As Filed With The Securities And Exchange Commission on April 30, 1998.
File Nos. 2-83299 and 811-3720
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 16 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 16 (X)
FUND FOR TAX-FREE INVESTORS, INC.
(Exact Name of Registrant as Specified in Charter)
4922 Fairmont Avenue, Bethesda, Maryland 20814
(Address of Principal Executive Offices) (Zip Code)
(301) 657-1500
(Registrant's Telephone Number, Including Area Code)
Timothy N. Coakley
4922 Fairmont Avenue
Bethesda, Maryland 20814
(Name and Address of Agent for Service of Process)
Approximate Date of Commencement of the Proposed Public Offering of the
Securities:
It is proposed that this filing will become effective (check appropriate box):
___ immediately upon filing pursuant to paragraph (b) of rule 485.
X on May 1, 1998 pursuant to paragraph (b) (1) (v) of rule 485.
___ 60 days after filing pursuant to paragraph (a) (1) of rule 485.
___ on (date) pursuant to paragraph (a) (1) of rule 485.
___ 75 days after filing pursuant to paragraph (a) (2) of rule 485.
___ on (date) pursuant to paragraph (a) (2) of rule 485.
If appropriate, check the following box:
___ This post-effective amendment designates a new effective
date for a previously-filed post-effective amendment.
The Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Rule 24f-2 Notice for the Registrant's
fiscal year ended December 31, 1997 was filed on February 27, 1998.
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
Form N-1A Location in
Item No. Registration Statement
Part A. Information Required in Prospectus
1. Cover Page Outside Front Cover Page
of Prospectus
2. Synopsis Fee Table
3. Condensed Financial Financial Highlights
Information
4. General Description of Organization and
Registrant Description of Common
Stock; Investment
Objective and Policies;
Management of the Fund
5. Management of the Fund Management of the Fund
5A. Management's Discussion Management's Discussion
of Fund Performance of Fund Performance
6. Capital Stock and Other Organization and
Securities Description Common Stock;
Dividends and
Distribution; Taxes
7. Purchase of Securities How to Invest in the
Being Offered Portfolio(s); Exchanges;
Net Asset Value
8. Redemption or How to Redeem an
Repurchase Investment (Withdrawals)
9. Legal Proceedings Not Applicable
Part B: Information Required In
Statement of Additional Information
10. Cover Page Outside Front Cover Page
of Statement of
Additional Information
11. Table of Contents Table of Contents
12. General Information and Not Applicable
History
13. Investment Objectives Investment Policies;
and Policies Investment Restrictions
14. Management of the Management of the Fund
Registrant
15. Control Persons and Principal Holders of
Principal Securities
Holders of Securities
16. Investment Advisory and Management of the Fund
Other Services
17. Brokerage Allocation Investment Policies
18. Capital Stock and Other Not Applicable
Securities
19. Purchase, Redemption Not Applicable
and Pricing of
Securities
Being Offered
20. Tax Status Dividends, Distributions,
and Taxes
21. Underwriters Management of the Fund
22. Calculations of Performance Information;
Performance Data Calculation of Return
Quotations
23. Financial Statements Financial Statements
Part C: Other Information
24. Financial Statements Financial Statements and
and Exhibits Exhibits
25. Persons Controlled by Persons Controlled by or
or Under Under Common Control
Common Control
26. Number of Holders of Numbers of Holders of
Securities Securities
27. Indemnification Indemnification
28. Business and Other Business and Other
Connections Connections of Investment
of Investment Adviser Adviser
29. Principal Underwriters Principal Underwriters
30. Location of Accounts Location of Accounts and
and Records Records
31. Management Services Management Services
32. Undertakings Undertakings
33. Signatures Signatures
<PAGE>
Fund for Tax-Free Investors, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
(800) 343-3355 (301) 657-1500
Rushmore Tax-Free Money Market Portfolio
Fund for Tax-Free Investors, Inc. (the "Fund") is a no-load, open-end,
management company consisting of three separate portfolios, Tax-Free
Money Market Portfolio, Rushmore Maryland Tax-Free Portfolio and
Rushmore Virginia Tax-Free Portfolio.
This Prospectus is a concise presentation of information about the Tax-
Free Money Market Portfolio (the "Portfolio").
Investors should read this Prospectus and retain it for future
reference. It is designed to set forth concisely the information an
investor should know before investing in the Portfolio. A Statement
of Additional Information ("SAI") dated May 1, 1998 containing
additional information about the Portfolio has been filed with the
Securities and Exchange Commission and is incorporated herein by
reference. A copy of the SAI may be obtained, without charge, by
writing or telephoning the Fund.
The shares offered by this Prospectus are not deposits or obligations
of any bank, are not endorsed or guaranteed by any bank, and are not
insured or guaranteed by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other U.S. Government agency.
The securities of the Portfolio are neither insured nor guaranteed by
the U.S. Government and there can be no assurance that the Portfolio
will be able to maintain a stable net asset value of $1.00 per share.
The date of this Prospectus is May 1, 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
The following table illustrates all expenses and fees that a
shareholder of the Fund will incur:
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Monthly Account Fee (applies to regular
accounts under $500)* $5.00
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees 0.50%
12b-1 Fees None
Other Expenses 0.25%
-----
Total Fund Operating Expenses 0.75%
=====
* A charge of $5 per month may be imposed on any account whose
average daily balance for the month falls below $500. See
"Transaction Charges."
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Years 5 Years 10 Years
$8 $25 $43 $95
The same level of expenses would be incurred if the investment were
held throughout the period indicated.
The preceding table of fees and expenses is provided to assist
investors in understanding the various costs and expenses that an
investor in the Portfolio will incur directly or indirectly. The 5%
assumed annual return is for comparison purposes only. The actual
annual return may be more or less depending on market conditions, and
the actual expenses an investor incurs in future periods may be more
or less than those shown above and will depend on the amount invested
and on the actual growth rate of the Portfolio. The example should
not be considered a representation of past or future expenses. For
more complete information about the various costs and expenses, see
"Management of the Fund" in the Prospectus and SAI.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Rushmore Tax-Free Money Market Portfolio
Audited
<CAPTION>
For The Year Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <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 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Income from Investment
Operations:
Net Investment Income 0.029 0.027 0.030 0.020 0.016 0.023 0.040 0.052 0.056 0.046
------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Total from Investment
Operations 0.029 0.027 0.030 0.020 0.016 0.023 0.040 0.052 0.056 0.046
------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Distributions to
Shareholders:
From Net Investment
Income (0.029) (0.027) (0.030) (0.020) (0.016) (0.023) (0.040) (0.052) (0.056) (0.046)
Total Distributions to
Shareholders (0.029) (0.027) (0.030) (0.020) (0.016) (0.023) (0.040) (0.052) (0.056) (0.046)
------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Net Increase in Net Asset
Value - - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Net Asset Value - End of
Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Return 2.93% 2.69% 3.09% 2.02% 1.66% 2.25% 4.01% 5.31% 5.76% 4.61%
Ratios to Average Net Assets:
Expenses 0.75% 0.75% 0.75% 0.75% 0.78% 0.80% 0.77% 0.79% 0.79% 0.80%
Net Investment Income 2.89% 2.67% 3.04% 1.99% 1.65% 2.25% 4.01% 5.19% 5.62% 4.56%
Supplementary Data:
Net Assets at
End of Year (000s
omitted) $19,177 $18,890 $20,772 $25,586 $23,283 $25,935 $29,707 $43,684 $42,840 $48,715
Number of Shares
Outstanding at
End of Year (000s
omitted) 19,177 18,890 20,792 25,604 23,312 25,964 29,736 43,716 42,871 48,747
The auditors' report is incorporated by reference in the registration statement. The auditors' report and further information
about the performance of the Portfolio are contained in the annual report to shareholders which may be obtained without charge
by calling or writing the Fund.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is to provide investors with
maximum current income available from investments made primarily in
securities exempt from federal income tax, to the extent such
investment is consistent with safety of principal. The Portfolio will
pursue this objective through investment in a portfolio consisting
primarily of high quality, tax-exempt municipal securities selected on
the basis of liquidity and safety of principal.
As a fundamental policy, the Portfolio will invest at least 80% of the
value of its net assets in securities, the interest on which is exempt
from federal income taxes, including the individual alternative
minimum tax. This policy may not be changed without prior approval of
a majority of the Portfolio's outstanding voting shares.
INVESTMENT POLICIES AND PRACTICES
The Portfolio seeks to achieve its investment objective by investing
at least 80% of its total assets, under normal conditions, in short-
term, municipal obligations which, at the time of purchase, are rated
within the top two grades assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"). The Portfolio
may also purchase, without limitation, unrated municipal securities
if, in the opinion of the Adviser, they are of an investment quality
comparable to that of rated securities eligible for purchase by the
Portfolio.
The Portfolio may not borrow money, except that as a temporary
measure, the Portfolio may borrow money to facilitate redemptions.
Such a borrowing may be in an amount not to exceed 30% of the
Portfolio's total assets, taken at current value, before such
borrowing. The Portfolio may not purchase a portfolio security if a
borrowing by the Portfolio is outstanding.
The Portfolio will not invest in securities having a remaining
maturity greater than 397 days at the time of purchase, nor will the
dollar-weighted average maturity of its portfolio exceed 90 days. The
Portfolio will value its investment securities at amortized cost and
seek to maintain, although it cannot assure, a constant net asset
value of $1.00 per share.
Although it is the intention of the Portfolio to invest all of its
assets in municipal securities, market conditions may arise from time
to time that limit the availability of such obligations. During such
periods, the Portfolio may invest up to 20% of its assets in short-
term, taxable obligations of the United States government, its
agencies and instrumentalities, or repurchase agreements secured by
such securities. A repurchase agreement arises when a buyer purchases
a security and simultaneously agrees to sell it to the seller at an
agreed upon future date, normally one day or a few days later. The
resale price is greater than the purchase price, reflecting an agreed
upon market rate which is effective for the period of time the buyer's
money is invested.
The Portfolio will invest in taxable securities only as a temporary
measure, either because of their liquidity or because of the
unavailability of short-term, tax-exempt securities meeting the
quality characteristics specified above. Income from such securities
may be taxable for federal and/or state income tax purposes.
MUNICIPAL SECURITIES
Municipal securities are debt obligations of states, cities,
municipalities and other public authorities and are principally
classified as notes and bonds. The yields on municipal securities are
dependent on a variety of factors, including the general level of
interest rates, the creditworthiness of a particular issuer, the size
of a specific issue, the maturity date of the issue, and its rating by
the various rating services. The market value of outstanding
municipal securities will also vary with the changes in interest rates
and with rating changes of the securities.
Municipal Bonds
Municipal bonds generally have maturities of more than one year when
issued and are issued to obtain funds for various public purposes.
Municipal bonds may be categorized as "general obligation" or
"revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its
full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are secured by the net revenue derived from
a particular facility or group of facilities or, in some cases, the
proceeds of a special excise or other specific revenue source, but
not by the general taxing power. Industrial development and
pollution control bonds are municipal bonds which are issued by or
on behalf of public authorities to provide funding for the
construction, equipment, repair or improvement of various privately-
operated facilities. Industrial development and pollution control
bonds are, in most cases, revenue bonds and do not generally carry
the pledge of credit of the issuing municipality or public
authority. The Portfolio may invest in either general obligation or
revenue bonds.
Municipal Notes
Municipal notes generally are used to provide for short-term capital
needs and ordinarily have maturities of one year or less. The
Portfolio intends to invest in various types of municipal notes,
including tax anticipation notes, revenue anticipation notes,
construction loan notes, and tax-exempt commercial paper.
"When-Issued" Securities
New issues of municipal securities are often sold on a "when-issued"
basis; that is, payment and delivery of the securities normally
occur 15 to 45 days after the date of the commitment to purchase.
At the time of the purchase commitment, both the interest and
principal amount are fixed. During the period between the purchase
commitment and actual delivery, no interest accrues to the purchaser
and the market value of the security may fluctuate. The Portfolio
intends to enter into purchase orders for "when-issued" securities
with the intention of actually taking delivery of such securities,
but it may sell "when-issued" securities prior to delivery if it is
deemed advisable as a matter of investment strategy. The Portfolio
will maintain short-term assets in a separate account with the
Fund's custodian bank in an amount equal in value to the amount of
the purchase commitment for "when-issued" securities. The Portfolio
does not intend to invest more than 25% of its net assets in "when-
issued" securities.
Variable Rate Securities
The Portfolio may purchase certain tax-exempt municipal obligations
which have a variable rate of interest. Such obligations bear
interest at rates which vary with changes in specific market rates
or indices, such as the bank prime rate. These securities will be
permitted for inclusion in the Money Market Portfolio even though
they may have a maturity which is greater than one year. The
Portfolio intends to invest in long-term variable rate securities in
order to take advantage of the higher yield that is usually paid on
long-term securities. Investment in these securities will be made
only if a secondary market for them exists or if the Portfolio may
redeem them on demand within seven days.
The Adviser will periodically analyze the credit-worthiness of any
unrated variable rate securities to ensure that such obligations
meet the quality standards of the Portfolio. Because variable rate
securities may have a maturity greater than one year, the Portfolio
will use as the basis of calculation for computing its dollar-
weighted average maturity the longer of (a) the notice period
required for demand of redemption by the holder or (b) the period
remaining until the next interest rate adjustment.
RISK CONSIDERATIONS
QUALITY
At least 80% of its investment portfolio will consist of high quality
notes rated A-l by S&P, or MIG 1, MIG 2, or P-l by Moody's, and of tax-
exempt municipal bonds holding one of the two highest ratings assigned
by Moody's (Aaa or Aa) or by S&P (AAA or AA) or, if unrated, are
believed by the Board of Directors to be of a quality comparable to
that of rated obligations eligible for purchase by the Portfolio.
MARKET RISK
Market risk is the risk of price fluctuations of a security and is
generally a function of the underlying credit rating of an issuer, the
maturity length of a security, a security's yield, and general
economic and interest rate conditions. Because, however, the
Portfolio will not invest in securities having a remaining maturity
greater than 397 days at the time of purchase, nor will the dollar-
weighted average maturity of its portfolio exceed 90 days, market risk
is minimized in the Portfolio.
CREDIT RISK
Credit risk is a function of the ability of the issuer to make timely
interest payments and to pay the principal at maturity.
The Portfolio is not required to sell a security which, once
purchased, ceases to be rated or has its rating reduced below the
minimum required for purchase by the Portfolio. However, the Adviser
will consider such event in determining whether the Portfolio should
continue to hold the security.
OTHER CONSIDERATIONS
The ability of the Portfolio to achieve its investment objective is
dependent on a number of factors. These factors include the ability
of the Adviser to choose suitable tax-exempt securities at a market
rate of return.
Except as stated above, the foregoing investment objective and
policies are not fundamental policies of the Portfolio and may be
changed by the Board of Directors of the Fund without shareholder
approval.
HOW TO INVEST IN THE PORTFOLIO
FACTS TO KNOW BEFORE YOU INVEST
The minimum initial investment is $2,500.
There is no minimum amount for subsequent investments.
Shares of the Portfolio are offered for sale continuously by the Fund.
There is no sales charge.
The Fund reserves the right to reject any purchase order.
All accounts will be held in book entry form. No certificates for
shares will be issued.
Orders received prior to 12 Noon, Eastern time, will be invested in
shares of the Portfolio at the next determined net asset value.
The Government securities market, in which the Portfolio buys and
sells its securities, usually requires immediate settlement in Federal
funds for all security transactions. Payments received by bank wire
can be converted immediately into Federal funds and will begin earning
dividends the same day. Payment for the purchase of Portfolio shares
not received in the form of Federal funds (i.e., by check) will begin
earning dividends the following day.
PURCHASING SHARES
By Mail
Complete an application and make a check payable to "Fund for Tax-
Free Investors, Inc." Send your completed and signed application
and check drawn on a U.S. bank to:
Fund for Tax-Free Investors, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 208l4
By Bank Wire
Speak to the branch manager of your bank. Request a transfer of
Federal funds to Rushmore Trust and Savings, FSB, instructing the
bank to wire transfer the money before 12 Noon, Eastern time to:
Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing No. 0550-71084
For Account of
Fund for Tax-Free Investors, Inc.
Account No. 029385770
After instructing your bank to transfer Federal funds, you must
telephone the Fund at (800) 622-1386 or (301) 657-1510 between 8:30
A.M. and 12 Noon Eastern time and tell us the amount you
transferred and the name of the bank sending the transfer. Your
bank may charge a fee for such services. Remember that it is
important to complete the wire transfer before 12 Noon Eastern
time.
