<PAGE>
SEMI-ANNUAL REPORT, June 30, 1997
[LOGO]
<TABLE>
<S> <C>
FUND FOR TAX-FREE INVESTORS, INC.
4922 FAIRMONT AVENUE, BETHESDA, MD 20814
(800) 622-1386 (301) 657-1510
</TABLE>
- --------------------------------------------------------------------------------
Dear Shareholders:
The issuance of municipal bonds in Virginia and Maryland continued to decline in
the first half of 1997. This low issuance, along with a strong economy that is
showing no signs of inflation, has helped to keep yields low. Though the Federal
Reserve elected to raise interest rates once in the first quarter, the lack of
inflationary data has kept them on the sidelines since, and bond yields have
trended downward. It appears that issuance of municipal bonds will continue to
remain low this year, which should keep yields in check due to supply and
demand.
TAX-FREE MONEY MARKET PORTFOLIO
The Tax-Free Money Market Portfolio invests in high-quality, tax-exempt
municipal bonds with maturities of less than one year. Fund For Tax-Free
Investors Money Market Portfolio had an annualized net investment income of
2.87% of net assets for the six months ended June 30, 1997, compared to 2.67%
for the year ended December 31, 1996. The Portfolio's average maturity was 49
days.
VIRGINIA AND MARYLAND TAX-FREE PORTFOLIOS
Both Virginia and Maryland have maintained their AAA credit ratings due to their
strong economic bases, increasing revenues and conservative fiscal policies.
Issuance of debt has decreased in both states this year.
The Virginia Tax-Free Portfolio's net assets were $32.5 million on June 30,
1997, up 0.4% from December 31, 1996. The total return for the six months ended
June 30, 1997 was 3.05%, and the average maturity was 16 years.
As of June 30, 1997, the Maryland Tax-Free Portfolio had net assets of $45.9
million, a change of 3.3% from the beginning of the year. The total return of
the Portfolio for the six months ended June 30, 1997 was 2.82%, with an average
maturity of 16 years.
<PAGE>
OUTLOOK
Inflation, or rather the lack of it, remains the driving force in the bond
market. We anticipate the economy to continue to grow at a sustainable pace, and
as long as inflation remains low, the Federal Reserve should remain on the
sidelines. The overall economic picture is a positive one for the bond market as
lower yields generally mean increased prices for bonds.
Looking ahead we expect to see the issuance of new municipal debt remain low in
the Maryland and Virginia markets, although continued lower yields may lead some
issues to be refunded and reissued at lower rates. When yields decline, it makes
it attractive for issuers to reissue their debt at these lower levels, as they
save money from lower coupon payments. Overall, lower supply as compared to
demand for municipal debt will keep downward pressure on yields.
The Fund for Tax-Free Investors, Inc. adheres to a long-term, conservative
investment strategy. Management selects high quality bonds with competitive
yields. Currently, we are investing in the 15 to 20-year maturity range, with a
focus on call structure. Holdings consist of approximately 30% general
obligation issues and 70% revenue issues.
As always, we thank you for your continued support.
Sincerely,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Daniel L. O'Connor Richard J. Garvey
Chairman President
August 11, 1997
</TABLE>
- 2 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
--------- -----------
<S> <C> <C>
ARIZONA 2.39% OF NET ASSETS
Glendale General Obligation
7.00%, 7/01/97 AAA............. $ 475,000 $ 475,000
-----------
CALIFORNIA 10.62%
California School Cash Reserve
Program Revenue
4.75%, 7/02/97 SP1+............ 800,000 800,019
California School Cash Reserve
Program Revenue
4.75%, 7/02/98 SPI+............ 800,000 806,928
San Diego Area Local Government
Revenue Anticipation Note General
Obligation
4.75%, 10/01/97 SP1+........... 500,000 501,269
-----------
State Total.................... 2,108,216
-----------
COLORADO 12.10%
Boulder Urban Renewel Authority
Revenue
5.30%, 3/01/98 AAA............. 300,000 303,010
Colorado Student Obligation Board
Authority Floating Rate Notes
4.15%, 8/01/00+ A-1+........... 800,000 800,000
Denver Airport Floating Rate
Notes
4.45%, 12/01/25+ A-1+.......... 800,000 800,000
Pitkin County Housing Revenue
Series 1996A Floating Rate Notes
4.20%, 12/01/24+ A-1+.......... 500,000 500,000
-----------
