<PAGE>
ANNUAL REPORT, December 31, 1996
[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 Federal Reserve began last year by reducing interest rates by 25 basis
points in January, and as it turns out, that would be the last adjustment for
1996. Inflationary fears began to creep into the market culminating in a peak in
rates above 7% in the 30 year Treasury bond, before retracing much of this
increase by year end, as these fears began to subside.
The municipal bond market was affected by several factors in 1996. Included
among them were the continued stock market surge, with over 40 new record highs
in the Dow, an ease in tax-reform fears, and an increased volatility on
individual economic data releases. All eyes will continue to be on the Federal
Reserve's take of the economy in 1997, for clues to their interest rate policy.
Another key to the municipal market in 1997 will be the performance of the
streaking equity markets. Should these markets start to show signs of slowing,
bonds stand to benefit from crossover interest.
TAX-FREE MONEY MARKET PORTFOLIO
The Tax-Free Money Market Portfolio invests in high quality, tax-exempt
municipal securities with maturities of less than one year. Fund For Tax-Free
Investors Money Market Portfolio had an annualized net investment income of
2.67% of net assets for the year ended December 31, 1996, compared to 3.04% for
1995. On December 31, 1996, the Portfolio's average maturity was 55 days.
MARYLAND AND VIRGINIA TAX-FREE PORTFOLIOS
Both the State of Maryland and the State of Virginia remain in a group of nine
states to hold a debt rating of AAA, with each state benefiting from a wealthy
and diversified economic base, as well as a conservative approach to debt policy
and financial operations. Maryland has been able to adjust its budget to
compensate for slower growth, and as a result has rebuilt its reserves. Virginia
continues to see moderate growth in its economy, with unemployment staying below
the national level.
<PAGE>
Fund for Tax-Free Investors Maryland Portfolio had a total return of 3.21% for
the year ended December 31, 1996. On an annualized basis, net income averaged
4.92% of net assets for the year. Net assets for the Maryland Portfolio stood at
$44.4 million at 1996 year end, and had an average maturity of 16.4 years.
The Maryland Portfolio continues to maintain investment in high quality bonds
with over 87% of the Portfolio having a rating of AA or better.
Fund for Tax-Free Virginia Portfolio ended 1996 with a 2.91% total return. On an
annualized basis, net income averaged 4.84% of net assets for the year ended
December 31, 1996. Net assets for the Virginia Portfolio stood at $32.4 million
at year end, and had an average maturity of 16.8 years. The quality of
securities in the Virginia Portfolio remain high with over 88% its bonds rated
AA or above.
OUTLOOK
We look for the economy to continue to grow at a moderate and sustainable pace
in 1997. Economic data will remain a prominent factor, as market participants
keep watch for any potential inflationary data that could cause the Fed to
intervene, which may result in some market volatility. The performance of the
stock markets will also play a major role, as its record breaking performance
has kept the spotlight on equities. Should sentiment begin to change, bonds
could begin to see more money come in from these markets. We also look for
municipal issuance not to increase in 1997, as municipalities adhere to budget
constraints.
As always management will maintain its long-term, conservative investment
strategy. Fund for Tax-Free Investors, Inc. invests in only high quality issues
that we feel provide the best value along the yield curve. We thank you for your
continued support, and look forward to serving your investment needs in the
future.
