As Filed With The Securities And Exchange Commission on February 26, 1999.
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. 17 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 17 (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.
___ on (date) pursuant to paragraph (b)(1)(v) of rule 485.
___ 60 days after filing pursuant to paragraph (a)(1) of rule 485.
_X_ on May 1, 1999 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.
<PAGE>
CROSS REFERENCE SHEET
Form Location in
N-1A Registration Statement
Item No.
Part A. Information Required in Prospectus
1. Front and Back Cover Pages Front Cover Page of
Prospectus;
Back Cover Page of Prospectus
2. Risk/Return Summary Risk and Return Summary
3. Risk/Return Summary: Fee Table Risk/Return Bar Chart and
Table; Performance Table; Fees
and Expenses
4. Investment Objectives, Investment Objectives,
Principal Investment Principal Investment
Strategies, and Related Risks Strategies, and Related Risks
5. Management's Discussion of Fund Management Discussion of Fund
Performance Performance: Performance
Comparison
6. Management, Organization, and Management, Organization, and
Capital Structure Capital Structure: Investment
Adviser; Year 200 Preparations
7. Shareholder Information Shareholder Information: How
to Invest in the Fund; How to
Redeem Your Investment;
Additional Information About
the Fund: Exchanging Fund
Shares; Pricing of Fund
Shares; Dividends and
Distributions; Tax
Consequences of Investing in
the Fund
8. Distribution Arrangements Not Applicable
9. Financial Highlights Financial Highlights
Information
Part B: Information Required In
Statement of Additional Information
10. Cover Page and Table of Cover Page and Table of
Contents Contents
11. Fund History Not Applicable
12. Description of the Fund and Its Fund Description, Investments,
Investments and Risks and Risks; Investment Limitations
13. Management of the Fund Management of the Fund
14. Control Persons and Principal Control Persons and Principal
Holders of Securities Holders of Securities
15. Investment Advisory and Other Investment Advisory and Other
Services Services: Investment Adviser;
Custodian and Independent
Public Accountant
16. Brokerage Allocation and Other Brokerage Allocation and Other
Practices Practices
17. Capital Stock and Other Not Applicable
Securities
18. Purchase, Redemption and Purchase and Redemption of
Pricing of Shares Shares
19. Taxation of the Fund Taxation of the Fund
20. Underwriters Not Applicable
<PAGE>
Form Location in
N-1A Registration Statement
Item No.
21. Calculation of Performance Data Calculation of Performance
Data: Average Annual Total
Return Quotation; Computation
of Yield
22. Financial Statements Financial Statements
Part C: Other Information
23. Exhibits Exhibits
24. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Fund Common Control with the Fund
25. Indemnification Indemnification
26. Business and Other Connections Business and Other Connections
of Investment Adviser of Investment Adviser
27. Principal Underwriters Not Applicable
28. Location of Accounts and Location of Accounts and
Records Records
29. Management Services Not Applicable
32. Undertakings Not Applicable
Signatures Signatures
<PAGE>
PART A
<PAGE>
FUND for TAX-FREE INVESTORS, INC.
Rushmore Tax-Free Money Market Portfolio
Prospectus
May 1, 1999
Fund for Tax-Free Investors, Inc. is a no-load investment company with
three separate portfolios. The Rushmore Tax-Free Money Market
Portfolio (the "Fund"), one of the three portfolios, is described in
this Prospectus.
This Prospectus contains important information about the Fund and
should be read before investing. Please keep the Prospectus on file
for future reference.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE of CONTENTS
Page
Risk and Return Summary:
Investments, Risks, and Performance
Risk/Return Bar Chart and Table
Performance Table and Yields
Fees and Expenses
Investment Objectives, Principal Investment
Strategies, and Related Risks
Shareholder Information
How to Invest in the Fund
How to Redeem Your Investment
Additional Information About the Fund
Exchanging Fund Shares
Pricing of Fund Shares
Dividends and Distributions
Tax Consequences of Investing in the Fund
Management, Organization, and Capital
Structure
Investment Adviser
Year 2000 Preparations
Financial Highlights
2
<PAGE>
RISK and RETURN SUMMARY
Investments, Risks, and Performance
Fund Investment Objective
Consistent with preservation of capital, the Rushmore Tax-Free Money
Market Portfolio seeks to provide investors with current income
derived from investments made principally in short-term municipal
securities exempt from federal income tax.
Principal Fund Investment Strategy
In attempting to achieve this objective, the Fund invests in short-
term high quality, tax-exempt municipal securities selected on the
basis of liquidity and safety of principal.
Principal Risks of Investing in the Fund
Because the Fund invests in municipal money market securities, the
Fund's performance may be affected by state and local economic
conditions and political developments, as well as the ability of
issuers to meet their obligations. Moreover, as a debt security,
municipal money market securities are effected by changing interest
rates. During a period of falling interest rates, it is likely that
debt securities will be prepaid, or "called", prior to maturity,
requiring the proceeds to be invested at a generally lower interest
rate.
Although the Fund has maintained a $1.00 net asset value per share
since it began operations in 1983, and seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund
An investment in the Fund is not a deposit or obligation of any bank
nor is it insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Risk/Return Bar Chart and Tables
The chart and table below shows the annual calendar-year returns and
the performance of the Fund. The Fund commenced operations on
September 9, 1983, and has a fiscal year-end of December 31. The
information in the chart and the table provides some indication of the
risks of investing in the Fund by showing changes in Fund performance
from year to year.
The chart and the table below assume the reinvestment of dividends and
distributions. Please keep in mind that how the Fund has performed in
the past does not necessarily indicate how the Fund will perform in
the future.
[DELETED BAR CHART]
5.76% 5.31% 4.01% 2.25% 1.66% 2.02% 3.09% 2.69% 2.93% 2.73%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Notes to Annual Total Return Chart:
1. The Fund's year-to-date total return for the most-recent fiscal
quarter (ended March 31, 1999) was _____%.
2. The Fund's highest quarterly return was 1.51% in the 2nd quarter
of 1989; the Fund's lowest quarterly return of 0.38% occurred
in the 1st quarter of 1994.
3
<PAGE>
Performance Table
Average Annual Total Returns
(for Periods Ended December 31, 1998)
One Year 2.73%
Five Years 2.69%
Ten Years 3.24%
Yields
(as of December 31, 1998)
Tax-Equivalent* 4.93%
7-Day 2.93%
7-Day Effective 2.98%
*Assuming a 39.6% tax bracket.
For current yield information please call 1-800-622-1386.
FEES and EXPENSES
This tables describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees 0.50%
Other Expenses 0.25%
------
Total Annual Fund Operating Expenses 0.75%
======
If your monthly account balance averages less than $500 you may be
charged a $5 fee.
Example
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated below and then redeem all of your shares at the end
of those periods. The Example also assumes that your investment has a
5% return each year, that all dividends are reinvested, and that the
Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would
be:
1 year 3 years 5 years 10 years
$ 77 $ 240 $ 417 $ 930
4
<PAGE>
INVESTMENT OBJECTIVES, PRINCIPAL
INVESTMENT STRATEGIES, and RELATED RISKS
Fund Investment Objective
Consistent with preservation of capital, the Rushmore Tax-Free Money
Market Portfolio seeks to provide investors with current income
derived from investments made principally in short-term municipal
securities exempt from federal income tax.
Principal Investment Strategies
In attempting to achieve its objective, the Fund will invest at least
80% of the value of its net assets 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. or Standard &
Poor's Corporation. The Fund 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 Fund. The Fund will not, under normal
conditions, 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 Fund may also purchase new issues of municipal securities on a
"when issued" basis; that is, at the time of the purchase commitment,
both the interest and principal amount are fixed and payment and
delivery of the securities normally occurs in 15 to 45 days. The Fund
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 Fund does not
intend to invest more than 25% of its net assets in these securities.
Although it is the intention of the Fund to invest all of its assets
in municipal securities, market conditions may arise that limit the
availability of such obligations. During such periods, the Fund may
invest up to 20% of its assets in short-term, taxable obligations of
the United States government, federal agencies and government-
sponsored enterprises, or in repurchase agreements secured by such
securities (although the Fund has never invested in repurchase
agreements and has no intentions of doing so). The Fund 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.
The Portfolio may also 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 Fund's portfolio even though they
may have a maturity which is greater than one year. Investment in
these securities will be made only if a secondary market for them
exists or if the Fund may redeem them on demand within seven days.
Risks of Investing in the Fund
Because the Fund invests in municipal money market securities, the
Fund's performance may be affected by state and local economic
conditions and political developments, as well as the ability of
issuers to meet their obligations. Moreover, as a debt security,
municipal money market securities are effected by changing interest
rates. During a period of falling interest rates, it is likely that
debt securities will be prepaid, or "called", prior to maturity,
requiring the proceeds to be invested at a generally lower interest
rate.
During the period between the purchase commitment of a "when issued"
security and actual delivery, no interest accrues to the purchaser and
the market value of the security may fluctuate (although the Fund
intends to take immediate delivery of these securities upon purchase).
Although the Fund invests in variable rate securities that entitle the
Fund to demand repayment in full (thus reducing credit risk), the
demand feature is not always unconditional and may make the securities
more difficult to sell quickly or without loss.
5
<PAGE>
SHAREHOLDER INFORMATION
How to Invest In The Fund
Facts To Know Before You Invest:
- - The minimum initial investment is $2,500
- - There are no minimum amounts for subsequent investments
- - There are no sales charges
- - The Fund reserves the right to reject any purchase order
- - All shares are electronically recorded; the Fund will not issue
certificates
- - A $10 fee may be charged for items returned for insufficient or
uncollectible funds
- - The securities market, in which the Fund buys and sells its
securities, usually requires settlement in Federal funds for all
transactions. Payments received by bank wire can be converted
immediately into Federal funds and will begin earning dividends the
same day provided the order was received prior to 12 Noon, Eastern
time. Payment for the purchase of Fund shares not received in the
form of Federal funds (i.e., by check) will normally begin earning
dividends within two business days.
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 12:00 Noon, Eastern time to:
Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing # 0550-71084
Specify the Fund name, your account number (if assigned), and the
name(s) in which the account is registered.
After instructing your bank to transfer Federal funds, you must
telephone Shareholder Services at (800) 622-1386 or (301) 657-1510
between 8:30 A.M. and 12:00 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 its services. Remember
that it is important to complete the wire transfer before 12:00
Noon Eastern time.
Through Brokers
You may invest in the Fund by purchasing shares through registered
broker-dealers, banks or other financial institutions that purchase
securities for their customers. Please note that such third
parties may charge a fee for their services.
