<PAGE>
[LOGO]
SEMIANNUAL REPORT, June 30, 1998
FUND FOR TAX-FREE INVESTORS, INC.
4922 FAIRMONT AVENUE, BETHESDA, MD 20814
(800) 622-1386 (301) 657-1510
- --------------------------------------------------------------------------------
July 31, 1998
Dear Shareholders:
The economy in the first half of 1998 continued to grow in a low inflation
environment. Although the labor market remains tight and consumer spending
remains relatively strong, economic troubles in Asia and increased productivity
in the U.S. economy have been able to help offset inflationary price increases.
At the Federal Open Market Committee meeting in March of this year the Federal
Reserve returned to a bias toward tightening the Fed Funds interest rate, but an
actual adjustment to short-term rates has not been made since March of 1997.
Supply of municipal securities skyrocketed during the first six months of 1998,
as issuers continued to take advantage of lower current rates by issuing new
debt and refinancing outstanding higher coupon debt. Demand was unable to keep
up with supply as equities kept most investors' focus and as "sticker shock" on
municipal yields kept some investor's away as well. The yields on municipal
securities at the end of June were relatively unchanged compared to the
beginning of the year as opposed to yields on Treasury securities where the
benchmark thirty-year Treasury dropped approximately 30 basis points in that
same six-month period. Low inflation, a "flight-to-quality" to U.S. backed
securities, and a smaller amount of Treasury issues being brought to market,
have been cited as reasons for the drop in Treasury yields. International
economic troubles such as those in Asia, have resulted in foreign investors
seeking the safety of U.S. backed securities, and as the U.S. government lowers
its budget deficit, the need to borrow through issuing Treasuries has decreased.
With government bond yields decreasing and municipal bond yields remaining
steady, the result has been that municipals have become "cheap" to Treasuries
according to historic yield spreads.
TAX-FREE MONEY MARKET PORTFOLIO
The Tax-Free Money Market Portfolio invests in high-quality, tax-exempt
municipal bonds with maturities of less than one year. The portfolio had an
annualized net investment income of 2.87% of net assets for the six-months ended
June 30, 1998, with an average maturity of 64 days.
<PAGE>
VIRGINIA AND MARYLAND TAX-FREE PORTFOLIOS
The Virginia Tax-Free Portfolio had a total return of 2.55% for the six-month
period ending June 30, 1998, which included annualized net investment income of
4.56%. The assets for the portfolio were $33 million, and the average maturity
was 16 years. The credit quality in the Fund remains high with over 90% being
rated AA or better.
The Maryland Tax-Free Portfolio had a total return of 2.57% for the six-month
period ending June 30, 1998 and its annualized net investment income was 4.58%.
Assets of the portfolio at the end of this period were $46 million, and the
average maturity was 15 years. The credit quality in the Maryland portfolio was
also high with over 86% of its holdings being rated AA or better.
Both Maryland and Virginia have retained their AAA credit ratings.
OUTLOOK
The economy should continue to expand in the second half of the year, as the Fed
remains watchful of any potential upswings in inflation. Key to the inflation
watch will be how big of an impact current international economic uncertainty
will have on the U.S. economy and if sustained tight labor markets will begin to
show any signs of increased wage pressure. Our feeling is that the Federal
Reserve will not have sufficient evidence to intervene on short-term interest
rates until late 1998 at the earliest.
It appears that new issuance of municipal bonds will be lower over the second
half of the year as compared to the impressive volume of bonds issued over the
first six months. Municipals should benefit from an environment of lower
issuance as supply falls into line with demand and tax-free yields decrease in
relation to Treasuries reflecting more traditional yield spreads, and pushing
prices up.
The Fund for Tax-Free Investors maintains its long-term, conservative investment
philosophy. We will continue to invest in high quality issues we feel provide
the best value along the yield curve. Thank you for your continued support and
we look forward to serving your investment needs in the future.
