<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
Dear Shareholder:
PERFORMANCE REVIEW
The Davis Tax-Free High Income Fund continued to post impressive growth in
assets under management over its latest six-month period, with total fund
assets doubling to $477 million on March 31, 1998 from $227 million on
September 30, 1997. 1
Your fund is attracting strong cash inflows from investors because of its
superior risk-adjusted performance and its high yield relative to the
portfolio's credit quality and because of the scarcity of other values in the
marketplace. Moreover, most of the fund's return comes from tax-free income,
rather than capital gains, which is a significant advantage for shareholders in
high tax brackets. Furthermore, the fund benefits from having had the same
portfolio manager--B. Clark Stamper--consistently applying a rigorous
investment discipline for almost eight years.
Your fund targets risk-adjusted performance and, as of March 31, 1998, held
Morningstar's highest risk-adjusted rating, ***** (five stars), for all time
periods measured for both its Class A and Class B shares. The Fund's Class A
shares earned 5 stars rated against 1,525 municipal bond funds for the
three-year period ended March 31, 1998. The Fund's Class A shares inception
date is December 1, 1994. The Fund's Class B shares earned 5 stars rated
against 1,525, 782 and 345 municipal bond funds for the three, five and ten
year periods ended March 31, 1998, respectively. 2 This superior risk-adjusted
rating was achieved, in part, by the fund's low level of volatility in addition
to its total return. In fact, the fund has achieved a positive return in every
year since its inception in March, 1985. Of course, there can be no assurance
that the Fund will continue to achieve a positive return every year in the
future.
The fund's volatility is so low that Morningstar classifies it as a short-term
municipal fund. According to Morningstar, "To use stock lingo, you could call
Stamper a value-oriented investor. He is that rare contrarian who has managed
to do well no matter the type of market. While the fund will never keep up with
longer-duration peers during rallies, it generally tops the short-term
category....the fund even shone when rates rose in 1994." 3
In an analysis of 180 tax-free load funds based on Morningstar data, the March,
1998 issue of Ticker selected the Davis Tax-Free High Income Fund as "a very
safe short-term fund." According to Ticker, "This short-term fund manages to
produce above-average returns while recording a minuscule standard deviation.
And good news for pessimists: The fund particularly shines in down markets. In
1994, when bonds tanked, Davis stayed firmly in the black. Manager B. Clark
Stamper holds a broadly diversified portfolio....He gets top returns by
scouring the corners of the market for bargains." 4
In terms of absolute performance, the fund's Class A shares provided a total
return on net asset value of 3.32% for the six months ended March 31, 1998. 5
While the fund's absolute total return lagged the average return of other
high-yield municipal bond funds tracked by Lipper Analytical Services, Inc.,
its risk level is considerably lower than other funds in that peer group. The
average credit quality rating of your fund's portfolio is currently AA- for the
securities that are rated. This investment-grade rating is considerably higher
than the quality rating of most high-yield municipal bond funds.
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
A LOW-RISK, HIGH-RETURN COMPLEMENT TO EQUITY HOLDINGS
The yield on the Davis Tax-Free High Income Fund Class A shares continues to
generate the equivalent of almost 9% a year in taxable income for investors in
the highest tax bracket 6, offering the opportunity to earn equity-type returns
with lower risk while broadening portfolio diversification.
This remains true even though the fund's monthly dividend was decreased as of
February 2, 1998 because of the decline in long-term interest rates and the
large number of bonds called in by issuers prior to maturity. The new monthly
dividend is $0.0465 on the Class A shares versus $0.053 before and $0.04075 on
the Class B shares versus $0.04715 before.
CAPITALIZING ON VALUE OPPORTUNITIES THROUGH RIGOROUS RESEARCH
Similar to the Davis equity investment discipline, the Davis Tax-Free High
Income Fund employs a contrarian value-oriented investment philosophy. We take
a long-term view, concentrating primarily on evaluating the risk and reward
trade-offs of different investments through a disciplined research process.
While providing current income free from federal income tax, our objective is
to maximize total return relative to the amount of risk taken and to maximize
tax-free income.
We build the portfolio bond by bond, using a bottom-up investment approach. Our
primary tool is in-depth credit analysis of municipal bond issuers in order to
minimize credit risk. We also analyze each individual investment's security
characteristics in terms of upside potential and downside protection in
relation to interest rate risk and call risk. In addition, we employ top-down
management techniques, monitoring the fund's investments in different types of
securities and strategies to assure proper portfolio diversification.
EFFECTIVE RISK-ADJUSTED STRATEGIES
Your fund continues to employ the same investment strategies that it used to
achieve its top risk-adjusted performance rating. To obtain extra yield
relative to credit quality, your Fund invests in bonds that are out of the
spotlight and often mispriced. These include housing bonds and bonds backed by
medical facilities as well as industrial revenue bonds, which are municipal
bonds backed by corporations. While many municipal investors are not
comfortable analyzing corporate credits, Portfolio Manager Stamper is because
he also manages the Davis High Income Fund, our high-yield taxable bond fund.
To gain a more than proportionate amount of downside protection when the market
seems high--as it has for quite some time--your fund relinquishes some upside
potential by buying "cushion" bonds. These are bonds that pay higher interest
rates but trade at relatively low prices because of the expectation that the
bonds will be called in by the issuer at the earliest possible date. Through
careful research, we seek to identify issues that are unlikely to be called
despite the market's expectation. Because the bonds are purchased at relatively
low prices, the fund has some protection or "cushion" if the market drops.
Further, if the bonds remain outstanding after the anticipated call date--as
has occurred with many of the cushion bonds the fund owns--the fund continues
collecting the bonds' high tax-free income.
HOW NEW MONEY WAS INVESTED
Even in an environment where prices of most kinds of investments are
historically high, our research efforts have continued to uncover sound
investment opportunities. Moreover, a large portion of the new shareholder
money the fund received during the past six months has been invested according
to the fund's signature
2
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
investment approach in overlooked special situation or "story" bonds that offer
more yield per credit quality and better upside/downside characteristics.
One example of a recent cushion bond investment is the fund's purchase of New
York State Medical Care 8% bonds due on February 15, 2027. These bonds are
backed by the Federal Housing Administration, and are also partially
prerefunded and escrowed by U.S. government securities. This issue has been
callable since August 15, 1997 at a price of $102 ( $1,020 per bond). The fund
purchased the bonds in November at what would have been a negative yield if the
bonds had been called immediately. But the bonds are still outstanding, and if
they remain outstanding until maturity, the fund will earn a 7.66% yield to
maturity on its investment. 7
Many of your fund's recent investments have been add-on purchases of securities
the fund already owned that we believe continue to represent good value. For
example, we made several add-on investments in Massachusetts State multifamily
housing bonds with a 9 1/2% interest coupon due on July 1, 2012 -- a bond we
have owned since 1994. This issue tends to trade cheaply because it is
partially callable at par in the event of default. While there is some call
risk, investors' principal is protected because the bond is insured by MBIA, a
private insurance company. As a result, the bond carries a triple-A credit
rating. 7
PRUDENTLY POSITIONED FOR UNCERTAIN MARKETS
While the bond market rallied modestly over the latest six-month period, we
remained concerned about the market outlook--particularly the possibility of a
credit crunch. With consumer debt at record levels, individuals' borrowing
capacity may be limited and current levels of purchasing could be curtailed in
the future. Today's high stock prices are also worrisome because of the impact
any significant stock market decline could have on consumer liquidity. Any of
these developments could drive interest rates higher, as could a re-escalation
of currency and financial problems in the Far East.
Furthermore, credit quality spreads--that is, the difference between the yields
on low-quality bonds and those of high-quality bonds--remain extremely tight
because investor demand for higher yielding low-quality bonds is so strong. As
a result, investors are being paid very little extra yield for taking on the
greater risk associated with low-quality bonds. It seems unlikely that spreads
can tighten much further from here. When spreads begin to widen to more normal
levels, as they inevitably will, lower quality bonds should underperform higher
quality bonds.
Given the uncertain market environment, your fund continues to be positioned
defensively with respect to credit quality and interest rate movements, much as
it has been for most of the past several years. To lower overall risk, the
portfolio remains highly diversified among issuers, types of bonds and
investment strategies. At the end of March, the fund held 527 positions in 49
states plus Washington D.C. and Puerto Rico.
In addition, with its average credit quality rating of AA-, the fund's credit
quality remains high. As a further measure of the fund's defensive posture,
approximately 34% of the bonds it owns are backed by private municipal bond
insurance or a federal agency.
Furthermore, the fund's core holdings of high-coupon municipals offer less
volatility because high-yield bonds tend to be much less affected by interest
rate increases. These high-coupon holdings should also provide ample tax-free
income under most scenarios.
3
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
POISED FOR PERFORMANCE
As a result of these strategies, your fund has the potential to outperform its
peer group in a rising or flat interest rate environment or in an environment
where credit quality weakens or stays the same--which is the environment we
expect in 1998. While our strategies provide extra yield and downside
protection, they would also limit the fund's upside potential if interest rates
dropped substantially, fueling a strong bond market rally, or the credit
quality environment improved dramatically due to a booming economy.
We believe the fund's prudent philosophy and defensive strategies will reward
shareholders with strong performance, consistent with our focus on minimizing
volatility and maximizing long-term risk-adjusted returns.
Sincerely,
Shelby M.C. Davis B. Clark Stamper
Chief Investment Officer Portfolio Manager
May 29, 1998
1 These figures include the Fund's total net assets for all classes of shares.
2 Morningstar proprietary ratings reflect historical risk-adjusted performance
as of March 31, 1998. Subject to change every month, Morningstar ratings are
calculated from a fund's three, five, and ten year average annual total returns
in excess of 90-day Treasury bill (T-bill) returns, with appropriate fee
adjustments and a risk factor that reflects fund performance below 90-day
T-bill returns. 10% of the funds in an investment category receive five stars.
The next 22.5% receive four stars. The next 35% receive three stars. The next
22.5% receive two stars, and 10% receive one star.
Star ratings for the Fund's other classes of shares may vary and are available
only for those classes with at least three years of performance history. Past
performance is no guarantee of future results.
3 Morningstar Mutual Funds, January 5, 1998.
4 Ticker Magazine, March, 1998.
4
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
5 All performance figures cited in this letter are calculated without
considering sales commissions. The total return for the Fund's Class A shares,
including the maximum front-end sales charge of 4.75%, for the six month period
ending March 31, 1998 was -1.59%. The average annual total returns for the
Fund's Class A shares, including the maximum front-end sales charge of 4.75%,
for the one and three year periods ended March 31, 1998 and for the period
December 1, 1994 though March 31, 1998 (life of Class ) were 2.40%, 5.12% and
6.06%, respectively.
6 On March 31, 1997, the tax-exempt SEC 30 day yield on the Davis Tax-Free High
Income Fund's Class A shares was 5.28%, which is equivalent to a taxable yield
of 8.74% for investors in the top 39.6% federal tax bracket.
7 The Fund's portfolio securities as of March 31, 1998, including the
securities discussed in this letter, are listed in the Schedule of Investments.
5
<PAGE>
<TABLE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
At March 31, 1998 (Unaudited)
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - (98.08%)
<S> <C> <C>
ALABAMA - (1.18%)
$ 150,000 Alabama Hsg. Fin. Auth., Sngl. Fam. Hsg. Rev. Bds. (MBIA Insured)
`82 Ser. A, 6.00%, 06/01/13................................................ $ 107,195
600,000 Anniston, AL, Reg'l Med. Ctr. Brd. Hosp. Rev. Ref. Bds. (Northeast
Alabama Reg'l Med. Ctr.) `86 Ser. A, 7.70%, 07/01/08....................... 607,458
1,365,000 Birmingham Med. Ctr., Eastern Alabama Special Care Fac. Rev. Ref. Bds.
(MBIA Insured) , 7.25%, 07/01/15........................................... 1,376,084
255,000 Houston Cnty., AL, (Southeast Alabama Med. Ctr. Prj.) (MBIA Insured),
7.625%, 04/01/07........................................................... 278,180
115,000 Ozark, AL, Medical Clinic Brd. 1st Mtg. Rev. Bds. (United States Hlth. &
Hsg. Foundation, Inc. Prj.), 9.25%, 10/01/99............................... 120,313
1,000,000 Prattville, AL, Ind. Dev. Brd. (Pollution Control Rev. Union Camp Corp.
Prj.), 5.875%, 03/01/08.................................................... 1,004,130
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%, 07/01/18.. 555,665
1,000,000 The West Jefferson Amusement and Public Park Auth. (Alabama) 1st Mtg.
Rev. Bds. (Visionland Alabama Prj.) Ser. `96, 7.50%, 12/01/08.............. 1,062,340
500,000 The West Jefferson Amusement and Public Park Auth. (Alabama) 1st Mtg.
Rev. Bds. (Visionland Alabama Prj.) Ser. `96, 8.00%, 12/01/26.............. 527,675
---------------
5,639,040
---------------
ALASKA - (0.11%)
490,000 Alaska St. Hsg. Fin. Corp. Collateralized Home Mtg. Bds. - Ser. `89A-1,
7.625%, 12/01/13........................................................... 503,206
--------------
ARIZONA - (1.86%)
145,000 Chandler, AZ, Improvement Dist. No. 51, 7.875%, 01/01/99..................... 146,451
1,275,000 City of Tolleson Muni Fin. Corp. Rev. Bds., Ser. of '85, 9.20%, 09/01/05..... 1,307,385
230,000 Coconino & Mohave Cntys., AZ, Unified School Dist. No. 6, Cap.
Appreciation Ref. Bds., Zero Cpn., 07/01/02................................ 192,195
625,000 The IDA of the City of Casa Grande, AZ, Dev. Rev. Bds. (Five Points
Redevelopment Prj.), Sr. Bds., 8.25%, 12/01/15............................. 678,113
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.... 530,150
2,000,000 The IDA of the Cnty. of Apache, AZ, Ser. '98A, 5.85%, 03/01/26............... 2,022,180
2,000,000 The IDA of the Cnty. of Apache, AZ, Ser. `98A, 5.85%, 03/01/28............... 2,022,180
75,000 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.......................... 77,505
13,015,000 Phoenix, AZ, IDA Sngl. Fam. Mtg. Rev. Bds., Ser. '84, Zero Cpn.,
12/01/15................................................................... 1,917,240
---------------
8,893,399
---------------
ARKANSAS - (0.22%)
5,000 Arkansas St. Dev. Fin. Auth., Sngl. Fam. Mtg. Rev. Bds., Conventional &
FHA-MBIA Insured, Ser. '85 A, 9.375%, 08/01/14............................. 5,124
6
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
ARKANSAS - CONTINUED
$ 500,000 Independence Cnty., AR, PCR, (Mississippi Pwr. & Lt. Co. Prj.) '82-A
Ser. B, 9.50%, 07/01/14................................................... $ 528,510
---------------
520,000 Jefferson Cnty, AR, Rev. Ref. Bds. (Entergy Ark, Inc. Prj.), 5.60%, 10/01/17. 524,675
---------------
1,058,309
CALIFORNIA - (7.31%)
66,000 California Educ. Fac. Auth. Rev. Bds. (Pooled Ref. Prg.) (MBIA Insured)
Ser. `86, 6.70%, 11/01/09.................................................. 66,817
3,655,000 California Hlth. Fac. Fin. Auth. Insured Hlth. Fac. Rev. Bds.