Sincerely,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Daniel L. O'Connor Richard J. Garvey
Chairman President
February 10, 1997
</TABLE>
- 2 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
ARIZONA 2.55%
Glendale General Obligation
7.00%,7/01/97 AAA............ $ 475,000 $ 482,121
-----------
CALIFORNIA 6.92%
California School Cash Reserve
Program Revenue
4.75%, 7/02/97 SP1+.......... 800,000 803,456
San Diego Area Local Government
Revenue Anticipation Note
General Obligation
4.75%, 10/01/97 SP1+......... 500,000 503,765
-----------
State Total.................. 1,307,221
-----------
COLORADO 11.12%
Colorado Student Obligation
Board Authority Floating Rate
Notes
3.90%, 8/01/00+ A-1+......... 800,000 800,000
Denver Airport Floating Rate
Notes
4.35%, 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.................. 2,100,000
-----------
GEORGIA 2.81%
Georgia Municipal Electric
Authority Revenue
7.75%, 1/01/97 AAA........... 520,000 530,400
-----------
IOWA 1.59%
Iowa Housing Financial
Authority
Floating Rate Notes
4.25%, 5/01/97+ A-1+......... 300,000 300,000
-----------
LOUISIANA 6.68%
Louisiana State
General Obligation
7.00%, 8/01/97 AAA........... 350,000 362,304
New Orleans Aviation Floating
Rate Notes
3.45%, 8/01/16+ A-1+......... 900,000 900,000
-----------
State Total.................. 1,262,304
-----------
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
MARYLAND 6.88%
Baltimore Industrial
Development
Authority Floating Rate Notes
3.70%, 8/01/16+ A-1.......... $ 100,000 $ 100,000
Maryland Health and Higher
Education
Loyola College Issue B
Floating Rate Notes
4.30%, 10/01/13+ AAA......... 400,000 400,000
Washington Suburban Sanitation
Floating Rate Notes
4.10%, 1/01/99+ A-1+......... 800,000 800,000
-----------
State Total.................. 1,300,000
-----------
MINNESOTA 21.93%
Beltrami County Environmental
Floating Rate Notes
5.00%, 12/01/21+ A-1+........ 100,000 100,000
City of Minneapolis Housing
Development Floating Rate Notes
4.15%, 9/01/26+ VMIG1........ 500,000 500,000
City of St. Louis Park Series
1985 Floating Rate Notes
4.15%, 2/01/06+ A-1.......... 230,000 230,000
Minnesota State General
Obligation
7.10%, 8/01/97 AAA........... 500,000 509,609
Minnesota State Higher
Education Floating Rate Notes
4.35%, 12/01/24+ VMIG1....... 500,000 500,000
Olmsted County General
Obligation
6.55%, 2/01/97 AA+........... 800,000 801,976
St. Paul Housing Development
Floating Rate Notes
4.15%, 3/01/13+ A-1+......... 300,000 300,000
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
4.40%, 10/01/16+ A-1......... 800,000 800,000
-----------
State Total.................. 4,141,585
-----------
</TABLE>
- 3 -
<PAGE>
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO (Continued)
December 31, 1996
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
MONTANA 3.18%
Montana State Health Floating
Rate Notes
4.20%, 12/01/15+ A-1+........ $ 600,000 $ 600,000
-----------
NEW HAMPSHIRE 2.65%
New Hamphshire Health Floating
Rate Notes
4.25%, 11/01/21+ VMIG1....... 500,000 500,000
-----------
NEW MEXICO 2.65%
New Mexico State Severence Tax
Series B Revenue
4.00%, 7/01/97 AA............ 500,000 500,850
-----------
NEW YORK 7.94%
Nassau County Bond Anticipation
Notes Series C General
Obligation
4.25%, 3/14/97 SP1........... 400,000 400,552
Nassau County Revenue
Anticipation Notes General
Obligation
3.50%, 3/05/97 SP1........... 200,000 199,943
New York, New York Series B
Subseries B2 Floating Rate
Notes
5.00%, 8/15/03+ A-1+......... 100,000 100,000
New York, New York Subseries A5
Floating Rate Notes
5.00%, 8/01/15+ A-1+......... 100,000 100,000
New York City Municipal Water
Finance Authority Floating Rate
Notes
5.00%, 6/15/22+ A-1+......... 700,000 700,000
-----------
State Total.................. 1,500,495
-----------
NORTH CAROLINA 4.24%
City of Winston-Salem Floating
Rate Notes
4.30%, 4/01/00+ A-1+......... 800,000 800,000
-----------
OHIO 2.65%
Ohio State Education Facility
Floating Rate Notes
2.80%, 10/01/15+ A-1+........ 500,000 500,000
-----------
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
TEXAS 6.73%
Port Arthur Floating Rate Notes
5.10%, 5/01/03+ P-1.......... $ 700,000 $ 700,000
Wichita Falls General
Obligation
4.10%, 9/01/97 AAA........... 570,000 571,645
-----------
State Total.................. 1,271,645
-----------
VIRGINIA 8.48%
Fairfax County General
Obligation
6.85%, 4/01/97 AAA........... 400,000 402,924
Henrico Industrial Development
Authority Floating Rate Notes
5.10%, 5/01/24+ VMIG1........ 600,000 600,000
Virginia Public School
Authority Revenue
7.40%, 1/01/97 AA............ 600,000 600,000
-----------
State Total.................. 1,602,924
-----------
WEST VIRGINIA 3.83%
Kanawha County Building
Commission Charleston Area
Medical Center Revenue
7.10%, 6/01/97 AAA........... 700,000 724,017
-----------
TOTAL INVESTMENTS 102.83%
(Cost $19,423,562*)...................... 19,423,562
LIABILITIES LESS OTHER ASSETS
(2.83)%.................................. (534,040)
-----------
NET ASSETS (NOTE 5) 100.00%................ $18,889,522
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 18,889,522 Shares
Outstanding)............................. $1.00
-----------
-----------
</TABLE>
*Same cost is used for Federal income tax purposes.
