<PAGE>
SEMI-ANNUAL REPORT
MARCH 31, 1999
DAVIS TAX-FREE
HIGH INCOME FUND
DAVIS FUNDS
"OVER 25 YEARS OF RELIABLE INVESTING"
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
- ------------------------------------------------------------------------------
Dear Shareholder,
Adhering to one of the Davis Funds' key investment principles--managing
risk--the Davis Tax-Free High Income Fund, Inc. continues to be one of the top
risk-adjusted performers among all municipal bond funds. Morningstar has awarded
your Fund's Class A and B shares its highest rating, ***** (five stars), based
on risk-adjusted performance over every time period measured.(1) In terms of
absolute performance, the Fund's Class A shares provided a total return on net
asset value of 1.22% for the six months ended March 31, 1999(2) versus a return
of .92% for the 54 high-yield municipal bond funds tracked by Lipper Analytical
Services.(3)
Importantly, your Fund achieved these results by taking far less risk than other
funds in its peer group. The average credit quality of all the securities in our
portfolio is AA-.(4) This investment-grade credit rating is considerably higher
than the credit quality rating of most high-yield municipal funds.
The Fund is also exceptional in that it has had the same portfolio manager--B.
Clark Stamper--consistently applying a disciplined long-term approach for almost
a decade that is parallel to the value-oriented Davis investment philosophy. He
has managed the portfolio to produce positive returns even in periods of
precipitously declining bond markets when most municipal bond funds generated
negative results. In fact, your Fund has not had one down year since its
inception in 1985. Of course, there can be no assurance the Fund will continue
to achieve positive returns.
FINDING VALUE IN MUNICIPAL SECURITIES
Overall, we believe the bond markets today offer investors great value relative
to inflation and to stocks, and tax-free municipal bonds offer some of the
greatest values of all. Real yields on long-term U.S. Treasury securities, after
subtracting inflation, are much higher than their historic norm. At the same
time, yields on AAA-rated municipal bonds have risen to about 95% of U.S.
Treasury yields. That's the highest this percentage has been since the mid-1990s
when politicians were debating the merits of a flat income tax, which would have
negated the appeal of tax-free municipal bonds. These yields make the case for
owning municipals compelling, especially for investors in higher tax brackets
who want to diversify their equity portfolios.
At the same time, credit quality spreads--that is, the difference in yields on
low-quality bonds versus high-quality bonds--remain historically tight. As a
result, investors are being paid very little extra yield for taking on the
greater risk associated with low-quality bonds. That means low-quality bonds are
not offering the outstanding values that we have found at times in the past.
We believe that credit quality spreads will inevitably widen to more normal
levels, and as they do, higher quality bonds should outperform lower quality
issues. We saw an inkling of this in the taxable markets from July through
October last year when growing concerns about international financial problems,
the threat of a global credit crunch and rising interest rates caused investors
to rush to quality and away from risk. This resulted in steep price declines for
low-quality taxable issues.
Your Fund's flexibility to invest in all credit quality rating categories is one
of its greatest strengths, and given current market uncertainties, we have
upgraded the credit quality of the Fund even further. Not only does the
portfolio have an average overall rating of AA-, we have reduced the proportion
of assets invested in nonrated securities to 7%, the lowest level it has been
since June, 1990. As another risk-reducing tactic, the Fund continues to be
highly diversified with just under 400 positions from issuers in most states and
Puerto Rico. We believe your Fund's defensive posture is well suited to this
volatile environment, including the likelihood of credit quality problems if the
U.S. business cycle turns down.
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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EMPHASIZING RISK-ADJUSTED RETURNS THROUGH RIGOROUS RESEARCH
In line with the Davis price discipline, the Fund takes a long-term view,
concentrating on evaluating the risk and reward trade-offs of different
investments through an intensive research process. By seeking to optimize upside
potential and downside protection, our aim is to maximize total return relative
to the amount of risk taken and to maximize tax-free income.(5)
We build the portfolio bond by bond using a bottom-up approach. Our primary tool
is in-depth credit analysis of municipal bond issuers in order to minimize
credit risk. To manage interest rate and call risk, we look at each individual
bond's security characteristics in terms of upside potential and downside
protection. In addition, we employ top-down management techniques to assure
proper portfolio diversification.
The Fund's investment team includes professionals with trading as well as
analytical experience. This broad-based experience helps them identify
opportunities that suit the Fund's value and price parameters, react quickly and
obtain favorable executions. We maintain an extensive data base as well as
research write-ups on every issue the Fund has purchased since June, 1990. These
files provide a valuable analytical resource because we may buy and sell the
same bonds at different times over a market cycle to position the Fund
appropriately for the prevailing investment climate.
Your Fund continues to emphasize the same investment strategies that it used to
achieve its top risk-adjusted performance rating. To obtain extra yield relative
to credit quality, the Fund invests in bonds that are out of the spotlight and
often mispriced. One recent example is the Fund purchase of the Port of Seattle,
Washington's 6% bonds due on December 1, 2017.(6) These Baa3/BBB-rated bonds
are guaranteed by Harnischfeger, a publicly traded manufacturer of industrial
equipment. The Fund bought the bonds at a sharply discounted price to yield
7.73% to maturity--which is an exceptional yield because BBB securities were
typically yielding just 5.60% to maturity at the time the bonds were purchased.
Your Fund finds such opportunities to obtain greater yield per credit quality in
less followed sectors because many municipal bond fund managers are not
comfortable analyzing nontraditional municipals, such as bonds backed by
corporations or housing bonds. Our investment team has experience in various
fixed-income markets over several market cycles.
In addition, to gain a more than proportionate amount of downside protection,
the Fund has relinquished some upside potential by continuing to invest in
cushion bonds, which have been a principal investment focus for four years.
Cushion bonds are bonds with above-average interest coupons trading at
relatively low prices because investors generally expect the bonds will be
called in or redeemed by the issuer long before maturity. Through meticulous
research, our objective is to identify issues that are unlikely to be called
despite the market's expectations. Because the bonds are purchased at relatively
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 instances--the Fund will continue collecting the high
tax-free income.
One example of a recent cushion bond investment is the Fund's purchase of
Massachusetts single-family housing bonds with a 7.75% coupon due on December 1,
2022.(6) This Aaa/AAA-rated issue is insured by FSA. The Fund purchased these
bonds at a 4.66% yield to the first call date on December 1, 1999. If the bonds
are not called in or redeemed before maturity, the Fund will earn a 7.36% yield
to maturity on its investment. This yield is quite attractive relative to the
general municipal market because the bonds can be called if mortgages are
prepaid by individual borrowers.
2
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
- -----------------------------------------------------------------------------
The average coupon of the bonds in the Fund's portfolio is quite high--currently
6.42%--which provides shareholders with considerable downside protection. This
positions the Fund to perform best on a relative basis in a volatile or
declining market, but the Fund would probably underperform in the event interest
rates drop or the credit quality environment improves. We believe the Fund's
prudent philosophy and defensive strategies can potentially offer our
shareholders relatively high levels of tax-free income and strong performance,
consistent with our focus on minimizing volatility and maximizing long-term risk
adjusted returns.
Sincerely,
/s/ Shelby M.C. Davis /s/ B. Clark Stamper
- ------------------------ -----------------------
Shelby M.C. Davis B. Clark Stamper
Chief Investment Officer Portfolio Manager
May 10, 1999
- -------------------
This Semi-Annual Report is furnished to you by Davis Distributors, LLC, which
acts as the distributor for Davis Tax-Free High Income Fund, Inc. This
Semi-Annual Report is authorized for distribution only when accompanied or
preceded by a current prospectus of Davis Tax-Free High Income Fund, Inc. which
contains more information about fees and expenses. Please read the prospectus
carefully before investing or sending money.
(1) Morningstar proprietary ratings reflect historical risk-adjusted
performance as of March 31, 1999. Subject to change every month, Morningstar
ratings are calculated from a fund's three-, five-, and 10- 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 1578 municipal bond funds for the
three-year period. The Fund's Class B shares were rated against 1578, 1131, and
368 municipal bond funds for the three-, five-, and 10-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.
3
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
- ------------------------------------------------------------------------------
* (Without a sales charge taken into consideration for the period ended
March 31, 1999)
<TABLE>
<CAPTION>
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
FUND NAME 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------- ------ ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C>
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
Davis Tax-Free High Income "A" 4.36% 6.34% N/A N/A 6.85% -12/01/94
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
Davis Tax-Free High Income "B" 3.56% 5.53% 5.60% 6.69% 6.91% - 03/21/85
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
Davis Tax-Free High Income "C" 3.57% N/A N/A N/A 4.53% - 08/18/97
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
Davis Tax-Free High Income "Y" 4.51% N/A N/A N/A 5.16% - 10/06/97
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
</TABLE>
** (With a 4.75% sales charge or any applicable contingent deferred sales charge
taken into consideration for the period ended March 31, 1999)
<TABLE>
<CAPTION>
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
FUND NAME 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- --------- ------ ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C>
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
Davis Tax-Free High Income "A" (0.62)% 4.64% N/A N/A 5.66% - 12/01/94
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
Davis Tax-Free High Income "B" (0.39)% 4.63% 5.28% 6.69% 6.91% - 03/21/85
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
Davis Tax-Free High Income "C" 2.59% N/A N/A N/A 4.53% - 08/18/97
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
Davis Tax-Free High Income "Y" 4.51% N/A N/A N/A 5.16% - 10/06/97
- --------------------------------------- ------------ ------------- ------------- ------------- --------------------
</TABLE>
(3) Lipper Analytical Services rankings are based on total returns but do not
consider sales charges.
(4) Standard & Poor's Corporate Bond Ratings -
AAA--Debt rated AAA has the highest rating assigned by Standard and Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--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 not guarantee that the Fund will achieve its goals.
(6) The Fund's portfolio securities as of March 31, 1999, including the
securities discussed in this letter, are listed in the Schedule of Investments.
Portfolio holdings are subject to change.
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.
4
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
At March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS - (98.11%)
ALABAMA - (2.52%)
$ 3,670,000 Birmingham Med. Ctr., Eastern Alabama Special Care Fac. Rev. Ref. Bds.
(MBIA Insured) , 7.25%, 07/01/15........................................... $ 3,682,258
295,000 Houston Cnty., AL, (Southeast Alabama Med. Ctr. Prj.) (MBIA Insured),
7.625%, 04/01/07........................................................... 301,587
770,000 Selma, AL, Ind'l. Dev. Brd. Ind'l. Dev. Rev. Bds., (Hammermill Plant Prj.)
Ser. `79, 6.875%, 04/01/04................................................. 780,033
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............................................................ 550,225
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.............. 1,226,980
4,850,000 The West Jefferson Amusement and Public Park Auth. (Alabama) 1st Mtg.
Rev. Bds. (Visionland Alabama Prj.) Ser. `96, 8.00%, 12/01/26.............. 6,136,220
---------------
12,677,303
---------------
ALASKA - (0.56%)
770,000 Alaska Energy Auth. Pwr. Rev. Bds. (Bradley Lake Prj.), 6.25%, 07/01/21...... 776,021
2,000,000 Alaska Energy Auth. Pwr. Rev. Bds. (Bradley Lake Prj.), 7.25%, 07/01/16...... 2,060,160
---------------
2,836,181
---------------
ARIZONA - (0.99%)
1,000,000 Arizona Educ. Loan Marketing Corp., Educ. Loan Rev. Bds., Ser. B,
7.30%, 09/01/03............................................................ 1,034,330
1,000,000 Arizona Educ. Loan Marketing Corp., Educ. Loan Rev. Bds., Ser. B,
7.35%, 09/01/04............................................................ 1,034,520
775,000 Arizona Educ. Loan Marketing Corp., Educ. Loan Rev. Bds., Ser. B,
7.375%, 09/01/05........................................................... 801,823
230,000 Coconino & Mohave Cntys., AZ, Unified School Dist. No. 6, Cap.
Appreciation Ref. Bds., Zero Cpn., 07/01/02 (d)............................ 201,386
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............................. 650,132
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..... 518,745
260,000 Pima, AZ, Ind'l. Dev. Auth. Hlth. Care Corp. Rev. Bds. Ser. '88, 8.00%,
07/01/13................................................................... 266,217
400,000 Pima, AZ, Ind'l. Dev. Auth. Multi. Fam. Mtg. Rev. Bds. (Broadway Prop.)