Sincerely,
[SIGNATURE] [SIGNATURE]
Daniel L. O'Connor Richard J. Garvey
Chairman President
- 2 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
--------- -----------
<S> <C> <C>
ARKANSAS 2.8%
Fayetteville, Public Facilities
Board Revenue Authority Floating
Rate Notes
4%, 9/1/27+ VMIGI.............. $ 500,000 $ 500,000
-----------
CALIFORNIA 8.7%
California School Cash Reserve
Program Revenue
4.75%, 7/2/98 SPI+............. 800,000 800,019
California School Cash Reserve
Program Revenue
4.5%, 7/2/99 SPI+.............. 800,000 805,856
-----------
State Total.................... 1,605,875
-----------
COLORADO 4.4%
Colorado Student Obligation Board
Authority Floating Rate Notes
3.4%, 8/1/00+ A-1+............. 800,000 800,000
-----------
FLORIDA 1.1%
Florida State Turnpike Authority
Revenue
5.3%, 7/1/98 AAA............... 200,000 200,000
-----------
HAWAII 2.8%
Hawaii State General Obligation
5.5%, 10/1/98 AAA.............. 500,000 502,411
-----------
ILLINOIS 4.0%
Illinois State Sales Tax Revenue
6.8%, 6/15/99 AAA.............. 700,000 733,479
-----------
INDIANA 3.8%
Allen County Economic Development
Floating Rate Notes
3.5%, 8/1/21+ A-1+............. 695,000 695,000
-----------
KANSAS 2.8%
Overland Park General Obligation
5.1%, 9/1/98 AAA............... 500,000 501,113
-----------
MARYLAND 10.9%
Baltimore County Revenue
Authority Floating Rate Notes
3.55%, 1/1/16+ A-1............. 200,000 200,000
Maryland Health and Higher
Education Loyola College Issue B
Floating Rate Notes
3.5%, 10/1/13+ AAA............. 200,000 200,000
<CAPTION>
Face Value
Value (Note 1)
--------- -----------
<S> <C> <C>
MARYLAND (continued)
Maryland Health and Higher
Education North Arundel Hospital
Floating Rate Notes
3.55%, 7/1/32+ VMIGI........... $ 400,000 $ 400,000
North East Maryland Waste
Disposal Authority Floating Rate
Notes
3.8%, 1/1/08+ A-1+............. 400,000 400,000
Washington Suburban Sanitation
Floating Rate Notes
3.55%, 1/1/99+ A-1+............ 800,000 800,000
-----------
State Total.................... 2,000,000
-----------
MINNESOTA 14.6%
Hennepin County, Floating Rate
Notes
3.4%, 12/1/10+ A-1+............ 100,000 100,000
Minnesota State Higher Education
Floating Rate Notes
3.7%, 12/1/24+ VMIG1........... 500,000 500,000
St. Paul Housing and
Redevelopment Authority Floating
Rate Notes
3.55%, 12/1/12+ A-1+........... 800,000 800,000
St. Paul United Way Project
Floating Rate Notes
3.6%, 12/1/18+ A-1............. 500,000 500,000
Waconia Industrial Development
Revenue Floating Rate Notes
3.75%, 10/1/16+ A-1............ 775,000 775,000
-----------
State Total.................... 2,675,000
-----------
MISSOURI 7.4%
Jackson County, School District
4.75%, 3/1/99 AA............... 640,000 643,710
Missouri State Health and
Education, Drury College Floating
Rate Notes
4.05%, 8/15/21+ VMIG1.......... 700,000 700,000
-----------
State Total.................... 1,343,710
-----------
MONTANA 3.3%
Montana State Health Floating
Rate Notes
3.5%, 12/1/15+ A-1+............ 600,000 600,000
-----------
NEW HAMPSHIRE 8.3%
New Hamphshire Health Floating
Rate Notes
3.5%, 11/1/21+ VMIG1........... 700,000 700,000
</TABLE>
- 3 -
<PAGE>
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO (continued)
June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
--------- -----------
<S> <C> <C>
NEW HAMPSHIRE (continued)
Shaker, Regional School District
General Obligation
4.75%, 8/15/98 AAA............. $ 500,000 $ 500,649
New Hampshire State Business
Finance Authority Foundation for
Seacoast Health Series A Floating
Rate Notes
3.55%, 6/1/28+ A-1............. 300,000 300,000
-----------
State Total.................... 1,500,649
-----------
NEW YORK 7.2%
New York City, Series B Floating
Rate Notes
4%, 8/15/03+ A-1+.............. 200,000 200,000
New York City, Series B Floating
Rate Notes
4%, 8/15/23+ A-1+.............. 400,000 400,000
Nassau County, Revenue
Anticipation Notes
4%, 3/10/99 SP1................ 700,000 701,389
-----------
State Total.................... 1,301,389
-----------
NORTH CAROLINA 3.9%
City of Winston-Salem Floating
Rate Notes
3.9%, 4/1/00+ A-1+............. 700,000 700,000
-----------
PENNSYLVANIA 6.1%
Emmaus General Authority Floating
Rate Notes
3.55%, 12/1/28+ A-1+........... 800,000 800,000
Pittsburgh Water and Sewer
Authority Revenue
3.9%, 9/1/98 AAA............... 300,000 300,048
-----------
State Total.................... 1,100,048
-----------
<CAPTION>
Face Value
Value (Note 1)
--------- -----------
<S> <C> <C>
TEXAS 1.2%
North Austin, Municipal Utility
Revenue
7%, 11/15/98 AAA............... $ 210,000 $ 215,638
-----------
VIRGINIA 0.9%
Fairfax County, General
Obligation
4.7%, 10/1/98 AAA.............. 155,000 155,322
-----------
WEST VIRGINIA 2.3%
South Charleston, Hospital
Revenue
8%, 10/1/98 AAA................ 400,000 412,352
-----------
WYOMING 3.9%
Lincoln County, P.C.R. Exxon
Project Floating Rate Notes
4%, 11/1/14+ A-1+.............. 700,000 700,000
-----------
TOTAL INVESTMENTS 100.4%
(Cost $18,241,986*)....................... 18,241,986
LIABILITIES LESS OTHER ASSETS (0.4)%........ (77,328)
-----------
NET ASSETS (NOTE 5) 100.0%.................. $18,164,658
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 18,164,658 Shares
Outstanding).............................. $1.00
-----------
-----------
</TABLE>
- ---------
* Same cost is used for Federal income tax purposes.