How To Redeem Your Investment
Redeeming Shares:
By Telephone
Contact Shareholder Services at
1-800-622-1386
between the hours of 8:30 A.M. and 4:30 P.M., Eastern time
6
<PAGE>
For your protection, we will take measures to verify your identity
by requiring some form of personal identification prior to acting
on telephone instructions and may also record telephone
transactions. A written confirmation will be mailed to you within
five business days after your redemption. Please note that we may
terminate or modify telephone redemption privileges upon 60 days
notice.
By Mail or Fax
Mail your instructions for Fax your instructions for
redemption to: 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 in your redemption request:
- 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.
Additional Information You Should Know When You Redeem:
- - There are no fees charged for redemptions.
- - You may receive redemption proceeds by bank wire, check, or through
the Automated Clearing House System (ACH). When the amount to be
redeemed is at least $5,000, we will, upon instruction, wire transfer
the amount to your commercial bank or brokerage account specified in
your account application. For amounts less than $5,000, you 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 your address of record.
- - If you request payment of redemptions to a third party or to a
location other than an address on record, the request must be in
writing and your 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).
- - Normally, payment for all shares redeemed will be issued within one
business day. However, withdrawal requests on investments that have
been made by check may be delayed up to ten calendar days following
the investment or until the check clears, whichever occurs first. This
delay is necessary to assure us that investments made by check are
good funds. You will receive redemption proceeds promptly upon
confirmation of receipt of good funds.
- - If your monthly account balance averages less than $500 you may be
charged a $5 fee. The fee will not be imposed on accounts established
under the Uniform Gifts or Transfers to Minors Acts. Additionally, we
reserve the right to involuntarily redeem accounts which fall below
$500 after providing 60 days written notice.
- - 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 (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 or
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.
7
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUND
Exchanging Fund Shares
You may exchange shares of the Fund, without cost, for shares of any
of the following Rushmore Funds: Fund for Government Investors,
American Gas Index Fund, U.S. Government Bond Portfolio, Maryland Tax-
Free Portfolio, or the Virginia Tax-Free Portfolio. You may also
exchange shares of the Fund for shares of the Cappiello-Rushmore
Emerging Growth, Growth and Utility Income Funds. The fund you are
exchanging into must be available for sale in your state and the
registration for both accounts must be identical. You should obtain a
current prospectus for the fund into which you are exchanging by
calling 1-800-343-3355. Exchanges will be effected at the respective
net asset values of the Funds involved as next determined after
receipt of the exchange request. The Fund may change or cancel their
exchange policies at any time, upon 60 days' notice to shareholders.
Pricing of Fund Shares
The price of a fund's shares on any given day is its net asset value
per share. This figure is computed by dividing the total amortized
value (which approximates market value) of the Fund's investments and
other assets, less any liabilities, by the number of fund shares
outstanding. The net asset value per share of the Fund is determined
as of 12:00 Noon Eastern time on days when the New York Stock Exchange
and the custodian bank are open for business.
The value of the Fund's portfolio of securities is determined on the
basis of fair value as determined in good faith by the Fund's
Directors. In determining fair value, the Fund uses the amortized
cost method of valuing the securities in its portfolio, which method
involves valuing a security at its cost adjusted by a constant
amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the
instrument. The purpose of this method of calculation is to
facilitate the maintenance of a constant Fund net asset value per
share of $1.00. Since the Fund commenced operations in 1983, it has
had a constant net asset value of $1.00; however, there is no
assurance the $1.00 net asset value will be maintained.
Dividends and Distributions
Dividends of the Fund are declared each day the Fund is open for
business and paid monthly. Dividends of the Fund will automatically
be reinvested in additional shares (including fractional shares where
necessary) unless you elect to receive the dividends in cash.
Dividends paid in cash to those investors so electing will be mailed
on the second business day of the following month. Account statements
showing dividends paid will be mailed to shareholders monthly.
Net income of the Fund shall consist of all interest income accrued
and discount earned, plus or minus any realized gains or losses, less
estimated expenses of the Fund. The Fund does not expect to realize
any long-term capital gains.
"Undeliverable" or "Uncashed" Dividend Checks
If you elect to receive dividends and distributions in cash and the
payment (1) is returned and marked as "undeliverable" or (2)
remains uncashed for six months, your cash election will be changed
automatically and future dividends will be reinvested in the Fund
at the per share net asset value determined as of the date of
payment (normally $1.00). In addition, any undeliverable checks or
checks that remain uncashed for six months will be canceled and
then reinvested in the Fund at the per share net asset value
determined as of the date of cancellation (normally $1.00).
Tax Consequences of Investing
Taxability of Distributions
As long as the Fund meets the requirements for being tax-qualified
regulated investment company, which the Fund intends to do, the
Fund pays no federal income tax on the earnings distributed to
shareholders. As a result, dividends and any short-term capital
gains you receive, whether reinvested or taken as cash, are
generally considered taxable as ordinary income. The Form 1099 that
is mailed to you each January details your dividends and their
federal tax category, although you should verify your tax liability
with your tax professional.
Taxability of Transactions
Any time you sell or exchange shares of the Fund, it is considered
a taxable event for you. For example, if you exchange shares of
the Fund for shares of another Rushmore or Cappiello-Rushmore fund,
the transaction would be treated as a sale. Consequently, any gain
resulting from the transaction would be subject to federal income
tax.
8
<PAGE>
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, ORGANIZATION and CAPITAL STRUCTURE
Investment Adviser
Money Management Associates ("Adviser"), 100 Lakeshore Drive, Suite
1555, North Palm Beach, Florida 33408, has served as the Fund's
investment adviser since the Fund commenced operations on September 9,
1983. Established in 1974, the Adviser manages six no-load mutual
funds (including the Fund) with total assets under management of
approximately $900 million.
Subject to the general supervision of the Board of Directors of the
Fund, the Adviser manages the investment and reinvestment of the
assets of the Fund and is responsible for the overall management of
the Fund's business affairs. An Adviser Group makes investment
decisions; therefore, no one person is primarily responsible for
making investment decisions. For the advisory services performed, the
Adviser received 0.50% of the average net assets of the Fund for the
fiscal year ended December 31, 1998.
Year 2000 Preparations
The day-to-day operations of the Fund are dependent upon the Fund's
service providers, principally the Adviser, Rushmore Trust and
Savings, FSB and Rushmore Services, Inc. (collectively, the
"Servicers"), and upon the smooth functioning of the computer systems
that they utilize. Many computer systems currently cannot properly
recognize or process date-sensitive information relating to the year
2000 and beyond. Like other mutual funds and financial and business
organizations around the world, the Fund, therefore, could be
adversely affected if the computer systems used by these Servicers,
and their vendors, do not properly process and calculate date-related
information and data on and after January 1, 2000. The Servicers have
been evaluating the impact that the year 2000 issue may have on the
computer systems that they utilize and are making appropriate
modifications to these systems in order to assure that they will be
prepared for the year 2000. The Fund and the Servicers expect that
any further modifications to their computer systems necessary to
address the year 2000 issue will be made and tested in a timely
manner. The Servicers also are working with their outside vendors,
and other persons whose systems are linked to those of the Fund and
the Servicers, to obtain satisfactory assurances regarding the year
2000 issue. The costs of this systems remediation will not be paid
directly by the Fund. Inadequate remediation could have an adverse
effect on the Fund's operations, including pricing and securities
trading and settlement, and the provision of shareholder services.
Although, at this time, there can be no assurance that the remedial
action taken by the Servicers will be sufficient or timely, the
Servicers do not anticipate that the transition to the 21st century
will have a material impact on the ability of the Servicers to
continue to service the Fund at current levels.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights table is intended to help you
understand the Fund's financial performance for the past 5 years.
Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has
been audited by Deloitte & Touche LLP, whose report, along with the
Fund's financial statements, is included in the annual report, which
is available upon request.
<TABLE>
<CAPTION>
For The Year Ended December 31,
1998 1997 1996 1995 1994
<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 0.03 0.03 0.03 0.03 0.02
--------- --------- --------- --------- ----------
Total from Investment Operations 0.03 0.03 0.03 0.03 0.02
--------- --------- --------- --------- ----------
Distributions to Shareholders:
Dividends (from net investment income) (0.03) (0.03) (0.03) (0.03) (0.02)
Distributions (from capital gains) - - - - -
--------- --------- --------- --------- ----------
Total Distributions to Shareholders (0.03) (0.03) (0.03) (0.03) (0.02)
--------- --------- --------- --------- ----------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ==========
Total Investment Return 2.73% 2.93% 2.69% 3.09% 2.02%
Ratios and Supplemental Data:
Net Assets at End of Year (000s omitted) $ 19,783 $ 19,177 $ 18,890 $ 20,772 $ 25,586
Ratio of Expenses to Average Net Assets 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of Net Income to Average Net Assets 2.70% 2.89% 2.67% 3.04% 1.99%
</TABLE>
10
<PAGE>
In addition to this prospectus, the following information is available
to assist you in making an investment decision:
Information Available Upon Request Description
Statement of Additional A document that includes
Information additional information about the
Fund.
Annual and Semiannual Reports Reports that contain information
about the Fund's investments.
The reports also discuss the
market conditions and investment
strategies that significantly
affected the Fund's performance
during its last fiscal year.
There are a variety of ways to receive the above information and make
other inquiries of the Fund. You may contact the Fund directly by
telephone at 1-800-343-3355, visit our internet site at
http://www.rushmorefunds.com, or you may send a written request to the
Fund's offices at 4922 Fairmont Avenue, Bethesda, Maryland 20814.
Additional information about the Fund can also be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in
Washington D.C. (for hours of operation please call the Commission at
1-800-SEC-0330). You may also obtain copies of the information by
visiting the Commission's internet site at http://www.sec.gov, or,
upon payment of a duplicating fee, by writing the Public Reference
Section of the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549.
Fund for Tax-Free Investors, Inc. Investment Company Act File No. 811-3720
11
<PAGE>
FUND for TAX-FREE INVESTORS, INC.
Rushmore Maryland Tax-Free Portfolio
Rushmore Virginia Tax-Free Portfolio
Prospectus
May 1, 1999
Fund for Tax-Free Investors, Inc. is a no-load investment company with
three separate portfolios. Two of the portfolios, the Rushmore
Maryland Tax-Free Portfolio ("Maryland Portfolio") and the Rushmore
Virginia Tax-Free Portfolio ("Virginia Portfolio") are described in
this Prospectus.
This Prospectus contains important information about the Maryland and
Virginia Portfolios (the "Funds") and should be read before investing.