(FHA Insured) Ser. `85, 8.15%, 12/01/25.................................... 441,500
---------------
4,948,653
---------------
ARKANSAS - (0.70%)
500,000 Independence Cnty., AR, PCR, (Mississippi Pwr. & Lt. Co. Prj.) `82-A
Ser. B, 9.50%, 07/01/14................................................... 505,650
520,000 Jefferson Cnty, AR, Rev. Ref. Bds. (Energy Ark, Inc. Prj.), 5.60%, 10/01/17.. 520,879
5
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
ARKANSAS - CONTINUED
$ 2,500,000 Little River Cnty., AR, Rev. Ref. Bds. (Georgia Pacific Corp. Prj.), 5.60%,
10/01/26................................................................... $ 2,508,650
---------------
3,535,179
---------------
CALIFORNIA - (11.49%)
3,355,000 Bellflower, CA, Ctfs. of Participation, Rev. Ref. Bds. (MBIA Insured)
Ser. '89, 7.20%, 10/01/19.................................................. 3,483,329
795,000 California Hlth. Fac. Auth. Insured Hosp. Rev. Bds. FGIC Insured (Victor
Valley Community Hosp.) `84 Ser. A, 9.875%, 07/01/12....................... 819,446
360,000 California Hlth. Fac. Auth. Insured Hosp. Rev. Bds. (Victor Valley
Community Hosp.) `84 Ser. A, 9.875%, 07/01/12.............................. 361,933
3,905,000 California Hlth. Fac. Fin. Auth. Insured Hlth. Fac. Rev. Bds.
(Henry Mayo Newhall Memorial Hosp.) Ser. `88A, 8.00%, 10/01/18............. 3,997,158
500,000 California Hlth. Fac. Fin. Auth. Insured Hosp. Rev. Bds. (H.E.L.P. Group)
Ser. A, 7.00%, 08/01/21.................................................... 538,925
140,000 California Hlth. Fac. Fin. Auth. Rev. Bds. (Cnty. Prj.) Ser. `86B,
7.20%, 01/01/12............................................................ 141,165
10,000,000 California Hsg. Fin. Agy. Rev. Bds. (Amt. Home Mtg.) (MBIA Insured)
Ser. `99B, Zero Cpn., 02/01/30 (d)......................................... 1,882,600
655,000 California Hsg. Fin. Agy. Rev. Home Mtg Bds., Cap. Appreciation,
Ser. D, Zero Cpn., 08/01/20 (d)............................................ 127,116
585,000 California Hsg. Fin. Agy. Rev. Insured Hsg. Bds., Ser. B,
8.625%, 08/01/15.......................................................... 606,902
10,000,000 California Poll. Ctl. Fin. Auth. Rev. Ref. Bds. (Southern CA Edison)
Ser. `87D, 6.85%, 12/01/08................................................. 10,318,700
430,000 California Pub. Cap. Impts. Fac. Auth. Rev. Bds. (Pooled Prj.) Ser. B,
8.10%, 03/01/18............................................................ 438,183
1,500,000 California St. Dept. Wtr. Res. Cent., Rev. Bds. (VY Prj.), 5.40%, 07/01/12... 1,513,335
600,000 California St. Veteran's Bds., 6.15%, 02/01/11............................... 607,302
200,000 California St. Veteran's Bds., 6.20%, 02/01/12............................... 202,458
175,000 California St. Veteran's Bds., 6.20%, 02/01/16............................... 177,084
2,500,000 California St. Veteran's Bds., 6.375%, 02/01/27.............................. 2,530,050
800,000 City of Napa, CA, `92, Ind. Rev. Ref. Bds. (Napa Motel and Restaurant),
8.50%, 12/01/07............................................................ 809,472
250,000 Cnty. of Marin, Mtg. Rev. Bds., Ser. `84A (FHA Insured Mtg. Loan -
Marion Park Apts. Prj.), Zero Cpn., 04/01/01 (d)........................... 205,097
1,000,000 Cnty. of Marin, Multifam. Hsg. Rev. Bds., Ser. `84B (Marion Park
Apts. Prj.), Zero Cpn., 04/01/07 (d)....................................... 450,220
2,795,000 Elk Grove, CA, Uni. School Dist. Special Tax Cap. Appreciation (Comm.
Facs. - Dist. 1)(MBIA Insured) Zero Cpn., 12/01/17 (d)..................... 1,050,808
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)..................... 985,874
1,730,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Zero Cpn., 04/01/19 (d)................................. 624,513
6
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
CALIFORNIA - CONTINUED
$ 1,730,000 Lancaster, CA, School Dist. Ctfs. of Participation (FSA Proj.) Capital
Appreciation Bds., Zero Cpn., 04/01/22 (d)................................. $ 531,577
680,000 Los Angeles, CA, Community Redevelopment Agy. Bds., `87 Ser. G,
6.75%, 07/01/10............................................................ 689,459
200,000 Los Angeles, CA, Community Redevelopment Agy. Bds., Prerefunded
`87 Ser. G,6.75%, 07/01/10................................................. 202,782
460,000 Los Angeles, CA, Home Mtg. Rev. Bds. (GNMA Mtg. Sec. Prog.), 8.10%,
05/01/17................................................................... 489,964
100,000 Los Angeles, CA, Multi. Fam. Hsg. Rev. Ref. Bds., Ser. `91 A, 7.00%,
05/01/21 (c)............................................................... 104,025
175,000 Los Angeles, CA, Multi. Fam. Rev. (FHA Insured Multi-Fam. Hsg. Mtg.
Rev. Bds.) Park Parthenia Prj., 7.30%, 07/20/11............................ 179,006
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................... 2,705,644
2,000,000 Monrovia, CA, Redev. Agy., Tax Allocation Rev. Ref. Bds. (Cent. Redev.
Prj.-Area 1), Ser. `92, 6.70%, 05/01/21.................................... 2,189,880
900,000 New Haven, CA, Unified School Dist., Cap. Appreciation Ref. Bds.,
Unlimited G.O., Zero Cpn., 08/01/13 (d).................................... 451,566
985,000 New Haven, CA, Unified School Dist., Cap. Appreciation, Unlimited G.O.,
Ser. B, Zero Cpn., 08/01/14 (d)............................................ 465,078
1,200,000 New Haven, CA, Unified School Dist., Cap. Appreciation, Unlimited G.O.,
Ser. B, Zero Cpn., 08/01/15 (d)............................................ 533,268
1,400,000 New Haven, CA, Unified School Dist., Cap. Appreciation, Unlimited G.O.,
Ser. B, Zero Cpn., 08/01/16 (d)............................................ 585,004
1,650,000 New Haven, CA, Unified School Dist., Cap. Appreciation, Unlimited G.O.,
Ser. B, Zero Cpn., 08/01/17 (d)............................................ 648,186
1,390,000 Palmdale, CA, School Dist. Ctfs. of Participation, Capital Appreciation
Bds., Zero Cpn., 10/01/18 (d).............................................. 520,625
1,580,000 Palmdale, CA, School Dist. Ctfs. of Participation, Capital Appreciation
Bds., Zero Cpn., 10/01/22 (d).............................................. 472,862
1,515,000 Palomar Pomerado Hosp. Dist., CA, Rev. Ref. Bds., (MBIA Insured)
Ser. `89A, 7.25%, 11/02/08................................................. 1,550,375
350,000 Ridgecrest, CA, Certificates of Participation Bds. (Ridgecrest Redev. Agy.)
Ser. `88, 7.60%, 03/01/03.................................................. 360,857
680,000 Ridgecrest, CA, Certificates of Participation Bds. (Ridgecrest Redev. Agy.)
Ser. `88, 7.60%, 03/01/13.................................................. 700,284
500,000 San Diego, CA, GNMA Collateralized Multi. Fam. Mtg. Rev. Bds.
(Island Gardens Apts. Prj.) Ser. `85B, 9.50%, 10/20/20..................... 502,370
5,000,000 San Diego Cnty., CA, Tax & Rev. Antic. Nts., Unlimited G.O., Ser. `98,
4.50%, 09/30/99............................................................ 5,034,350
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)............... 1,467,146
7
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
CALIFORNIA - CONTINUED
$ 3,910,000 San Francisco, CA, City & Cnty. Redev. Fin. Auth. Tax Allocation,
Ctfs. of Participation Bds., Ser. A, Zero Cpn., 08/01/18 (d)............... $ 1,384,844
500,000 an Luis Obispo, CA, Certificates of Participation Rev. Bds., Ser. `88,
7.25%, 06/01/08............................................................ 501,700
170,000 Santa Clara Cnty., CA, Mtg. Rev. Insured Multiplier Rev. Bds., (Terman
Apt. Prj.) Ser. `84 A, Zero Cpn., 10/01/99 (d)............................. 165,980
1,400,000 Santa Maria, CA, Wtr. & Wastewtr. Certificates of Participation,
Ser. A, Zero Cpn., 08/01/27 (d)............................................ 1,114,792
440,000 Torrance, CA, Hosp. Rev. Bds. (Torrance Mem. Hosp.) Ser. `87, 6.75%,
01/01/12................................................................... 441,254
250,000 University, CA, Rev. Bds. (Faculty Residential Mtg.) Ser. `79, 7.20%,
09/01/12................................................................... 250,838
1,500,000 Vacaville, CA, Pub. Fin. Auth. Tax Allocation Rev. Bds.
(Vacaville Redev. Prj.) (MBIA Insured) Ser. `902, 6.35%, 09/01/22........ 1,583,460
---------------
57,698,846
---------------
COLORADO - (0.52%)
105,000 Colorado Hsg. Fin. Auth. Multi-Fam., Ser. `82B, 6.00%, 10/01/25............. 88,970
1,850,000 Colorado St. Student Obligation Bd. Auth. Student Ln. Sr. Sub. Rev. Bds.
Ser. II B, 6.20%, 12/01/08................................................. 1,940,557
475,000 El Paso Cnty., CO, School Dist. No. 38 Unlimited G.O., Ser. `87B,
7.90%, 12/01/08............................................................ 478,738
180,000 Hamilton Creek Metro Dist., Summit Cnty., CO, G.O., 11.25%, 12/01/04......... 102,600
---------------
2,610,865
---------------
CONNECTICUT - (0.40%)
600,000 Connecticut Dev. Auth., Hlth. Care Rev. Bds. (Corp. for Independent Living
Prj.) Ser. `93B, 8.00%, 07/01/17........................................... 649,680
680,000 Connecticut St. Higher Ed. Supplemental Ln. Auth. Rev. Bds., Ser. `90A,
7.375%, 11/15/05........................................................... 694,987
645,000 Connecticut St. Res. Recovery Auth. Bds. (Bridgeport Resco Co., L.P. Prj.)
`85 Ser. B, 8.625%, 01/01/04............................................... 650,592
---------------
1,995,259
---------------
DELAWARE - (0.52%)
830,000 Delaware Econ. Dev. Rev. Ref. Bds. (Supermarkets General Corp. Prj.)
Ser. `83, 10.875%, 12/01/03................................................ 838,566
1,500,000 Delaware St. Econ. Dev. Auth. Rev. Bds. (Exempt Facs. Delmarva
P & L Co.) Ser. `90A, 7.60%, 03/01/20...................................... 1,580,910
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)..... 198,508
---------------
2,617,984
---------------
8
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
DISTRICT OF COLUMBIA - (0.02%)
$ 1,500,000 District of Columbia, Multi-Unit Hsg. Fin. Corp. Mtg. Rev. Bds. (MBIA/
FHA Insured) Congress Pk. II Ap, Zero Cpn., 11/01/25 (d)................... $ 100,905
---------------
FLORIDA - (5.84%)
710,000 Broward Cnty., FL, Hsg. Fin. Auth. Rev. Home Mtg., Ser. A, Cap.
Appreciation, Zero Cpn., 04/01/14 (d)...................................... 158,969
410,000 Charlotte Cnty., FL, IDR Ref. Bds. (Beverly Enterprises - Florida, Inc. Prj.)
Ser. `87, 10.00%, 06/01/11................................................. 453,661
3,890,000 City of Tampa, FL, Home Mtg. Rev. Bds., `83 Ser. A, Muni Multiplier
Bds., Zero Cpn., 10/01/14 (d).............................................. 710,470
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..................... 212,730
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................ 2,704,710
225,000 Dade Cnty., FL, Hsg. Fin. Auth. Mtg. Rev. Bds. (Coll-Lihud Ltd. Apts. Prj.)