State Total.................... 2,403,010
-----------
ILLINOIS 2.08%
Illinois State General Obligation
8.25%, 10/01/97 AA-............ 400,000 412,315
-----------
INDIANA 2.52%
Allen County Economic Development
Floating Rate Notes
4.15%, 8/01/21+ A-1+........... 500,000 500,000
-----------
LOUISIANA 6.33%
Louisiana State General
Obligation
7.00%, 8/01/97 AAA............. 350,000 357,000
<CAPTION>
Face Value
Value (Note 1)
--------- -----------
<S> <C> <C>
LOUISIANA (continued)
New Orleans Aviation Floating
Rate Notes
4.15%, 8/01/16+ A-1+........... $ 900,000 $ 900,000
-----------
State Total.................... 1,257,000
-----------
MARYLAND 7.81%
Maryland Department Of
Transportation Revenue
6.25%, 8/15/97 AA.............. 150,000 150,444
Maryland Health and Higher
Education Loyola College Issue B
Floating Rate Notes
4.15%, 10/01/13+ AAA........... 400,000 400,000
Maryland Health and Higher
Education North Arundel Hospital
Floating Rate Notes
4.20%, 7/01/32+ VMIGI.......... 200,000 200,000
Washington Suburban Sanitation
Floating Rate Notes
4.25%, 1/01/99+ A-1+........... 800,000 800,000
-----------
State Total.................... 1,550,444
-----------
MINNESOTA 16.82%
City of St. Louis Park Series
1985 Floating Rate Notes
4.20%, 2/01/06+ A-1............ 95,000 95,000
City of St. Louis Park Series
1987A Floating Rate Notes
4.20%, 3/01/02+ A-1............ 400,000 400,000
Minneapolis General Obligation
7.00%, 12/1/97 AAA............. 500,000 507,071
Minneapolis Tax Increment Revenue
7.00%, 3/01/98 AAA............. 135,000 137,627
Minnesota State General
Obligation
7.10%, 8/01/97 AAA............. 500,000 501,405
Minnesota State Higher Education
Floating Rate Notes
4.25%, 12/01/24+ VMIG1......... 500,000 500,000
St. Paul United Way Project
Floating Rate Notes
4.20%, 12/01/18+ A-1........... 400,000 400,000
Waconia Industrial Development
Revenue Floating Rate Notes
4.30%, 10/01/16+ A-1........... 800,000 800,000
-----------
State Total.................... 3,341,103
-----------
</TABLE>
- 3 -
<PAGE>
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO (Continued)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
--------- -----------
<S> <C> <C>
MONTANA 3.02%
Montana State Health Floating
Rate Notes
4.15%, 12/01/15+ A-1+.......... $ 600,000 $ 600,000
-----------
NEW HAMPSHIRE 3.52%
New Hamphshire Health Floating
Rate Notes
4.20%, 11/01/21+ VMIG1......... 700,000 700,000
-----------
NEW MEXICO 2.52%
New Mexico State Severence Tax
Series B Revenue
4.00%, 7/01/97 AA.............. 500,000 500,000
-----------
NEVADA 2.57%
Clark County School District
Series A
6.10%, 6/01/98 AAA............. 500,000 510,032
-----------
NEW YORK 7.05%
New York, New York Series B
Subseries B2 Floating Rate Notes
4.15%, 8/15/03+ A-1+........... 100,000 100,000
New York, New York Subseries A5
Floating Rate Notes
4.15%, 8/01/15+ A-1............ 500,000 500,000
New York, New York Subseries A8
Floating Rate Notes
4.15%, 8/1/17+ A-1+............ 500,000 500,000
New York City Municipal Water
Finance Authority Floating Rate
Notes
4.15%, 6/15/22+ AAA............ 300,000 300,000
-----------
State Total.................... 1,400,000
-----------
NORTH CAROLINA 3.52%
City of Winston-Salem Floating
Rate Notes
4.15%, 4/01/00+ A-1+........... 700,000 700,000
-----------
OHIO 2.52%
Ohio State Education Facility
Floating Rate Notes
4.00%, 10/01/15+ A-1+.......... 500,000 500,000
-----------
<CAPTION>
Face Value
Value (Note 1)
--------- -----------
<S> <C> <C>
PENNSYLVANIA 2.52%
Emmaus General Authority Floating
Rate Notes
4.45%, 12/01/28+ A-1+.......... $ 500,000 $ 500,000
-----------
SOUTH CAROLINA 2.03%
Piedmont Municipal Power Agency
Electrical Revenue
5.0%, 1/01/98 AAA.............. 400,000 402,784
-----------
TEXAS 7.90%
Houston Independent School
District General Obligation
4.80%, 7/15/97 AA+............. 300,000 300,114
Port Arthur Floating Rate Notes
4.25%, 5/01/03+ P-1............ 700,000 700,000
Wichita Falls General Obligation
4.10%, 9/01/97 AAA............. 570,000 570,419
-----------
State Total.................... 1,570,533
-----------
VIRGINIA 2.52%
Henrico Industrial Development
Authority Floating Rate Notes
4.35%, 5/01/24+ VMIG1.......... 400,000 400,000
Virginia State HDA Commonwealth
Meeting Series D Subseries D-4
4.35%, 1/01/98 AA+............. 100,000 100,141
-----------
State Total.................... 500,141
-----------
TOTAL INVESTMENTS 100.36%