Please keep the Prospectus on file for future reference.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE of CONTENTS
Page
Risk and Return Summary:
Investments, Risks, and Performance
Risk/Return Bar Chart and Table
Performance Table
Fees and Expenses
Investment Objectives, Principal Investment
Strategies, and Related Risks
Maryland Tax-Free Portfolio
Virginia Tax-Free Portfolio
Management's Discussion of Fund Performance
Performance Comparison
Shareholder Information
How to Invest in the Funds
How to Redeem Your Investment
Additional Information About the Fund
Exchanging Fund Shares
Pricing of Fund Shares
Dividends and Distributions
Tax Consequences of Investing in the Funds
Management, Organization, and Capital
Structure
Investment Adviser
Year 2000 Preparations
Financial Highlights
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RISK and RETURN SUMMARY
Investments, Risks, and Performance
Maryland Tax-Free Portfolio
Fund Investment Objective
The Maryland Tax-Free Portfolio seeks to provide investors with
income derived from investments exempt from federal and Maryland
state and local income taxes, including the individual alternative
minimum tax.
Principal Fund Investment Strategy
In attempting to achieve this objective, the Fund invests
principally in tax-exempt securities issued by the State of
Maryland, its political subdivisions and other issuers exempt from
Maryland state income tax.
Principal Risks of Investing in the Fund
Because the Fund is non-diversified, investing solely in securities
issued by the State of Maryland and its political subdivisions, the
Fund's performance may be affected by Maryland state and local
economic conditions and political developments, as well as the
ability of issuers to meet their obligations. Moreover, because
the Fund invests in debt securities, it is effected by changing
interest rates. During a period of falling interest rates, it is
likely that debt securities will be prepaid, or "called", prior to
maturity, requiring the proceeds to be invested at a generally
lower interest rate.
Virginia Tax-Free Portfolio
Fund Investment Objective
The Virginia Tax-Free Portfolio seeks to provide investors with
income derived from investments exempt from federal and Virginia
state and local income taxes, including the individual alternative
minimum tax.
Principal Fund Investment Strategy
In attempting to achieve this objective, the Fund invests
principally in tax-exempt securities issued by the Commonwealth of
Virginia, its political subdivisions and other issuers exempt from
Virginia state income tax.
Principal Risks of Investing in the Fund
Because the Fund is non-diversified, investing solely in securities
issued by the Commonwealth of Virginia and its political
subdivisions, the Fund's performance may be affected by Virginia
state and local economic conditions and political developments, as
well as the ability of issuers to meet their obligations.
Moreover, because the Fund invests in debt securities, it is
effected by changing interest rates. During a period of falling
interest rates, it is likely that debt securities will be prepaid,
or "called", prior to maturity, requiring the proceeds to be
invested at a generally lower interest rate.
Loss of money is a risk of investing in the Maryland and Virginia Tax-
Free Portfolios. An investment in the Funds is not a deposit or
obligation of any bank nor is it insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
Risk/Return Bar Chart and Table
The chart and table below shows the annual calendar-year returns and
the performance of the Funds. The Funds commenced operations on
September 9, 1983, and have a fiscal year-end of December 31. The
information in the chart and the table provides some indication of the
risks of investing in the Funds by showing changes in the Funds'
performance from year to year.
The chart and the table below assume the reinvestment of dividends and
distributions. Please keep in mind that how the Funds have performed
in the past does not necessarily indicate how the Funds will perform
in the future.
3
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[DELETED BAR CHART]
<TABLE>
<CAPTION>
Annual Total Return Chart
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maryland Tax-Free Portfolio 6.68% 2.89% 10.24% 8.00% 11.91% -5.24% 14.35% 3.21% 7.85% 5.90%
Virginia Tax-Free Portfolio 7.95% 4.42% 10.85% 7.98% 11.80% -5.02% 14.92% 2.91% 8.45% 5.64%
Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
Notes to Annual Total Return Chart:
1. The year-to-date total returns for the Maryland and Virginia
Portfolios' most-recent fiscal quarter (ended March 31, 1999) are
_____% and _____%, respectively.
2. The highest quarterly returns of the Funds since their inception
are as follows: the Maryland Tax-Free Portfolio, 7.75% (in the
3rd Quarter of 1984); the Virginia Tax-Free Portfolio, 6.55% (in
the 4th Quarter of 1985).
3. The lowest quarterly returns of the Funds since their inception
are as follows: the Maryland Tax-Free Portfolio, (6.40)% (in the
2nd Quarter of 1984); the Virginia Tax-Free Portfolio, (4.71)% (in
the 1st Quarter of 1994).
Performance Table
Average Annual Total Returns
(for Periods Ended December 31, 1998)
Maryland Virginia Lehman
Tax-Free Tax-Free Brothers
Portfolio Portfolio Municipal
Bond Index
One Year 5.90% 5.64% 6.48%
Five Years 5.00% 5.17% 6.22%
Ten Years 6.44% 6.86% 8.22%
4
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FEES and EXPENSES
This tables describes the fees and expenses that you may pay if you
buy and hold shares of the Funds.
Maryland Virginia
Portfolio Portfolio
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees 0.625% 0.625%
Other Expenses 0.300% 0.300%
------- -------
Total Annual Fund Operating Expenses 0.925% 0.925%
======= =======
If your monthly account balance averages less than $500 due to
redemptions you may be charged a $5 fee.
Example
This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Funds for the time
periods indicated below and then redeem all of your shares at the end
of those periods. The Example also assumes that your investment has a
5% return each year, that all dividends are reinvested, and that the
Funds' operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would
be:
1 Year 3 Years 5 Years 10 Years
Maryland Portfolio $94 $295 $512 $1,137
Virginia Portfolio $94 $295 $512 $1,137
INVESTMENT OBJECTIVES, PRINCIPAL
INVESTMENT STRATEGIES, and RELATED RISKS
Maryland Tax-Free Portfolio
Fund Investment Objective
The Maryland Tax-Free Portfolio seeks to provide investors with
income derived from investments exempt from federal and Maryland
state and local income taxes, including the individual alternative
minimum tax.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by investing at
least 80% of its total assets under normal conditions in
securities issued by the State of Maryland, its political
subdivisions, agencies and instrumentalities and other issuers
exempt from Maryland state income tax. The Fund will generally
invest in long-term investment grade securities, and may also
invest in either general obligation or revenue bonds. The average
portfolio maturity will ordinarily exceed ten years; however,
when, in the opinion of the Adviser, it is in the best interest of
shareholders, the average maturity may be reduced to less than ten
years. The Fund 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 Fund. Additionally, the Fund may
purchase securities that are rated below investment grade; such
purchases will be limited to 5% of net assets.
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Although the Fund seeks to invest its total assets in securities
described in the preceding paragraph, market conditions may
occasionally limit the availability of such obligations. During
such periods, the Fund will seek to invest in municipal
obligations, the interest on which may be subject to personal
income taxes in your state of residence. Also, as a temporary
defensive measure or to provide liquidity, the Fund may hold up to
30% of its total assets in obligations issued or guaranteed by the
U.S. government, its agencies or government sponsored enterprises
or repurchase agreements secured by such securities. Income from
such securities may be taxable for federal and state income tax
purposes. (Please note that the Fund has never invested in
repurchase agreements and has no intentions of doing so.)
The Fund may also purchase new issues of municipal securities on a
"when issued" basis; that is, at the time of the purchase
commitment, both the interest and principal amount are fixed and
payment and delivery of the securities normally occurs in 15 to 45
days. The Fund 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 Fund does not intend to invest more than 25% of its
net assets in these securities.
The Fund may also 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.
Investment in these securities will be made only if the Fund may
redeem them on demand within seven days.
Risks of Investing in the Fund
Since the Fund intends to invest only in the securities of the
State of Maryland, the Fund may be affected by state and local
economic conditions and political developments, and may be subject
to greater market or credit risk than if the securities purchased
by the Fund were more geographically diversified. Furthermore, as
a debt security, municipal money market securities are effected by
changing interest rates. During a period of falling interest
rates, it is likely that debt securities will be prepaid, or
"called", prior to maturity, requiring the proceeds to be invested
at a generally lower interest rate.
During the period between the purchase commitment of a "when
issued" security and actual delivery, no interest accrues to the
purchaser and the market value of the security may fluctuate
(although the Fund intends to take immediate delivery of these
securities upon purchase).
Although the Fund invests in variable rate securities that entitle
the Fund to demand repayment in full (thus reducing credit risk),
the demand feature is not always unconditional and may make the
securities more difficult to sell quickly or without loss.
Virginia Tax-Free Portfolio
Fund Investment Objective
The Virginia Tax-Free Portfolio seeks to provide investors with
income derived from investments exempt from federal and Virginia
state and local income taxes, including the individual alternative
minimum tax.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by investing at
least 80% of its total assets under normal conditions in
securities issued by the Commonwealth of Virginia, its political
subdivisions, agencies and instrumentalities and other issuers
exempt from Virginia state income tax. The Fund will generally
invest in long-term investment grade securities, and may also
invest in either general obligation or revenue bonds. The average
portfolio maturity will ordinarily exceed ten years; however,
when, in the opinion of the Adviser, it is in the best interest of
shareholders, the average maturity may be reduced to less than ten
years. The Fund 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 Fund. Additionally, the Fund may
purchase securities that are rated below investment grade; such
purchases will be limited to 5% of net assets.
Although the Fund seeks to invest its total assets in securities
described in the preceding paragraph, market conditions may
occasionally limit the availability of such obligations. During
such periods, the Fund will seek to invest in
6
<PAGE>
municipal obligations, the interest on which may be subject to
personal income taxes in your state of residence. Also, as a
temporary defensive measure or to provide liquidity, the Fund may
hold up to 30% of its total assets in obligations issued or
guaranteed by the U.S. government, its agencies or government
sponsored enterprises or repurchase agreements secured by such
securities. Income from such securities may be taxable for
federal and state income tax purposes. (Please note that the Fund
has never invested in repurchase agreements and has no intentions
of doing so.)
The Fund may also purchase new issues of municipal securities on a
"when issued" basis; that is, at the time of the purchase
commitment, both the interest and principal amount are fixed and
payment and delivery of the securities normally occurs in 15 to 45
days. The Fund 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 Fund does not intend to invest more than 25% of its
net assets in these securities.
The Fund may also 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.
Investment in these securities will be made only if the Fund may
redeem them on demand within seven days.
Risks of Investing in the Fund
Since the Fund intends to invest only in the securities of the
Commonwealth of Virginia, the Fund may be affected by state and
local economic conditions and political developments, and may be
subject to greater market or credit risk than if the securities
purchased by the Fund were more geographically diversified.
Furthermore, as a debt security, municipal money market securities
are effected by changing interest rates. During a period of
falling interest rates, it is likely that debt securities will be
prepaid, or "called", prior to maturity, requiring the proceeds to
be invested at a generally lower interest rate.
During the period between the purchase commitment of a "when
issued" security and actual delivery, no interest accrues to the
purchaser and the market value of the security may fluctuate
(although the Fund intends to take immediate delivery of these
securities upon purchase).
Although the Fund invests in variable rate securities that entitle
the Fund to demand repayment in full (thus reducing credit risk),
the demand feature is not always unconditional and may make the
securities more difficult to sell quickly or without loss.