Security ratings are unaudited.
See Notes to Financial Statements.
- -------------
+--Daily or Weekly Tender Bond
- 4 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
VIRGINIA PORTFOLIO
December 31, 1996
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Alexandria Industrial
Development Authority Revenue
7.40%, 1/01/08 A+............ $ 175,000 $ 176,173
Arlington County General
Obligation
6.00%, 8/01/12 AAA........... 500,000 529,865
5.40%, 6/01/13 AAA........... 1,000,000 1,010,140
5.375%, 12/01/16 AAA......... 1,000,000 1,000,820
Chesapeake Bay Bridge & Tunnel
Revenue
5.25%, 7/01/19 AAA........... 1,000,000 959,240
Chesapeake Water & Sewer System
Revenue
6.50%, 7/01/05 A+............ 270,000 294,883
Chesterfield County General
Obligation
6.25%, 7/15/11 AA+........... 300,000 319,218
Chesterfield County Water &
Sewer Revenue
6.375%, 11/01/07 AA.......... 300,000 325,683
6.375%, 11/01/10 AA.......... 500,000 533,230
Danville General Obligation
6.50%, 5/01/11 A............. 250,000 265,140
Fairfax County Economic
Development Authority Lease
Revenue
5.50%, 5/15/18 AA............ 2,000,000 1,958,040
Fairfax County Industrial
Development Authority Revenue
5.25%, 8/15/19 AA............ 500,000 473,995
Fairfax County Resource
Recovery Revenue
7.75%, 2/01/11 A+............ 300,000 323,610
Fairfax County Water Authority
Revenue
5.80%, 1/01/16 AAA........... 500,000 512,195
6.00%, 4/01/22 AA-........... 1,000,000 1,028,750
Hampton General Obligation
6.00%, 1/15/14 AA-........... 350,000 363,353
Hanover City Water & Sewer
Revenue
5.25%, 2/01/16 AAA........... 500,000 485,320
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Henrico County Industrial
Development Authority Revenue
7.125%, 8/01/21 AA........... $ 400,000 $ 449,444
Henrico County Industrial
Development Authority Floating
Rate Notes
5.10%, 5/01/24+ VMIG1........ 200,000 200,000
Henrico County Water & Sewer
Revenue
6.45%, 5/01/02 AAA........... 300,000 327,144
6.25%, 5/01/13 AA-........... 500,000 514,525
Henry County General Obligation
8.825%, 11/01/05 Aaa......... 200,000 258,652
Isle of Wight County General
Obligation
6.70%, 1/01/12 A............. 200,000 215,054
James City County General
Obligation
5.25%, 12/15/15 AAA.......... 1,000,000 971,910
Leesburg General Obligation
5.50%, 6/01/13 AAA........... 500,000 500,365
Loudoun County Sanitation
Authority Revenue
6.25%, 1/01/10 AAA........... 550,000 585,926
6.25%, 1/01/16 AAA........... 500,000 524,670
Metropolitan Washington, D.C.