(Cost $19,930,578*)....................... 19,930,578
LIABILITIES LESS OTHER ASSETS
(0.36%)................................... (70,759)
-----------
NET ASSETS (NOTE 6) 100.00%................. $19,859,819
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 19,859,819 Shares
Outstanding).............................. $1.00
-----------
-----------
</TABLE>
- ---------
+Daily or Weekly Tender Bond
*Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
- 4 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
VIRGINIA PORTFOLIO
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Alexandria Industrial
Development Authority Revenue
7.40%, 1/01/08 A+............ $ 175,000 $ 176,143
Arlington County General
Obligation
6.00%, 8/01/12 AAA........... 500,000 531,625
5.40%, 6/01/13 AAA........... 1,000,000 1,018,960
5.375%, 12/01/16 AAA......... 1,000,000 1,006,740
Brunswick County Virginia
Revenue
5.5%, 7/01/17 AAA............ 1,000,000 1,001,630
Chesapeake Bay Bridge & Tunnel
Revenue
5.25%, 7/01/19 AAA........... 1,000,000 965,840
Chesapeake Water & Sewer
System Revenue
6.50%, 7/01/05 A+............ 270,000 293,576
Danville General
Obligation
6.50%, 5/01/11 A............. 250,000 266,733
Fairfax City EDA Lease Revenue
5.50%, 5/15/18 AA............ 2,000,000 1,985,140
Fairfax County Industrial
Development Authority Revenue
5.25%, 8/15/19 AA............ 500,000 480,375
Fairfax County Resource
Recovery Revenue
7.75%, 2/01/11 A+............ 300,000 319,302
Fairfax County Water Authority
Revenue
5.80%, 1/01/16 AAA........... 500,000 519,050
6.00%, 4/01/22 AA-........... 1,000,000 1,039,250
Hampton General Obligation
6.00%, 1/15/14 AA-........... 350,000 365,488
Hanover City Water & Sewer
Revenue
5.25%, 2/01/16 AAA........... 500,000 490,670
Hanover County Virginia General
Obligation
5.4%, 7/15/16 AA............. 1,000,000 1,004,930
Henrico County Industrial
Development Authority Revenue
7.125%, 8/01/21 AA........... 400,000 450,332
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Henrico County Industrial
Development Authority Floating
Rate Notes
4.35%, 5/01/24+ VMIG1........ $ 300,000 $ 300,000
Henrico County Water & Sewer
Revenue
6.45%, 5/01/02 AAA........... 300,000 325,827
6.25%, 5/01/13 AA-........... 500,000 515,050
Henry County General Obligation
8.825%, 11/01/05 AAA......... 200,000 256,270
Isle of Wight County General
Obligation
6.70%, 1/01/02 A............. 200,000 221,460
James City County General
Obligation
5.25%, 12/15/15 AAA.......... 1,000,000 989,490
Leesburg General Obligation
5.50%, 06/01/13 AAA.......... 500,000 506,075
Loudoun County Sanitation
Authority Revenue
6.25%, 1/01/10 AAA........... 550,000 585,849
6.25%, 1/01/16 AAA........... 500,000 524,365
Metropolitan Washington, D.C.
Airport Authority Revenue
6.50%, 10/01/06 AAA.......... 300,000 325,743
Newport News General Obligation
6.125%, 6/01/12 AA-.......... 270,000 283,038
Norfolk General Obligation
5.75%, 6/01/13 AAA........... 500,000 514,370
Norfolk Water Revenue
5.75%, 11/01/12 AAA.......... 500,000 518,495
5.875%, 11/01/15 AAA......... 500,000 515,190
Portsmouth General Obligation
6.375%, 8/01/11 AA-.......... 200,000 210,084
Portsmouth Redevelopment &
Housing Authority Revenue
6.05%, 12/01/08 AAA.......... 500,000 525,605
Potomac & Rappahannock
Transportation District
Commission Revenue
6.70%, 3/01/11 AAA........... 600,000 634,728
Prince William County General
Obligation
6.20%, 12/01/11 AA........... 300,000 315,465
</TABLE>
- 5 -
<PAGE>
STATEMENT OF NET ASSETS
VIRGINIA PORTFOLIO (Continued)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Prince William County
Industrial Development
Authority Revenue
7.25%, 3/01/00 NR............ $ 250,000 $ 273,188
Prince William County Park
Authority Revenue
6.875%, 10/15/16 A-.......... 500,000 537,955
Richmond Metro Authority
Revenue
6.10%, 7/15/06 AAA........... 300,000 323,538
6.375%, 7/15/16 AAA.......... 500,000 533,815
Upper Occoquan Sewer Authority
Revenue
5.15%, 7/01/20 AAA........... 500,000 476,060
Virginia Beach General
Obligation
6.50%, 8/01/07 AA............ 500,000 540,575
5.85%, 11/01/12 AA........... 500,000 523,005
Virginia College Building
Authority Revenue
6.625%, 5/01/13 A-........... 300,000 316,980
5.75%, 1/01/14 AA............ 500,000 512,835
Virginia Housing Development
Authority Revenue
6.625%, 7/01/13 A+........... 275,000 284,372
5.95%, 7/01/13 AA+........... 500,000 512,110