MANAGEMENT'S DISCUSSION of FUND PERFORMANCE
Interest rates continued to fall during 1998 as inflation remained
relatively nonexistent throughout the year. The yield on the
benchmark 30-year Treasury was lower by over 80 basis points ending
the year yielding 5.08%, and 30-year AAA municipal yields declined by
approximately ten basis points and closed the year at 4.94%. The
Federal Reserve lowered the overnight Federal Funds rate a total of 75
basis points to 4.75%.
Although employment levels remained high and domestic consumer demand
remained strong, inflation was held in check primarily due to
persistent global financial crises, low import prices, and continued
gains in productivity by U.S. firms. The growing financial problems,
such as those in Asia, Brazil, and Russia, caused the financial
markets to begin to deteriorate and credit spreads to widen as
investors turned their backs on risky investments. The Federal
Reserve cut the Fed Funds rate 25 basis points three different times
during late 1998, in an attempt to calm fears that this foreign
financial turmoil could lead to a recession in the U.S. economy. The
easing of monetary policy succeeded in putting investors at ease and
the financial markets were able to stabilize.
Municipal bonds had another positive year, with the greatest increases
occurring in securities with ten years or less to maturity.
Municipals, however, were unable to keep up with the stunning
performance of Treasuries. Yields on Treasury securities dropped
significantly due to several factors, the most notable being: low
inflation, flight-to-safety caused by instability in the financial
markets, and an increased budget surplus resulting in less need for
the Treasury to borrow (i.e., less supply). The under-performance by
municipals has resulted in them remaining "cheap" relative to their
Treasury counterparts, in relation to their historical percentages.
Even though municipals offer an attractive investment on a relative
7
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basis, demand has remained weak. For many investors the focus has
returned back to equities, their confidence having been restored
after performance in the stock markets picked up following the Fed
intervention on short-term rates.
What happens in the year ahead will be dictated primarily by how the
current financial situation in the various troubled foreign economies
plays out. If the international financial woes persist we could see
deflationary pressures remain in the picture leading to possible
further rate cuts by the Federal Reserve. Further rate cuts should
lead to lower yield and higher prices for bonds. On the other hand,
should these economies rebound we would probably see the ugly head of
inflation creep back onto the radar screen of the financial markets.
Inflationary fears would at best put a halt to further advances in the
bond markets, but at worst lead to a tightening in monetary policy,
higher interest rates and lower bond prices.
We believe a scenario closer to the former to be the case in the
coming year. Our economy should slow down from the pace it has
exhibited over the last several years, as the affect of troubled
foreign economies continues to put the brakes on the economy here in
the United States. This moderation of the economy will keep inflation
in check and low interest rates will remain the trend in 1999. We
think the Fed is finished for the time being, however, lowering short-
term interest rates so as not to unnecessarily jump-start inflationary
pressures.
Municipals are poised technically to perform well due to their high
ratios relative to Treasuries, as well as the forecast for lower
issuance of new securities in the year ahead. The relative value of
municipals leaves room for strong performance should investors begin
to divest from equities and into debt securities. If the low interest
rate environment holds for 1999 as we think it should, municipals will
have another positive year as they come back in line with historical
spreads to Treasuries.
Performance Comparison
Assuming a $10,000 initial investment, the following graph compares
each Fund's total return to the performance of the Lehman Brothers
Municipal Bond Index since the Funds began operating on September 9,
1983. Please remember that past performance does not necessarily
reflect how the Funds may perform in the future.
[DELETED LINE GRAPH]
Account Lehman Brothers Virginia Tax-Free Maryland Tax-Free
Value Total Muni Bond Index Portfolio Portfolio
Return
(as of)
12/31/88 $10,000 $10,000 $10,000
12/31/89 $11,079 $10,795 $10,668
8
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12/31/90 $11,887 $11,272 $10,976
12/31/91 $13,330 $12,495 $12,100
12/31/92 $14,504 $13,492 $13,068
12/31/93 $16,287 $15,084 $14,625
12/31/94 $15,445 $14,327 $13,858
12/31/95 $18,140 $16,465 $15,847
12/31/96 $18,943 $16,944 $16,356
12/31/97 $20,684 $18,376 $17,640
12/31/98 $22,024 $19,412 $18,680
Average Annual Total Returns as of December 31, 1998
Maryland Virginia Lehman
Tax-Free Tax-Free Brothers
Portfolio Portfolio Municipal
Bond Index
One Year 5.90% 5.64% 6.48%
Five Years 5.00% 5.17% 6.22%
Ten Years 6.44% 6.86% 8.22%
SHAREHOLDER INFORMATION
How to Invest In The Funds
Facts To Know Before You Invest:
- The minimum initial investment is $2,500
- There are no minimum amounts for subsequent investments
- There are no sales charges
- The Funds reserve the right to reject any purchase order
- All shares are electronically recorded; the Funds will not issue
certificates
- A $10 fee may be charged for items returned for insufficient or
uncollectible funds
- The securities market, in which the Funds buy and sell their
securities, usually requires settlement in Federal funds for all
transactions. Payments received by bank wire can be converted
immediately into Federal funds and will begin earning dividends the
same day provided the order was received prior to 4:00 P.M., Eastern
time. Payment for the purchase of each Fund's shares not received in
the form of Federal funds (i.e., by check) will normally begin earning
dividends within two business days.
Purchasing Shares:
By Mail
Complete an application, specifically noting which Fund into which
you are investing, 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:
9
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Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing # 0550-71084
Specify the Fund name, your account number (if assigned), and the
name(s) in which the account is registered.
After instructing your bank to transfer Federal funds, you must
telephone Shareholder Services 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 its services. Remember that it is
important to complete the wire transfer before 4:00 P.M. Eastern
time.
Through Brokers
You may invest in the Funds by purchasing shares through registered
broker-dealers, banks or other financial institutions that purchase
securities for their customers. Please note that such third
parties may charge a fee for their services.
How To Redeem Your Investment
Redeeming Shares:
By Telephone
Contact Shareholder Services at
1-800-622-1386
between the hours of 8:30 A.M. and 4:30 P.M., Eastern time
For your protection, we will take measures to verify your identity
by requiring some form of personal identification prior to acting
on telephone instructions and may also record telephone
transactions. A written confirmation will be mailed to you within
five business days after your redemption. Please note that we may
terminate or modify telephone redemption privileges upon 60 days
notice.
By Mail or Fax
Mail your instructions for Fax your instructions for
redemption to: 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 in your redemption request:
- 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.
Additional Information You Should Know When You Redeem:
- There are no fees charged for redemptions.
- You may receive redemption proceeds by bank wire, check, or through
the Automated Clearing House System (ACH). When the amount to be
redeemed is at least $5,000, we will, upon instruction, wire transfer
the amount to your commercial bank or brokerage account specified in
your account application. For amounts less than $5,000, you may
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have redemption proceeds deposited directly into an account specified
on the account application or request that a redemption check be
delivered by mail to your address of record.
- If you request payment of redemptions to a third party or to a
location other than an address on record, the request must be in
writing and your 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).
- Normally, payment for all shares redeemed will be issued within one
business day. However, withdrawal requests on investments that have
been made by check may be delayed up to ten calendar days following
the investment or until the check clears, whichever occurs first. This
delay is necessary to assure us that investments made by check are
good funds. You will receive redemption proceeds promptly upon
confirmation of receipt of good funds.
- If your monthly account balance averages less than $500 due to
redemptions you may be charged a $5 fee. The fee will not be imposed
on accounts established under the Uniform Gifts or Transfers to Minors
Acts. Additionally, we reserve the right to involuntarily redeem
accounts which fall below $500 after providing 60 days written notice.
- 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 (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 or
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.
ADDITIONAL INFORMATION ABOUT THE FUND
Exchanging Fund Shares
You may exchange shares of the Funds, without cost, for shares of any
of the following Rushmore Funds: Fund for Government Investors,
American Gas Index Fund, U.S. Government Bond Portfolio, or the Tax-
Free Money Market Portfolio. You may also exchange shares of the
Funds for shares of the Cappiello-Rushmore Emerging Growth, Growth and
Utility Income Funds. The fund you are exchanging into must be
available for sale in your state and the registration for both
accounts must be identical. You should obtain a current prospectus
for the fund into which you are exchanging by calling 1-800-343-3355.
Exchanges will be effected at the respective net asset values of the
Funds involved as next determined after receipt of the exchange
request. The Maryland and Virginia Portfolios may change or cancel
their exchange policies at any time, upon 60 days' notice to
shareholders.
Pricing of Fund Shares
The price of a fund's shares on any given day is its net asset value
per share. This figure is computed by adding the appraised value of
all securities and all other assets, deducting liabilities and
dividing by the number of shares outstanding. The net asset value per
share of the Funds is determined as of 4:00 P.M. Eastern time on days
when the New York Stock Exchange and the bond markets are open for
trading.
The securities of each Fund will be valued on the basis of the mid-
point of quoted bid and ask prices when market quotations are
available. In the absence of readily available market quotations,
securities will be valued in good faith based on fair value as
determined by the Board of Directors. In determining fair market
value, prices are supplied by an independent pricing service.
Dividends and Distributions
Dividends of the Funds are declared each day the Funds are open for
business and paid monthly. Capital gains, if any, will be distributed
on an annual basis usually in November of December. Fund
distributions will automatically be reinvested in additional shares
(including fractional shares where necessary) unless you elect to
receive them in cash. Distributions paid in cash to those investors so
electing will be mailed on the second business day of the following
month. Account statements showing dividends paid will be mailed to
shareholders monthly.
11
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Net income of the Funds shall consist of all interest income accrued
and discount earned, plus or minus any realized gains or losses, less
estimated expenses of the Funds.
"Undeliverable" or "Uncashed" Dividend Checks
If you elect to receive dividends and distributions in cash and the
payment (1) is returned and marked as "undeliverable" or (2)
remains uncashed for six months, your cash election will be changed
automatically and future dividends will be reinvested in the
applicable Fund at the per share net asset value determined as of
the date of payment (normally $1.00). In addition, any
undeliverable checks or checks that remain uncashed for six months
will be canceled and then reinvested in the applicable Fund at the
per share net asset value determined as of the date of cancellation
(normally $1.00).
Tax Consequences of Investing
Taxability of Distributions
As long as the Funds meet the requirements for being tax-qualified
regulated investment companies, which each Fund intends to do, the
Funds pay no federal income tax on the earnings distributed to
shareholders. As a result, dividends and any short-term capital
gains you receive, whether reinvested or taken as cash, are
generally considered taxable as ordinary income. The Form 1099 that
is mailed to you each January details your dividends and their
federal tax category, although you should verify your tax liability
with your tax professional.