Through Brokers
Investors may invest in the Portfolio by purchasing shares through
registered broker-dealers. Such broker-dealers who process orders
may charge a fee for such service.
HOW TO REDEEM AN INVESTMENT
(WITHDRAWALS)
FACTS TO KNOW BEFORE YOU REDEEM
An investor may withdraw all or any portion of his investment by
redeeming shares by writing or telephoning the Fund at (800) 622-1386
or (301) 657-1510 on any day that the Fund is open for business. The
shares will be redeemed at the next determined net asset value per
share after receipt of the order.
The proceeds of redemptions will be sent directly to the investor's
address of record. If the investor requests payment of redemptions to
a third party or to a location other than his address of record listed
on the account application, the request must be in writing and the
investor's signature must be guaranteed by an eligible institution.
Eligible institutions generally include banking institutions,
securities exchanges, associations, agencies or broker/dealers, and
"STAMP" program participants. There are no fees charged for
redemptions.
Normally, the Fund will make payment for all shares redeemed within
one business day. However, withdrawal requests upon investments that
have been made by check may be delayed up to ten calendar days
following such investment or until the check clears, whichever occurs
first. This delay is necessary to assure the Fund that investments
made by check are good funds. The proceeds of the redemption will be
forwarded promptly upon confirmation of receipt of good funds.
The right of redemption may be suspended, or the date of payment
postponed during the following periods: (a) periods during which the
New York Stock Exchange (the "NYSE") is closed (other than customary
weekend or holiday closings); (b) periods when trading on the NYSE is
restricted, or an emergency exists, as determined by the Securities
and Exchange Commission, so that disposal of the Fund's investments
for determination of net asset value is not reasonably practicable; or
(c) for such other periods as the Commission, by order, may permit for
protection of the Fund's investors.
After receipt of redemption instructions, shareholders may receive
monies by bank wire, check, or ACH. When the amount to be redeemed is
at least $5,000, the Fund, upon telephone or written instructions,
will wire transfer the amount to the investor's commercial bank or
brokerage account specified in the account application. For amounts
less than $5,000, investors may have redemption proceeds deposited
directly into an account specified on the account application or
request that a redemption check be delivered by mail to the address of
record.
REDEEMING SHARES
By Telephone
The privilege to initiate redemption transactions by telephone will
be made available to Fund shareholders automatically. Telephone
orders for redemptions must be received by 12 Noon Eastern time to
be effective that day. Telephone redemptions will only be sent to
the address of record or to bank accounts specified in the account
applications. When acting on instructions believed to be genuine,
the Fund will not be liable for any loss resulting from a
fraudulent telephone redemption request and the investor would bear
the risk of any such loss. The Fund will employ reasonable
procedures to confirm that redemption instructions communicated by
telephone are genuine; and if the Fund does not employ such
procedures, then the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. The Fund follows specific
procedures for transactions initiated by telephone, including among
others requiring some form of personal identification prior to
acting on instructions received by telephone, providing written
confirmation not later than five business days after such
transactions, and/or tape recording of telephone transactions.
Telephone redemption privileges may be terminated or modified by
the Fund upon 60 days notice to all shareholders of the Fund.
By Mail or Fax
Mail your instructions for Fax your instructions
redemption to: for redemption to:
Rushmore Trust and Savings, FSB (301) 657-1520
4922 Fairmont Avenue Attn: Shareholder Services
Bethesda, MD 20814
Attn: Shareholder Services
Include the following information:
- the name of the Portfolio and account number you are redeeming from;
- your name(s) and address as it appears on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
SHAREHOLDER ACCOUNTS
ACCOUNT STATEMENTS
The Portfolio maintains an account for each investor in full and
fractional shares. Statements of account will be sent monthly showing
the beginning balance, detail of all transactions for the month and
the ending balance. Confirmations of individual transactions in the
Money Market Portfolio will not be sent.
TRANSACTION CHARGES
In addition to charges described elsewhere in this Prospectus, the
Fund may impose a charge of $5 per month for any Portfolio account
whose average daily balance is below $500. The fee will continue to
be imposed during months when the account balance remains below $500.
This fee will be paid to Rushmore Trust and Savings, FSB. The fee
will not be imposed on tax-sheltered retirement plans or accounts
established under the Uniform Gifts or Transfers to Minors Act.
Because of the expense of handling small accounts, the Fund reserves
the right to involuntarily redeem an investor's account which falls
below $500 in total value in all Tax-Free Portfolios of the Fund due
to redemptions or exchanges after providing 60 days written notice.
The Fund may also assess a charge of $10 for items returned for
insufficient or uncollectible funds.
EXCHANGE PRIVILEGES
The Portfolio's shares may be exchanged, without cost, for shares of
any other Tax-Free Portfolio or for shares of Fund for Government
Investors, The Rushmore Fund, Inc., American Gas Index Fund, Inc., or
Cappiello-Rushmore Trust, on the basis of the respective net asset
values of the shares involved, provided such exchange is permitted
under the applicable laws of the state of the investor's residence.
Shareholders contemplating such an exchange should obtain and review
the prospectuses of those funds. Exchanges may be made by telephone or
letter. Written requests should be sent to Fund for Tax-Free
Investors, Inc., 4922 Fairmont Avenue, Bethesda, Maryland 20814 and
be signed by the record owner or owners. Telephone exchange requests
may be made by telephoning the Fund at (800) 622-1386 or (301) 657-
1510. To implement an exchange, shareholders should provide the
following information: account registration including address and
number, taxpayer identification number, number, percentage or dollar
value of shares to be redeemed, name and account number of the
portfolio to which the investment is to be transferred. Exchanges may
be made only if they are between identically registered accounts.
Telephone exchange privileges may be terminated or modified by the
Fund upon 60 days notice to all shareholders of the Fund.
ADDITIONAL INFORMATION ABOUT THE PORTFOLIO
PERFORMANCE DATA
From time to time the Portfolio advertises its "yield" and "effective
yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "yield" of the
Portfolio refers to the income generated by an investment in the
Portfolio over a seven-day period (which period will be stated in the
advertisement). That is, the amount of income generated by the
investment during that week is assumed to be generated each week over
a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the
income earned by an investment in the Portfolio is assumed to be
reinvested. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed
reinvestment.
For the seven-day period ended December 31, 1997, the Portfolio's
annualized yield was 3.22%. The annual effective yield was 3.32%.
NET ASSET VALUE
The Fund's net asset value per share will be determined as of 12 Noon,
Eastern time, on days when the New York Stock Exchange and the
custodian bank are open for business. The net asset value per share
is calculated by adding the appraised value of all securities and all
other assets, deducting liabilities and dividing by the number of
shares outstanding. To the extent market quotations are not readily
available, the Board of Directors will value the Portfolio's portfolio
securities in good faith.
In determining fair market value, the Portfolio may take into
consideration prices supplied by a pricing service, provided the use
of the pricing service has been approved by the Board of Directors.
Valuations provided by pricing services are generally determined
without exclusive regard to quoted prices. Generally, pricing
services consider in their valuation the market activity of similar
groups of securities, their yields, quality ratings, maturities, and
other characteristics.
The Directors will continuously review this method of valuation and
recommend changes which may be necessary to assure that the Fund's
portfolio instruments are valued at fair value.
The Portfolio intends to value its portfolio securities at their
amortized cost value pursuant to Rule 2a-7 under the Investment
Company Act of 1940. The Money Market Portfolio will seek to
maintain, but cannot assure, a constant net asset value of $1.00 per
share.
DIVIDENDS
The Portfolio distributes all of its net income on a daily basis. Net
income consists of all interest income accrued and discount earned,
less estimated expenses of the Portfolio. Capital gains, if any, will
be distributed on an annual basis.
Dividends are declared each day that the Portfolio is open for
business. Investors receive dividends in additional shares unless
they elect to receive cash. Payment, either in additional shares or
in cash, is made on a monthly basis at the net asset value on the
payable date. Investors wishing to change the method of receiving
dividends must notify the Portfolio in writing at least one week
before payment is to be made.
TAXES
The Portfolio has qualified (and intends to continue to qualify) as a
regulated investment company under Subchapter M of the Internal
Revenue Code. Because of this qualification the Portfolio will not be
liable for federal income taxes to the extent its earnings are
distributed. Additionally, the Portfolio qualifies to pay "exempt-
interest dividends" within the meaning of the Internal Revenue Code.
The qualification will continue if the Portfolio meets certain
requirements. One requirement is that at least 50% of the value of
the Portfolio's total assets at the close of each quarter of its
taxable year consist of obligations, on which the interest is exempt
from federal income tax.
Dividends derived from interest on municipal obligations, which
constitute exempt-interest dividends, will not be subject to federal
income tax, except to the extent such interest is subject to the
alternative minimum tax. Net interest on certain "private activity
bonds" issued on or after August 8, 1986 is treated as an item of tax
preference and may, therefore, be subject to both the individual and
corporate alternative minimum tax. To the extent provided by
regulations to be issued by the Secretary of the Treasury, exempt-
interest dividends from the Portfolio are to be treated as interest on
"private activity bonds" in proportion to the interest the Portfolio
receives from private activity bonds, reduced by allowable deductions.
Regarding dividends derived from taxable money market securities, the
amount received, subject to repurchase agreements and distributions of
the Portfolio's net short-term capital gains, if any, will be taxed as
ordinary income whether they are invested in additional shares of the
Portfolio or received in cash. The Portfolio anticipates that any
such amounts would be insubstantial in relation to the tax-exempt
interest generated by the Portfolio.
The exemption of interest income for federal income tax purposes may
not produce similar exemptions under the tax laws of state or local
taxing authorities. In general, only interest earned on obligations
issued by the state or locality in which the investor resides will be
exempt from state and local taxes. Shareholders should consult their
tax advisers concerning the tax status of the dividends from the
Portfolio in their own states and localities.
Statements as to the federal tax status of shareholders' dividends and
distributions will be mailed by February 15 of each year. The
Portfolio will also report to its shareholders annually the percentage
and source, on a state-by-state basis, of interest income received by
the Portfolio on municipal obligations.
Shareholders are required by law to certify that their tax
identification number is correct and that they are not subject to back-
up withholding. In the absence of this certification, the Fund is
required to withhold taxes at the rate of 31% on dividends, capital
gains distributions, and redemptions. Shareholders who are non-
resident aliens may be subject to a withholding tax on dividends
earned.
MANAGEMENT AND ORGANIZATION OF THE FUND
OFFICERS AND DIRECTORS
The Fund has a Board of Directors which is responsible for the general
supervision of the Fund's business. The day-to-day operations of the
Fund are the responsibility of the Fund's officers. A complete list
of the Fund's directors and officers is contained in the SAI.
INVESTMENT ADVISER AND ADMINISTRATIVE SERVICING AGENT
The Portfolio is provided investment advisory and management services
by Money Management Associates (the "Adviser"), 1001 Grand Isle Way,
Palm Beach Gardens, Florida 33418. The Adviser is a limited
partnership which was formed under the laws of the District of
Columbia on August 15, 1974. Its primary business since inception has
been to serve as the Adviser to Fund for Government Investors, The
Rushmore Fund, Inc., Fund for Tax-Free Investors, Inc. and American
Gas Index Fund, Inc. Daniel L. O'Connor, is the sole general partner
of the Adviser, and as such, exercises control of the Adviser.
Under an Agreement with the Adviser, the Portfolio pays the Adviser a
fee at an annual rate based on 0.50% of the net assets of the Money
Market Portfolio, 0.625% of the net assets of the Rushmore Virginia
Tax-Free Portfolio and 0.625% of the net assets of the Rushmore
Maryland Tax-Free Portfolio. The Rushmore Tax-Free Money Market
Portfolio's total operating expenses were 0.75% for the 1997 fiscal
year.
Effective September 1, 1993, the Board of Directors approved an
arrangement whereby Rushmore Trust and Savings, FSB, 4922 Fairmont
Avenue, Bethesda, Maryland 20814, a majority-owned subsidiary of the
Adviser, provides the Portfolio with custodial, transfer agency,
dividend-disbursing, and other shareholder services. The Portfolio
pays an annual fee of 0.25% (25/100 of 1%) of average daily net assets
for the Money Market Portfolio and 0.30% (30/100 of 1%) of average
daily net assets for the Rushmore Maryland Tax-Free and Rushmore
Virginia Tax-Free Portfolios for these services.
ORGANIZATION AND DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on April 8, 1983, and has a
present authorized capital of 200,000,000 shares of $.001 par value
common stock, which may be issued in three separate classes: the Money
Market Portfolio, the Rushmore Maryland Tax-Free Portfolio and the
Rushmore Virginia Tax-Free Portfolio.
All shares of the Fund are freely transferable. The shares do not
have preemptive rights, and none of the shares has any preference to
conversion, exchange, dividends, retirements, liquidation, redemption
or any other feature. Shares have equal voting rights, except that in
a matter affecting only a single Portfolio (such as the proposed sale
of all the assets of one Portfolio), only shares of that Portfolio may
be entitled to vote on the matter. Because the shares have non-
cumulative voting rights, the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors,
if they choose to do so. In such event, the holders of the remaining
less than 50% of the shares voting will not be able to elect any
directors.
The Board of Directors of the Fund has the authority to classify or
reclassify any unissued shares by fixing the number of shares in each
of the Portfolios.
Shareholders having inquiries about the Fund's organization or
operation should contact the Fund in writing at 4922 Fairmont Avenue,
Bethesda, Maryland 20814 or by telephone at (301) 657-1500.
<PAGE>
CONTENTS
Page [LOGO]
Fee Table
FUND FOR TAX-FREE INVESTORS
Financial Highlights
Tax-Free Money Market Portfolio
Investment Objective
Prospectus
Investment Policies and Practices
Risk Considerations
How to Invest in the Fund
Facts to Know Before You Invest
Purchasing Shares
May 1, 1998
How to Redeem an Investment (Withdrawals)
Facts to Know Before You Redeem
Redeeming Shares
Shareholder Accounts
Account Statements
Transaction Charges
Exchange Privileges
Additional Information About the Fund
Performance Data
Net Asset Value
Dividends
Taxes
Management and Organization of the Fund
Officers and Directors
Investment Adviser and Administrative
Servicing Agent
Organization and Description of
Common Stock
<PAGE>
Fund for Tax-Free Investors, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
(800) 343-3355 (301) 657-1500
Rushmore Maryland Tax-Free Portfolio
and
Rushmore Virginia Tax-Free Portfolio
Fund for Tax-Free Investors, Inc. (the "Fund") is a no-load, open-end
management company consisting of three separate portfolios, Rushmore
Tax-Free Money Market Portfolio, Rushmore Maryland Tax-Free Portfolio
and Rushmore Virginia Tax-Free Portfolio.
This Prospectus is a concise presentation of information about the
Rushmore Maryland Tax-Free Portfolio ("Maryland Portfolio") and the
Rushmore Virginia Tax-Free Portfolio ("Virginia Portfolio"), each a
non-diversified series of the Fund.
Investors should read this Prospectus and retain it for future
reference. It is designed to set forth concisely the information an
investor should know before investing in the Portfolios. A Statement
of Additional Information ("SAI") dated May 1, 1998 containing
additional information about the Portfolios has been filed with the
Securities and Exchange Commission and is incorporated herein by
reference. A copy of the SAI may be obtained, without charge, by
writing or telephoning the Fund.
The shares offered by this Prospectus are not deposits or obligations
of any bank, are not endorsed or guaranteed by any bank, and are not
insured or guaranteed by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other U.S. Government agency.
The date of this Prospectus is May 1, 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
The following table illustrates all expenses and fees that a
shareholder of each Portfolio will incur:
Maryland Virginia
Portfolio Portfolio
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees None None
Exchange Fee None None
Monthly Account Fee (applies to regular
accounts under $500)* $5.00 $5.00
Annual Fund Operating Expenses (as a
percentage of average net assets)
Management Fees 0.625% 0.625%
12b-1 Fees None None
Other Expenses 0.30% 0.30%
----- ------
Total Fund Operating Expenses 0.925% 0.925%
====== ======
* A charge of $5 per month may be imposed on any account whose
average daily balance for the month falls below $500. See
"Transaction Charges."
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Years 5 Years 10 Years
Maryland Portfolio $10 $30 $53 $117
Virginia Portfolio $10 $30 $53 $117
The same level of expenses would be incurred if the investment were
held throughout the period indicated. The preceding table is provided
to assist the investor in understanding the various costs and expenses
that the investor will incur directly or indirectly. The five percent
assumed annual return is for comparison purposes only. The actual
return may be more or less depending on market conditions. The
example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For more complete information about the various costs and expenses,
see "Management of the Fund" in the Prospectus and SAI.