5.75%, 1/01/19 AAA........... 1,000,000 1,006,800
Virginia Port Authority Revenue
5.90%, 7/01/16 A+............ 500,000 512,195
Virginia Public Building
Authority Revenue
5.10%, 8/01/06 AA............ 550,000 561,605
5.00%, 8/01/15 AA............ 1,000,000 955,250
5.20%, 8/01/16 AA............ 1,000,000 973,990
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Virginia Public School
Authority Revenue
6.20%, 8/01/13 AA............ $ 320,000 $ 341,488
5.00%, 8/01/16 AA............ 500,000 475,190
Virginia Resource Authority
Revenue
6.75%, 10/01/04 NR........... 240,000 270,705
6.45%, 4/01/13 AA............ 300,000 318,195
Virginia Transportation Board
Revenue
6.00%, 4/01/10 AA............ 300,000 313,146
5.125%, 5/15/13 AA........... 800,000 782,104
5.125%, 5/15/17 AA........... 500,000 482,445
-----------
TOTAL INVESTMENTS 97.96% OF NET ASSETS
(Cost $30,526,747*)...................... 31,810,434
OTHER ASSETS LESS LIABILITIES
2.04%.................................... 663,686
-----------
NET ASSETS (NOTE 6) 100.00%................ $32,474,120
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 2,908,706 Shares
Outstanding)............................. $11.16
-----------
-----------
</TABLE>
- ---------
+Daily or Weekly Tender Bond
*Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
- 6 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
MARYLAND PORTFOLIO
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Anne Arundel County Water &
Sewer General Obligation
6.20%, 8/01/12 AA+........... $ 725,000 $ 776,120
6.00%, 7/15/13 AA+........... 500,000 523,920
6.30%, 8/01/16 AA+........... 500,000 537,490
6.30%, 8/01/19 AA+........... 725,000 777,381
Anne Arundel County Pollution
Control Revenue
6.00%, 4/01/24 A............. 1,230,000 1,258,425
Anne Arundel County Solid Waste
Project General Obligation
5.50%, 9/01/15 AA+........... 500,000 498,250
Baltimore City General
Obligation
6.40%, 10/15/02 AAA.......... 465,000 507,296
5.50%, 10/15/10 AAA.......... 1,000,000 1,027,880
Baltimore City Revenue
6.00%, 7/01/15 AAA........... 500,000 526,580
Baltimore County General
Obligation
6.125%, 7/01/08 AAA.......... 500,000 536,240
6.70%, 7/01/11 AAA........... 200,000 208,494
5.50%, 6/01/12 AAA........... 1,000,000 1,028,070
Baltimore Port Facility Revenue
6.50%, 12/01/10 AA-.......... 400,000 431,436
6.50%, 10/01/11 AA-.......... 250,000 268,612
6.50%, 10/01/11 AA-.......... 250,000 268,830
Calvert County Pollution
Control Revenue
5.55%, 7/15/14 A............. 1,000,000 1,007,040
Carroll County General
Obligation
7.10%, 10/01/09 AA........... 235,000 259,224
7.25%, 10/01/15 AA........... 300,000 332,277
5.30%, 11/01/15 AA........... 1,000,000 989,520
6.50%, 10/01/24 AA........... 225,000 245,279
Frederick County General
Obligation
6.125%, 12/01/07 AAA......... 500,000 535,900
5.60%, 7/01/11 AA-........... 500,000 515,445
City of Frederick General
Obligation
6.00%, 10/01/11 AAA.......... 300,000 316,296
Howard County Metropolitan
District General Obligation
6.00%, 8/15/19 AA+........... 500,000 509,445
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Howard County Public
Improvement General Obligation
6.00%, 5/15/14 AA+........... $ 500,000 $ 522,045
5.50%, 2/15/16 AA+........... 1,000,000 1,011,720
Howard County Special
Facilities Revenue
6.10%, 2/15/13 AA-........... 500,000 516,555
Laurel General Obligation
6.70%, 7/01/01 AAA........... 600,000 661,392
Maryland Community Development
Administration Revenue
6.60%, 4/01/06 AA............ 200,000 210,610
7.375%, 4/01/10 AA........... 495,000 521,997
7.25%, 4/01/11 AA............ 200,000 210,502
7.15%, 4/01/11 AA............ 405,000 423,525
7.25%, 4/01/16 AA............ 275,000 280,098
7.70%, 5/15/20 AA............ 250,000 262,568
7.25%, 4/01/27 AA............ 385,000 403,122
Maryland General Obligation
6.80%, 7/15/00 AAA........... 500,000 542,605
5.00%, 03/01/11 AAA.......... 500,000 493,635
5.00%, 10/15/11 AAA.......... 1,000,000 986,870
5.00%, 03/01/12 AAA.......... 1,500,000 1,475,415
Maryland Health & Higher
Education Facilities Authority
Revenue
5.70%, 7/01/09 A............. 500,000 516,245
5.25%, 7/01/13 AAA........... 500,000 495,730
6.125%, 7/01/14 AAA.......... 500,000 522,865
5.50%, 10/01/16 AAA.......... 1,000,000 1,009,100
6.125%, 7/01/19 AAA.......... 500,000 522,140
5.00%, 7/01/20 AAA........... 1,000,000 933,950
4.20%, 7/01/32+ VMIG1........ 200,000 200,000
Maryland Industrial Development