Ser. `84 H, 10.50%, 06/01/00............................................... 226,570
1,430,000 Florida Hsg. Fin. Agy., 1st Mtg. Rev. Bds., Cap. Appreciation, Ser. `84,
Zero Cpn., 07/15/16 (d).................................................... 185,471
900,000 Florida Hsg. Fin. Agy. (Southlake Apartments Prj. - D), 8.10%, 10/01/02...... 871,146
5,000,000 Florida Hsg. Fin. Corp. Rev. Bds. (Florida Hsg. Fin. Corp.-CAB)
Zero Cpn., 07/01/30 (d).................................................... 895,450
100,000 Highlands Cnty., FL, IDA (Beverly Enterprises - Florida, Inc. Prj.) Ser. `91,
9.25%, 07/01/07............................................................ 109,367
500,000 Jacksonville, FL, Excise Taxes Rev. Bds., Ser. `77, 5.65%, 10/01/05.......... 543,235
460,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. `89A (Methodist
Hosp. Prj.), 8.00%, 10/01/15............................................... 450,418
280,000 Jacksonville Hlth. Fac. Auth. Hosp. Rev. Ref. Bds., Ser. `89B (Methodist
Hosp. Prj.), 8.00%, 10/01/15............................................... 274,168
208,680 Manatee Cnty., FL, Hsg. Fin. Auth. Mtg. Rev. Bds., Cap. Appreciation,
`83 Ser. A, Zero Cpn., 10/01/15 (d)........................................ 36,934
375,000 Melbourne, FL, Wtr. & Swr. Rev. Red. Bds., Ser. `86C, 6.00%, 10/01/14........ 379,868
7,500,000 Miami-Dade Cnty., FL, Special Obligation Bds. (MBIA Insured) Ser. `97 B,
Zero Cpn., 10/01/32 (d).................................................... 1,219,650
33,010,000 Miami-Dade Cnty., FL, Special Obligation Bds. (MBIA Insured) Ser. `97 B,
Zero Cpn., 10/01/33 (d).................................................... 5,074,957
4,320,000 Miami-Dade Cnty., FL, Special Obligation Ref. Bds. (MBIA Insured)
Ser. `97 C, Zero Cpn., 10/01/13 (d)........................................ 2,108,030
3,990,000 Miami-Dade Cnty., FL, Special Obligation Ref. Bds. (MBIA Insured)
Ser. `97 A, Zero Cpn., 10/01/24 (d)........................................ 1,025,709
3,800,000 Miami-Dade Cnty., FL, Special Obligation Rev. Bds. (MBIA Insured)
Ser. `97 B, Zero Cpn., 10/01/28 (d)........................................ 776,644
320,000 Miami, FL, Special Obligation Bds. (MBIA Insured) `86 Ser. A, 7.375%,
07/01/06................................................................... 323,226
9
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
FLORIDA - CONTINUED
$ 415,000 Orange Cnty., FL, IDA (Beverly Enterprises - Florida, Inc. Prj.) Ser. `91,
9.25%, 08/01/10............................................................ $ 455,081
485,000 Orlando & Orange Cnty., Expressway Auth. FL Expressway, Sr. Lien Rev.
Bds., Ser. `88, 7.625%, 07/01/18........................................... 516,932
490,000 Palm Beach Cnty., FL, Hsg. Fin. Auth. Sngl. Fam. Mtg. Rev. Bds. Cap.
Appreciation, Zero Cpn., 07/01/14 (d)...................................... 101,347
1,000,000 Pinellas Cnty., FL, Res. Recovery Rev. Ref. Bds. (MBIA Insured)
Ser. `90A, 6.90%, 10/01/04................................................. 1,091,030
100,000 Pinellas Park, FL, Wtr. & Swr. Rev. Bds., Ser. `84 A, 10.00%, 10/01/02....... 100,550
2,750,000 St. Petersburg, FL, Hlth. Fac. Auth. Rev. Bds. (Allegany Hlth.-A)
(MBIA Insured) Ser. `85, 7.00%, 12/01/15.................................. 3,029,813
4,200,000 Sarasota Cnty., FL, School Brd. Fin. Corp. Lease Rev. Bds. (MBIA Insured),
7.25%, 07/01/10............................................................ 4,443,684
275,000 South Indian River Wtr. Control Dist., Sect. 15A Improvement Bds. (Egret
Landing - Phase I), 8.00%, 11/01/18........................................ 301,799
470,000 Winter Garden, FL, IDR Ref. Bds. (Beverly Enterprises - Florida, Inc. Prj.)
Ser. `91, 8.75%, 07/01/12.................................................. 519,731
---------------
29,301,350
---------------
GEORGIA - (1.06%)
300,000 Douglas Cnty., GA, School Dist. Bds., Unlimited G.O., Ser. `86, 6.85%,
01/01/03................................................................... 305,745
200,000 Gainesville Redevelopment Auth., 1st Mtg. Rev. Bds. (Autumn Breeze
Personal Care Home, Inc. Prj.) Ser. `96A, 8.00%, 04/01/26.................. 212,452
570,000 The Hsg. Auth. of Columbus, GA, Multifamily Hsg. Rev. Bds. (Columbus
Gardens Elderly Hsg. Prj.) Ser. `94, 8.25%, 01/01/24....................... 631,651
200,000 Liberty Cnty., IDA, Ind. Rev. Ref. Bds., Ser. `92 (LeConte Properties,
Inc. Prj.), 7.875%, 12/01/14............................................... 213,456
750,000 Macon Cnty., GA, Hosp. Ref. Rev. Bds. (Flint River Comm.
Hospital - Paracelsus Healthcare Corp. Prj.) Ser. `91, 9.00%, 03/01/11..... 751,987
1,000,000 Savannah, GA, Econ. Dev. Auth. Rev. Bds. (First Mtg.-Coastal Care)
Ser. `97 A, 7.75%, 09/01/27................................................ 990,000
8,000,000 Washington, GA, Wilkes Payroll Dev. Auth., 1st Mtg. Rev. Bds.,
Zero Cpn., 12/01/21 (d).................................................... 2,232,880
---------------
5,338,171
---------------
HAWAII - (3.66%)
195,000 Dept. of Transportation of the State of HI, Special Fac. Rev. Bds., Ser. `90
(Continental Airlines, Inc.), 9.60%, 06/01/08............................. 209,395
10,000,000 Hawaii St. Airports System Rev. Bds. (Second Series), 7.00%, 07/01/18........ 10,756,200
4,000,000 Hawaii St. Dept. Budget & Fin. Spl. Pur. Mtg. Rev. Bds. (Hawaii Elec. Prj.)
(MBIA Insured) Ser. `88, 7.625%, 12/01/18.................................. 4,159,520
10
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
HAWAII - CONTINUED
$ 3,000,000 Honolulu, HI, (City & Cnty.) Multifam. Rev. Hsg. (Waipahu Towers Prj.)
Ser. `95, 6.90%, 06/20/35.................................................. $ 3,257,880
---------------
18,382,995
---------------
ILLINOIS - (6.03%)
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)......... 1,145,485
2,000,000 Chicago, IL, Brd. of Education Cap. Appreciation Rev. Bds., School
Reform Ser. A (FGIC Insured), Unlimited G.O., Zero Cpn., 12/01/27 (d)...... 439,540
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)...... 1,870,200
6,000,000 Chicago, IL, Pub. Bldg. Comm. Mtg. Rev. Bds. (MBIA Insured) Ser. A,
7.125%, 01/01/15........................................................... 6,343,500
250,000 Chicago, IL, School Fin. Auth. Unlimited G.O., Ser. B, 7.60%, 06/01/01....... 253,012
105,000 Cnty. of Cook, IL, Sngl. Mtg. Rev. Bds., `83 Ser. A, Zero Cpn.,
07/01/15 (d).............................................................. 18,090
450,000 Illinois Educ. Fac. Auth. Rev. Ref. Bds. (Illinois Institute of Technology)
Ser. A '87, 8.75%, 06/01/15................................................ 458,649
5,980,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Hinsdale Hosp.) Ser. `90 A,
9.00%, 11/15/15............................................................ 6,632,179
500,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Midwest Physician Group Ltd.),
5.50%, 11/15/19............................................................ 477,545
500,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Rockford Hlth. Sys.) Ser. `97,
5.125%, 08/15/15........................................................... 503,485
395,000 Illinois Hlth. Fac. Auth. Rev. Ref. Bds. (Unrefunded Balance-A)
(MBIA Insured) Ser. `88, 7.90%, 08/15/03................................... 400,431
8,897,526 Illinois Hsg. Dev. Auth., Multi-Fam. Hsg. Rev. Bds., Cap. Appreciation,
Ser. `83A, Zero Cpn., 07/01/25 (d)......................................... 665,580
3,975,000 Illinois St. Dedicated Tax Unrefunded Bal., Rev. Bds. (Civic Ctr.) Ser. `90A,
7.00%, 12/15/10............................................................ 4,270,064
14,305,000 Metro. Pier & Expo. Auth. IL Ded. St. Tax Rev. Ref. Bds. (McCormick
Prj.) Ser.`96A, Zero Cpn., 06/15/24 (d).................................... 3,829,019
1,000,000 St. Clair Cnty., IL, Pub. Bldg., Community Bldg. Rev. Bds., 8.00%,
12/01/05................................................................... 1,043,640
131,000 Village of Sauget, IL, IDR Bds. (The Pillsbury Co. Prj.) Ser. `80, 8.375%,
05/01/05................................................................... 131,368
500,000 Village of Sherman, IL, 1st Mtg. Rev. Bds. (Villa Vianney, Inc.) Ser. `95A,
8.375%, 07/01/25........................................................... 526,115
550,000 Village of Sherman, IL, 1st Mtg. Rev. Bds. (Villa Vianney, Inc.) Ser. `97A,
7.75%, 10/01/22............................................................ 572,847
1,000,000 Village of Wataga, IL, 1st Mtg. Hlth. Fac. Rev. Bds. (First Humanics Corp.
- Galesburg, IL Prj.) Ser. `86, 7.76%, 09/01/16............................ 710,000
---------------
30,290,749
---------------
11
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
INDIANA - (1.28%)
$ 470,000 Carmel, IN, Retirement Rental Hsg. Rev. Ref. Bds. (Beverly Enterprises -
Indiana, Inc. Prj.) Ser. `92, 8.75%, 12/01/08.............................. $ 523,397
160,720 Elwood, IN, Econ. Dev. Rev. (K-Mart Co. - S. S. Kresge Co. Prj.), 8.50%,
10/15/00................................................................... 161,098
500,000 Griffith, IN, Econ. Dev. Rev. Bds. (May Dept. Stores Co. Prj.) Ser. `79,
6.75%, 03/01/09............................................................ 502,405
510,000 Indiana Bond Bank, Ser. `88 B Bds., 8.50%, 02/01/18.......................... 522,714
410,000 Indiana Bond Bank, Ser. `88 C Bds., 8.125%, 02/01/17......................... 419,762
130,000 Indiana Bond Bank, Special Program Bds., Ser. `87 A, 8.70%, 02/01/13......... 132,083
1,000,000 Indiana Hlth. Fin. Auth. Hosp. Fac. Rev. Bds. (Community Hosp. Prj.)
Ser. `91, (MBIA Insured), 6.85%, 07/01/22.................................. 1,097,110
2,000,000 Indianapolis, IN, Loc. Pub. Impt. Bd. Bk. Rev. Bds., Cap. Appreciation,
Ser. `91 C, Zero Cpn., 01/01/10 (d)........................................ 1,194,820
830,000 Madison Cnty., IN, Hosp. Auth. Hosp. Rev. Ref. Bds. (Community Hosp.
Of Anderson), 8.00%, 01/01/14.............................................. 841,454
1,000,000 Monroe Cnty., IN, Multifam. Hsg. Rev. Bds. (GNMA Coll. - Country
View-A), 5.75%, 04/01/33................................................... 1,030,420
---------------
6,425,263
---------------
IOWA - (0.13%)
168,184 Creston, IA, IDR (S.S. Kresge Co. - K-Mart Inc.), 8.50%, 08/01/00............ 168,558
500,000 Iowa Fin. Auth. Hosp. Fac. Rev. Ref. Bds. (Iowa Hlth. Sys.), Ser. A,
(MBIA Insured), 5.125%, 01/01/28........................................... 491,465
---------------
660,023
---------------
KANSAS - (0.10%)
205,000 Liberal, KS, Swr. Util. Sys. Rev. Ref. Bds., 8.80%, 10/01/99................. 210,014
305,000 Liberal, KS, Swr. Util. Sys. Rev. Ref. Bds., 8.90%, 04/01/00................. 312,485
---------------
522,499
---------------
KENTUCKY - (2.33%)
105,000 Cntys. of Jefferson, Oldham and Bullitt, KY, Home Mtg. Rev. Bds, Ser. `84,
10.75%, 11/01/14........................................................... 111,935
1,800,000 Elizabethtown, KY, IDR Bds. (Colt Industries Inc.), 9.875%, 10/01/10......... 1,823,544
550,000 Jefferson Cnty., KY, Cap. Prj. Corp. Rev. Muni Multi Lease Ref. Bds. -
Ser. A `87, Zero Cpn., 08/15/14 (d)........................................ 193,341
395,000 Kentucky, St. Tpk. Auth. Res. Rec. Rd. Rev. Ref. Bds. (FGIC Insured),
Ser. `85 A, 6.00%, 07/01/09................................................ 395,893
1,720,000 Kentucky, St. Tpk. Auth. Res. Rec. Rd. Rev. Ref. Bds., Ser. `85 A,
6.00%, 07/01/09............................................................ 1,723,595
7,185,000 Louisville & Jefferson Cnty., KY, Riverport Auth. Mtg. Rev. Bds.,
Ser. `86, 7.875%, 05/15/16................................................. 7,293,637
175,000 Morehead, KY, Ind. Bldg. Rev. Bds. (Emerson Elec.) Ser. `76, 6.30%,
04/01/01................................................................... 177,251
---------------
11,719,196
---------------
12
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
LOUISIANA - (2.90%)
$ 435,000 Bossier City, LA, Rev. Ref. Bds. Ser. `87, 7.85%, 01/01/04................... $ 443,130
2,000,000 Caddo Parish, LA, Rev. Bds. (Ind'l. Dev. Brd. Inc. Exempt Fac.- Atlas Prj.)