Money Management Associates, the Fund's investment adviser, has agreed
to reimburse the Maryland and Virginia Portfolios (the "Portfolios")
for expenses (including the investment advisory fee, and excluding
interest and extraordinary legal expenses) which exceed one percent of
the average daily net assets per annum. No reimbursement was required
for the fiscal year ended December 31, 1997.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Rushmore Virginia Tax-Free Portfolio
Audited
<CAPTION>
For The Year Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -
Beginning of Year $ 11.09 $ 11.31 $ 10.36 $ 11.51 $ 10.84 $ 10.63 $ 10.17 $ 10.31 $ 10.12 $ 9.99
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.525 0.534 0.564 0.578 0.582 0.610 0.615 0.578 0.595 0.601
Net Realized and Unrealized
Gain (Loss) on Securities 0.387 (0.221) 0.953 (1.150) 0.670 0.210 0.460 (0.140) 0.190 0.130
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations 0.912 0.313 1.517 (0.572) 1.252 0.820 1.075 0.438 0.785 0.731
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to Shareholders:
From Net Investment Income (0.525) (0.533) (0.564) (0.578) (0.582) (0.610) (0.615) (0.578) (0.595) (0.601)
From Net Realized Gain (0.017) - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions
to Shareholders (0.542) (0.533) (0.564) (0.578) (0.582) (0.610) (0.615) (0.578) (0.595) (0.601)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Increase (Decrease) in
Net Asset Value 0.37 (0.22) 0.95 (1.15) 0.67 0.21 0.46 (0.14) 0.19 0.13
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value - End of Year $ 11.46 $ 11.09 $ 11.31 $ 10.36 $ 11.51 $ 10.84 $ 10.63 $ 10.17 $ 10.31 $ 10.12
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Return 8.45% 2.91% 14.92% (5.02%) 11.80% 7.98% 10.85% 4.42% 7.95% 7.56%
Ratios to Average Net Assets:
Expenses 0.93% 0.93% 0.77% 0.55% 0.50% 0.50% 0.61% 0.93% 0.94% 0.93%
Expenses Before Reimbursement
from Investment Adviser 0.93% 0.93% 0.93% 0.93% 0.93% 0.93% 0.93% 0.93% 0.94% 0.93%
Net Investment Income 4.70% 4.84% 5.17% 5.35% 5.15% 5.71% 5.91% 5.70% 5.82% 5.92%
Supplementary Data:
Portfolio Turnover Rate 27% 46% 55% 33% 43% 50% 74% 202% 150% 78%
Net Assets at End of Year
(000s omitted) $32,907 $32,355 $33,468 $27,929 $34,371 $25,513 $16,753 $ 7,333 $ 6,877 $ 7,772
Number of Shares Outstanding
at End of Year
(000s omitted) 2,872 2,917 2,958 2,697 2,985 2,354 1,576 721 667 768
The auditors' report is incorporated by reference in the registration statement. The auditors' report and further information
about the performance of the Portfolio are contained in the annual report to shareholders which may be obtained without charge
by calling or writing the Fund.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Rushmore Maryland Tax-Free Portfolio
Audited
<CAPTION>
For The Year Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -
Beginning of Year $ 10.79 $ 10.98 $ 10.11 $ 11.27 $ 10.60 $ 10.39 $ 9.99 $ 10.33 $ 10.34 $ 10.09
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net Investment Income 0.514 0.528 0.550 0.565 0.568 0.594 0.594 0.620 0.679 0.702
Net Realized and Unrealized
Gain (Loss) on Securities 0.311 (0.190) 0.87 (1.157) 0.670 0.210 0.400 (0.340) 0.010 0.250
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations 0.825 0.338 1.421 (0.592) 1.238 0.804 0.994 0.280 0.669 0.952
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to Shareholders:
From Net Investment Income (0.515) (0.528) (0.551) (0.565) (0.568) (0.594) (0.594) (0.620) (0.679) (0.702)
From Net Realized Gain - - - (0.003) - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions to
Shareholders (0.515) (0.528) (0.551) (0.568) (0.568) (0.594) (0.594) (0.620) (0.679) (0.702)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Increase (Decrease) in
Net Asset Value 0.31 (0.19) 0.87 (1.16) 0.67 0.21 0.40 (0.34) (0.01) 0.25
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value - End of Year $ 11.10 $ 10.79 $ 10.98 $ 10.11 $ 11.27 $ 10.60 $ 10.39 $ 9.99 $ 10.33 $ 10.34
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Return 7.85% 3.21% 14.35% (5.24%) 11.91% 8.00% 10.24% 2.89% 6.68% 9.67%
Ratios to Average Net Assets:
Expenses 0.93% 0.93% 0.77% 0.55% 0.50% 0.50% 0.62% 0.93% 0.92% 0.93%
Expenses Before Reimbursement
from Investment Adviser 0.93% 0.93% 0.93% 0.93% 0.93% 0.93% 0.93% 0.93% 0.92% 0.93%
Net Investment Income 4.73% 4.92% 5.16% 5.36% 5.13% 5.67% 5.85% 6.19% 6.56% 6.81%
Supplementary Data:
Portfolio Turnover Rate 22% 31% 37% 38% 30% 21% 61% 244% 173% 102%
Net Assets at End of Year
(000s omitted) $45,344 $44,410 $49,725 $44,385 $58,094 $43,921 $23,835 $ 9,750 $11,249 $ 9,337
Number of Shares Outstanding at
End of Year (000s omitted) 4,086 4,116 4,527 4,391 5,157 4,145 2,294 976 1,089 903
The auditors' report is incorporated by reference in the registration statement. The auditors' report and further information
about the performance of the Portfolio are contained in the annual report to shareholders which may be obtained without charge
by calling or writing the Fund.
</TABLE>
<PAGE>
TOTAL RETURN COMPARISON
Maryland and Virginia Tax-Free Portfolios
Lehman Brothers Muni Virginia Tax-Free Maryland Tax-Free
Bond Index Portfolio Portfolio
12/31/87 $10,000 $10,000 $10,000
12/31/88 $11,016 $10,756 $10,967
12/31/89 $12,205 $11,612 $11,700
12/31/90 $13,095 $12,125 $12,038
12/31/91 $14,685 $13,440 $13,269
12/31/92 $15,979 $14,513 $14,330
12/31/93 $17,943 $16,225 $16,038
12/31/94 $17,015 $15,410 $15,182
12/31/95 $19,984 $17,710 $17,360
12/31/96 $20,869 $18,225 $17,917
12/31/97 $22,787 $19,765 $19,323
Past performance is not predictive of future performance. The Lehman
Brothers Municipal Bond Index is an unmanaged index and, unlike the
Portfolios, has no management fees or other operating expenses to
reduce its reported return. Returns are historical and include
changes in principal and reinvested dividends and capital gains.
Average Annual Total Return
Period Ending
December 31, 1997
One Five Ten
Year Years Years
Rushmore Virginia Tax-Free 8.45% 6.37% 7.05%
Rushmore Maryland Tax-Free 7.85% 6.16% 6.81%
<PAGE>
ABOUT THE MARYLAND AND VIRGINIA TAX-FREE PORTFOLIOS
MARYLAND TAX-FREE PORTFOLIO
The investment objective for the Portfolio is to maximize income for
investors that is exempt from federal and Maryland state income taxes.
As a matter of fundamental policy, the Portfolio will invest at least
80% of the value of its net assets in securities, the interest on
which is exempt from federal income taxes, including the individual
alternative minimum tax, and from personal income taxes of the State
of Maryland. The investment objective cannot be changed without
shareholder approval. In view of the risks inherent in all
investments in securities, there is no assurance that the objective
will be achieved.
While such concentration in securities issued by the State of Maryland
and its political subdivisions involves greater risk than a portfolio
more broadly invested across many states and municipalities, the
Portfolio's investment restrictions should be viewed in light of the
economic condition of such entities. Some risk factors affecting
Maryland are discussed below.
Maryland has a well-diversified economy with wealth and income
levels above the national average. Economic diversity is a key
factor when assessing credit worthiness in that it reduces reliance
on any one type of industry or economic activity. Principal
employment sectors in Maryland are services, wholesale and retail
trade, government and manufacturing.
General obligations of the State of Maryland carry the highest
rating of AAA by the three major rating services: Standard and
Poor's, Moody's and Fitch as of the writing of this Prospectus. All
but three of Maryland's twenty-four counties carry general
obligation debt ratings of A or higher by at least one of the three
major rating agencies with Montgomery County, Baltimore County, and
Howard County carrying an AAA rating by at least one of the rating
agencies.
The State of Maryland has paid the principal and interest on its
general obligation bonds when due for over one hundred twenty years.
The state has the authority to make short-term borrowings in
anticipation of tax or other receipts, but has not done so for its
own needs for over one hundred years.
The factors mentioned above indicate that Maryland and its larger
political subdivisions are in satisfactory economic condition. There
can, of course, be no assurances made that particular bond issues will
not be adversely affected by changes in national, state, or local
economic or political conditions.
VIRGINIA TAX-FREE PORTFOLIO
The investment objective for the Rushmore Virginia Tax-Free Portfolio
is to maximize income for investors that is exempt from federal and
Virginia state income taxes. The Portfolio will, as a matter of
fundamental policy, invest at least 80% of the value of its net assets
in securities, the interest on which is exempt from federal income
taxes, including the individual alternative minimum tax, and from
personal income taxes of the Commonwealth of Virginia. The investment
objective cannot be changed without shareholder approval. In view of
the risks inherent in all investments in securities, there is no
assurance that the objective will be achieved.
While such concentration in securities issued by the Commonwealth of
Virginia and its political subdivisions involves greater risk than a
portfolio more broadly invested across many states and municipalities,
the Portfolio's investment restrictions should be viewed in light of
the economic condition of such entities. Some risk factors affecting
Virginia are discussed below.
The Constitution of Virginia limits the ability of the Commonwealth
to create debt. An amendment to the Constitution of Virginia,
approved by voters in 1984, requires a balanced budget.
General obligations of the Commonwealth of Virginia carry the
highest rating of AAA by the three major rating services: Standard
and Poor's, Moody's and Fitch as of the writing of this Prospectus.
General obligations of cities, towns or counties are payable from
the general revenues of the entity, including ad valorem tax
revenues on property within the jurisdiction. While the obligation
to levy taxes could be enforced by mandamus, such a remedy may be
impracticable and difficult to enforce.
A holder of any general obligation bond of any governmental issuer
in the Commonwealth of Virginia that is in default, may file an
affidavit with the Governor setting forth such default. If the
Governor determines that such default exists, he is directed to
order the state comptroller to withhold funds appropriated and
payable by the Commonwealth to the defaulting governmental unit and
apply the amount so withheld to cover the default as to such bonds
and interest thereon.
The factors mentioned above indicate that Virginia and its larger
political subdivisions are in satisfactory economic condition. There
can, of course, be no assurances made that particular bond issues will
not be adversely affected by changes in national, state, or local
economic or political conditions.
INVESTMENT POLICIES AND PRACTICES
Each Portfolio seeks to achieve the investment objective by investing
at least 80% of its total assets under normal conditions in securities
issued by the state, its political subdivisions, agencies and
instrumentalities and other issuers exempt from state income tax.
Each Portfolio will generally invest in long-term investment grade
securities. The average portfolio maturity will ordinarily exceed ten
years, although when, in the opinion of the investment adviser, it is
in the best interest of shareholders, the average maturity may be
reduced to less than ten years. The Portfolios may buy without
limitation unrated securities which are believed by the Board of
Directors to be of a quality comparable to that of rated bonds
eligible for purchase by the Portfolios. From time to time, the
Portfolios may purchase securities that are rated below investment
grade, however, such purchases will be limited to 5% of net assets.
Although each Portfolio seeks to invest its total assets in securities
described in the preceding paragraph, market conditions may from time
to time limit the availability of such obligations. During such
periods, the Portfolios will seek to invest in municipal obligations,
the interest on which may be subject to personal income taxes in the
shareholder's state of residence. Also as a temporary defensive
measure or to provide liquidity, the Portfolios may hold up to 30% of
their total assets in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities or repurchase agreements
secured by such securities. Income from such securities may be
taxable for federal and state income tax purposes.
MUNICIPAL SECURITIES
Municipal securities are debt obligations of states, cities,
municipalities and other public authorities and are principally
classified as notes and bonds. The yields on municipal securities are
dependent on a variety of factors, including the general level of
interest rates, the credit-worthiness of a particular issuer, the size
of a particular issue, the maturity date of the issue, and its rating
by the various rating services. The market value of outstanding
municipal securities will also vary with the changes in interest rates
and with rating changes of the securities.
Municipal Bonds
Municipal bonds generally have maturities of more than one year when
issued and are issued to obtain funds for various public purposes.
Municipal bonds may be categorized as "general obligation" or
"revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its
full faith, credit and taxing power for the payment of the principal
and interest. Revenue bonds are secured by the net revenue derived
from a particular facility or group of facilities or, in some cases,
the proceeds of a special excise or other specific revenue source,
but not by the general taxing power. Industrial development and
pollution control bonds are municipal bonds which are issued by or
on behalf of public authorities to provide funding for the
construction, equipment, repair or improvement of various privately-
operated facilities. Industrial development and pollution control
bonds are, in most cases, revenue bonds and do not generally carry
the pledge of credit of the issuing municipality or public
authority. Each Portfolio may invest in either general obligation
or revenue bonds.
Municipal Notes
Municipal notes generally are used to provide for short-term capital
needs and ordinarily have maturities of one year or less. Each
Portfolio intends to invest in various types of municipal notes,
including tax anticipation notes, revenue anticipation notes,
construction loan notes and tax-exempt commercial paper.
"When-Issued" Securities
New issues of municipal securities are often sold on a "when-issued"
basis; that is, payment and delivery of the securities usually
occurs 15 to 45 days after the date of the commitment to purchase.
At the time of the purchase commitments, both the interest and
principal amounts are fixed. During the period between the purchase
commitment and actual delivery, no interest accrues to the purchaser
and the market value of the security may fluctuate. Each Portfolio
of the Fund may enter into purchase orders for "when-issued"
securities with the intention of actually taking delivery of such
securities, but may sell "when-issued" securities prior to delivery
if it is deemed advisable as a matter of investment strategy. Each
Portfolio will maintain short-term assets in a separate account with
the Fund's custodian bank in an amount equal to the amount of
purchase commitment for "when-issued" securities. Each Portfolio
does not intend to invest more than 25% of its net assets in "when-
issued" securities.
Variable Rate Securities
Each Portfolio may purchase certain tax-exempt municipal obligations
which have a variable rate of interest. Such obligations bear
interest at rates which vary with changes in specific market rates
or indices, such as a bank prime rate. Both Portfolios intend to
invest in such securities in order to take advantage of the higher
yield that is usually paid on long-term securities. However,
investment in these securities will be made only if each Portfolio
may redeem them on demand within seven days.
The investment adviser will periodically analyze the credit-
worthiness of any unrated variable rate securities to insure that
such obligations meet the quality standards of the particular
Portfolio. Because variable rate securities may have a maturity
greater than one year, each Portfolio will use, as the basis of
calculation for computing its dollar-weighted average maturity, the
longer of (a) the notice period required for demand of redemption by
the holder or (b) the period remaining until the next interest rate
adjustment.
The investment policies and practices employed in pursuit of each
Portfolio's objective may be changed without shareholder approval.
RISK CONSIDERATIONS
QUALITY
The Maryland and Virginia Portfolios generally invest in long-term
obligations that, on the date of purchase, are rated in the four
highest ratings of Standard & Poor's Corporation ("S&P") (AAA, AA, A
and BBB) or Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A
and Baa) or, if unrated, are believed by the Board of Directors to be
of a quality comparable to that of rated bonds eligible for purchase
by the Portfolios. In addition, the Portfolios may purchase
securities that are rated below investment grade, however, such
purchases will be limited to 5% of each Portfolio's net assets.
Purchase of unrated securities and securities rated below investment
grade may expose the Portfolios to greater market and credit risk than
purchases of investment grade-rated securities.
MARKET RISK
Market risk is the risk of price fluctuations of a security and is
generally a function of the underlying credit rating of an issuer, the
maturity length of a security, a security's yield, and general
economic and interest rate conditions. The average portfolio
maturities will ordinarily exceed ten years although when, in the
opinion of the investment advisor, it is in the best interests of
shareholders, average maturities may be reduced to less than ten
years.