Revenue
7.125%, 7/01/06 A-........... 300,000 308,109
Maryland Stadium Authority
Sports Revenue
7.375%, 12/15/04 AA-......... 425,000 460,696
7.50%, 12/15/10 AA-.......... 695,000 750,544
5.875%, 12/15/13 AAA......... 1,000,000 1,035,920
5.375%, 12/15/15 AA.......... 500,000 496,515
7.60%, 12/15/19 AA-.......... 500,000 538,440
Maryland Transportation
Authority Revenue
6.50%, 7/01/04 A+............ 500,000 537,755
</TABLE>
- 7 -
<PAGE>
STATEMENT OF NET ASSETS
MARYLAND PORTFOLIO (Continued)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Maryland Water Quality Finance
Administration Revenue
6.00%, 9/01/15 AA............ $1,000,000 $ 1,034,590
Montgomery County Housing
Opportunity Commission Revenue
6.70%, 7/01/11 AA............ 370,000 390,620
7.80%, 7/01/12 N/R........... 200,000 207,774
7.375%, 7/01/17 AA........... 180,000 187,130
6.65%, 7/01/17 AA............ 180,000 189,196
7.00%, 7/01/23 A............. 250,000 261,655
Montgomery County Parking
Revenue
6.25%, 6/01/09 AAA........... 300,000 318,702
Montgomery County Waste
Disposal Authority Revenue
5.875%, 6/01/13 AAA.......... 250,000 251,558
North East Maryland Waste
Disposal Authority Revenue
6.20%, 7/01/10 A............. 500,000 509,775
6.30%, 7/01/16 A............. 1,000,000 1,017,570
North East Maryland Waste
Disposal Authority Floating
Rate Notes
4.15%, 1/01/08+ AAA.......... 400,000 400,000
Prince Georges County General
Obligation
5.75%, 3/15/08 AAA........... 500,000 527,955
5.25%, 3/15/15 AAA........... 1,000,000 987,440
Prince Georges County Housing
Authority Revenue
6.35%, 7/20/20 AAA........... 700,000 724,549
Prince Georges County Pollution
Control Revenue
5.75%, 3/15/10 A............. 1,000,000 1,040,200
Prince Georges County Solid
Waste Management System Revenue
6.80%, 6/30/00 AAA........... 250,000 272,188
7.00%, 6/30/00 AAA........... 250,000 273,580
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
St. Mary's County General
Obligation
5.85%, 11/01/18 AAA.......... $ 500,000 $ 513,215
University of Maryland System
Auxiliary Revenue
6.375%, 4/01/09 AA+.......... 500,000 545,035
5.60%, 4/01/12 AA+........... 1,000,000 1,028,390
5.60%, 4/01/16 AA+........... 1,000,000 1,014,160
Washington County General
Obligation
5.125%, 1/01/12 AAA.......... 500,000 492,460
5.25%, 1/01/16 AAA........... 500,000 493,015
Washington, D.C. Metropolitan
Area Transportation Authority
Revenue
6.00%, 7/01/10 AAA........... 275,000 293,992
Washington Suburban Sanitary
District General Obligation
6.20%, 6/01/12 AA............ 900,000 951,696
TOTAL INVESTMENTS 97.40% OF NET ASSETS
(Cost $43,121,219*)...................... 44,662,563
OTHER ASSETS LESS LIABILITIES
2.60%.................................... 1,191,639
-----------
NET ASSETS (NOTE 6) 100.00%................ $45,854,202
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 4,234,996 Shares
Outstanding)............................. $10.83
-----------
-----------
</TABLE>
- -------------
+Daily or Weekly Tender Bond
*Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
- 8 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Money
Market Virginia Maryland
Portfolio Portfolio Portfolio
----------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME (Note 1)............................................... $ 362,485 $ 925,132 $1,271,830
----------- ----------- ----------
EXPENSES
Investment Advisory Fee (Note 2)....................................... 50,018 100,329 137,805
Administrative Fee (Note 2)............................................ 25,009 48,158 66,147
Interest Expense (Note 2).............................................. 83 -- --
----------- ----------- ----------
Total Expenses....................................................... 75,110 148,487 203,952
----------- ----------- ----------
NET INVESTMENT INCOME.................................................... 287,375 776,645 1,067,878
----------- ----------- ----------
Net Realized Gain on Investment Transactions............................. -- 80,655 139,798
Net Change in Unrealized Appreciation of Investments..................... -- 120,290 31,445
----------- ----------- ----------
NET GAIN ON INVESTMENTS.................................................. -- 200,945 171,243
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $ 287,375 $ 977,590 $1,239,121
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See Notes to Financial Statements.