+ Daily or Weekly Tender Bond
See Notes to Financial Statements.
- 4 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
VIRGINIA PORTFOLIO
June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Alexandria Industrial
Development Authority Revenue
7.4%, 1/1/08 A+.............. $ 175,000 $ 175,557
Arlington County General
Obligation
6%, 8/1/04 AAA............... 500,000 555,635
5.4%, 6/1/13 AAA............. 1,000,000 1,048,150
5.375%, 12/1/16 AAA.......... 1,000,000 1,036,300
Brunswick County Virginia
Revenue
5.5%, 7/1/17 AAA............. 1,000,000 1,046,190
Chesapeake Water & Sewer System
Revenue
6.5%, 7/1/05 A+.............. 270,000 294,721
Fairfax City EDA Lease Revenue
5.5%, 5/15/18 AA............. 2,000,000 2,056,440
Fairfax County Industrial
Development Authority Revenue
5.25%, 8/15/19 AA............ 500,000 520,825
Fairfax County Resource
Recovery Revenue
7.75%, 2/1/11 A+............. 300,000 313,680
Fairfax County Water Authority
Revenue
5.8%,1/1/16 AAA.............. 500,000 551,855
6%,4/1/07 AA-................ 370,000 419,095
6%,4/1/22 AA-................ 630,000 682,397
Hampton General Obligation
6%, 1/15/14 AA-.............. 350,000 382,809
Hanover City Water & Sewer
Revenue
5.25%, 2/1/16 AAA............ 500,000 505,985
Hanover County Virginia General
Obligation
5.4%, 7/15/16 AA............. 1,000,000 1,031,250
Henrico County Industrial
Development Authority Revenue
7.125%, 8/1/21 AA............ 400,000 461,664
Henrico County Water & Sewer
Revenue
6.45%, 5/1/02 AAA............ 300,000 313,770
6.25%, 5/1/13 AA-............ 200,000 209,180
Henry County General Obligation
8.825%, 11/1/05 AAA.......... 200,000 257,070
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Isle of Wight County General
Obligation
6.7%, 1/1/02 A............... $ 200,000 $ 220,276
James City County General
Obligation
5.25%, 12/15/15 AAA.......... 1,000,000 1,019,390
Leesburg General Obligation
5.5%, 6/1/13 AAA............. 500,000 524,760
Loudoun County Sanitation
Authority Revenue
6.25%, 1/1/16 AAA............ 500,000 540,930
Lynchburg, General Obligation
5%, 5/1/18 AA................ 1,000,000 997,440
Lynchburg, I.D.A Healthcare
Facilities
5.2%, 1/1/18 A+.............. 500,000 496,970
Manassas, General Obligation
5%, 1/1/14 AA-............... 1,000,000 1,004,340
Metropolitan Washington, D.C.
