Prj.) Ser. A, 10.25%, 11/01/06.................................................................. 398,879
------------
4,139,087
------------
TEXAS - (8.23%)
285,000 Grand Prairie Hsg. Fin. Corp., Grand Prairie, TX, Sngl. Fam. Mtg. Rev.
Bds., Ser. '85, Ryan Mtg. Co. - Admin.-Servicer, 9.875%, 09/01/05............................... 290,486
1,400,000 Harris Cnty., TX, Hlth. Fac. Dev. Corp. Rev. Bds. (Adj. Conv. Extendible
Secs.), GTR Houston Pooled Htlh. Care, 7.375%, 12/01/25......................................... 1,419,698
590,000 Harris Cnty., TX, Hsg. Fin. Corp., Mtg. Rev. FHA Insured Bds.(South
Lake Villas Apartments), 9.00%, 11/01/05........................................................ 599,688
30,000 Houston, TX, Hsg. Corp. No. 1 Rev. Bds., Long Drive Apartments - Section
8 Assisted, 9.00%, 02/01/20..................................................................... 31,861
2,160,000 Houston Hsg. Fin. Corp. Sngl. Fam. Mtg. Rev. Bds., Ser. '83B (The Lomas
& Nettleton Co. - Admin.), 10.375%, 12/15/13.................................................... 2,169,698
200,000 Houston Hsg. Fin. Corp. Sngl. Fam. Mtg. Rev. Bds., Ser. '84A, 10.875%,
02/15/16........................................................................................ 203,270
2,000,000 The Ind. Dev. Corp. of Port of Corpus Christi, TX, Rev. Bds., Valero
Refng. & Mkg. Co., Ser. A, 10.25%, 06/01/17..................................................... 2,173,120
1,010,000 Jefferson Cnty., TX, Hlth. Fac. Dev. Corp. Hosp. Rev. Bds. (Baptist
Healthcare Sys. Prj.) Ser. '91, 8.875%, 06/01/21................................................ 1,062,621
1,765,000 Orange Cnty. Navigation & Port Dist. Ind. Dev. Corp. (Texas), North
Star Stl. TX, Inc. Prj., 9.50%, 12/01/04........................................................ 1,824,975
1,000,000 Southeast TX, Hsg. Fin. Corp. Multi-Fam. Hsg. Rev., 1st Mtg. Rev. Bds.
(The Ridge Apartments Prj.), 8.30%, 11/01/23.................................................... 740,000
1,555,000 Texas Hsg. Agy., Residential Mtg. Rev. Bds., Ser. '87D, 8.40%, 01/01/21........................... 1,637,213
230,000 Texas St. Higher Educ. Coordinating Brd., College Student Loan Rev. Bds.,
7.20%, 04/01/02................................................................................. 240,216
50,000 Texas Wtr. Res. Fin. Auth. Rev. Bds., Ser. '89, 7.625%, 08/15/08.................................. 53,500
150,000 Texas Wtr. Res. Fin. Auth. Rev. Bds., Ser. '89, 7.50%, 08/15/13.................................. 160,454
500,000 Thomason Hlth. Fac. Dev. Corp., Hlth. Fac. Rev. Bds. (El Paso Cnty.