Airport Authority Revenue
6.50%, 10/01/06 AAA.......... 300,000 325,791
5.90%, 10/01/09 AAA.......... 300,000 310,536
7.60%, 10/01/14 AA-.......... 125,000 137,735
Newport News General Obligation
6.125%, 6/01/12 AA-.......... 270,000 283,316
Norfolk General Obligation
5.75%, 6/01/13 AAA........... 500,000 509,065
Norfolk Water Revenue
5.75%, 11/01/12 AAA.......... 500,000 512,520
5.875%, 11/01/15 AAA......... 500,000 513,670
Portsmouth General Obligation
6.375%, 8/01/11 AA-.......... 200,000 210,656
Portsmouth Redevelopment &
Housing Authority Revenue
6.05%, 12/01/08 AAA.......... 500,000 525,065
</TABLE>
- 5 -
<PAGE>
STATEMENT OF NET ASSETS
VIRGINIA PORTFOLIO (Continued)
December 31, 1996
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Potomac & Rappahannock
Transportation District
Commission Revenue
6.70%, 3/01/11 AAA........... $ 600,000 $ 638,466
Prince William County General
Obligation
6.20%, 12/01/11 AA........... 300,000 314,163
Prince William County
Industrial Development
Authority Revenue
7.25%, 3/01/00 NR............ 250,000 275,810
Prince William County Park
Authority Revenue
6.875%, 10/15/16 A-.......... 500,000 533,320
Richmond Metro Authority
Revenue
6.10%, 7/15/06 AAA........... 300,000 324,294
6.375%, 7/15/16 AAA.......... 500,000 530,015
Southeastern Virginia Public
Service Authority Revenue
5.15%, 7/01/09 AAA........... 500,000 494,105
Suffolk General Obligation
6.00%, 8/01/13 A............. 500,000 513,745
Upper Occoquan Sewer Authority
Revenue
5.15%, 7/01/20 AAA........... 1,000,000 941,590
Virginia Beach General
Obligation
6.50%, 8/01/07 AA............ 500,000 544,995
5.90%, 9/01/08 AA............ 500,000 530,580
5.85%, 11/01/12 AA........... 500,000 517,335
Virginia College Building
Authority Revenue
6.625%, 5/01/13 A-........... 300,000 313,401
5.75%, 1/01/14 AA............ 500,000 506,305
Virginia Housing Development
Authority Revenue
7.40%, 7/01/09 AA+........... 200,000 208,444
6.625%, 7/01/13 A+........... 275,000 284,787
5.95%, 7/01/13 AA+........... 500,000 510,965
5.35%, 7/01/16 AA+........... 500,000 472,815
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Virginia Port Authority Revenue
5.90%, 7/01/16 A+............ $ 500,000 $ 509,195
Virginia Public Building
Authority Revenue
5.00%, 8/01/15 AA............ 1,000,000 942,210
5.20%, 8/01/16 AA............ 1,000,000 964,250
Virginia Public School
Authority Revenue
6.20%, 8/01/13 AA............ 320,000 340,416
5.00%, 8/01/16 AA............ 500,000 470,230
Virginia Resource Authority
Revenue
6.75%, 10/01/04 NR........... 240,000 272,126
6.00%, 10/01/12 AA........... 400,000 408,900
6.45%, 4/01/13 AA............ 300,000 316,086
Virginia Transportation Board
Revenue
6.00%, 4/01/10 AA............ 300,000 313,026
-----------
TOTAL INVESTMENTS 97.13%
(Cost $30,263,876*)...................... 31,427,273
OTHER ASSETS LESS LIABILITIES
2.87%.................................... 927,471
-----------
NET ASSETS (NOTE 5) 100.00%................ $32,354,744
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 2,917,394 Shares
Outstanding)............................. $11.09
-----------
-----------
</TABLE>
*Same cost is used for Federal income tax purposes.
Security ratings are unaudited.
See Notes to Financial Statements.