Airport Authority Revenue
6.5%, 10/1/06 AAA............ 300,000 327,438
Newport News General Obligation
5%, 3/1/18 AA................ 795,000 788,068
Norfolk General Obligation
5.75%, 6/1/13 AAA............ 500,000 531,980
Norfolk Water Revenue
5.75%, 11/1/12 AAA........... 500,000 534,980
5.875%, 11/1/15 AAA.......... 500,000 537,115
Portsmouth Redevelopment and
Housing Authority Revenue
6.05%, 12/1/08 AAA........... 500,000 538,075
Potomac and Rappahannock
Transportation District
Commission Revenue
6.7%, 3/1/00 AAA............. 600,000 638,106
Prince William County
Industrial Development
Authority Revenue
7.25%, 3/1/00 NR............. 250,000 268,078
Prince William County Park
Authority Revenue
6.875%, 10/15/16 A-.......... 500,000 564,170
Richmond Metro Authority
Revenue
6.375%, 7/15/02 AAA.......... 500,000 550,355
Upper Occoquan Sewer Authority
Revenue
5.15%, 7/1/20 AAA............ 500,000 509,265
</TABLE>
- 5 -
<PAGE>
STATEMENT OF NET ASSETS
VIRGINIA PORTFOLIO (continued)
June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Virginia Beach General
Obligation
6.5%, 8/1/01 AA.............. $ 500,000 $ 544,780
5%, 8/1/17 AA................ 1,075,000 1,076,891
Virginia College Building
Authority Revenue
6.625%, 5/1/13 A-............ 300,000 322,584
5.75%, 1/1/14 AA............. 500,000 528,985
Virginia Housing Development
Authority Revenue
6.625%, 7/1/13 A+............ 275,000 289,388
5.95%, 7/1/13 AA+............ 500,000 529,635
5.75%, 1/1/19 AAA............ 1,000,000 1,029,720
Virginia Port Authority Revenue
5.9%, 7/1/16 AA.............. 500,000 535,140
Virginia Public Building
Authority Revenue
5%, 8/1/15 AA................ 1,000,000 1,002,130
5.2%, 8/1/16 AA.............. 1,000,000 1,013,690
Virginia Public School
Authority Revenue
6.2%, 8/1/13 AA.............. 320,000 353,728
5%, 8/1/16 AA................ 500,000 501,065
5%, 8/1/18 AA+............... 1,000,000 996,190
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Virginia Resource Authority
Revenue
6.75%, 10/1/04 NR............ $ 240,000 $ 273,329
Virginia Transportation Board
Revenue
5.125%, 5/15/17 AA........... 500,000 504,600
-----------
TOTAL INVESTMENTS 97.5%
(Cost $30,038,232*)...................... 31,956,164
OTHER ASSETS LESS LIABILITIES 2.5%......... 827,909
-----------
NET ASSETS (NOTE 5) 100.0%................. $32,784,073
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 2,854,412 Shares
Outstanding)............................. $11.49
-----------
-----------
</TABLE>
- ---------
* Same cost is used for Federal income tax purposes.
NR Not Rated
See Notes to Financial Statements.
- 6 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENT OF NET ASSETS
MARYLAND PORTFOLIO
June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Anne Arundel County Water and
Sewer General Obligation
6.2%, 8/1/12 AA+............. $ 725,000 $ 793,708
6%, 7/15/13 AA+.............. 500,000 532,520
6.3%, 8/1/16 AA+............. 500,000 554,185
6.3%, 8/1/19 AA+............. 725,000 806,816
Anne Arundel County Pollution
Control Revenue
6%, 4/1/24 A................. 1,230,000 1,304,083
Anne Arundel County Solid Waste
Project General Obligation
5.5%, 9/1/15 AA1............. 500,000 516,080
Baltimore City General
Obligation
6.4%, 10/15/02 AAA........... 465,000 506,659
5.5%, 10/15/10 AAA........... 1,000,000 1,069,670
Baltimore City Revenue
6%, 7/1/15 AAA............... 500,000 565,445
Baltimore County General
Obligation
6.125%, 7/1/02 AAA........... 500,000 545,435
5.5%, 6/1/12 AAA............. 1,000,000 1,055,200
Baltimore Port Facility Revenue
6.5%, 12/1/10 AA-............ 400,000 435,032
6.5%, 10/1/11 AA-............ 250,000 271,143
Carroll County General
Obligation
7.1%, 10/1/00 AA............. 235,000 255,356
7.25%, 10/1/00 AA............ 300,000 326,949
5.3%, 11/1/15 AA............. 1,000,000 1,027,350
6.5%, 10/1/24 AA............. 225,000 249,809
Frederick County General
Obligation
6.125%, 12/1/07 AAA.......... 500,000 546,445
5.6%, 7/1/11 AA.............. 500,000 529,585
City of Frederick General
Obligation
6%, 10/1/11 AAA.............. 300,000 329,670
Harford County General
Obligation
5%, 3/1/14 AA-............... 500,000 503,780
Howard County Metropolitan
District General Obligation