Hosp. Dist. Ltd. Tax Equip. Fin. Prg.) Ser. '90, 7.20%, 08/15/98................................ 533,810
------------
13,140,610
------------
UTAH - (0.17%)
2,140,040 Utah State Hsg. Fin. Agy. Rev. Bds. Cap. Appreciation Residential Mtg.,
Ser. '83A, Zero Cpn., 07/01/16.................................................................. 268,746
------------
VERMONT - (1.26%)
1,500,000 Vermont Hsg. Fin. Agy. Multi-Fam. Hsg. Bds., '79 Ser. A, 8.50%,
02/15/21........................................................................................ 1,520,070
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
MUNICIPAL BONDS - Continued Value
Principal (Note 1)
- --------- ------
VERMONT - Continued
$ 485,000 Vermont Muni Bd. Bank, General Purpose/Pub. Improvement Ser. A & B,
8.75%, 12/01/96................................................................................. $ 488,337
------------
2,008,407
------------
VIRGINIA - (1.05%)
460,000 IDA of the City of Norfolk, IDR Bds. (Ralston Purina Co. Prj.) Ser. '81,
11.00%, 06/01/01................................................................................ 467,089
365,000 IDA of Covington-Alleghany Cnty., VA, IDR Ref. Bds. (Beverly
Enterprises, Inc. Prj.) Ser. '91, 9.375%, 09/01/01.............................................. 409,453
1,100,000 Virginia St. Hsg. Dev. Auth. Comnwlth. Mtg., Ser. A, Subser. A-1,
Zero Cpn., 01/01/01............................................................................. 802,945
------------
1,679,487
------------
WEST VIRGINIA - (3.41%)
165,000 Berkeley Brooke Fayette Etc. Cnty., WV, Sngl. Fam. Mtg. Rev. Bds., Ser. A,
9.10%, 08/01/11................................................................................. 168,044
390,000 Beverly, WV, Hsg. Corp. Mtg. Rev. Bds., Ser. `81 (Beverly Manor/FHA -
Insured/Section 8 Prj.), 11.00%, 11/15/22....................................................... 437,974
360,000 Glasgow, WV, Hlth. Fac. Rev. Ref. Bds. (Beverly Enterprises, Inc. Prj.)
Ser. '91, 9.50%, 09/01/01....................................................................... 407,959
275,000 The Ohio Cnty. Bldg. Comm., WV, Hlth. Sys. Rev. Ref. Bds. (Ohio
Valley Med. Ctr. Issue) Ser. `85, 9.30%, 01/01/99............................................... 273,171
2,400,000 The Ohio Cnty. Bldg. Comm., WV, Hlth. Sys. Rev. Ref. Bds. (Ohio
Valley Med. Ctr. Issue) Ser. `85, 9.625%, 01/01/13.............................................. 2,333,088
25,000 Putnam Cnty., WV, IDR (IDR Bds.) Rite Aid West Virginia Inc., 10.375%,
11/01/02........................................................................................ 25,520
845,000 West Virginia Hsg. Dev. Fd., Hsg. Fin. Bds., `76 Ser. A, 7.25%, 11/01/18.......................... 855,571
935,000 West Virginia Hsg. Dev. Fd., Rental Dev. Prg. Bds., Ser. C (Section 8
Assisted Dev.), 10.00%, 07/01/15................................................................ 952,073
------------
5,453,400
------------
WISCONSIN - (1.62%)
300,000 Clear Lake, WI, Sewer Sys. Mtg. Rev. Bds., 8.00%, 08/01/11........................................ 324,612
170,000 Wisconsin Hlth. Fac. Auth. Rev. Ref. Bds., Hosp. Sisters Svcs. Sys.,
Ser. D, 9.125%, 07/01/05........................................................................ 174,121
1,000,000 Wisconsin Hlth. Fac. Auth. Rev. Bds., Ser. `85 (Riverview Hosp.
Assoc. Prj.), 9.00%, 05/01/11................................................................... 1,024,110
1,030,000 Wisconsin St., Ser. B, 7.60%, 01/01/20............................................................ 1,064,443
------------
2,587,286
------------
Total Municipal Bonds - (identified cost $ 151,193,251)...................................... 153,119,474
------------
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
Value
Principal (Note 1)
- --------- ------
SHORT TERM - (0.48%)
$ 760,000 Federal Home Loan Bank Discount Note, 5.25%, 04/01/96
(identified cost $759,778)...................................................................... $ 759,778
------------
Total investments - (identified cost $151,953,029)(96.35%) <F1>.............................. 153,879,252
Other assets less liabilities - (3.65%)...................................................... 5,830,326
------------
Net assets - (100%).......................................................................... $159,709,578
============
<FN>
<F1> Aggregate cost for Federal income tax purposes is $151,953,029.
At March 31, 1996 unrealized appreciation (depreciation) of securities for
Federal income tax purposes was as follows:
Unrealized appreciation........................................................................... $ 3,640,976
Unrealized depreciation........................................................................... (1,714,753)
------------
Net unrealized appreciation....................................................................... $ 1,926,223
============
<F2> Security is paying less than stated interest rate.
<F3> Represents securities valued at fair value in good faith by the Board of Directors.