(Henry Mayo Newhall Memorial Hosp.) Ser. `88A, 8.00%, 10/01/18............. 3,795,352
145,000 California Hlth. Fac. Auth. Hosp. Rev. Bds. (Rabobank Nederland)
Ser. B, 7.20%, 01/01/12.................................................... 148,165
370,000 California Hlth. Fac. Auth. Insured Hosp. Rev. Bds. (Victor Valley
Community Hosp.) '84 Ser. A, 9.875%, 07/01/12.............................. 371,702
825,000 California Hlth. Fac. Auth. Insured Hosp. Rev. Bds. FGIC Insured (Victor
Valley Community Hosp.) '84 Ser. A, 9.875%, 07/01/12....................... 849,750
200,000 California Hsg. Fin. Agy. Rev. Bds., Cap. Appreciation Home Mtg.,
Ser. B, Zero Cpn., 02/01/99................................................ 189,822
200,000 California Hsg. Fin. Agy. Rev. Home Mtg Bds., Cap. Appreciation,
Ser. `87B, Zero Cpn., 08/01/99............................................. 183,212
400,000 California Hsg. Fin. Agy. Rev. Home Mtg. Bds., Ser. `86B, (MBIA Insured),
6.90%, 08/01/16........................................................... 405,440
190,000 California Hsg. Fin. Agy. Rev. Home Mtg. Bds., `91 Ser. C, 7.45%,
08/01/11................................................................... 193,564
690,000 California Hsg. Fin. Agy. Rev. Insured Hsg. Bds., Ser. B, 8.625%, 08/01/15... 718,601
600,000 California St. Veteran's Bds., 6.15%, 02/01/11............................... 612,942
200,000 California St. Veteran's Bds., 6.20%, 02/01/12............................... 204,322
2,500,000 California St. Veteran's Bds., 6.375%, 02/01/27.............................. 2,554,350
100,000 The City of Los Angeles, Multifam. Hsg. Ref. Rev. Bds., `91 Ser. A,
7.00%, 05/01/21............................................................ 105,381
825,000 City of Napa, CA, '92, Ind. Rev. Ref. Bds. (Napa Motel and Restaurant),
8.50%, 12/01/07............................................................ 843,051
250,000 Cnty. of Marin, Mtg. Rev. Bds., Ser. '84A (FHA Insured Mtg. Loan -
Marion Park Apts. Prj.), Zero Cpn., 04/01/01............................... 186,570
1,000,000 Cnty. of Marin, Multifam. Hsg. Rev. Bds., Ser. '84B (Marion Park
Apts. Prj.), Zero Cpn., 04/01/07........................................... 409,630
1,030,000 Covina, CA, Hosp. Rev. Bds. Ctfs. of Participation (Community Hlth. Svcs.
Inc.) Ser. `87, 7.00%, 03/01/17............................................ 1,041,948
100,000 Hsg. Auth. of the Cnty. of Santa Clara, Multifam. Hsg. Rev. Bds., Ser.
`85 C (Fannie Mae Prg./Amberwood Apts. Prj.), 9.375%/Adj., 10/01/07........ 101,378
335,000 Huntington Park, CA, Sngl. Fam. Mtg. Rev. Bds., Ser. '84A, 9.50%,
01/01/11................................................................... 357,214
7
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
CALIFORNIA - CONTINUED
$ 1,000,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Zero Cpn., 04/01/15..................................... $ 412,320
1,480,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Zero Cpn., 04/01/16..................................... 579,242
1,480,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Zero Cpn., 04/01/17..................................... 543,752
1,730,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Zero Cpn., 04/01/19..................................... 572,025
1,730,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Zero Cpn., 04/01/22..................................... 486,666
120,000 Los Angeles, CA, Community Redevelopment Agy. Res. Mtg. Rev. Bds.,
'85 Ser. A, 8.875%, 05/01/18............................................... 129,262
200,000 Los Angeles, CA, Community Redevelopment Agy. Bds., '87 Ser. G,
6.75%, 07/01/10............................................................ 208,060
455,000 Los Angeles, CA, Community Redevelopment Agy. Bds., '87 Ser. G,
6.75%, 07/01/10............................................................ 474,374
400,000 Los Angeles, CA, Dept. Wtr. & Pwr. Elec. Plant Rev. Bds., 3rd Issue,
5.30%, 10/15/12............................................................ 400,680
175,000 Los Angeles, CA, Multi. Fam. Rev. (FHA Insured Multi-Fam. Hsg. Mtg.
Rev. Bds.) Park Parthenia Prj., 7.30%, 07/20/11............................ 179,855
30,000 Los Angeles, CA, Reg'l Airports Improvement Corp. Lease Rev. Bds.
(Los Angeles West Terminal Fuel Corp.), 10.00%, 01/01/01................... 33,174
435,000 M S R Pub. Pwr. Agy. CA Rev. Bds. (San Juan Prj.) Ser. '83 A, 6.00%,
07/01/22................................................................... 435,461
6,250,000 Northern California Pwr. Agy. Pub. Pwr. Rev. Bds. (Hydroelec. Prj. #1)
Ser. '91 E, 7.15%, 07/01/24................................................ 6,418,813
1,390,000 Palmdale, CA, School Dist. Ctfs. of Participation, Capital Appreciation Bds.,
Zero Cpn., 10/01/18........................................................ 473,768
1,580,000 Palmdale, CA, School Dist. Ctfs. of Participation, Capital Appreciation Bds.,
Zero Cpn., 10/01/22........................................................ 438,908
850,000 Palomar Pomerado Hosp. Dist., CA, Rev. Ref. Bds., (MBIA Insured)
Ser. `89A, 7.25%, 11/02/08................................................. 883,558
100,000 San Bernardino Assoc. Comm. Fin. Auth. Hlth. Care Ref. and Improvement
Certificates of Participation (Granada Hills Community Hosp. Prj.)
`97 Ser. A, 6.90%, 05/01/27................................................ 110,664
1,000,000 San Francisco, CA, Bay Area Rapid Tran. Dist. Sales Tax, Rev. Ref. Bds.,
4.75%, 07/01/23............................................................ 937,060
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.................. 703,640
3,910,000 San Francisco, CA, City & Cnty. Redev. Fin. Auth. Tax Allocation,
Ctfs. of Participation Bds., Ser. A, Zero Cpn., 08/01/16................... 1,440,874
3,915,000 San Francisco, CA, City & Cnty. Redev. Fin. Auth. Tax Allocation,
Ctfs. of Participation Bds., Ser. A, Zero Cpn., 08/01/17................... 1,366,257
8
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
CALIFORNIA - CONTINUED
$ 3,910,000 San Francisco, CA, City & Cnty. Redev. Fin. Auth. Tax Allocation,
Ctfs. of Participation Bds., Ser. A, Zero Cpn., 08/01/18................... $ 1,292,216
170,000 Santa Clara Cnty., CA, Mtg. Rev. Insured Multiplier Rev. Bds., (Terman
Apt. Prj.) Ser. `84 A, Zero Cpn., 10/01/99................................. 156,539
1,400,000 Santa Maria, CA, Wtr. & Wastewtr. Certificates of Participation,
Ser. A, Zero Cpn., 08/01/27................................................ 1,036,896
745,000 South Pasadena, CA, Uni. School Dist. FGIC Insured, Ser. B, Zero Cpn.,
11/01/21................................................................... 217,317
750,000 South Pasadena, CA, Uni. School Dist. FGIC Insured, Ser. B, Zero Cpn.,
11/01/22................................................................... 207,443
440,000 Torrance, CA, Hosp. Rev. Bds. (Torrance Mem. Hosp.) Ser. `87, 6.75%,
01/01/12................................................................... 445,434
90,000 Torrance, CA, Hosp. Rev. Ref. Bds. (Torrance Mem. Hosp.)(MBIA Insured)
Ser. `87, 6.75%, 01/01/12.................................................. 91,107
250,000 University, CA, Rev. Bds. (Faculty Residential Mtg.) Ser. `79, 7.20%,
09/01/12................................................................... 250,688
500,000 Whisman, CA, School Dist. Cap. Appreciation, (MBIA Insured) Ser. B,
Zero Cpn., 08/01/16........................................................ 194,740
500,000 Whisman, CA, School Dist. Cap. Appreciation, (MBIA Insured) Ser. B,
Zero Cpn., 08/01/18........................................................ 173,975
750,000 Whisman, CA, School Dist. Cap. Appreciation, (MBIA Insured) Ser. B,
Zero Cpn., 08/01/19........................................................ 246,218
---------------
34,880,197
---------------
COLORADO - (0.41%)
1,450,000 Adams Cnty., CO, School Dist. No. 012 Cap. Appreciation, (MBIA Insured)
Ser. `95A, Zero Cpn., 12/15/12............................................. 692,404
1,000,000 Colorado Hlth. Fac. Auth. Rev. Bds. (Sisters of Charity Leavenworth)
(MBIA Insured) , 5.125%, 12/01/18.......................................... 983,040
105,000 Colorado Hsg. Fin. Auth. Multi-Fam., Ser. `82B, 6.00%, 10/01/25............. 91,347
30,000 Denver (City & Cnty.), CO, Sngl. Fam. Mtg. Rev. Bds., Ser. '85A,
Zero Cpn., 09/01/16........................................................ 4,450
100,000 Greeley, CO, Sales & Use Tax Rev. Ref. Bds. (MBIA Insured) Ser. `87,
6.00%, 02/01/99............................................................ 100,757
180,000 Hamilton Creek Metro Dist., Summit Cnty., CO, G.O., 11.25%, 12/01/04*........ 93,600
---------------
1,965,598
---------------
CONNECTICUT - (0.34%)
250,000 Connecticut Dev. Auth., Aquarium Prj. Rev. Bds. (Mystic Marine Life
Aquarium Prj. - `97 Series A), 6.875%, 12/01/17............................ 266,990
600,000 Connecticut Dev. Auth., Hlth. Care Rev. Bds. (Corp. for Independent Living
Prj.) Ser. '93B, 8.00%, 07/01/17........................................... 655,686
9
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
CONNECTICUT - CONTINUED
$ 40,000 Connecticut St. Hlth. & Educ. Facs. Auth. Rev. Bds. (Yale New Haven Hosp.)
Ser. `85B, 7.00%, 07/01/12................................................. $ 46,249
645,000 Connecticut St. Res. Recovery Auth. Bds. (Bridgeport Resco Co., L.P. Prj.)
`85 Ser. B, 8.625%, 01/01/04............................................... 653,985
---------------
1,622,910
---------------
DELAWARE - (0.44%)
830,000 Delaware Econ. Dev. Rev. Ref. Bds. (Supermarkets General Corp. Prj.)
Ser. '83, 10.875%, 12/01/03................................................ 842,799
200,000 Delaware St. Econ. Dev. Comm. Multi. Fam. Mtg. Rev. Bds. Cap.
Appreciation & Def. Inc. Sec. (Chestnut Cross), 0%/9.75%, 07/20/20 (b)..... 195,800
1,000,000 Delaware St. Hlth. Fac. Auth. Rev. Ref. Bds. (Med. Ctr. Delaware) (MBIA
Insured) Ser. '89, 7.00%, 10/01/15......................................... 1,058,710
---------------
2,097,309
---------------
DISTRICT OF COLUMBIA - (0.25%)
250,000 District of Columbia (Washington, D.C.) Rev. Bds. (The Howard University
Issue) Ser. A, 7.875%, 10/01/04............................................ 256,395
1,000,000 District of Columbia (Washington, D.C.) Rev. Ref. Bds. (Howard University)
(MBIA Insured) Ser. `98, 5.00%, 10/01/20................................... 958,310
---------------
1,214,705
---------------
FLORIDA - (7.14%)
10,000,000 Broward Cnty., FL, Apt. Sys. Rev. Bds., Ser. `89B, 7.625%, 10/01/13.......... 10,362,600
1,080,000 Broward Cnty., FL, Hsg. Fin. Auth. Rev. Home Mtg., Ser. A, Cap.
Appreciation, Zero Cpn., 04/01/14.......................................... 221,540
435,000 Charlotte Cnty., FL, IDR Ref. Bds. (Beverly Enterprises - Florida, Inc. Prj.)
Ser. '87, 10.00%, 06/01/11................................................. 495,874
5,215,000 City of Tampa, FL, Home Mtg. Rev. Bds., '83 Ser. A, Muni Multiplier
Bds., Zero Cpn., 10/01/14.................................................. 939,795
1,210,000 Dade Cnty., FL, Hlth. Fac. Auth. Hosp. Rev. Ref. Bds. (Miami Childrens)
(MBIA/FGIC Insured) Ser. `87, 6.875%, 08/15/17............................ 1,237,068
690,000 Dade Cnty., FL, Special Hsg. Rev. Bds. (City of Miami Dev. - Indenture
VIII), Ser. A, 11.00%, 07/01/12............................................ 701,633
890,000 Dade Cnty., FL, Special Hsg. Rev. Bds. (City of Miami Dev. - Indenture
VIII), Ser. A, 12.00%, 07/01/12............................................ 904,845
170,000 Florida Hsg. Fin. Agy. Multifam. Bds. (Pickwick Apts.) Ser. `84A,
Zero Cpn., 01/01/07........................................................ 96,152
900,000 Florida Hsg. Fin. Agy. (Southlake Apartments Prj. - D), 8.10%, 10/01/02...... 859,689
35,000 Florida St. Board of Educ. Cap. Outlay Bds., Ser. `89B, 7.50%, 06/01/05...... 37,586
3,380,000 Florida St. Board of Educ. Cap. Outlay Pub. Ed. Bds., Ser. `97B, 6.50%,
06/01/00................................................................... 3,564,785
1,000,000 Gulf Breeze, FL, Rev. Cap. Ref. Bds., (MBIA Insured) Ser. '97 B, 4.50%,
10/01/27................................................................... 893,610
10
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
FLORIDA - CONTINUED
$ 105,000 Highlands Cnty., FL, IDA (Beverly Enterprises - Florida, Inc. Prj.) Ser. '91,
9.25%, 07/01/07............................................................ $ 117,672
500,000 Hillsborough Cnty. IDA 1st Mtg. Rev. Bds. (Tampa Bay Christian Ctr.,
Inc. - Alafia Village Prj.) Ser. `96, 8.75%, 10/01/26...................... 522,185
235,000 The Hsg. Fin. Auth. of Dade Cnty. (Florida) Collateralized Mtg. Rev. Bds.,
'84 Ser. H (Lihud Ltd. Apts. Prj.), 10.50%, 06/01/00....................... 236,175
185,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. '89A (Methodist
Hosp. Prj.), 8.00%, 10/01/06............................................... 181,269
460,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. '89A (Methodist
Hosp. Prj.), 8.00%, 10/01/15............................................... 450,611
290,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. '89B (Methodist
Hosp. Prj.), 8.00%, 10/01/15............................................... 284,081
200,000 Lee Cnty., FL, IDA Hlth. Care Fac. Rev. Bds., Ser. '97 (Cypress Cove),
5.875%, 10/01/27........................................................... 203,944
280,000 Manatee Cnty., FL, Hsg. Fin. Auth. Mtg. Rev. Bds., Cap. Appreciation,
'83 Ser. A, Zero Cpn., 10/01/15............................................ 46,052
75,000 Marion Cnty., FL, IDR (Midland-Ross Corp. Prj.) Ser. '81, 11.875%,
08/01/11................................................................... 76,482
375,000 Melbourne, FL, Wtr. & Swr. Rev. Red. Bds., Ser. `86C, 6.00%, 10/01/14........ 378,956
1,000,000 Miami, FL, Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. '88 (Mercy Hosp.),
8.125%, 08/01/11........................................................... 1,032,890
345,000 Miami, FL, Special Obligation Bds. (MBIA Insured) `86 Ser. A, 7.375%,
07/01/06................................................................... 348,029
4,320,000 Miami-Dade Cnty., FL, Special Obligation Ref. Bds. (MBIA Insured)
Ser. `97 C, Zero Cpn., 10/01/13............................................ 1,952,424
3,990,000 Miami-Dade Cnty., FL, Special Obligation Ref. Bds. (MBIA Insured)
Ser. `97 A, Zero Cpn., 10/01/24............................................ 959,076
7,500,000 Miami-Dade Cnty., FL, Special Obligation Bds. (MBIA Insured) Ser. `97 B,
Zero Cpn., 10/01/32........................................................ 1,145,775
7,500,000 Miami-Dade Cnty., FL, Special Obligation Bds. (MBIA Insured) Ser. '97 B,
Zero Cpn., 10/01/33........................................................ 1,083,375
435,000 Orange Cnty., FL, IDA (Beverly Enterprises - Florida, Inc. Prj.) Ser. '91,
9.25%, 08/01/10............................................................ 488,853
1,655,000 Palm Beach Cnty., FL, Hsg. Fin. Auth. Sngl. Fam. Mtg. Rev. Bds. Cap.