Ser. `98, 5.60%, 12/01/28.................................................. 1,974,460
365,000 Lafayette Parish, LA, Law Enforcement Dist. Special Bds., 6.10%, 03/01/00.... 365,818
275,000 Lafayette Parish, LA, Law Enforcement Dist. Special Bds., 6.20%, 03/01/01.... 275,547
1,000,000 Lake Charles Non-Profit Hsg. Dev. Corp. Mtg. Rev. Ref. Bds., Ser. `90A
and Ser. `90B, 7.875%, 02/15/25............................................ 1,013,500
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.......................... 732,226
1,500,000 Louisiana Pub. Fac. Auth. Rev. Ref. Bds., Ser. `93 (Schwegmann Westside
Expressway, Inc. Prj.), 8.00%, 10/01/09.................................... 1,624,035
350,000 Louisiana Pub. Fac. Auth. Supplemental Student Loan Rev. Demand Bds.,
(Statewide Prg.) Ser. `84C, 8.125%, 12/01/99............................... 362,862
1,000,000 Louisiana St., Gas & Fuels Tax, Rev. Bds., Ser. `90 A, 7.25%, 11/15/00....... 1,042,110
1,000,000 Louisiana St., Gas & Fuels Tax, Rev. Bds., Ser. `90 A, 7.25%, 11/15/04....... 1,042,270
355,000 New Orleans, LA, Hsg. Dev. Corp. First Lien Rev. Bds. (Tulane Ave. Prj.)
Ser. `79, 7.875%, 06/01/10................................................. 355,941
900,000 St. Charles Parish, LA, Poll. Ctl. Rev. Bds. (Louisiana Power & Light)
Ser. `84, 8.15%, 06/01/14.................................................. 933,768
2,750,000 Sales Tax School Bds., Parish School Brd. of the Parish of Jefferson, State of
LA, Ser. `86A, 7.00%, 02/01/08............................................. 2,863,025
500,000 Sales Tax School Bds., Parish School Brd. of the Parish of Jefferson, State of
LA, Ser. `86A (FGIC Insured), 7.00%, 02/01/08.............................. 520,550
1,000,000 West Feliciana Parish, LA, Rev. Bds. (Pollution Control Rev. Gulf States),
5.80%, 12/01/15............................................................ 995,680
---------------
14,544,922
---------------
MARYLAND - (1.59%)
700,000 Allegany Cnty., MD, IDR Bds. (Moran Manor Care Ctr.) Ser. `84,
12.45%, 02/01/27........................................................... 831,810
845,000 Maryland St. Cmnty. Dev. Admin. Sngl. Fam. Program Rev. Bds. (Dept. &
Econ. & Cmnty. Dev. Fifth Ser.), 7.70%, 04/01/15........................... 870,477
985,000 Maryland St. Hlth. & Higher Educ. Facs. Auth. Rev. Bds., Ser. `97
(Charity Oblig. Group), 4.60%, 11/01/26 (c)................................ 1,009,497
400,000 Maryland St. Ind'l. Dev. Fin. Auth. Economic Dev. Rev. Bds., Ser. '86 1-11,
7.125%, 07/01/06........................................................... 405,144
475,000 Montgomery Cnty., MD, Econ. Dev. Rev. Bds. (Brink Reservoir Fac.)
Ser. `84, 10.375%, 12/15/14................................................ 486,500
220,000 Montgomery Cnty., MD, Hsg. Opportunity Comm. Multifam. Mtg. Rev.
Bds., Ser. `88 A, 8.10%, 07/01/08.......................................... 224,842
2,275,000 Montgomery Cnty., MD, Hsg. Opportunity Comm. Multifam. Mtg. Rev.
Bds., Ser. `88 A, 8.25%, 07/01/19.......................................... 2,328,030
13
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
MARYLAND - CONTINUED
$ 1,770,000 Upper Potomac River Comm., MD, PCR Bds., Westvaco Corp. Prj.,
9.125%, 08/01/15........................................................... $ 1,846,287
---------------
8,002,587
---------------
MASSACHUSETTS - (2.47%)
1,000,000 Boston, MA, Ref. Rev. Bds. (Boston City Hosp.) (FHA Insured) Ser. `93B,
5.75%, 02/15/13............................................................ 1,039,200
250,000 Lawrence, MA, IDR Bds., (New Balance Realty Trust Prj.), 10.00%,
10/01/03................................................................... 251,265
200,000 Massachusetts Educ. Loan Auth., Educ. Loan Rev. Bds., Issue D, Ser. `89A,
7.65%, 01/01/07............................................................ 204,394
125,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds. (New England
School of Law), 8.30%, 07/01/03............................................ 125,492
125,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds. (New England
School of Law), 8.30%, 07/01/04............................................ 125,492
1,000,000 Massachusetts Hlth. & Educational Fac. Auth. Rev. Bds., St. Anne's Hosp.
Issue, Ser. A, 9.375%, 07/01/14............................................ 1,000,660
375,000 Massachusetts State G.O., 10.50%, 08/01/03................................... 379,084
200,000 Massachusetts State G.O., 9.75%, 09/01/03.................................... 201,058
1,705,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Bds.
(Brockton Hosp.), Ser. `87 B, 8.00%, 07/01/07.............................. 1,723,755
1,930,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Bds.
(Brockton Hosp.), Ser. `87 B, 8.10%, 07/01/13.............................. 1,952,349
2,000,000 Massachusetts State Hlth. & Educational Fac. Auth. Rev. Bds.
(Care Group Issue) (MBIA Insured) Ser. A, 4.75%, 07/01/20.................. 1,877,560
1,015,000 Massachusetts State Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds.
(FHA/FMHA/VA Insured) Ser. 11, 7.75%, 12/01/22............................ 1,052,454
1,500,000 Massachusetts State, Ind. Fin. Agy., Rev. Ref. Bds., (1st Healthcare Corp.
Prj.), 7.75%, 04/01/19..................................................... 1,532,460
945,000 Massachusetts State, Ind. Fin. Agy., Rev. Ref. Bds., (Provider Lease
Program) Ser. `89A, 8.75%, 07/15/09........................................ 952,210
---------------
12,417,433
---------------
MICHIGAN - (4.80%)
100,000 Cnty. of Oakland, State of Michigan Bds., Clinton-Oakland Sys., Paint
Creek Inceptor Sewage Disposal Bds., 7.00%, 05/01/01....................... 102,298
1,090,000 The Econ. Dev. Corp. of the City of Westland, MI, Contract Sec'd. Rev. Bds.
(Weyerhauser Co. Contract Rev.), 9.80%, 12/01/00........................... 1,098,448
1,000,000 Kalamazoo, MI, Hosp. Fin. Auth. Hosp. Fac. Rev. Ref. Bds. (Bronson
Methodist Hosp.) (MBIA Insured) Ser. `98, 5.50%, 05/15/28.................. 1,038,740
580,000 Kentwood, MI, Econ. Dev. Corp. Rev. Bds. (Hanover-Kent, Inc. - K-Mart
Corp.), 7.85%, 09/01/01.................................................... 584,031
570,000 Michigan Muni Bd. Auth. Local Gov't Loan Prg. Rev. Ref. Bds.,
Ser. `92 A, 8.625%, 11/01/16............................................... 580,802
14
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
MICHIGAN - CONTINUED
$ 1,000,000 Michigan State Bldg. Auth. Rev. Bds. (Facs. Prog.) `97 Ser. IIA, 5.00%,
10/15/14................................................................... $ 1,008,130
8,480,000 Michigan State Hsg. Dev. Auth. Cap. Appreciation Rev. Bds., Ser. '82,
Zero Cpn., 04/01/15 (d).................................................... 1,302,782
1,000,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Ref. Bds. (Detroit Edison Co.)
Ser. `91, 6.875%, 12/01/21................................................. 1,087,510
1,000,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Ref. Bds. (Detroit Edison Co.)
Ser. `91, 6.95%, 09/01/21.................................................. 1,083,820
600,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Bds. (NSF International Prj.)
Ser. `97A, 5.75%, 08/01/19................................................. 626,364
975,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Bds. (St. John-Bon Secours
Cont. Care) Ser. `87, 7.90%, 11/15/16...................................... 988,016
500,000 Michigan State Strategic Fd. Ltd. Oblig. Rev. Bds. (Welch Foods Inc.)
Ser. `91, 6.75%, 07/01/01.................................................. 512,325
3,250,000 Monroe Cnty., MI, Poll. Ctl. Rev. Bds. (Detroit EDSN Prj.) Ser. `89 I,
7.30%, 09/01/19............................................................ 3,395,925
9,745,000 Monroe Cnty., MI, Poll. Ctl. Rev. Bds. (Detroit EDSN Prj.) Ser. `89 I,
7.50%, 09/01/19............................................................ 10,190,541
200,000 Munising, MI, Pub. Schools, Alger & Schoolcraft Cntys. Rev. Bds., Ser.
`89, 7.05%, 05/01/99....................................................... 200,632
180,000 River Dist., MI, Community Hosp. Auth. Hosp. Rev. Ref. Bds., Ser. `89,
7.20%, 05/01/99............................................................ 180,322
100,000 River Dist., MI, Community Hosp. Auth. Hosp. Rev. Ref. Bds., Ser. `89,
7.40%, 05/01/01............................................................ 100,181
---------------
24,080,867
---------------
MINNESOTA - (0.23%)
100,000 Hutchinson, MN, Bank Rev. Bds., Ser. `90, 6.70%, 02/01/01.................... 100,971
305,000 Minneapolis, MN, Community Dev. Agy. Rev. Bds. (River Bluff Prj.),
11.375%, 06/01/09.......................................................... 311,829
250,000 Minneapolis, MN, Community Dev. Agy. Rev. Bds. (West Bank
Homes Prj.), 11.75%, 10/01/08.............................................. 263,638
250,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. `84-N, Sunwood
Inn/Bandana Square Ltd., 10.00%, 12/01/14.................................. 257,673
235,000 The Port Auth. of the City of Saint Paul, MN, IDR, Ser. K, Jackson Str.
Shops Ltd., 9.50%, 12/01/14................................................ 242,019
---------------
1,176,130
---------------
MISSISSIPPI - (1.89% )
1,500,000 Amory, MS, Dock & Wharf Rev. Bds. (Weyerhauser Co. Prj.), 9.50%,
09/01/00................................................................... 1,535,070
1,945,000 Clarksdale, MS, Ind. Rev. Bds. (Bah Pptys./Archer-Daniel's), 11.75%,
06/01/11................................................................... 1,969,371
200,000 Hinds Cmnty. College Dist., MS, Ctfs. of Participation (Conference &
Training Ctr. Prj.) Ser. `94, 6.50%, 09/01/14.............................. 211,546
15
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
MISSISSIPPPI - CONTINUED
$ 545,000 Lauderdale Cnty., MS, Mtg. Rev. Bds. (Aldersgate) (MBIA/FHA Insured)
Ser. `85, 8.25%, 11/01/06.................................................. $ 563,666
1,695,000 Lauderdale Cnty., MS, Mtg. Rev. Bds. (Aldersgate) (MBIA/FHA Insured)
Ser. `86, 8.25%, 11/01/16.................................................. 1,753,054
10,105,000 Mississippi Home Corp. Residual Rev. Bds., Cap. Appreciation, Ser. I `92,
Zero Cpn., 09/15/16 (d).................................................... 3,455,001
---------------
9,487,708
---------------
MISSOURI - (0.47%)
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............................................ 250,733
200,000 Jefferson Cnty., MO, Reorg. School Dist. No. R3 Unlimited G.O., 6.60%,
03/01/03................................................................... 200,542
150,000 Kansas City, MO, Ind. Dev. Auth. Econ. Dev. Rev. Ref. Bds. (Encore
Nursing Ctr. Ltd.), 8.00%, 12/01/02........................................ 159,724
210,000 Missouri Hsg. Dev. Commission, Hsg. Dev. Bds. (Federally Insured Mtg.
Loans) Ser. July 1, 1975, 8.00%, 07/01/17.................................. 213,175
140,000 Missouri School Bds. Association Ctfs. (Partner Pool) Ser. A, 7.375%,
03/01/06................................................................... 142,352
665,000 Missouri St. Hsg. Dev. Comm. Mtg. Rev. Ref. Bds., `91 Ser. B, Zero Cpn.,
09/01/12 (d)............................................................... 275,210
450,000 Missouri St. Hsg. Dev. Comm. Rev. Bds., Ser. `79, 7.00%, 09/15/22............ 458,379
625,000 Missouri St. Hsg. Dev. Comm., Sngl. Fam. Mtg. Rev. Bds. (FHA/VA/
Private Mtgs. Insured) Ser. '85, 9.375%, 04/01/16.......................... 655,319
---------------
2,355,434
---------------
MONTANA - (4.25%)
7,000,000 Forsyth, MT, Pollution Control Rev. Ref Bds., (Montana Pwr. Co.)