- -------------
+--Daily or Weekly Tender Bond
- 6 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
MARYLAND PORTFOLIO
December 31, 1996
<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 $ 770,508
6.00%, 7/15/13 AA+........... 500,000 518,675
6.30%, 8/01/16 AA+........... 500,000 535,860
6.30%, 8/01/19 AA+........... 725,000 774,409
Anne Arundel County Pollution
Control Revenue
6.00%, 4/01/24 A............. 1,230,000 1,250,812
Anne Arundel County Solid Waste
Project General Obligation
5.50%, 9/01/15 AA+........... 500,000 489,680
Baltimore City General
Obligation
6.40%, 10/15/02 AAA.......... 465,000 509,054
5.50%, 10/15/10 AAA.......... 1,000,000 1,020,800
Baltimore City Revenue
6.00%, 7/01/15 AAA........... 500,000 523,450
Baltimore County General
Obligation
6.125%, 7/01/08 AAA.......... 500,000 537,765
6.70%, 7/01/11 AAA........... 600,000 630,348
5.50%, 6/01/12 AAA........... 1,000,000 1,017,780
6.70%, 7/01/16 AAA........... 500,000 525,140
Baltimore Port Facility Revenue
6.50%, 12/01/10 AA-.......... 400,000 432,744
6.50%, 10/01/11 AA-.......... 250,000 269,505
6.50%, 10/01/11 AA-.......... 250,000 269,505
Calvert County Pollution
Control Revenue
5.55%, 7/15/14 A............. 1,000,000 987,840
Carroll County General
Obligation
6.10%, 10/01/08 AA........... 380,000 410,085
7.10%, 10/01/09 AA........... 235,000 261,376
7.25%, 10/01/15 AA........... 300,000 331,908
5.30%, 11/01/15 AA........... 1,000,000 985,870
6.50%, 10/01/24 AA........... 225,000 244,805
Frederick County General
Obligation
6.30%, 7/01/06 AA-........... 500,000 547,145
6.125%, 12/01/07 AAA......... 500,000 537,150
5.60%, 7/01/11 AA-........... 500,000 511,150
City of Frederick General
Obligation
6.00%, 10/01/11 AAA.......... 300,000 313,476
Howard County Metropolitan
District General Obligation
6.00%, 8/15/19 AA+........... 500,000 510,045
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Howard County Public
Improvement General Obligation
6.00%, 5/15/14 AA+........... $ 500,000 $ 515,415
5.50%, 2/15/16 AA+........... 1,500,000 1,511,610
Howard County Special
Facilities Revenue
6.10%, 2/15/13 AA-........... 500,000 515,110
Laurel General Obligation
6.70%, 7/01/01 AAA........... 600,000 665,130
Maryland Community Development
Administration Revenue
6.60%, 4/01/06 Aa............ 200,000 211,050
7.375%, 4/01/10 Aa........... 495,000 519,413
7.25%, 4/01/11 Aa............ 200,000 211,260
7.15%, 4/01/11 Aa............ 405,000 424,845
7.25%, 4/01/16 Aa............ 275,000 281,108
7.70%, 5/15/20 Aa............ 250,000 263,293
7.40%, 5/15/24 Aa............ 125,000 131,711
7.25%, 4/01/27 Aa............ 385,000 404,212
Maryland General Obligation
5.00%, 10/15/11 AAA.......... 1,000,000 976,440
Maryland Health & Higher
Education Facilities Authority
Revenue
5.70%, 7/01/09 A............. 500,000 512,170
5.25%, 7/01/13 AAA........... 500,000 482,355
6.125%, 7/01/14 AAA.......... 500,000 521,200
5.50%, 10/01/16 AAA.......... 1,000,000 1,000,000
6.50%, 7/01/17 A............. 200,000 207,188
6.125%, 7/01/19 AAA.......... 500,000 519,330
Maryland Industrial Development
Revenue
7.125%, 7/01/06 A-........... 300,000 310,941
Maryland Stadium Authority
Sports Revenue
7.375%, 12/15/04 AA-......... 425,000 465,473
7.50%, 12/15/10 AA-.......... 695,000 758,196
5.875%, 12/15/13 AAA......... 1,000,000 1,029,590
5.375%, 12/15/15 AA.......... 500,000 490,090
7.60%, 12/15/19 AA-.......... 500,000 542,350
Maryland Transportation
Authority Revenue
6.50%, 7/01/04 A+............ 500,000 540,210
Maryland Water Quality Finance
Administration Revenue
7.10%, 9/01/01 AAA........... 230,000 259,468
6.00%, 9/01/15 AA............ 1,000,000 1,033,370
</TABLE>
- 7 -
<PAGE>
STATEMENT OF NET ASSETS
MARYLAND PORTFOLIO (Continued)
December 31, 1996
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Montgomery County Housing
Opportunity Commission Revenue
6.70%, 7/01/11 Aa............ $ 380,000 $ 402,040
7.80%, 7/01/12 N/R........... 200,000 207,460
7.875%, 7/01/13 A............ 400,000 401,204
7.375%, 7/01/17 Aa........... 180,000 187,898
6.65%, 7/01/17 Aa............ 180,000 188,910
7.00%, 7/01/23 A............. 250,000 262,157
Montgomery County Parking
Revenue
6.25%, 6/01/09 AAA........... 300,000 318,975
Montgomery County Waste
Disposal Authority Revenue
5.875%, 6/01/13 AAA.......... 250,000 250,000
North East Maryland Waste
Disposal Authority Revenue
6.20%, 7/01/10 A............. 500,000 508,580
6.30%, 7/01/16 A............. 1,000,000 1,012,450
Prince Georges County General
Obligation
5.75%, 3/15/08 AAA........... 500,000 522,210
Prince Georges County Housing
Authority Revenue
6.35%, 7/20/20 AAA........... 700,000 723,555
Prince Georges County Pollution