Appreciation, Zero Cpn., 07/01/14.......................................... 317,892
1,440,000 Pasco Cnty., FL, Hsg. Fin Auth. Multifam. Rev. Ref. Bds., (Cypress Trail
Apts. Prj.) Ser. `97 B, 5.50%/Adj., 06/01/27............................... 1,498,925
100,000 Pinellas Park, FL, Wtr. & Swr. Rev. Bds., Ser. `84 A, 10.00%, 10/01/02....... 103,062
425,000 South Indian River Wtr. Control Dist., Sect. 15A Improvement Bds. (Egret
Landing - Phase I), 8.00%, 11/01/18........................................ 470,348
1,300,000 Tamarac, FL, IDR Bds., (Sun Belt Precision Prods. Inc.) Ser. `97,
6.50%, 08/01/17............................................................ 1,333,397
11
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
FLORIDA - CONTINUED
$ 470,000 Winter Garden, FL, IDR Ref. Bds. (Beverly Enterprises - Florida, Inc. Prj.)
Ser. '91, 8.75%, 07/01/12.................................................. $ 530,174
---------------
34,076,824
---------------
GEORGIA - (0.66%)
300,000 Douglas Cnty., GA, School Dist. Bds., Unlimited G.O., Ser. `86, 6.85%,
01/01/03................................................................... 303,714
200,000 Gainesville Redevelopment Auth., 1st Mtg. Rev. Bds. (Autumn Breeze
Personal Care Home, Inc. Prj.) Ser. `96A, 8.00%, 04/01/26.................. 215,630
575,000 The Hsg. Auth. of Columbus, GA, Multifamily Hsg. Rev. Bds. (Columbus
Gardens Elderly Hsg. Prj.) Ser. '94, 8.25%, 01/01/24....................... 636,979
200,000 Liberty Cnty., IDA, Ind. Rev. Ref. Bds., Ser. `92 (LeConte Properties,
Inc. Prj.), 7.875%, 12/01/14............................................... 217,972
750,000 Macon Cnty., GA, Hosp. Ref. Rev. Bds. (Flint River Comm.
Hospital - Paracelsus Healthcare Corp. Prj.) Ser. '91, 9.00%, 03/01/11..... 759,473
1,000,000 Savannah, GA, Econ. Dev. Auth. Rev. Bds. (First Mtg.-Coastal Care)
Ser. `97 A, 7.75%, 09/01/27................................................ 1,028,200
---------------
3,161,968
---------------
HAWAII - (0.77%)
220,000 Dept. of Transportation of the State of HI, Special Fac. Rev. Bds., Ser. `90
(Continental Airlines, Inc.), 9.60%, 06/01/08.............................. 243,848
200,000 Hawaii St., Ser. `97-CN (FGIC Insured), 5.25%, 03/01/17...................... 201,312
3,000,000 Honolulu, HI, (City & Cnty.) Multifamily Rev. Hsg. (Waipahu Towers Prj.)
Ser. '95, 6.90%, 06/20/35.................................................. 3,219,450
---------------
3,664,610
---------------
ILLINOIS - (4.10%)
2,650,000 Chicago, IL, Prj. & Ref. (FGIC Insured) Ser. `98, 5.25%, 01/01/28............ 2,614,411
750,000 Chicago, IL, Wtr. Rev. Bds., Ser. `97, 4.00%, 11/01/98....................... 751,395
140,000 Cnty. of Cook, IL, Sngl. Mtg. Rev. Bds., '83 Ser. A, Zero Cpn., 07/01/15..... 22,330
965,000 Illinois Dev. Fin. Auth. Hosp. Rev. Ref. Bds. (Sisters of St. Francis Hlth.
Ser.) Ser. B '97, 5.25%, 11/01/17.......................................... 961,449
450,000 Illinois Educ. Fac. Auth. Rev. Ref. Bds. (Illinois Institute of Technology)
Ser. A '87, 8.75%, 06/01/15................................................ 460,764
100,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Advocate Hlth. Care) `96 Ser. A,
4.70%, 08/15/01............................................................ 101,364
2,230,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Ancilla Sys. Inc.) (MBIA Insured)
`97 Ser. A, 5.25%, 07/01/16................................................ 2,229,799
155,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Graham Hosp. Assoc.) Ser. '87,
7.375%, 07/01/11........................................................... 156,322
1,000,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Mem. Hlth. Sys.) (MBIA Insured)
Ser. `97, 5.25%, 10/01/18.................................................. 992,560
500,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Rockford Hlth. Sys.) Ser. 97,
5.125%, 08/15/15........................................................... 493,465
12
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
ILLINOIS - CONTINUED
$ 8,897,526 Illinois Hsg. Dev. Auth., Multi-Fam. Hsg. Rev. Bds., Cap. Appreciation,
Ser. `83A, Zero Cpn., 07/01/25............................................. $ 624,647
300,000 St. Clair Cnty., IL, Certificates of Participation Bds., Ser. `97 A, 5.30%,
10/01/12................................................................... 304,182
1,000,000 St. Clair Cnty., IL, Pub. Bldg., Community Bldg. Rev. Bds., 8.00%,
12/01/05................................................................... 1,049,170
890,000 State of Illinois Civic Ctr. Bds. (Dedicated Tax Rev. Bds.) Ser. `91,
9.15%, 12/15/99............................................................ 911,520
1,680,000 Urbana, IL, Econ. Dec. Rev. Bds. (Kroger Co. Prj.), 11.50%, 03/01/07......... 1,746,024
3,000,000 Village of Robbins, Cook Cnty., IL, Res. Recovery Rev. Bds. (Robbins
Res. Recovery Partners, L.P. Prj.), 8.375%, 10/15/16....................... 3,135,720
1,000,000 Village of Robbins, Cook Cnty., IL, Res. Recovery Rev. Ref. Bds., Ser. `97
(Robbins Res. Recovery Partners, L.P. Prj.), 4.90%/Adj., 10/15/17.......... 1,009,900
151,000 Village of Sauget, IL, IDR Bds. (The Pillsbury Co. Prj.) Ser. '80, 8.375%,
05/01/05................................................................... 151,394
550,000 Village of Sherman, IL, 1st Mtg. Rev. Bds. (Villa Vianney, Inc.) Ser. '97A,
7.75%, 10/01/22........................................................... 576,527
500,000 Village of Sherman, IL, 1st Mtg. Rev. Bds. (Villa Vianney, Inc.) Ser. '95A,
8.375%, 07/01/25........................................................... 534,800
1,000,000 Village of Wataga, IL, 1st Mtg. Hlth. Fac. Rev. Bds. (First Humanics Corp.
- Galesburg, IL Prj.) Ser. '86, 10.00%, 09/01/16*.......................... 770,000
---------------
19,597,743
---------------
INDIANA - (1.84%)
485,000 Carmel, IN, Retirement Rental Hsg. Rev. Ref. Bds. (Beverly Enterprises -
Indiana, Inc. Prj.) Ser. '92, 8.75%, 12/01/08.............................. 550,591
234,183 Elwood, IN, Econ. Dev. Rev. (K-Mart Co. - S. S. Kresge Co. Prj.), 8.50%,
10/15/00................................................................... 234,738
175,000 Greencastle, IN, Multifamily Rev. (FNMA Insured Multi-Fam. Hsg. Mtg.
Rev. Bds.) Pedcor Invest. VH LP Prj., Ser. '91, 7.125%, 11/01/06........... 183,792
960,000 Indiana Bond Bank, Ser. '88 B Bds., 8.50%, 02/01/18.......................... 993,274
835,000 Indiana Bond Bank, Ser. '88 C Bds., 8.125%, 02/01/17......................... 862,922
515,000 Indiana Bond Bank, Special Program Bds., Ser. '87 A, 8.70%, 02/01/13......... 528,333
1,000,000 Indiana Hlth. Fin. Auth. Hosp. Fac. Rev. Bds. (Community Hosp. Prj.)
Ser. `91, (MBIA Insured), 6.85%, 07/01/22.................................. 1,102,350
785,000 Indiana Hlth. Fin. Auth. Hosp. Fac. Rev. Ref. Bds. (Floyd Mem. Hosp. &
Hlth. Svc.) Ser. `98, 5.25%, 02/15/18...................................... 768,837
500,000 Indiana Mun. Pwr. Agy. Pwr. Supply Rev. Ref. Bds., Ser. `86A, 5.75%,
01/01/18................................................................... 500,875
85,000 Indianapolis, IN, Econ. Dev. (GNMA Coll. - Bethany Indpt. Care), 9.15%,
08/20/16................................................................... 88,973
560,000 Madison Cnty., IN, Hosp. Auth. Hosp. Rev. Ref. Bds. (Community Hosp.
Of Anderson), 8.00%, 01/01/14.............................................. 572,970
13
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
INDIANA - CONTINUED
$ 1,025,000 Marion Cnty., IN, Convention & Recreational Fac. Rev. Bds. (MBIA Insured),
Ser. A, Zero Cpn., 06/01/13................................................ $ 471,223
2,000,000 Tipton, IN, Comm. School Bldg. Corp. 1st Mtg. Rev. Bds., Ser. `98,
5.00%, 07/15/20............................................................ 1,937,160
---------------
8,796,038
---------------
IOWA - (0.57%)
244,806 Creston, IA, IDR (S.S. Kresge Co. - K-Mart Inc.), 8.50%, 08/01/00............ 245,352
1,500,000 Iowa Fin. Auth. Hosp. Fac. Rev. Ref. Bds. (Iowa Hlth. Sys.), Ser. A,
(MBIA Insured), 5.125%, 07/01/20........................................... 1,452,480
500,000 Iowa Fin. Auth. Hosp. Fac. Rev. Ref. Bds. (Iowa Hlth. Sys.), Ser. A,
(MBIA Insured), 5.125%, 07/01/28........................................... 480,425
315,000 Salix, IA, PCR Bds., (Iowa-Illinois Gas & Elec. Prj.), 5.75%, 06/01/03....... 315,649
230,000 Woodbury Cnty., IA, Hosp. Fac. Rev. Bds. (St. Luke Reg. Med. Ctr Prj.),
Ser.97, (MBIA Insured), 6.875%, 07/01/07................................... 234,878
---------------
2,728,784
---------------
KANSAS - (0.37%)
500,000 Johnson Cnty., KS, Unified School Dist. No. 229, Rev. Ref. Bds.,
(FGIC Insured) Ser. '97, 7.10%, 03/01/99................................... 506,800
765,000 Kansas City, KS, Crawford Cnty., Tax-Exempt Muni Multiplier Rev. Bds.,
Zero Cpn., 04/01/16........................................................ 112,945
250,000 Kansas City, KS, Dev. Fin Auth. Rev. Bds. MBIA Insured (Sisters of Charity
Leavenworth) Ser. `98, 5.125%, 12/01/18.................................... 247,033
205,000 Liberal, KS, Swr. Util. Sys. Rev. Ref. Bds., 8.80%, 10/01/99................. 209,924
305,000 Liberal, KS, Swr. Util. Sys. Rev. Ref. Bds., 8.90%, 04/01/00................. 312,351
325,000 Saline Cnty., KS, Sngl. Fam. Mtg. Rev. Cap. Accumulator Bds.,
Ser. '82 A, Zero Cpn., 11/01/14............................................ 53,505
300,000 Topeka, KS, Ser. '87 A, 7.00%, 08/01/98...................................... 303,150
---------------
1,745,708
---------------
KENTUCKY - (2.64%)
155,000 Cntys. of Jefferson, Oldham and Bullitt, KY, Home Mtg. Rev. Bds, Ser. '84,
10.75%, 11/01/14........................................................... 163,812
1,800,000 Elizabethtown, KY, IDR Bds. (Colt Industries Inc.), 9.875%, 10/01/10......... 1,843,848
250,000 Floyd, KY, Gas Sys. Rev. Ref. Bds., Ser. '91A, 8.00%, 09/01/12............... 280,605
200,000 Jefferson Cnty., KY, Cap. Prj. Corp. Rev. Bds. Lease - Ser. B, Zero Cpn.,
08/15/07................................................................... 102,728
550,000 Jefferson Cnty., KY, Cap. Prj. Corp. Rev. Muni Multi Lease Ref. Bds. -
Ser. A `87, Zero Cpn., 08/15/14............................................ 180,565
320,000 Jefferson Cnty., KY, Econ. Dev. Rev. Bds. (Bellarmine College Prj.),
Zero Cpn., 05/01/14........................................................ 73,542
1,720,000 Kentucky, St. Tpk. Auth. Res. Rec. Rd. Rev. Ref. Bds., Ser. `85 A,
6.00%, 07/01/09............................................................ 1,722,821
14
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
KENTUCKY - CONTINUED
$ 395,000 Kentucky, St. Tpk. Auth. Res. Rec. Rd. Rev. Ref. Bds. (FGIC Insured),
Ser. `85 A, 6.00%, 07/01/09............................................... $ 395,723
7,185,000 Louisville & Jefferson Cnty., KY, Riverport Auth. Mtg. Rev. Bds.,
Ser. '86, 7.875%, 05/15/16................................................. 7,293,422
175,000 Morehead, KY, Ind. Bldg. Rev. Bds. (Emerson Elec.) Ser. `76, 6.30%,
04/01/01................................................................... 179,435
750,000 Owensboro, KY, Elec. Light & Pwr. Rev. Bds., Ser. B, Zero Cpn.,
01/01/09................................................................... 259,943
325,000 Owensboro, KY, Elec. Light & Pwr. Rev. Bds., Ser. B, Zero Cpn.,
01/01/09................................................................... 113,233
---------------
12,609,677
---------------
LOUISIANA - (1.77%)
435,000 Bossier City, LA, Rev. Ref. Bds. Ser. `87, 7.85%, 01/01/04................... 445,109
115,000 Jefferson Parish, LA, Home Mtg. Rev. Bds. Cap. Appreciation, Zero Cpn.,
09/01/02................................................................... 73,737
115,000 Jefferson Parish, LA, Home Mtg. Rev. Bds. Cap. Appreciation, Zero Cpn.,
03/01/03................................................................... 69,775
1,000,000 Lake Charles Non-Profit Hsg. Dev. Corp. Mtg. Rev. Ref. Bds., Ser. '90A
and Ser. '90B, 7.875%, 02/15/25............................................ 1,006,600
720,000 Louisiana Pub. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. '93 (Gen. Hlth., Inc.
Prj.) (MBIA Insured), Ser. '89 A, 6.50%, 11/01/14.......................... 744,696
1,350,000 Louisiana Pub. Fac. Auth. Rev. Bds., Ser. `88 (CP Prog. Hlth. & Ed. Cap.
Facs.), 7.90%, 11/01/15.................................................... 1,410,021
1,500,000 Louisiana Pub. Fac. Auth. Rev. Ref. Bds., Ser. '93 (Schwegmann Westside
Expressway, Inc. Prj.), 8.00%, 10/01/09.................................... 1,644,555
25,000 Louisiana Pub. Fac. Auth. Supplemental Student Loan Rev. Variable Rate
Demand Bds., (Statewide Prg.) Ser. '84B, 8.125%, 12/01/99.................. 26,000
350,000 Louisiana Pub. Fac. Auth. Supplemental Student Loan Rev. Variable Rate
Demand Bds., (Statewide Prg.) Ser. '84C, 8.125%, 12/01/99.................. 364,000
370,000 New Orleans, LA, Hsg. Dev. Corp. First Lien Rev. Bds. (Tulane Ave. Prj.)