CREDIT RISK
Credit risk is a function of the ability of the issuer to make timely
interest payments and to pay the principal at maturity. Since each
Portfolio generally will invest only in the securities of its
respective state, there are certain specific factors and
considerations concerning the states which may subject the Portfolios
to greater market or credit risk than if the municipal securities
purchased by each Portfolio were more broadly diversified
geographically. Such factors and considerations are discussed below.
DIVERSIFICATION
A "diversified" investment company under the federal securities laws
may not, with respect to 75% of its total assets, invest more than 5%
of its total assets in any one issuer. Each Portfolio is "non-
diversified" for securities law purposes and is not subject to this
limitation. However, each Portfolio intends to qualify as a
"regulated investment company" under the Internal Revenue Code. Such
qualification requires each Portfolio to limit its investments so
that, with respect to at least 50% of its total assets, not more than
5% of such assets are invested in the securities of a single issuer,
and with respect to the remaining 50% of its total assets, not more
than 25% of such assets are invested in the securities of a single
issuer. Since, as a "non-diversified" investment company, each
Portfolio is permitted to invest a greater proportion of its assets in
the securities of a smaller number of issuers, each Portfolio may be
subject to greater credit risk with respect to its portfolio
securities than an investment company which is more broadly
diversified.
OTHER CONSIDERATIONS
The ability of the Portfolios to achieve their investment objectives
are dependent on a number of factors. These factors include the
ability of the Adviser to choose suitable tax-exempt securities at a
market rate of yield. Municipal securities with longer maturities and
a constant interest rate to maturity are generally subject to greater
decline in market value than short-term securities when interest rates
increase.
Except as stated above, the foregoing investment objective and
policies are not fundamental policies of the Fund and may be changed
by the Board of Directors of the Fund without shareholder approval.
HOW TO INVEST IN THE PORTFOLIOS
FACTS TO KNOW BEFORE YOU INVEST
The minimum initial investment is $2,500.
There is no minimum amount for subsequent investments.
Shares of the Portfolios are offered for sale continuously by the Fund.
There is no sales charge.
The Fund reserves the right to reject any purchase order.
All accounts will be held in book entry form. No certificates for
shares will be issued.
Orders received prior to 4:00 P.M., Eastern time, will be invested
in shares of the specified Portfolio at the next determined net
asset value.
The Government securities market, in which the Fund buys and sells
its securities, usually requires immediate settlement in Federal
funds for all security transactions. Payments received by bank wire
can be converted immediately into Federal funds and will begin
earning dividends the same day. Payment for the purchase of Fund
shares not received in the form of Federal funds (i.e., by check)
will begin earning dividends the following day.
PURCHASING SHARES
By Mail
Complete an application and make a check payable to "Fund for Tax-
Free Investors, Inc." Send your completed and signed application
and check drawn on a U.S. bank to:
Fund for Tax-Free Investors, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 208l4
By Bank Wire
Speak to the branch manager of your bank. Request a transfer of
Federal funds to Rushmore Trust and Savings, FSB, instructing the
bank to wire transfer the money before 4:00 P.M., Eastern time to:
Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing No. 0550-71084
For Account of
Fund for Tax-Free Investors, Inc.
Account No. 029385770
After instructing your bank to transfer Federal funds, you must
telephone the Fund at (800) 622-1386 or (301) 657-1510 between 8:30
A.M. and 4:00 P.M. Eastern time and tell us the amount you
transferred and the name of the bank sending the transfer. Your
bank may charge a fee for such services. Remember that it is
important to complete the wire transfer before 4:00 P.M. Eastern
time.
Through Brokers
Investors may invest in the Fund by purchasing shares through
registered broker-dealers, banks or other financial institutions
that purchase securities for their customers. When an authorized
third party accepts an order, the Fund will be deemed to have
received the order. Orders accepted by an authorized third party
will be priced at the Portfolios' net asset value next computed
after acceptance. Such third parties who process orders may charge
a fee for such service.
HOW TO REDEEM AN INVESTMENT
(WITHDRAWALS)
FACTS TO KNOW BEFORE YOU REDEEM
An investor may withdraw all or any portion of his investment by
redeeming shares by writing or telephoning the Fund at (800) 622-
1386 or (301) 657-1510 on any day that the Fund is open for
business. The shares will be redeemed at the next determined net
asset value per share after receipt of the order.
The proceeds of redemptions will be sent directly to the investor's
address of record. If the investor requests payment of redemptions
to a third party or to a location other than his address of record
listed on the account application, the request must be in writing
and the investor's signature must be guaranteed by an eligible
institution. Eligible institutions generally include banking
institutions, securities exchanges, associations, agencies or
broker/dealers, and "STAMP" program participants. There are no fees
charged for redemptions.
Normally, the Fund will make payment for all shares redeemed within
one business day. However, withdrawal requests upon investments
that have been made by check may be delayed up to ten calendar days
following such investment or until the check clears, whichever
occurs first. This delay is necessary to assure the Fund that
investments made by check are good funds. The proceeds of the
redemption will be forwarded promptly upon confirmation of receipt
of good funds.
The right of redemption may be suspended, or the date of payment
postponed during the following periods: (a) periods during which the
New York Stock Exchange (the "NYSE") is closed (other than customary
weekend or holiday closings); (b) periods when trading on the NYSE
is restricted, or an emergency exists, as determined by the
Securities and Exchange Commission, so that disposal of the Fund's
investments for determination of net asset value is not reasonably
practicable; or (c) for such other periods as the Commission, by
order, may permit for protection of the Fund's investors.
After receipt of redemption instructions, shareholders may receive
monies by bank wire, check, or ACH. When the amount to be redeemed
is at least $5,000, the Fund, upon telephone or written
instructions, will wire transfer the amount to the investor's
commercial bank or brokerage account specified in the account
application. For amounts less than $5,000, investors may have
redemption proceeds deposited directly into an account specified on
the account application or request that a redemption check be
delivered by mail to the address of record.
REDEEMING SHARES
By Telephone
The privilege to initiate redemption transactions by telephone will
be made available to Fund shareholders automatically. Telephone
redemptions will only be sent to the address of record or to bank
accounts specified in the account applications. When acting on
instructions believed to be genuine, the Fund will not be liable
for any loss resulting from a fraudulent telephone redemption
request and the investor would bear the risk of any such loss. The
Fund will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine; and if the Fund
does not employ such procedures, then the Fund may be liable for
any losses due to unauthorized or fraudulent instructions. The
Fund follows specific procedures for transactions initiated by
telephone, including among others requiring some form of personal
identification prior to acting on instructions received by
telephone, providing written confirmation not later than five
business days after such transactions, and/or tape recording of
telephone transactions. Telephone redemption privileges may be
terminated or modified by the Fund upon 60 days notice to all
shareholders of the Fund.
By Mail or Fax
Mail your instructions for Fax your instructions
redemption to: for redemption to:
Rushmore Trust and Savings, FSB (301) 657-1520
4922 Fairmont Avenue Attn: Shareholder Services
Bethesda, MD 20814
Attn: Shareholder Services
Include the following information:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as it appears on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
SHAREHOLDER ACCOUNTS
ACCOUNT STATEMENTS
The Fund maintains an account for each investor in full and fractional
shares. All purchase and sale transactions will be confirmed to the
investor. Account statements detailing account activity will be sent
at least quarterly.
TRANSACTION CHARGES
In addition to charges described elsewhere in this Prospectus, the
Fund may impose a charge of $5 per month for any Portfolio account
whose average daily balance for the month falls below $500. The fee
may continue to be imposed during the months when the account balance
remains below $500. This fee will be paid to Rushmore Trust and
Savings, FSB. The fee will not be imposed on tax-sheltered retirement
plans or accounts established under the Uniform Gifts or Transfers to
Minors Act. Because of the administrative expense of handling small
accounts, the Fund reserves the right to involuntarily redeem an
investor's account which falls below $500 due to redemptions or
exchanges after providing 60 days written notice. The Fund may also
assess a charge of $10 for items returned for insufficient or
uncollectible funds.
EXCHANGE PRIVILEGES
Each Portfolio's shares may be exchanged, without cost, for shares of
any other Portfolio or for shares of Fund for Government Investors,
The Rushmore Fund, Inc., American Gas Index Fund, Inc. or Cappiello-
Rushmore Trust on the basis of the respective net asset values of the
shares involved, provided such exchange is permitted under the
applicable laws of the state of the investor's residence. Shareholders
contemplating such an exchange should obtain and review the
prospectuses of those funds. Exchanges may be made by telephone or
letter. Written requests should be sent to Fund for Tax-Free
Investors, Inc., 4922 Fairmont Avenue, Bethesda, Maryland 20814 and
be signed by the record owner or owners. Telephone exchange requests
may be made by telephoning the Fund at (800) 622-1386 or (301) 657-
1510. To implement an exchange, shareholders should provide the
following information: account registration including address and
number, taxpayer identification number, number, percentage or dollar
value of shares to be redeemed, name and account number of the
portfolio to which the investment is to be transferred. Exchanges may
be made only if they are between identically registered accounts.
Telephone exchange privileges may be terminated or modified by the
Fund upon 60 days notice to all shareholders of the Fund.
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS
PERFORMANCE DATA
The Portfolios may from time to time include total return in
advertisements or reports to shareholders or prospective shareholders.
Quotations of average annual total return for the Portfolios will be
expressed in terms of the average annual compounded rate of return on
a hypothetical investment in the Portfolio(s) over a period of at
least one, five and ten years, or up to the life of each Portfolio
(the ending date of the period will be stated). Total return is
calculated from two factors: the amount of dividends earned by each
share and by the increase or decrease in value of a Portfolio's share
price.
Performance information for the Portfolios contained in reports and
promotional literature may be compared to various unmanaged indices,
including, but not limited to, the Standard & Poor's 500 Stock Index
("S&P 500") or the Dow Jones Industrial Average ("DJIA"). Such
unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for operating costs and expenses.
In addition, each Portfolio's total return may be compared to the
performance of other mutual funds and may quote rankings in the
relevant fund category as published by such organizations as Lipper
Analytical Services, Inc. and CDA Investment Technologies, Inc., among
others.
The Portfolios may also provide yield and tax-equivalent yield
quotations and quote fund rankings. Yield and tax-equivalent yield
quotations are based on each Portfolio's annualized net investment
income per share over a 30 day period stated as a percent of the
maximum public offering price on the last day of the period.
Annualized yields of each of the Fund's Portfolios during a particular
period are computed by taking the Portfolio's average daily net
investment income, dividing by the net assets of the Portfolio, and
multiplying the result by 365 days. The quoted yield of a Portfolio
for any particular period of time should not be considered as
representation of future yield of the Portfolio.
For the 30-day period ended December 31, 1997, the yields on the
Maryland and Virginia Portfolios were 4.90% and 4.85%, respectively.
NET ASSET VALUE
Net asset value of the Portfolios' shares will be determined as of
4:00 P.M. Eastern time each day that the New York Stock Exchange is
open for trading and on which there is sufficient degree of trading in
portfolio securities of each Portfolio to affect the net asset value.
The net asset value per share of each of the Portfolios is calculated
by adding the appraised value of all securities and all other assets,
deducting liabilities and dividing by the number of shares
outstanding. To the extent market quotations are not readily
available, the Board of Directors will value each Portfolio's
portfolio securities in good faith. The Directors will continuously
review this method of valuation and recommend changes which may be
necessary to assure that the Fund's portfolio instruments are valued
at fair value.
The securities of each Portfolio will be valued on the basis of the
average of quoted bid and ask prices when market quotations are
available. In the absence of readily available market quotations, the
Fund may value the securities in good faith based on fair market
value. In determining fair market value, the Fund may take into
consideration prices supplied by a pricing service, provided the use
of the pricing service has been approved by the Board of Directors.
Valuations provided by pricing services are generally determined
without exclusive regard to quoted prices. Generally, pricing
services consider in their valuation the market activity of similar
groups of securities, their yields, quality ratings, maturities, and
other characteristics. The share prices of investments in the
Portfolios are expected to fluctuate with the movement of municipal
bond prices.
DIVIDENDS
Each Portfolio distributes all of its net income on a daily basis. Net
income consists of all interest income accrued and discount earned,
less estimated expenses of the Fund. Capital gains, if any, will be
distributed on an annual basis.
Dividends are declared each day that the Fund is open for business.
Investors receive dividends in additional shares unless they elect to
receive cash. Payment, either in additional shares or in cash, is
made on a monthly basis at the net asset value on the payable date.
Investors wishing to change the method of receiving dividends must
notify the Fund in writing at least one week before payment is to be
made.
TAXES
Each Portfolio has qualified (and intends to continue to qualify) as a
regulated investment company under Subchapter M of the Internal
Revenue Code. Because of this qualification, each Portfolio will not
be liable for federal income taxes to the extent earnings are
distributed. Additionally, each Portfolio qualifies to pay "exempt-
interest dividends" within the meaning of the Internal Revenue Code.
The qualification will continue if each Portfolio meets certain
requirements. One requirement is that at least 50% of the value of
each Portfolio's total assets at the close of each quarter of the
taxable year consists of obligations, on which the interest is exempt
from federal income tax.
Dividends derived from interest on municipal obligations, which
constitute exempt-interest dividends, will not be subject to federal
income tax, except to the extent such interest is subject to the
alternative minimum tax. Net interest on certain "private activity
bonds" issued on or after August 8, 1986, is treated as an item of tax
preference and may, therefore, be subject to both the individual and
corporate alternative minimum tax. To the extent provided by
regulations to be issued by the Secretary of the Treasury, exempt-
interest dividends from each Portfolio are to be treated as interest
on "private activity bonds" in proportion to the interest each
Portfolio receives from private activity bonds, reduced by allowable
deductions. Regarding dividends derived from taxable money market
securities, the amount received, subject to repurchase agreements and
distributions of each Portfolio's net short-term capital gains, if
any, will be taxed as ordinary income whether they are invested in
additional shares of either Portfolio or received in cash. Each
Portfolio anticipates that any such amounts would be insubstantial in
relation to the tax-exempt interest generated by each Portfolio. Each
Portfolio will distribute such short-term gains at least annually.
Distribution of net long-term capital gains, if any, realized by each
Portfolio and designated as capital gains dividends will be made at
least annually and will be taxed to shareholders at capital gains'
rates regardless of the length of time the shares have been held.
Currently, long-term capital gains are taxed at ordinary income rates.
The exemption of interest income for federal income tax purposes may
not produce similar exemptions under the tax laws of state or local
taxing authorities. In general, only interest earned on obligations
issued by the state or locality in which the investor resides will be
exempt from state and local taxes. Shareholders should consult their
tax advisers concerning the tax status of the dividends from each
Portfolio in their own states and localities.
Statements as to the federal tax status of shareholders' dividends and
distributions will be mailed by February 15 of each year. Each
Portfolio will also report to its shareholders annually the percentage
and source, on a state-by-state basis, of interest income received by
each Portfolio on municipal obligations.
MANAGEMENT AND ORGANIZATION OF THE FUND
OFFICERS AND DIRECTORS
The Fund has a Board of Directors which is responsible for the general
supervision of the Fund's business. The day-to-day operations of the
Fund are the responsibility of the Fund's officers. A complete list
of the Fund's directors and officers is contained in the Statement of
Additional Information.
INVESTMENT ADIVSER AND ADMINISTRATIVE SERVICING AGENT
The Fund is provided investment advisory and management services by
Money Management Associates (the "Adviser"), 1001 Grand Isle Way, Palm
Beach Gardens, Florida 33418. The Adviser is a limited partnership
which was formed under the laws of the District of Columbia on August
15, 1974. Its primary business since inception has been to serve as
the Adviser to Fund for Government Investors, The Rushmore Fund, Inc.,
Fund for Tax-Free Investors, Inc. and American Gas Index Fund, Inc.
Daniel L. O'Connor is the sole general partner of the Adviser, and as
such, exercises control of the Adviser. Investment decisions are made
by committee and no person is primarily responsible for making
recommendations to that committee.
Under an Agreement with the Adviser, the Fund pays the Adviser a fee
at an annual rate based on 0.50% of the net assets of the Money Market
Portfolio, 0.625% of the net assets of Maryland Portfolio and 0.625%
of the net assets of the Virginia Portfolio. The Rushmore Virginia
and Maryland Tax-Free Portfolios' total operating expenses were 0.93%
and 0.93%, respectively, for the 1997 fiscal year.