6.125%, 05/01/23........................................................... 7,604,870
5,110,000 Forsyth, MT, Pollution Control Rev. Ref Bds., (Washington Wtr. Pwr. Prj.)
Ser. `89 (MBIA Insured), 7.125%, 12/01/13.................................. 5,330,752
4,900,000 Lewis & Clark Cnty., MT, Environmental Facs. Rev. Bds. (Asarco Inc. Prj.)
Ser. `98, 5.85%, 10/01/33.................................................. 4,858,350
3,250,000 Montana St. Brd. Invt. Workers Comp. Prog. Rev. Bds. MBIA Insured
Ser. `91, 6.875%, 06/01/20................................................. 3,522,773
---------------
21,316,745
---------------
NEBRASKA - (0.10%)
1,415,000 Nebraska Higher Educ. Loan Prg. Capital Appreciation Rev. Bds.,
Ser. `89 A, Zero Cpn., 12/15/15 (d)........................................ 516,503
---------------
NEVADA - (0.81%)
1,250,000 Clark Cnty., NV, IDR (Nevada Pwr. Co. Prj.) Ser. `97A, 5.90%,
11/01/32................................................................... 1,272,487
16
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
NEVADA - CONTINUED
$ 2,000,000 Clark Cnty., NV, Pollution Ctl. Rev. Ref. Bds. (Southern CA Edison Prj.)
Ser. A, 7.125%, 06/01/09................................................... $ 2,132,660
500,000 State Of Nevada Muni Bd. Bank Prj. No. 18 & 19, 8.40%, 09/01/01.............. 555,160
105,000 State Of Nevada Muni Bd. Bank Prj. No. 18 & 19, 8.50%, 09/01/05.............. 109,934
---------------
4,070,241
---------------
NEW HAMPSHIRE - (1.40%)
500,000 New Hampshire Higher Educ. & Hlth. Fac. Auth. Rev. Bds. (NH Catholic
Charities Issue) Ser. `91, 8.40%, 08/01/11................................. 565,595
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.......................................... 2,350,090
3,950,000 New Hampshire St. IDA Rev. Bds. (Pollution Ctl.-Connecticut Lt. Prj.)
Ser. `89, 7.375%, 12/01/19................................................. 4,124,393
---------------
7,040,078
---------------
NEW JERSEY - (1.04%)
200,000 Essex Cnty., NJ, Improvement Auth. Rev. Bds., (Sr. Citizens Hsg.-FHA-
Jewish Fed. Prj.) Ser. `87, 7.75%, 03/01/09................................ 201,006
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........................... 1,366,808
1,000,000 New Jersey Econ. Dev. Auth., Econ. Dev. Rev. Ref. Bds. (Holt Hauling &
Warehousing) Ser. G, 8.40%, 12/15/15....................................... 1,080,770
215,000 New Jersey Econ. Dev. Auth., Econ. Dev. Sr. Rev. Bds. (Lakewood of
Voorhees FHA Insured Prj.) Ser. A, 8.875%, 01/15/20........................ 247,747
1,000,000 New Jersey Econ. Dev. Auth. Ind. & Econ. Dev. Rev. Bds. (Owens-Ill Inc.
Vineland Prj.), 5.85%, 09/01/07............................................ 996,330
200,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Bds. (Muhlenberg Reg'l. Med.
Ctr.) Ser. `88 B, 7.60%, 07/01/02.......................................... 204,696
605,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Bds. (Muhlenberg Reg'l. Med.
Ctr.) Ser. `88 B, 8.00%, 07/01/18.......................................... 619,435
500,000 New Jersey Hlth. Care Fac. Fin. Auth. Rev. Ref. Bds. (Community Med.
Ctr./Kimball Etc. FSA) Ser. `98, 4.75%, 07/01/19........................... 481,080
---------------
5,197,872
---------------
NEW MEXICO - (0.66%)
120,000 City of Albuquerque, NM, Hlth. Care Sys. Rev. Bds. (Lovelace Medical
Foundation Prj.), 12.00%, 03/01/11......................................... 120,809
2,970,000 Gallup, NM, Pollution Control Rev. Ref Bds., (Plains Elec. Generation Prj.)
(MBIA Insured), 6.65%, 08/15/17............................................ 3,170,416
---------------
3,291,225
---------------
NEW YORK - (9.19%)
300,000 Battery Park City Auth., POD III Hsg. Rev. Bds., Ser. `84 (FHA-Insured
Mtg.), 10.00%, 06/01/23.................................................... 313,425
2,435,000 Clifton Park, NY, IDA IDR Bds. (Caldor Inc. Prj.) Ser. A, 11.25%,
12/01/12................................................................... 2,463,660
17
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
NEW YORK - CONTINUED
$ 165,000 New York City, Ser. `86 B, Unlimited G.O., 7.30%, 08/15/99................... $ 167,544
280,000 New York City, Ser. `90 I, FGIC Insured Bds., 7.25%, 08/15/14................ 288,366
740,000 New York City, Ser. `90 I, Unlimited G.O., 7.25%, 08/15/13................... 762,244
610,000 New York, NY, City Muni Wtr. Fin. Auth., Wtr. & Swr. Rev. Bds.,
FGIC Insured, Ser. `89 B, 5.75%, 06/15/13.................................. 638,853
1,000,000 New York State Dorm Auth., Rev. Bds., (St. Barnabas Hosp.), Ser. `97,
5.35%, 08/01/17............................................................ 1,024,580
825,000 New York State Dorm Auth., Rev. Ref. Bds., (Rochester Inst. Tech.)
Ser. `97, 5.30%, 07/01/17.................................................. 848,727
4,250,000 New York State Energy Research & Dev. Auth., Elec. Fac. Rev. Bds.
(Edison Co. Prj.) Ser. `91, 7.50%, 01/01/26................................ 4,410,353
1,000,000 New York State Local Gov. Assistance Corp., Rev. Ref. Bds., Ser. '98 A,
4.375%, 04/01/18........................................................... 919,880
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..................................... 2,405,178
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.......................... 2,046,620
280,000 New York State Med. Care Fac. Fin. Agy. Rev. Bds., Hosp. & Nursing
Home Mtg., Ser. `87 A, 8.00%, 02/15/27..................................... 283,690
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................................... 1,024,483
5,000,000 New York State Mtg. Agy. Rev. Bds., (Homeownership Mtg. - Ser. HH-2)
(FHA/Priv. Mtgs. Insured) Ser. `88, 7.85%, 04/01/22........................ 5,155,000
725,000 New York State Urban Development Corp., Rev. Bds., (St. Office-South
Mall) Ser. `89 A, Zero Cpn., 01/01/11 (d).................................. 374,528
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...................................... 102,259
750,000 Otsego Cnty., NY, Ind'l. Dev. Agy. Civic Agy. Rev. Bds. (Bassett Hlth.
Care Prj.) Ser. `98 A, 5.35%, 11/01/20..................................... 773,505
10,000,000 Port Auth NY & NJ Rev. Bds. (Cons.-Seventy-Second) Ser. `92, 7.35%,
10/01/27................................................................... 11,261,900
7,000,000 Port Auth NY & NJ Rev. Bds. (Cons.-Sixty-Ninth) Ser. `90, 7.125%,
06/01/25................................................................... 7,359,380
300,000 Port Jervis, NY, IDA, Mercy Community Hosp. Rev. Bds., (Franciscan Hlth.
Partnership) Ser. `97, 5.10%, 11/01/07..................................... 306,618
470,000 Port Jervis, NY, IDA, Mercy Community Hosp. Rev. Bds., (Franciscan Hlth.
Partnership) Ser. `97, 5.20%, 11/01/08..................................... 482,361
2,700,000 United Nations Dev. Corp NY, Sub Lien Rev. Ref. Bds., Ser. `97C,
5.60%, 07/01/26............................................................ 2,726,001
---------------
46,139,155
---------------
NORTH CAROLINA - (1.36%)
500,000 Brevard, NC, Hsg. Auth. 1st Mtg. Rev. Bds. (Ascend Healthcare, Inc. Prj.),
Ser. `98A, 7.50%, 03/01/28................................................. 496,040
18
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
NORTH CAROLINA - CONTINUED
$ 500,000 Charlotte, NC, Hsg. Auth. 1st Mtg. Rev. Bds. (Ascend Healthcare, Inc. Prj.),
Ser. `98A, 7.50%, 03/01/28................................................. $ 496,040
800,000 North Carolina Eastern Mun. Pwr. Agy. Pwr. Sys. Rev. Ref. Bds.,
Ser. `88A, 6.00%, 01/01/26................................................. 800,232
1,045,000 North Carolina Eastern Mun. Pwr. Agy. Pwr. Sys. Rev. Ref. Bds.,
Ser. `89A, 6.50%, 01/01/24................................................. 1,046,568
200,000 North Carolina Med. Care Comm. Hosp. Rev. Ref. Bds. (Moore Memorial
Hosp. Prj.), 9.10%, 10/01/99............................................... 205,844
2,330,000 North Carolina Mun. Pwr. Agy. No. 1 Catawba Elec. Rev. Bds., Ser. `85 B,
6.00%, 01/01/20............................................................ 2,334,800
900,000 North Carolina Mun. Pwr. Agy. No. 1 Catawba Elec. Rev. Bds., Ser. `90,
6.50%, 01/01/10............................................................ 937,773
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..... 510,720
---------------
6,828,017
---------------
NORTH DAKOTA - (0.84%)
3,000,000 Bismarck, ND, Hosp. Rev. Ref. Bds. (Med. Ctr. One, Inc.) Ser. '89,
7.50%, 05/01/13............................................................ 3,070,500
900,000 Ward Cnty., ND, Hlth Care Fac. Rev. Bds. (St. Joseph's Hosp. Corp. Prj.)
Ser. `94, 8.875%, 11/15/14................................................. 1,126,656
---------------
4,197,156
---------------
OHIO - (3.24%)
500,000 Cleveland, OH, Waterworks Rev. Bds., Ser. A, 6.125%, 01/01/08................ 503,315
2,700,000 Cnty. of Belmont, Ohio Hlth. Sys. Rev. and Ref. Bds. (East Ohio Reg'l
Hosp. Issue), 5.80%, 01/01/18.............................................. 2,618,757
680,000 Hamilton Cnty., OH Hosp. Fac. Auth. Rev. Bds. (Unrefunded Balance)
(MBIA Insured) Ser. `86, 7.00%, 01/01/09................................... 685,896
440,000 Hamilton Cnty., OH Hosp. Fac. Auth. Rev. Bds. (Unrefunded Balance)
(MBIA Insured) Ser. `86, 7.00%, 01/01/09................................... 443,815
250,000 Lakewood, Ohio Hosp. Impt. Rev. Ref. Bds. (Lakewood Hosp. ) Ser. One,
6.00%, 02/15/10............................................................ 250,532
950,000 Mahoning Cnty., OH, Hosp. Facs. Rev. Ref. Bds. (St. Elizabeth Hosp. Med.
Ctr.) Ser. `86, 7.375%, 12/01/09........................................... 956,631
2,000,000 Mahoning Valley Sanitary Dist. (Ohio) Wtr. Rev. Bds., Ser. `94,
7.750%, 05/15/19........................................................... 2,206,440
515,000 Montgomery Cnty., OH, Hosp. Rev. Ref. Bds. (Kettering Med. Ctr.)
Ser. `89, 7.40%, 04/01/09.................................................. 526,938
750,000 Ohio Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds. Cap. Appreciation,
Ser. `85 A, Zero Cpn., 01/15/15 (d)........................................ 163,605
7,500,000 Ohio St. Air Quality Dev. Auth. Rev. Ref. Bds. (Pollution Ctl./Ohio Edison)
Ser. `90, 7.45%, 03/01/16.................................................. 7,901,550
---------------
16,257,479
---------------
19
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
OKLAHOMA - (0.45%)
$ 1,000,000 Oklahoma Dev. Fin. Auth. Rev. Ref. Bds. (Hillcrest Hlth. Sys.) Ser. A,
5.625%, 08/15/19........................................................... $ 997,520
200,000 Oklahoma St. Ind. Auth. Rev. Bds. (Hlth. Sys./Baptist Ctr.) Ser. `95C,
7.00%, 08/15/03............................................................ 223,582
1,000,000 Southeastern, OK, Ind. Auth. OK Rev. Bds. (Pollution Ctl./Weyerhauser Co.