Taxability of Transactions
Any time you sell or exchange shares of the Funds, it is considered
a taxable event for you. For example, if you exchange shares of
the Maryland Tax-Free Portfolio for shares of another Rushmore or
Cappiello-Rushmore fund, the transaction would be treated as a
sale. Consequently, any gain resulting from the transaction would
be subject to federal income tax.
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, ORGANIZATION and CAPITAL STRUCTURE
Investment Adviser
Money Management Associates ("Adviser"), 100 Lakeshore Drive, Suite
1555, North Palm Beach, Florida 33408, has served as the Funds'
investment adviser since the Funds' commenced operations on September
9, 1983. Established in 1974, the Adviser manages six no-load mutual
funds (including the Funds) with total assets under management of
approximately $900 million.
Subject to the general supervision of the Funds' Board of Directors,
the Adviser manages the investment and reinvestment of the assets of
the Funds and is responsible for the overall management of the Funds'
business affairs. An Adviser Group makes investment decisions;
therefore, no one person is primarily responsible for making
investment decisions. For the advisory services performed, the
Adviser received 0.625% of the average net assets of both the Maryland
and Virginia Portfolios for the fiscal years ended December 31, 1998.
Year 2000 Preparations
The day-to-day operations of the Funds are dependent upon the Funds'
service providers, principally the Adviser, Rushmore Trust and
Savings, FSB and Rushmore Services, Inc. (collectively, the
"Servicers"), and upon the smooth functioning of the computer systems
that they utilize. Many computer systems currently cannot properly
recognize or process date-sensitive information relating to the year
2000 and beyond. Like other mutual funds and financial and business
organizations around the world, the Funds, therefore, could be
adversely affected if the computer systems used by these Servicers,
and their vendors, do not properly process and calculate date-related
information and data on and after January 1, 2000. The Servicers have
been evaluating the impact that the year 2000 issue may have on the
computer systems that they utilize and are making appropriate
modifications to these systems in order to assure that they will be
prepared for the year 2000. The Funds and the Servicers expect that
any further modifications to their computer systems necessary to
address the year 2000 issue will be made and tested in a timely
manner. The Servicers also are working with their outside vendors,
and other
12
<PAGE>
persons whose systems are linked to those of the Funds and the
Servicers, to obtain satisfactory assurances regarding the year 2000
issue. The costs of this systems remediation will not be paid
directly by the Funds. Inadequate remediation could have an adverse
effect on the Funds' operations, including pricing and securities
trading and settlement, and the provision of shareholder services.
Although, at this time, there can be no assurance that the remedial
action taken by the Servicers will be sufficient or timely, the
Servicers do not anticipate that the transition to the 21st century
will have a material impact on the ability of the Servicers to
continue to service the Funds at current levels.
FINANCIAL HIGHLIGHTS
Rushmore Maryland Tax-Free Portfolio
The following financial highlights tables are intended to help you
understand the Funds' financial performance for the past 5 years.
Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in the Funds (assuming
reinvestment of all dividends and distributions). This information has
been audited by Deloitte & Touche LLP, whose report, along with the
Funds' financial statements, is included in the annual report, which
is available upon request.
<TABLE>
<CAPTION>
For The Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Year $ 11.10 $ 10.79 $ 10.98 $ 10.11 $ 11.27
-------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income 0.51 0.51 0.53 0.55 0.57
Net Realized and Unrealized Gain (Loss) on
Investments 0.13 0.31 (0.19) 0.87 (1.16)
-------- -------- -------- -------- --------
Total from Investment Operations 0.64 0.82 0.34 1.42 (0.59)
-------- -------- -------- -------- --------
Distributions to Shareholders:
Dividends (from net investment income) (0.51) (0.51) (0.53) (0.55) (0.57)
Distributions (from capital gains) - - - - -
-------- -------- -------- -------- --------
Total Distributions to Shareholders (0.51) (0.51) (0.53) (0.55) (0.57)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 11.23 $ 11.10 $ 10.79 $ 10.98 $ 10.11
======== ======== ======== ======== ========
Total Investment Return 5.90% 7.85% 3.21% 14.35% (5.24)%
Ratios and Supplemental Data:
Net Assets at End of Year (000s omitted) $45,827 $45,344 $44,410 $49,725 $44,385
Ratio of Expenses to Average Net Assets 0.93% 0.93% 0.93% 0.77% 0.55%
Ratio of Expenses to Average Net Assets Before
Reimbursement from Investment Adviser 0.93% 0.93% 0.93% 0.93% 0.93%
Ratio of Net Income to Average Net Assets 4.58% 4.73% 4.92% 5.16% 5.36%
Portfolio Turnover Rate 5% 22% 31% 37% 38%
</TABLE>
13
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Rushmore Virginia Tax-Free Portfolio
<CAPTION>
For The Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Year $ 11.46 $ 11.09 $ 11.31 $ 10.36 $ 11.51
-------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income 0.52 0.52 0.53 0.56 0.58
Net Realized and Unrealized Gain (Loss) on
Investments 0.12 0.39 (0.22) 0.95 (1.15)
-------- -------- -------- -------- --------
Total from Investment Operations 0.64 0.91 0.31 1.51 (0.57)
-------- -------- -------- -------- --------
Distributions to Shareholders:
Dividends (from net investment income) (0.52) (0.52) (0.53) (0.56) (0.58)
Distributions (from capital gains) (0.16) (0.02) - - -
-------- -------- -------- -------- --------
Total Distributions to Shareholders (0.68) (0.54) (0.53) (0.56) (0.58)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 11.42 $ 11.46 $ 11.09 $ 11.31 $ 10.36
======== ======== ======== ======== ========
Total Investment Return 5.64% 8.45% 2.91% 14.92% (5.02)%
Ratios and Supplemental Data:
Net Assets at End of Year (000s omitted) $34,543 $32,907 $32,355 $33,468 $27,929
Ratio of Expenses to Average Net Assets 0.93% 0.93% 0.93% 0.77% 0.55%
Ratio of Expenses to Average Net Assets Before
Reimbursement from Investment Adviser 0.93% 0.93% 0.93% 0.93% 0.93%
Ratio of Net Income to Average Net Assets 4.48% 4.70% 4.84% 5.17% 5.35%
Portfolio Turnover Rate 25% 27% 46% 55% 33%
</TABLE>
14
<PAGE>
In addition to this prospectus, the following information is available
to assist you in making an investment decision:
Information Available Upon Description
Request
Statement of Additional A document that includes additional
Information information about the Funds.
Annual and Semiannual Reports Reports that contain information about
the Funds' investments. The reports
also discuss the market conditions and
investment strategies that
significantly affected the Funds'
performance during its last fiscal year.
There are a variety of ways to receive the above information and make
other inquiries of the Funds. You may contact the Funds directly by
telephone at 1-800-343-3355, visit our internet site at
http://www.rushmorefunds.com, or you may send a written request to the
Funds' offices at 4922 Fairmont Avenue, Bethesda, Maryland 20814.
Additional information about the Funds can also be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in
Washington D.C. (for hours of operation please call the Commission at
1-800-SEC-0330). You may also obtain copies of the information by
visiting the Commission's internet site at http://www.sec.gov, or,
upon payment of a duplicating fee, by writing the Public Reference
Section of the Commission at 450 Fifth Street, N.W. Washington, D.C.
20549.
Fund for Tax-Free Investors, Inc. Investment Company Act File No. 811-3720
15
<PAGE>
PART B
<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
Rushmore Maryland Tax-Free Portfolio
Rushmore Virginia Tax-Free Portfolio
Statement of Additional Information
May 1, 1999
This Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Funds' Prospectuses, dated May
1, 1999. A copy of the Funds' Prospectuses may be obtained without
charge by writing or telephoning the Fund at the above address or
telephone numbers.
The audited financial statements of the Funds, for the Funds' fiscal
year ended December 31, 1998, are included in the Funds' 1998 Annual
Report to Shareholders, which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. Copies
of the Funds' 1998 Annual Report are available, without charge, by
request by writing or telephoning the Funds at the above address or
telephone numbers.
<PAGE>
Table of Contents
Page in Page in
Statement of Maryland Page in Tax-
Additional and Free Money
Information Virginia Market
Tax-Free Prospectus
Portfolios
Prospectus
Fund Description, Investments,
and Risks
Investment Limitations - -
Management of the Fund
Control Persons and Principal - -
Holders of Securities
Investment Advisory and Other
Services
Brokerage Allocation and - -
Portfolio Transactions
Taxation of the Fund - -
Calculation of Performance - -
Data
Financial Statements
2
<PAGE>
FUND DESCRIPTION, INVESTMENTS and RISKS
Description
The Fund for Tax-Free Investors, Inc. (the "Fund") is an open-end
management investment company incorporated in the State of Maryland on
April 8, 1983. The following are the investment strategies and risks
associated with investing in the Rushmore Tax-Free Money Market
Portfolio ("Money Market Portfolio"), the Rushmore Maryland Tax-Free
Portfolio ("Maryland Portfolio"), and the Virginia Tax-Free Portfolio
("Virginia Portfolio") (collectively, the "Funds").
Investments
The Funds' principal investment strategies are detailed in each Fund's
prospectus. The following paragraphs detail the Fund's investment
limitations. 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, Principal Investment Strategies, and
Related Risks.")
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 government sponsored
enterprises, or in obligations of the United States Government, its
agencies or government sponsored enterprises, which are purchased
on a temporary basis in accordance with each Fund's investment
objective and policies.
3
<PAGE>
MANAGEMENT OF THE FUND
A Board of Directors governs the Fund. The Directors are responsible
for overseeing the management of the Fund's business affairs and play
a vital role in protecting the interests of Fund shareholders. Among
other things, the Directors approve and review the Fund's contracts
and other arrangements and monitor Fund performance and operations.
The names, ages and addresses of the Directors and officers of the
Fund, together with information as to their principal business
occupations during the past five years are set forth below.
Name, Age, Address Position Held Principal Occupation(s)
With Fund During Past 5 Years
Daniel L. O'Connor*, 56 Chairman, General Partner of Money
100 Lakeshore Drive Treasurer, Management Associates,
Suite 1555 and registered investment
North Palm Beach, FL 33408 Director adviser of the Rushmore
Funds, since 1975.
Director, Rushmore Trust
and Savings, FSB, the
Trust's transfer agent
and custodian. Director
of four Rushmore Fund
Boards. Director of the
Cappiello-Rushmore Trust.
Richard J. Garvey*, 65 President and Director of four
730 Southwest 67th Place Director Rushmore Fund Boards.
Portland, OR 97225
Bruce C. Ellis,** 53 Director A private investor in
7108 Heathwood Court start-up companies.
Bethesda, MD 20817 Vice President,
LottoPhone, Inc., a
telephone state lottery
service, September 1991-
1995. Director, The
Torray Fund, since 1994;
Director, the Sheppard
Fund, Since 1994.