6%, 8/15/19 AAA.............. 810,000 851,027
Howard County Public
Improvement General Obligation
6%, 5/15/03 AAA.............. 500,000 540,420
5.5%, 2/15/04 AAA............ 1,000,000 1,072,390
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Howard County Special
Facilities Revenue
6.1%, 2/15/13 AA-............ $ 500,000 $ 540,900
Laurel General Obligation
6.7%, 7/1/01 AAA............. 600,000 656,064
Maryland Community Development
Administration Revenue
6.6%, 4/1/06 AA.............. 200,000 212,032
7.375%, 4/1/10 AA............ 495,000 519,295
7.25%, 4/1/11 AA............. 200,000 211,932
7.15%, 4/1/11 AA............. 405,000 428,146
7.7%, 5/15/20 AA............. 250,000 265,605
7.25%, 4/1/27 AA............. 385,000 404,639
Maryland General Obligation
5%, 10/15/11 AAA............. 1,000,000 1,031,470
5%, 3/1/12 AAA............... 1,500,000 1,533,854
Maryland Health and Higher
Education Facilities Authority
Revenue
5.7%, 7/1/09 A............... 500,000 549,340
5.25%, 7/1/13 AAA............ 500,000 523,865
6.125%, 7/1/14 AAA........... 500,000 538,330
5.5%, 10/1/16 AAA............ 1,000,000 1,054,420
6.125%, 7/1/19 AAA........... 500,000 539,415
5%, 7/1/27 AAA............... 1,500,000 1,472,954
Maryland Health and Higher
Education Facilities Authority
Floating Rate Notes
3.5%, 10/1/13+ AAA........... 500,000 500,000
Maryland Industrial Development
Revenue
7.125%, 7/1/06 A-............ 300,000 305,850
Maryland Stadium Authority
Sports Revenue
7.375%, 12/15/04 AA-......... 425,000 452,731
7.5%, 12/15/10 AA-........... 695,000 741,405
5.55%, 3/1/13 AAA............ 500,000 528,120
5.875%, 12/15/13 AAA......... 1,000,000 1,076,410
5.375%, 12/15/15 AA.......... 500,000 512,970
7.6%, 12/15/19 AA-........... 500,000 533,425
Maryland Water Quality Finance
Administration Revenue
6%, 9/1/15 AA................ 1,000,000 1,071,610
</TABLE>
- 7 -
<PAGE>
STATEMENT OF NET ASSETS
MARYLAND PORTFOLIO (continued)
June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
Montgomery County Housing
Opportunity Commission Revenue
6.7%, 7/1/11 AA.............. $ 345,000 $ 365,624
7.8%, 7/1/12 NR.............. 200,000 209,680
7.375%, 7/1/17 AA............ 175,000 180,961
6.65%, 7/1/17 AA............. 170,000 183,150
7%, 7/1/23 A................. 250,000 264,465
Montgomery County Waste
Disposal Authority Revenue
5.875%, 6/01/13 AAA.......... 250,000 263,325
North East Maryland Waste
Disposal Authority Revenue
6.2%, 7/1/10 A............... 500,000 533,160
6.3%, 7/1/16 A............... 1,000,000 1,064,290
Prince George's County General
Obligation
5.25%, 3/15/15 AAA........... 1,000,000 1,020,460
Prince George's County Housing
Authority Revenue
6.35%, 7/20/20 AAA........... 700,000 740,628
Prince George's County
Pollution Control Revenue
5.75%, 3/15/10 A............. 1,000,000 1,104,089
Prince George's County Revenue
Bond
5.375%, 7/1/14 A............. 500,000 505,180
Prince George's County Solid
Waste Management System Revenue
7%, 6/30/00 AAA.............. 250,000 269,400
St. Mary's County General
Obligation
5.85%, 11/1/18 AAA........... 500,000 533,160
<CAPTION>
Face Value
Value (Note 1)
---------- -----------
<S> <C> <C>
University of Maryland System
Auxiliary Revenue
6.375%, 4/1/09 AA+........... $ 500,000 $ 552,260
5.6%, 4/1/12 AA+............. 1,000,000 1,056,790
5.125%, 4/1/15 AA+........... 1,000,000 1,012,300
5.6%, 4/1/16 AA+............. 1,000,000 1,047,810
Washington County General
Obligation
5.125%, 1/1/12 AAA........... 500,000 508,655
5.25%, 1/1/16 AAA............ 500,000 508,230
Washington, D.C. Metropolitan
Area Transportation Authority
Revenue
6%, 7/1/10 AAA............... 275,000 308,586
Washington Suburban Sanitary
District General Obligation
6.2%, 6/1/12 AA.............. 900,000 970,173
5.125%, 6/1/20 AA............ 1,000,000 1,005,650
-----------
TOTAL INVESTMENTS 98.5%
(Cost $43,036,472*)...................... 45,601,565
OTHER ASSETS LESS LIABILITIES
1.5%..................................... 695,665
-----------
NET ASSETS (NOTE 5) 100.0%................. $46,297,230
-----------
-----------
NET ASSET VALUE PER SHARE
(Based on 4,159,189 Shares
Outstanding)............................. $11.13
-----------
-----------
</TABLE>
- ---------
* Same cost is used for
Federal income tax
purposes.