Control Revenue
5.75%, 3/15/10 A............. 1,000,000 1,027,890
Prince Georges County Solid
Waste Management System Revenue
6.80%, 6/30/00 AAA........... 250,000 274,230
7.00%, 6/30/00 AAA........... 250,000 275,837
St. Mary's County General
Obligation
5.85%, 11/01/18 AAA.......... 500,000 509,620
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
University of Maryland System
Auxiliary Revenue
6.375%, 4/01/09 AA+.......... $ 500,000 $ 539,000
5.60%, 4/01/12 AA+........... 1,000,000 1,018,290
5.60%, 4/01/16 AA+........... 1,000,000 1,010,000
Washington County General
Obligation
5.125%, 1/01/12 AAA.......... 500,000 488,240
5.25%, 1/01/16 AAA........... 500,000 482,525
Washington, D.C. Metropolitan
Area Transit Authority Revenue
6.00%, 7/01/10 AAA........... 275,000 292,575
5.25%, 7/01/14 AAA........... 650,000 633,308
Washington Suburban Sanitary
District General Obligation
6.20%, 6/01/09 AA............ 300,000 320,589
6.20%, 6/01/12 AA............ 900,000 952,488
-----------
TOTAL INVESTMENTS 98.69%
(Cost $42,319,545*)...................... 43,829,444
OTHER ASSETS LESS LIABILITIES
1.31%.................................... 580,913
-----------
NET ASSETS (NOTE 5) 100.00%................ $44,410,357
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 4,116,494 Shares
Outstanding)............................. $10.79
-----------
-----------
</TABLE>
*Same cost is used for Federal income tax purposes.
Security ratings are unaudited.
See Notes to Financial Statements.
- 8 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Money
Market Virginia Maryland
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME (Note 1).......................................... $ 672,036 $ 1,877,579 $ 2,784,078
----------- ----------- -----------
EXPENSES
Investment Advisory Fee (Note 2).................................. 98,353 203,550 297,831
Administrative Fee (Note 2)....................................... 49,176 97,704 142,959
----------- ----------- -----------
Total Expenses.................................................. 147,529 301,254 440,790
----------- ----------- -----------
NET INVESTMENT INCOME............................................... 524,507 1,576,325 2,343,288
----------- ----------- -----------
Net Realized Gain on Investment Transactions........................ -- 262,689 484,951
Net Change in Unrealized Appreciation (Depreciation) of
Investments......................................................... -- (932,337) (1,400,547)
----------- ----------- -----------
NET LOSS ON INVESTMENTS............................................. -- (669,648) (915,596)
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $ 524,507 $ 906,677 $ 1,427,692
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
- 9 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31,
<TABLE>
<CAPTION>
Money Market Virginia Maryland
Portfolio Portfolio Portfolio
-------------------------- ------------------------- -------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net Investment Income.......................... $ 524,507 $ 685,821 $ 1,576,325 $ 1,616,115 $ 2,343,288 $ 2,458,343
Net Realized Gain on Investment Transactions... -- -- 262,689 520,780 484,951 703,293
Net Change in Unrealized Appreciation
(Depreciation) of Investments................ -- -- (932,337) 2,211,797 (1,400,547) 3,181,300
------------ ------------ ------------ ----------- ------------ -----------
Net Increase in Net Assets Resulting from
Operations................................... 524,507 685,821 906,677 4,348,692 1,427,692 6,342,936
------------ ------------ ------------ ----------- ------------ -----------
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income (Note 1)............ (524,507) (685,821) (1,575,364) (1,616,115) (2,341,219) (2,462,951)
From Net Realized Capital Gains................ -- -- -- -- -- --
------------ ------------ ------------ ----------- ------------ -----------
Total Distributions to Shareholders............ (524,507) (685,821) (1,575,364) (1,616,115) (2,341,219) (2,462,951)
------------ ------------ ------------ ----------- ------------ -----------
FROM SHARE
TRANSACTIONS
Net Proceeds from Sales of Shares.............. 33,109,020 35,510,140 9,574,030 6,434,659 6,196,673 8,322,830
Reinvestment of Distributions.................. 501,351 654,122 1,309,667 1,335,827 1,976,301 2,084,415
Cost of Shares Redeemed........................ (35,493,325) (40,978,186) (11,328,124) (4,964,282) (12,573,794) (8,947,989)
------------ ------------ ------------ ----------- ------------ -----------
Net Increase (Decrease) in Net Assets Resulting
