<PAGE>
ANNUAL REPORT
SEPTEMBER 30, 1999
DAVIS TAX-FREE
HIGH INCOME FUND
[DAVIS FUNDS LOGO]
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
Dear Shareholder,
Despite 1999's difficult bond market environment, the Davis Tax-Free High Income
Fund continues to be one of the top-performing municipal bond funds on a
risk-adjusted basis. Your Fund's Class A and Class B shares enjoy Morningstar's
highest ***** (five-star) rating for risk-adjusted performance over every time
period measured.(1)
In terms of absolute performance, the Fund's Class A shares declined 0.61%
(based on net asset value) for the one-year period ended September 30, 1999.(2)
While we view this as a disappointing result, your Fund did outperform its peer
group, with the 52 high-yield municipal bond funds tracked by Lipper Analytical
Services registering an average decline of 1.54% for the same time period.(3)
In addition, the credit quality and liquidity of the Fund's portfolio are
substantially better than the average high-yield fund--meaning your Fund took
far less risk in achieving its results.
A TRYING TIME FOR BONDS
The year 1999 is on track to becoming the worst year for the bond market since
1927. The yield on the 30-year U.S. Treasury "long bond" increased 96 basis
points from 5.09% to 6.05% and the price of the bond went down by 13% in the
first nine months of the year.
The municipal market also posted poor results--with the yield on the average
AAA-rated municipal rising 79 basis points from 4.95% to 5.74%, resulting in a
price drop of around 11% over the same time frame. A primary reason for the
municipal market's negative performance was lack of institutional demand. Large
insurance companies, normally big buyers of tax-free municipal bonds, had less
need for tax-free income because of lower profitability. In addition, municipal
bond funds in general were experiencing net shareholder redemptions and were
selling more municipal bonds than they were buying in order to meet those
redemptions.
Overall, we believe the bond markets today offer investors great value and
municipal securities in particular provide exceptional value. Yields on
AAA-rated municipal bonds have risen to about 95% of U.S. Treasury yields--the
highest this percentage has been since the mid-1990s. These yields make the case
for owning tax-free municipals compelling, particularly for investors in higher
tax brackets.
At the same time, the yield spreads between high-quality and low-quality bonds
have widened from about 25 basis points at the beginning of year to about 45
basis points at the end of September. This means lower quality bonds have
performed worse than higher quality bonds.
In this uncertain environment, the Fund continued to upgrade the credit quality
of its portfolio as it has done for several years. The average credit quality of
the rated securities in our portfolio is AA--an investment-grade rating
considerably higher than the credit quality rating of most high-yield municipal
funds.(4) And the percentage of nonrated securities is around 7%, the lowest
level it has been since June, 1990.
As a further risk-reducing strategy, the Fund is well diversified with 377
positions from issuers in most states and Puerto Rico. Because even our biggest
holdings each represent less than 2 1/2% of the portfolio, no one position by
itself should have a substantial impact on the Fund's overall results.
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
MANAGING FOR RISK-ADJUSTED PERFORMANCE
The Davis Tax-Free High Income Fund continues to employ the same disciplined
investment approach and intensive research process that it used to achieve its
top risk-adjusted performance rating. We constantly evaluate each bond's credit
quality and security characteristics in terms of upside potential and downside
protection. Our objective is to maximize total return relative to the amount of
risk taken and to optimize tax-free income. We also monitor the characteristics
of the portfolio as a whole in order to assure proper portfolio
diversification.(5)
The bonds we own possess a variety of special characteristics that have made
them more resilient in the down market we have experienced in 1999. For example,
we own higher coupon bonds with shorter maturities and lower durations. In
addition, the Fund's strategy of investing in cushion bonds--a principal
investment focus for several years--proved beneficial in this environment.
Cushion bonds are bonds with above-average interest coupons trading at
relatively low prices because the market expects them to be called in by the
issuer long before maturity, but that we think are unlikely to be called for
various structural reasons. Because the bonds are purchased at fairly low
prices, the Fund has some protection or cushion if the overall market drops.
Furthermore, if the bonds remain outstanding after the anticipated call date--as
has occurred in many cases--the Fund continues collecting the high tax-free
income.
By employing these strategies, the Fund sacrificed some upside potential to gain
a more than proportionate amount of downside protection. As the market declined,
we outperformed on a relative basis.
As the market continued to trade off in the second and third quarter of 1999,
many of the Fund's cushion bonds lost their price cushion and we sold them. We
also sold off lower quality bonds that were somewhat defensive. At the same
time, we began gradually moving into more aggressive, higher quality bonds with
better upside potential, such as zero coupon bonds and lower coupon, AAA-rated
insured bonds--even picking up some additional yield in certain instances. This
turned out to be a smart move, as credit quality spreads widened and higher
quality bonds performed relatively better than lower grade issues.
Going forward, we plan to pursue the same strategies, assuming interest rates
stabilize or trend lower as we expect. That is, we intend to maintain our core
portfolio and, as opportunities arise, make commitments to bonds that offer more
yield per credit quality and more upside potential while giving up only a little
bit of downside protection. In a flat to declining interest rate environment,
that seems like a good trade-off to us. As always, we remain committed to
helping shareholders build and preserve wealth through prudent strategies
focused on minimizing volatility and optimizing long-term, risk-adjusted
performance.
Sincerely,
/s/ Shelby M.C. Davis /s/ B. Clark Stamper
Shelby M.C. Davis B. Clark Stamper
Chief Investment Officer Portfolio Manager
November 5, 1999
2
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
This Annual Report is authorized for distribution only when accompanied or
preceded by a current prospectus of Davis Tax-Free High Income Fund which
contains more information about risks, fees and expenses. Please read the
prospectus carefully before investing or sending money.
(1) Morningstar proprietary ratings reflect historical risk-adjusted performance
as of September 30, 1999. 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. The Fund's Class A shares (inception date December 1, 1994) were rated
against 1611 short-term municipal bond funds for the three-year period. The
Fund's Class B shares were rated against 1611, 1241, and 375 short-term
municipal bond funds for the three-, five-, and ten-year periods, respectively.
Ten percent 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 may vary and are available only for those classes with at least three
years of performance history. Past performance is not a guarantee of future
results.
(2) Total return assumes reinvestment of dividends and capital gain
distributions. Past performance is not a guarantee of future results. Investment
return and principal value will vary so that, when redeemed, an investor's
shares may be worth more or less than when purchased. Below are the average
annual total returns for all classes of shares for Davis Tax-Free High Income
Fund for the periods ended September 30, 1999.
* (Without a 4.75% sales charge or any applicable contingent deferred sales
charge taken into consideration for the period ended September 30, 1999)
- --------------------------------------------------------------------------------
FUND NAME 1 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Davis Tax-Free High Income A (0.61%) N/A N/A 5.72% - 12/01/94
- --------------------------------------------------------------------------------
Davis Tax-Free High Income B (1.39%) 4.63% 5.92% 6.50% - 03/21/85
- --------------------------------------------------------------------------------
Davis Tax-Free High Income C (1.34%) N/A N/A 2.39% - 08/18/97
- --------------------------------------------------------------------------------
Davis Tax-Free High Income Y (0.51%) N/A N/A 2.88% - 10/06/97
- --------------------------------------------------------------------------------
** (With a 4.75% sales charge or any applicable contingent deferred sales charge
taken into consideration for the period ended September 30, 1999)
- --------------------------------------------------------------------------------
FUND NAME 1 YEAR 5 YEAR 10 YEAR INCEPTION
- --------------------------------------------------------------------------------
Davis Tax-Free High Income A (5.34%) N/A N/A 4.67% - 12/01/94
- --------------------------------------------------------------------------------
Davis Tax-Free High Income B (5.16%) 4.31% 5.92% 6.50% - 03/21/85
- --------------------------------------------------------------------------------
Davis Tax-Free High Income C (2.28%) N/A N/A 2.39% - 08/18/97
- --------------------------------------------------------------------------------
Davis Tax-Free High Income Y (0.51%) N/A N/A 2.88% - 10/06/97
- --------------------------------------------------------------------------------
(3) Lipper Analytical Services rankings are based on total returns but do not
consider sales charges.
(4) Standard & Poor's Corporate Bond Ratings - Debt rated AA has a very strong
capacity to pay interest and repay principal, and differs from the highest rated
issues only in small degree.
(5) There can be no guarantee that the Fund will achieve its goals.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
3
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
TABLE OF KEY STATISTICS
NET ASSET VALUE TOTAL RETURNS
- --------------------------------------------------------------------------------
Class A Shares 3 mos. (1.02%) 6 mos. (1.80%) 12 mos. (0.61%)
Class B Shares 3 mos. (1.22%) 6 mos. (2.19%) 12 mos. (1.39%)
Class C Shares 3 mos. (1.20%) 6 mos. (2.15%) 12 mos. (1.34%)
Class Y Shares 3 mos. (1.09%) 6 mos. (1.81%) 12 mos. (0.51%)
- --------------------------------------------------------------------------------
NET ASSET VALUE AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
Class A Shares 3 yrs. 4.46% Since inception (December 1, 1994) 5.72%
Class B Shares 3 yrs. 3.68% 5 yrs. 4.63% 10 yrs. 5.92%
Class C Shares Since inception (August 18, 1997) 2.39%
Class Y Shares Since inception (October 6, 1997) 2.88%
- --------------------------------------------------------------------------------
COMPOSITION OF THE FUND'S PORTFOLIO BY QUALITY RATING AS A PERCENTAGE OF
TOTAL ASSETS AT SEPTEMBER 30, 1999
Moody's/S&P Fund's Assessment of General Definition
Rating Category Percentage Non-rated Securities of Bond Quality
- --------------- ---------- -------------------- ---------------
Aaa/AAA.................. 58.15% 0.49% Highest quality
Aa/AA.................... 13.45% 0.00% High quality
A/A...................... 10.44% 0.67% Upper medium grade
Baa/BBB.................. 6.92% 1.08% Medium grade
Ba/BB.................... 1.08% 3.96% Some speculative
elements
B/B...................... 0.47% 1.19% Speculative
Caa/CCC.................. 0.00% 0.00% More speculative
Ca, C/CC, C, D........... 0.00% 0.00% Very speculative,
may be in default
Not Rated................ 7.39% 0.00% Not rated by
Moody's or S&P
Short-term Investments... 2.10% 0.00%
------- -----
100.00% 7.39%
Average credit rating: AA
Weighted average maturity: 18.26 years
4
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
COMPARISON OF DAVIS TAX-FREE HIGH INCOME FUND, INC., CLASS A SHARES AND LEHMAN
BROTHERS 10 YEAR REVENUE BOND INDEX
================================================================================
Average Annual Total Return For the Periods ended September 30, 1999.
- ---------------------------------------------------------------
CLASS A SHARES
(This calculation includes an initial sales charge of 4 3/4%).
One Year ......................................... (5.34%)
Life of Class (December 1, 1994
through September 30, 1999).............. 4.67%
- ---------------------------------------------------------------
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Tax-Free
High Income Fund, Inc. A shares on December 1, 1994 (inception of class) and
paid a 4 3/4% sales charge. As the chart below shows, by September 30, 1999 the
value of your investment would have grown to $12,467 - a 24.67% increase on your
initial investment. For comparison, the Lehman Brothers 10 Year Revenue Bond
Index is also presented on the chart below.
Lehman Brothers
Davis Tax-Free High Income Fund Class A 10 Year Revenue
--------------------------------------- ---------------
12/1/94 9,525 10,000
9/30/95 10,285 11,652
9/30/96 10,936 12,162
9/30/97 11,774 13,283
9/30/98 12,543 14,449
9/30/99 12,467 14,433
Lehman Brothers 10 Year Revenue Bond Index is an unmanaged index and has no
specific investment objective. The index used includes gross dividends
reinvested, but does not take into account any sales charge.
The performance data for Davis Tax-Free High Income Fund, Inc. contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
5
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
COMPARISON OF DAVIS TAX-FREE HIGH INCOME FUND, INC., CLASS B SHARES AND LEHMAN
BROTHERS 10 YEAR REVENUE BOND INDEX
================================================================================
Average Annual Total Return For the Periods ended September 30, 1999.
- ---------------------------------------------------------------
CLASS B SHARES (This calculation includes applicable contingent
deferred sales charges.)
One Year............................................... (5.16%)
Five Years.............................................. 4.31%
Ten Years............................................... 5.92%
- ---------------------------------------------------------------
$10,000 INVESTED OVER TEN YEARS. Let's say you invested $10,000 in Davis
Tax-Free High Income Fund, Inc. B shares on September 30, 1989. As the chart
below shows, by September 30, 1999 the value of your investment would have grown
to $17,775 - a 77.75% increase on your initial investment. For comparison, the
Lehman Brothers 10 Year Revenue Bond Index is also presented on the chart below.
Lehman Brothers
Davis Tax-Free High Income Fund Class B 10 Year Revenue
--------------------------------------- ---------------
9/30/89 10,000 10,000
9/30/90 10,537 10,675
9/30/91 11,600 12,175
9/30/92 12,635 13,435
9/30/93 13,784 15,214
9/30/94 14,172 14,957
9/30/95 15,113 16,704
9/30/96 15,949 17,542
9/30/97 17,047 19,159
9/30/98 18,026 20,841
9/30/99 17,775 20,818
Lehman Brothers 10 Year Revenue Bond Index is an unmanaged index and has no
specific investment objective. The index used includes gross dividends
reinvested, but does not take into account any sales charge.
The performance data for Davis Tax-Free High Income Fund, Inc. contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
6
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC. COMPARISON OF DAVIS
TAX-FREE HIGH INCOME FUND, INC., CLASS C SHARES AND LEHMAN BROTHERS 10 YEAR
REVENUE BOND INDEX
================================================================================
Average Annual Total Return For the Periods ended September 30, 1999.