- 9 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Money Market Virginia Maryland
Portfolio Portfolio Portfolio
-------------------------- ------------------------- -------------------------
For the Six For the Six For the Six
Months Months Months
Ended For the Year Ended For the Year Ended For the Year
June 30, Ended June 30, Ended June 30, Ended
1997 December 31, 1997 December 31, 1997 December 31,
(Unaudited) 1996 (Unaudited) 1996 (Unaudited) 1996
------------ ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net Investment Income.......................... $ 287,375 $ 524,507 $ 776,645 $ 1,576,325 $1,067,878 $ 2,343,288
Net Realized Gain on Investments............... -- -- 80,655 262,689 139,798 484,951
Net Change in Unrealized
Appreciation/Depreciation of Investments..... -- -- 120,290 (932,337 ) 31,445 (1,400,547 )
------------ ------------ ----------- ------------ ----------- ------------
Net Increase in Net Assets Resulting from
Operations................................... 287,375 524,507 977,590 906,677 1,239,121 1,427,692
------------ ------------ ----------- ------------ ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income (Note 1)............ (287,375 ) (524,507 ) (769,398 ) (1,575,364 ) (1,072,157 ) (2,341,219 )
From Net Realized Capital Gains................ -- -- -- -- -- --
------------ ------------ ----------- ------------ ----------- ------------
Total Distributions to Shareholders............ (287,375 ) (524,507 ) (769,398 ) (1,575,364 ) (1,072,157 ) (2,341,219 )
------------ ------------ ----------- ------------ ----------- ------------
FROM SHARE
TRANSACTIONS
Net Proceeds from Sales of Shares.............. 17,699,267 33,109,020 7,074,631 9,574,030 4,038,154 6,196,673
Reinvestment of Distributions.................. 274,528 501,351 640,614 1,309,667 891,039 1,976,301
Cost of Shares Redeemed........................ (17,003,498 ) (35,493,325 ) (7,804,061 ) (11,328,124 ) (3,652,312 ) (12,573,794 )
------------ ------------ ----------- ------------ ----------- ------------
Net Increase (Decrease) in Net Assets Resulting
from Share Transactions...................... 970,297 (1,882,954 ) (88,816 ) (444,427 ) 1,276,881 (4,400,820 )
------------ ------------ ----------- ------------ ----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 970,297 (1,882,954 ) 119,376 (1,113,114 ) 1,443,845 (5,314,347 )
NET ASSETS - Beginning of Period................. 18,889,522 20,772,476 32,354,744 33,467,858 44,410,357 49,724,704
------------ ------------ ----------- ------------ ----------- ------------
NET ASSETS - End of Period....................... $19,859,819 $18,889,522 $32,474,120 $32,354,744 $45,854,202 $44,410,357
------------ ------------ ----------- ------------ ----------- ------------
------------ ------------ ----------- ------------ ----------- ------------
SHARES
Sold........................................... 17,699,267 33,089,461 641,189 871,229 375,734 576,046
Issued in Reinvestment of Distributions........ 274,528 501,351 58,066 118,996 83,026 184,046
Redeemed....................................... (17,003,498 ) (35,493,325 ) (707,942 ) (1,030,689 ) (340,258 ) (1,170,922 )
------------ ------------ ----------- ------------ ----------- ------------
Net Increase (Decrease) in Shares.............. 970,297 (1,902,513 ) (8,687 ) (40,464 ) 118,502 (410,830 )
------------ ------------ ----------- ------------ ----------- ------------
------------ ------------ ----------- ------------ ----------- ------------
</TABLE>
See Notes to Financial Statements.