from Share Transactions...................... (1,882,954) (4,813,924) (444,427) 2,806,204 (4,400,820) 1,459,256
------------ ------------ ------------ ----------- ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ (1,882,954) (4,813,924) (1,113,114) 5,538,781 (5,314,347) 5,339,241
NET ASSETS - Beginning of Year................... 20,772,476 25,586,400 33,467,858 27,929,077 49,724,704 44,385,463
------------ ------------ ------------ ----------- ------------ -----------
NET ASSETS - End of Year......................... $18,889,522 $20,772,476 $32,354,744 $33,467,858 $44,410,357 $49,724,704
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
SHARES
Sold........................................... 33,089,461 35,510,140 871,229 592,898 576,046 780,823
Issued in Reinvestment of Distributions........ 501,351 654,122 118,996 122,110 184,046 195,235
Redeemed....................................... (35,493,325) (40,978,186) (1,030,689) (454,301) (1,170,922) (839,368)
------------ ------------ ------------ ----------- ------------ -----------
Net Increase (Decrease) in Shares.............. (1,902,513) (4,813,924) (40,464) 260,707 (410,830) 136,690
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
</TABLE>
See Notes to Financial Statements.
- 10 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of Year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income............................ 0.027 0.030 0.020 0.016 0.023
Net Realized and Unrealized Gains on
Securities..................................... -- -- -- -- --
--------- --------- --------- --------- ---------
Total from Investment Operations............... 0.027 0.030 0.020 0.016 0.023
--------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income....................... (0.027) (0.030) (0.020) (0.016) (0.023)
From Net Realized Capital Gains.................. -- -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions to Shareholders............ (0.027) (0.030) (0.020) (0.016) (0.023)
--------- --------- --------- --------- ---------
Net Increase in Net Asset Value.................... -- -- -- -- --
--------- --------- --------- --------- ---------
Net Asset Value - End of Year...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN.............................. 2.69% 3.09% 2.02% 1.66% 2.25%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... 0.75% 0.75% 0.75% 0.78% 0.80%
Net Investment Income.............................. 2.67% 3.04% 1.99% 1.65% 2.25%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate............................ -- -- -- -- --
Net Assets at End of Year (000's omitted).......... $ 18,890 $ 20,772 $ 25,586 $ 23,283 $ 25,935
Number of Shares Outstanding at End of Year (000's
omitted)......................................... 18,890 20,792 25,604 23,312 25,964
</TABLE>
See Notes to Financial Statements.
- 11 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
VIRGINIA PORTFOLIO
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of Year................ $ 11.31 $ 10.36 $ 11.51 $ 10.84 $ 10.63
--------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income............................ 0.534 0.564 0.578 0.582 0.610
Net Realized and Unrealized Gains (Losses) on
Securities..................................... (0.221) 0.953 (1.150) 0.670 0.210
--------- --------- --------- --------- ---------
Total from Investment Operations............... 0.313 1.517 (0.572) 1.252 0.820
--------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income....................... (0.533) (0.564) (0.578) (0.582) (0.610)
From Net Realized Capital Gains.................. -- -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions to Shareholders............ (0.533) (0.564) (0.578) (0.582) (0.610)
--------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset Value......... (0.22) 0.95 (1.15) 0.67 0.21
--------- --------- --------- --------- ---------
Net Asset Value - End of Year...................... $ 11.09 $ 11.31 $ 10.36 $ 11.51 $ 10.84
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN.............................. 2.91% 14.92% (5.02)% 11.80% 7.98%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... 0.93% 0.77% 0.55% 0.50% 0.50%
Expenses Before Reimbursement from Adviser......... 0.93% 0.93% 0.93% 0.93% 0.93%
Net Investment Income.............................. 4.84% 5.17% 5.35% 5.15% 5.71%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate............................ 46% 55% 33% 43% 50%
Net Assets at End of Year (000's omitted).......... $ 32,355 $ 33,468 $ 27,929 $ 34,371 $ 25,513
Number of Shares Outstanding at End of Year (000's
omitted)......................................... 2,917 2,958 2,697 2,985 2,354
</TABLE>
See Notes to Financial Statements.