</FN>
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Statement of Assets and Liabilities
At March 31, 1996 (Unaudited)
================================================================================================================================
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $151,953,029) (Note 1).................................... $153,879,252
Cash........................................................................................................... 525,514
Receivables:
Interest..................................................................................................... 3,731,169
Capital stock sold........................................................................................... 117,629
Investment securities sold................................................................................... 2,839,800
Prepaid expenses............................................................................................... 61,172
------------
Total assets........................................................................................... 161,154,536
------------
LIABILITIES:
Payables:
Capital stock reacquired..................................................................................... 222,896
Investment securities purchased.............................................................................. 867,357
Commissions to distributor (Note 5).......................................................................... 168,000
Accrued expenses............................................................................................... 186,705
------------
Total liabilities...................................................................................... 1,444,958
------------
NET ASSETS (Note 5).............................................................................................. $159,709,578
============
CLASS A SHARES
Net assets................................................................................................... $ 43,404,674
Shares outstanding........................................................................................... 4,768,430
Net asset value and redemption price per share (net assets/shares outstanding)............................... $ 9.10
---------
Maximum offering price per share (100/95.25 of $9.10)........................................................ $ 9.55
=========
CLASS B SHARES
Net assets................................................................................................... $116,304,904
Shares outstanding........................................................................................... 12,811,353
Net asset value, offering and redemption price per share (net assets/
shares outstanding)........................................................................................ $ 9.08
=========
Net assets consist of:
Undistributed net income....................................................................................... $ 270,948
Unrealized appreciation on investments......................................................................... 1,926,223
Accumulated net realized gain.................................................................................. (3,159)
Paid-in capital................................................................................................ 157,515,566
------------
Net assets............................................................................................. $159,709,578
============
</TABLE>
See Notes to Financial Statements
<TABLE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Statement of Operations
For the six months ended March 31, 1996 (Unaudited)
================================================================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest...................................................................................... $ 6,374,029
------------
Expenses:
Management fees (Note 3)...................................................................... $ 623,838
Custodian fees................................................................................ 81,379
Transfer agent fees........................................................................... 72,469
Audit fees.................................................................................... 17,300
Legal fees.................................................................................... 10,000
Accounting fees (Note 3)...................................................................... 22,500
Reports to shareholders....................................................................... 14,918
Directors fees and expenses................................................................... 28,926
Registration and filing fees.................................................................. 29,562
Miscellaneous................................................................................. 12,775
Commissions paid under distribution plan (Note 5)
Class A..................................................................................... 51,396
Class B..................................................................................... 591,618
------------
Total expenses......................................................................................... 1,556,681
------------
Net investment income................................................................................ 4,817,348
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions................................................................... 199,211
Net decrease in unrealized appreciation of investments during the period......................................... (950,578)
------------
Net realized and unrealized gain (loss) on investments........................................................... (751,367)
------------
Net increase in net assets resulting from operations............................................................. $ 4,065,981
============
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Statement of Changes in Net Assets
================================================================================================================================
<CAPTION>
Six Months
Ended Year Ended
March 31, 1996 September 30,
(Unaudited) 1995
-------------- --------------
<S> <C> <C>
Operations:
Net investment income............................................................... $ 4,817,348 $ 9,954,694