Prj.) Ser. `85, 9.85%, 02/01/00............................................ 1,018,690
---------------
2,239,792
---------------
PENNSYLVANIA - (6.82%)
2,915,000 Beaver Cnty., PA, IDA PCR Bds. (J&L Specialty Steel-formerly known
as Colt Ind. Prj.) Ser. 19, 7.00%, 06/01/08................................ 2,978,839
2,360,000 Berks Cnty., PA, IDA (Supermarkets General Corp. Prj.), 10.50%, 11/01/03..... 2,441,656
400,000 Columbia Cnty. IDA, Columbia Cnty., PA, 1st Mtg. Rev. Bds., Ser. `86
(Orangeville Nursing Ctr. Associates Prj.), 9.00%, 12/01/12................ 400,980
1,000,000 Delaware Cnty., PA, Auth. Hlth. Sys. Rev. Bds. (Catholic Hlth. East)
Ser. `98, 4.875%, 11/15/18................................................. 965,040
665,000 Luzerne Cnty., PA, Hsg. Corp. Rev. Bds., 8.125%, 12/01/08.................... 666,609
200,000 McKean Cnty., PA, Ind. Dev. Auth. Rev. Bds., Ser. `80 (Corning Glass
Wks. Prj.), 7.75%, 06/01/05................................................ 201,054
1,000,000 Mercer Cnty., PA, IDA, Gumberg Assoc. - Pine Grove Square, The Kroger
Co., Ind. Dev. 1st Mtg. Rev. Bds., 13.00%, 06/01/07........................ 1,041,670
115,000 Pennsylvania Hsg. Fin. Agy., Moderate Rehab. Rev. Bds., 9.00%, 08/01/01...... 116,480
7,585,000 Pennsylvania Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds., Ser. 28,
7.55%, 10/01/23............................................................ 7,585,000
11,000,000 Pennsylvania Hsg. Fin. Agy. Sngl. Fam. Mtg. Rev. Bds., Ser. 63 A,
Zero Cpn., 04/01/30 (d).................................................... 2,021,470
3,000,000 Pennsylvania St. Higher Educ. Fac. Auth. Hlth. Svcs. Rev. Bds.
(Allegheny Delaware VY Oblig.) Ser. `96, 5.50%, 11/15/08................... 3,031,740
5,000,000 Pennsylvania St. Higher Educ. Fac. Auth. Hlth. Svcs. Rev. Bds.
(Allegheny Delaware VY Oblig.) Ser. `96, 5.875%, 11/15/18.................. 5,049,000
285,000 Pennsylvania St. Higher Educ. Fac. Auth. Rev. Bds., (Thomas Jefferson
Univ.) Ser. `89 A, 6.00%, 07/01/19......................................... 292,481
4,000,000 Pennsylvania St. Second Ser. Unlimited G.O., Ser. `92, 5.40%, 07/01/00....... 4,102,320
1,150,000 Philadelphia, PA, Hosp. & Higher Educ. Fac. Auth. Rev. Ref. Bds.
(Jefferson Hlth. Sys.) Ser. `97 A, 5.125%, 05/15/18........................ 1,145,078
150,000 Philadelphia, PA, Redev. Auth. Home Improvement Loan, Rev. Bds.,
Ser. `86 A, 7.375%, 06/01/03............................................... 152,423
220,000 Pittsburgh & Allegheny Cnty., PA, Pub. & Auth. Rev. Bds. Ser. `78,
6.50%, 12/01/07............................................................ 220,579
45,000 Pittsburgh, PA, Urban Redevelopment Auth. Home Improvement Loan,
Rev. Bds., Ser. `87 A, 7.125%, 08/01/04.................................... 45,918
750,000 Sayre, PA, Hlth. Care Facs. Auth. Rev. Bds. (VHA-Cap. Asset)
(MBIA Insured) Ser. `85C, 7.70%, 12/01/15.................................. 777,788
20
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
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...................... $ 735,233
250,000 Warren Cnty., PA, IDA Specialized Dev. Rev. Ref. Bds. (Beverly
Enterprises - Pennsylvania, Inc. Prj.) Ser. `91, 9.00%, 11/01/12........... 274,340
---------------
34,245,698
PUERTO RICO - (0.31%)
780,000 Puerto Rico Commonwealth Infrastructure Fin. Auth. Special Bds.,
Ser. `88 A, 7.75%, 07/01/08................................................ 798,205
720,000 Puerto Rico Ind. Med. & Environmental PCR Fac. Fin. Auth. Rev. Bds.,
(Abbott Chemical Inc. Prj.), 6.50%, 07/01/09............................... 737,568
---------------
1,535,773
---------------
SOUTH CAROLINA - (0.68%)
400,000 Certificates of Participation, Ser. `90A, South Carolina School Financing
Corp. (School Dist. No. 2 of Sumter Cnty., SC Prj.), 8.125%, 04/01/10...... 418,940
100,000 Clemson Univ., SC, Ctfs. of Participation, Ser. `86, 6.90%, 12/01/07......... 100,296
1,210,000 Piedmont Mun. Pwr. Agy., SC, Elect. Rev. Ref. Bds., Ser. `86 A,
5.75%, 01/01/24............................................................ 1,210,206
1,055,000 Piedmont Mun. Pwr. Agy., SC, Elect. Rev. Ref. Bds., Ser. `96 A,
6.55%, 01/01/16............................................................ 1,057,564
595,000 South Carolina St. Ports Auth. Ports. Rev. Ref. Bds., 6.75%, 07/01/21........ 644,748
---------------
3,431,754
---------------
SOUTH DAKOTA - (0.46%)
250,000 Aberdeen, SD, Unlimited G.O., Rev. Ref. Bds., (MBIA Insured) Ser. `87,
6.90%, 07/01/04............................................................ 252,227
1,000,000 Education Loans, Inc., SD, Student Loan Ref. Bds., Ser. `98, 5.60%,
06/01/20................................................................... 1,008,840
1,000,000 South Dakota St. Hlth. & Educ. Fac. Auth. Rev. Ref. Bds., (McKennan
Hosp.) (MBIA Insured), Ser. `89 A, 7.625%, 07/01/14....................... 1,030,930
---------------
2,291,997
---------------
TENNESSEE - (0.76%)
295,000 Dover, TN, Hlth. & Educ. Fac., IDR (Wessex Corp. Dover Prj.), 9.50%,
09/01/11................................................................... 298,723
203,313 Dyer Cnty., TN, Ind. Dev. Brd. IDR Bds. (S.S. Kresge Co. - K-Mart Corp.),
8.10%, 11/01/00............................................................ 203,644
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............................................................ 531,140
505,000 Lewisburg, TN, IDR Bds. (Mead Corp. Prj.), 7.875%, 02/01/00.................. 523,483
195,000 McMinn Cnty., TN, Ind. Dev. Brd. Rev. Bds., (S.S. Kresge Co.), 8.00%,
11/01/00................................................................... 195,374
440,000 New Tazewell, TN, Hlth. Educational & Hsg. Fac. Brd. IDR Bds. (Wessex
Corp. New Tazewell Prj.) Ser. `87, 10.00%, 06/01/17........................ 441,527
21
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
TENNESSEE - CONTINUED
$ 3,000,000 Tennessee Hsg. Dev. Agy. Rev. Bds., (Homeownership Prog. - Issue 3A)
Ser. `97, Zero Cpn., 07/01/17 (d).......................................... $ 1,079,910
510,000 Tennessee Hsg. Dev. Agy. Rev. Bds., (Homeownership Prog. - S)
(MBIA Insured) Ser. `90, 7.625%, 07/01/22.................................. 539,417
---------------
3,813,218
TEXAS - (5.90%)
9,735,000 Austin, TX, Hsg. Fin. Corp., Sngl. Fam. Mtg. Rev. Bds., Ser. `84,
Zero Cpn., 02/01/16 (d).................................................... 1,071,823
6,305,000 Bexar, TX, Metro. Wtr. Dist. Waterworks Sys. Rev. Bds., Cap.
Appreciation, (MBIA Insured), Zero Cpn., 05/01/32 (d)...................... 1,043,351
6,305,000 Bexar, TX, Metro. Wtr. Dist. Waterworks Sys. Rev. Bds., Cap.
Appreciation, (MBIA Insured), Zero Cpn., 05/01/34 (d)...................... 931,816
6,000,000 Brazos River Auth., TX, Pollution Control Rev. Ref. Bds. (Texas Util. Elec.
Co. Prj.) Ser. A, 5.55%, 05/01/33.......................................... 6,225,480
610,000 Coastal Wtr. Auth. TX Wtr. Rev. Ref. Bds., 6.25%, 12/15/17................... 649,656
370,000 Coastal Wtr. Auth. TX Wtr. Rev. Ref. Bds. (FGIC Insured), Ser. `86 A,
7.50%, 12/15/16............................................................ 383,087
625,000 Dallas Cnty., TX, Utility & Reclamation Dist. Rev. Ref. Bds., Cap.
Appreciation (MBIA Insured) Ser. `93, Zero Cpn., 02/15/14 (d).............. 279,306
2,000,000 Gulf Coast Waste Disp. Auth. Rev. Bds. (TX Waste Disp.-Valero Energy
Corp. Prj.) Ser. `98, 5.60%, 04/01/32...................................... 1,970,400
1,000,000 Gulf Coast Waste Disp. Auth. Rev. Bds. (TX Waste Disp.-Valero Energy
Corp. Prj.) Ser. `99, 5.70%, 04/01/32...................................... 998,230
11,185,000 Harris Cnty., Houston, TX, SportsAuth. Sp., Jr. Lien Rev. Bds., Cap.
Appreciation (MBIA Insured) Ser. `98 B, Zero Cpn., 11/15/18 (d)............ 3,923,027
300,000 Houston, TX, Hsg. Fin. Corp. Sngl. Fam. Mtg. Rev. Ref. Bds., Ser. A-1,
8.00%, 06/01/14............................................................ 316,890
1,000,000 Lewisville, TX, Hsg. Fin. Corp. Multifam. Rev. Bds., Ser. `97, 5.50%,
06/01/17................................................................... 1,022,040
2,700,000 Matagorda Cnty., TX, NA Dist. No. 1 Poll. Ctl. Rev. Bds. (Central Power
& Light) Ser. `84, 7.50%, 12/15/14......................................... 2,853,441
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)....................... 494,720
1,000,000 Matagorda Cnty., TX, NA Dist. No. 1, Rev. Ref. Bds., (Houston Ind'l. Inc.,
Prj.) (MBIA Insured) Ser. `98 B, 5.15%, 11/01/29 (c)....................... 986,310
1,000,000 Richardson, TX, Hosp. Auth. Hosp. Rev. Ref. Bds., (Baylor/Richardson)
Ser. `98, 5.625%, 12/01/28................................................. 964,310
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............................ 1,373,338
180,000 Tarrant Cnty., TX, Hlth. Fac. Dev. Corp. Hlth. Sys. Rev. Bds. (Harris
Methodist Hlth. Sys.) Ser. `87 A, 6.875%, 09/01/12......................... 182,806
800,000 Texas Hsg. Agy., Residential Mtg. Rev. Bds., Ser. `87D, 8.40%, 01/01/21...... 819,840
750,000 Texas Mun. Pwr. Agy. Rev. Ref. Bds., Ser. `87, 5.50%, 09/01/13............... 750,698
22
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
TEXAS - CONTINUED
$ 160,000 Texas St. Higher Educ. Coordinating Brd., College Student Loan Rev. Bds.,
7.20%, 04/01/02............................................................ $ 172,314
330,000 Texas Wtr. Res. Fin. Auth. Rev. Bds., Ser. `89, 7.50%, 08/15/13.............. 335,138
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................. 240,001
255,000 Tomball, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O. Prerefunded, Zero Cpn., 02/15/13 (d)....................... 102,490
745,000 Tomball, TX, Independent School Dist. Cap. Appreciation Ref. Bds.,
Unlimited G.O. Unrefunded, Zero Cpn., 02/15/13 (d)........................ 292,249
1,195,000 Tyler Hlth. Fac. Dev. Corp. Hosp. Rev. Bds. (East TX Med. Ctr. Reg'l
Healthcare Sys. Prj.) Ser. `97 B, 5.50%, 11/01/17.......................... 1,238,618
---------------
29,621,379
---------------
UTAH - (0.48%)
7,420,000 Intermountain Pwr. Agy., UT, Pwr. Supply Rev. Bds., Cap. Appreciation,
`87 Ser. D, Zero Cpn., 07/01/20 (d)........................................ 1,345,098
1,000,000 Utah Hsg. Fin. Agy. Rev. Bds. (RHA Community Services of Utah,
Inc. Prj.) Ser. `97 A, 6.875%, 07/01/27.................................... 1,057,900
---------------
2,402,998
---------------
VERMONT - (0.29%)
1,390,000 Vermont Hsg. Fin. Agy. Multi-Fam. Hsg. Bds., `79 Ser. A, 8.50%,
02/15/21................................................................... 1,434,828
---------------
VIRGINIA - (3.08%)
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................................ 1,023,490
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................................. 4,095,080
210,000 The IDA of Covington-Alleghany Cnty., VA, IDR Ref. Bds. (Beverly
Enterprises, Inc. Prj.) Ser. `91, 9.375%, 09/01/01......................... 220,811
1,000,000 The IDA of Goochland Cnty., VA, IDR Ref. Bds. (Nekoosa Packaging
Corp.) Ser. `98, 5.65%, 12/01/25........................................... 1,007,480
110,000 Montgomery Cnty., VA, Rev. Bds., Ser. `87, 6.70%, 04/01/07................... 111,395
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................................ 1,023,490
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................................. 2,047,200
500,000 Peninsula Ports Auth. VA, Hosp. Fac. Rev. Ref. Bds. (Whittaker Mem.