Ser. `79, 7.875%, 06/01/10................................................. 370,881
1,725,000 Sales Tax School Bds., Parish School Brd. of the Parish of Jefferson, State of
LA, Ser. '86A, 7.00%, 02/01/08............................................. 1,787,997
250,000 Sales Tax School Bds., Parish School Brd. of the Parish of Jefferson, State of
LA, Ser. '86A, 7.00%, 02/01/08............................................. 266,465
250,000 Terrebonne Parish, LA, Hosp. Ser. Dist. No. 1 Hosp. Rev. Ref. Bds.
(Terrebonne Gen. Med. Ctr. Prj.) Ser. `88, 7.50%, 04/01/15................. 255,688
---------------
8,465,524
---------------
MAINE - (0.38%)
1,765,000 Maine Hlth. & Higher Educ. Fac., Hosp. Rev. Ref. Bds. (Eastern Maine
Med. Ctr.) Ser. '85, 9.10%, 10/01/12....................................... 1,809,566
---------------
15
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
MARYLAND - (0.89%)
$ 700,000 Allegany Cnty., MD, IDR Bds. (Moran Manor Care Ctr.) Ser. `84,
12.45%, 02/01/27........................................................... $ 862,722
10,000 Hsg. Auth. of Prince George's Cnty. (Maryland) GNMA Collateralized Sngl.
Fam. Mtg. Rev. Bds., '89 Ser. A, 8.10%, 10/01/20........................... 10,742
1,000,000 Maryland St. Hlth. & Higher Educ. Facs. Auth. Rev. Bds., Ser. '97
(Charity Oblig. Group), 4.60%, 11/01/26.................................... 1,009,280
485,000 Montgomery Cnty., MD, Econ. Dev. Rev. Bds. (Brink Reservoir Fac.)
Ser. `84, 10.375%, 12/15/14................................................ 498,468
1,770,000 Upper Potomac River Comm., MD, PCR Bds., Westvaco Corp. Prj.,
9.125%, 08/01/15........................................................... 1,854,075
---------------
4,235,287
---------------
MASSACHUSETTS - (5.00%)
250,000 Lawrence, MA, IDR Bds., (New Balance Realty Trust Prj.), 10.00%,
10/01/03................................................................... 251,020
105,000 Massachusetts Educ. Loan Auth., Educ. Loan Rev. Bds., Issue C, Ser. '85A,
7.875%, 06/01/03........................................................... 106,962
225,000 Massachusetts Educ. Loan Auth., Educ. Loan Rev. Bds., Issue D, Ser. '89A,
7.65%, 01/01/07............................................................ 233,442
125,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds. (New England
School of Law), 8.30%, 07/01/03............................................ 125,434
125,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds. (New England
School of Law), 8.30%, 07/01/04............................................ 125,434
1,000,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds., St. Anne's Hosp.
Issue, Ser. A, 9.375%, 07/01/14............................................ 1,003,480
450,000 Massachusetts State G.O., 10.50%, 08/01/03................................... 456,948
240,000 Massachusetts State G.O., 9.75%, 09/01/03.................................... 242,362
2,000,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Ref. Bds.
(Care Group Issue) (MBIA Insured) Ser. A, 4.75%, 07/01/20.................. 1,862,060
250,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Bds. (Catholic
Hlth. East) Ser. B, 5.00%, 11/15/28........................................ 238,323
1,000,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Bds.
(Milford-Whitinsville Regional), 5.375%, 07/15/28.......................... 981,140
1,390,000 Massachusetts State Hsg. Fin. Agy. Multi Fam. Hsg. Rev. Bds.
(MBIA Insured) Ser. `97A, 9.50%, 07/01/12.................................. 1,510,277
420,000 Massachusetts State Hsg. Fin. Agy. Sngl. Fam. Hsg. Rev. Bds.
Ser. 4, 7.375%, 06/01/14................................................... 428,812
205,000 Massachusetts State Hsg. Fin. Agy. Sngl. Fam. Hsg. Rev. Bds.
(MBIA Insured) Ser. 4, 7.375%, 06/01/14.................................... 208,651
3,000,000 Massachusetts State, Ind. Fin. Agy., Rev. Ref. Bds., (Harvard Cmnty. Hlth.)
Ser. `88B, 8.125%, 10/01/17................................................ 3,116,130
1,170,000 Massachusetts State, Ind. Fin. Agy., Rev. Ref. Bds., (Harvard Cmnty.)
(MBIA Insured) Ser. `88, 8.125%, 10/01/17.................................. 1,217,490
16
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
MASSACHUSETTS - CONTINUED
$ 965,000 Massachusetts State, Ind. Fin. Agy., Rev. Bds., (Provider Lease Program)
Ser. `89A, 8.75%, 07/15/09................................................. $ 998,331
1,500,000 Massachusetts State, Ind. Fin. Agy., Rev. Bds., Ser. `94, 7.75%, 04/01/19.... 1,561,425
3,000,000 Massachusetts State, Wtr. Res. Auth. Gen., Rev. Bds., Ser. A, 4.75%,
08/01/27................................................................... 2,751,300
5,000,000 Massachusetts State, Wtr. Res. Auth. Gen., Rev. Bds., Ser. A, 4.75%,
08/01/27................................................................... 4,648,750
2,000,000 Massachusetts State, Wtr. Res. Auth. Gen., Rev. Ref. Bds., Ser. B, 4.50%,
08/01/22................................................................... 1,802,740
---------------
23,870,511
---------------
MICHIGAN - (4.02%)
1,000,000 Chippewa Valley, MI, Schools Rev. Ref. Bds., 4.75%, 05/01/23................. 934,640
100,000 Cnty. of Oakland, State of Michigan Bds., Clinton-Oakland Sys., Paint
Creek Inceptor Sewage Disposal Bds., 7.00%, 05/01/01....................... 102,255
1,090,000 The Econ. Dev. Corp. of the City of Westland, MI, Contract Sec'd. Rev. Bds.
(Weyerhauser Co. Contract Rev.), 9.80%, 12/01/00........................... 1,098,448
580,000 Kentwood, MI, Econ. Dev. Corp. Rev. Bds. (Hanover-Kent, Inc. - K-Mart
Corp.), 7.85%, 09/01/01.................................................... 584,077
570,000 Michigan Muni Bd. Auth. Local Gov't Loan Prg. Rev. Ref. Bds.,
Ser. `92 A, 8.625%, 11/01/16............................................... 583,572
1,000,000 Michigan State Bldg. Auth. Rev. Bds. (Facs. Prog.) `97 Ser. IIA, 5.00%,
10/15/14................................................................... 984,510
1,000,000 Michigan State Hosp. Fin. Auth. Rev. Ref. Bds. (Genesys Regl. Med.)
Ser. `98, 5.50%, 10/01/18.................................................. 990,900
500,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Environmental Impt. Bds.,
Crown- Ser. `97 A, 6.50%, 08/01/21......................................... 520,500
340,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Environmental Impt. Bds,
Crown- Ser. `97 B, 6.25%, 08/01/12......................................... 350,268
600,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Bds. (NSF International Prj.)
Ser. `97A, 5.75%, 08/01/19................................................. 622,410
975,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Bds. (St. John-Bon Secours
Cont. Care) Ser. `87, 7.90%, 11/15/16...................................... 997,357
9,745,000 Monroe Cnty., MI, Poll. Ctl. Rev. Bds. (Detroit EDSN Prj.) Ser. '89 I,
7.50%, 09/01/19............................................................ 10,448,492
200,000 Munising, MI, Pub. Schools, Alger & Schoolcraft Cntys. Rev. Bds., Ser. `89,
7.05%, 05/01/99............................................................ 201,536
250,000 Muskegon, MI, Hosp. Fin. Auth. Rev. Bds. (Hackley Hosp.) Ser. `88 A,
8.00%, 02/01/08............................................................ 255,720
180,000 River Dist., MI, Community Hosp. Auth. Hosp. Rev. Ref. Bds., Ser. `89,
7.20%, 05/01/99............................................................ 182,120
100,000 River Dist., MI, Community Hosp. Auth. Hosp. Rev. Ref. Bds., Ser. `89,
7.40%, 05/01/01............................................................ 101,180
17
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
MICHIGAN - CONTINUED
$ 210,000 University, MI, Univ. Rev. Ref. Bds. (Student Fee) Ser. `87, 6.00%,
04/01/09................................................................... $ 212,379
---------------
19,170,364
---------------
MINNESOTA - (0.65%)
880,000 Blaine, MN, IDR (Consolidated Freightways Del. Prj.) `79 Ser. B,
7.25%, 01/01/04............................................................ 885,298
100,000 Hugo, MN, Bank Rev. Bds., Ser. `88A, 7.50%, 03/01/04......................... 101,600
100,000 Hutchinson, MN, Bank Rev. Bds., Ser. `90, 6.70%, 02/01/01.................... 100,790
320,000 Minneapolis, MN, Community Dev. Agy. Rev. Bds. (River Bluff Prj.),
11.375%, 06/01/09.......................................................... 329,434
260,000 Minneapolis, MN, Community Dev. Agy. Rev. Bds. (West Bank
Homes Prj.), 11.75%, 10/01/08.............................................. 272,719
185,000 Minnesota St. Hsg. Fin. Agy., Sngl. Fam. Mtg. Rev. Bds., `86 Ser. B,
7.25%, 07/01/16............................................................ 188,071
365,000 Minnesota St. Hsg. Fin. Agy., Sngl. Fam. Mtg. Rev. Bds., `87 Ser. D,
8.15%, 07/01/14............................................................ 373,333
10,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. `84-N, Sunwood
Inn/Bandana Square Ltd., 10.00%, 12/01/01.................................. 10,291
15,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. `84-N, Sunwood
Inn/Bandana Square Ltd., 10.00%, 12/01/02.................................. 15,436
250,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. `84-N, Sunwood
Inn/Bandana Square Ltd., 10.00%, 12/01/14.................................. 257,365
5,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. K, Jackson Str.
Shops Ltd., 9.50%, 12/01/01................................................ 5,141
10,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. K, Jackson Str.
Shops Ltd., 9.50%, 12/01/02................................................ 10,283
235,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. K, Jackson Str.
Shops Ltd., 9.50%, 12/01/14................................................ 241,730
200,000 Spring Lake Park, Mn, Independent School Dist. No. 016 Rev. Bds.,
6.10%, 04/01/02............................................................ 200,000
100,000 University, MN, Rev. Ref. Bds., `86 Ser. A, 6.00%, 02/01/11.................. 98,934
---------------
3,090,425
---------------
MISSISSIPPI - (1.91%)
1,500,000 Amory, MS, Dock & Wharf Rev. Bds. (Weyerhauser Co. Prj.), 9.50%,
09/01/00................................................................... 1,530,000
2,685,000 Claiborne Cnty., MS, PCR (Middle South Energy, Inc. Prj.) Ser. C,
9.875%, 12/01/14........................................................... 2,849,752
1,815,000 Clarksdale, MS, Ind. Rev. Bds. (Bah Pptys./Archer-Daniel's), 11.75%,
06/01/11................................................................... 1,833,350
8,815,000 Mississippi Home Corp. Residual Rev. Bds., Cap. Appreciation, Ser. I '92,
Zero Cpn., 09/15/16........................................................ 2,923,759
---------------
9,136,861
---------------
18
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
MISSOURI - (0.95%)
$ 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..... $ 161,310
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............................................ 250,555
1,000,000 Independence, MO, Elec. Util. Rev. Ref. Bds., `89 Ser. A & B,
7.10%, 06/01/04............................................................ 1,021,650
435,000 Little Blue Valley Swr. Dist., MO, Rev. Ref. Bds. (Ambac Insured)
Ser. `85, 8.60%, 10/01/00.................................................. 436,705
210,000 Missouri Hsg. Dev. Commission, Hsg. Dev. Bds. (Federally Insured Mtg.
Loans) Ser. July 1, 1975, 8.00%, 07/01/17.................................. 212,663
555,000 Missouri School Bds. Association Ctfs. (Partner Pool) Ser. A, 7.375%,
03/01/06................................................................... 568,620
1,200,000 Missouri St. Hlth. & Educ. Fac. Auth. Rev. Bds. (St. Louis Univ.) Ser. `87A,
7.75%, 06/01/07............................................................ 1,219,656
285,000 Missouri St. Hlth. & Educ. Fac. Auth. Rev. Ref. Bds., (St. Louis Univ.)
`87 Ser. A, 7.875%, 06/01/12............................................... 289,700
730,000 Missouri St. Hsg. Dev. Comm. Mtg. Rev. Ref. Bds., `91 Ser. B, Zero Cpn.,
09/01/12................................................................... 290,489
80,000 St. Louis Cnty., MO, Sngl. Fam. Mtg. Rev. Bds., 9.25%, 10/01/16.............. 85,220
---------------
4,536,568
---------------
MONTANA - (2.05%)
4,900,000 Forsyth, MT, Pollution Control Rev. Ref Bds., (Washington Wtr. Pwr. Prj.)
Ser.'89 (MBIA Insured), 7.125%, 12/01/13................................... 5,216,001
30,000 Montana Brd. Of Hsg., Sngl. Fam. Prg. Bds., '85 Ser. A (Federally Insured
or Gtd. Mtg. Loans), 0%/9.75%, 06/01/13 (b)................................ 30,357
3,250,000 Montana St. Brd. Invt. Workers Comp. Prog. Rev. Bds. MBIA Insured
Ser. `91, 6.875%, 06/01/20................................................. 3,567,394
1,000,000 Montana St. Hlth. Fac. Auth. Rev. Bds. (Sisters of Charity Leavenworth)
Ser. '98 (MBIA Insured), 5.125%, 12/01/18.................................. 989,370
---------------
9,803,122
---------------
NEBRASKA - (0.02%)
315,000 Nebraska Higher Educ. Loan Prg. Capital Appreciation Rev. Bds.,
Ser. `89 A, Zero Cpn., 12/15/15............................................ 108,839
---------------
NEVADA - (0.82%)
1,250,000 Clark Cnty., NV, IDR (Nevada Pwr. Co. Proj.) Ser. `97A, 5.90%,
11/01/32................................................................... 1,275,300
2,000,000 Clark Cnty., NV, Pollution Ctl. Rev. Ref. Bds. (Nevada Pwr. Co. Prj.)
Ser. `98D, 5.45%, 10/01/23................................................. 2,000,000
500,000 State Of Nevada Muni Bd. Bank Prj. No. 18 & 19, 8.40%, 09/01/01.............. 516,635
105,000 State Of Nevada Muni Bd. Bank Prj. No. 18 & 19, 8.50%, 09/01/05.............. 111,461
---------------
3,903,396
---------------
19
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
NEW HAMPSHIRE - (2.20%)
$ 2,000,000 Hudson, NH, Rev. Ref. Bds., 5.25%, 03/15/28.................................. $ 1,982,940
350,000 New Hampshire Higher Educ. & Hlth. Fac. Auth. Rev. Bds. (Franklin
Pierce College) Ser. '98, 5.25%, 10/01/18.................................. 346,105
1,000,000 New Hampshire Higher Educ. & Hlth. Fac. Auth. Rev. Bds. (Franklin
Pierce College) Ser. '98, 5.30%, 10/01/28.................................. 985,130
500,000 New Hampshire Higher Educ. & Hlth. Fac. Auth. Rev. Bds. (NH Catholic
Charities Issue) Ser. '91, 8.40%, 08/01/11................................. 577,700
3,950,000 New Hampshire St. IDA Rev. Bds. (Pollution Ctl.-Connecticut Lt. Prj.)
Ser.'89, 7.375%, 12/01/19.................................................. 4,217,139
2,225,000 New Hampshire St. IDA PCR Ref. Bds. (Pub. Svc. Co. Of New Hampshire
Prj.) `91 Ser. C, 7.65%, 05/01/21.......................................... 2,377,168
---------------
10,486,182
---------------
NEW JERSEY - (3.20%)
200,000 Essex Cnty., NJ, Improvement Auth. Rev. Bds., (Sr. Citizens Hsg.-FHA-
Jewish Fed. Prj.) Ser.'87, 7.75%, 03/01/09................................. 201,930
50,000 New Jersey Econ. Dev. Auth., Econ. Dev. Bds. (Polymeric Resources Corp.