- 10 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended December 31,
June 30, 1997 -----------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income........................ 0.014 0.027 0.030 0.020 0.016 0.023
Net Realized and Unrealized Gains on
Securities................................. -- -- -- -- -- --
------------- --------- --------- --------- --------- ---------
Total from Investment Operations........... 0.014 0.027 0.030 0.020 0.016 0.023
------------- --------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income................... (0.014) (0.027) (0.030) (0.020) (0.016) (0.023)
From Net Realized Capital Gains.............. -- -- -- -- -- --
------------- --------- --------- --------- --------- ---------
Total Distributions to Shareholders........ (0.014) (0.027) (0.030) (0.020) (0.016) (0.023)
------------- --------- --------- --------- --------- ---------
Net Increase in Net Asset Value................ -- -- -- -- -- --
------------- --------- --------- --------- --------- ---------
Net Asset Value - End of Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN.......................... 1.43%(A) 2.69% 3.09% 2.02% 1.66% 2.25%
RATIOS TO AVERAGE NET ASSETS:
Expenses....................................... 0.75%(B) 0.75% 0.75% 0.75% 0.78% 0.80%
Net Investment Income.......................... 2.87%(B) 2.67% 3.04% 1.99% 1.65% 2.25%
SUPPLEMENTARY DATA:
Net Assets at End of Period (000's omitted).... $ 19,860 $ 18,890 $ 20,772 $ 25,586 $ 23,283 $ 25,935
Number of Shares Outstanding at End of Period
(000's omitted).............................. 19,860 18,890 20,792 25,604 23,312 25,964
</TABLE>
- ---------
(A)Total Investment Return for periods of less than one year are not annualized.
(B)Annualized.
See Notes to Financial Statements.
- 11 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
VIRGINIA PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended December 31,
June 30, 1997 -----------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of
Period............................. $ 11.09 $ 11.31 $ 10.36 $ 11.51 $ 10.84 $ 10.63
------------- --------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income.............. 0.265 0.534 0.564 0.578 0.582 0.610
Net Realized and Unrealized Gains
(Losses) on Securities........... 0.067 (0.221) 0.953 (1.150) 0.670 0.210
------------- --------- --------- --------- --------- ---------
Total from Investment
Operations..................... 0.332 0.313 1.517 (0.572) 1.252 0.820
------------- --------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income......... (0.262) (0.533) (0.564) (0.578) (0.582) (0.610)
From Net Realized Capital Gains.... -- -- -- -- -- --
------------- --------- --------- --------- --------- ---------
Total Distributions to
Shareholders................... (0.262) (0.533) (0.564) (0.578) (0.582) (0.610)
------------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset
Value.............................. 0.07 (0.22) 0.95 (1.15) 0.67 0.21
------------- --------- --------- --------- --------- ---------
Net Asset Value - End of Period...... $ 11.16 $ 11.09 $ 11.31 $ 10.36 $ 11.51 $ 10.84
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN................ 3.05%(A) 2.91% 14.92% (5.02)% 11.80% 7.98%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 0.93%(B) 0.93% 0.77% 0.55% 0.50% 0.50%
Expenses Before Reimbursement from
Adviser............................ 0.93%(B) 0.93% 0.93% 0.93% 0.93% 0.93%
Net Investment Income................ 4.84%(B) 4.84% 5.17% 5.35% 5.15% 5.71%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate.............. 20% 46% 55% 33% 43% 50%
Net Assets at End of Period (000's
omitted)........................... $ 32,474 $ 32,355 $ 33,468 $ 27,929 $ 34,371 $ 25,513
Number of Shares Outstanding at End
of Period (000's omitted).......... 2,909 2,917 2,958 2,697 2,985 2,354
</TABLE>
- ---------
(A)Total Investment Return for periods of less than one year are not annualized.
(B)Annualized.
See Notes to Financial Statements.
- 12 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
MARYLAND PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended December 31,
June 30, 1997 -----------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of Period....... $ 10.79 $ 10.98 $ 10.11 $ 11.27 $ 10.60 $ 10.39
------------- --------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income..................... 0.258 0.528 0.550 0.565 0.568 0.594
Net Realized and Unrealized Gains (Losses)
on Securities........................... 0.041 (0.190) 0.869 (1.157) 0.670 0.210
------------- --------- --------- --------- --------- ---------
Total from Investment Operations........ 0.299 0.338 1.419 (0.592) 1.238 0.804
------------- --------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income................ (0.259) (0.528) (0.551) (0.565) (0.568) (0.594)
From Net Realized Capital Gains........... -- -- -- (0.003) -- --
------------- --------- --------- --------- --------- ---------
Total Distributions to Shareholders..... (0.259) (0.528) (0.551) (0.568) (0.568) (0.594)
------------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset
Value..................................... 0.04 (0.19) 0.87 (1.16) 0.67 0.21
------------- --------- --------- --------- --------- ---------
Net Asset Value - End of Period............. $ 10.83 $ 10.79 $ 10.98 $ 10.11 $ 11.27 $ 10.60
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN....................... 2.82%(A) 3.21% 14.35% (5.24)% 11.91% 8.00%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................... 0.93%(B) 0.93% 0.77% 0.55% 0.50% 0.50%
Expenses Before Reimbursement from
Adviser................................... 0.93%(B) 0.93% 0.93% 0.93% 0.93% 0.93%
Net Investment Income....................... 4.84%(B) 4.92% 5.16% 5.36% 5.13% 5.67%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate..................... 11% 31% 37% 38% 30% 21%
Net Assets at End of Period (000's
omitted).................................. $ 45,854 $ 44,410 $ 49,725 $ 44,385 $ 58,094 $ 43,921
Number of Shares Outstanding at End of
Period (000's omitted).................... 4,235 4,116 4,527 4,391 5,157 4,145
</TABLE>
- ---------
(A)Total Investment Return for periods of less than one year are not annualized.