Director on three
Rushmore Fund Boards and
the Cappiello-Rushmore
Trust.
Jeffrey R. Ellis,** 53 Director Executive Vice
513 Kerry Lane President, Buddy
Virginia Beach, VA 23451 Systems, Inc., a
manufacturing-marketing
company in Virginia
Beach, Virginia since
January 1996. Vice
President, LottoPhone,
Inc., a telephone state
lottery service,
September 1993-1995.
Director on three
Rushmore Fund Boards and
the Cappiello-Rushmore Trust.
Michael D. Lange, *55 Director Vice President, Capital
7521 Pepperell Drive Hill Management
Bethesda, MD 20817 Corporation since 1967.
Owner of Michael D.
Lange, Ltd., a builder
and developer since
1980. Partner of
Greatful Falls, a
building developer since
1994. Director, Rushmore
Trust and Savings, FSB,
the Trust's transfer
agent and custodian.
Director of three
Rushmore Fund Boards.
Patrick F. Noonan, **55 Director Chairman and Chief
11901 Glen Mill Drive Executive Officer of the
Potomac, MD 20854 Conservation Fund since
1986. Vice Chairman,
American Farmland Trust
and Trustee, American
Conservation Association
since 1985. President,
Conservation Resources,
Inc. since 1981.
Director of four
Rushmore Fund Boards.
Leo Seybold, **83 Director Retired 1988. Director
5804 Rockmere Drive of three Rushmore Fund
Bethesda, MD 20816 Boards.
Timothy N. Coakley, CPA*, 31 Vice President Chief Financial Officer
4922 Fairmont Avenue and Treasurer, Rushmore
Bethesda, MD 20814 Trust and Savings, FSB,
since 1995. Vice
President of four
Rushmore Funds and the
Cappiello-Rushmore Trust
(collectively, the
"Funds"). Controller of
the Funds, 1995-1997.
Formerly Audit Manager,
Deloitte & Touche LLP
until 1994.
4
<PAGE>
Edward J. Karpowicz, CPA*, 35 Controller Vice President of
4922 Fairmont Avenue Rushmore Trust and
Bethesda, MD 20814 Savings, FSB, since
1997. Controller of the
Funds. Treasurer,
Bankers Finance
Investment Management
Corp., August 1993 to
June 1997. Senior
Accountant, Ernst &
Young, September 1989 to
February 1993.
Stephenie E. Adams*, 29 Secretary Secretary of three
4922 Fairmont Avenue Rushmore Funds and the
Bethesda, MD 20814 Cappiello-Rushmore
Trust. Assistant
Secretary of one
Rushmore Fund. 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.
* Indicates an "interested" person. An interested person has any
one of several close business or family ties to the Fund, the
Fund's investment adviser, or an affiliated company of the Fund.
** Bruce C. Ellis and Jeffrey R. Ellis are brothers.
The aggregate compensation paid to the Directors serving during the
fiscal year ended December 31, 1998, is set forth in the table below:
Total
Aggregate Pension or Estimated Compensation
Name of Person Compensation Retirement Annual Paid to
and Position Paid Benefits Benefits Directors for
Accrued Upon Services to
Retirement the Fund and
Fund Complex
Daniel L. O'Connor,*
Chairman, Treasurer $0 $0 $0 $0
and Director
Richard J. Garvey,*
President and Director $0 $0 $0 $0
Bruce C. Ellis,
Director $3,000 $0 $0 $9,000
Jeffrey R. Ellis,
Director $3,000 $0 $0 $9,000
Michael D. Lange,*
Director $3,000 $0 $0 $9,000
Patrick F. Noonan,
Director $3,000 $0 $0 $10,000
Leo Seybold,
Director $3,000 $0 $0 $9,000
* Indicates an "interested" person. An interested person has any one
of several close business or family ties to the Fund, the Fund's adviser, or
an affiliated company of the Fund.
CONTROL PERSONS and PRINCIPAL HOLDERS of SECURITIES
As of February 12, 1999, the following parties were the only owners of
record owning 5% or more of the shares of the Fund.
Portfolio Controlling Party or Shares % Owned
Principal Holder of Outstanding
Securities
Address
5
<PAGE>
Tax-Free Money John G. Ballenger. 2,118,831.26 10.825% 1/
Market Portfolio 10830 Pleasant Hill Drive
Potomac, MD 20854
Virginia Tax-Free Charles Schwab & Co., Inc. 4,246,126.54 12.130% 2/
Portfolio 101 California Street
San Francisco, CA 94101
Roger W. Jones 2,480,004.50 7.085% 1/
Post Office Box 248
Sperryville, VA 22740
Robert P. and Maryann Nirschl 1,910,542.89 5.458% 1/
4143 North River Street
McLean, VA 22101
1/ Beneficial owner only.
2/ Record owner only.
As of the date of this Statement of Additional Information, no
shareholder owned of record or beneficially, more than 5% of the
Maryland Tax-Free Portfolio. Officers and Directors of the Fund, as a
group, owned, of record and beneficially, less than 1% of the
outstanding shares of the Fund.
INVESTMENT ADVISORY and OTHER SERVICES
Investment Adviser
Money Management Associates (the "Adviser"), 100 Lakeshore Drive,
Suite 1555, North Palm Beach, Florida 33408, has served as the Fund's
investment adviser since the Fund commenced operations on September 9,
1983. 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. For its services, the Adviser receives 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 Maryland Portfolio,
and 0.625% of the net assets of the Virginia Portfolio. For the fiscal
years ended December 31, 1998, 1997, and 1996, the Funds paid the
following investment advisory fees to the Adviser:
1998 1997 1996
Tax-Free Money Market Portfolio $ 92,105 $ 99,510 $ 98,353
Maryland Tax-Free Portfolio $ 288,928 $ 283,756 $ 297,831
Virginia Tax-Free Portfolio $ 204,458 $ 202,010 $ 203,550
The Adviser also advises: Fund for Government Investors, a money
market fund established in 1975 that invests only in U.S. Treasury
securities; The Rushmore Fund, Inc., which was established in 1985 and
currently consists of one series, the U.S. Government Bond Portfolio;
and American Gas Index Fund, Inc., a common stock index fund
established in 1989 that seeks to provide investment results that
correlate to those of an index comprising the common stocks of natural
gas distribution and transmission company members of the American Gas
Association. As of December 31, 1998, total assets under the
Adviser's management were approximately $900 million.
6
<PAGE>
Fund expenses which are paid by the Adviser include, but are not
limited to: the expenses of shareholders and directors meetings, the
cost of office space, and the preparation, filing, printing and
distribution of the Fund's prospectus and Statement of Additional
Information. Additionally, the Adviser may, from its own resources,
including profits from advisory fees received from the Fund provided
such fees are legitimate and not excessive, make payments to broker-
dealers and other financial institutions for their expenses in
connection with the distribution of Fund shares.
Administrator
Under an Administrative Services Agreement between the Fund and
Rushmore Trust and Savings, FSB ("RTS"), 4922 Fairmont Avenue,
Bethesda, Maryland 20814, a majority-owned subsidiary of the Adviser,
RTS provides transfer agency, dividend-disbursing, fund accounting and
administrative services to the Fund. Under the Administrative
Services Agreement with RTS, which has been approved by the Board of
Directors, RTS receives an annual fee of 0.25% of average daily net
assets for the Money Market Portfolio and 0.30% of average daily net
assets for the Rushmore Maryland Tax-Free and Rushmore Virginia Tax-
Free Portfolios for the services it provides. For the fiscal years
ended December 31, 1998, 1997, and 1996, the Fund paid the following
administrative services fees to the RTS:
1998 1997 1996
Tax-Free Money Market Portfolio $ 46,053 $ 49,755 $ 49,176
Maryland Tax-Free Portfolio $ 138,690 $ 136,203 $ 142,959
Virginia Tax-Free Portfolio $ 98,140 $ 96,964 $ 97,704
As the Administrator, RTS is responsible for all costs of the Fund
except for the investment advisory fee, extraordinary legal expenses,
interest and the expenses paid by the Adviser. Specifically, RTS pays
costs of registration of the Funds' shares with the Securities and
Exchanges commission and the various states, all expenses of dividend
and transfer agent services, outside auditing and legal fees,
preparation of shareholders reports, and all costs incurred in
providing custodial services.
Other Servicer
Under an agreement between the Adviser and Rushmore Services, Inc.
("RSI"), 4922 Fairmont Avenue, Bethesda, Maryland 20814, a wholly-
owned subsidiary of the Adviser, certain administrative services
provided to the Fund by the adviser, such as prospectus preparation,
are provided by RSI.
Custodian and Independent Public Accountant
RTS is the Fund's custodian and is responsible for safeguarding and
controlling the Fund's cash and securities, handling the securities,
and collecting interest on the Fund's investments.
Independent certified public accountants, Deloitte & Touche LLP,
University Square, 117 Campus Drive, Princeton, New Jersey 08540, are
responsible for auditing the annual financial statements of the Fund.
Brokerage Allocation and Other Practices
The Fund's portfolio securities are normally purchased on a net basis
which does not involve payment of brokerage commissions.
DRAFT REDEMPTIONS
Redemptions by check or wire transfer are discussed in the Money
Market Fund's Prospectus. Investors may also elect to redeem shares
by draft check (minimum check - $250) made payable to the order of any
person or institution. 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 and to charge for the reorder of draft checks. 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 Rushmore Trust
and Savings, FSB applies to checking accounts. Investors' accounts
may not be closed by draft check.
7
<PAGE>
TAXATION OF THE FUND
The Fund currently qualifies, and will seek to continue to qualify, as
a regulated investment company (a "RIC") under Subchapter M of the
U.S. Internal Revenue Code of 1986, as amended (the "Code"). As a RIC,
the Fund will not be subject to federal income taxes on the net
investment income and capital gains that the Fund distributes to its
shareholders. The distribution of net investment income and capital
gains by the Fund to a Fund shareholder will be taxable to the
shareholder regardless of whether the shareholder elects to receive
these distributions in cash or in additional shares. Distributions
reported to a Fund shareholder as long-term capital gains shall be
taxable as such, regardless of how long the shareholder has owned the
shares. Fund shareholders will be notified annually by the Fund as to
the federal tax status of all distributions made by the Fund.
Distributions may be subject to state and local taxes.
If the Fund fails to qualify as a RIC for any taxable year, the Fund
would be taxed in the same manner as an ordinary corporation. In that
event, the Fund would not be entitled to deduct the distributions
which the Fund had paid to shareholders and, thus, would incur a
corporate income tax liability on all of the Fund's taxable income
whether or not distributed. The imposition of corporate income taxes
on the Fund would directly reduce the return a shareholder would
receive from an investment in the Fund.