Prj. - '94 Ser.), 9.00%, 12/01/19.......................................... 54,326
1,000,000 New Jersey Econ. Dev. Auth., Econ. Dev. Rev. Ref. Bds. (Holt Hauling &
Warehousing) Ser. G, 8.40%, 12/15/15....................................... 1,103,770
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........................... 1,373,706
235,000 New Jersey Econ. Dev. Auth., Econ. Dev. Sr. Rev. Bds. (Lakewood of
Voorhees FHA Insured Prj.) Ser. A, 8.875%, 01/15/20........................ 265,632
350,000 New Jersey Econ. Dev. Auth., 1st Mtg. Rev. Bds. (Franciscan Oaks Prj.)
Ser. '97, 5.60%, 10/01/12.................................................. 351,089
250,000 New Jersey Econ. Dev. Auth., 1st Mtg. Rev. Bds. (Franciscan Oaks Prj.)
Ser. '97, 5.75%, 10/01/23.................................................. 252,700
1,000,000 New Jersey Econ. Dev. Auth., 1st Mtg. Rev. Ref. Bds. (Keswick Pines)
Ser. '98, 5.70%, 01/01/18.................................................. 999,430
1,000,000 New Jersey Econ. Dev. Auth. Ind. & Econ. Dev. Rev. Bds. (Owens-Ill Inc.
Vineland Prj.), 5.85%, 09/01/07............................................ 1,000,130
80,000 New Jersey Econ. Dev. Auth., Mtg. Rev. Ref. Bds. (Geriatric And Medical
Svcs., Inc. Prj.) Ser. '92, 9.00%, 07/01/98................................ 80,898
1,000,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Ref. Bds. (Cathedral Hlth. Svcs.)
(MBIA Insured) Ser. `98, 5.20%, 08/01/15................................... 994,730
250,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Ref. Bds. (Christian Hlth. Care
Ctr.) Ser. `97A, 5.50%, 07/01/18........................................... 251,960
500,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Ref. Bds. (Community Med.
Ctr./Kimball Etc. FSA) Ser. `98, 4.75%, 07/01/19........................... 473,075
1,000,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Bds. (Intercare Hlth. Sys./
JFK Ctr.) Ser. `88, 7.50%, 07/01/07........................................ 1,028,150
1,740,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Bds. (Rahway Hosp. Issue B)
Ser. `88, 7.75%, 07/01/14.................................................. 1,785,344
20
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
NEW JERSEY - CONTINUED
$ 5,000,000 New Jersey St. Trans. Tr. Fd. Auth. Rev. Bds. (Trans. Sys.) Ser. `97 A,
4.50%, 06/15/99............................................................ $ 5,043,500
---------------
15,260,370
---------------
NEW MEXICO - (0.11%)
120,000 City of Albuquerque, NM, Hlth. Care Sys. Rev. Bds. (Lovelace Medical
Foundation Prj.), 12.00%, 03/01/11......................................... 120,769
20,000 City of Albuquerque, NM, Hlth. Care Sys. Rev. Bds. (Lovelace Medical
Foundation Prj.) Ser. `83A, 10.25%, 03/01/11............................... 20,497
355,000 Espanola, NM, Hosp. Sys. Rev. Ref. Bds. (Southwest Cmnty. Hlth Svcs.)
`85 Ser. A (MBIA Insured), 8.70%, 08/01/98................................. 360,840
30,000 New Mexico Mtg. Fin. Auth. Sngl. Fam. Mtg. Prg. Rev. Bds., 7.00%,
07/01/14................................................................... 20,625
---------------
522,731
---------------
NEW YORK - (11.98%)
1,400,000 Amherst, NY, Ind'l Dev. Agy. Auth. Bds. (Lease Rev. Mult. Surface Rink
Complex) Ser. `97, 5.55%, 10/01/17......................................... 1,427,440
300,000 Battery Park City Auth., POD III Hsg. Rev. Bds., Ser. '84 (FHA-Insured
Mtg.), 10.00%, 06/01/23.................................................... 311,580
2,505,000 Clifton Park, NY, IDA IDR Bds. (Caldor Inc. Prj.) Ser. A, 11.25%,
12/01/12................................................................... 2,548,863
1,000,000 Monroe Cnty., NY, Wtr. Auth. Rev. Ref. Bds., Ser. `97, 5.00%, 08/01/19....... 975,590
200,000 New York City, Ser. `86 B, FGIC Insured Bds., 7.30%, 08/15/99................ 204,288
300,000 New York City, Ser. `86 C, FGIC Insured Bds., 7.25%, 02/01/06................ 306,498
105,000 New York City, Ser. `86 C, FGIC Insured Bds., 7.25%, 02/01/08................ 124,424
85,000 New York City, Ser. `88 B, FGIC Insured Bds., 7.50%, 12/01/03................ 86,167
750,000 New York City, Ser. '88 D, FGIC Insured Bds., 7.875%, 08/01/00............... 770,273
140,000 New York City, Ser. `89 B, FGIC Insured Bds., 7.00%, 10/01/19................ 146,005
200,000 New York City, Ser. `90 F, FGIC Insured Bds., 6.00%, 08/01/18................ 204,454
1,850,000 New York City, Ser. `90 I, FGIC Insured Bds., 7.25%, 08/15/13................ 1,960,482
280,000 New York City, Ser. `90 I, FGIC Insured Bds., 7.25%, 08/15/14................ 296,722
520,000 New York City, Ser. `90 I, FGIC Insured Bds., 7.75%, 08/15/19................ 554,497
3,000,000 New York City, Ser. '98 H, FGIC Insured Bds., 5.125%, 08/01/25............... 2,895,060
800,000 New York, NY, City IDA IDR Bds. (Brooklyn Navy Yard Cogen Partners)
Ser. `97, 5.65%, 10/01/28.................................................. 813,280
375,000 New York, NY, City Muni Wtr. Fin. Auth., Wtr. & Swr. Rev. Bds.,
FGIC Insured, Ser. `89 B, 5.75%, 06/15/13.................................. 395,531
2,000,000 New York, NY, City Muni Wtr. Fin. Auth., Wtr. & Swr. Rev. Bds.,
MBIA Insured, Ser. '98 D, 4.875%, 06/15/21................................. 1,912,820
3,000,000 New York, NY, City Trans. Fin. Auth. Rev. Bds. (Future Tax Sec.)
Ser. '98 B, 4.75%, 11/15/18................................................ 2,805,060
75,000 New York State Dorm Auth., Rev. Bds., Cap. Appreciation, Ser. `88,
Zero Cpn., 07/01/04........................................................ 49,292
21
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
NEW YORK - CONTINUED
$ 225,000 New York State Dorm Auth., Rev. Bds., Cap. Appreciation, Ser. `88,
Zero Cpn., 07/01/04........................................................ $ 147,602
825,000 New York State Dorm Auth., Rev. Ref. Bds., (Rochester Inst. Tech.)
Ser. `97, 5.30%, 07/01/17.................................................. 835,684
1,000,000 New York State Dorm Auth., Rev. Bds., (St. Barnabas Hosp.), Ser. `97,
5.35%, 08/01/17............................................................ 1,007,820
350,000 New York State Dorm Auth., Rev. Bds., (St. Vincent DePaul Res.), Ser. `97,
5.30%, 07/01/18............................................................ 348,250
15,000,000 New York State Energy Research & Dev. Auth., Elec. Fac. Rev. Bds.
(Edison Co. Prj.) Ser. '89 B, 7.375%, 07/01/24............................. 15,265,350
1,000,000 New York State Environmental Facs. Corp. Rev. Bds. (St. Clean Wtr. &
Drinking Wtr. Rev. Rev. Fds.) Ser. '98 C, 5.00%, 06/15/19.................. 975,660
2,350,000 New York State Med. Care Fac. Fin. Agy., FGIC Insured Bds., (St. Francis
Hosp. Prj.), Ser. `88, 7.60%, 11/01/08..................................... 2,447,478
295,000 New York State Med. Care Fac. Fin. Agy., New York Hosp. FHA Insured
Mtg. Bds., Ser. A, 6.90%, 08/15/34......................................... 343,604
170,000 New York State Med. Care Fac. Fin. Agy., Rev. Bds., Hosp. & Nursing
Home Insured Mtg., Ser. `88, 7.90%, 02/15/08............................... 175,653
290,000 New York State Med. Care Fac. Fin. Agy., Rev. Bds., Hosp. & Nursing
Home Mtg., Ser. `87 A, 8.00%, 02/15/27..................................... 296,670
4,470,000 New York State Med. Care Fac. Fin. Agy., Rev. Bds., Hosp. & Nursing
Home Mtg., Ser. `88, 8.00%, 02/15/28....................................... 4,620,237
1,400,000 New York State Med. Care Fac. Fin. Agy., Rev. Ref. Bds., Mental Hlth.
Svcs. Fac., Ser. `87 A, 8.25%, 02/15/99.................................... 1,432,788
500,000 New York State Med. Care Fac. Fin. Agy., Rev. Ref. Bds., Mental Hlth.
Svcs. Fac., Ser. `87 A, 8.875%, 08/15/07................................... 511,940
10,000 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............ 10,104
320,000 New York State Pwr. Auth. Rev. & Gen. Purpose Rev. Ref. Bds.,
(MBIA Insured) Ser. `86U, 5.75%, 01/01/18.................................. 320,166
3,500,000 New York State Twy. Auth. Hwy. & Brdg. Tr. Fd., FGIC Insured, Ser. `98A,
5.00%, 04/01/18............................................................ 3,417,855
2,000,000 New York State Urban Development Corp., Rev. Bds., (Corr. Fac. Svc.
Contract) Ser. `98, 5.00%, 01/01/18........................................ 1,917,460
1,000,000 New York State Urban Development Corp., Rev. Ref. Bds., (Corr. Fac.)
Ser. `98, 5.00%, 01/01/19.................................................. 960,000
300,000 New York State Urban Development Corp., Rev. Bds., (St. Office-South
Mall) Ser. '89 A, Zero Cpn., 01/01/11...................................... 145,620
1,500,000 New York State Urban Development Corp., Rev. Bds., (Youth Fac.)
Ser. '98 A, 5.00%, 01/01/18................................................ 1,436,010
1,095,000 North Hempstead, NY, Ser. '98 A (FGIC Insured), 4.75%, 01/15/18.............. 1,033,176
300,000 Port Jervis, NY, IDA, Mercy Community Hosp. Rev. Bds., (Franciscan Hlth.
Partnership) Ser. '97, 5.10%, 11/01/07..................................... 302,475
22
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
NEW YORK - CONTINUED
$ 470,000 Port Jervis, NY, IDA, Mercy Community Hosp. Rev. Bds., (Franciscan Hlth.
Partnership) Ser. '97, 5.20%, 11/01/08..................................... $ 475,706
---------------
57,215,634
---------------
NORTH CAROLINA - (0.91%)
500,000 Brevard, NC, Hsg. Auth. 1st Mtg. Rev. Bds. (Ascend Healthcare, Inc. Prj.),
Ser. '98A, 7.50%, 03/01/28................................................. 497,765
430,000 Buncome Cnty., NC, Ctfs. of Participation (MBIA Insured) Ser. `89,
6.90%, 12/01/04............................................................ 435,375
500,000 Charlotte, NC, Hsg. Auth. 1st Mtg. Rev. Bds. (Ascend Healthcare, Inc. Prj.),
Ser. '98A, 7.50%, 03/01/28................................................. 497,765
750,000 Charlotte, NC, Special Facs. Rev. Ref. Bds. (Charlotte/Douglas Int'l. Airport),
Ser. '98, 5.60%, 07/01/27.................................................. 737,108
470,000 North Carolina Eastern Mun. Pwr. Agy. Pwr. Sys. Rev. Ref. Bds.,
Ser. `88A, 6.00%, 01/01/26................................................. 470,113
500,000 North Carolina Med. Care Comm. Hlth. Care Fac., 1st Mtg. Rev. Bds. ,
(Deerfield Espiscopal) Ser. `97, 6.00%, 11/01/27........................... 503,990
500,000 North Carolina Med. Care Comm. Hlth. Care Fac., 1st Mtg. Rev. Ref. Bds.,
(Glenaire Prj.) Ser. `97, 5.75%, 07/01/17.................................. 496,735
200,000 North Carolina Med. Care Comm. Hosp. Rev. Ref. Bds. (Moore Memorial
Hosp. Prj.), 9.10%, 10/01/99............................................... 206,194
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..... 515,710
--------------
4,360,755
--------------
NORTH DAKOTA - (2.17%)
9,015,000 North Dakota St. 1986 Real Estate, Ser. `86A, 6.00%, 09/01/13................ 9,080,719
160,000 University, ND, Univ. Rev. Ref. Bds. (Hsg. & Auxiliary Fac.)
Ser. `88 A, 7.85%, 04/01/14................................................ 164,800
900,000 Ward Cnty., ND, Hlth Care Fac. Rev. Bds. (St. Joseph's Hosp. Corp. Prj.)
Ser. '94, 8.875%, 11/15/14................................................. 1,137,060
--------------
10,382,579
--------------
OHIO - (3.38%)
1,500,000 Cleveland, OH, Airport Rev. Bds. (Continental Airlines, Inc. Prj.) Ser. '98,
5.375%, 09/15/27........................................................... 1,455,525
500,000 Cleveland, OH, Waterworks 1st Mtg. Rev. Bds., Ser. `87E, 6.00%, 01/01/17.... 500,240
500,000 Cleveland, OH, Waterworks Rev. Bds., Ser. A, 6.125%, 01/01/08................ 502,605
1,165,000 Cnty. of Belmont, Ohio Hlth. Sys. Rev. and Ref. Bds. (East Ohio Reg'l
Hosp. Issue) Ser. `85, 9.50%, 01/01/05..................................... 1,168,483
410,000 Cnty. of Belmont, Ohio Hlth. Sys. Rev. and Ref. Bds. (East Ohio Reg'l
Hosp. Issue) Ser. `85, 9.50%, 01/01/13..................................... 411,283
245,000 Garfield Heights, OH, Ser. `89, 7.50%, 12/01/09.............................. 255,373
680,000 Hamilton Cnty., Ohio Hosp. Facs. Rev. Bds. (Bethesda Hosp. Inc.)
Ser. `86A, 7.00%, 01/01/09................................................. 691,662
23
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
OHIO - CONTINUED
$ 440,000 Hamilton Cnty., Ohio Hosp. Facs. Rev. Bds. (Bethesda Hosp. Inc.)
Ser. `86A, 7.00%, 01/01/09................................................. $ 447,546
950,000 Mahoning Cnty., OH, Hosp. Facs. Rev. Ref. Bds. (St. Elizabeth Hosp. Med.
Ctr.) Ser. `86, 7.375%, 12/01/09........................................... 1,014,895
2,000,000 The Mahoning Valley Sanitary Dist. (Ohio) Wtr. Rev. Bds., Ser. `94,
7.750%, 05/15/19........................................................... 2,223,280
325,000 Montgomery Cnty., OH, Hosp. Rev. Ref. Bds. (Grandview Hosp. & Med.
Ctr.) Ser. `97, 5.65%, 12/01/12............................................ 334,263
1,635,000 Ohio Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. Cap. Appreciation,
Ser. '85 A, Zero Cpn., 01/15/15............................................ 327,507
55,000 Ohio Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. (GNMA Mtg.-Backed Sec.