- ----------------------------------------------------------------------------
CLASS C SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year....................................................... (2.28%)
Life of Class (August 18, 1997 through September 30, 1999) .... 2.39%
- ----------------------------------------------------------------------------
$10,000 INVESTED ON AUGUST 31, 1997. Let's say you invested $10,000 in Davis
Tax-Free High Income Fund, Inc. C shares on August 31, 1997. As the chart below
shows, by September 30, 1999 the value of your investment would have grown to
$10,512 - a 5.12% increase on your initial investment. For comparison, the
Lehman Brothers 10 Year Revenue Bond Index is also presented on the chart below.
Lehman Brothers
Davis Tax-Free High Income Fund Class C 10 Year Revenue
--------------------------------------- ---------------
8/31/97 10,000 10,000
9/30/97 10,077 10,121
9/30/98 10,655 11,009
9/30/99 10,512 10,996
Lehman Brothers 10 Year Revenue Bond Index is an unmanaged index and has no
specific investment objective. The index used includes gross dividends
reinvested, but does not take into account any sales charge.
The performance data for Davis Tax-Free High Income Fund, Inc. contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
7
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
COMPARISON OF DAVIS TAX-FREE HIGH INCOME FUND, INC., CLASS Y SHARES AND LEHMAN
BROTHERS 10 YEAR REVENUE BOND INDEX
================================================================================
Average Annual Total Return For the Periods ended September 30, 1999.
- ------------------------------------------------------------------------
CLASS Y SHARES
(There is no sales charge applicable to this calculation.)
One Year...................................................... (0.51%)
Life of Class (October 6, 1997 through September 30, 1999) ... 2.88%
- ------------------------------------------------------------------------
$10,000 INVESTED ON OCTOBER 31, 1997. Let's say you invested $10,000 in Davis
Tax-Free High Income Fund, Inc. Y shares on October 31, 1997. As the chart below
shows, by September 30, 1999 the value of your investment would have grown to
$10,545 - a 5.45% increase on your initial investment. For comparison, the
Lehman Brothers 10 Year Revenue Bond Index is also presented on the chart below.
Lehman Brothers
Davis Tax-Free High Income Fund Class Y 10 Year Revenue
--------------------------------------- ---------------
10/31/97 10,000 10,000
9/30/98 10,599 10,807
9/30/99 10,545 10,795
Lehman Brothers 10 Year Revenue Bond Index is an unmanaged index and has no
specific investment objective. The index used includes gross dividends
reinvested, but does not take into account any sales charge.
The performance data for Davis Tax-Free High Income Fund, Inc. contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
8
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
PORTFOLIO HOLDINGS AS OF SEPTEMBER 30, 1999
================================================================================
PORTFOLIO MAKEUP SECTOR WEIGHTINGS
(% OF FUND NET ASSETS) (% OF PORTFOLIO)
---------------------- ----------------
[PIE CHART] [PIE CHART]
Other Assets & Liabilities 2.0% Revenue Bonds 27.7%
Municipal Bonds 98.0% Poll. Ctrl. Rev. 5.0%
Utilities 8.0%
General Obligation 7.5%
Education 6.6%
Health 25.1%
Housing 6.0%
Other 2.4%
Ind. Dev. Rev. 11.7%
<TABLE>
<CAPTION>
% OF FUND
TOP 10 HOLDINGS STATE NET ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hawaii St. Airports System Rev. Bds. (Second Series), 7.00%, 07/01/18 Hawaii 2.36%
Ohio St. Air Quality Dev. Auth. Rev. Ref. Bds. (Pollution Ctl./Ohio Edison)
Ser. `90, 7.45%, 03/01/16 Ohio 1.74%
Manchester, NH, Gen. Airport Rev. Bds., (MBIA Insured) Ser. `A,
4.50%, 01/01/28 New Hampshire 1.73%
Louisville & Jefferson Cnty., KY, Riverport Auth. Mtg. Rev. Bds.,
Ser. `86, 7.875%, 05/15/16 Kentucky 1.63%
Port Auth NY & NJ Rev. Bds. (Cons.-Sixty-Ninth) Ser. `90, 7.125%,
06/01/25 New York 1.62%
Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Hinsdale Hosp.) Ser. `90 A,
9.00%, 11/15/15 Illinois 1.44%
Chicago, IL, Pub. Bldg. Comm. Mtg. Rev. Bds. (MBIA Insured) Ser. A,
7.125%, 01/01/15 Illinois 1.42%
Illinois Hlth. Fac. Auth. Rev. Bds. (Hosp. Sisters Svcs.) Ser. A,
5.00%, 06/01/18 Illinois 1.39%
Indiana Hlth. Fac. Auth. Hosp. Rev. Bds., Ser. A (Sisters St. Francis Hlth.),
5.00%, 11/01/29 Indiana 1.34%
Port Auth NY & NJ Rev. Bds. (Cons.-Seventy-Second) Ser. `92, 7.35%,
10/01/27 New York 1.22%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - (98.01%)
ALABAMA - (1.85%)
$ 3,670,000 Birmingham Med. Ctr., Eastern Alabama Special Care Fac. Rev. Ref. Bds.
(MBIA Insured), 7.25%, 07/01/15........................................................ $ 3,679,395
295,000 Houston Cnty., AL, (Southeast Alabama Med. Ctr. Prj.) (MBIA Insured),
7.625%, 04/01/07....................................................................... 295,965
2,000,000 Lauderdale Cnty & Florence, AL, Hlth. Care Fac. Rev. Bds., Unlimited
G.O., (MBIA Insured) Ser. A (Coffee Hlth. Group), 5.25%, 07/01/24...................... 1,814,840
770,000 Selma, AL, Ind'l. Dev. Brd. Ind'l. Dev. Rev. Bds., (Hammermill Plant Prj.)
Ser. `79, 6.875%, 04/01/04............................................................. 777,515
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........................................................................ 535,950
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.......................... 1,129,590
------------
8,233,255
------------
ARIZONA - (1.10%)
1,000,000 Arizona Educ. Loan Marketing Corp., Educ. Loan Rev. Bds., Ser. B,
7.30%, 09/01/03........................................................................ 1,022,390
1,000,000 Arizona Educ. Loan Marketing Corp., Educ. Loan Rev. Bds., Ser. B,
7.35%, 09/01/04........................................................................ 1,022,430
775,000 Arizona Educ. Loan Marketing Corp., Educ. Loan Rev. Bds., Ser. B,
7.375%, 09/01/05....................................................................... 792,399
230,000 Coconino & Mohave Cntys., AZ, Unified School Dist. No. 6, Cap.
Appreciation Ref. Bds., Zero Cpn., 07/01/02 (d)........................................ 202,117
620,000 The IDA of the City of Casa Grande, AZ, Dev. Rev. Bds. (Five Points
Redevelopment Prj.), Sr. Bds., 8.25%, 12/01/15......................................... 630,683
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................. 515,640
260,000 Pima, AZ, Ind'l. Dev. Auth. Hlth. Care Corp. Rev. Bds. Unrefunded, Ser. `88,
8.00%, 07/01/13........................................................................ 263,414
400,000 Pima, AZ, Ind'l. Dev. Auth. Multi. Fam. Mtg. Rev. Bds. (Broadway Prop.)
(FHA Insured) Ser. `85, 8.15%, 12/01/25................................................ 437,132
------------
4,886,205
------------
CALIFORNIA - (9.03%)
765,000 California Hlth. Fac. Auth. Insured Hosp. Rev. Bds. FGIC Insured (Victor
Valley Community Hosp.) `84 Ser. A, 9.875%, 07/01/12................................... 779,918
345,000 California Hlth. Fac. Auth. Insured Hosp. Rev. Bds. (Victor Valley
Community Hosp.) `84 Ser. A, 9.875%, 07/01/12.......................................... 346,580
3,955,000 California Hlth. Fac. Fin. Auth. Insured Hlth. Fac. Rev. Bds.
(Henry Mayo Newhall Memorial Hosp.) Ser. `88A, 8.00%, 10/01/18......................... 4,005,743
500,000 California Hlth. Fac. Fin. Auth. Insured Hosp. Rev. Bds. (H.E.L.P. Group)
Ser. A, 7.00%, 08/01/21................................................................ 527,610
140,000 California Hlth. Fac. Fin. Auth. Rev. Bds. (Cnty. Prj.) Ser. `86B,
7.20%, 01/01/12........................................................................ 140,202
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
CALIFORNIA - CONTINUED
$ 155,000 California Hsg. Fin. Agy. Rev. Home Mtg Bds., Cap. Appreciation,
Ser. D, Zero Cpn., 08/01/20 (d)........................................................ $ 31,060
760,000 California Hsg. Fin. Agy. Rev. Home Mtg Bds., Ser. C, 7.60%, 08/01/30.................... 771,248
1,430,000 California Hsg. Fin. Agy. Rev. Home Mtg Bds., Ser. G, 7.25%, 08/01/17.................... 1,463,748
585,000 California Hsg. Fin. Agy. Rev. Insured Hsg. Bds., Ser. B,
8.625%, 08/01/15....................................................................... 596,636
430,000 California Pub. Cap. Impts. Fac. Auth. Rev. Bds. (Pooled Prj.) Ser. B,
8.10%, 03/01/18........................................................................ 437,869
600,000 California St. Veteran's Bds., 6.15%, 02/01/11........................................... 603,900
200,000 California St. Veteran's Bds., 6.20%, 02/01/12........................................... 201,252
250,000 California St. Veteran's Bds., 6.20%, 02/01/16........................................... 251,203
3,000,000 California St. Veteran's Bds., 6.375%, 02/01/27.......................................... 3,015,840
800,000 City of Napa, CA, `92, Ind. Rev. Ref. Bds. (Napa Motel and Restaurant),
8.50%, 12/01/07........................................................................ 804,304
250,000 Cnty. of Marin, Mtg. Rev. Bds., Ser. `84A (FHA Insured Mtg. Loan -
Marion Park Apts. Prj.), Zero Cpn., 04/01/01 (d)....................................... 216,465
1,000,000 Cnty. of Marin, Multifam. Hsg. Rev. Bds., Ser. `84B (Marion Park
Apts. Prj.), Zero Cpn., 04/01/07 (d)................................................... 474,990
5,000,000 El Camino, CA, Hosp. Dist. Rev. Ref. Bds., Ser. A, 6.25%, 08/15/17....................... 5,052,200
2,545,000 Elk Grove, CA, Uni. School Dist. Special Tax Cap. Appreciation (Comm.
Facs. - Dist. 1)(MBIA Insured) Zero Cpn., 12/01/17 (d)................................. 891,106
2,790,000 Elk Grove, CA, Uni. School Dist. Special Tax Cap. Appreciation (Comm.
Facs. - Dist. 1)(MBIA Insured) Zero Cpn., 12/01/18 (d)................................. 913,502
1,730,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Refunded, Zero Cpn., 04/01/19 (d)................................... 558,721
1,730,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Refunded, Zero Cpn., 04/01/22 (d)................................... 466,495
680,000 Los Angeles, CA, Community Redevelopment Agy. Bds., `87 Ser. G,
6.75%, 07/01/10........................................................................ 685,107
200,000 Los Angeles, CA, Community Redevelopment Agy. Bds., Prerefunded
`87 Ser. G, 6.75%, 07/01/10............................................................ 201,502
360,000 Los Angeles, CA, Home Mtg. Rev. Bds. (GNMA Mtg. Sec. Prog.), 8.10%,
05/01/17............................................................................... 366,466
100,000 Los Angeles, CA, Multi. Fam. Hsg. Rev. Ref. Bds., Ser. `91 A, 7.00%,
05/01/21 (c)........................................................................... 102,379
175,000 Los Angeles, CA, Multi. Fam. Rev. (FHA Insured Multi-Fam. Hsg. Mtg.
Rev. Bds.) Park Parthenia Prj., 7.30%, 07/20/11........................................ 178,934
2,635,000 Menlo Park, CA, Community Dev. Agy. Multi. Fam. Mtg. Rev. Bds.
(Gateway Prj.) (FHA Insured) Ser. `87 A, 8.25%, 12/01/28............................... 2,703,694
2,000,000 Monrovia, CA, Redev. Agy., Tax Allocation Rev. Ref. Bds. (Cent. Redev.
Prj.-Area 1), Ser. `92, 6.70%, 05/01/21................................................ 2,167,440
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
CALIFORNIA - CONTINUED
$ 900,000 New Haven, CA, Unified School Dist., Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 08/01/13 (d)................................................ $ 423,684
985,000 New Haven, CA, Unified School Dist., Cap. Appreciation, Unlimited G.O.,
Ser. B, Zero Cpn., 08/01/14 (d)........................................................ 432,829
1,200,000 New Haven, CA, Unified School Dist., Cap. Appreciation, Unlimited G.O.,
Ser. B, Zero Cpn., 08/01/15 (d)........................................................ 493,524
1,400,000 New Haven, CA, Unified School Dist., Cap. Appreciation, Unlimited G.O.,
Ser. B, Zero Cpn., 08/01/16 (d)........................................................ 539,938
1,650,000 New Haven, CA, Unified School Dist., Cap. Appreciation, Unlimited G.O.,
Ser. B, Zero Cpn., 08/01/17 (d)........................................................ 596,145
1,390,000 Palmdale, CA, School Dist. Ctfs. of Participation, Capital Appreciation
Bds., Zero Cpn., 10/01/18 (d).......................................................... 469,862
1,580,000 Palmdale, CA, School Dist. Ctfs. of Participation, Capital Appreciation
Bds., Zero Cpn., 10/01/22 (d).......................................................... 413,818
350,000 Ridgecrest, CA, Certificates of Participation Bds. (Ridgecrest Redev. Agy.)