CALCULATION OF PERFORMANCE DATA
Average Annual Total Return Quotations
For purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be
stated in terms of total return. Under the rules of the Securities
and Exchange Commission (the "SEC Rules"), Fund advertising stating
performance must include total return quotes calculated according to
the following formula:
n
P (1+T) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1-, 5-, or 10- year
periods at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the
most recent quarter prior to submission of the advertising for
publication, and will cover 1, 5, and 10 year periods or a shorter
period dating from the effectiveness of the Registration Statement of
the Fund. In calculating the ending redeemable value, all dividends
and distributions by the Fund are assumed to have been reinvested at
net asset value as described in the Prospectus for the Fund on the
reinvestment dates during the period. Total return, or "T" in the
formula above, is computed by finding the average annual compounded
rates of return over the 1, 5, and 10 year periods (or fractional
portion thereof) that would equate the initial amount invested to the
ending redeemable value.
The Fund, from time to time, also may include in such advertising a
total return figure that is not calculated according to the formula
set forth above in order to compare more accurately the performance of
the Funds with other measures of investment return. For example, in
comparing the total return of the Funds with data published by Lipper
Analytical Services, Inc., or with the performance of the Lehman
Brothers Intermediate Government and Long Treasury Bond Indexes, as
appropriate, the Funds calculate their aggregate total return for the
specified periods of time by assuming the investment of $10,000 in a
Fund's shares and assuming the reinvestment of each dividend or other
distribution at net asset value on the reinvestment date. Percentage
increases are determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the
beginning value. Such alternative total return information will be
given no greater prominence in such advertising than the information
prescribed under SEC Rules.
The average annual compounded rates of return, assuming the
reinvestment of all dividends and distributions, for the Funds, as of
December 31, 1998, are as follows:
8
<PAGE>
Tax-Free Maryland Virginia
Money Tax-Free Tax-Free
Market Portfolio Portfolio
Portfolio
One Year 2.73% 5.90% 5.64%
Five Years 2.69% 5.00% 5.17%
Ten Years 3.24% 6.44% 6.86%
Computation of Yield
In addition to the total return quotations discussed above, the Fund
also may advertise its yield based on a thirty-day (or one month)
period ended on the date of the most-recent balance sheet included in
the Fund's Registration Statement, computed by dividing the net
investment income per share of a fund earned during the period by the
maximum offering price per Fund share on the last day of the period,
according to the following formula:
6
YIELD = 2[(a-b/cd+1) -1]
Where: a = income earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends; and
d = the maximum offering price per share on the last
day of the period.
Under this formula, interest earned on debt obligations for purposes
of "a" above, is calculated by (i) computing the yield to maturity of
each obligation held by the Portfolio based on the market value of the
obligation (including actual accrued interest) at the close of
business on the last day of each month, or, with respect to
obligations purchased during the month, the purchase price (plus
actual accrued interest), (ii) dividing that figure by 360 and
multiplying the quotient by the market value of the obligation
(including actual accrued interest as referred to above) to determine
the interest income on the obligation that is in the Portfolio's
portfolio (assuming a month of thirty days), and (iii) computing the
total of the interest earned on all debt obligations and all dividends
accrued on all equity securities during the thirty-day or one month
period. In computing dividends accrued, dividend income is recognized
by accruing 1/360 of the stated dividend rate of a security each day
that the security is in the Portfolio's portfolio. Undeclared earned
income, computed in accordance with generally accepted accounting
principles, may be subtracted from the maximum offering price
calculation required pursuant to "d" above.
Financial Statements
Copies of the Fund's audited financial statements for the fiscal year
ended December 31, 1998, may be obtained without charge by contacting
the Fund at 4922 Fairmont Avenue, Bethesda, Maryland 20814, or by
telephoning the Fund at (800) 343-3355 or (301) 657-1500.
9
<PAGE>
Fund for Tax-Free Investors, Inc.
FINANCIAL STATEMENTS
To be filed by amendment
<PAGE>
PART C
<PAGE>
PART C
OTHER INFORMATION
Fund for Tax-Free Investors, Inc.
ITEM 23. Exhibits
(a) Articles of Incorporation of Registrant.1/
(b) Bylaws of Registrant. 1/
(c) Voting Trust Agreement. 2/
(d) Management Contract between Registrant and Money Management
Associates. 3/
(e) Underwriting Contracts. 2/
(f) Bonus or Profit Sharing Contracts. 2/
(g) Custody Agreement between Registrant and Rushmore Trust and
Savings, FSB. 3/
(h)(1) Administrative Services Agreement between Registrant and
Rushmore Trust and Savings, FSB. 3/
(h)(2) Agreement between Money Management Associates and Rushmore
Services, Inc. as amended. 3/
(i) Opinion of counsel regarding the legality of securities being
registered. 1/
(j) Consent of Deloitte & Touche LLP, independent public accountants
for the Registrant. 3/
(k) Omitted Financial Statements. 2/
(l) Initial Capital Agreements. 2/
(m) Rule 12b-1 Plan. 2/
(n) Financial Data Schedule for the Registrant. 4/
(o) Rule 18f-3 Plan. 2/
(p) Powers of Attorney. 3/
1/ Incorporated by reference to the Registrant's initial
registration statement on Form N-1 filed on July 19, 1983
(Registration Nos. 33-63313 and 811-4369).
2/ None.
3/ Filed herewith.
4/ To be filed by amendment.
ITEM 24. Persons Controlled By or Under Common Control with the Fund
The following persons may be deemed to be directly or indirectly
controlled by or under common control with the Fund, a Maryland
corporation:
<TABLE>
<CAPTION>
Percentage of Voting Securities
Owned and/or Controlled by the
State of Organization and Controlling Persons or
Company Relationship (if any) to the Fund Other Basis of Common Control
<S> <S> <S>
Money Management Associates a District of Columbia limited Daniel L. O'Connor holds 100% of
("MMA" or the "Adviser") partnership, registered transfer the voting authority in MMA in
agent and registered investment Daniel L. O'Connor's capacity as
adviser to four investment the sole general partner of MMA.
companies, including the Fund
<PAGE>
Rushmore Trust and Savings, FSB a Maryland corporation, and a 72.2% of the voting securities
("RTS" or the "Administrator") registered transfer agent, which of RTS is held by MMA, and 27.6%
provides transfer agency, dividend of the voting securities of RTS
disbursing, and shareholder is held by Daniel L. O'Connor,
services to the Fund, and serves the sole general partner of MMA.
as the Fund's custodian
Rushmore Services, Inc. ("RSI") a Maryland Corporation which 100% of the voting securities of
provides certain services to the RSI is owned by MMA.
Fund
The Rushmore Fund, Inc. a Maryland corporation, and a
registered investment company,
which is advised by MMA
Fund for Government Investors a Delaware business trust, and a
registered investment company,
which is advised by MMA
American Gas Index Fund, Inc. a Maryland corporation, and a
registered investment company,
which is advised by MMA
Cappiello-Rushmore Trust a Delaware business trust, and a
registered investment company, of
which MMA is the administrator
</TABLE>
ITEM 25. Indemnification
The Registrant was incorporated in the State of Maryland on April
8, 1983, and is operated pursuant to the Articles of Incorporation
of the Registrant, dated as of April 6, 1983, that permit the
Registrant to indemnify its directors and officers under certain
circumstances. Such indemnification, however, is subject to the
limitations imposed by the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended.
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.
This indemnification is subject to the following conditions:
(a) no director or officer is indemnified against any 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 indemnified only for actions
taken in good faith which the officers and directors believed
were in or not opposed to the best interests of the Fund; and
(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 of Incorporation of the Registrant provide that if
indemnification is not ordered by a court, indemnification may be
authorized upon determination by shareholders, or by a majority
vote of a quorum of
<PAGE>
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 so directs, by independent legal counsel in
a written opinion that the persons to be indemnified have met the
applicable standard.
ITEM 26. Business and Other Connections of the Investment Adviser
Money Management Associates ("MMA"), 100 Lakeshore Drive, Suite
1555, North Palm Beach, Florida 33408, a limited partnership
organized under the laws of the District of Columbia on August 15,
1974, has one general partner and two limited partners. Daniel L.
O'Connor is the general partner and sole employee of MMA. Limited
partners 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 27. Principal Underwriters
Not applicable
ITEM 28. Location 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 29. Management Services
Not Applicable
ITEM 30. Undertakings
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in this City
of Bethesda in the State of Maryland, on the 19th day of February, 1999.
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
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 February 19, 1999
Daniel L. O'Connor Treasurer, Director
/s/ Richard J. Garvey President, Director February 19, 1999
Richard J. Garvey
/s/ Jeff Ellis Director February 19, 1999
Jeffrey R. Ellis
/s/ Bruce Ellis Director February 19, 1999
Bruce C. Ellis
/s/ Michael D. Lange Director February 19, 1999
Michael D. Lange
/s/ Patrick F. Noonan Director February 19, 1999
Patrick F. Noonan
/s/ Leo Seybold Director February 19, 1999
Leo Seybold
Exhibit D
Management Contract between the Registrant and Money Management Associates
<PAGE>
MANAGEMENT CONTRACT
Between
FUND FOR TAX-FREE INVESTORS, INC.
And
MONEY MANAGEMENT ASSOCIATES
This Management Contract (the "Contract"), dated as of the
12th day of July, 1983, is entered into by and between Fund for Tax-
Free Investors, Inc. (hereinafter sometimes referred to as the "Fund")
and Money Management Associates (hereinafter sometimes referred to as
the "Manager").
THAT in consideration of the mutual covenants hereinafter
contained, it is agreed as follows:
1. THE FUND hereby employs the Manager to manage the
investment and reinvestment of the assets of the Fund and to
administer the affairs of the Fund, subject to the control of the
officers and Board of Directors of the Fund, for the period and on the
terms set forth in this Agreement. The Manager hereby accepts such
employment and agrees during such period to render the services and to
assume the obligations set forth, for the compensation herein
provided.
2. The Manager assumes and shall pay or reimburse the Fund
for: (a) all expenses in connection with the management of the
investment and reinvestment of the assets of the Fund, except that the
Fund assumes and shall pay all broker's commissions and issue and
transfer taxes chargeable to the Fund in connection with securities
transactions to which the Fund is a party; (b) the compensation (if
any) of those directors and officers of the Fund who also serve as
directors, officers or employees of the Manager; and (c) all expenses
not hereinafter specifically assumed by the Fund where such expenses
are incurred by the Manager or by the Fund in connection with the
administration of the affairs of the Fund.