Prg.) Ser. '90 C, Zero Cpn., 09/01/02...................................... 40,191
5,000,000 Ohio St. Air Quality Dev. Auth. Rev. Ref. Bds. (Pollution Ctl./Ohio Edison)
Ser. `90, 7.45%, 03/01/16.................................................. 5,373,900
1,100,000 Ohio St. Solid Waste Rev. Ref. Bds. (CSC Ltd. Prj.) Ser. `97 B, 8.50%,
08/01/22................................................................... 1,165,978
225,000 Student Loan Funding Corp. Cincinnati, OH, Student Loan Rev. Bds.,
Ser. `93 A, 6.10%, 08/01/08................................................ 235,267
---------------
16,147,998
---------------
OKLAHOMA - (0.36%)
200,000 Oklahoma St. Ind. Auth. Rev. Bds. (Hlth. Sys./Baptist Ctr.) Ser. `95C,
7.00%, 08/15/03............................................................ 225,440
1,000,000 Southeastern, OK, Ind. Auth OK Rev. Bds. (Pollution Ctl./Weyerhauser Co.
Prj.) Ser. `85, 9.85%, 01/01/00............................................ 1,016,990
420,000 Trustees of the Oklahoma Ordnance Works Auth. IDR Ref. Bds. (A.P.
Green Ind., Inc. Prj.) Ser. '92, 8.50%, 05/01/08........................... 456,721
---------------
1,699,151
---------------
OREGON - (0.63%)
2,900,000 Oregon St., Ser. B, 6.875%, 12/01/13......................................... 3,013,535
---------------
PENNSYLVANIA - (4.52%)
540,000 Allegheny Cnty., PA, Hosp. Dev. Auth. Rev. Bds. (Allegheny VY Hlth.
Facs. Mgmt. Co.) Ser. `86, 7.50%, 08/01/13................................. 552,236
1,870,000 Allegheny Cnty., PA, Hosp. Dev. Auth. Rev. Bds. (Presbyterian Univ. Hosp.)
Ser. '88 C, 7.625%, 07/01/15............................................... 1,925,352
75,000 Allegheny Cnty., PA, Residential Fin. Auth. Sngl. Fam. Mtg. Rev. Bds.,
'83-Ser.-B, Zero Cpn., 10/01/15............................................ 12,032
3,000,000 Beaver Cnty., PA, IDA PCR Bds. (J&L Specialty Steel-formerly known
as Colt Ind. Prj.) Ser. 19, 7.00%, 06/01/08................................ 3,047,400
85,000 Berks Cnty., PA, IDA IDR (Borg-Warner/Baker Protection Svcs., Inc.)
Ser. '81, 11.10%, 07/01/01................................................. 86,089
2,330,000 Berks Cnty., PA, IDA (Supermarkets General Corp. Prj.), 10.50%, 11/01/03..... 2,415,744
24
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
PENNSYLVANIA - CONTINUED
$ 30,000 Bucks Cnty., PA, IDA Mtg. Rev. (Geriatric and Medical Svcs., Inc. Prj.)
Ser. '92, 9.00%, 07/01/98.................................................. $ 30,363
35,000 Chester Cnty., PA, IDA Mtg. Rev. Ref. Bds. (Geriatric and Medical
Svcs., Inc. Prj.) Ser. '92, 9.00%, 07/01/98................................ 35,341
400,000 Columbia Cnty. IDA, Columbia Cnty., PA, 1st Mtg. Rev. Bds., Ser. `86
(Orangeville Nursing Ctr. Associates Prj.), 9.00%, 12/01/12................ 400,992
1,000,000 Delaware Cnty., PA, Auth. Hlth. Sys. Rev. Bds. (Catholic Hlth. East)
Ser. `98, 4.875%, 11/15/18................................................. 953,050
1,000,000 Emmaus, PA, Gen'l Auth. Rev. Loc. Gov't Bds. (Bd. Pool Prog.) Ser. B,
8.00%, 05/15/18............................................................ 1,020,360
250,000 Emmaus, PA, Gen'l Auth. Rev. Loc. Gov't Bds. (Bd. Pool Prog.) Ser. F,
7.90%, 05/15/18............................................................ 259,235
145,000 Greene Cnty., PA, Ind'l Dev. Auth. Pollution Ctl. Rev. Bds. (Potomac
Edison/Hatfield Ferry) Ser. '77 A, 6.30%, 02/01/02......................... 145,000
100,000 Hempfield, PA, School Dist., Lancaster Cnty. Ref. Bds. Ser. `90,
6.90%, 10/15/01............................................................ 100,387
2,850,000 Lehigh Cnty., PA, Gen. Purpose Auth. Rev. Ref. Bds. (Muhlenberg Hosp.
Ctr.) Ser. `89A, 8.10%, 07/15/10........................................... 3,039,069
715,000 Luzerne Cnty., PA, Hsg. Corp. Rev. Bds., 8.125%, 12/01/08.................... 716,201
200,000 McKean Cnty., PA, Ind. Dev. Auth. Rev. Bds., Ser. `80 (Corning Glass
Wks. Prj.), 7.75%, 06/01/05................................................ 201,054
315,000 Mercer Cnty., PA, IDA, Gumberg Assoc. - Pine Grove Square, The Kroger
Co., Ind. Dev. 1st Mtg. Rev. Bds., 13.00%, 06/01/07........................ 325,162
500,000 Montgomery Cnty., PA, IDA 1st Mtg. Rev. Ref. Bds., Ser. '97 A
(Meadowood), 6.25%, 12/01/17............................................... 520,295
100,000 Montgomery Cnty., PA, IDA Mtg. Rev. Ref. Bds., Ser. '92 A
(Geriatric and Medical Svcs., Inc. Prj.), 9.00%, 07/01/99.................. 102,586
160,000 Pennsylvania Hsg. Fin. Agy., Moderate Rehab. Rev. Bds., 9.00%, 08/01/01...... 162,379
675,000 Pennsylvania St. Higher Educ. Fac. Auth. College & Univ. Rev. Bds.,
(Temple Univ.) Ser. `86, 7.40%, 10/01/10................................... 686,792
400,000 Pennsylvania St. Higher Educ. Fac. Auth. College & Univ. Rev. Bds.,
(Temple Univ.) Ser. `86, 7.40%, 10/01/10................................... 407,112
1,150,000 Philadelphia, PA, Hosp. & Higher Educ. Fac. Auth. Rev. Bds.
(Jefferson Hlth. Sys.) Ser. `97, 5.125%, 05/15/18.......................... 1,128,001
305,000 Philadelphia, PA, Hosp. & Higher Educ. Fac. Auth. Rev. Ref. Bds.
(The Philadelphia Protestant Home Prj.) Ser. `97 A, 5.60%, 07/01/04........ 310,734
315,000 Philadelphia, PA, Hosp. & Higher Educ. Fac. Auth. Rev. Ref. Bds.
(The Philadelphia Protestant Home Prj.) Ser. `97 A, 5.70%, 07/01/05........ 320,909
260,000 Philadelphia, PA, Hosp. & Higher Educ. Fac. Auth. Rev. Ref. Bds.
(The Philadelphia Protestant Home Prj.) Ser. `97 A, 5.80%, 07/01/06........ 265,361
245,000 Philadelphia, PA, Hosp. & Higher Educ. Fac. Auth. Rev. Ref. Bds.
(The Philadelphia Protestant Home Prj.) Ser. `97 A, 5.90%, 07/01/07........ 250,045
25
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
PENNSYLVANIA - CONTINUED
$ 100,000 Philadelphia, PA, Redev. Auth. Sngl. Fam. Home Mtg. Rev. Ref. Bds.,
`85 Ser. A, 0%/10.25%, 06/01/17 (b)........................................ $ 102,866
205,000 Pittsburgh, PA, Redevelopment Auth. Home Improvement Loan,
Rev. Bds., Ser. `86 A, 7.375%, 06/01/03.................................... 209,108
100,000 Pittsburgh, PA, Urban Redevelopment Auth. Home Improvement Loan,
Rev. Bds., Ser. `87 A, 7.125%, 08/01/04.................................... 102,486
500,000 U R A Hsg. Corp., PA, Mtg. Rev. Bds. (Chemical Bk.) Ser. `82, 12.00%,
11/01/23................................................................... 518,035
250,000 Warren Cnty., PA, IDA Specialized Dev. Rev. Ref. Bds. (Beverly
Enterprises - Pennsylvania, Inc. Prj.) Ser. '91, 9.00%, 11/01/12........... 280,555
930,000 Westmoreland Cnty., PA, Ind'l Dev. Auth. Rev. Ref. Bds. (Citizens Gen.
Hosp. Prj.) Ser. `87, 8.25%, 07/01/13...................................... 953,343
---------------
21,585,674
---------------
PUERTO RICO - (1.26%)
3,475,000 Puerto Rico Commonwealth Infrastructure Fin. Auth. Special Bds.,
Ser. `88 A, 7.75%, 07/01/08................................................ 3,580,466
2,000,000 Puerto Rico Elec. Pwr. Auth. Rev. Ref. Bds., Ser. '98 EE, 4.75%, 07/01/24.... 1,855,560
300,000 Puerto Rico Ind. Med. & Environmental PCR Fac. Fin. Auth. Rev. Bds.,
(Abbott Chemical Inc. Prj.), 6.50%, 07/01/09............................... 302,448
250,000 Puerto Rico Ind. Tourist Educational Med. & Environmental Ctl. Fac. Fin.
Auth. Rev. Bds., (Mennonite Gen. Hosp. Prj.), Ser. '97 A, 5.625%,
07/01/17................................................................... 256,550
---------------
5,995,024
---------------
RHODE ISLAND - (0.07%)
100,000 Rhode Island Hlth. & Educational Bldg. Corp. Hosp. Fin. Rev. Bds.,
(Roger Williams Gen. Hosp. Issue) Ser. `85, 9.375%, 07/01/04............... 100,401
250,000 Rhode Island Hlth. & Educational Bldg. Corp. Rev. Bds., 9.50%, 07/01/16...... 250,990
---------------
351,391
---------------
SOUTH CAROLINA - (1.91%)
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...... 429,096
750,000 Charleston Cnty., SC, Res. Recovery, Rev. Ref. Bds., (Foster Wheeler
Charleston), Ser. `97, 5.25%, 01/01/10..................................... 773,858
2,300,000 City of Charleston, SC, Waterworks and Sewer Sys. Ref. Rev. Bds.,
Ser. '86A, 7.00%, 01/01/15................................................. 2,328,267
100,000 Clemson Univ., SC, Ctfs. of Participation, Ser. `86, 6.90%, 12/01/07......... 101,250
11,350,000 Connector 2000 Association, Inc., Toll Rd. Rev. Bds., (Southern Connector
Prj., Greenville, SC) Ser. '98 B, Zero Cpn., 01/01/32...................... 1,621,234
21,950,000 Connector 2000 Association, Inc., Toll Rd. Rev. Bds., (Southern Connector
Prj., Greenville, SC) Ser. '98 B, Zero Cpn., 01/01/33...................... 2,959,519
26
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
SOUTH CAROLINA - CONTINUED
$ 900,000 Piedmont Mun. Pwr. Agy., SC, Elect. Rev. Ref. Bds., Ser. `86 A,
5.75%, 01/01/24............................................................ $ 899,901
---------------
9,113,125
---------------
SOUTH DAKOTA - (0.49%)
250,000 Aberdeen, SD, Unlimited G.O., Rev. Ref. Bds., (MBIA Insured) Ser. `87,
6.90%, 07/01/04............................................................ 251,898
1,000,000 Education Loans, Inc., SD, Student Loan Ref. Bds., Ser. `98, 5.60%,
06/01/20................................................................... 991,270
30,000 South Dakota Bldg. Auth., Rev. Ref. Bds., Ser. of Feb. '84, 10.50%,
09/01/00................................................................... 31,249
1,000,000 South Dakota St. Hlth. & Educ. Fac. Auth. Rev. Ref. Bds., (McKennan
Hosp.) (MBIA Insured), Ser. '89 A, 7.625%, 07/01/14....................... 1,060,180
---------------
2,334,597
---------------
TENNESSEE - (1.27%)
305,000 Dover, TN, Hlth. & Educ. Fac., IDR (Wessex Corp. Dover Prj.), 9.50%,
09/01/11................................................................... 311,893
290,446 Dyer Cnty., TN, Ind. Dev. Brd. IDR Bds. (S.S. Kresge Co. - K-Mart Corp.),
8.10%, 11/01/00............................................................ 290,925
500,000 The Hlth. & Educational Fac. Auth. of the City of Crossville, TN, 1st Mtg.
Ref. Rev. Bds. (Country Place Hlth. Care Ctr., Inc. Prj.) Ser. '96 A,
7.75%, 06/01/13............................................................ 538,405
840,000 Lewisburg, TN, IDR Bds. (Mead Corp. Prj.), 7.875%, 02/01/00.................. 865,704
290,000 McMinn Cnty., TN, Ind. Dev. Brd. Rev. Bds., (S.S. Kresge Co.), 8.00%,
11/01/00................................................................... 290,563
1,000,000 Met. Gov't Nashville & Davidson Cnty, TN, H & E Facs. Rev. Bds.,
(Baptist Hosp. Inc.) (MBIA Insured) Ser. '98 A, 4.75%, 11/01/18............ 941,090
2,000,000 Met. Gov't Nashville & Davidson Cnty, TN, H & E Facs. Rev. Ref. Bds.,
(Blakeford At Green Hills) Ser. '98, 5.65%, 07/01/24....................... 1,975,540
450,000 New Tazewell, TN, Hlth. Educational & Hsg. Fac. Brd. IDR Bds. (Wessex
Corp. New Tazewell Prj.) Ser. '87, 10.00%, 06/01/17........................ 453,164
395,000 Sevier Cnty., TN, Ind. Dev. Brd. IDR Bds. (The Kroger Co. and Super X
Prj.) Ser. A, 10.25%, 11/01/06............................................. 395,356
---------------
6,062,640
---------------
TEXAS - (5.74%)
10,790,000 Austin, TX, Hsg. Fin. Corp., Sngl. Fam. Mtg. Rev. Bds., Ser. `84,
Zero Cpn., 02/01/16........................................................ 1,359,432
600,000 Austin, TX, Utility Sys. Rev. and Ref. Bds., Cap. Appreciation, Ser. '88,
Zero Cpn., 11/15/12........................................................ 203,166
2,000,000 Brazos River Auth., TX, Rev. Ref. Bds. (Houston Inds. Prj.) Ser. `98,
5.125%, 05/01/19........................................................... 1,968,260
355,000 Brazos River Auth., TX, Rev. Ref. Collateralized Bds. (Houston L&P
Co. Prj.) `88 Ser. D, 7.75%, 10/01/15...................................... 368,398
27
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
TEXAS - CONTINUED
$ 1,000,000 Brazos River Auth., TX, Rev. Ref. Collateralized Bds. (Houston L&P
Co. Prj.) `88 Ser. C, 8.10%, 05/01/19...................................... $ 1,023,600
1,250,000 The City of San Antonio (Texas) Hlth. Fac. Dev. Corp. Econ. Dev. Rev.
Bds. (Encore Nursing Ctr. Partners, Ltd. - 85), 8.25%, 12/01/19............ 1,395,375
625,000 Dallas Cnty., TX, Utility & Reclamation Dist. Rev. Ref. Bds., Cap.