Ser. `88, 7.60%, 03/01/03.............................................................. 359,828
680,000 Ridgecrest, CA, Certificates of Participation Bds. (Ridgecrest Redev. Agy.)
Ser. `88, 7.60%, 03/01/13.............................................................. 698,353
500,000 San Diego, CA, GNMA Collateralized Multi. Fam. Mtg. Rev. Bds.
(Island Gardens Apts. Prj.) Ser. `85B, 9.50%, 10/20/20................................. 502,165
3,915,000 San Francisco, CA, City & Cnty. Redev. Fin. Auth. Tax Allocation,
Ctfs. of Participation Bds., Ser. A, Zero Cpn., 08/01/17 (d)........................... 1,354,551
3,910,000 San Francisco, CA, City & Cnty. Redev. Fin. Auth. Tax Allocation,
Ctfs. of Participation Bds., Ser. A, Zero Cpn., 08/01/18 (d)........................... 1,270,007
500,000 San Luis Obispo, CA, Certificates of Participation Rev. Bds., Ser. `88,
7.25%, 06/01/08........................................................................ 501,400
1,400,000 Santa Maria, CA, Wtr. & Wastewtr. Certificates of Participation,
Ser. A, Zero Cpn., 08/01/27 (d)........................................................ 1,022,000
440,000 Torrance, CA, Hosp. Rev. Bds. (Torrance Mem. Hosp.) Ser. `87, 6.75%,
01/01/12............................................................................... 440,933
245,000 University, CA, Rev. Bds. (Faculty Residential Mtg.) Ser. `79, 7.20%,
09/01/12............................................................................... 245,630
1,500,000 Vacaville, CA, Pub. Fin. Auth. Tax Allocation Rev. Bds.
(Vacaville Redev. Prj.) (MBIA Insured) Ser. `902, 6.35%, 09/01/22.................... 1,553,325
------------
40,274,106
------------
COLORADO - (0.57%)
1,850,000 Colorado St. Student Obligation Bd. Auth. Student Ln. Sr. Sub. Rev. Bds.
Ser. II B, 6.20%, 12/01/08............................................................. 1,915,083
530,000 Colorado Student Obligation Bd. Auth. Student Ln. Rev. Bds.
Ser. A-3, 7.25%, 09/01/05.............................................................. 539,572
180,000 Hamilton Creek Metro Dist., Summit Cnty., CO, G.O., 11.25%, 12/01/04..................... 102,600
------------
2,557,255
------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
CONNECTICUT - (0.30%)
$ 600,000 Connecticut Dev. Auth., Hlth. Care Rev. Bds. (Corp. for Independent Living
Prj.) Ser. `93B, 8.00%, 07/01/17....................................................... $ 678,966
650,000 Connecticut St. Higher Ed. Supplemental Ln. Auth. Rev. Bds., Ser. `90A,
7.375%, 11/15/05....................................................................... 664,196
------------
1,343,162
------------
DELAWARE - (0.58%)
830,000 Delaware Econ. Dev. Rev. Ref. Bds. (Supermarkets General Corp. Prj.)
Ser. `83, 10.875%, 12/01/03............................................................ 833,793
1,500,000 Delaware St. Econ. Dev. Auth. Rev. Bds. (Exempt Facs. Delmarva
P & L Co.) Ser. `90A, 7.60%, 03/01/20.................................................. 1,549,320
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)................. 211,912
------------
2,595,025
------------
FLORIDA - (5.37%)
540,000 Broward Cnty., FL, Hsg. Fin. Auth. Rev. Home Mtg., Ser. A, Cap.
Appreciation, Zero Cpn., 04/01/14 (d).................................................. 127,057
385,000 Charlotte Cnty., FL, IDR Ref. Bds. (Beverly Enterprises - Florida, Inc.
Prj.) Ser. `87, 10.00%, 06/01/11....................................................... 415,638
210,000 Dade Cnty., FL, Hlth. Fac. Auth. Hosp. Rev. Ref. Bds. (Miami Childrens
Hosp. Prj.) (FGIC Insured) Ser. `87, 6.875%, 08/15/17................................. 210,464
2,670,000 Dade Cnty., FL, Hlth. Fac. Auth. Hosp. Rev. Ref. Bds. (Miami Childrens
Hosp. Prj.) (MBIA/FGIC Insured) Ser. `87, 6.875%, 08/15/17............................ 2,675,901
215,000 Dade Cnty., FL, Hsg. Fin. Auth. Mtg. Rev. Bds. (Coll-Lihud Ltd. Apts.
Prj.) Ser. `84 H, 10.50%, 06/01/00..................................................... 216,348
935,000 Florida Hsg. Fin. Agy., 1st Mtg. Rev. Bds., Cap. Appreciation, Ser. `84,
Zero Cpn., 07/15/16 (d)................................................................ 121,111
900,000 Florida Hsg. Fin. Agy. (Southlake Apartments Prj. - D), 8.10%, 10/01/02.................. 864,099
5,545,000 Florida Hsg. Fin. Corp. Rev. Bds., Cap. Appreciation, (Logan's Pointe
Assoc. Ltd.) Zero Cpn., 12/01/29 (d)................................................... 797,981
5,000,000 Florida Hsg. Fin. Corp. Rev. Bds. (Florida Hsg. Fin. Corp.-CAB)
Zero Cpn., 07/01/30 (d)................................................................ 790,200
600,000 Gulf Breeze, FL, Rev. Bds., (MBIA Insured) 7.75%, 12/01/15.............................. 603,660
90,000 Highlands Cnty., FL, IDA (Beverly Enterprises - Florida, Inc. Prj.) Ser. `91,
9.25%, 07/01/07........................................................................ 98,511
500,000 Jacksonville, FL, Excise Taxes Rev. Bds., Ser. `77, 5.65%, 10/01/05...................... 525,660
460,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. `89A (Methodist
Hosp. Prj.), 8.00%, 10/01/15........................................................... 433,702
280,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. `89B (Methodist
Hosp. Prj.), 8.00%, 10/01/15........................................................... 260,666
178,680 Manatee Cnty., FL, Hsg. Fin. Auth. Mtg. Rev. Bds., Cap. Appreciation,
`83 Ser. A, Zero Cpn., 10/01/15 (d).................................................... 30,933
375,000 Melbourne, FL, Wtr. & Swr. Rev. Ref. Bds., Ser. `86C, 6.00%, 10/01/14.................... 378,338
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
FLORIDA - CONTINUED
$ 7,500,000 Miami-Dade Cnty., FL, Special Obligation Bds. (MBIA Insured) Ser. `97 B,
Zero Cpn., 10/01/32 (d)................................................................ $ 1,031,325
33,010,000 Miami-Dade Cnty., FL, Special Obligation Bds. (MBIA Insured) Ser. `97 B,
Zero Cpn., 10/01/33 (d)................................................................ 4,271,494
3,990,000 Miami-Dade Cnty., FL, Special Obligation Ref. Bds. (MBIA Insured)
Ser. `97 A, Zero Cpn., 10/01/24 (d).................................................... 895,117
3,800,000 Miami-Dade Cnty., FL, Special Obligation Ref. Bds. (MBIA Insured)
Ser. `97 B, Zero Cpn., 10/01/28 (d).................................................... 666,102
4,320,000 Miami-Dade Cnty., FL, Special Obligation Ref. Bds. (MBIA Insured)
Ser. `97 C, Zero Cpn., 10/01/13 (d).................................................... 1,958,472
290,000 Miami, FL, Special Obligation Bds. (MBIA Insured) `86 Ser. A, 7.375%,
07/01/06............................................................................... 292,500
745,000 Orange Cnty., FL, IDA (Beverly Enterprises - Florida, Inc. Prj.) Ser. `91,
9.25%, 08/01/10........................................................................ 798,670
175,000 Palm Beach Cnty., FL, Hsg. Fin. Auth. Sngl. Fam. Mtg. Rev. Bds. Cap.
Appreciation, Zero Cpn., 07/01/14 (d).................................................. 35,579
1,000,000 Pinellas Cnty., FL, Res. Recovery Rev. Ref. Bds. (MBIA Insured)
Ser. `90A, 6.90%, 10/01/04............................................................. 1,050,290
100,000 Pinellas Park, FL, Wtr. & Swr. Rev. Bds., Ser. `84 A, 10.00%, 10/01/02................... 100,498
2,750,000 St. Petersburg, FL, Hlth. Fac. Auth. Rev. Bds. (Allegany Hlth.-A)
(MBIA Insured) Ser. `85, 7.00%, 12/01/15.............................................. 2,957,213
225,000 South Indian River Wtr. Control Dist., Sect. 15A Improvement Bds. (Egret
Landing - Phase I), 8.00%, 11/01/18.................................................... 240,388
3,215,000 Tampa, FL, Home Mtg. Rev. Muni Multiplier Rev. Bds., Ser. `83 A,
Zero Cpn., 10/01/14 (d)................................................................ 589,792
470,000 Winter Garden, FL, IDR Ref. Bds. (Beverly Enterprises - Florida, Inc. Prj.)
Ser. `91, 8.75%, 07/01/12.............................................................. 507,078
------------
23,944,787
------------
GEORGIA - (1.02%)
200,000 Gainesville Redevelopment Auth., 1st Mtg. Rev. Bds. (Autumn Breeze
Personal Care Home, Inc. Prj.) Ser. `96A, 8.00%, 04/01/26.............................. 209,268
570,000 The Hsg. Auth. of Columbus, GA, Multifamily Hsg. Rev. Bds. (Columbus
Gardens Elderly Hsg. Prj.) Ser. `94, 8.25%, 01/01/24................................... 614,614
200,000 Liberty Cnty., IDA, Ind. Rev. Ref. Bds., Ser. `92 (LeConte Properties,
Inc. Prj.), 7.875%, 12/01/14........................................................... 209,976
750,000 Macon Cnty., GA, Hosp. Ref. Rev. Bds. (Flint River Comm.
Hospital - Paracelsus Healthcare Corp. Prj.) Ser. `91, 9.00%, 03/01/11................. 751,613
1,000,000 Savannah, GA, Econ. Dev. Auth. Rev. Bds. (First Mtg.-Coastal Care)
Ser. `97 A, 7.75%, 09/01/27............................................................ 988,900
8,000,000 Washington, GA, Wilkes Payroll Dev. Auth., 1st Mtg. Rev. Bds.,
Zero Cpn., 12/01/21 (d)................................................................ 1,751,600
------------
4,525,971
------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
HAWAII - (3.11%)
$ 170,000 Dept. of Transportation of the State of HI, Special Fac. Rev. Bds., Ser. `90
(Continental Airlines, Inc.), 9.60%, 06/01/08.......................................... $ 177,856
10,000,000 Hawaii St. Airports System Rev. Bds. (Second Series), 7.00%, 07/01/18.................... 10,501,900
3,000,000 Honolulu, HI, (City & Cnty.) Multifam. Rev. Hsg. (Waipahu Towers Prj.)
Ser. `95, 6.90%, 06/20/35.............................................................. 3,166,440
------------
13,846,196
------------
ILLINOIS - (12.90%)
1,500,000 Bolingbrook, IL, Cap. Appreciation Rev. Bds., Unlimited G.O.,
(MBIA Insured) Ser. B, Zero Cpn., 01/01/29 (d)........................................ 248,850
2,500,000 Bolingbrook, IL, Cap. Appreciation Rev. Bds., Unlimited G.O.,
(MBIA Insured) Ser. B, Zero Cpn., 01/01/30 (d)........................................ 389,825
2,500,000 Bolingbrook, IL, Cap. Appreciation Rev. Bds., Unlimited G.O.,
(MBIA Insured) Ser. B, Zero Cpn., 01/01/31 (d)........................................ 366,375
1,500,000 Bolingbrook, IL, Cap. Appreciation Rev. Bds., Unlimited G.O.,
(MBIA Insured) Ser. B, Zero Cpn., 01/01/32 (d)........................................ 206,595
2,500,000 Bolingbrook, IL, Cap. Appreciation Rev. Bds., Unlimited G.O.,
(MBIA Insured) Ser. B, Zero Cpn., 01/01/33 (d)........................................ 323,600
10,000,000 Chicago, IL, Brd. of Education Cap. Appreciation Rev. Bds., School
Reform B-1 (FGIC Insured), Unlimited G.O., Zero Cpn., 12/01/14 (d)..................... 4,176,100
11,225,000 Chicago, IL, Brd. of Education Cap. Appreciation Rev. Bds., School
Reform B-1 (FGIC Insured), Unlimited G.O., Zero Cpn., 12/01/15 (d)..................... 4,390,771
5,500,000 Chicago, IL, Brd. of Education Cap. Appreciation Rev. Bds., School
Reform B-1 (FGIC Insured), Unlimited G.O., Zero Cpn., 12/01/28 (d)..................... 946,165
10,000,000 Chicago, IL, Brd. of Education Cap. Appreciation Rev. Bds., School
Reform Ser. A (FGIC Insured), Unlimited G.O., Zero Cpn., 12/01/30 (d).................. 1,522,900
6,000,000 Chicago, IL, Pub. Bldg. Comm. Mtg. Rev. Bds. (MBIA Insured) Ser. A,
7.125%, 01/01/15....................................................................... 6,329,160
250,000 Chicago, IL, School Fin. Auth. Unlimited G.O., Ser. B, 7.60%, 06/01/01................... 252,775
85,000 Cnty. of Cook, IL, Sngl. Mtg. Rev. Bds., `83 Ser. A, Zero Cpn.,
07/01/15 (d).......................................................................... 14,366
7,000,000 Illinois Hlth. Fac. Auth. Rev. Bds. (Hosp. Sisters Svcs.) Ser. A,
5.00%, 06/01/18........................................................................ 6,212,500
5,980,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Hinsdale Hosp.) Ser. `90 A,
9.00%, 11/15/15........................................................................ 6,439,025
4,460,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Hinsdale Hosp.) Ser. `90 B,
9.00%, 11/15/15........................................................................ 4,802,350
500,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Midwest Physician Group Ltd.),
5.50%, 11/15/19........................................................................ 439,685
3,125,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Refunded Balance-C)
(Hinsdale), 9.50%, 11/15/19............................................................ 3,381,938
1,000,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Silver Cross Hosp. & Med.)