(B)Annualized.
See Notes to Financial Statements.
- 13 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Fund for Tax-Free Investors, Inc. (the "Fund") is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 as a no-load,
open-end, investment company. The Fund consists of three separate portfolios
which invest primarily in securities exempt from Federal income taxes. On June
30, 1997, there were 200,000,000 shares of $0.001 par value capital stock
authorized. The financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The following
is a summary of significant accounting policies which the Fund consistently
follows:
(a) Securities of the Money Market Portfolio are valued at amortized cost,
which approximates market value. Securities of the Virginia and Maryland
Portfolios are valued by a pricing service approved by the Board of
Directors. The valuation methods used are reviewed by the Board of
Directors to determine that they reflect fair value.
(b) Investment income is recorded as earned.
(c) Net investment income is computed, and dividends are declared daily.
Dividends are paid monthly and reinvested in additional shares unless
shareholders request payment. Net capital gains, if any, will be
distributed to shareholders annually.
(d) The Fund complies with the provisions of the Internal Revenue Code
applicable to regulated investment companies and distributes all net
investment income to its shareholders. Therefore, no Federal income tax
provision is required. The Fund also meets the requirements that allow
it to designate distributions from interest income on obligations which
are exempt from Federal income tax as exempt-interest dividends.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Investment advisory and management services are provided by Money Management
Associates (the "Adviser") under an agreement whereby the Fund pays a fee at an
annual rate of 0.50% of the average daily net assets of the Money Market
Portfolio and 0.625% of the average daily net assets of the Virginia Portfolio
and of the Maryland Portfolio. The Adviser has agreed to reimburse the Fund for
expenses, (including investment advisory fee), excluding interest and
extraordinary legal expenses, which exceed one percent of the average daily net
assets per annum. No reimbursement was required for the six months ended June
30, 1997. Certain Officers and Directors of the Fund are also affiliated with
the Adviser.
Rushmore Trust and Savings, FSB ("Rushmore Trust"), a majority-owned subsidiary
of the Adviser, provides transfer agency, dividend disbursing and other
shareholder services to the Fund. In addition, Rushmore Trust serves as
custodian of the Fund's assets and pays the operating expenses of the Fund. For
these services, Rushmore Trust receives an annual fee of 0.25% of the average
net assets of the Money Market Portfolio, and 0.30% of the average net assets of
the Virginia and Maryland Portfolios.
- 14 -
<PAGE>
3. SECURITIES TRANSACTIONS
Security transactions are recorded on the trade date. For the six months ended
June 30, 1997, purchases and sales (including maturities), of securities,
excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
Virginia Maryland
Portfolio Portfolio
------------ ------------
<S> <C> <C>
Purchases................................................... $ 6,441,453 $ 5,476,885
------------ ------------
------------ ------------
Sales....................................................... $ 6,271,332 $ 4,816,907
------------ ------------
------------ ------------
</TABLE>
4. NET UNREALIZED APPRECIATION OF INVESTMENTS
As of June 30, 1997, net unrealized appreciation of investments in the Virginia
Portfolio for Federal income tax purposes aggregated $1,283,687 of which
$1,295,543 related to appreciated investments and $11,856 related to depreciated
investments. In the Maryland Portfolio, net unrealized appreciation of
investments for Federal income tax purposes totaled $1,541,344 of which
$1,555,271 related to appreciated investments and $13,927 related to depreciated
investments.
5. NET ASSETS
At June 30, 1997, net assets consisted of the following:
<TABLE>
<CAPTION>
Money Market Virginia Maryland
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
Paid-in-Capital............................................... $19,859,819 $ 31,123,750 $ 44,632,060
Undistributed Net Investment Income (Loss).................... -- 8,208 (2,210)
Accumulated Net Realized Gain (Loss) on Investments........... -- 58,475 (316,992)
Net Unrealized Appreciation of Investments.................... -- 1,283,687 1,541,344
------------- ------------- -------------
NET ASSETS.................................................... $19,859,819 $ 32,474,120 $ 45,854,202
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
6. CAPITAL LOSS CARRYOVERS
At December 31, 1996, for Federal income tax purposes, the following Portfolios
had capital loss carryforwards which may be applied against future net taxable
realized gains of each succeeding year until the earlier of its utilization or
its expiration:
<TABLE>
<CAPTION>
Money Market Virginia Maryland
Expires December 31, Portfolio Portfolio Portfolio
- ------------------------------------------------- ------------- --------- ----------
<S> <C> <C> <C>
2002............................................. -- $ 22,180 $ 456,790
</TABLE>
- 15 -