- 12 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
MARYLAND PORTFOLIO
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of Year................ $ 10.98 $ 10.11 $ 11.27 $ 10.60 $ 10.39
--------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income............................ 0.528 0.550 0.565 0.568 0.594
Net Realized and Unrealized Gains (Losses) on
Securities..................................... (0.190) 0.869 (1.157) 0.670 0.210
--------- --------- --------- --------- ---------
Total from Investment Operations............... 0.338 1.419 (0.592) 1.238 0.804
--------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income....................... (0.528) (0.551) (0.565) (0.568) (0.594)
From Net Realized Capital Gains.................. -- -- (0.003) -- --
--------- --------- --------- --------- ---------
Total Distributions to Shareholders............ (0.528) (0.551) (0.568) (0.568) (0.594)
--------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset Value......... (0.19) 0.87 (1.16) 0.67 0.21
--------- --------- --------- --------- ---------
Net Asset Value - End of Year...................... $ 10.79 $ 10.98 $ 10.11 $ 11.27 $ 10.60
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN.............................. 3.21% 14.35% (5.24)% 11.91% 8.00%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... 0.93% 0.77% 0.55% 0.50% 0.50%
Expenses Before Reimbursement from Adviser......... 0.93% 0.93% 0.93% 0.93% 0.93%
Net Investment Income.............................. 4.92% 5.16% 5.36% 5.13% 5.67%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate............................ 31% 37% 38% 30% 21%
Net Assets at End of Year (000's omitted).......... $ 44,410 $ 49,725 $ 44,385 $ 58,094 $ 43,921
Number of Shares Outstanding at End of Year (000's
omitted)......................................... 4,116 4,527 4,391 5,157 4,145
</TABLE>
See Notes to Financial Statements.
- 13 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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
December 31, 1996, 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 year ended December 31,
1996. 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
- 14 -
<PAGE>
Money Market Portfolio, and 0.30% of the average net assets of the Virginia and
Maryland Portfolios.
3. SECURITIES TRANSACTIONS
Security transactions are recorded on the trade date. For the year ended
December 31, 1996, purchases and sales (including maturities), of securities,
excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
Virginia Maryland
Portfolio Portfolio
----------- -----------
<S> <C> <C>
Purchases...................................................... $14,760,466 $14,666,158
----------- -----------
Sales.......................................................... $15,463,095 $18,848,087
----------- -----------
</TABLE>
4. NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS
As of December 31, 1996, net unrealized appreciation of investments in the
Virginia Portfolio for Federal income tax purposes aggregated $1,163,397 of
which $1,190,533 related to appreciated investments and $27,136 related to
depreciated investments. In the Maryland Portfolio, net unrealized appreciation
of investments for Federal income tax purposes totaled $1,509,899 of which
$1,550,245 related to appreciated investments and $40,346 related to depreciated
investments.
5. NET ASSETS
At December 31, 1996, net assets consisted of the following:
<TABLE>
<CAPTION>
Money
Market Virginia Maryland
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Paid-in-Capital....................................................... $18,889,522 $31,212,566 $43,355,179
Undistributed Net Investment Income................................... -- 961 2,069
Accumulated Net Realized Loss on Investments.......................... -- (22,180) (456,790)
Net Unrealized Appreciation of Investments............................ -- 1,163,397 1,509,899
----------- ----------- -----------
NET ASSETS............................................................ $18,889,522 $32,354,744 $44,410,357
----------- ----------- -----------
----------- ----------- -----------
</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 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
of Fund for Tax-Free Investors, Inc.:
We have audited the statements of net assets of the Money Market, Virginia and
Maryland Portfolios of Fund for Tax-Free Investors, Inc. (the Fund) as of
December 31, 1996, the related statements of operations for the year then ended
and of changes in net assets for the years ended December 31, 1996 and 1995, and
the financial highlights for each of the five years in the period ended December
31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1996 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the net assets of the Money Market, Virginia
and Maryland Portfolios of Fund for Tax-Free Investors, Inc. at December 31,
1996, the results of their operations, the changes in their net assets, and the
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
January 24, 1997
- 16 -
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<PAGE>
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<PAGE>
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<PAGE>
[Logo]
FUND FOR TAX-FREE
INVESTORS
-------------------
Annual Report
December 31, 1996