5.50%, 08/15/19........................................................................ 916,300
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
ILLINOIS - CONTINUED
$ 395,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Unrefunded Balance-A)
(MBIA Insured) Ser. `88, 7.90%, 08/15/03............................................... $ 396,284
8,897,526 Illinois Hsg. Dev. Auth., Multi-Fam. Hsg. Rev. Bds., Cap. Appreciation,
Ser. `83A, Zero Cpn., 07/01/25 (d)..................................................... 620,021
3,975,000 Illinois St. Dedicated Tax Unrefunded Bal., Rev. Bds. (Civic Ctr.) Ser. `90A,
7.00%, 12/15/10........................................................................ 4,182,336
11,425,000 Metro. Pier & Expo. Auth. IL Ded. St. Tax Rev. Ref. Bds. (McCormick
Prj.) Ser.`94, Zero Cpn., 06/15/29 (d)................................................. 1,918,486
14,305,000 Metro. Pier & Expo. Auth. IL Ded. St. Tax Rev. Ref. Bds. (McCormick
Prj.) Ser.`96A, Zero Cpn., 06/15/24 (d)................................................ 3,268,406
1,000,000 St. Clair Cnty., IL, Pub. Bldg., Community Bldg. Rev. Bds., 8.00%,
12/01/05............................................................................... 1,007,080
2,975,000 Southern, IL, Univ. Rev. Bds. Cap. Appreciation (Hsg. & Auxiliary-A)
Zero Cpn., 04/01/25 (d)................................................................ 642,332
2,000,000 Southern, IL, Univ. Rev. Bds. Cap. Appreciation (Hsg. & Auxiliary-A)
Zero Cpn., 04/01/28 (d)................................................................ 358,380
2,000,000 Southern, IL, Univ. Rev. Bds. Cap. Appreciation (Hsg. & Auxiliary-A)
Zero Cpn., 04/01/29 (d)................................................................ 337,200
5,345,000 University, IL, Univ. Rev. Bds. Cap. Appreciation (Auxiliary)
(MBIA Insured), Ser. `91, Zero Cpn., 04/01/21 (d)...................................... 1,504,885
111,000 Village of Sauget, IL, IDR Bds. (The Pillsbury Co. Prj.) Ser. `80, 8.375%,
05/01/05............................................................................... 111,249
500,000 Village of Sherman, IL, 1st Mtg. Rev. Bds. (Villa Vianney, Inc.) Ser. `95A,
8.375%, 07/01/25....................................................................... 519,580
550,000 Village of Sherman, IL, 1st Mtg. Rev. Bds. (Villa Vianney, Inc.) Ser. `97A,
7.75%, 10/01/22........................................................................ 555,891
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....................................... 720,000
------------
57,501,410
------------
INDIANA - (3.52%)
470,000 Carmel, IN, Retirement Rental Hsg. Rev. Ref. Bds. (Beverly Enterprises -
Indiana, Inc. Prj.) Ser. `92, 8.75%, 12/01/08.......................................... 509,851
121,828 Elwood, IN, Econ. Dev. Rev. (K-Mart Co. - S. S. Kresge Co. Prj.), 8.50%,
10/15/00............................................................................... 122,042
1,020,000 Goshen-Chandler, IN, School Bldg. Corp. 1st Mtg. Rev. Ref. Bds., Cap.
Appreciation (MBIA Insured), Zero Cpn., 01/15/11 (d)................................... 552,748
500,000 Griffith, IN, Econ. Dev. Rev. Bds. (May Dept. Stores Co. Prj.) Ser. `79,
6.75%, 03/01/09........................................................................ 501,660
510,000 Indiana Bond Bank, Ser. `88 B Bds., 8.50%, 02/01/18...................................... 516,523
410,000 Indiana Bond Bank, Ser. `88 C Bds., 8.125%, 02/01/17..................................... 414,756
125,000 Indiana Bond Bank, Special Program Bds., Ser. `87 A, 8.70%, 02/01/13..................... 126,711
7,000,000 Indiana Hlth. Fac. Auth. Hosp. Rev. Bds., Ser. A (Sisters St. Francis Hlth.), ...........
5.00%, 11/01/29........................................................................ 5,961,340
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
INDIANA - CONTINUED
$ 4,125,000 Indiana Hlth. Fin. Auth. Hosp. Fac. Rev. Bds. (Community Hosp. Prj.)
Ser. `91, (MBIA Insured), 6.85%, 07/01/22.............................................. $ 4,412,636
1,585,000 Madison Cnty., IN, Hosp. Auth. Hosp. Rev. Ref. Bds. (Community Hosp.
Of Anderson), 8.00%, 01/01/14.......................................................... 1,599,534
1,000,000 Monroe Cnty., IN, Multifam. Hsg. Rev. Bds. (GNMA Coll. - Country
View-A), 5.75%, 04/01/33............................................................... 964,080
------------
15,681,881
------------
IOWA - (0.02%)
87,849 Creston, IA, IDR (S.S. Kresge Co. - K-Mart Inc.), 8.50%, 08/01/00......................... 87,991
------------
KANSAS - (0.12%)
205,000 Liberal, KS, Swr. Util. Sys. Rev. Ref. Bds., 8.80%, 10/01/99.............................. 205,027
305,000 Liberal, KS, Swr. Util. Sys. Rev. Ref. Bds., 8.90%, 04/01/00.............................. 312,323
------------
517,350
------------
KENTUCKY - (2.64%)
65,000 Cntys. of Jefferson, Oldham and Bullitt, KY, Home Mtg. Rev. Bds, Ser. `84,
10.75%, 11/01/14....................................................................... 66,716
1,900,000 Elizabethtown, KY, IDR Bds. (Colt Industries Inc.), 9.875%, 10/01/10..................... 1,918,601
550,000 Jefferson Cnty., KY, Cap. Prj. Corp. Rev. Muni Multi Lease Ref. Bds. -
Ser. A `87, Zero Cpn., 08/15/14 (d).................................................... 196,862
395,000 Kentucky, St. Tpk. Auth. Res. Rec. Rd. Rev. Ref. Bds. (FGIC Insured),
Ser. `85 A, 6.00%, 07/01/09............................................................ 395,691
1,720,000 Kentucky, St. Tpk. Auth. Res. Rec. Rd. Rev. Ref. Bds., Ser. `85 A,
6.00%, 07/01/09........................................................................ 1,722,718
7,185,000 Louisville & Jefferson Cnty., KY, Riverport Auth. Mtg. Rev. Bds.,
Ser. `86, 7.875%, 05/15/16............................................................. 7,287,674
175,000 Morehead, KY, Ind. Bldg. Rev. Bds. (Emerson Elec.) Ser. `76, 6.30%,
04/01/01............................................................................... 176,740
------------
11,765,002
------------
LOUISIANA - (2.84%)
2,000,000 Caddo Parish, LA, Rev. Bds. (Ind'l. Dev. Brd. Inc. Exempt Fac.- Atlas Prj.)
Ser. `98, 5.60%, 12/01/28.............................................................. 1,840,120
23,045,000 East Baton Rouge, LA, Mtg. Fin. Auth. Sngl. Fam. Rev. Ref. Bds. Cap.
Appreciation (FNMA/GNMA Insured) Ser. C-1, Zero Cpn., 10/01/30 (d).................... 3,504,684
365,000 Lafayette Parish, LA, Law Enforcement Dist. Special Bds., 6.10%, 03/01/00................ 365,668
275,000 Lafayette Parish, LA, Law Enforcement Dist. Special Bds., 6.20%, 03/01/01................ 275,481
1,000,000 Lake Charles Non-Profit Hsg. Dev. Corp. Mtg. Rev. Ref. Bds., Ser. `90A
and Ser. `90B, 7.875%, 02/15/25........................................................ 1,001,130
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...................................... 721,390
1,500,000 Louisiana Pub. Fac. Auth. Rev. Ref. Bds., Ser. `93 (Schwegmann Westside
Expressway, Inc. Prj.), 8.00%, 10/01/09 +.............................................. 1,275,000
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
LOUISIANA - CONTINUED
$ 350,000 Louisiana Pub. Fac. Auth. Supplemental Student Loan Rev. Demand Bds.,
(Statewide Prg.) Ser. `84C, 8.125%, 12/01/99........................................... $ 351,173
1,000,000 Louisiana St., Gas & Fuels Tax, Rev. Bds., Ser. `90 A, 7.25%, 11/15/00................... 1,024,210
1,000,000 Louisiana St., Gas & Fuels Tax, Rev. Bds., Ser. `90 A, 7.25%, 11/15/04................... 1,024,210
335,000 New Orleans, LA, Hsg. Dev. Corp. First Lien Rev. Bds. (Tulane Ave. Prj.)
Ser. `79, 7.875%, 06/01/10............................................................. 335,630
1,000,000 West Feliciana Parish, LA, Rev. Bds. (Pollution Control Rev. Gulf States),
5.80%, 12/01/15........................................................................ 941,440
------------
12,660,136
------------
MARYLAND - (1.58%)
700,000 Allegany Cnty., MD, IDR Bds. (Moran Manor Care Ctr.) Ser. `84,
12.45%, 02/01/27....................................................................... 814,219
45,000 Maryland St. Cmnty. Dev. Admin. Sngl. Fam. Program Rev. Bds. (Dept. &
Econ. & Cmnty. Dev. Fifth Ser.), 7.70%, 04/01/15....................................... 45,072
365,000 Maryland St. Ind'l. Dev. Fin. Auth. Economic Dev. Rev. Bds., Ser. `86
1-11, 7.125%, 07/01/06................................................................. 367,639
475,000 Montgomery Cnty., MD, Econ. Dev. Rev. Bds. (Brink Reservoir Fac.)
Ser. `84, 10.375%, 12/15/14............................................................ 483,346
220,000 Montgomery Cnty., MD, Hsg. Opportunity Comm. Multifam. Mtg. Rev.
Bds., Ser. `88 A, 8.10%, 07/01/08...................................................... 222,825
2,275,000 Montgomery Cnty., MD, Hsg. Opportunity Comm. Multifam. Mtg. Rev.
Bds., Ser. `88 A, 8.25%, 07/01/19...................................................... 2,306,532
2,685,000 Upper Potomac River Comm., MD, PCR Bds., Westvaco Corp. Prj.,
9.125%, 08/01/15....................................................................... 2,798,307
------------
7,037,940
------------
MASSACHUSETTS - (2.61%)
250,000 Lawrence, MA, IDR Bds., (New Balance Realty Trust Prj.), 10.00%,
10/01/03............................................................................... 251,128
185,000 Massachusetts Educ. Loan Auth., Educ. Loan Rev. Bds., Issue D, Ser. `89A,
7.65%, 01/01/07........................................................................ 189,083
125,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds. (New England
School of Law), 8.30%, 07/01/03........................................................ 125,428
125,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds. (New England
School of Law), 8.30%, 07/01/04........................................................ 125,428
300,000 Massachusetts State G.O., 10.50%, 08/01/03............................................... 301,614
160,000 Massachusetts State G.O., 9.75%, 09/01/03................................................ 160,763
1,705,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Bds.
(Brockton Hosp.), Ser. `87 B, 8.00%, 07/01/07.......................................... 1,710,337
1,930,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Bds.
(Brockton Hosp.), Ser. `87 B, 8.10%, 07/01/13.......................................... 1,936,118
2,000,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Bds.
(Care Group Issue) (MBIA Insured) Ser. A, 4.75%, 07/01/20.............................. 1,694,820
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
MASSACHUSETTS - CONTINUED
$ 180,000 Massachusetts State, Ind. Fin. Agy., Rev. Ref. Bds., (Provider Lease
Program) Ser. `89A, 8.75%, 07/15/09.................................................... $ 180,299
3,855,000 Rail Connections, Inc. MA Rev. Bds. Cap. Appreciation (Rte. 128 Pkg.)
Ser. B, Zero Cpn., 07/01/23 (d)........................................................ 789,234
4,000,000 Rail Connections, Inc. MA Rev. Bds. Cap. Appreciation (Rte. 128 Pkg.)
Ser. B, Zero Cpn., 07/01/24 (d)........................................................ 766,040
4,140,000 Rail Connections, Inc. MA Rev. Bds. Cap. Appreciation (Rte. 128 Pkg.)
Ser. B, Zero Cpn., 07/01/25 (d)........................................................ 739,777
4,195,000 Rail Connections, Inc. MA Rev. Bds. Cap. Appreciation (Rte. 128 Pkg.)
Ser. B, Zero Cpn., 07/01/26 (d)........................................................ 701,152
4,430,000 Rail Connections, Inc. MA Rev. Bds. Cap. Appreciation (Rte. 128 Pkg.)
Ser. B, Zero Cpn., 07/01/27 (d)........................................................ 692,542
4,495,000 Rail Connections, Inc. MA Rev. Bds. Cap. Appreciation (Rte. 128 Pkg.)