+ Daily or Weekly Tender
Bond
NR Not Rated
See Notes to Financial Statements.
- 8 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Money
Market Virginia Maryland
Portfolio Portfolio Portfolio
----------- --------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME (Note 1)............................................... $ 326,335 $ 859,746 $1,253,318
----------- --------- ----------
EXPENSES
Investment Advisory Fee (Note 2)....................................... 45,054 97,901 142,180
Administrative Fee (Note 2)............................................ 22,527 46,992 68,246
Other Fees............................................................. 121 -- --
----------- --------- ----------
Total Expenses....................................................... 67,702 144,893 210,426
----------- --------- ----------
NET INVESTMENT INCOME.................................................... 258,633 714,853 1,042,892
----------- --------- ----------
Net Realized Gain (Loss) on Investment Transactions...................... -- 360,045 59,623
Net Change in Unrealized Appreciation/Depreciation of Investments........ -- (272,104) 69,140
----------- --------- ----------
NET GAIN ON INVESTMENTS.................................................. -- 87,941 128,763
----------- --------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $ 258,633 $ 802,794 $1,171,655
----------- --------- ----------
----------- --------- ----------
</TABLE>
See Notes to Financial Statements.
- 9 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Money Market Virginia Maryland
Portfolio Portfolio Portfolio
--------------------------- -------------------------- -----------
For the Six For the Six For the Six
Months Ended For the Year Months For the Year Months
June 30, Ended Ended June Ended Ended June
1998 December 31, 30, 1998 December 31, 30, 1998
(unaudited) 1997 (unaudited) 1997 (unaudited)
------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net Investment Income.......................... $ 258,633 $ 574,669 $ 714,853 $ 1,518,094 $1,042,892
Net Realized Gain on Investment Transactions... -- -- 360,045 70,517 59,623
Net Change in Unrealized
Appreciation/Depreciation of Investments..... -- -- (272,104) 1,026,639 69,140
------------ ------------ ----------- ------------ -----------
Net Increase in Net Assets Resulting from
Operations................................... 258,633 574,669 802,794 2,615,250 1,171,655
------------ ------------ ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income (Note 1)............ (258,633) (574,669) (714,853) (1,519,055) (1,042,892)
From Net Realized Gain......................... -- -- -- (48,336) --
------------ ------------ ----------- ------------ -----------
Total Distributions to Shareholders............ (258,633) (574,669) (714,853) (1,567,391) (1,042,892)
------------ ------------ ----------- ------------ -----------
FROM SHARE
TRANSACTIONS
Net Proceeds from Sales of Shares.............. 17,085,825 31,756,045 8,610,878 12,324,705 4,447,696
Reinvestment of Distributions.................. 246,103 547,728 593,602 1,308,417 876,340
Cost of Shares Redeemed........................ (18,344,416) (32,016,149) (9,415,666) (14,128,407) (4,499,626)
------------ ------------ ----------- ------------ -----------
Net Increase (Decrease) in Net Assets Resulting
from Share Transactions...................... (1,012,488) 287,624 (211,186) (495,285) 824,410
------------ ------------ ----------- ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ (1,012,488) 287,624 (123,245) 552,574 953,173
NET ASSETS - Beginning of Period................. 19,177,146 18,889,522 32,907,318 32,354,744 45,344,057
------------ ------------ ----------- ------------ -----------
NET ASSETS - End of Period....................... $18,164,658 $19,177,146 $32,784,073 $32,907,318 $46,297,230
------------ ------------ ----------- ------------ -----------
------------ ------------ ----------- ------------ -----------
SHARES
Sold........................................... 17,085,825 31,756,045 750,122 1,104,589 399,791
Issued in Reinvestment of Distributions........ 246,103 547,728 51,817 116,812 78,879
Redeemed....................................... (18,344,416) (32,016,149) (819,768) (1,266,554) (405,025)
------------ ------------ ----------- ------------ -----------
Net Increase (Decrease) in Shares.............. (1,012,488) 287,624 (17,829) (45,153) 73,645
------------ ------------ ----------- ------------ -----------
------------ ------------ ----------- ------------ -----------
<CAPTION>
For the Year
Ended
December 31,
1997
------------
<S> <C>
FROM INVESTMENT
ACTIVITIES
Net Investment Income.......................... $ 2,149,276
Net Realized Gain on Investment Transactions... 326,372
Net Change in Unrealized
Appreciation/Depreciation of Investments..... 986,054
------------
Net Increase in Net Assets Resulting from
Operations................................... 3,461,702