Hosp. Prj.) Ser. `87, 8.70%, 08/01/23...................................... 535,875
400,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., 6.20%, 07/01/21.............. 415,072
600,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., Ser. A, 7.10%,
01/01/17................................................................... 624,720
1,000,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., Ser. A,
7.10%, 01/01/22............................................................ 1,032,100
23
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
MUNICIPAL BONDS - CONTINUED
VIRGINIA - CONTINUED
$ 3,000,000 Virginia St. Hsg. Dev. Auth. Commonwealth Mtg., Ser. A,
7.10%, 01/01/25............................................................ $ 3,096,300
215,000 Virginia St. Res. Auth. Wtr. & Swr. Sys. Rev. Bds. (Pooled Loan Prg.)
Ser. `97 A, 7.50%, 11/01/17................................................ 215,761
---------------
15,448,774
---------------
WASHINGTON - (2.06%)
2,000,000 Chelan Cnty., WA, Pub. Utilities Dist. No. 1, Chelan Hydro Cons. Sys.
Rev. Bds., Ser. `91 A, 7.60%, 07/01/25 (c)................................ 2,241,320
500,000 Chelan Cnty., WA, Pub. Utilities Dist. No. 1, Chelan Hydro Cons. Sys.
Rev. Bds., Ser. `97 A, 5.25%, 07/01/32 (c)................................. 502,320
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)................................. 515,290
400,000 King Cnty., WA, Unlimited G.O., Ser. A '78, 6.50%, 12/01/12.................. 401,108
1,000,000 Port Seattle, WA, Ind'l. Dev. Corp. IDR Ref. Bds. (Beloit Corp.Prj.)
Ser. `94, 6.00%, 12/01/17.................................................. 888,970
2,000,000 Washington St. Hlth. Care Fac. Auth. Rev. Bds. (SW Washington Hosp.
Vancouver) Ser. `89, 7.125%, 10/01/19..................................... 2,074,840
1,500,000 Washington St. Hlth. Care Fac. Auth. Rev. Bds. (Swedish Hlth. Sys.)
Ser. `98, 5.125%, 11/15/18................................................. 1,491,640
2,300,000 Washington St. Hsg. Fin. Comm. Nonprofit Hsg. Rev. Bds. (Seattle Univ.
Auxiliary Svcs. Prj.) Ser. `98, 5.30%, 07/01/31............................ 2,240,844
---------------
10,356,332
---------------
WEST VIRGINIA - (0.71%)
375,000 Beverly, WV, Hsg. Corp. Mtg. Rev. Bds., Ser. `81 (Beverly Manor/FHA -
Insured/Section 8 Prj.), 11.00%, 11/15/22.................................. 446,569
200,000 Glasgow, WV, Hlth. Fac. Rev. Ref. Bds. (Beverly Enterprises, Inc. Prj.)
Ser. `91, 9.50%, 09/01/01................................................. 211,064
2,805,000 West Virginia St. Hsg. Dev. Fd. Hsg. Fin. Rev. Bds., Ser. B, 7.20%,
11/01/20................................................................... 2,908,476
---------------
3,566,109
---------------
WISCONSIN - (0.72%)
300,000 Clear Lake, WI, Sewer Sys. Mtg. Rev. Bds., 8.00%, 08/01/11................... 315,642
170,000 Wisconsin Hlth. Fac. Auth. Rev. Ref. Bds., Hosp. Sisters Svcs. Sys.,
Ser. D, 9.125%, 07/01/05................................................... 170,813
1,480,000 Wisconsin Hlth. Fac. Auth. Rev. Ref. Bds., Hosp. Sisters Svcs. Sys.,
Ser. D, 9.25%, 07/01/12.................................................... 1,522,180
1,595,000 Wisconsin St. Hlth. & Educational Fac. Auth. Rev. Bds. (RFDF Inc. Prj.)
Ser. `97, 7.375%, 07/15/27................................................. 1,618,893
---------------
3,627,528
---------------
Total Municipal Bonds - (identified cost $492,703,790)..................... 492,597,153
---------------
24
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL (NOTE 1)
--------- --------
SHORT TERM BONDS - (1.05%)
$ 4,100,000 Burke Cnty., GA, Dev. Auth. Poll. Ctl. Rev. Bds. (Adj. GA Power Co.
PLT Vog.) Ser. '94, 1.95%, 07/01/24 (c).................................... $ 4,100,000
1,185,000 State Street Bank and Trust Co. Repurchase Agreement, 4.95%, 04/01/99,
dated 03/31/99, repurchase value of $1,185,163 (collateralized by
$1,220,000 par value Freddie Mac, 5.34%, 08/09/01, market
value $1,225,397).......................................................... 1,185,000
---------------
Total Short Term - (identified cost $5,285,000)............................ 5,285,000
---------------
Total investments - (identified cost $497,988,790)(99.16%) (a)......... 497,882,153
Other assets less liabilities - (0.84%)............................. 4,233,961
---------------
Net assets - (100%)............................................... $ 502,116,114
===============
</TABLE>
(a) Aggregate cost for Federal income tax purposes is $497,988,790.
At March 31, 1999 unrealized appreciation (depreciation) of securities for
Federal income tax purposes was as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation...................................................... $ 4,286,984
Unrealized depreciation...................................................... (4,393,621)
---------------
Net unrealized depreciation............................................ $ (106,637)
===============
</TABLE>
(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 March 31, 1999, zero coupon bonds amounted to $56,030,202 or 11.16% of
the Fund's net assets as of March 31, 1999. 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
25
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
At March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at value (including repurchase agreement of $1,185,000)
(identified cost $497,988,790) (See accompanying Schedule of Investments)........... $ 497,882,153
Cash.................................................................................... 47,184
Receivables:
Interest............................................................................ 9,503,510
Capital stock sold.................................................................. 682,635
Prepaid expenses........................................................................ 128,245
---------------
Total assets............................................................... 508,243,727
---------------
LIABILITIES:
Payables:
Capital stock reacquired............................................................ 1,320,959
Investment securities purchased.................................................... 3,905,089
Commissions to distributor (Note 4)................................................. 494,053
Accrued expenses........................................................................ 407,512
---------------
Total liabilities.......................................................... 6,127,613
---------------
NET ASSETS (NOTE 5).......................................................................... $ 502,116,114
===============
CLASS A SHARES
Net assets.......................................................................... $ 206,763,716
Shares outstanding.................................................................. 22,816,649
Net asset value and redemption price per share...................................... $ 9.06
=========
Maximum offering price per share (100/95.25 of $9.06)............................... $ 9.51
=========
CLASS B SHARES
Net assets.......................................................................... $ 250,397,788
Shares outstanding.................................................................. 27,732,537
Net asset value and redemption price per share...................................... $ 9.03
=========
CLASS C SHARES
Net assets.......................................................................... $ 43,960,907
Shares outstanding.................................................................. 4,837,336
Net asset value and redemption price per share...................................... $ 9.09
=========
CLASS Y SHARES
Net assets.......................................................................... $ 993,703
Shares outstanding.................................................................. 109,604
Net asset value and redemption price per share...................................... $ 9.07
=========
NET ASSETS CONSIST OF:
Deficit in undistributed net investment income.......................................... $ (114,711)
Par value of shares of capital stock.................................................... 554,961
Additional paid-in capital.............................................................. 504,320,259
Net unrealized depreciation on investments.............................................. (106,637)
Accumulated net realized loss........................................................... (2,537,758)
---------------
Net assets................................................................. $ 502,116,114
===============
</TABLE>
26
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the six months ended March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest............................................................................ $ 16,361,107
---------------
Expenses:
Management fees (Note 3).......................................... $ 1,618,259
Custodian fees.................................................... 60,671
Transfer agent fees
Class A...................................................... 70,453
Class B...................................................... 108,292
Class C...................................................... 18,938
Class Y...................................................... 1,299
Audit fees........................................................ 13,450
Legal fees....................................................... 24,464
Accounting fees (Note 3).......................................... 7,998
Reports to shareholders........................................... 53,737
Directors fees and expenses....................................... 50,410
Registration and filing fees...................................... 107,139
Miscellaneous..................................................... 2,964
Payments under distribution plan (Note 4)
Class A...................................................... 271,792
Class B...................................................... 1,264,575
Class C...................................................... 205,331
----------------
Total expenses......................................................... 3,879,772
Expenses paid indirectly (Note 6)...................................... (2,469)
---------------
Net expenses........................................................... 3,877,303
---------------
Net investment income............................................. 12,483,804
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from investment transactions............................................... (2,142,631)
Net increase in unrealized depreciation of investments during the period..................... (5,258,141)
---------------
Net realized and unrealized loss on investments................................ (7,400,772)
---------------
Net increase in net assets resulting from operations........................... $ 5,083,032
===============
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
27
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
OPERATIONS: (UNAUDITED) 1998
---------------- -----------------
Net investment income........................................... $ 12,483,804 $ 21,973,208
Net realized loss from investment transactions................. (2,142,631) (237,034)
Net change in unrealized appreciation/(depreciation)
of investments......................................... (5,258,141) 3,568,267
---------------- -----------------
Net increase in net assets resulting
from operations............................... 5,083,032 25,304,441
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A .......................................... (5,973,564) (11,779,256)
Class B ......................................... (5,686,126) (10,526,467)
Class C .......................................... (913,033) (1,029,628)
Class Y .......................................... (27,056) (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 .......................................... - (518,381)
Class B .......................................... - (262,079)
Class C .......................................... - (39,435)
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets resulting from capital share
transactions (Note 5)
Class A .......................................... (33,771,260) 152,107,227
Class B ......................................... (1,305,695) 122,590,184
Class C .......................................... 7,930,996 34,078,836
Class Y .......................................... 124,217 877,300
---------------- -----------------
Total increase (decrease) in net assets........... (34,538,489) 309,270,214
NET ASSETS:
Beginning of year .............................................. 536,654,603 227,384,389
---------------- -----------------
End of year (including undistributed net investment income
(deficit) of $(114,711) and $1,264, respectively) ..... $ 502,116,114 $ 536,654,603
================ =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENT
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------
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.
SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME
Securities transactions are accounted for on the trade date (date the
order to buy or sell is executed) with realized gain or loss on the sale of
securities being determined based upon identified cost. Interest income is
recorded on the accrual basis. Premiums on tax-exempt securities, original issue
discounts and market discounts are amortized to investment income, over the
lives of the respective securities, or to the earliest call date, if applicable,
for financial reporting and tax purposes.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded on the
ex-dividend date. The character of the distributions made during the year from
net investment income may differ from its ultimate characterization for federal
income tax purposes. Also, due to the timing of distributions, the fiscal year
in which amounts are distributed may differ from the fiscal year in which income
or gain was recorded by the Fund. The Fund adjusts the classification of
distributions to shareholders to reflect the differences between financial
statement amounts and distributions determined in accordance with income tax
regulations. Income from amortization of market discounts and certain short-term
investments is not tax-exempt and may result in some percentage of dividends
being reported as taxable income to shareholders.
29
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
USE OF ESTIMATES IN FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of income and expenses during the reporting period. Actual
results may differ from these estimates.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term
securities) during the six months ended March 31, 1999, were $183,578,499 and
$202,491,891, 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 six months ended March 31, 1999, amounted to $6,498.
Boston Financial Data Services is the Fund's primary transfer agent. The Adviser
is also paid for certain transfer agent services. The fee for these services for
the six months ended March 31, 1999, amounted to $19,812. State Street Bank &
Trust Company ("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 six months ended March
31, 1999, amounted to $7,998. Certain directors and the officers of the Fund are
also officers and directors of the general partner of the Adviser.
Davis Selected Advisers-NY, Inc. ("DSA-NY"), a wholly-owned subsidiary
of the Adviser, acts as sub-adviser to the Fund. The Fund pays no fees directly
to DSA-NY.
Stamper Capital & Investments, Inc. ("Stamper") also acts as sub-adviser
of the Fund. Stamper manages the day-to-day investment operations for the Fund.
The Fund pays no fees directly to Stamper. Stamper receives from the Adviser a
percentage of the total annual investment advisory fees paid by the Fund to the
Adviser.
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES
CLASS A SHARES
Class A shares of the Fund are sold at net asset value plus a sales
charge and are redeemed at net asset value (without a contingent deferred sales
charge).
During the six months ended March 31, 1999, Davis Distributors, LLC, the
Fund's Underwriter (the "Underwriter" or "Distributor") received $198,650 from
commissions earned on sales of Class A shares of the Fund of which $32,988 was
retained by the Underwriter and the remaining $165,662 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 connect with such
sales.