Ser. B, Zero Cpn., 07/01/28 (d)........................................................ 655,416
4,640,000 Rail Connections, Inc. MA Rev. Bds. Cap. Appreciation (Rte. 128 Pkg.)
Ser. B, Zero Cpn., 07/01/29 (d)........................................................ 632,710
------------
11,651,889
------------
MICHIGAN - (1.43%)
100,000 Cnty. of Oakland, State of Michigan Bds., Clinton-Oakland Sys., Paint
Creek Inceptor Sewage Disposal Bds., 7.00%, 05/01/01................................... 102,253
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....................................... 1,097,412
310,000 Kentwood, MI, Econ. Dev. Corp. Rev. Bds. (Hanover-Kent, Inc. - K-Mart
Corp.), 7.85%, 09/01/01................................................................ 311,280
570,000 Michigan Muni Bd. Auth. Local Gov't Loan Prg. Rev. Ref. Bds.,
Ser. `92 A, 8.625%, 11/01/16........................................................... 577,592
600,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Bds. (NSF International Prj.)
Ser. `97A, 5.75%, 08/01/19............................................................. 581,334
975,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Bds. (St. John-Bon Secours
Cont. Care) Ser. `87, 7.90%, 11/15/16.................................................. 978,968
500,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Ref. Bds. (Welch Foods Inc.)
Ser. `91, 6.75%, 07/01/01.............................................................. 508,560
1,000,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Ref. Bds. (Detroit Edison Co.)
Ser. `91, 6.95%, 09/01/21.............................................................. 1,058,070
1,000,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Ref. Bds. (Detroit Edison Co.)
Ser. `91, 6.875%, 12/01/21............................................................. 1,060,310
100,000 River Dist., MI, Community Hosp. Auth. Hosp. Rev. Ref. Bds., Ser. `89,
7.40%, 05/01/01........................................................................ 100,132
------------
6,375,911
------------
MINNESOTA - (0.26%)
100,000 Hutchinson, MN, Bank Rev. Bds., Ser. `90, 6.70%, 02/01/01................................ 100,767
285,000 Minneapolis, MN, Community Dev. Agy. Rev. Bds. (River Bluff Prj.),
11.375%, 06/01/09...................................................................... 291,623
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
MINNESOTA - CONTINUED
$ 250,000 Minneapolis, MN, Community Dev. Agy. Rev. Bds. (West Bank
Homes Prj.), 11.75%, 10/01/08.......................................................... $ 261,168
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.............................................. 254,853
235,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. K, Jackson Str.
Shops Ltd., 9.50%, 12/01/14............................................................ 241,700
------------
1,150,111
------------
MISSISSIPPI - (1.91%)
1,500,000 Amory, MS, Dock & Wharf Rev. Bds. (Weyerhauser Co. Prj.), 9.50%,
09/01/00............................................................................... 1,516,125
1,945,000 Clarksdale, MS, Ind. Rev. Bds. (Bah Pptys./Archer-Daniel's), 11.75%,
06/01/11............................................................................... 1,956,087
200,000 Hinds Cmnty. College Dist., MS, Ctfs. of Participation (Conference &
Training Ctr. Prj.) Ser. `94, 6.50%, 09/01/14.......................................... 204,108
1,590,000 Mississippi Bus. Fin. Corp. MS Poll. Ctl. Rev. Bds. (Energy Res. Inc. Prj.)
5.90%, 05/01/22........................................................................ 1,471,545
10,105,000 Mississippi Home Corp. Residual Rev. Bds., Cap. Appreciation, Ser. I `92,
Zero Cpn., 09/15/16 (d)................................................................ 3,353,142
------------
8,501,007
------------
MISSOURI - (0.61%)
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........................................................ 250,693
200,000 Jefferson Cnty., MO, Reorg. School Dist. No. R3 Unlimited G.O., 6.60%,
03/01/03............................................................................... 200,440
150,000 Kansas City, MO, Ind. Dev. Auth. Econ. Dev. Rev. Ref. Bds. (Encore
Nursing Ctr. Ltd.), 8.00%, 12/01/02.................................................... 155,853
210,000 Missouri Hsg. Dev. Commission, Hsg. Dev. Bds. (Federally Insured Mtg.
Loans) Ser. July 1, 1975, 8.00%, 07/01/17.............................................. 212,927
125,000 Missouri School Bds. Association Ctfs. (Partner Pool) Ser. A, 7.375%,
03/01/06............................................................................... 126,303
665,000 Missouri St. Hsg. Dev. Comm. Mtg. Rev. Ref. Bds., `91 Ser. B, Zero Cpn.,
09/01/12 (d)........................................................................... 267,483
450,000 Missouri St. Hsg. Dev. Comm. Rev. Bds., Ser. `79, 7.00%, 09/15/22........................ 456,966
420,000 Missouri St. Hsg. Dev. Comm., Sngl. Fam. Mtg. Rev. Bds. (FHA/VA/
Private Mtgs. Insured) Ser. `85, 9.375%, 04/01/16...................................... 429,332
1,500,000 St. Louis, MO, Mun. Fin. Corp. Leasehold Rev. Ref. Bds., Ser. A,
Zero Cpn., 07/15/14 (d)................................................................ 600,720
------------
2,700,717
------------
MONTANA - (2.97%)
5,110,000 Forsyth, MT, Pollution Control Rev. Ref. Bds., (Washington Wtr. Pwr. Prj.)
Ser. `89 (MBIA Insured), 7.125%, 12/01/13.............................................. 5,240,509
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
MONTANA - CONTINUED
$ 4,900,000 Lewis & Clark Cnty., MT, Environmental Facs. Rev. Bds. (Asarco Inc. Prj.)
Ser. `98, 5.85%, 10/01/33.............................................................. $ 4,549,993
3,250,000 Montana St. Brd. Invt. Workers Comp. Prog. Rev. Ref. Bds. MBIA Insured
Ser. `91, 6.875%, 06/01/20............................................................. 3,450,785
------------
13,241,287
------------
NEBRASKA - (0.14%)
1,700,000 Nebraska Higher Educ. Loan Prg. Capital Appreciation Rev. Bds.,
Ser. `89 A, Zero Cpn., 12/15/15 (d).................................................... 608,362
------------
NEVADA - (0.88%)
1,250,000 Clark Cnty., NV, IDR (Nevada Pwr. Co. Prj.) Ser. `97A, 5.90%,
11/01/32............................................................................... 1,175,638
2,000,000 Clark Cnty., NV, Pollution Ctl. Rev. Ref. Bds. (Southern CA Edison Prj.)
Ser. A, 7.125%, 06/01/09............................................................... 2,093,220
500,000 State Of Nevada Muni Bd. Bank Prj. No. 18 & 19, 8.40%, 09/01/01.......................... 538,620
105,000 State Of Nevada Muni Bd. Bank Prj. No. 18 & 19, 8.50%, 09/01/05.......................... 107,062
------------
3,914,540
------------
NEW HAMPSHIRE - (3.49%)
10,000,000 Manchester, NH, Gen. Airport Rev. Bds., (MBIA Insured) Ser. `A,
4.50%, 01/01/28........................................................................ 7,723,800
500,000 New Hampshire Higher Educ. & Hlth. Fac. Auth. Rev. Bds. (NH Catholic
Charities Issue) Ser. `91, 8.40%, 08/01/11............................................. 550,090
925,000 New Hampshire St. Hsg. Fin. Auth. Sngl. Fam. Mtg. Rev. Bds.
(FHA/VA Insured) Ser. B, 6.05%, 07/01/25.............................................. 932,030
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...................................................... 2,308,104
3,950,000 New Hampshire St. IDA Rev. Bds. (Pollution Ctl. - Connecticut Lt. Prj.)
Ser. `89, 7.375%, 12/01/19............................................................. 4,048,592
------------
15,562,616
------------
NEW JERSEY - (0.91%)
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....................................... 1,359,059
1,000,000 New Jersey Econ. Dev. Auth., Econ. Dev. Rev. Ref. Bds. (Holt Hauling &
Warehousing) Ser. G, 8.40%, 12/15/15................................................... 1,060,850
205,000 New Jersey Econ. Dev. Auth., Econ. Dev. Sr. Rev. Bds. (Lakewood of
Voorhees FHA Insured Prj.) Ser. A, 8.875%, 01/15/20.................................... 221,213
200,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Bds. (Muhlenberg Reg'l. Med.
Ctr.) Ser. `88 B, 7.60%, 07/01/02...................................................... 202,596
605,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Bds. (Muhlenberg Reg'l. Med.
Ctr.) Ser. `88 B, 8.00%, 07/01/18...................................................... 612,974
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
NEW JERSEY - CONTINUED
$ 590,000 New Jersey Hlth. Care Fac. Rev. Bds. (Muhlenberg Reg'l. Med. Ctr.) (MBIA
Insured) Ser. `88, 8.00%, 07/01/18..................................................... $ 597,776
------------
4,054,468
------------
NEW MEXICO - (0.71%)
120,000 City of Albuquerque, NM, Hlth. Care Sys. Rev. Bds. (Lovelace Medical
Foundation Prj.), 12.00%, 03/01/11..................................................... 120,743
2,970,000 Gallup, NM, Pollution Control Rev. Ref Bds., (Plains Elec. Generation Prj.)
(MBIA Insured), 6.65%, 08/15/17........................................................ 3,061,654
------------
3,182,397
------------
NEW YORK - (6.23%)
300,000 Battery Park City Auth., POD III Hsg. Rev. Bds., Ser. `84 (FHA-Insured
Mtg.), 10.00%, 06/01/23................................................................ 303,591
280,000 New York City, Ser. `90 I, FGIC Insured Bds., 7.25%, 08/15/14............................ 287,762
200,000 New York State Dorm Auth., Rev. Ref. Bds., (Rochester Inst. Tech.)
Ser. `97, 5.30%, 07/01/17.............................................................. 191,078
4,250,000 New York State Energy Research & Dev. Auth., Elec. Fac. Rev. Bds.
(Edison Co. Prj.) Ser. `91, 7.50%, 01/01/26............................................ 4,325,523
1,000,000 New York State Local Gov. Assistance Corp., Rev. Ref. Bds., Ser. `98 A,
4.375%, 04/01/18....................................................................... 819,870
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................................................. 2,403,933
2,000,000 New York State Med. Care Fac. Fin. Agy. Rev. Bds. (Beth Israel Med.
Ctr.-A) (MBIA Insured), Ser. `89, 7.40%, 11/01/04...................................... 2,045,560
700,000 New York State Med. Care Fac. Fin. Agy. Rev. Bds., Long Term-Hlth. Care,
Ser. `89 B, 7.375%, 11/01/11........................................................... 715,848
1,010,000 New York State Med. Care Fac. Fin. Agy. Rev. Ref. Bds., Mental Hlth.
Svcs. Fac., Ser. `87 A, 8.875%, 08/15/07............................................... 1,013,838
1,755,000 New York State Mtg. Agy. Rev. Bds., (Homeownership Mtg. - Ser. HH-2)
(FHA/Priv. Mtgs. Insured) Ser. `88, 7.85%, 04/01/22.................................... 1,792,575
100,000 Onondaga Cnty., NY, Ind'l. Dev. Agy. Ind'l. Dev. Rev. Bds. (Sysco Frosted
Foods Inc.) Ser. `83, 7.75%, 04/01/03.................................................. 101,803
400,000 Otsego Cnty., NY, Ind'l. Dev. Agy. Civic Agy. Rev. Bds. (Bassett Hlth.
Care Prj.) Ser. `98 A, 5.35%, 11/01/20................................................. 379,356
5,000,000 Port Auth NY & NJ Rev. Bds. (Cons.-Seventy-Second) Ser. `92, 7.35%,
10/01/27............................................................................... 5,437,650
7,000,000 Port Auth NY & NJ Rev. Bds. (Cons.-Sixty-Ninth) Ser. `90, 7.125%,
06/01/25............................................................................... 7,204,750
300,000 Port Jervis, NY, IDA, Mercy Community Hosp. Rev. Bds., (Franciscan Hlth.
Partnership) Ser. `97, 5.10%, 11/01/07................................................. 291,552
470,000 Port Jervis, NY, IDA, Mercy Community Hosp. Rev. Bds., (Franciscan Hlth.
Partnership) Ser. `97, 5.20%, 11/01/08................................................. 456,304
------------
27,770,993
------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
NORTH CAROLINA - (1.20%)
$ 500,000 Brevard, NC, Hsg. Auth. 1st Mtg. Rev. Bds. (Ascend Healthcare, Inc. Prj.),
Ser. `98A, 7.50%, 03/01/28............................................................. $ 464,345
500,000 Charlotte, NC, Hsg. Auth. 1st Mtg. Rev. Bds. (Ascend Healthcare, Inc. Prj.),
Ser. `98A, 7.50%, 03/01/28............................................................. 464,345
3,000,000 North Carolina Eastern Mun. Pwr. Agy. Pwr. Sys. Rev. Ref. Bds.,
Ser. B, 5.70%, 01/01/17................................................................ 2,803,560
200,000 North Carolina Med. Care Comm. Hosp. Rev. Ref. Bds. (Moore Memorial
Hosp. Prj.), 9.10%, 10/01/99........................................................... 200,028
900,000 North Carolina Mun. Pwr. Agy. No. 1 Catawba Elec. Rev. Bds., Ser. `90,
6.50%, 01/01/10........................................................................ 923,373
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................. 508,655
------------
5,364,306
------------
NORTH DAKOTA - (0.24%)
900,000 Ward Cnty., ND, Hlth Care Fac. Rev. Bds. (St. Joseph's Hosp. Corp. Prj.)