Effective September 1, 1993, the Board of Directors approved an
arrangement whereby Rushmore Trust and Savings, FSB, 4922 Fairmont
Avenue, Bethesda, Maryland, a majority-owned subsidiary of the
Adviser, provides the Fund with custodial, transfer agency, dividend-
disbursing, and other shareholder services. The Fund pays an annual
fee of 0.25% (25/100 of 1%) of average daily net assets for the Money
Market Portfolio and 0.30% (30/100 of 1%) of average daily net assets
for the Maryland and Virginia Portfolios for these services.
ORGANIZATION AND DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on April 8, 1983, and has a
present authorized capital of 200,000,000 shares of $.001 par value
common stock, which may be issued in three separate classes: the
Rushmore Tax-Free Money Market Portfolio, Rushmore Maryland Tax-Free
Portfolio and Rushmore Virginia Tax-Free Portfolio.
All shares of the Fund are freely transferable. The shares do not
have preemptive rights, and none of the shares has any preference to
conversion, exchange, dividends, retirements, liquidation, redemption
or any other feature. Shares have equal voting rights, except that in
a matter affecting only a single portfolio (such as the proposed sale
of all the assets of one Portfolio), only shares of that portfolio may
be entitled to vote on the matter. Because the shares have non-
cumulative voting rights, the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors,
if they choose to do so. In such event, the holders of the remaining
less than 50% of the shares voting will not be able to elect any
directors.
The Board of Directors of the Fund has the authority to classify or
reclassify any unissued shares by fixing the number of shares in each
of the Portfolios.
Officers and directors of the Fund, as a group, own less than 1% of
the shares outstanding.
Shareholders having inquires about the Fund's organization or
operation should contact the Fund in writing at 4922 Fairmont Avenue,
Bethesda, Maryland, or by telephone at (301) 657-1500 or (800) 343-3355.
<PAGE>
CONTENTS
Page [LOGO]
Fee Table
FUND FOR TAX-FREE INVESTORS
Financial Highlights
Maryland Tax-Free Portfolio
Total Return Comparison Virginia Tax-Free Portfolio
About the Maryland and Prospectus
Virginia Portfolios
Investment Policies and Practices May 1, 1998
Risk Considerations
How to Invest in the Fund
Facts to Know Before You Invest
Purchasing Shares
How to Redeem an Investment
(Withdrawals)
Facts to Know Before You Redeem
Redeeming Shares
Shareholder Accounts
Account Statements
Transaction Charges
Exchange Privileges
Additional Information About
the Fund
Performance Data
Net Asset Value
Dividends
Taxes
Management and Organization
of the Fund
Officers and Directors
Investment Adviser and
Administrative Servicing Agent
Organization and Description of
Common Stock
<PAGE>
PART B
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
4922 Fairmont Avenue, Bethesda, MD 20814
(301) 657-1500
(800) 343-3355
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Fund's Prospectus, dated May 1,
1998. A copy of the Prospectus may be obtained without charge by
writing or telephoning the Fund.
The date of this Statement of Additional Information is May 1, 1998.
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF ADDITIONAL INFORMATION
Table of Contents
Cross Reference to Related Item in Prospectus
Page in
Page in Rushmore Page in
Statement of Maryland and Tax-Free
Additional Virginia Money
Information Tax-Free Market
Portfolios' Portfolio
Prospectus Prospectus
Investment Objective
and Policies
Investment Restrictions
Management of the Fund
Principal Holders of
Securities
Investment Advisory and
Other Services
Net Asset Value
Comparative Performance
Data
Calculation of Yield
Quotations
Auditors and Financial
Statements
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund may invest only in municipal obligations and United States
Government securities of the quality specified in the prospectus under
"Investment Objectives and Policies." The Fund has therefore adopted
the investment restrictions listed below. These restrictions, which
apply to each Portfolio, may not be changed without prior approval of
a majority of holders of the Fund's outstanding voting shares. As
defined in the Investment Company Act of 1940, the term "majority"
means the vote of the lesser of (a) 67% of the shares of the Fund at a
meeting where more than 50% of the outstanding shares are present in
person or by proxy; or (b) more than 50% of the outstanding shares of
the Fund.
1.The Fund may not borrow money, except that as a temporary measure
the Fund may borrow money to facilitate redemptions. Such a
borrowing may be in an amount not to exceed 30% of the Fund's total
assets, taken at current value, before such borrowing. The Fund
may not purchase a portfolio security if a borrowing by the Fund is
outstanding.
2.The Fund may not make short sales of securities or purchase any
securities on margin, except for such short-term credits as are
necessary for the clearance of transactions. The Fund may not
enter into put or call options except in connection with stand-by
commitments.
3.The Fund may not make loans except through repurchase agreements.
(See "Investment Objectives and Policies")
4.The Fund may not underwrite securities of any other issuer.
5.The Fund may not purchase or sell real estate; however, the Fund
may invest in municipal obligations secured by real estate or
interests therein.
6.The Fund may not purchase or sell restricted securities,
commodities or commodity contracts, nor may it issue senior
securities.
7.The Fund may not purchase securities of any issuer if, as a result
of such a purchase, more than 25% of the Fund's total assets would
be invested in any one industry. There is no limitation, however,
as to investments in municipal obligations issued or guaranteed by
the United States Government, its agencies or instrumentalities, or
in obligations of the United States Government, its agencies or
instrumentalities, which are purchased on a temporary basis in
accordance with the Fund's investment objective and policies.
HOW TO REDEEM AN INVESTMENT (WITHDRAWALS)
Tax-Free Money Market Portfolio Draft Check Redemption
Investors may elect to redeem shares of the Money Market Portfolio by
draft check (minimum check - $250) made payable to the order of any
person or institution. Shares of the Maryland and Virginia Portfolios
cannot be redeemed by draft check. Upon the Fund's receipt of a
completed signature card, investors will be supplied with draft checks
which are drawn on the Fund's account and are paid through Rushmore
Trust and Savings, FSB. The Fund reserves the right to change or
suspend the checking service. THESE DRAFT CHECKS CANNOT BE CERTIFIED,
NOR CAN THESE CHECKS BE NEGOTIATED FOR CASH AT RUSHMORE TRUST AND
SAVINGS, FSB. There will be a $10 charge for each stop payment request
on the draft checks. Investors will be subject to the same rules and
regulations that the bank applies to checking accounts. Shares held
in certificate form may not be redeemed, and investors' accounts may
not be closed by writing a draft check.
MANAGEMENT OF THE FUND
Directors and Officers of the Fund and Officers of the Adviser,
together with information as to their principal business occupations
during the past five years, are set forth below. Officers of the Fund
do not receive salaries or other forms of compensation from the Fund.
Non-interested Directors' fees and expenses will be paid by the
servicing agent. Non-interested Directors were paid an annual fee of
$3,000. For the year ended December 31, 1997, such fees amounted to
$14,250.
*Daniel L. O'Connor, 56 - Chairman of the Board of Directors,
Treasurer and Director of the Fund. President of the Fund 1974 to
1981. General Partner of the adviser since 1975. President of
Rushmore Trust and Savings, FSB since 1989. Address: 1001 Grand Isle
Way, Palm Beach Gardens, FL 33418.
*Richard J. Garvey, 65 - President and Director of the Fund.
Executive Vice President, 1974 to 1981. Employee of Rushmore
Services, Inc., a subsidiary of the Adviser, since 1995. Limited
Partner of the Adviser since 1975. Address: 4922 Fairmont Avenue,
Bethesda, Maryland 20814.
Jeffrey R. Ellis, 53 - Director of the Fund. Vice President,
LottoFone, Inc., a telephone state lottery service, since 1993. Vice
President Shoppers Express, Inc. 1988-1992. Address: 513 Kerry Lane,
Virginia Beach, Virginia 23451.
Bruce C. Ellis, 53 - Director of the Fund. Vice President, LottoFone,
Inc., a telephone state lottery service, since 1991. Vice President,
Shoppers' Express, Inc. 1986-1992. Address: 7108 Heathwood Court
Bethesda, Maryland 20817.
Patrick F. Noonan, 55 - Director of the Fund. Chairman and Chief
Executive Officer of the Conservation Fund since 1986. Chairman,
American Farmland Trust and Trustee, American Conservation Association
since 1985. President, Conservation Resources, Inc. since 1981.
Address: 11901 Glen Mill Drive, Potomac, Maryland 20854.
Michael D. Lange, 56 - Director of the Fund. Vice President, Capital
Hill Management Corporation since 1967. Owner of Michael D. Lange,
Ltd., a builder and developer since 1980. Partner of Greatful Falls,
a building developer since 1994. Address: 7521 Pepperell Drive,
Bethesda, Maryland 20817.
Leo Seybold, 84 - Director of the Fund. Retired 1988. Address: 5804
Rockmere Drive, Bethesda, Maryland 20816.
*Timothy N. Coakley, CPA, 30 - Vice President since 1994. Controller
1994-1997. Chief Financial Officer, Rushmore Trust and Savings, FSB
since 1995. Formerly Audit Manager, Deloitte & Touche LLP until 1994.
Address: 4922 Fairmont Avenue, Bethesda, MD 20814.
*Edward J. Karpowicz, CPA, 34 - Controller since July 1997.
Treasurer, Bankers Finance Investment Management Corp., August 1993 to
June 1997. Senior Accountant, Ernst & Young, September 1989 to
February 1993. Address: 4922 Fairmont Avenue, Bethesda, MD 20814.
*Stephenie E. Adams, 29 - Secretary. Manager, Fund Administration and
Marketing, Rushmore Services, Inc., from July 1994 to present.
Regional Sales Coordinator, Media General Cable, from June 1993 to
June 1994. Graduate Student, Northwestern University, M.S., from
September 1991 to December 1992. Address: 4922 Fairmont Avenue,
Bethesda, Maryland 20814.
* Indicates interested person as defined by the Investment Company
Act of 1940.
Certain Directors and Officers of the Fund are also Directors and
Officers of Fund for Government Investors, The Rushmore Fund, Inc.,
and American Gas Index Fund, Inc., other investment companies managed
by the Adviser.
PRINCIPAL HOLDERS OF SECURITIES
On April 1, 1998, there were outstanding 18,103,009.96 shares of the
Money Market Portfolio, 4,144,014.59 shares of the Rushmore Maryland
Tax-Free Portfolio, and 2,712,464.58 shares of the Rushmore Virginia
Tax-Free Portfolio. No shareholder owned more than 5% of the
outstanding shares of any of the Tax-Free Portfolios. Officers and
directors of the Fund, as a group own less than 1% of the shares
outstanding.
INVESTMENT ADVISER AND OTHER SERVICES
The Fund is provided investment advisory and management services by
Money Management Associates (the "Adviser"), 1001 Grand Isle Way, Palm
Beach Gardens, Florida 33418. The Adviser is a limited partnership
which was formed under the laws of the District of Columbia on August
15, 1974. Its primary business since inception has been to serve as
the investment adviser to Fund for Government Investors, Fund for Tax-
Free Investors, Inc., The Rushmore Fund, Inc., and American Gas Index
Fund, Inc. Certain officers and directors of the Fund are affiliated
with Fund for Government Investors, The Rushmore Fund, Inc., American
Gas Index Fund, Inc. or with the Adviser. (See "Management of the
Fund.")
Under an Investment Advisory Agreement with the Adviser, dated July
12, 1983 (the "Agreement"), the Adviser provides investment advice to
the Fund and oversees its day-to-day operations, subject to direction
and control by the Fund's Board of Directors. Pursuant to the
Agreement, the Fund pays the Adviser a fee at an annual rate based on
0.50% of the net assets of the Money Market Portfolio, 0.625% of the
net assets of the Rushmore Maryland Tax-Free Portfolio and 0.625% of
the net assets of the Rushmore Virginia Tax-Free Portfolio. Under the
Agreement, the Adviser will reimburse the Fund for expenses which
exceed one percent of the average daily net assets per annum.
Reimbursable expenses include the investment advisory fee, but exclude
interest and extraordinary legal expenses. Normal expenses which are
borne by the Fund, include, but are not limited to, taxes, corporate
fees, interest expenses (if any), office expenses, the costs incident
to preparing, registering and redeeming stock certificates for
shareholders, custodian charges, the expenses of shareholders' and
directors' meetings, data processing, preparation, printing and
distribution of all reports and proxy materials, legal services
rendered to the Fund, compensation for those directors who do not
serve as employees of the Adviser, insurance coverage for the Fund and
its directors and officers, and its membership in trade associations.
The Adviser may, from time to time, make payments to broker-dealers
and others for their expenses in connection with the distribution of
Fund shares. Although such payments may be based upon the number of
shares distributed, it is the understanding of the Adviser that such
payments will be for reimbursement and will not exceed the expenses of
the recipients in arranging for and administering distribution of Fund
shares. For the fiscal year ended December 31, 1997, 1996, and 1995,
the Fund paid the following advisory fees to the Adviser:
1997 1996 1995
Tax-Free Money Market Portfolio $ 99,510 $ 98,353 $112,637
Maryland Tax-Free Portfolio $283,756 $297,831 $297,506
Virginia Tax-Free Portfolio $202,010 $203,550 $195,452
Daniel L. O'Connor is the sole general partner of the Adviser, and, as
such, exercises control thereof.
The Agreement was last renewed by the Board of Directors on October
30, 1997 and shall be renewed annually, if approved by either of two
methods: (1) by the Board of Directors, including approval by a
majority of the non-interested directors by vote cast in person at a
meeting called for that purpose, or (2) by a majority of those
shareholders of the outstanding voting securities of the Fund and the
non-interested directors. The Agreement may be canceled without
penalty on sixty days' notice by the Board of Directors of the Fund,
by the Adviser or by vote of the holders of a majority of the Fund's
shares. The agreement will terminate automatically in the event it is
assigned.
Effective September 1, 1993, the Board of Directors approved an
arrangement whereby Rushmore Trust and Savings, FSB ("RTS"), 4922
Fairmont Avenue, Bethesda, Maryland 20814, a majority-owned subsidiary
of the Adviser, acts as the Fund's custodian, transfer agent, dividend
disbursing agent and shareholder servicing agent. The Fund pays RTS an
annual fee of 0.25% (25/100 of 1%) of average daily net assets for the
Money Market Portfolio and 0.30% (30/100 of 1%) of average daily net
assets for the Rushmore Maryland Tax-Free and Rushmore Virginia Tax-
Free Portfolios for these services. The non-interested directors of
the Fund have reviewed the fee structure and determined that it is
competitive and in the best interests of the shareholders of the Fund.
The fees will be reviewed and approved annually by the non-interested
directors. The Fund is subject to the self-custodian rules of the
Securities and Exchange Commission. These rules require that the
custodian be subject to three securities verification examinations
each year conducted by the Fund's independent accountants. Two of the
examinations must be performed on an unannounced surprise basis.
Year 2000
The investment management services provided to the Fund by the Adviser
and the services provided to the Fund and its shareholders by RTS depend
on the smooth functioning of computer systems. Like other mutual funds
and financial and business organizations around the world, the Fund
could be adversely affected if the computer systems used by the Adviser
and RTS and their vendors do not properly process and calculate date-related
information and data on and after January 1, 2000. The Adviser and RTS
are taking necessary steps to assure that the computer systems utilized
by them will be prepard for the year 2000. Although at this time there
can be no assurance of sufficient or timely remediation, they do not
anticipate that the transition to the 21st century will have a material
impact on their ability to continue to service the Fund at current levels.
NET ASSET VALUE
Net asset value of the Fund's Money Market shares will be determined
as of 12 Noon, and the net asset value of Rushmore Maryland Tax-Free
and Rushmore Virginia Tax-Free Portfolio shares will be determined as
of 4:00 P.M., Eastern time, each day that the New York Stock Exchange
is open for trading and on which there is sufficient degree of trading
in portfolio securities of each Portfolio to affect the net asset
value. The net asset value per share of each of the Portfolios is
calculated by adding the appraised value of all securities and all
other assets, deducting liabilities and dividing by the number of
shares outstanding. To the extent market quotations are not readily
available, the Board of Directors will value the Fund's portfolio
securities in good faith. The Directors will continuously review this
method of valuation and recommend changes which may be necessary to
assure that the Fund's Portfolio instruments are valued at fair value.
Money Market Portfolio
The Money Market Portfolio intends to value its Portfolio securities
at their amortized cost value pursuant to Rule 2a-7 under the
Investment Company Act of 1940. This method does not take into
account unrealized securities gains or losses. It involves valuing a
security at its cost and thereafter assuming a constant amortization
to maturity of any purchase discount or premium. While this method
provides certainty in calculation, it may result in periods during
which the value, as determined by amortized cost, is higher or lower
than the price which the Fund would receive if the security were sold.