Appreciation (MBIA Insured) Ser. `93, Zero Cpn., 02/15/14.................. 263,550
260,000 Dallas, TX, Civic Ctr. Convention Complex, Sr. Lien Rev. Bds., Ser. '85,
8.30%, 01/01/00............................................................ 262,681
150,000 Dallas, TX, Civic Ctr. Convention Complex, Sr. Lien Rev. Bds., Ser. '85,
8.50%, 01/01/04............................................................ 151,620
965,000 Dallas, TX, Civic Ctr. Convention Complex, Sr. Lien Rev. Bds., Ser. '85,
8.60%, 01/01/07............................................................ 972,952
720,000 El Paso Cnty., TX, Community College Dist. Rev. Ref. Bds., Ser. `97B,
5.125%, 04/01/19........................................................... 709,531
120,000 El Paso, TX, Hsg. Fin. Corp. Sngl. Fam. Mtg. Rev. Bds., Ser. `89,
7.85%, 09/01/20............................................................ 124,427
250,000 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.......... 251,520
3,000,000 Gulf Coast Waste Disp. Auth. TX Rev. Bds. (Waste Disp.-Valero Energy
Corp.) Ser. `98, 5.60%, 04/01/32........................................... 3,003,630
1,525,000 Harris Cnty., TX, Hlth. Fac. Dev. Corp. Rev. Bds. (Adj. Conv. Extendible
Secs.), GTR Houston Pooled Hlth. Care, 7.375%, 12/01/25.................... 1,543,773
30,000 Houston, TX, Hsg. Corp. No. 1 Rev. Bds., Long Drive Apartments - Section
8 Assisted, 9.00%, 02/01/20................................................ 33,458
985,000 Jefferson Cnty., TX, Hlth. Fac. Dev. Corp. Hosp. Rev. Bds. (Baptist
Healthcare Sys. Prj.) Ser. '91, 8.875%, 06/01/21........................... 1,036,476
1,000,000 Lewisville, TX, Hsg. Fin. Corp. Multifam. Rev. Bds., Ser. `97, 5.50%,
06/01/17................................................................... 1,016,410
500,000 Matagorda Cnty., TX, NA Dist. No. 1, Rev. Ref. Bds., (Houston Ind'l. Inc.,
Prj.) (MBIA Insured) Ser. '98 A, 5.25%/Adj., 11/01/29...................... 488,670
1,000,000 Matagorda Cnty., TX, NA Dist. No. 1, Rev. Ref. Bds., (Houston Ind'l. Inc.,
Prj.) (MBIA Insured) Ser. '98 B, 5.15%/Adj., 11/01/29...................... 977,080
2,000,000 North Central, TX, Hlth. Fac. Dev. Corp. Rev. Bds., (Young Mem. Prj.)
Ser. '98, 5.375%, 02/15/25................................................. 1,954,020
1,045,000 North Forest Independent School Dist. TX, Rev. Ref. Bds., Ser. '98, 5.00%,
08/15/18................................................................... 1,007,422
500,000 Southeast TX, Hsg. Fin. Corp. Multi-Fam. Hsg. Rev., 1st Mtg. Rev. Bds.
(The Ridge Apartments Prj.), 8.30%, 11/01/23+.............................. 125,000
180,000 Tarrant Cnty., TX, Hlth. Fac. Dev. Corp. Hlth. Sys. Rev. Bds. (Harris
Methodist Hlth. Sys.) Ser. `87 A, 6.875%, 09/01/12......................... 187,825
95,000 Terrell, TX, Pub. Hosp. Corp. Rev. Bds. (American Med. Int'l Inc.)
Ser. `76, 7.375%, 02/01/06................................................. 97,171
880,000 Texas Hsg. Agy., Residential Mtg. Rev. Bds., Ser. '87D, 8.40%, 01/01/21...... 917,629
28
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
TEXAS - CONTINUED
$ 3,630,000 Texas St. Dept. Hsg. & Community Affairs Sngl. Fam. Rev. Ref. Bds.,
Ser. '96 B CL 2, 5.55%, 03/01/11........................................... $ 3,709,933
185,000 Texas St. Higher Educ. Coordinating Brd., College Student Loan Rev. Bds.,
7.20%, 04/01/02............................................................ 194,533
45,000 Texas Wtr. Res. Fin. Auth. Rev. Bds., Ser. '89, 7.625%, 08/15/08............. 46,890
380,000 Texas Wtr. Res. Fin. Auth. Rev. Bds., Ser. '89, 7.50%, 08/15/13.............. 397,499
255,000 Tomball, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 02/15/13........................................ 97,188
745,000 Tomball, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 02/15/13........................................ 276,708
1,195,000 Tyler Hlth. Fac. Dev. Corp. Hosp. Rev. Bds. (East TX Med. Ctr. Reg'l
Healthcare Sys. Prj.) Ser. `97 B, 5.50%, 11/01/17.......................... 1,221,660
---------------
27,387,487
---------------
UTAH - (0.53%)
500,000 Intermountain Pwr. Agy., UT, Pwr. Supply Rev. Bds.,`88 Ser. B, 7.75%,
07/01/20................................................................... 514,510
1,845,000 Intermountain Pwr. Agy., UT, Pwr. Supply Rev. Bds., Cap. Appreciation,
`87 Ser. D, Zero Cpn., 07/01/20............................................ 313,853
200,000 Intermountain Pwr. Agy., UT, Pwr. Supply Rev. Bds. (First Crossover)
(MBIA Insured) `86 Ser. B, 6.00%, 07/01/15................................. 200,140
500,000 Intermountain Pwr. Agy., UT, Pwr. Supply Rev. Bds. (Second Crossover)
`86 Ser. C, 5.75%, 07/01/20................................................ 500,425
1,000,000 Utah Hsg. Fin. Agy. Rev. Bds. (RHA Community Services of Utah,
Inc. Prj.) Ser. `97 A, 6.875%, 07/01/27.................................... 1,022,510
---------------
2,551,438
---------------
VERMONT - (0.31%)
1,450,000 Vermont Hsg. Fin. Agy. Multi-Fam. Hsg. Bds., '79 Ser. A, 8.50%,
02/15/21................................................................... 1,488,208
---------------
VIRGINIA - (3.39%)
2,500,000 Bedford Cnty., VA, Ind'l Dev. Auth. IDR Ref. Bds. (Nekoosa Packaging
Corp. Prj.) Ser. `98, 5.60%, 12/01/25...................................... 2,522,200
1,000,000 Chesapeake, VA, Ind'l Dev. Auth. Nursing Home Rev. Bds. (Sentara Life
Care Corp. Prj.) Ser. `88, 7.875%, 11/01/08................................ 1,041,320
4,000,000 Chesapeake, VA, Ind'l Dev. Auth. Nursing Home Rev. Bds. (Sentara Life
Care Corp. Prj.) Ser. `88, 8.00%, 11/01/18................................. 4,168,120
270,000 IDA of Covington-Alleghany Cnty., VA, IDR Ref. Bds. (Beverly
Enterprises, Inc. Prj.) Ser. '91, 9.375%, 09/01/01......................... 292,696
1,400,000 Lynchburg, VA, Ind'l Dev. Auth. Hosp. Fac. 1st Mtg. Rev. Ref. Bds.
(Centra Hlth. Inc.) Ser. `88, 8.125%, 01/01/16............................. 1,441,188
110,000 Montgomery Cnty., VA, Rev. Bds., Ser. `87, 6.70%, 04/01/07................... 111,902
1,000,000 Norfolk, VA, Ind'l Dev. Auth. Nursing Home Rev. Bds. (Sentara Life
Care Corp. Prj.) Ser. `88, 7.875%, 11/01/08................................ 1,041,320
29
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
VIRGINIA - CONTINUED
$ 2,000,000 Norfolk, VA, Ind'l Dev. Auth. Nursing Home Rev. Bds. (Sentara Life
Care Corp. Prj.) Ser. `88, 7.90%, 11/01/18................................. $ 2,081,720
500,000 Peninsula Ports Auth. VA, Hosp. Fac. Rev. Ref. Bds. (Whittaker Mem.
Hosp. Prj.) Ser. `87, 8.70%, 08/01/23...................................... 511,955
500,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., Ser. A, 6.90%,
07/01/07................................................................... 507,300
600,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., Ser. A, 7.00%,
01/01/13................................................................... 602,460
115,000 Virginia St. Res. Auth. Wtr. & Swr. Sys. Rev. Bds. (Pooled Loan Prg.)
Ser. `97 A, 7.50%, 11/01/17................................................ 115,917
500,000 Winchester, VA, Ind'l Dev. Auth. Res. Care Fac., 1st Mtg. Rev. Bds.
(Westminster-Canterbury) Ser. `98, 5.75%, 01/01/18......................... 497,615
1,250,000 Winchester, VA, Ind'l Dev. Auth. Res. Care Fac., 1st Mtg. Rev. Bds.
(Westminster-Canterbury) Ser. `98, 5.75%, 01/01/27......................... 1,234,288
---------------
16,170,001
---------------
WASHINGTON - (0.87%)
500,000 Chelan Cnty., WA, Pub. Utilities Dist. No. 1, Chelan Hydro Cons. Sys.
Rev. Bds., Ser. '97 A, 4.85%, 07/01/32..................................... 501,075
500,000 Chelan Cnty., WA, Pub. Utilities Dist. No. 1, Chelan Hydro Cons. Sys.
Rev. Bds., Ser. '97 A, 5.25%, 07/01/32..................................... 505,040
500,000 Chelan Cnty., WA, Pub. Utilities Dist. No. 1, Chelan Hydro Cons. Sys.
Rev. Bds.. Ser. '97 A, 5.60%, 07/01/32..................................... 512,120
400,000 King Cnty., WA, Unlimited G.O., Ser. A '78, 6.50%, 12/01/12.................. 400,920
2,300,000 Washington St. Hsg. Fin. Comm. Nonprofit Hsg. Rev. Bds. (Seattle Univ.
Auxiliary Svcs. Prj.) Ser. '98, 5.30%, 07/01/31............................ 2,257,473
---------------
4,176,628
---------------
WEST VIRGINIA - (1.63%)
380,000 Beverly, WV, Hsg. Corp. Mtg. Rev. Bds., Ser. `81 (Beverly Manor/FHA -
Insured/Section 8 Prj.), 11.00%, 11/15/22.................................. 447,830
270,000 Glasgow, WV, Hlth. Fac. Rev. Ref. Bds. (Beverly Enterprises, Inc. Prj.)
Ser. '91, 9.50%, 09/01/01................................................. 293,234
300,000 The Ohio Cnty. Bldg. Comm., WV, Hlth. Sys. Rev. Ref. Bds. (Ohio
Valley Med. Ctr. Issue) Ser. `85, 9.40%, 01/01/00.......................... 301,059
950,000 The Ohio Cnty. Bldg. Comm., WV, Hlth. Sys. Rev. Ref. Bds. (Ohio
Valley Med. Ctr. Issue) Ser. `85, 9.50%, 01/01/05.......................... 952,784
3,440,000 The Ohio Cnty. Bldg. Comm., WV, Hlth. Sys. Rev. Ref. Bds. (Ohio
Valley Med. Ctr. Issue) Ser. `85, 9.625%, 01/01/13......................... 3,528,752
65,000 Putnam Cnty., WV, IDR (IDR Bds.) Rite Aid West Virginia Inc., 10.375%,
11/01/02................................................................... 65,116
870,000 West Virginia Hsg. Dev. Fd., Rental Dev. Prg. Bds., Ser. C (Section 8
Assisted Dev.), 10.00%, 07/01/15........................................... 879,892
30
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
PRINCIPAL (NOTE 1)
MUNICIPAL BONDS - CONTINUED
WEST VIRGINIA - CONTINUED
$ 1,250,000 West Virginia St. Hsg. Dev. Fd. Hsg. Fin. Rev. Bds., Ser. '87, 7.40%,
11/01/11................................................................... $ 1,290,438
---------------
7,759,105
---------------
WISCONSIN - (2.46%)
1,000,000 Berlin, WI, Area School Dist. Rev. Ref. Bds., Ser. '98, 4.90%, 04/01/14...... 977,450
300,000 Clear Lake, WI, Sewer Sys. Mtg. Rev. Bds., 8.00%, 08/01/11................... 321,489
170,000 Wisconsin Hlth. Fac. Auth. Rev. Ref. Bds., Hosp. Sisters Svcs. Sys.,
Ser. D, 9.125%, 07/01/05................................................... 170,740
4,040,000 Wisconsin Hlth. Fac. Auth. Rev. Ref. Bds., Hosp. Sisters Svcs. Sys.,
Ser. D, 9.25%, 07/01/12.................................................... 4,145,040
1,410,000 Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev. Bds.,
Ser. `88 D, 7.90%, 09/01/05................................................ 1,444,108
600,000 Wisconsin Muni Ins. Comm. Rev. Bds., Ser. '87, 8.70%, 04/01/07............... 609,000
2,500,000 Wisconsin St. Hlth. & Educational Fac. Auth. Rev. Ref. Bds. (Wausau
Hosp. Inc.) Ser. '98 A, 5.125%, 08/15/20................................... 2,433,301
1,595,000 Wisconsin St. Hlth. & Educational Fac. Auth. Rev. Bds. (RFDF Inc. Prj.)
Ser. `97, 7.375%, 07/15/27................................................. 1,624,220
---------------
11,725,348
---------------
WYOMING - (0.02%)
85,000 Wyoming Community Dev. Auth. Insured Bds., Sngl. Fam. Mtg., Cap.
Appreciation, Ser. B, 0%/8.25%, 06/01/11 (b)............................... 84,448
---------------
Total Municipal Bonds - (identified cost $467,021,436)..................... 468,260,537
---------------
SHORT TERM - (2.39%)
400,000 California PCR Var-Rt, Fin. Auth. SW (Shell-Martinez-A "AMT"), 10/01/24...... 400,000
8,300,000 Jackson Cnty., MS, Var-Rt, Port Fac. Rev. Ref. Bds. (Chevron USA),
06/01/23................................................................... 8,300,000
2,720,000 State Street Bank & Trust Co. Repurchase Agreement, 5.75%, 04/01/98,
dated 03/31/98, repurchase value of $2,720,434 (collateralized by $2,705,000
par value U.S. Treasury Note, 6.25%, 5/31/99, market value $2,779,388)..... 2,720,000
---------------
Total Short Term - (identified cost $11,420,000)........................... 11,420,000
---------------
Total investments - (identified cost $478,441,436)(100.47%) (a)........ $ 479,680,537
Liabilities less other assets - (0.47%)............................. (2,252,211)
Net assets - (100%)............................................... $ 477,428,326
===============
31
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1998 (Unaudited)
VALUE
(a) Aggregate cost for Federal income tax purposes is $478,441,436.
At March 31, 1998 unrealized appreciation (depreciation) of securities for
Federal income tax purposes was as follows:
Unrealized appreciation...................................................... $ 6,206,266
Unrealized depreciation...................................................... (4,967,165)
---------------
Net unrealized appreciation............................................ $ 1,239,101
---------------
</TABLE>
(b) Represents a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
* This security is paying less than stated interest rate.
+ This security is in default and is not currently paying interest.