Net realized gain from investment transactions...................................... 199,211 1,053,761
Net increase (decrease) in unrealized appreciation
of investments.................................................................... (950,578) 991,288
-------------- --------------
Net increase in net assets resulting
from operations............................................................... 4,065,981 11,999,743
Distributions to shareholders from:
Distribution from net investment income
Class A ($0.27 and $0.40 per share, respectively)............................... (1,313,635) (1,972,849)
Class B ($0.24 and $0.48 per share, respectively)............................... (3,232,766) (7,981,845)
Distribution from gains from investment transactions
Class A ($0.06 and $0.01 per share, respectively)............................... (290,460) (39,640)
Class B ($0.06 and $0.01 per share, respectively)............................... (814,882) (111,149)
Distribution in excess of net investment income
Class B ($0.01 per share)....................................................... _ (235,293)
Capital share transactions (Note 4)................................................... (10,892,596) (18,344,618)
-------------- --------------
Total increase (decrease) in net assets..................................... (12,478,358) (16,685,651)
Net Assets:
Beginning of year..................................................................... 172,187,936 188,873,587
-------------- --------------
End of year (including undistributed net investment
income of $270,948 and $-0-, respectively).......................................... $ 159,709,578 $ 172,187,936
============== ==============
</TABLE>
See Notes to Financial Statements
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND
Notes to Financial Statement
At March 31, 1996 (Unaudited)
==============================================================================
Note 1 - Summary of Significant Accounting Policies
Davis Tax-Free High Income Fund (formerly Venture Muni (+) Plus,
Inc.) is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The Fund's
investment objective is to provide current income free from federal
income tax by investing in municipal obligations. The Fund may invest in
high yield, high risk, low rated and unrated bonds commonly referred to as
"junk bonds." Such securities are speculative and subject to greater
market fluctuations and risk of loss of income and principal than higher
rated bonds. On December 1, 1994, the Company commenced the offering
of shares in two classes, Class A and Class B. The Class A shares are sold
with a front-end sales charge and the Class B shares are sold at net asset
value and may be subject to a contingent deferred sales charge upon
redemption. All classes have identical rights with respect to voting
(exclusive of each Class's 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
Municipal bonds are normally valued on the basis of prices provided
by a pricing service. Securities not priced in this manner are priced at the
last sales price if traded on that day and, if not traded, at the mean
between the most recent quoted bid and ask prices provided by investment
dealers. Short-term obligations are valued at amortized cost, which
approximates value. The pricing service and valuation procedures are
reviewed and subject to approval by the Board of Directors.
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 tax-exempt and taxable income to
shareholders. Therefore, no provision for federal income tax is required.
Securities Transactions
Securities transactions are accounted for on the trade date (date the
order to buy or sell is executed) with gain or loss on the sale of securities
being determined based upon identified cost.
Investment Income and Distributions to Shareholders
Interest income is recorded on the accrual basis. Dividends and
distributions to shareholders are recorded on the ex-dividend date.
Premiums on tax-exempt securities, original issue discounts and market
discounts are amortized to investment income for financial reporting and
tax purposes. Premiums are amortized over the life of the respective
securities or to the earliest call date, if applicable.
Note 2 - Purchases and Sales of Securities
Purchases and sales of investment securities (excluding short-term
securities) during the six months ended March 31, 1996, were
$87,703,532 and $99,363,030, 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. (formerly Selected/Venture Advisers, L.P.) (the "Adviser").
The agreement provides for a monthly fee of .0625 of 1% (equivalent to
.75 of 1% per annum) of the first $250 million of average daily net
assets of the Fund. Effective May 1, 1996, the management agreement was
amended
DAVIS TAX-FREE HIGH INCOME FUND
Notes to Financial Statements - Continued
At March 31, 1996 (Unaudited)
==============================================================================
Note 3 - Investment Advisory Fees and Other Transactions with Affiliates
- - (continued)
and the monthly fee was changed to .0542 of 1% (equivalent to .65 of 1%
per annum) of the first $250 million of average daily net assets of the
Fund. Regardless of the above provision, the Adviser will pay or refund to
the Fund all expenses borne by the Fund in any fiscal year (including the
advisory fee, but excluding interest, taxes, brokerage fees, payments made
to the Distributor under any Rule 12b-1 Distribution Plan adopted by the
Fund and, where permitted, extraordinary expenses) that exceed
limitations imposed by the most restrictive state securities laws or
regulations. The Adviser must reimburse the Fund for any such excess at
least annually, up to the amount of its advisory fee. The Adviser believes
that the most restrictive expense limitations presently applicable are 2
1/2% for the first $30 million of average net assets, 2% for the next $70
million of average net assets and 1 1/2% for any additional average net
assets. The Adviser is paid for registering Fund shares for sale in various
states. The fee for the six months ended March 31, 1996 amounted to
$6,000. The Adviser is paid for certain transfer agent services. The fee
for the six months ended March 31, 1996 amounted to $7,421. The Adviser
is also paid for certain accounting services. The fee for the six months
ended March 31, 1996 amounted to $22,500. Certain directors and the
officers of the Fund are also officers and directors of the general partner
of the Adviser.