During periods of declining interest rates, the daily yield on shares
of the Money Market Portfolio may tend to be higher than a like
computation made by a fund with identical investments using a method
of valuation based upon market prices of its portfolio securities.
The converse would apply in a period of rising interest rates.
As a condition to the use of amortized cost and maintenance of the
Fund's per share net asset value of $1.00, the Fund has agreed that
the Money Market Portfolio will maintain a dollar-weighted average
maturity of 90 days or less and, except for certain variable rate
securities, will purchase only securities having remaining maturities
of 397 days or less. The Board of Directors has also agreed to
establish procedures designed to stabilize, to the extent reasonably
possible, the Money Market Portfolio's price per share, as computed
for the purpose of sales and redemptions, at $1.00. Such procedures
will include review by the Board of Directors, at such intervals as it
may be deemed appropriate, to determine whether the Money Market
Portfolio's net asset value, calculated by using available market
quotations, deviates from $1.00 per share based on amortized cost.
The extent of any deviation between the Money Market Portfolio's net
asset value based on market value and the $1.00 per share based on
amortized cost will be examined by the Board of Directors. If such
deviation exceeds 1/2 of 1% the Board of Directors will promptly
consider what action, if any, will be initiated. If the Board of
Directors determines that a deviation exists, which may result in
material dilution or other unfair results to new investors or existing
shareholders, it will consider corrective action. This action might
include selling securities prior to maturity to realize capital gains
or losses or to shorten average portfolio maturity, withholding
dividends, or establishing a net asset value per share by using
available market quotations.
Rushmore Maryland Tax-Free and Rushmore Virginia Tax-Free Portfolios
The securities of these Portfolios will be valued on the basis of the
average of quoted bid and ask prices when market quotations are
available. In the absence of readily available market quotations, the
Fund may value the securities in good faith based on fair market
value. In determining fair market value, the Fund may take into
consideration prices supplied by a pricing service, provided the use
of the pricing service has been approved by the Board of Directors.
Valuations provided by pricing services are generally determined
without exclusive regard to quoted prices. Generally, pricing
services consider in their valuation the market activity of similar
groups of securities, their yields, quality ratings, maturities, and
other characteristics. The share prices of investments in the
Rushmore Maryland Tax-Free and Rushmore Virginia Tax-Free Portfolios
are expected to fluctuate with the movement of municipal bond prices.
TAXES
Interest incurred on borrowings made to purchase shares of the Fund is
not deductible. In addition, entities or persons who are "substantial
users" (or persons related to "substantial users"), as defined by the
Internal Revenue Code and the regulations thereunder, of facilities
financed by industrial development bonds should consult their tax
advisers before purchasing shares of the Fund. The income from those
bonds may not be tax-exempt for "substantial users."
CALCULATION OF PERFORMANCE DATA
The yield for the Rushmore Tax-Free Money Market Portfolio is
calculated by multiplying the total dollar amount of dividends
declared on the Portfolio by 365 days and dividing the results by the
net assets of the Portfolio. The total amount of dividends earned is
equal to the earnings realized on the investment securities held by
the portfolio less management fees and a provision for ordinary
expenses.
The yield quotation for the Rushmore Maryland Tax-Free and Rushmore
Virginia Tax-Free Portfolios are based on the 30-day period ended
December 31, 1997 computed by dividing the net investment income per
share earned during the period by the offering price per share on
December 31, 1997.
Total returns for the Rushmore Maryland Tax-Free and Rushmore Virginia
Tax-Free Portfolios are computed by calculating the average annual
compounded rates of return over the one-year, five-year and ten year
periods ending December 31, 1997.
Comparative Performance Data
The Fund's performance may be compared in advertising to the
performance of other mutual funds in general or to the performance of
particular types of mutual funds, especially those with similar
objectives. More up-to-date performance data may be provided as it
becomes available. From time to time, the Fund may provide
information concerning general economic conditions, financial trends,
and analysis and supply comparative performance and rankings, with
respect to comparable investments for the same period, for unmanaged
market indexes such as the Dow Jones Industrial Average, Standard &
Poor's 500 IndexTM, Shearson Lehman Bond Indexes, Merrill Lynch Bond
Indexes, Bond Buyer Index, and from recognized independent sources
such as Donoghue's Money Fund Report, Donoghue Money Letter, Bank Rate
Monitor, Money Magazine, Forbes, Lipper, Standard & Poor's
Corporation, CDA/Wiesenberger Investment Technologies, Inc. ("CDA"),
Mutual Fund Values, Mutual Fund Forecaster, Mutual Fund Sourcebook,
Fortune, Business Week, Changing Times, The Wall Street Journal,
Investor's Daily and Schabacker Investment Management, Inc.
Comparisons may also be made to Consumer Price Index, rate of
inflation, bank money market rates, rates of certificates of deposit,
Treasury Bills and Treasury Bond rates and yields.
AUDITORS AND CUSTODIAN
Deloitte & Touche LLP independent certified public accountants, are
the auditors of the Fund. Rushmore Trust and Savings, FSB, Bethesda,
Maryland, acts as custodian bank for the Fund.
FINANCIAL STATEMENTS
The Fund incorporates by reference in this Statement of Additional
Information the financial statements and notes contained in its annual
report to the shareholders for the year ended December 31, 1997.
<PAGE>
[DELETED RUSHMORE LOGO]
FUND FOR TAX-FREE
INVESTORS
____________
Annual Report
December 31, 1997
<PAGE>
[DELETED RUSHMORE LOGO]
ANNUAL REPORT, December 31, 1997
FUND FOR TAX-FREE INVESTORS, INC.
4922 Fairmont Avenue, Bethesda, MD 20814
(800) 622-1386 (301) 657-1510
January 29, 1998
Dear Shareholders:
The general municipal market saw a big jump in bond issuance this
year, although for Virginia and Maryland, new bond issuance was down
from its 1996 levels. This past year also saw municipal yields fall to
almost 5% for AAA 30-year maturities, a drop of almost 35 basis points
from the beginning of the year. After raising the Federal Funds rate
25 basis points in March of this year, the Federal Reserve did not
intervene again as the rapid growth of the first quarter slowed
considerably for the remainder of the year. As inflation did not
appear to be a threat, interest rates moved downward, thus causing
prices of bonds to rise. The equity markets continued to grab much of
the attention in 1997, but economic troubles in Asia in the second
half of the year created an opportunity for bonds and bond funds to
gain back some favor, as investors looked to the credit safety that
they offer.
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 2.89% of net assets for the year ended
December 31, 1997, compared to 2.67% for 1996. On December 31, 1997,
the Portfolio's average maturity was 49 days.
Virginia and Maryland Tax-Free Portfolios
Fund for Tax-Free Investors Virginia Portfolio ended 1997 with a
8.45% total return. On an annualized basis, net income averaged 4.70%
of net assets for the year ended December 31, 1997. Net assets for the
Virginia Portfolio stood at $32.9 million at year end, and had an
average maturity of 16.1 years. The quality of securities in the
Virginia Portfolio remain high with over 88% its bonds rated AA or
above.
Fund for Tax-Free Investors Maryland Portfolio had a total return
of 7.85% for the year ended December 31, 1997. On an annualized basis,
net income averaged 4.73% of net assets for the year. Net assets for
the Maryland Portfolio stood at $45.3 million at year end, and had an
average maturity of 16 years. The Maryland Portfolio continues to
maintain investment in high quality bonds with over 83% of the
Portfolio having a rating of AA or better.
4922 Fairmont Avenue Bethesda, Maryland 20814 800-621-7874 301-657-1517
<PAGE>
The states of Virginia and Maryland continue to maintain the
highest credit rating of AAA by all three rating agencies: Moody's,
S&P, and Fitch.
Outlook
In the year ahead, we expect growth to move ahead at a slower pace
than that of 1997. Troubles in Asia should also have a dampening
impact on our economy, due in part to a decline in exports. With
inflation under control for the time being, some have started to look
for a possible Fed easing. We would hold this as unlikely in the near
term, as the current tight labor market is an area that the Federal
Reserve still holds as a concern. Should the labor market weaken,
however, coupled with a slower economy, a Fed easing in the second
half of the year would be a possibility. A low inflation scenario
would again be a positive for the bond markets, and should global
market uncertainty continue to affect the stock markets, bonds could
also see a renewed "flight to quality".
Management continues to adhere to its strategy of long-term,
conservative investing. Fund for Tax-Free Investors, Inc. invests in
only high quality issues we feel provide the best opportunity to meet
these objectives. As always, we thank you for your continued support
and look forward to serving your investment needs in 1998.
/s/ Daniel L. O'Connor /s/ Richard J. Garvey
Daniel L. O'Connor Richard J. Garvey
Chairman President
- 2 -
<PAGE>
<TABLE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
December 31, 1997
<CAPTION>
Face Value
Value (Note 1)
<S> <C> <C>
California 5.2%
California
California School Cash Reserve
Program Revenue
4.75%, 7/02/98 SPI+ $ 800,000 $ 803,455
South Coast Education Tax Anticipation Note
4.50%, 06/30/98 SP1+ 200,000 200,656
----------
State Total 1,004,111
----------
Colorado 5.7%
Colorado
Boulder Urban Renewal Authority Revenue
5.30%, 3/01/98 AAA 300,000 300,732
Colorado Student Obligation Board Authority Floating Rate Notes
4.15%, 8/01/00# A-1+ 800,000 800,000
---------
State Total 1,100,732
---------
Florida 1.0%
Florida
Florida State Turnpike Authority Revenue
5.30%, 7/01/98 AAA 200,000 201,456
---------
Georgia 2.7%
Georgia
Georgia State General Obligation
7.00%, 6/01/98 AAA 500,000 516,181
---------
Indiana 3.1%
Indiana
Allen County Economic Development Floating Rate Notes
4.15%, 8/1/21# A-1+ 600,000 600,000
---------
Kansas 5.2%
Kansas
Olathe Temporary Notes Series A General Obligation
4.50%, 6/01/98 MIG1 500,000 501,395
Overland Park General Obligation
5.10%, 9/01/98 AAA 500,000 504,362
----------
State Total 1,005,757
---------
Louisiana 4.7%
Louisiana
New Orleans Aviation Floating Rate Notes
3.80%, 8/01/16# A-1+ 900,000 900,000
---------
Maryland 12.0%
Maryland
Baltimore County Revenue Authority Floating Rate Notes
3.95%, 1/01/16# A-1 200,000 200,000
Maryland Health and Higher Education Loyola College Issue B
Floating Rate Notes
3.90%, 10/01/13# AAA 700,000 700,000
Maryland Health and Higher Education North Arundel Hospital
Floating Rate Notes
3.95%, 7/1/32# VMIG1 200,000 200,000
North East Maryland Waste Disposal Authority Floating Rate Notes
3.60%, 1/01/08# A1+ 400,000 400,000
Washington Suburban Sanitation Floating Rate Notes
3.85%, 1/01/99# A-1+ 800,000 800,000
---------
State Total 2,300,000
---------
Minnesota 20.4%
Minnesota
City of St. Louis Park Series 1987A Floating Rate Notes
4.10%, 3/01/02# A-1 100,000 100,000
Minneapolis General Obligation Floating Rate Notes
4.05%, 12/1/07# A-1+ 400,000 400,000
Minneapolis Tax Increment Revenue
7.00%, 3/1/98 AAA 135,000 135,638
Minnesota State Higher Education Floating Rate Notes
4.25%, 12/01/24# VMIG1 500,000 500,000
Southern Minnesota Power Authority Revenue
7.00%, 01/01/98 AAA 710,000 710,001
St. Paul Housing and Redevelopment Authority Floating Rate Notes
4.00%, 12/01/12# A-1+ 800,000 800,000
St. Paul United Way Project Floating Rate Notes
4.05%, 12/01/18# A-1 500,000 500,000
Waconia Industrial Development Revenue Floating Rate Notes
3.95%, 10/01/16# A-1 775,000 775,000
---------
State Total 3,920,639
---------
Montana 3.1%
Montana
Montana State Health Floating Rate Notes
4.10%, 12/01/15# A-1+ 600,000 600,000
---------
</TABLE>
- 3 -
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO (Continued)
December 31, 1997
<CAPTION>
Face Value
Value (Note 1)
<S> <C> <C>
New Hampshire 3.7%
New Hampshire
New Hamphshire Health Floating Rate Notes
3.95%, 11/01/21# VMIG1 $ 700,000 $ 700,000
----------
Nevada 2.6%
Nevada
Clark County School District Series A General Obligation
6.10%, 6/1/98 AAA 500,000 504,522
---------
New York 6.3%
New York
New York, New York Series B Subseries B2 Floating Rate Notes
5.10%, 8/15/03# A-1+ 600,000 600,000
New York, New York Subseries A8 Floating Rate Notes
5.10%, 8/1/17# A-1+ 500,000 500,000
New York City Municipal Water Finance Authority Floating Rate Notes
5.10%, 6/15/22# AAA 100,000 100,000
---------
State Total 1,200,000
---------
North Carolina 3.7%
North Carolina
City of Winston-Salem Floating Rate Notes
4.10%, 4/01/00# A-1+ 700,000 700,000
---------
Ohio 2.5%
Ohio
Ohio State Water Development Revenue
7.50%, 6/01/98 AAA 465,000 481,105
---------
Pennsylvania 7.5%
Pennsylvania
Emmaus General Authority Floating Rate Notes
4.00%, 12/1/28# A-1+ 800,000 800,000
Pennsylvania State General Obligation
4.75%, 6/15/98 AAA 345,000 346,524
Pittsburgh Water and Sewer Authority Revenue
3.90%, 9/01/98 AAA 300,000 300,187
---------
State Total 1,446,711
---------
South Carolina 2.1%
South Carolina
Piedmont Municipal Power Agency Electrical Revenue
5.0%, 1/1/98 AAA 400,000 400,000
---------
Texas 3.7%
Texas
Port Arthur Floating Rate Notes
5.50%, 5/01/03# P-1 700,000 700,000
---------
Virginia 4.8%
Virginia
Fairfax County Industrial Development Authority Floating
Rate Notes
3.95%, 10/01/16# A-1+ 100,000 100,000
Fredericksburg General Obligation
3.90%, 6/15/98 AAA 225,000 224,914
Henrico Industrial Development Authority Floating Rate Notes
5.35%, 5/01/24# VMIG1 500,000 500,000
Virginia State Housing Development Floating Rate Notes
4.35%, 1/01/98# AA+ 100,000 100,000
---------
State Total 924,914
---------
Wisconsin 1.1%
Wisconsin
Wisconsin State General Obligation
6.60%, 5/01/98 AAA 200,000 206,093
-----------
Total Investments 101.2%
(Cost $19,412,221*) 19,412,221
Liabilities Less Other Assets (1.2)% (235,075)
------------
Net Assets (Note 5) 100.0% $19,177,146
============
Net Asset Value Per Share
(Based on 19,177,146 Shares Outstanding) $1.00
============
___________________________________________________
#Daily or Weekly Tender Bond
*Same cost is used for Federal income tax purposes.
Security ratings are unaudited.
See Notes to Financial Statements.