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
<TABLE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
At March 31, 1998 (Unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $478,441,436) (See accompanying
Schedule of Investments)............................................................ $ 479,680,537
Cash.................................................................................... 74,117
Receivables:
Interest............................................................................ 8,188,304
Capital stock sold.................................................................. 3,718,180
Investment securities sold.......................................................... 18,164,897
Prepaid expenses........................................................................ 83,280
--------------
Total assets............................................................... 509,909,315
--------------
LIABILITIES:
Payables:
Capital stock reacquired............................................................ 2,601,367
Investment securities purchased.................................................... 29,136,341
Commissions to distributor (Note 4)................................................. 291,929
Accrued expenses........................................................................ 451,352
--------------
Total liabilities.......................................................... 32,480,989
--------------
NET ASSETS (NOTE 5).......................................................................... $ 477,428,326
===============
CLASS A SHARES
Net assets.......................................................................... $ 234,838,771
Shares outstanding.................................................................. 25,610,185
Net asset value and redemption price per share (net assets/shares outstanding)...... $ 9.17
--------
Maximum offering price per share (100/95.25 of $9.17)............................... $ 9.63
--------
CLASS B SHARES
Net assets.......................................................................... $ 218,943,749
Shares outstanding.................................................................. 23,960,202
Net asset value and redemption price per share (net assets/shares outstanding)...... $ 9.14
---------
CLASS C SHARES
Net assets.......................................................................... $ 23,459,000
Shares outstanding.................................................................. 2,549,880
Net asset value and redemption price per share (net assets/shares outstanding)...... $ 9.20
--------
CLASS Y SHARES
Net assets.......................................................................... $ 186,806
Shares outstanding.................................................................. 20,356
Net asset value and redemption price per share (net assets/shares outstanding)...... $ 9.18
--------
NET ASSETS CONSIST OF:
Deficit in undistributed net investment income.......................................... $ (45,638)
Net unrealized appreciation on investments.............................................. 1,239,101
Accumulated net realized gain........................................................... 1,256,742
Paid-in capital......................................................................... 474,978,121
--------------
Net assets................................................................. $ 477,428,326
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
<TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the six months ended March 31, 1998 (Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest............................................................................ $ 11,822,627
---------------
Expenses:
Management fees (Note 3).......................................... $ 1,139,173
Custodian fees.................................................... 72,007
Transfer agent fees
Class A...................................................... 63,111
Class B...................................................... 67,920
Class C...................................................... 3,129
Class Y...................................................... 63
Audit fees........................................................ 18,197
Legal fees....................................................... 17,239
Accounting fees (Note 3).......................................... 21,965
Reports to shareholders........................................... 34,264
Directors fees and expenses....................................... 50,307
Registration and filing fees...................................... 55,490
Miscellaneous..................................................... 10,463
Payouts under distribution plan (Note 4)
Class A...................................................... 216,407
Class B...................................................... 878,536
Class C...................................................... 66,091
------------
Total expenses......................................................... 2,714,362
Fee reduction (Note 6).............................................................. (13,166)
---------------
Net expenses................................................................... (2,701,196)
---------------
Net investment income.................................................. 9,121,431
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions............................................... 1,414,835
Net decrease in unrealized appreciation of investments during the period..................... (344,135)
---------------
Net realized and unrealized gain on investments................................ 1,070,700
---------------
Net increase in net assets resulting from operations........................... $ 10,192,131
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
<TABLE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30,
OPERATIONS: (UNAUDITED) 1997
<S> <C> <C>
Net investment income........................................... $ 9,121,431 $ 10,003,819
Net realized gain from investment transactions................. 1,414,835 1,392,396
Net decrease in unrealized appreciation
of investments......................................... (344,135) (127,490)
---------------- ----------------
Net increase in net assets resulting
from operations............................... 10,192,131 11,268,725
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Distribution from net investment income
Class A .......................................... (5,241,929) (3,300,319)
Class B ......................................... (4,973,938) (6,339,753)
Class C .......................................... (333,340) (767)
Class Y .......................................... (3,211) -
Distribution from gains from investment transactions
Class A .......................................... (673,757) (78,623)
Class B .......................................... (790,190) (178,821)
Class C .......................................... (46,345) -
Class Y .......................................... (294) -
CAPITAL SHARE TRANSACTIONS (Note 5)............................. 251,914,810 71,697,040
---------------- ----------------
Total increase in net assets........................... 250,043,937 73,067,482
NET ASSETS:
Beginning of year .............................................. 227,384,389 154,316,907
---------------- ----------------
End of year (including undistributed net investment income
(deficit) of $(45,638) and $1,385,348, respectively) . $ 477,428,326 $ 227,384,389
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENT
At March 31, 1998 (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Davis Tax-Free High Income Fund 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. 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,
the Class B shares are sold at net asset value and may be subject to a
contingent deferred sales charge upon redemption and the 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 shares 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'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
an independent pricing service or broker. 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 or excise tax is required.
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. Interest income is
recorded on the accrual basis. Premiums on tax-exempt securities, original
issue discounts and market discounts are amortized to investment income, over
the lives of the respective securities, or to the earliest call date, if
applicable, for financial reporting and tax purposes.
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. Income from amortization of market discounts and certain
short-term investments is not tax-exempt and may result in some percentage of
dividends being reported as taxable income to shareholders.
36
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1998 (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
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 March 31, 1998, were $533,769,075 and
$279,160,698, 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 agreement provides for a fee at the annual rate of 0.65% of the
first $250 million of average net assets of the Fund, 0.60% of the next $250
million of average net assets of the Fund and 0.55% of average net assets over
$500 million.
The Adviser is paid for registering Fund shares for sale in various
states. The fee for the six months ended March 31, 1998 amounted to $6,498.
Boston Financial Data Services 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 March 31, 1998 amounted to $25,983. State
Street Bank & Trust Co. is the Fund's primary accounting provider. The Adviser
is also paid for certain accounting services. The fee for the six months ended
March 31, 1998 amounted to $21,965. Certain directors and the officers of the
Fund are also officers and directors of the general partner of the Adviser.
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.
Stamper Capital & Investments, Inc. ("Stamper") also acts as
sub-adviser of the Fund. Stamper manages the day-to-day investment operations
for the Fund. The Fund pays no fees directly to Stamper. Stamper receives from
the Adviser a percentage of the total annual investment advisory fees paid by
the Fund to 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, 1998, Davis Distributors, LLC, the
Fund's Underwriter (the "Underwriter" or "Distributor") received $ 3,995,146
from commissions earned on sales of Class A shares of the Fund of which
$628,398 was retained by the Underwriter and the remaining $3,366,748 was
reallowed 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.
37
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1998 (Unaudited)
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
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 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 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 ended March 31, 1998 was $216,407.
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 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 1% annual limit in some future period
or periods when the plan limits have not been reached.
During the six months ended March 31, 1998, Class B shares of the Fund
made distribution plan payments which included distribution fees of $659,558
and service fees of $218,978.
Commission advances by the Distributor during the six months ended March
31, 1998 on the sale of Class B shares of the Fund amounted to $4,021,608 of
which $4,015,417 was reallowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the Fund
in the amount of $6,436,522, 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.
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, 1998 the Distributor received contingent deferred sales
charges of $43,822 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 March 31, 1998, Class C shares of the
Fund made distribution payments of $66,091.
38
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1998 (Unaudited)
NOTE 5 - CAPITAL STOCK
At March 31, 1998, 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, 1998
CLASS A (UNAUDITED)
---------------------------------
SHARES AMOUNT
<S> <C> <C>
Shares sold.......................................................... 22,812,214 $ 209,624,325
Shares issued to shareholders in connection with
reinvestment of distributions.................................. 302,832 2,772,772
------------- ---------------
23,115,046 212,397,097
Shares reacquired.................................................... (7,482,594) (68,729,241)
------------- ---------------
Net increase................................................. 15,632,452 $ 143,667,856
============= ===============
FOR THE YEAR ENDED
SEPTEMBER 30, 1997
---------------------------------
SHARES AMOUNT
Shares sold.......................................................... 6,872,383 $ 63,146,106
Shares issued to shareholders in connection with
reinvestment of distributions.................................. 211,487 1,933,280
------------- ---------------
7,083,870 65,079,386
Shares reacquired.................................................... (2,004,557) (18,369,419)
-------------- ---------------
Net increase................................................. 5,079,313 $ 46,709,967
-------------- ---------------
FOR THE SIX MONTHS
ENDED MARCH 31, 1998
CLASS B (UNAUDITED)
---------------------------------
SHARES AMOUNT
Shares sold.......................................................... 11,047,164 $ 101,189,441
Shares issued to shareholders in connection with
reinvestment of distributions.................................. 281,233 2,568,471
------------- ---------------
11,328,397 103,757,912
Shares reacquired.................................................... (1,832,182) (16,790,322)
------------- ---------------
Net increase................................................. 9,496,215 $ 86,967,590
-------------- ---------------
FOR THE YEAR ENDED
SEPTEMBER 30, 1997
---------------------------------
SHARES AMOUNT
Shares sold.......................................................... 4,212,644 $ 38,566,676
Shares issued to shareholders in connection with
reinvestment of distributions.................................. 352,552 3,214,140
------------- ---------------
4,565,196 41,780,816
Shares reacquired.................................................... (2,103,052) (19,216,556)
------------- ---------------
Net increase................................................. 2,462,144 $ 22,564,260
-------------- ---------------
39
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1998 (Unaudited)
NOTE 5 - CAPITAL STOCK - (CONTINUED)
FOR THE SIX MONTHS
ENDED MARCH 31, 1998
---------------------------------
CLASS C (UNAUDITED)
SHARES AMOUNT
Shares sold.......................................................... 2,293,740 $ 21,152,751
Shares issued to shareholders in connection with
reinvestment of distributions.................................. 14,320 131,586
------------- ---------------
2,308,060 21,284,337
Shares reacquired.................................................... (20,845) (192,230)
------------- ---------------
Net increase................................................. 2,287,215 $ 21,092,107
------------- ---------------
AUGUST 18, 1997
(COMMENCEMENT
OF OPERATIONS)
THROUGH
SEPTEMBER 30, 1997
---------------------------------
SHARES AMOUNT
Shares sold.......................................................... 262,631 $ 2,422,498
Shares issued to shareholders in connection with
reinvestment of distributions.................................. 34 315
------------- ---------------
262,665 2,422,813
Shares reacquired.................................................... - -
------------- ---------------
Net increase................................................. 262,665 $ 2,422,813
------------- ---------------
OCTOBER 6, 1997
(COMMENCEMENT
OF OPERATIONS)
THROUGH
CLASS Y MARCH 31, 1998
(UNAUDITED)
---------------------------------
SHARES AMOUNT
Shares sold.......................................................... 20,356 $ 187,255
Shares issued to shareholders in connection with
reinvestment of distributions.................................. - 2
------------- ---------------
20,356 187,257
Shares reacquired.................................................... - -
------------- ---------------
Net increase................................................. 20,356 $ 187,257
------------- ---------------
</TABLE>
NOTE 6 - CUSTODY FEES
Under an agreement with the custodian bank, custody fees are
reduced by credits for cash balances. Such reductions amounted to $13,166
during the six months ended March 31, 1998.
40
<PAGE>
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
SIX MONTHS
ENDED TEN MONTHS
MARCH 31, ENDED
1998 YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 1997 1996 1995
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period....................................... $ 9.22 $ 9.15 $ 9.19 $ 8.90
------- ------- ------- ------
Income From Investment Operations
Net Investment Income........................... .25 .57 .61 .40
Net Gains or Losses on Securities (both
realized and unrealized)...................... .06 .11 (.05) .30
------- ------- -------- ------
Total From Investment Operations......... .31 .68 .56 .70
------- ------- -------- ------
Less Distributions
Dividends (from net
investment income)............................ (.31) (.59) (.54) (.40)
Distribution from gains from investment
transactions.................................. (.05) (.02) (.06) (.01)
------- ------ ------- ------
Total Distributions....................... (.36) (.61) (.60) (.41)
------- ------ ------- ------
Net Asset Value, End of Period..................... $ 9.17 $ 9.22 $ 9.15 $ 9.19
======= ====== ======= ======
Total Return 1..................................... 3.32% 7.66% 6.33% 7.93%
- ------------
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)................................. $234,839 $92,020 $44,828 $45,461
Ratio of Expenses to
Average Net Assets............................ 1.11%* 1.26%2 1.36% 1.43%*
Ratio of Net Income to
Average Net Assets............................ 5.48%* 6.60% 6.64% 5.95%*
Portfolio Turnover Rate 3....................... 79.88% 112.71% 106.55% 127.80%
</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 for 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 1.25% for September 30, 1997. Prior
to 1996, 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
41
<PAGE>
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:
CLASS B
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1998 ----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period........................ $ 9.19 $ 9.12 $ 9.17 $ 9.09 $ 9.65 $ 9.49
------ ------- ------ -------- ------- -------
Income From Investment Operations
Net Investment Income............ .21 .53 .54 .48 .44 .54
Net Gains or Losses on
Securities (both realized and .06 .08 (.05) .10 (.18) .29
------ -------- ------ -------- ------- -------
unrealized)....................
Total From Invest-
ment Operations............ .27 .61 .49 .58 .26 .83
------ -------- ------ -------- ------- -------
Less Distributions
Dividends (from net
investment income)............. (.27) (.52) (.48) (.48) (.44) (.54)
Distribution from gains
from investment transactions... (.05) (.02) (.06) (.01) (.28) -
Distribution in excess
of net investment income....... - - - (.01) (.07) (.10)
Tax Return of capital
distributions................. - - - - (.03) (.03)
------- ------- ------ -------- ------- -------
Total Distributions.......... (.32) (.54) (.54) (.50) (.82) (.67)
------ ------- ------ ------- ------- -------
Net Asset Value, End of Period...... $ 9.14 $ 9.19 $ 9.12 $ 9.17 $ 9.09 $ 9.65
====== ======= ====== ======== ======= =======
Total Return 1...................... 2.93% 6.89% 5.51% 6.64% 2.81% 9.10%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted).................. $218,944 $132,934 $109,488 $126,727 $188,874 $164,018
Ratio of Expenses to
Average Net Assets............. 1.86%* 2.02% 2.10% 2.14% 2.07% 2.26%
Ratio of Net Income to
Average Net Assets............. 4.73%* 5.87% 5.89% 5.37% 4.49% 5.50%
Portfolio Turnover Rate 2........ 79.88% 112.71% 106.55% 127.80% 113.46% 107.80%
</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 for 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 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
42
<PAGE>
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 C AUGUST 18, 1997
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS)
MARCH 31, THROUGH
1998 SEPTEMBER 30,
(UNAUDITED) 1997
<S> <C> <C>
Net Asset Value, Beginning
of Period............................ $ 9.25 $ 9.20
------ -------
Income From Investment Operations
Net Investment Income................ .25 .04
Net Gains on Securities (both
realized and unrealized)........... .02 .03
------ --------
Total From Invest-
ment Operations................ .27 .07
------ --------
Less Distributions
Dividends (from net
investment income)................. (.27) (.02)
Distribution from gains
from investment transactions....... (.05) -
------ ------
.
Total Distributions.............. (.32) (.02)
------ -------
Net Asset Value, End of Period.......... $ 9.20 $ 9.25
------ -------
Total Return 1.......................... 2.93% 0.77%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)...................... $ 23,459 $2,430
Ratio of Expenses to
Average Net Assets................. 1.84%* 2.03%*
Ratio of Net Income to
Average Net Assets................. 4.75%* 5.85%*
Portfolio Turnover Rate 2............ 79.88% 112.71%
</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 for 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 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
43
<PAGE>
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 Y OCTOBER 6, 1997
(COMMENCEMENT
OF OPERATIONS)
THROUGH
MARCH 31,
1998
(UNAUDITED)
<S> <C>
Net Asset Value, Beginning of Period....................................
$ 9.20
Income From Investment Operations
Net Investment Income................................................ .26
Net Gains on Securities (both realized and unrealized) ............. .03
--------
Total From Investment Operations................................ .29
--------
Less Distributions
Dividends (from net investment income)............................... (.26)
Distribution from gains from investment transactions................. (.05)
-------
Total Distributions.............................................. (.31)
-------
Net Asset Value, End of Period.......................................... $ 9.18
========
Total Return 1.......................................................... 3.10%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)............................. $ 187
Ratio of Expenses to Average Net Assets.............................. 0.89%*
Ratio of Net Income to Average Net Assets............................ 5.69%*
Portfolio Turnover Rate 2............................................ 79.88%
</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 for 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 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
44
<PAGE>
DAVIS TAX-FREE HIGH
INCOME FUND, INC.
124 East Marcy Street Santa Fe, New Mexico 87501
<TABLE>
<CAPTION>
<S> <C> <C>
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
Eugene M. Feinblatt Vice President
Jerry D. Geist Eileen R. Street
D. James Guzy Vice President, Treasurer
G. Bernard Hamilton & Assistant Secretary
LeRoy E. Hoffberger Thomas D. Tays
Laurence W. Levine Vice President & Secretary
Christian R. Sonne Andrew A. Davis
Vice President
INVESTMENT ADVISER Christopher C. Davis
Davis Selected Advisers, L.P. Vice President
124 East Marcy Street Carolyn H. Spolidoro
Santa Fe, New Mexico 87501 Vice President
Sharra L. Reed
DISTRIBUTOR Assistant Treasurer
Davis Distributors, LLC & Assistant Secretary
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
AUDITORS
KPMG Peat Marwick LLP
707 Seventeenth Street, Suite 2300
Denver, Colorado 80202
</TABLE>
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.
45