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 March 31, 1996, the Fund's Underwriter,
Davis Selected Advisers, L.P., received $16,797 from commissions earned
on sales of Class A shares of the Fund of which $2,690 was retained by
the Underwriter and the remaining $14,107 was reallowed to investment
dealers. Davis Selected Advisers, L.P. 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
maintenance fee with respect to Class A shares sold by dealers and
remaining outstanding during the period. The maintenance fee is paid at
the annual rate of 1/4 of 1% of the average net assets maintained by the
responsible dealers. The Underwriter is not reimbursed for accounts in
which the Underwriter pays no service fees to other firms. The
maintenance fee for Class A shares of the Fund for the six months ended
March 31, 1996 was $51,396.
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 compensates the Distributor with a 4% commission on the
proceeds from the sale of the Fund's Class B shares (subject to the limits
described below) and the Distributor pays 4% to the qualified dealer
responsible for the sale of the shares. A rule implemented by the National
Association of Securities Dealers, Inc., ("NASD") limits the percentage of
the Fund's annual average net assets attributable to Class B shares which
may be paid to the Distributor in connection with the distribution of its
shares. 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.
DAVIS TAX-FREE HIGH INCOME FUND
Notes to Financial Statements - Continued
At March 31, 1996 (Unaudited)
==============================================================================
Note 4 - Distribution and Underwriting Fees - (Continued)
Class B Shares - (Continued)
The NASD rule also limits the aggregate amount the Fund may pay for
distribution-related services to 6.25% of gross Fund 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 new 1% annual
limit in some future period or periods when the plan limits have not been
reached.
During the six months ended March 31, 1996, Class B shares of the
Fund made distribution plan payments which included commissions of
$456,456 and maintenance fees of $135,162.
Commissions earned by the Distributor during the six months ended
March 31, 1996 on the sale of Class B shares of the Fund amounted to
$127,915 of which $122,336 was reallowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the
Fund in the amount of $2,434,606, representing the cumulative
commissions earned by the Distributor on the sale of the Fund's Class B
shares, plus interest, reduced by cumulative commissions paid by the Fund
and cumulative contingent deferred sales charge 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.
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. During the six months ended March 31, 1996 the Distributor
received contingent deferred sales charges from Class B shares of the
Fund of $126,241, (Prior to December 1, 1994, the charge was a declining
percentage starting at 4% of the lesser of net asset value of the shares
redeemed or the total cost of such shares. The charge was imposed upon
redemption of certain Class B shares of the Fund within four calendar
years of the original purchase).
Note 5 - Capital Stock
At March 31, 1996, there were 1,000,000,000 shares of capital
stock ($0.01 par value per share) authorized. Transactions in capital stock
were as follows:
<TABLE>
<CAPTION>
For the Six Months
Ended March 31, 1996
Class A (Unaudited)
--------------------
Shares Amount
------ ------
<S> <C> <C>
Shares sold............................................................................. 123,332 $ 1,127,328
Shares issued to shareholders in connection with
reinvestment of distributions......................................................... 97,366 889,468
------------ ------------
220,698 2,016,796
Shares reacquired....................................................................... (400,807) (3,669,658)
------------ ------------
Net decrease.................................................................. (180,109) $ (1,652,862)
============ ============
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Notes to Financial Statements - Continued
At March 31, 1996 (Unaudited)
========================================================================================================================
Note 5 - Capital Stock - (Continued)
For the Ten Months ended
Class A - Continued September 30, 1995
----------------------------
Shares Amount
------ ------
Shares sold............................................................................. 5,537,144 $ 49,420,038
Shares issued to shareholders in connection with
reinvestment of distributions......................................................... 115,852 1,057,589
------------ ------------
5,652,996 50,477,627
Shares reacquired....................................................................... (704,457) (6,432,629)
------------ ------------
Net increase.................................................................. 4,948,539 $ 44,044,998
============ ============
For the Six Months
Ended March 31, 1996
Class B (Unaudited)
----------------------------
Shares Amount
------ ------