</TABLE>
- 4 -
<PAGE>
<TABLE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
VIRGINIA PORTFOLIO
December 31, 1997
<CAPTION>
Face Value
Value (Note 1)
<S> <C> <C>
Alexandria Industrial Development Authority Revenue
7.40%, 1/01/08 A+ $ 175,000 $ 175,532
Arlington County General Obligation
6.00%, 8/01/12 AAA 500,000 545,865
5.40%, 6/01/13 AAA 1,000,000 1,052,710
5.375%, 12/01/16 AAA 1,000,000 1,035,900
Brunswick County Virginia Revenue
5.50%, 7/01/17 AAA 1,000,000 1,041,290
Chesapeake Bay Bridge & Tunnel Revenue
5.25%, 7/01/19 AAA 1,000,000 1,005,950
Chesapeake Water & Sewer System Revenue
6.50%, 7/01/05 A+ 270,000 295,734
Danville General Obligation
6.50%, 5/01/11 A 250,000 271,423
Fairfax City EDA Lease Revenue
5.50%, 5/15/18 AA 2,000,000 2,060,700
Fairfax County Industrial Development Authority Revenue
5.25%, 8/15/19 AA 500,000 513,700
Fairfax County Industrial Development Authority Revenue
Floating Rate Notes
3.95%, 10/01/16# A-1+ 600,000 600,000
Fairfax County Resource Recovery Revenue
7.75%, 2/01/11 A+ 300,000 317,337
Fairfax County Water Authority Revenue
5.80%, 1/01/16 AAA 500,000 546,485
6.00%, 4/01/07 AA- 370,000 418,600
6.00%, 4/01/22 AA- 630,000 681,395
Hampton General Obligation
6.00%, 1/15/14 AA- 350,000 378,312
Hanover City Water & Sewer Revenue
5.25%, 2/01/16 AAA 500,000 508,595
Hanover County Virginia General Obligation
5.4%, 7/15/16 AA 1,000,000 1,036,580
Henrico County Industrial Development Authority Revenue
7.125%, 8/01/21 AA 400,000 461,752
Henrico County Water & Sewer Revenue
6.45%, 5/01/02 AAA 300,000 326,715
6.25%, 5/01/13 AA- 500,000 523,245
Henry County General Obligation
8.825%, 11/01/05 Aaa 200,000 259,098
Isle of Wight County General Obligation
6.70%, 1/01/02 A 200,000 221,778
James City County General Obligation
5.25%, 12/15/15 AAA 1,000,000 1,024,910
Leesburg General Obligation
5.50%, 06/01/13 AAA 500,000 523,545
Loudoun County Sanitation Authority Revenue
6.25%, 1/01/10 AAA 550,000 594,011
6.25%, 1/01/16 AAA 500,000 541,870
Metropolitan Washington, D.C. Airport Authority Revenue
6.50%, 10/01/06 AAA 300,000 329,421
Newport News General Obligation
6.125%, 6/01/12 AA- 270,000 288,176
Norfolk General Obligation
5.75%, 6/01/13 AAA 500,000 531,480
Norfolk Water Revenue
5.75%, 11/01/12 AAA 500,000 531,610
5.875%, 11/01/15 AAA 500,000 533,830
Portsmouth General Obligation
6.375%, 8/01/11 AA- 200,000 213,932
Portsmouth Redevelopment & Housing Authority Revenue
6.05%, 12/01/08 AAA 500,000 537,375
Potomac & Rappahannock Transportation District Commission Revenue
6.70%, 3/01/11 AAA 600,000 635,760
Prince William County General Obligation
6.20%, 12/01/11 AA 300,000 318,540
</TABLE>
- 5 -
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS
VIRGINIA PORTFOLIO (Continued)
December 31, 1997
<CAPTION>
Face Value
Value (Note 1)
<S> <C> <C>
Prince William County Industrial Development
Authority Revenue
7.25%, 3/01/00 NR $ 250,000 $ 271,383
Prince William County Park Authority Revenue
6.875%, 10/15/16 A- 500,000 550,325
Richmond Metro Authority Revenue
6.10%, 7/15/06 AAA 300,000 326,472
6.375%, 7/15/16 AAA 500,000 547,025
Upper Occoquan Sewer Authority Revenue
5.15%, 7/01/20 AAA 500,000 506,005
Virginia Beach General Obligation
6.50%, 8/01/07 AA 500,000 544,035
5.85%, 11/01/12 AA 500,000 535,910
Virginia College Building Authority Revenue
6.625%, 5/01/13 A- 300,000 321,597
5.75%, 1/01/14 AA 500,000 527,175
Virginia Housing Development Authority Revenue
6.625%, 7/01/13 A+ 275,000 291,662
5.95%, 7/01/13 AA+ 500,000 527,065
5.75%, 1/01/19 AAA 1,000,000 1,027,990
Virginia Port Authority Revenue
5.90%, 7/01/16 AA 500,000 529,150
Virginia Public Building Authority Revenue
5.10%, 8/01/06 AA 550,000 576,851
5.00%, 8/01/15 AA 1,000,000 997,640
5.20%, 8/01/16 AA 1,000,000 1,010,480
Virginia Public School Authority Revenue
6.20%, 8/01/13 AA 320,000 349,510
5.00%, 8/01/16 AA 500,000 498,180
Virginia Resource Authority Revenue
6.75%, 10/01/04 NR 240,000 274,413
6.45%, 4/01/13 AA 300,000 322,383
Virginia Transportation Board Revenue
6.00%, 4/01/10 AA 300,000 321,930
5.125%, 5/15/17 AA 500,000 500,370
-----------
Total Investments 98.0%
(Cost $30,050,671*) 32,240,707
Other Assets Less Liabilities 2.0% 666,611
-----------
Net Assets (Note 5) 100.0% $32,907,318
===========
Net Asset Value Per Share
(Based on 2,872,241 Shares Outstanding) $11.46
===========
_____________________________________________________
#Daily or Weekly Tender Bond
*Same cost is used for Federal income tax purposes.
NR Not Rated
Security ratings are unaudited.
See Notes to Financial Statements.
</TABLE>
- 6 -
<PAGE>
<TABLE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
MARYLAND PORTFOLIO
December 31, 1997
<CAPTION>
Face Value
Value (Note 1)
<S> <C> <C>
Anne Arundel County Water & Sewer General Obligation
6.20%, 8/01/12 AA+ $ 725,000 $ 796,333
6.00%, 7/15/13 AA+ 500,000 533,955
6.30%, 8/01/16 AA+ 500,000 556,060
6.30%, 8/01/19 AA+ 725,000 806,780
Anne Arundel County Pollution Control Revenue
6.00%, 4/01/24 A 1,230,000 1,298,597
Anne Arundel County Solid Waste Project General Obligation
5.50%, 9/01/15 Aa1 500,000 515,430
Baltimore City General Obligation
6.40%, 10/15/02 AAA 465,000 509,347
5.50%, 10/15/10 AAA 1,000,000 1,066,150
Baltimore City Revenue
6.00%, 7/01/15 AAA 500,000 557,240
Baltimore County General Obligation
6.125%, 7/01/08 AAA 500,000 544,055
6.70%, 7/01/11 AAA 200,000 206,842
5.50%, 6/01/12 AAA 1,000,000 1,053,950
Baltimore Port Facility Revenue
6.50%, 12/01/10 AA- 400,000 436,488
6.50%, 10/01/11 AA- 250,000 271,765
Calvert County Pollution Control Revenue
5.55%, 7/15/14 A 1,000,000 1,037,820
Carroll County General Obligation
7.10%, 10/01/09 AA 235,000 258,117
7.25%, 10/01/15 AA 300,000 330,672
5.30%, 11/01/15 AA 1,000,000 1,026,130
6.50%, 10/01/24 AA 225,000 250,630
Frederick County General Obligation
6.125%, 12/01/07 AAA 500,000 545,240
5.60%, 7/01/11 AA 500,000 530,070
City of Frederick General Obligation
6.00%, 10/01/11 AAA 300,000 326,877
Harford County General Obligation
5.00%, 3/01/14 AA- 500,000 504,730
Howard County Metropolitan District General Obligation
6.00%, 8/15/19 AA+ 500,000 528,890
Howard County Public Improvement General Obligation
6.00%, 5/15/14 AA+ 500,000 535,900
5.50%, 2/15/16 AA+ 1,000,000 1,033,220
Howard County Special Facilities Revenue
6.10%, 2/15/13 AA- 500,000 534,125
Laurel General Obligation
6.70%, 7/01/01 AAA 600,000 661,212
Maryland Community Development Administration Revenue
6.60%, 4/01/06 Aa 200,000 212,814
7.375%, 4/01/10 Aa 495,000 522,284
7.25%, 4/01/11 Aa 200,000 212,754
7.15%, 4/01/11 Aa 405,000 429,640
7.70%, 5/15/20 Aa 250,000 266,635
7.25%, 4/01/27 Aa 385,000 404,974
Maryland General Obligation
5.00%, 10/15/11 AAA 1,000,000 1,022,720
5.00%, 03/01/12 AAA 1,500,000 1,525,995
Maryland Health & Higher Education Facilities Authority Revenue
5.70%, 7/01/09 A 500,000 538,500
5.25%, 7/01/13 AAA 500,000 517,750
6.125%, 7/01/14 AAA 500,000 537,430
5.50%, 10/01/16 AAA 1,000,000 1,047,040
6.125%, 7/01/19 AAA 500,000 538,295
Maryland Health & Higher Education Facilities Authority Floating Rate Notes
4.20%, 7/01/32# VMIG1 200,000 200,000
Maryland Industrial Development Revenue
7.125%, 7/01/06 A- 300,000 308,625
Maryland Stadium Authority Sports Revenue
7.375%, 12/15/04 AA- 425,000 458,201
7.50%, 12/15/10 AA- 695,000 751,107
5.55%, 3/01/13 AAA 500,000 522,980
5.875%, 12/15/13 AAA 1,000,000 1,067,370
5.375%, 12/15/15 AA 500,000 515,030
7.60%, 12/15/19 AA- 500,000 537,855
Maryland Water Quality Finance Administration Revenue
6.00%, 9/01/15 AA 1,000,000 1,064,180
</TABLE>
- 7 -
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS
MARYLAND PORTFOLIO (Continued)
December 31, 1997
<CAPTION>
Face Value
Value (Note 1)
<S> <C> <C>
Montgomery County Housing Opportunity Commission Revenue
6.70%, 7/01/11 Aa $ 355,000 $ 377,422
7.80%, 7/01/12 NR 200,000 210,762
7.375%, 7/01/17 Aa 180,000 187,124
6.65%, 7/01/17 Aa 175,000 188,235
7.00%, 7/01/23 A 250,000 264,683
Montgomery County Waste Disposal Authority Revenue
5.875%, 6/01/13 AAA 250,000 258,323
North East Maryland Waste Disposal Authority Revenue
6.20%, 7/01/10 A 500,000 521,585
6.30%, 7/01/16 A 1,000,000 1,046,130
Prince Georges County General Obligation
5.25%, 3/15/15 AAA 1,000,000 1,022,900
Prince Georges County Housing Authority Revenue
6.35%, 7/20/20 AAA 700,000 738,969
Prince Georges County Pollution Control Revenue
5.75%, 3/15/10 A 1,000,000 1,089,800
5.375%, 7/01/14 A 500,000 505,440
Prince Georges County Solid Waste Management System Revenue
7.00%, 6/30/00 AAA 250,000 272,310
St. Mary's County General Obligation
5.85%, 11/01/18 AAA 500,000 529,220
University of Maryland System Auxiliary Revenue
6.375%, 4/01/09 AA+ 500,000 551,030
5.60%, 4/01/12 AA+ 1,000,000 1,055,750
5.125%, 4/01/15 AA+ 1,000,000 1,014,450
5.60%, 4/01/16 AA+ 1,000,000 1,042,410
Washington County General Obligation
5.125%, 1/01/12 AAA 500,000 510,995
5.25%, 1/01/16 AAA 500,000 507,385
Washington, D.C. Metropolitan Area Transportation Authority Revenue
6.00%, 7/01/10 AAA 275,000 307,953
Washington Suburban Sanitary District General Obligation
6.20%, 6/01/12 AA 900,000 974,655
5.125%, 6/01/20 AA 1,000,000 1,004,410
----------
Total Investments 98.4%
(Cost $42,144,792*) 44,640,745
Other Assets Less Liabilities 1.6% 703,312
----------
Net Assets (Note 5) 100.0% $45,344,057
==========
Net Asset Value Per Share
(Based on 4,085,544 Shares Outstanding) $11.10
==========
____________________________________________________
#Daily or Weekly Tender Bond
*Same cost is used for Federal income tax purposes.
NR Not Rated
Security ratings are unaudited.
See Notes to Financial Statements.
</TABLE>
- 8 -
<PAGE>
<TABLE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
<CAPTION>
Money Virginia Maryland
Market Portfolio Portfolio
Portfolio
<S> <C> <C> <C>
Investment Income (Note 1) $724,111 $1,817,068 $2,569,235
-------- ---------- ----------
Expenses
Investment Advisory Fee (Note 2) 99,510 202,010 283,756
Administrative Fee (Note 2) 49,755 96,964 136,203
Interest Expense 177 _ _
-------- ---------- ----------
Total Expenses 149,442 298,974 419,959
-------- ---------- ----------
Net Investment Income 574,669 1,518,094 2,149,276
-------- ---------- ----------
Net Realized Gain on Investment Transactions _ 70,517 326,372
Net Change in Unrealized Appreciation of Investments _ 1,026,639 986,054
-------- ---------- ----------
Net Gain on Investments _ 1,097,156 1,312,426
-------- ---------- ----------
Net Increase in Net Assets Resulting from Operations $574,669 $2,615,250 $3,461,702
======== ========== ==========
See Notes to Financial Statements.
</TABLE>
- 9 -
<PAGE>
<TABLE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31,
<CAPTION>
Money Market Virginia Maryland
Portfolio Portfolio Portfolio
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income $ 574,669 $ 524,507 $ 1,518,094 $ 1,576,325 $ 2,149,276 $ 2,343,288
Net Realized Gain on Investment
Transactions _ _ 70,517 262,689 326,372 484,951
Net Change in Unrealized
Appreciation/Depreciation
of Investments _ _ 1,026,639 (932,337) 986,054 (1,400,547)
------------- ------------ ------------ ------------ ----------- ------------
Net Increase in Net Assets
Resulting from Operations 574,669 524,507 2,615,250 906,677 3,461,702 1,427,692
------------- ------------ ------------ ------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income (Note 1) (574,669) (524,507) (1,519,055) (1,575,364) (2,151,344) (2,341,219)
From Net Realized Gain _ _ (48,336) _ _ _
------------- ------------ ------------ ------------ ----------- ------------
Total Distributions to Shareholders (574,669) (524,507) (1,567,391) (1,575,364) (2,151,344) (2,341,219)
------------- ------------ ------------ ------------ ----------- ------------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares 31,756,045 33,109,020 12,324,705 9,574,030 6,860,756 6,196,673
Reinvestment of Distributions 547,728 501,351 1,308,417 1,309,667 1,803,253 1,976,301
Cost of Shares Redeemed (32,016,149) (35,493,325) (14,128,407) (11,328,124) (9,040,667) (12,573,794)
------------- ------------ ------------ ------------ ----------- ------------
Net Increase (Decrease) in Net
Assets Resulting from Share
Transactions 287,624 (1,882,954) (495,285) (444,427) (376,658) (4,400,820)
------------- ------------ ------------ ------------ ----------- ------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS 287,624 (1,882,954) 552,574 (1,113,114) 933,700 (5,314,347)
NET ASSETS - Beginning of Year 18,889,522 20,772,476 32,354,744 33,467,858 44,410,357 49,724,704
------------- ------------ ------------ ------------ ----------- ------------
NET ASSETS - End of Year $ 19,177,146 $ 18,889,522 $ 32,907,318 $ 32,354,744 $45,344,057 $ 44,410,357
============= ============ ============ ============ =========== ============
SHARES
Sold 31,756,045 33,089,461 1,104,589 871,229 633,250 576,046
Issued in Reinvestment of
Distributions 547,728 501,351 116,812 118,996 165,933 184,046
Redeemed (32,016,149) (35,493,325) (1,266,554) (1,030,689) (830,133) (1,170,922)
------------- ------------ ------------ ------------ ----------- ------------
Net Increase (Decrease) in Shares 287,624 (1,902,513) (45,153) (40,464) (30,950) (410,830)
============= ============= ============= ============ =========== ============
See Notes to Financial Statements.
</TABLE>
- 10 -
<PAGE>
<TABLE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
Money Market Portfolio
<CAPTION>
For the Years Ended December 31,
1997 1996 1995 1994 1993
<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 0.029 0.027 0.030 0.020 0.016
-------- -------- -------- -------- --------
Total from Investment Operations 0.029 0.027 0.030 0.020 0.016
-------- -------- -------- -------- --------
Distributions to Shareholders:
From Net Investment Income (0.029) (0.027) (0.030) (0.020) (0.016)
-------- -------- -------- -------- --------
Total Distributions to Shareholders (0.029) (0.027) (0.030) (0.020) (0.016)
-------- -------- -------- -------- --------
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 2.93% 2.69% 3.09% 2.02% 1.66%
Ratios to Average Net Assets:
Expenses 0.75% 0.75% 0.75% 0.75% 0.78%
Net Investment Income 2.89% 2.67% 3.04% 1.99% 1.65%
Supplementary Data:
Net Assets at End of Year (000's omitted) $19,177 $18,890 $20,772 $25,586 $23,283
Number of Shares Outstanding at End of
Year (000's omitted) 19,177 18,890 20,792 25,604 23,312
See Notes to Financial Statements.