Ser. `94, 8.875%, 11/15/14............................................................. 1,079,847
------------
OHIO - (3.53%)
500,000 Cleveland, OH, Waterworks Rev. Bds., Ser. A, 6.125%, 01/01/08............................ 502,585
2,700,000 Cnty. of Belmont, Ohio Hlth. Sys. Rev. and Ref. Bds. (East Ohio Reg'l
Hosp. Issue), 5.80%, 01/01/18.......................................................... 2,448,549
850,000 Hamilton Cnty., OH Hosp. Fac. Auth. Rev. Bds. (Unrefunded Balance)
Ser. `86, 7.00%, 01/01/09.............................................................. 856,018
680,000 Hamilton Cnty., OH Hosp. Fac. Auth. Rev. Bds. (Unrefunded Balance)
(MBIA Insured - IBC) Ser. `86, 7.00%, 01/01/09......................................... 684,903
440,000 Hamilton Cnty., OH Hosp. Fac. Auth. Rev. Bds. (Unrefunded Balance)
(MBIA Insured) Ser. `86, 7.00%, 01/01/09............................................... 443,172
305,000 Lakewood, Ohio Hosp. Impt. Rev. Ref. Bds. (Lakewood Hosp. ) Ser. One,
6.00%, 02/15/10........................................................................ 305,497
2,000,000 Mahoning Valley Sanitary Dist. (Ohio) Wtr. Rev. Bds., Ser. `94,
7.75%, 05/15/19........................................................................ 2,133,400
515,000 Montgomery Cnty., OH, Hosp. Rev. Ref. Bds. (Kettering Med. Ctr.)
Ser. `89, 7.40%, 04/01/09.............................................................. 526,665
470,000 Ohio Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. Cap. Appreciation,
Ser. `85 A, Zero Cpn., 01/15/15 (d).................................................... 107,560
7,500,000 Ohio St. Air Quality Dev. Auth. Rev. Ref. Bds. (Pollution Ctl./Ohio
Edison) Ser. `90, 7.45%, 03/01/16...................................................... 7,744,650
------------
15,752,999
------------
OKLAHOMA - (1.27%)
530,000 Oklahoma Dev. Fin. Auth. Rev. Ref. Bds. (Hillcrest Hlth. Sys.) Ser. A,
5.625%, 08/15/19....................................................................... 479,714
12,000,000 Oklahoma Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. Cap. Appreciation,
Ser. A-1, Zero Cpn., 03/01/29 (d)...................................................... 2,066,160
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
OKLAHOMA - CONTINUED
$ 5,000,000 Oklahoma Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. Cap. Appreciation,
Ser. B-1, Zero Cpn., 03/01/29 (d)...................................................... $ 829,550
6,185,000 Oklahoma Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. Cap. Appreciation,
Ser. D-1, Zero Cpn., 03/01/29 (d)...................................................... 1,052,873
200,000 Oklahoma St. Ind. Auth. Rev. Bds. (Hlth. Sys./Baptist Ctr.) Ser. `95C,
7.00%, 08/15/03........................................................................ 216,772
1,000,000 Southeastern, OK, Ind. Auth. OK Rev. Bds. (Pollution Ctl./Weyerhauser
Co. Prj.) Ser. `85, 9.85%, 02/01/00.................................................... 1,016,670
------------
5,661,739
------------
PENNSYLVANIA - (3.72%)
2,835,000 Beaver Cnty., PA, IDA PCR Bds. (J&L Specialty Steel-formerly known
as Colt Ind. Prj.) Ser. 19, 7.00%, 06/01/08............................................ 2,904,741
2,360,000 Berks Cnty., PA, IDA (Supermarkets General Corp. Prj.), 10.50%, 11/01/03................. 2,440,240
500,000 Clarion Cnty., PA, Ind. Dev. Auth. Rev. Bds., Ser. `80 (Beverly
Enterprises Inc.) 5.875%, 05/01/07..................................................... 478,745
400,000 Columbia Cnty. IDA, Columbia Cnty., PA, 1st Mtg. Rev. Bds., Ser. `86
(Orangeville Nursing Ctr. Associates Prj.), 9.00%, 12/01/12............................ 400,000
1,000,000 Delaware Cnty., PA, Auth. Hlth. Sys. Rev. Bds. (Catholic Hlth. East)
Ser. `98, 4.875%, 11/15/18............................................................. 868,860
2,210,000 Erie, PA, Cap. Appreciation, Unlimited G.O., Ser. B, Zero Cpn.,
11/15/12 (d)........................................................................... 1,069,110
665,000 Luzerne Cnty., PA, Hsg. Corp. Rev. Bds., 8.125%, 12/01/08................................ 666,337
200,000 McKean Cnty., PA, Ind. Dev. Auth. Rev. Bds., Ser. `80 (Corning Glass
Wks. Prj.), 7.75%, 06/01/05............................................................ 200,858
920,000 Mercer Cnty., PA, IDA, Gumberg Assoc. - Pine Grove Square, The Kroger
Co., Ind. Dev. 1st Mtg. Rev. Bds., 13.00%, 06/01/07.................................... 949,173
1,000,000 Pennsylvania Econ. Dev. Fin. Auth. Solid Waste Disp. Rev. Bds.,
(USG Corp. Prj.) 6.00%, 06/01/31....................................................... 960,940
45,000 Pennsylvania Hsg. Fin. Agy. Moderate Rehab. Rev. Bds., 9.00%, 08/01/01................... 45,512
11,000,000 Pennsylvania Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds., Ser. 63 A,
Zero Cpn., 04/01/30 (d)................................................................ 1,801,690
75,000 Philadelphia, PA, Redev. Auth. Home Improvement Loan Rev. Bds.,
Ser. `86 A, 7.375%, 06/01/03........................................................... 75,616
860,000 Philadelphia, PA, Wtr. & Swr. Rev. Ref. Bds. (MBIA Insured) 15th Ser.,
6.875%, 10/01/06....................................................................... 877,269
220,000 Pittsburgh & Allegheny Cnty., PA, Pub. & Auth. Rev. Bds. Ser. `78,
6.50%, 12/01/07........................................................................ 220,464
45,000 Pittsburgh, PA, Urban Redevelopment Auth. Home Improvement Loan,
Rev. Bds., Ser. `87 A, 7.125%, 08/01/04................................................ 45,783
5,000,000 Pittsburgh, PA, Wtr. & Swr. Auth. Wtr. & Swr. Sys. 1st Lien Rev.
Bds. Cap. Appreciation, Ser. B, Zero Cpn., 09/01/28 (d)................................ 890,800
750,000 Sayre, PA, Hlth. Care Facs. Auth. Rev. Bds. (VHA-Cap. Asset)
(MBIA Insured) Ser. `85C, 7.70%, 12/01/15.............................................. 769,275
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
PENNSYLVANIA - CONTINUED
$ 750,000 Sharon, PA, Reg'l. Hlth. Sys. Auth. Hlth. Sys. Rev. Bds., (Sharon Reg'l.
Hlth. Sys.) (MBIA Insured) Ser. `98, 5.00%, 12/01/18.................................. $ 667,538
250,000 Warren Cnty., PA, IDA Specialized Dev. Rev. Ref. Bds. (Beverly
Enterprises - Pennsylvania, Inc. Prj.) Ser. `91, 9.00%, 11/01/12....................... 268,168
------------
16,601,119
------------
PUERTO RICO - (0.34%)
780,000 Puerto Rico Commonwealth Infrastructure Fin. Auth. Special Bds.,
Unrefunded, Ser. `88 A, 7.75%, 07/01/08................................................ 790,023
720,000 Puerto Rico Ind. Med. & Environmental PCR Fac. Fin. Auth. Rev. Bds.,
(Abbott Chemical Inc. Prj.), 6.50%, 07/01/09........................................... 741,744
------------
1,531,767
------------
SOUTH CAROLINA - (1.81%)
380,000 Certificates of Participation, Ser. `90A, South Carolina School Financing
Corp. (School Dist. No. 2 of Sumter Cnty., SC Prj.), 8.125%, 04/01/10.................. 391,902
100,000 Clemson Univ., SC, Ctfs. of Participation, Ser. `86, 6.90%, 12/01/07..................... 100,245
5,165,000 Piedmont Mun. Pwr. Agy., SC, Elect. Rev. Ref. Bds., Ser. A,
5.00%, 01/01/14........................................................................ 4,776,954
1,055,000 Piedmont Mun. Pwr. Agy., SC, Elect. Rev. Ref. Bds., Ser. A,
6.55%, 01/01/26........................................................................ 1,055,222
1,075,000 South Carolina St. Ports Auth. Ports. Rev. Ref. Bds., 6.625%, 07/01/11................... 1,139,070
595,000 South Carolina St. Ports Auth. Ports. Rev. Ref. Bds., 6.75%, 07/01/21.................... 631,706
------------
8,095,099
------------
SOUTH DAKOTA - (0.06%)
250,000 Aberdeen, SD, Unlimited G.O., Rev. Ref. Bds., (MBIA Insured) Ser. `87,
6.90%, 07/01/04........................................................................ 251,838
------------
TENNESSEE - (0.59%)
285,000 Dover, TN, Hlth. & Educ. Fac., IDR (Wessex Corp. Dover Prj.), 9.50%,
09/01/11............................................................................... 285,618
154,905 Dyer Cnty., TN, Ind. Dev. Brd. IDR Bds. (S.S. Kresge Co. - K-Mart Corp.),
8.10%, 11/01/00........................................................................ 155,066
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........................................................................ 522,865
1,040,000 Lewisburg, TN, IDR Bds. (Mead Corp. Prj.), 7.875%, 02/01/00.............................. 1,066,936
145,000 McMinn Cnty., TN, Ind. Dev. Brd. Rev. Bds., (S.S. Kresge Co.), 8.00%,
11/01/00............................................................................... 145,199
430,000 New Tazewell, TN, Hlth. Educational & Hsg. Fac. Brd. IDR Bds. (Wessex
Corp. New Tazewell Prj.) Ser. `87, 10.00%, 06/01/17.................................... 431,277
20,000 Tennessee Hsg. Dev. Agy. Rev. Bds., (Homeownership Prog. - S)
(MBIA Insured) Ser. `90, 7.625%, 07/01/22.............................................. 20,822
------------
2,627,783
------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
TEXAS - (8.38%)
$ 8,025,000 Austin, TX, Hsg. Fin. Corp., Sngl. Fam. Mtg. Rev. Bds., Ser. `84,
Zero Cpn., 02/01/16 (d)................................................................ $ 718,077
6,305,000 Bexar, TX, Metro. Wtr. Dist. Waterworks Sys. Rev. Bds., Cap.
Appreciation, (MBIA Insured), Zero Cpn., 05/01/32 (d).................................. 866,811
6,305,000 Bexar, TX, Metro. Wtr. Dist. Waterworks Sys. Rev. Bds., Cap.
Appreciation, (MBIA Insured), Zero Cpn., 05/01/34 (d).................................. 766,373
1,000,000 Brazos River Auth., TX, Rev. Ref. Bds. (FGIC Insured) (Houston Light &
Power) Ser. B, 7.20%, 12/01/18......................................................... 1,025,710
1,005,000 Coastal Wtr. Auth. TX Wtr. Rev. Ref. Bds., 6.25%, 12/15/17............................... 1,048,587
370,000 Coastal Wtr. Auth. TX Wtr. Rev. Ref. Bds. (FGIC Insured), Ser. `86 A,
7.50%, 12/15/16........................................................................ 374,681
5,205,000 Coppell, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 08/15/16 (d)............................................... 1,925,694
5,205,000 Coppell, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 08/15/17 (d)............................................... 1,806,083
5,205,000 Coppell, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 08/15/18 (d)............................................... 1,689,803
5,200,000 Coppell, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 08/15/19 (d)............................................... 1,584,388
625,000 Dallas Cnty., TX, Utility & Reclamation Dist. Rev. Ref. Bds., Cap.
Appreciation (MBIA Insured) Ser. `93, Zero Cpn., 02/15/14 (d).......................... 272,425
2,000,000 Gulf Coast Waste Disp. Auth. Rev. Bds. (TX Waste Disp.-Valero Energy
Corp. Prj.) Ser. `98, 5.60%, 04/01/32.................................................. 1,790,980
1,000,000 Gulf Coast Waste Disp. Auth. Rev. Bds. (TX Waste Disp.-Valero Energy
Corp. Prj.) Ser. `99, 5.70%, 04/01/32.................................................. 907,630
11,185,000 Harris Cnty., Houston, TX, Sports Auth. Sp., Jr. Lien Rev. Bds., Cap.
Appreciation (MBIA Insured) Ser. `98 B, Zero Cpn., 11/15/18 (d)........................ 3,577,522
300,000 Houston, TX, Hsg. Fin. Corp. Sngl. Fam. Mtg. Rev. Ref. Bds., Ser. A-1,
8.00%, 06/01/14........................................................................ 307,056
10,000,000 Houston, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 02/15/13 (d)............................................... 4,648,600
2,700,000 Matagorda Cnty., TX, NA Dist. No. 1 Poll. Ctl. Rev. Bds. (Central Power
& Light) Ser. `84, 7.50%, 12/15/14..................................................... 2,798,226
500,000 Matagorda Cnty., TX, NA Dist. No. 1, Rev. Ref. Bds., (Houston Ind'l. Inc.,
Prj.) (MBIA Insured) Ser. `98 A, 5.25%, 11/01/29 (c)................................... 444,230
2,000,000 Matagorda Cnty., TX, NA Dist. No. 1, Rev. Ref. Bds., (Houston Lighting
& Power Co,) (FGIC Insured) 7.20%, 12/01/18........................................... 2,049,980
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
TEXAS - CONTINUED
$ 720,000 Red River Auth. TX Ind. Dev. Ref. Bds. (Cargill Inc. Prj.), 7.90%,
04/01/07............................................................................... $ 735,926
1,000,000 Richardson, TX, Hosp. Auth. Hosp. Rev. Ref. Bds., (Baylor/Richardson)
Ser. `98, 5.625%, 12/01/28............................................................. 879,060
1,250,000 San Antonio, TX, Hlth. Fac. Dev. Corp. Econ. Dev. Rev. Ref. Bds.