------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income (Note 1)............ (2,151,344)
From Net Realized Gain......................... --
------------
Total Distributions to Shareholders............ (2,151,344)
------------
FROM SHARE
TRANSACTIONS
Net Proceeds from Sales of Shares.............. 6,860,756
Reinvestment of Distributions.................. 1,803,253
Cost of Shares Redeemed........................ (9,040,667)
------------
Net Increase (Decrease) in Net Assets Resulting
from Share Transactions...................... (376,658)
------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 933,700
NET ASSETS - Beginning of Period................. 44,410,357
------------
NET ASSETS - End of Period....................... $45,344,057
------------
------------
SHARES
Sold........................................... 633,250
Issued in Reinvestment of Distributions........ 165,933
Redeemed....................................... (830,133)
------------
Net Increase (Decrease) in Shares.............. (30,950)
------------
------------
</TABLE>
See Notes to Financial Statements.
- 10 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the Years Ended December 31,
June 30, 1998 -----------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
--------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of
Period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- --------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income............... 0.01 0.03 0.03 0.03 0.02 0.02
------- --------- --------- --------- --------- ---------
Total from Investment
Operations...................... 0.01 0.03 0.03 0.03 0.02 0.02
------- --------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income.......... (0.01) (0.03) (0.03) (0.03) (0.02) (0.02)
------- --------- --------- --------- --------- ---------
Total Distributions to
Shareholders.................... (0.01) (0.03) (0.03) (0.03) (0.02) (0.02)
------- --------- --------- --------- --------- ---------
Net Increase in Net Asset Value....... -- -- -- -- -- --
------- --------- --------- --------- --------- ---------
Net Asset Value - End of Period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN................. 2.89%(A) 2.93% 2.69% 3.09% 2.02% 1.66%
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................. 0.75%(A) 0.75% 0.75% 0.75% 0.75% 0.78%
Net Investment Income................. 2.87%(A) 2.89% 2.67% 3.04% 1.99% 1.65%
SUPPLEMENTARY DATA:
Net Assets at End of Period (000's
omitted)............................ $ 18,165 $ 19,177 $ 18,890 $ 20,772 $ 25,586 $ 23,283
Number of Shares Outstanding at End of
Period (000's omitted).............. 18,165 19,177 18,890 20,792 25,604 23,312
</TABLE>
- ---------
(A) Annualized
See Notes to Financial Statements.
- 11 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
VIRGINIA PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the Years Ended December 31,
June 30, 1998 -----------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
--------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of Period....... $ 11.46 $ 11.09 $ 11.31 $ 10.36 $ 11.51 $ 10.84
------- --------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income..................... 0.26 0.52 0.53 0.56 0.58 0.58
Net Realized and Unrealized Gain (Loss) on
Securities.............................. 0.03 0.39 (0.22) 0.95 (1.15) 0.67
------- --------- --------- --------- --------- ---------
Total from Investment Operations........ 0.29 0.91 0.31 1.51 (0.57) 1.25
------- --------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income................ (0.26) (0.52) (0.53) (0.56) (0.58) (0.58)
From Net Realized Gain.................... -- (0.02) -- -- -- --
------- --------- --------- --------- --------- ---------
Total Distributions to Shareholders..... (0.26) (0.54) (0.53) (0.56) (0.58) (0.58)
------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset
Value..................................... 0.03 0.37 (0.22) 0.95 (1.15) 0.67
------- --------- --------- --------- --------- ---------
Net Asset Value - End of Period............. $ 11.49 $ 11.46 $ 11.09 $ 11.31 $ 10.36 $ 11.51
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN....................... 2.55%(B) 8.45% 2.91% 14.92% (5.02)% 11.80%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................... 0.93%(A) 0.93% 0.93% 0.77% 0.55% 0.50%
Expenses Before Reimbursement from
Adviser................................... 0.93%(A) 0.93% 0.93% 0.93% 0.93% 0.93%
Net Investment Income....................... 4.56%(A) 4.70% 4.84% 5.17% 5.35% 5.15%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate..................... 19% 27% 46% 55% 33% 43%
Net Assets at End of Period (000's
omitted).................................. $ 32,784 $ 32,907 $ 32,355 $ 33,468 $ 27,929 $ 34,371
Number of Shares Outstanding at End of
Period (000's omitted).................... 2,854 2,872 2,917 2,958 2,697 2,985
</TABLE>
- ---------
(A) Annualized
(B) Total Investment Return for periods of less than one year are not
annualized.