</TABLE>
- 11 -
<PAGE>
<TABLE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
Virginia Portfolio
<CAPTION>
For the Years Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 11.09 $ 11.31 $ 10.36 $ 11.51 $ 10.84
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.525 0.534 0.564 0.578 0.582
Net Realized and Unrealized Gain
(Loss) on Securities 0.387 (0.221) 0.950 (1.150) 0.670
------- ------- ------- ------- -------
Total from Investment Operations 0.912 0.313 1.514 (0.572) 1.252
------- ------- ------- ------- -------
Distributions to Shareholders:
From Net Investment Income (0.525) (0.533) (0.564) (0.578) (0.582)
From Net Realized Gain (0.017) _ _ _ _
------- ------- ------- ------- -------
Total Distributions to Shareholders (0.542) (0.533) (0.564) (0.578) (0.582)
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Asset Value 0.37 (0.22) 0.95 (1.15) 0.67
------- ------- ------- ------- -------
Net Asset Value - End of Year $ 11.46 $ 11.09 $ 11.31 $ 10.36 $ 11.51
======= ======= ======= ======= =======
Total Investment Return 8.45% 2.91% 14.92% (5.02)% 11.80%
Ratios to Average Net Assets:
Expenses 0.93% 0.93% 0.77% 0.55% 0.50%
Expenses Before Reimbursement from Adviser 0.93% 0.93% 0.93% 0.93% 0.93%
Net Investment Income 4.70% 4.84% 5.17% 5.35% 5.15%
Supplementary Data:
Portfolio Turnover Rate 27% 46% 55% 33% 43%
Net Assets at End of Year (000's omitted) $32,907 $32,355 $33,468 $27,929 $34,371
Number of Shares Outstanding at End of Year
(000's omitted) 2,872 2,917 2,958 2,697 2,985
See Notes to Financial Statements.
</TABLE>
- 12 -
<PAGE>
<TABLE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
Maryland Portfolio
<CAPTION>
For the Years Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 10.79 $ 10.98 $ 10.11 $ 11.27 $ 10.60
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.514 0.528 0.550 0.565 0.568
Net Realized and Unrealized Gain
(Loss) on Securities 0.311 (0.190) 0.871 (1.157) 0.670
------- ------- ------- ------- -------
Total from Investment Operations 0.825 0.338 1.421 (0.592) 1.238
------- ------- ------- ------- -------
Distributions to Shareholders:
From Net Investment Income (0.515) (0.528) (0.551) (0.565) (0.568)
From Net Realized Gain _ _ _ (0.003) _
------- ------- ------- ------- -------
Total Distributions to Shareholders (0.515) (0.528) (0.551) (0.568) (0.568)
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Asset Value 0.31 (0.19) 0.87 (1.16) 0.67
------- ------- ------- ------- -------
Net Asset Value - End of Year $ 11.10 $ 10.79 $ 10.98 $ 10.11 $ 11.27
======= ======= ======= ======= =======
Total Investment Return 7.85% 3.21% 14.35% (5.24)% 11.91%
Ratios to Average Net Assets:
Expenses 0.93% 0.93% 0.77% 0.55% 0.50%
Expenses Before Reimbursement from Adviser 0.93% 0.93% 0.93% 0.93% 0.93%
Net Investment Income 4.73% 4.92% 5.16% 5.36% 5.13%
Supplementary Data:
Portfolio Turnover Rate 22% 31% 37% 38% 30%
Net Assets at End of Year (000's omitted) $45,344 $44,410 $49,725 $44,385 $58,094
Number of Shares Outstanding at End of Year
(000's omitted) 4,086 4,116 4,527 4,391 5,157
See Notes to Financial Statements.
</TABLE>
- 13 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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, 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. Securities for which market quotations are
not readily available are valued at their fair value as
determined in good faith by the Board of Directors.
(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 period ended December 31,
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 daily net assets
of the Money Market Portfolio, and 0.30% of the average daily net
assets of the Virginia and Maryland Portfolios.
- 14 -
<PAGE>
3. SECURITIES TRANSACTIONS
Security transactions are recorded on the trade date. For the year
ended December 31, 1997, purchases and sales (including maturities),
of securities, excluding short-term securities, were as follows:
Virginia Maryland
Portfolio Portfolio
Purchases $8,598,583 $ 9,708,732
Sales $8,907,976 $10,209,365
4. NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS
As of December 31, 1997, net unrealized appreciation of investments in
the Virginia Portfolio for Federal income tax purposes aggregated
$2,190,036 of which $2,192,327 related to appreciated investments and
$2,291 related to depreciated investments. In the Maryland Portfolio,
net unrealized appreciation of investments for Federal income tax
purposes totaled $2,495,953 of which $2,504,013 related to appreciated
investments and $8,060 related to depreciated investments.
5. NET ASSETS
At December 31, 1997, net assets consisted of the following:
Money Market Virginia Maryland
Portfolio Portfolio Portfolio
Paid-in-Capital $19,177,146 $30,717,282 $42,978,522
Accumulated Net Realized
Loss on Investments _ _ (130,418)
Net Unrealized Appreciation
of Investments _ 2,190,036 2,495,953
----------- ----------- -----------
NET ASSETS $19,177,146 $32,907,318 $45,344,057
=========== =========== ===========
6. CAPITAL LOSS CARRYOVERS
At December 31, 1997, for Federal income tax purposes, the following
Portfolio had capital loss carryforwards which may be applied against
future net taxable realized gain of each succeeding year until the
earlier of its utilization or its expiration:
Maryland
Portfolio
Expires December 31, 2002 $130,418
- 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, 1997, the related statements of
operations for the year then ended and of changes in net assets for
the years ended December 31, 1997 and 1996, and the financial
highlights for each of the five years in the period ended December 31,
1997. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free from 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, 1997, by
correspondence with the custodian and broker. 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, 1997, 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.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
January 23, 1998
- 16 -
<PAGE>
PART C
<PAGE>
PART C
OTHER INFORMATION
Fund for Tax-Free Investors, Inc.
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial statements:
The Financial Highlights in Part A (for each of the
Portfolios) and the following financial statements in Part B
(for each of the Portfolios) of this registration statement's
amendment are incorporated by reference.
Statements of Net Assets as of December 31, 1997
Statements of Operations for the year ended December 31, 1997
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Financial Highlights for each of the five years in the period
ended December 31, 1997
b. Exhibits:
11 Consent of Deloitte & Touche LLP independent auditors for Registrant
16 Schedule for computation of performance quotations
27 Financial Data Schedules
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Approximate Number of
Shareholders of Record
Title of Class at April 1, 1998
Common Stock, $.001 par value
Money Market Portfolio 522
Rushmore Virginia Tax-Free Portfolio 710
Rushmore Maryland Tax-Free Portfolio 858
ITEM 27. INDEMNIFICATION
The Articles of Incorporation of the Fund provide that
officers and directors shall be indemnified by the Fund
against liabilities and expenses of defense in proceedings
against them by reason of the fact that they serve as
officers or directors of the Fund or as an officer or
director of another entity at the request of the entity. The
indemnification is subject to the following conditions:
(a) no director or officer is indemnified against all
liability to the Fund or its security holders which was the
result of any willful misfeasance, bad faith, gross
negligence or reckless disregard of his duties;
(b) officers and directors are only indemnified for actions
taken in good faith which they believed were in or not
opposed to the best interests of the Fund;
(c) expenses of any suit or proceeding will be paid in
advance only if the persons who will benefit by such advance
undertake to repay the expenses unless it is subsequently
determined that they are entitled to indemnification.
The Articles provide that if indemnification is not ordered
by a court, it may be authorized upon determination by
shareholders, by a majority vote of a quorum of the directors
who were not parties to the proceedings or if a quorum is not
obtainable, or if directed by a quorum of disinterested
directors, by independent legal counsel in a written opinion
that the persons to be indemnified have met the applicable
standard.
In connection with the approval of indemnification to
officers and directors, the Fund hereby undertakes in all
cases where indemnification is not ordered by a court not to
submit any proposed indemnification to a vote of its
shareholders or directors unless it has obtained a legal
opinion from independent counsel that the product of the
persons seeking indemnification did not involve willful
misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be
permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
1933 Act and, therefore, is unenforceable. In the event that
a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being
registered, the Registrant, unless in the opinion of the
Registrant's counsel the matter has been settled by
controlling precedent, will submit to a court of appropriate
jurisdiction the question whether such indemnification by the
Registrant is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Money Management Associates ("MMA"), 1001 Grand Isle Way,
Palm Beach Gardens, Florida 33418, a limited partnership
organized under the laws of the District of Columbia on
August 15, 1974, has one general partner and three limited
partners. Daniel L. O'Connor is the general partner and sole
employee of MMA. Limited partners Richard J. Garvey, Martin
M. O'Connor, and John R. Cralle, are full-time employees of
Rushmore Services, Inc. ("RSI"), a subsidiary of MMA, at 4922
Fairmont Avenue, Bethesda, Maryland 20814.
MMA also serves as the investment adviser to Fund for
Government Investors, The Rushmore Fund, Inc., and American
Gas Index Fund, Inc., all regulated investment companies
since their inception.
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable
ITEM 30. LOCATIONS OF ACCOUNTS AND RECORDS
The physical location for all accounts, books and records
required to be maintained and preserved by Section 31(a) of
the Investment Company Act of 1940, as amended, and Rules 31a-
1 and 31a-2 thereunder, is 4922 Fairmont Avenue, Bethesda,
Maryland 20814.
ITEM 31. MANAGEMENT SERVICES
None
ITEM 32. UNDERTAKINGS
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in this City of Bethesda
and State of Maryland on the 27th day of April, 1998.
Fund for Tax-Free Investors, Inc.
By:
/s/ Daniel L. O'Connor*
Daniel L. O'Connor, Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 16 to the Registration Statement has been signed below
by the following persons in the capacities and on the dates indicated.
Name Title Date
/s/ Daniel L. O'Connor* Chairman of the Board, April 27, 1998
Daniel L. O'Connor Treasurer, Director
/s/ Richard J. Garvey President, Director April 27, 1998
Richard J. Garvey
/s/ Timothy N. Coakley Vice President April 27, 1998
Timothy N. Coakley
/s/ Edward J. Karpowicz Controller April 27, 1998
Edward J. Karpowicz
/s/ Jeffrey R. Ellis* Director April 27, 1998
Jeffrey R. Ellis
/s/ Bruce C. Ellis* Director April 27, 1998
Bruce C. Ellis
/s/ Michael D. Lange* Director April 27, 1998
Michael D. Lange
/s/ Patrick F. Noonan* Director April 27, 1998
Patrick F. Noonan
/s/ Leo Seybold* Director April 27, 1998
Leo Seybold
*Richard J. Garvey, Attorney-in-Fact
EXHIBIT 11
CONSENT OF DELOITTE & TOUCHE LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Fund for Tax-Free Investors, Inc.:
We consent to the incorporation by reference in Post-Effective
Amendment No. 16 to Registration Statement No. 2-83299 of our report
dated January 23, 1998 appearing in the Annual Report of Fund for Tax-
Free Investors, Inc. for the year ended December 31, 1997 and to the
reference to us under the caption "Financial Highlights" appearing in
the Prospectuses, which are also a part of such Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
Princeton, NJ
April 27, 1998
EXHIBIT 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
Rushmore Tax-Free Money Market Portfolio
Exhibit 16
Computation of Yield Quotation
Item 22, Part B
Net Shares Daily Yield
Investment Outstanding (income divided
Income by shares
multiplied by 365)
December 25, 1997 $ 1,677 19,059,831 3.21%
December 26, 1997 $ 1,687 19,212,292 3.20%
December 27, 1997 $ 1,687 19,212,292 3.20%
December 28, 1997 $ 1,687 19,212,292 3.20%
December 29, 1997 $ 1,683 19,151,925 3.21%
December 30, 1997 $ 1,701 19,167,131 3.24%
December 31, 1997 $ 1,727 19,101,469 3.30%
Average 7-Day Yield 3.22%
Annual Effective Yield 3.32%
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
Exhibit 16
Computation of Yield Quotation
Rushmore Maryland Tax-Free Portfolio
a. Interest Income $222,631
b. Less: Management Fees and Fund Expenses 37,114
--------
Net Income $185,516
c. Average Number of Shares Outstanding 4,132,226
d. Closing Share Price 12/31/97 $ 11.10
-----------
Value of Shares $45,867,708
6
Yield: 2[(a-b/cd + 1) - 1] = 4.90%
Computation of Yield Quotation
Rushmore Virginia Tax-Free Portfolio
a. Interest Income $158,609
b. Less: Management Fees and Fund Expenses 26,335
--------
Net Income $130,274
c. Average Number of Shares Outstanding 2,839,235
d. Closing Share Price 12/31/97 $ 11.46
-----------
Value of Shares $32,537,633
6
Yield: 2[(a-b/cd + 1) - 1] = 4.85%
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
Exhibit 16
Total Return Calculations
Rushmore Maryland Rushmore Virginia Tax-
Tax-Free Portfolio Free Portfolio
n n
One Year P (1+T) = ERV P (1+T) = ERV
(1/1/97-12/31/97)
ERV = 1,078.63 ERV = 1,084.52
n = 1 n = 1
T = 7.85% T = 8.45%
n n
Five Years P (1+T) = ERV P (1+T) = ERV
(1/1/92-12/31/97)
ERV = 1,348.59 ERV = 1,361.99
n = 5 n = 5
T = 6.16% T = 6.37%
n n
Ten Years P (1+T) = ERV P (1+T) = ERV
(1/1/87-1/31/97)
ERV = 1,932.68 ERV = 1,976.56
n = 10 n = 10
T = 6.81% T = 7.05%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 724,111
<OTHER-INCOME> 0
<EXPENSES-NET> (149,442)
<NET-INVESTMENT-INCOME> 574,669
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<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 574,669
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<DISTRIBUTIONS-OF-INCOME> (574,669)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,756,045
<NUMBER-OF-SHARES-REDEEMED> (32,016,149)
<SHARES-REINVESTED> 547,728
<NET-CHANGE-IN-ASSETS> 287,624
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<GROSS-EXPENSE> 149,442
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<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.029
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<PER-SHARE-DIVIDEND> (0.029)
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<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> VIRGINIA PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 30,050,671
<INVESTMENTS-AT-VALUE> 32,240,707
<RECEIVABLES> 559,281
<ASSETS-OTHER> 190,007
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,989,995
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82,677
<TOTAL-LIABILITIES> 82,677
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,717,282
<SHARES-COMMON-STOCK> 2,872,241
<SHARES-COMMON-PRIOR> 2,917,394
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,190,036
<NET-ASSETS> 32,907,318
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,817,068
<OTHER-INCOME> 0
<EXPENSES-NET> (298,974)
<NET-INVESTMENT-INCOME> 1,518,094
<REALIZED-GAINS-CURRENT> 70,517
<APPREC-INCREASE-CURRENT> 1,026,639
<NET-CHANGE-FROM-OPS> 2,615,250
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,519,055)
<DISTRIBUTIONS-OF-GAINS> (48,336)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,104,589
<NUMBER-OF-SHARES-REDEEMED> (1,266,554)
<SHARES-REINVESTED> 116,812
<NET-CHANGE-IN-ASSETS> 552,574
<ACCUMULATED-NII-PRIOR> 961
<ACCUMULATED-GAINS-PRIOR> (22,180)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 202,010
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 298,974
<AVERAGE-NET-ASSETS> 32,321,530
<PER-SHARE-NAV-BEGIN> 11.090
<PER-SHARE-NII> 0.525
<PER-SHARE-GAIN-APPREC> 0.387
<PER-SHARE-DIVIDEND> (0.525)
<PER-SHARE-DISTRIBUTIONS> (0.017)
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<PER-SHARE-NAV-END> 11.460
<EXPENSE-RATIO> 0.930
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> MARYLAND PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 42,144,792
<INVESTMENTS-AT-VALUE> 44,640,745
<RECEIVABLES> 784,214
<ASSETS-OTHER> 85,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,510,028
<PAYABLE-FOR-SECURITIES> 54,481
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111,490
<TOTAL-LIABILITIES> 165,971
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,978,522
<SHARES-COMMON-STOCK> 4,085,544
<SHARES-COMMON-PRIOR> 4,116,494
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (130,418)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,495,953
<NET-ASSETS> 45,344,057
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,569,235
<OTHER-INCOME> 0
<EXPENSES-NET> (419,959)
<NET-INVESTMENT-INCOME> 2,149,276
<REALIZED-GAINS-CURRENT> 326,372
<APPREC-INCREASE-CURRENT> 986,054
<NET-CHANGE-FROM-OPS> 3,461,702
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,151,344)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 633,250
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</TABLE>