(Encore Nursing Ctr.) Ser. `92, 8.25%, 12/01/19........................................ 1,340,888
140,000 Texas St. Higher Educ. Coordinating Brd., College Student Loan Rev. Bds.,
7.20%, 04/01/02........................................................................ 147,256
5,000,000 Texas St. Tax & Rev. Antic. Nts., Rev. Bds., Ser. A, 4.50%, 08/31/00..................... 5,035,900
235,000 Texoma Hsg. Fin. Corp. TX Sngl. Fam. Mtg. Rev. Ref. Bds.
(GNMA/FNMA Mtg.-Backed Sec.Prg.) Ser. `97, 5.80%, 09/01/28............................. 227,412
255,000 Tomball, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O. Prerefunded, Zero Cpn., 02/15/13 (d)................................... 103,525
745,000 Tomball, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O. Unrefunded, Zero Cpn., 02/15/13 (d).................................... 296,950
------------
37,369,773
UTAH - (0.23%)
1,000,000 Utah Hsg. Fin. Agy. Rev. Bds. (RHA Community Services of Utah,
Inc. Prj.) Ser. `97 A, 6.875%, 07/01/27................................................ 1,011,925
------------
VERMONT - (0.31%)
1,390,000 Vermont Hsg. Fin. Agy. Multi-Fam. Hsg. Bds., `79 Ser. A, 8.50%,
02/15/21............................................................................... 1,393,642
------------
VIRGINIA - (3.22%)
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............................................ 1,022,960
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............................................. 4,092,240
140,000 The IDA of Covington-Alleghany Cnty., VA, IDR Ref. Bds. (Beverly
Enterprises, Inc. Prj.) Ser. `91, 9.375%, 09/01/01..................................... 144,277
110,000 Montgomery Cnty., VA, Rev. Bds., Ser. `87, 6.70%, 04/01/07............................... 111,338
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............................................ 1,022,960
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............................................. 2,045,780
500,000 Peninsula Ports Auth. VA, Hosp. Fac. Rev. Ref. Bds. (Whittaker Mem.
Hosp. Prj.) Ser. `87, 8.70%, 08/01/23.................................................. 550,250
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
VIRGINIA - CONTINUED
$ 400,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., 6.20%, 07/01/21.......................... $ 404,560
600,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., Ser. A,
7.10%, 01/01/17........................................................................ 619,158
1,000,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., Ser. A,
7.10%, 01/01/22........................................................................ 1,028,180
3,000,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., Ser. A,
7.10%, 01/01/25........................................................................ 3,082,860
215,000 Virginia St. Res. Auth. Wtr. & Swr. Sys. Rev. Bds. (Pooled Loan Prg.)
Ser. `97 A, 7.50%, 11/01/17............................................................ 215,624
------------
14,340,187
------------
WASHINGTON - (1.57%)
500,000 Chelan Cnty., WA, Pub. Utilities Dist. No. 1, Chelan Hydro Cons. Sys.
Rev. Bds.. Ser. `97 A, 5.60%, 07/01/32 (c)............................................. 480,975
400,000 King Cnty., WA, Unlimited G.O., Ser. A `78, 6.50%, 12/01/12.............................. 400,816
6,000,000 Spokane Cnty., WA, School Dist. No. 356 Cent. VY Tax Deferred Int.
Unlimited G.O., Ser. B, Zero Cpn., 12/01/17 (d)........................................ 2,056,800
2,000,000 Washington St. Hlth. Care Fac. Auth. Rev. Bds. (SW Washington Hosp.
Vancouver) Ser. `89, 7.125%, 10/01/19................................................. 2,044,540
2,300,000 Washington St. Hsg. Fin. Comm. Nonprofit Hsg. Rev. Bds. (Seattle Univ.
Auxiliary Svcs. Prj.) Ser. `98, 5.30%, 07/01/31........................................ 2,031,222
------------
7,014,353
------------
WEST VIRGINIA - (2.40%)
375,000 Beverly, WV, Hsg. Corp. Mtg. Rev. Bds., Ser. `81 (Beverly Manor/FHA -
Insured/Section 8 Prj.), 11.00%, 11/15/22.............................................. 426,034
135,000 Glasgow, WV, Hlth. Fac. Rev. Ref. Bds. (Beverly Enterprises, Inc. Prj.)
Ser. `91, 9.50%, 09/01/01.............................................................. 139,540
8,700,000 West Virginia St. Cap. Appreciation, Infrastructure -A, Unlimited G.O.
Zero Cpn., 11/01/22 (d)................................................................ 2,282,880
4,400,000 West Virginia St. Cap. Appreciation, Infrastructure -A, Unlimited G.O.
Zero Cpn., 11/01/23 (d)................................................................ 1,086,228
9,400,000 West Virginia St. Cap. Appreciation, Infrastructure -A, Unlimited G.O.
Zero Cpn., 11/01/24 (d)................................................................ 2,183,244
9,250,000 West Virginia St. Cap. Appreciation, Infrastructure -A, Unlimited G.O.
Zero Cpn., 11/01/25 (d)................................................................ 2,020,293
2,525,000 West Virginia St. Hsg. Dev. Fd. Hsg. Fin. Rev. Bds., Ser. B, 7.20%,
11/01/20............................................................................... 2,560,249
------------
10,698,468
------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At September 30, 1999
=======================================================================================================================
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - CONTINUED
WISCONSIN - (0.44%)
$ 300,000 Clear Lake, WI, Sewer Sys. Mtg. Rev. Bds., 8.00%, 08/01/11............................... $ 310,194
135,000 Wisconsin Hlth. Fac. Auth. Rev. Ref. Bds., Hosp. Sisters Svcs. Sys.,
Ser. D, 9.125%, 07/01/05............................................................... 135,574
1,595,000 Wisconsin St. Hlth. & Educational Fac. Auth. Rev. Bds. (RFDF Inc. Prj.)
Ser. `97, 7.375%, 07/15/27............................................................. 1,533,896
------------
1,979,664
------------
Total Municipal Bonds - (identified cost $455,815,706)................................. 436,946,479
------------
Total investments - (identified cost $455,815,706)(98.01%) (a)....................... 436,946,479
Other assets less liabilities - (1.99%).............................................. 8,868,322
------------
Net assets - (100%)................................................................ $445,814,801
============
+ These securities are in default but have made partial payments.
(a) Aggregate cost for Federal income tax purposes is $455,815,706.
At September 30, 1999 unrealized appreciation (depreciation) of securities for Federal income tax purposes was
as follows:
Unrealized appreciation................................................................ $ 1,519,358
Unrealized depreciation................................................................ (20,388,585)
------------
Net unrealized depreciation.......................................................... $(18,869,227)
============
(b) Represents a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated
future date.
(c) Represents the current rate for a variable rate security.
(d) As of September 30, 1999, zero coupon bonds amounted to $94,837,145 or 21.27% of the Fund's net assets.
Because zero coupon bonds pay no interest and compound semi-annually at the fixed rate at the time of
reissuance, their value is generally more volatile than the value of other debt securities.
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
At September 30, 1999
========================================================================================================
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $455,815,706)
(See accompanying Schedule of Investments).......................................... $436,946,47
Cash................................................................................... 3,201,661
Receivables:
Interest............................................................................ 7,374,886
Investment securities sold.......................................................... 541,533
Capital stock sold.................................................................. 283,804
Prepaid expenses....................................................................... 45,498
------------
Total assets..................................................................... 448,393,861
------------
LIABILITIES:
Payables:
Capital stock reacquired............................................................ 966,035
Investment securities purchased..................................................... 811,350
Commissions to distributor (Note 4)................................................. 409,322
Accrued expenses....................................................................... 392,353
------------
Total liabilities................................................................ 2,579,060
------------
NET ASSETS (NOTE 5)....................................................................... $445,814,801
============
CLASS A SHARES
Net assets.......................................................................... $174,440,651
Shares outstanding.................................................................. 20,139,569
Net asset value and redemption price per share...................................... $8.66
=====
Maximum offering price per share (100/95.25 of $8.66)............................... $9.09
=====
CLASS B SHARES
Net assets.......................................................................... $228,440,224
Shares outstanding.................................................................. 26,470,666
Net asset value and redemption price per share...................................... $8.63
=====
CLASS C SHARES
Net assets.......................................................................... $ 41,642,045
Shares outstanding.................................................................. 4,794,090
Net asset value and redemption price per share...................................... $8.69
=====
CLASS Y SHARES
Net assets.......................................................................... $ 1,291,881
Shares outstanding.................................................................. 149,099
Net asset value and redemption price per share...................................... $8.66
=====
NET ASSETS CONSIST OF:
Par value of shares of capital stock................................................... 515,534
Additional paid-in capital............................................................. 469,108,448
Net unrealized depreciation on investments............................................. (18,869,227)
Accumulated net realized loss.......................................................... (4,939,954)
------------
Net assets....................................................................... $445,814,801
============
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the year ended September 30, 1999
========================================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest............................................................................ $ 31,699,670
------------
Expenses:
Management fees (Note 3)............................................ $ 3,107,801
Custodian fees...................................................... 122,920
Transfer agent fees
Class A.......................................................... 143,135
Class B.......................................................... 214,630
Class C.......................................................... 37,490
Class Y.......................................................... 2,261
Audit fees.......................................................... 24,150
Legal fees ......................................................... 38,048
Accounting fees (Note 3)............................................ 15,996
Reports to shareholders............................................. 115,596
Directors fees and expenses......................................... 77,697
Registration and filing fees........................................ 157,471
Miscellaneous....................................................... 31,909
Payments under distribution plan (Note 4)
Class A.......................................................... 515,625
Class B.......................................................... 2,464,753
Class C.......................................................... 425,374
------------
Total expenses................................................................ 7,494,856
Expenses paid indirectly (Note 6)............................................. (2,705)
------------
Net expenses.................................................................. 7,492,151
------------
Net investment income...................................................... 24,207,519
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss from investment transactions............................................ (4,702,920)
Net increase in unrealized depreciation of investments during the period.................. (24,020,731)
------------
Net realized and unrealized loss on investments.................................. (28,723,651)
------------
Net decrease in net assets resulting from operations.......................... $ (4,516,132)
============
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
=========================================================================================================
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
OPERATIONS: 1999 1998
------------ ------------
<S> <C> <C>
Net investment income..................................................... $ 24,207,519 $ 21,973,208
Net realized loss from investment transactions............................ (4,702,920) (237,034)
Net change in unrealized appreciation/(depreciation)
of investments......................................................... (24,020,731) 3,568,267
------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................................. (4,516,132) 25,304,441
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ............................................................ (10,996,601) (11,779,256)
Class B ........................................................... (11,220,403) (10,526,467)
Class C ............................................................ (1,924,689) (1,029,628)
Class Y ............................................................ (67,090) (21,941)
Realized gains
Class A ............................................................ - (673,758)
Class B ............................................................ - (790,190)
Class C ............................................................ - (46,345)
Class Y ............................................................ - (294)
In excess of net investment income
Class A ............................................................ (89,106) (518,381)
Class B ............................................................ (90,919) (262,079)
Class C ............................................................ (15,596) (39,435)
Class Y ............................................................ (544) -
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets resulting from
capital share transactions (Note 5)
Class A ............................................................ (57,667,370) 152,107,227
Class B ........................................................... (12,350,227) 122,590,184
Class C ............................................................ 7,608,906 34,078,836
Class Y ............................................................ 489,969 877,300
------------ ------------
Total increase (decrease) in net assets............................. (90,839,802) 309,270,214
NET ASSETS:
Beginning of year ..................................................... 536,654,603 227,384,389
------------ ------------
End of year (including undistributed net investment income
of $1,264 in 1998) .................................................... $445,814,801 $536,654,603
============ ============
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
32
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENT
At September 30, 1999
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Davis Tax-Free High Income Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. 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 and 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 asked 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. During the
year ended September 30, 1999, the fund deferred $4,700,000 in realized losses
for federal income tax purposes. These losses will be recognized for federal
income tax purposes during the year ended September 30, 2000. At September 30,
1999, the Fund had approximately $249,000 of capital loss carryovers available
to offset future capital gains, if any, which expire by 2007.
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
33
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At September 30, 1999
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
and distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1999, amounts have been
reclassified to reflect an increase in undistributed net income of $196,165, a
decrease in accumulated net realized losses of $158,093 and a decrease in
additional paid-in capital of $354,258. 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.
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 year ended September 30, 1999, were $357,931,836 and
$412,633,748, 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 annual net assets of the Fund, 0.60% of the next
$250 million of average annual net assets of the Fund and 0.55% of average
annual net assets over $500 million.
The Adviser is paid for registering Fund shares for sale in various
states. The fee for the year ended September 30, 1999, amounted to $12,996.
State Street Bank & Trust Company ("State Street Bank") is the Fund's primary
transfer agent. The Adviser is also paid for certain transfer agent services.