30
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
The Underwriter is reimbursed for amounts paid to dealers as a service
fee with respect to Class A shares sold by dealers which remain outstanding
during the period. The service fee is paid at the annual rate of 1/4 of 1% of
the average net assets maintained by the responsible dealers. The Underwriter is
not reimbursed for accounts for which the Underwriter pays no service fees to
other firms. The service fee for Class A shares of the Fund for the six months
ended March 31, 1999, was $271,792.
CLASS B SHARES
Class B shares of the Fund are sold at net asset value and are redeemed
at net asset value less a contingent deferred sales charge if redeemed within
six years of purchase.
The Fund pays a distribution fee to reimburse the Distributor for
commission advances on the sale of the Fund's Class B shares. The National
Association of Securities Dealers, Inc., ("NASD") limits the percentage of the
Fund's average annual net assets attributable to Class B shares which may be
used to reimburse the Distributor. The limit is 1%, of which 0.75% may be used
to pay distribution expenses and 0.25% may be used to pay shareholder service
fees. The NASD rule also limits the aggregate amount the Fund may pay for
distribution-related services to 6.25% of gross Fund sales since inception of
the Rule 12b-1 plan plus interest at 1% over the prime rate on unpaid amounts.
The Distributor intends to seek full payment (plus interest at prime plus 1%) of
distribution charges that exceed the 1% annual limit in some future period or
periods when the plan limits have not been reached.
During the six months ended March 31, 1999, Class B shares of the Fund
made distribution plan payments which included distribution fees of $951,596 and
service fees of $312,979.
Commission advances by the Distributor during the six months ended March
31, 1999 on the sale of Class B shares of the Fund amounted to $720,460 of which
$683,130 was reallowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the Fund
in the amount of $7,302,832, representing the cumulative commission advances by
the Distributor on the sale of the Fund's Class B shares, plus interest, reduced
by cumulative distribution fees paid by the Fund and cumulative contingent
deferred sales charges paid by redeeming shareholders. The Fund has no
contractual obligation to pay any such distribution charges and the amount, if
any, timing and condition of such payment are solely within the discretion of
the Directors who are not interested persons of the Fund or the Distributor.
A contingent deferred sales charge is imposed upon redemption of certain
Class B shares of the Fund within six years of the original purchase. The charge
is a declining percentage starting at 4% of the lesser of net asset value of the
shares redeemed or the total cost of such shares. During the six months ended
March 31, 1999, the Distributor received contingent deferred sales charges of
$351,905 from redemptions of Class B shares of the Fund.
31
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------
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 six months ended March 31, 1999, Class C shares of the Fund
made distribution plan payments of $205,331. During the six months ended March
31, 1999, the Distributor received $5,521 in contingent deferred sales charges
from redemption of Class C shares of the Fund.
NOTE 5 - CAPITAL STOCK
At March 31, 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>
FOR THE SIX MONTHS
ENDED MARCH 31, 1999
CLASS A (UNAUDITED)
---------------------------------
SHARES AMOUNT
------------- ---------------
<S> <C> <C>
Shares sold.......................................................... 3,229,771 $ 29,429,111
Shares issued in reinvestment of distributions....................... 305,925 2,782,764
------------- ---------------
3,535,696 32,211,875
Shares redeemed...................................................... (7,249,060) (65,983,135)
------------- ---------------
Net decrease................................................. (3,713,364) $ (33,771,260)
============= ===============
YEAR ENDED
SEPTEMBER 30, 1998
---------------------------------
SHARES AMOUNT
------------- ---------------
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
============= ===============
32
</TABLE>
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, 1999
CLASS B (UNAUDITED)
---------------------------------
SHARES AMOUNT
------------- ---------------
<S> <C> <C>
Shares sold.......................................................... 2,891,495 $ 26,248,868
Shares issued in reinvestment of distributions....................... 222,949 2,020,978
------------- ---------------
3,114,444 28,269,846
Shares redeemed...................................................... (3,258,999) (29,575,541)
------------- ---------------
Net decrease................................................. (144,555) $ (1,305,695)
============= ===============
YEAR ENDED
SEPTEMBER 30, 1998
---------------------------------
SHARES AMOUNT
------------- ---------------
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
============= ===============
FOR THE SIX MONTHS
CLASS C ENDED MARCH 31, 1999
(UNAUDITED)
---------------------------------
SHARES AMOUNT
------------- ---------------
Shares sold.......................................................... 1,491,882 $ 13,632,286
Shares issued in reinvestment of distributions....................... 40,354 367,972
------------- ---------------
1,532,236 14,000,258
Shares redeemed...................................................... (664,855) (6,069,262)
------------- ---------------
Net increase................................................. 867,381 $ 7,930,996
============= ===============
YEAR ENDED
SEPTEMBER 30, 1998
---------------------------------
SHARES AMOUNT
------------- ---------------
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>
33
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
CLASS Y FOR THE SIX MONTHS
ENDED MARCH 31, 1999
(UNAUDITED)
---------------------------------
SHARES AMOUNT
------------- ---------------
<S> <C> <C>
Shares sold.......................................................... 38,239 $ 349,483
Shares issued in reinvestment of distributions....................... 309 2,808
------------- ---------------
38,548 352,291
Shares redeemed...................................................... (25,051) (228,074)
------------- ---------------
Net increase................................................. 13,497 $ 124,217
============= ===============
OCTOBER 6, 1997
(INCEPTION OF CLASS) THROUGH
SEPTEMBER 30, 1998
---------------------------------
SHARES AMOUNT
------------- ---------------
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 $2,469 during the six months ended March 31, 1999.
34
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial information represents financial highlights for each
share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS DECEMBER 1, 1994
ENDED (INCEPTION OF
MARCH 31, CLASS) THROUGH
1999 YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 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........................ 0.24 0.54 0.57 0.61 0.40
Net Realized and Unrealized Gains (Losses)... (0.13) 0.04 0.11 (0.05) 0.30
------- ------- ------ -------- ------
Total From Investment Operations..... 0.11 0.58 0.68 0.56 0.70
-------- ------- ------ -------- ------
Dividends and Distributions
- ---------------------------
Net Investment Income........................ (0.24) (0.54) (0.59) (0.54) (0.40)
Distribution from Realized Gains............. - (0.05) (0.02) (0.06) (0.01)
Return of Capital............................ - (0.02) - - -
------- ------- ------ -------- -------
Total Distributions.................... (0.24) (0.61) (0.61) (0.60) (0.41)
------- ------- ------ -------- -------
Net Asset Value, End of Period.................. $ 9.06 $ 9.19 $ 9.22 $ 9.15 $ 9.19
======= ======= ====== ======== ======
Total Return (1)................................ 1.22% 6.53% 7.66% 6.33% 7.93%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted).............................. $ 206,764 $243,878 $92,020 $44,828 $45,461
Ratio of Expenses to
Average Net Assets......................... 1.05%* 1.04% 1.26%(2) 1.36% 1.43%*
Ratio of Net Investment Income to
Average Net Assets......................... 5.23%* 5.37% 6.60% 6.64% 5.95%*
Portfolio Turnover Rate (3).................. 36.06% 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
35
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial information represents financial highlights for each
share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS B SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 -----------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period.......................... $ 9.16 $ 9.19 $ 9.12 $ 9.17 $ 9.09 $ 9.65
------- ------- ------- ------ -------- -------
Income (Loss) From Investment
- -----------------------------
Operations
- ----------
Net Investment Income.............. 0.20 0.49 0.53 0.54 0.48 0.44
Net Realized and Unrealized
Gains (Losses)................... (0.13) 0.02 0.08 (0.05) 0.10 (0.18)
------- ------- -------- ------ -------- -------
Total From Investment
Operations................... 0.07 0.51 0.61 0.49 0.58 0.26
------- ------- -------- ------ -------- -------
Dividends and Distributions
- ---------------------------
Net Investment Income.............. (0.20) (0.48) (0.52) (0.48) (0.48) (0.44)
Distribution from Realized Gains.. - (0.05) (0.02) (0.06) (0.01) (0.28)
Returns of Capital................. - (0.01)- - - (0.01) (0.07)
Tax Return of Capital
Distributions................... - - - - - (0.03)
-------- -------- ------- ------ --------- -------
Total Distributions............ (0.20) (0.54) (0.54) (0.54) (0.50) (0.82)
------- ------- ------- ------ -------- -------
Net Asset Value, End of Period........ $ 9.03 $ 9.16 $ 9.19 $ 9.12 $ 9.17 $ 9.09
======= ======= ======= ====== ======== =======
Total Return (1)...................... 0.82% 5.74% 6.89% 5.51% 6.64% 2.81%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted).................... $250,398 $255,300 $132,934 $109,488 $126,727 $188,874
Ratio of Expenses to
Average Net Assets............... 1.83%* 1.80%(2) 2.02% 2.10% 2.14% 2.07%
Ratio of Net Investment Income
to Average Net Assets............ 4.45%* 4.62% 5.87% 5.89% 5.37% 4.49%
Portfolio Turnover Rate (3)........ 36.06% 126.28% 112.71% 106.55% 127.80% 113.46%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.79% 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.
* Annualized
36
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial information represents financial highlights for each
share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS C
AUGUST 18, 1997
(INCEPTION
SIX MONTHS YEAR OF CLASS)
ENDED ENDED THROUGH
MARCH 31, 1999 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 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......................... 0.21 0.49 0.04
Net Realized and Unrealized Gains (Loss)...... (0.13) 0.03 0.03
------ ------ -------
Total From Investment Operations......... 0.08 0.52 0.07
------ ------ -------
Dividends and Distributions
- ---------------------------
Net Investment Income......................... (0.21) (0.48) (0.02)
Return of Capital............................. - (0.02) -
Distribution from Realized Gains.............. - (0.05) -
------ ------ -----
Total Distributions....................... (0.21) (0.55) (0.02)
------ ------ -------
Net Asset Value, End of Period................... $ 9.09 $ 9.22 $ 9.25
====== ====== =======
Total Return (1)................................. 0.83% 5.74% 0.77%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)............................... $43,961 $ 36,594 $2,430
Ratio of Expenses to
Average Net Assets.......................... 1.84%* 1.77%(2) 2.03%*
Ratio of Net Investment Income to
Average Net Assets.......................... 4.44%* 4.65% 5.85%*
Portfolio Turnover Rate (3)................... 36.06% 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.
* Annualized
37
<PAGE>
DAVIS TAX-FREE HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following financial information represents financial highlights for each
share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS Y
OCTOBER 6, 1997
SIX MONTHS (INCEPTION
ENDED OF CLASS)
MARCH 31, THROUGH
1999 SEPTEMBER 30,
(UNAUDITED) 1998
------- --------
<S> <C> <C>
Net Asset Value, Beginning of Period....................... $ 9.19 $ 9.20
------- --------
Income (Loss) From Investment Operations
- ----------------------------------------
Net Investment Income................................... 0.26 0.54
Net Realized and Unrealized Gain (Loss)................. (0.14) 0.03
------- --------
Total From Investment Operations................... 0.12 0.57
------- --------
Dividends and Distributions
- ---------------------------
Net Investment Income................................... (0.24) (0.53)
Distribution from Realized Gain........................ - (0.05)
------- --------
Total Distributions................................. (0.24) (0.58)
------- --------
Net Asset Value, End of Period............................. $ 9.07 $ 9.19
======== ========
Total Return (1)........................................... 1.32% 6.34%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)......................................... $994 $ 883
Ratio of Expenses to
Average Net Assets.................................... 1.00%* 0.93%*(2)
Ratio of Net Investment Income to
Average Net Assets.................................... 5.28%* 5.49%*
Portfolio Turnover Rate (3)............................. 36.06% 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
38
<PAGE>
DAVIS TAX-FREE HIGH
INCOME FUND, INC.
==============================================================================
124 East Marcy Street, P.O. Box 1688, Santa Fe, New Mexico 87501
DIRECTORS OFFICERS
Wesley E. Bass, Jr Jeremy H. Biggs
Jeremy H. Biggs. Chairman
Marc P. Blum Shelby M.C. Davis
Andrew A. Davis President
Christopher C. Davis Kenneth C. Eich
Jerry D. Geist Vice President
D. James Guzy Sharra L. Reed
G. Bernard Hamilton Vice President, Treasurer
LeRoy E. Hoffberger & Assistant Secretary
Laurence W. Levine Thomas D. Tays
Christian R. Sonne Vice President & Secretary
Marsha Williams Andrew A. Davis
Vice President
INVESTMENT ADVISER Christopher C. Davis
Davis Selected Advisers, L.P. Vice President
124 East Marcy Street Carolyn H. Spolidoro
Santa Fe, New Mexico 87501 Vice President
1-800-279-0279
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
===============================================================================
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.
<PAGE>
DAVIS SELECTED ADVISERS, L. P.
124 EAST MARCY STREET
SANTA FE, NEW MEXICO 87501
1-800-279-0279
DAVIS FUNDS
"OVER 25 YEARS OF RELIABLE INVESTING"