See Notes to Financial Statements.
- 12 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
FINANCIAL HIGHLIGHTS
MARYLAND PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the Years Ended December 31,
June 30, 1998 -----------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
--------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value - Beginning of Period...... $ 11.10 $ 10.79 $ 10.98 $ 10.11 $ 11.27 $ 10.60
------- --------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income.................... 0.25 0.51 0.53 0.55 0.57 0.57
Net Realized and Unrealized Gain (Loss)
on Securities.......................... 0.03 0.31 (0.19) 0.87 (1.16) 0.67
------- --------- --------- --------- --------- ---------
Total from Investment Operations....... 0.28 0.82 0.34 1.42 (0.59) 1.24
------- --------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income............... (0.25) (0.51) (0.53) (0.55) (0.57) (0.57)
------- --------- --------- --------- --------- ---------
Total Distributions to Shareholders.... (0.25) (0.51) (0.53) (0.55) (0.57) (0.57)
------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset
Value.................................... 0.03 0.31 (0.19) 0.87 (1.16) 0.67
------- --------- --------- --------- --------- ---------
Net Asset Value - End of Period............ $ 11.13 $ 11.10 $ 10.79 $ 10.98 $ 10.11 $ 11.27
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN...................... 2.57%(B) 7.85% 3.21% 14.35% (5.24)% 11.91%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................... 0.93%(A) 0.93% 0.93% 0.77% 0.55% 0.50%
Expenses Before Reimbursement from
Adviser.................................. 0.93%(A) 0.93% 0.93% 0.93% 0.93% 0.93%
Net Investment Income...................... 4.58%(A) 4.73% 4.92% 5.16% 5.36% 5.13%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate.................... 5% 22% 31% 37% 38% 30%
Net Assets at End of Period (000's
omitted)................................. $ 46,297 $ 45,344 $ 44,410 $ 49,725 $ 44,385 $ 58,094
Number of Shares Outstanding at End of
Period (000's omitted)................... 4,159 4,086 4,116 4,527 4,391 5,157
</TABLE>
- ---------
(A) Annualized
(B) Total Investment Return for periods of less than one year are not
annualized.
See Notes to Financial Statements.
- 13 -
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Fund for Tax-Free Investors, Inc. (the "Fund") is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 as a no-load,
open-end, investment company. The Fund consists of three separate portfolios
which invest primarily in securities exempt from Federal income taxes. On June
30, 1998, 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 June 30,
1998. 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 period ended June
30, 1998, purchases and sales (including maturities), of securities, excluding
short-term securities, were as follows:
<TABLE>
<CAPTION>
Virginia Maryland
Portfolio Portfolio
------------ ------------
<S> <C> <C>
Purchases................................................... $ 5,917,443 $ 3,233,600
------------ ------------
------------ ------------
Sales....................................................... $ 6,305,510 $ 2,406,260
------------ ------------
------------ ------------
</TABLE>
4. NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS
As of June 30, 1998, net unrealized appreciation of investments in the Virginia
Portfolio for Federal income tax purposes aggregated $1,917,932 of which
$1,923,377 related to appreciated investments and $5,445 related to depreciated
investments. In the Maryland Portfolio, net unrealized appreciation of
investments for Federal income tax purposes totaled $2,565,093 of which
$2,578,205 related to appreciated investments and $13,112 related to depreciated
investments.
5. NET ASSETS
At June 30, 1998, net assets consisted of the following:
<TABLE>
<CAPTION>
Money Market Virginia Maryland
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
Paid-in-Capital............................................... $18,164,658 $ 30,506,096 $ 43,802,932
Accumulated Net Realized Gain (Loss) on Investments........... -- 360,045 (70,795)
Net Unrealized Appreciation of Investments.................... -- 1,917,932 2,565,093
------------- ------------- -------------
NET ASSETS.................................................... $18,164,658 $ 32,784,073 $ 46,297,230
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
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:
<TABLE>
<CAPTION>
Maryland
Portfolio
----------
<S> <C>
Expires December 31, 2002................................................... $ 130,418
</TABLE>
- 15 -