The fee for these services for the year ended September 30, 1999, amounted to
$32,413. State Street Bank is the Fund's primary accounting provider. Fees for
such services are included in the custodian fee as State Street Bank also serves
as the Fund's custodian. The Adviser is also paid for certain accounting
services. Such fee paid to the Adviser for the year ended September 30, 1999,
amounted to $15,996. 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 year ended September 30, 1999, Davis Distributors, LLC, the
Fund's Underwriter (the "Underwriter" or "Distributor") received $316,814 from
commissions earned on sales of Class A shares of the Fund of which $51,835 was
retained by the Underwriter and the remaining $264,979 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.
34
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At September 30, 1999
================================================================================
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 reimbursed at the annual rate up to 1/4 of
1% of the average net assets maintained by the responsible dealers. The
Underwriter is not reimbursed for accounts for which the Underwriter pays no
service fees to other firms. The service fee for Class A shares of the Fund for
the year ended September 30, 1999, was $515,625.
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 year ended September 30, 1999, Class B shares of the Fund
made distribution plan payments which included distribution fees of $1,860,068
and service fees of $604,685.
Commission advances by the Distributor during the year ended September
30, 1999 on the sale of Class B shares of the Fund amounted to $1,097,633 of
which $1,040,189 was re-allowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the Fund
in the amount of $6,713,113, 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 year ended
September 30, 1999, the Distributor received contingent deferred sales charges
of $730,629 from redemptions of Class B shares of the Fund.
35
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At September 30, 1999
================================================================================
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
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 year ended September 30, 1999, Class C shares of the Fund
made distribution plan payments of $425,374. During the year ended September 30,
1999, the Distributor received $20,824 in contingent deferred sales charges from
redemption of Class C shares of the Fund.
NOTE 5 - CAPITAL STOCK
At September 30, 1999, 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>
YEAR ENDED
CLASS A SEPTEMBER 30, 1999
-------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold....................................... 5,092,150 $ 45,945,933
Shares issued in reinvestment of distributions.... 564,534 5,078,931
------------- -------------
5,656,684 51,024,864
Shares redeemed................................... (12,047,128) (108,692,234)
------------- -------------
Net decrease............................. (6,390,444) $ (57,667,370)
============= =============
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1998
-------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold....................................... 35,588,556 $ 326,191,003
Shares issued in reinvestment of distributions.... 640,064 5,842,119
------------- -------------
36,228,620 332,033,122
Shares redeemed................................... (19,676,340) (179,925,895)
------------- -------------
Net increase............................. 16,552,280 $ 152,107,227
============= =============
</TABLE>
36
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At September 30, 1999
================================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
CLASS B SEPTEMBER 30, 1999
-------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold....................................... 4,239,576 $ 38,228,135
Shares issued in reinvestment of distributions.... 444,771 3,985,404
------------- -------------
4,684,347 42,213,539
Shares redeemed................................... (6,090,773) (54,563,766)
------------- -------------
Net decrease............................. (1,406,426) $ (12,350,227)
============= =============
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1998
-------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold....................................... 17,056,260 $ 155,837,641
Shares issued in reinvestment of distributions.... 511,231 4,656,040
------------- -------------
17,567,491 160,493,681
Shares redeemed................................... (4,154,386) (37,903,497)
------------- -------------
Net increase............................. 13,413,105 $ 122,590,184
============= =============
<CAPTION>
YEAR ENDED
CLASS C SEPTEMBER 30, 1999
-------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold....................................... 2,125,712 $ 19,312,493
Shares issued in reinvestment of distributions.... 86,645 780,258
------------- -------------
2,212,357 20,092,751
Shares redeemed................................... (1,388,222) (12,483,845)
------------- -------------
Net increase............................. 824,135 $ 7,608,906
============= =============
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1998
-------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold....................................... 4,003,278 $ 36,794,143
Shares issued in reinvestment of distributions.... 37,685 345,114
------------- -------------
4,040,963 37,139,257
Shares redeemed................................... (333,673) (3,060,421)
------------- -------------
Net increase............................. 3,707,290 $ 34,078,836
============= =============
</TABLE>
37
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At September 30, 1999
================================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
CLASS Y SEPTEMBER 30, 1999
-------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold....................................... 200,923 $ 1,820,882
Shares issued in reinvestment of distributions.... 3,093 27,497
------------- -------------
204,016 1,848,379
Shares redeemed................................... (151,024) (1,358,410)
------------- -------------
Net increase............................. 52,992 $ 489,969
============= =============
<CAPTION>
OCTOBER 6, 1997
(INCEPTION OF CLASS) THROUGH
SEPTEMBER 30, 1998
-------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold....................................... 115,009 $ 1,049,727
Shares issued in reinvestment of distributions.... 1 5
------------- -------------
115,010 1,049,732
Shares redeemed................................... (18,903) (172,432)
------------- -------------
Net increase............................. 96,107 $ 877,300
============= =============
</TABLE>
NOTE 6 - CUSTODIAN FEES
Under an agreement with the custodian bank, custodian fees are reduced
for earnings on cash balances maintained at the custodian by the Fund. Such
reductions amounted to $2,705 during the year ended September 30, 1999.
38
<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 A
<TABLE>
<CAPTION>
DECEMBER 1, 1994
(INCEPTION OF
YEAR ENDED SEPTEMBER 30, CLASS) THROUGH
-------------------------------------------------- SEPTEMBER 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period............................................ $ 9.19 $ 9.22 $ 9.15 $ 9.19 $ 8.90
-------- -------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income................................ 0.47 0.54 0.57 0.61 0.40
Net Realized and Unrealized Gains (Losses)........... (0.52) 0.04 0.11 (0.05) 0.30
-------- -------- ------- -------- --------
Total From Investment Operations............. (0.05) 0.58 0.68 0.56 0.70
-------- -------- ------- -------- --------
Dividends and Distributions
Net Investment Income................................ (0.47) (0.54) (0.59) (0.54) (0.40)
Distribution from Realized Gains..................... - (0.05) (0.02) (0.06) (0.01)
Dividends in Excess of Net Investment
Income.......................................... (0.01) (0.02) - - -
-------- -------- -------- -------- --------
Total Dividends and Distributions............ (0.48) (0.61) (0.61) (0.60) (0.41)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 8.66 $ 9.19 $ 9.22 $ 9.15 $ 9.19
======== ======== ======== ======== ========
Total Return (1)........................................ 0.61)% 6.53% 7.66% 6.33% 7.93%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)..................................... $174,441 $243,878 $ 92,020 $ 44,828 $ 45,461
Ratio of Expenses to
Average Net Assets................................ 1.06% 1.04% 1.26%(2) 1.36% 1.43%*
Ratio of Net Investment Income to
Average Net Assets................................ 5.30% 5.37% 6.60% 6.64% 5.95%*
Portfolio Turnover Rate (3).......................... 73.45% 126.28% 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 of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.25% 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
39
<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>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period.......................................... $ 9.16 $ 9.19 $ 9.12 $ 9.17 $ 9.09
-------- -------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income.............................. 0.41 0.49 0.53 0.54 0.48
Net Realized and Unrealized Gains (Losses)......... (0.53) 0.02 0.08 (0.05) 0.10
-------- -------- -------- -------- --------
Total From Investment
Operations................................. (0.12) 0.51 0.61 0.49 0.58
-------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income.............................. (0.41) (0.48) (0.52) (0.48) (0.48)
Distribution from Realized Gains.................. - (0.05) (0.02) (0.06) (0.01)
Dividends in Excess of Net Investment
Income......................................... -(4) (0.01) - - (0.01)
-------- -------- -------- -------- --------
Total Dividends and Distributions............. (0.41) (0.54) (0.54) (0.54) (0.50)
-------- -------- -------- -------- --------
Net Asset Value, End of Period........................ $ 8.63 $ 9.16 $ 9.19 $ 9.12 $ 9.17
======== ======== ======== ======== ========
Total Return (1)...................................... (1.39)% 5.74% 6.89% 5.51% 6.64%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)................................... $228,440 $255,300 $132,934 $109,488 $126,727
Ratio of Expenses to
Average Net Assets.............................. 1.82% 1.80%(2) 2.02% 2.10% 2.14%
Ratio of Net Investment Income
to Average Net Assets........................... 4.54% 4.62% 5.87% 5.89% 5.37%
Portfolio Turnover Rate (3)........................ 73.45% 126.28% 112.71% 106.55% 127.80%
</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 of the fiscal period. Sales
charges are not reflected in the total returns.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.79% for September 30, 1998. 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.
(4) Less than $0.005 per share.
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:
CLASS C
<TABLE>
<CAPTION>
AUGUST 18, 1997
(INCEPTION
OF CLASS)
YEAR ENDED SEPTEMBER 30, THROUGH
------------------------ SEPTEMBER 30,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period.............................................. $ 9.22 $ 9.25 $ 9.20
------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income.................................. 0.42 0.49 0.04
Net Realized and Unrealized Gains (Losses)............. (0.54) 0.03 0.03
------- ------- -------
Total From Investment Operations................. (0.12) 0.52 0.07
------- ------- -------
Dividends and Distributions
Net Investment Income.................................. (0.41) (0.48) (0.02)
Distribution from Realized Gains....................... - (0.05) -
Dividends in Excess of Net Investment Income........... -(4) (0.02) -
------- ------- -------
Total Dividends and Distributions................. (0.41) (0.55) (0.02)
------- ------- -------
Net Asset Value, End of Period............................ $ 8.69 $ 9.22 $ 9.25
======= ======= =======
Total Return (1).......................................... (1.34)% 5.74% 0.77%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)....................................... $41,642 $36,594 $ 2,430
Ratio of Expenses to
Average Net Assets.................................. 1.83% 1.77%(2) 2.03%*
Ratio of Net Investment Income to
Average Net Assets.................................. 4.53% 4.65% 5.85%*
Portfolio Turnover Rate (3)............................ 73.45% 126.28% 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) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.76% for September 30, 1998.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(4) Less than $0.005 per share.
* 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 Y
<TABLE>
<CAPTION>
OCTOBER 6, 1997
(INCEPTION
OF CLASS)
YEAR ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
<S> <C> <C>
Net Asset Value, Beginning
of Period.......................................... $ 9.19 $ 9.20
------ ------
Income (Loss) From Investment Operations
Net Investment Income.............................. 0.48 0.54
Net Realized and Unrealized Gain (Loss)............ (0.52) 0.03
------ ------
Total From Investment Operations............. (0.04) 0.57
------ ------
Dividends and Distributions
Net Investment Income.............................. (0.48) (0.53)
Distribution from Realized Gain.................... - (0.05)
Dividend in Excess of Net Investment Income........ (0.01) -
------ ------
Total Dividends and Distributions............. (0.49) (0.58)
------ ------
Net Asset Value, End of Period........................ $ 8.66 $ 9.19
====== ======
Total Return (1)...................................... (0.51)% 6.34%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)................................... $1,292 $883
Ratio of Expenses to
Average Net Assets.............................. 0.93% 0.93%*(2)
Ratio of Net Investment Income to
Average Net Assets.............................. 5.43% 5.49%*
Portfolio Turnover Rate (3)........................ 73.45% 126.28%
</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. 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 0.92% for September 30, 1998.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
42
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
INDEPENDENT AUDITORS' REPORT
================================================================================
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF DAVIS TAX-FREE HIGH INCOME FUND, INC.:
We have audited the accompanying statement of assets and liabilities of
Davis Tax-Free High Income Fund, Inc. including the schedule of investments, as
of September 30, 1999, and the related statement of operations for the year then
ended and the statement of changes in net assets and the financial highlights
for each of the years in the two-year period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for each of the years in the three-year period ended September 30,
1997 were audited by other auditors whose report, dated November 11, 1997,
expressed an unqualified opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Davis Tax-Free High Income Fund, Inc. as of September 30, 1999, the
results of its operations for the year then ended, and the changes in its net
assets and the financial highlights for each of the years in the two-year period
then ended, in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 5, 1999
43
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
FOR THE YEAR ENDED SEPTEMBER 30, 1999
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In early 2000, shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during calendar year 1999.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
None of the dividends paid by the Fund during the year ended September
30, 1999 are eligible for the corporate dividend-received deduction. A total of
93.6% of dividends were derived from interest on municipal bonds, which are not
subject to federal income tax.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax adviser for specific
guidance.
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DAVIS TAX-FREE HIGH
INCOME FUND, INC.
124 East Marcy Street, P.O. Box 1688, Santa Fe, New Mexico 87501
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DIRECTORS OFFICERS
Wesley E. Bass, Jr Jeremy H. Biggs
Jeremy H. Biggs. Chairman
Marc P. Blum Shelby M.C. Davis
Andrew A. Davis President
Christopher C. Davis Kenneth C. Eich
Jerry D. Geist Vice President
D. James Guzy Sharra L. Reed
G. Bernard Hamilton Vice President, Treasurer
LeRoy E. Hoffberger & Assistant Secretary
Laurence W. Levine Thomas D. Tays
Christian R. Sonne Vice President & Secretary
Marsha Williams Andrew A. Davis
Vice President
INVESTMENT ADVISER Christopher C. Davis
Davis Selected Advisers, L.P. Vice President
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-2279
DISTRIBUTOR
Davis Distributors, LLC
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
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
AUDITORS
KPMG LLP
707 Seventeenth Street, Suite 2300
Denver, Colorado 80202
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FOR MORE INFORMATION ABOUT DAVIS TAX-FREE HIGH INCOME FUND, INC. INCLUDING
MANAGEMENT FEE, CHARGES AND EXPENSES, SEE THE CURRENT PROSPECTUS WHICH MUST
PRECEDE OR ACCOMPANY THIS REPORT.
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DAVIS SELECTED ADVISERS, L.P.
124 EAST MARCY STREET
SANTA FE, NEW MEXICO 87501
1-800-279-0279
[DAVIS FUNDS LOGO]