Shares sold............................................................................. 468,101 $ 4,275,579
Shares issued to shareholders in connection with
reinvestment of distributions......................................................... 232,232 2,118,111
------------ ------------
700,333 6,393,690
Shares reacquired....................................................................... (1,712,887) (15,633,424)
------------ ------------
Net decrease.................................................................. (1,012,554) $ (9,239,734)
============ ============
For the Year Ended
September 30, 1995
----------------------------
Shares Amount
------ ------
Shares sold............................................................................. 2,538,110 $ 22,901,839
Shares issued to shareholders in connection with
reinvestment of distributions......................................................... 453,075 4,103,609
------------ ------------
2,991,185 27,005,448
Shares reacquired....................................................................... (9,952,705) (89,395,064)
------------ ------------
Net decrease.................................................................. (6,961,520) $(62,389,616)
============ ============
</TABLE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
Financial Highlights
================================================================================
The following financial information represents financial highlights for
each share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
--------Class A--------- ----------------------------Class B------------------------------
Six Months Six Months
ended Ten Months ended
March 31, ended March 31, Year ended September 30,
1996 Semptember 30, 1996 -------------------------------------------------
(Unaudited) 1995 (Unaudited) 1995 1994 1993 1992 1991
--------- ---- --------- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period........................ $ 9.19 $ 8.90 $9.17 $ 9.09 $ 9.65 $ 9.49 $ 9.41 $ 9.30
Income From Investment
- ----------------------
Operations
- ----------
Net Investment Income............ .29 .40 .25 .48 .44 .54 .54 .67
Net Gains or Losses on
Securities (both
realized and unrealized)....... (.05) .30 (.04) .10 (.18) .29 .27 .22
Total from Investment ------ ------ ------ ------ ------ ------ ------ ------
Operations................. .24 .70 .21 .58 .26 .83 .81 .89
------ ------ ------ ------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net
investment income)............. (.27) (.40) .24 (.48) (.44) (.54) (.54) (.67)
Distribution from gains from
investment transactions........ (.06) (.01) (.06) (.01) (.28) _ _ _
Distribution in excess
of net investment income....... _ - - (.01) (.07) (.10) (.12) (.11)
Tax Return of capital
distributions.................. _ _ - - (.03) (.03) (.07) _
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions............ (.33) (.41) (.30) (.50) (.82) (.67) (.73) (.78)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period.................... $ 9.10 $ 9.19 $ 9.08 $ 9.17 $ 9.09 $ 9.65 $ 9.49 $ 9.41
====== ====== ====== ====== ====== ====== ====== ======
Total Return <F1>.................. 2.65% 7.93% 2.32% 6.76% 2.81% 9.10% 8.89% 10.09%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted).................. 43,405 45,461 116,305 126,727 188,874 164,018 124,227 91,718
Ratio of Expenses to
Average Net Assets............. 1.33%<F2> 1.43%<F2> 2.07%<F2> 2.14% 2.07% 2.26% 2.41% 2.41%
Ratio of Net Income to
Average Net Assets............. 6.33%<F2> 5.95%<F2> 5.59%<F2> 5.37% 4.59% 5.50% 5.53% 7.13%
Portfolio Turnover Rate.......... 53.42% 127.80% 53.42% 127.80% 113.46% 107.80% 47.31% 55.07%
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Annualized
</FN>
</TABLE>
This page is intentionally left blank.
===============================================================================
DAVIS TAX-FREE HIGH INCOME FUND, INC.
124 East Marcy Street Santa Fe, New Mexico 87501
===============================================================================
Directors Officers
Wesley E. Bass Jeremy H. Biggs
Jeremy H. Biggs Chairman
Marc P. Blum Shelby M.C. Davis
Shelby M.C. Davis President
Eugene M. Feinblatt Carl R. Luff
Jerry D. Geist Vice President, Treasurer
D. James Guzy & Assistant Secretary
G. Bernard Hamilton Raymond O. Padilla
LeRoy E. Hoffberger Vice President, Secretary
Laurence W. Levine & Assistant Treasurer
Martin H. Proyect Carolyn H. Spolidoro
Christian R. Sonne Vice President
Edwin R. Werner Andrew A. Davis
Vice President
Christopher C. Davis
Vice President
Eileen R. Street
Assistant Treasurer
& Assistant Secretary
Investment Adviser & Distributor
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
Transfer Agent & Custodian
State Street Bank and Trust Company
c/o The Davis Funds
P.O. Box 8406
Boston, MA 02266-8406
Counsel
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
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For more information about Davis Tax-Free High Income Fund including
management fee, charges and expenses, see the current prospectus which
must precede or accompany this report.
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9605-10 DTFHIF70