The Fund assumes and shall pay or reimburse the Manager for
the Fund's taxes, corporate fees, interest expenses (if any) and its
allocable share of all charges, costs and expenses incurred in
connection with : (a) maintaining its offices, determining from time
to time the net assets of the Fund, maintaining its books and records,
and preparing, reproducing and filing its tax returns and reports to
governmental agencies; (b) auditing its financial statements; (c)
providing stock certificates representing shares of the Fund and the
services rendered in the registration or transfer of such shares, in
the payment and disbursement of dividends and distributions by the
Fund, and in the custody of the cash, securities and other assets of
the Fund; (d) stockholders' and directors' meetings, and preparation,
printing and distribution of all reports and proxy materials; (e)
printing the Fund's prospectus on at least an annual basis, and
distributing it to its then-existing shareholders; (f) legal services
rendered to the Fund; (g) retaining and compensating those directors,
officers and employees of the Fund who do not also serve as directors,
officers of employees of the Manager; (h) maintaining appropriate
insurance coverage for the Fund and its directors and officers; and
(i) its membership in trade associations.
At the request of the Fund, the Manager shall make available to
the Fund all necessary office facilities, equipment and personnel that
the Fund may require. Such office facilities, equipment, personnel
and services, the charges and expenses of which are to be paid by the
Fund under the provisions of this Section 2, may be provided for or
rendered to the Fund by the Manager and billed to the Fund at the
Manager's cost.
3. In connection with the management of the investment and
reinvestment of the assets of the Fund, the Manager is authorized on
behalf of the Fund, to place orders for the execution of the Fund's
portfolio transactions in accordance with the applicable policies of
the Fund as set forth in the Fund's registration statements under the
Securities Act of 1933 and the Investment Company Act of 1940, as such
registration statements may be amended
<PAGE>
from time to time, and is directed to use its best efforts to
obtain the best available price and most favorable execution with
respect to all such transactions for the Fund.
4. As compensation for the services to be rendered and the
charges and expenses to be assumed and paid by the Manager as provided
in Section 2, the Fund shall pay the Manager an annual fee of one-half
of one percent of the average daily net asset value of the money
market portfolio and five-eights of one percent of the daily net
assets values of the Intermediate-Term and Long-Term Portfolios (as
such terms are defined in the Fund's current prospectus). The fees
will be paid monthly.
If in any fiscal year the aggregate expenses of the Fund,
exclusive of taxes, brokerage, interest and extraordinary legal
expenses, but including the management fee, exceed 1% of the average
market value of the net assets for that fiscal year of the Fund, the
Manager will refund to the Fund, or bear, the excess expenses over 1%.
These expense reimbursements, if any, will be estimated, reconciled
and paid on a monthly basis.
In the event of termination of this Contract, the fee shall be
computed on the basis of the period ending on the last business day on
which this Contract is in effect subject to a pro rata adjustment
based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
5. The directors of the Fund acknowledge that, in further
consideration of the services of the Manager hereunder, the Manager
has reserved for itself all rights to, and interest in, the name "Fund
for Tax-Free Investors, Inc.," or any similar name, and that use of
the name shall continue only with the continuing consent of the
Manager, which consent may be withdrawn at any time, effective
immediately upon written notice thereof to the Fund.
6. Subject to and in accordance with the governing instruments
of the Fund and of the Manager respectively, directors, officers,
agents and stockholders of the Fund are or may be interested in the
Manager (or any successor thereof) as partners or otherwise; partners
and agents of the Manager are or may be interested in the Fund as
directors, officers, agents, stockholders or otherwise; the Manager
(or any successor) is or may be interested in the Fund as a
stockholder or otherwise; and the effect of any such
interrelationships shall be governed by said governing instruments and
the applicable provisions of the Investment Company Act of 1940.
7. This Contract shall continue in effect until the first
meeting of the Shareholders of the Fund (but in no event longer than
two years from the date hereof), and if approved at such stockholders'
meeting, until two years from the data hereof, and thereafter only so
long as such continuance is approved at least annually by a votes of a
majority of the Fund's Board of Directors, including the votes of a
majority of the directors who are not parties to such contract or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting such approval. In addition, the
questions of continuance of this Contract may be presented to
stockholders of the Fund; in such event, such continuance shall be
effected only if approved by the affirmative vote of a majority of the
outstanding voting securities of the Fund. Provided, however, that
(a) this Contract may at any time be terminated without payment of any
penalty either by vote of the Board of Directors of the Fund or by
vote of a majority of the outstanding voting securities of the Fund,
on sixty days prior written notice to the Manager, (b) this Contract
shall automatically terminate in the event of its assignment (within
the meaning of the Investment Company Act of 1940), and (c) this
Contract may be terminated by the Manager on sixty days prior written
notice to the Fund. Any notice under this contract shall be given in
writing, addressed and delivered, or mailed post paid, to the other
party at any office of such party.
As used in this Section 6, the terms "interested persons" and
"vote of a majority of the outstanding securities" shall have the
respective meanings set forth in Section 2(a)(9) and Section 2(a)(42)
of the Investment Company Act of 1940.
8. The services of the Manager to the Fund hereunder are not to
be deemed exclusive, and the Manager shall be free to render similar
services to others so long as its services hereunder are not impaired
thereby. The Manager shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise
<PAGE>
expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
9. No provisions of this Contract shall be deemed to protect the
Manager against any liability to the Fund or its stockholders to which
it might otherwise be subject by reasons of any willful misfeasance,
bad faith or gross negligence in the performance of its duties or the
reckless disregard of its obligations under this Contract. Nor shall
any provisions hereof be deemed to protect any director or officer of
the Fund against any such liability to which he might otherwise be
subject by reasons of any willful misfeasance, bad faith or gross
negligence in the performance of his duties or the reckless disregard
of his obligations. If any provision of this Contract shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Contract shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Contract
to be executed on the day and year first above written.
FUND FOR TAX-FREE INVESTORS, INC.
WITNESS:
/s/ Lisa D. Kelelis By: /s/ Richard J. Garvey
MONEY MANAGEMENT ASSOCIATES
WITNESS:
/s/ Lisa D. Kelelis By: /s/ Daniel L. O'Connor
Exhibit G
Custody Agreement between the Registrant and Rushmore Trust and Savings, FSB
<PAGE>
CUSTODY AGREEMENT BETWEEN
FUND FOR TAX-FREE INVESTORS, INC.
AND
RUSHMORE TRUST AND SAVINGS BANK, FSB
This Agreement (the "Agreement") is entered into this 23rd day of
March, 1992 by and between Fund for Tax-Free Investors, Inc. (the
"Fund") and Rushmore Trust and Savings Bank, FSB (the "Custodian").
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the
Fund and the Custodian, intending to be legally bound hereby, agree as
follows:
1. APPOINTMENT OF CUSTODIAN. The Fund hereby designates and
appoints the Custodian, subject to the provisions hereof. In
connection with such appointment, the Fund shall promptly deliver to
the Custodian certified or authenticated copies of its Charter and By-
laws, all amendments thereto, certified resolutions of its Board of
Directors appointing the Custodian and certified copies of such other
resolutions of its Board of Directors, contracts and other documents
as may be reasonably required by the Custodian.
2. DELIVERY OF ASSETS. The Fund shall, on receipt, promptly
deliver and pay or cause to be delivered and paid to the Custodian all
securities and cash hereafter acquired by the Fund.
3. DUTIES OF THE CUSTODIAN. The Custodian shall have and
perform the following powers and duties with reference to the
portfolio securities and cash of the Fund:
(a) Safekeeping of Securities. To keep safely the securities of
the Fund in its possession, in a depository or by book entry, and to
receive for such safekeeping delivery of securities acquired by the
Fund from time to time. The Custodian may hold such securities in
bearer form, registered in the name of the Fund, registered in the
name of the nominee of the Custodian or registered in the name of the
nominee of any depository of the Custodian.
(b) Sales and Redemptions. To make delivery of securities which
have been sold for the account of the Fund upon receipt of proper
instructions, or which have been called, exchanged, redeemed, retired
or otherwise become payable, understanding that the delivery of such
securities sold and receipt of payment therefore may not be completed
simultaneously. The Fund assumes the responsibility for all credit
risks involved in connection with the Custodian's delivery of
securities pursuant to instructions of the Fund.
(c) Cash Accounts. To retain all cash of the Fund in a separate
account or accounts in the name of the Fund subject only to draft or
order by the Bank, as Custodian, in accordance with the terms of this
Agreement. All monies received by the Custodian from or for the
account of the Fund shall be deposited in said account or accounts.
(d) Purchases. Upon receipt of proper instructions, and insofar
as funds are available for the purpose, to pay for all securities
purchased from the account of the Fund, payment being made only upon
receipt of the securities in bearer form or registered in form
satisfactory to the Custodian.
(e) Collections. Unless otherwise directed by receipt of proper
instructions, to collect and receive all income with respect to the
securities held hereunder, and to do all other things necessary and
proper in connection with the collection of such items, including but
not limited to the authority to:
(i) present for payment all income items requiring presentation;
<PAGE>
(ii) present for payment all securities which may mature or be
called, redeemed, retired, or otherwise become payable;
(iii) endorse for collection, for the account of the Fund,
checks, drafts, or other negotiable instruments.
(f) Sales of Shares of the Funds. To receive all considerations
paid into the Fund in connection with the issuance of shares of the
Fund and to deposit such considerations in the account or accounts
maintained hereunder.
(g) Redemption of Shares. Upon the request of the Fund, the
Custodian shall pay such sums to the Fund, its redemption agent or its
shareholders as the Fund may advise the Custodian are necessary in
connection with a redemption of shares of the Fund.
(h) Dividends and Distributions. Upon receipt of proper
instructions, to release available funds to the Fund or its disbursing
agent for the payment of dividends or other distributions payable in
cash to shareholders of the Fund.
(i) Transfer of Funds. Prohibit the Custodian's transfer of
funds upon receipt by the Custodian directly of a telephone purchase
or redemption request. The Custodian should forward all requests for
purchases and redemptions made by telephone directly to the Fund for
proper processing.
(j) Other Payments of Cash. Upon receipt of proper
instructions, to release available funds to the Fund or cause to be
paid on behalf of the Fund, insofar as funds are available, for the
following particular purposes: such taxes, interest charges,
investment advisory fees, administrative fees, and legal fees as well
as such amounts payable in connection with the conversion or exchange
of securities owned by the Fund or for other proper purposes of the
Fund as may be approved generally or from time to time by the
Treasurer or such other person or persons as the Board of Directors of
the Fund may authorize, except that if such payment is made for other
proper corporate purposes not otherwise specified above in this
Agreement, it shall be made only upon receipt of proper instructions
together with a certified copy of a resolution of the Board of
Directors of the Fund setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper corporate purpose
and naming the persons or persons to whom such payment is to be made.
(4) OTHER DUTIES AS CUSTODIAN. The Custodian shall perform
other duties on behalf of the Fund as follows:
(a) Accounts and Statements. To send daily statements of cash
transactions to the Fund and such listings of securities held by the
Custodian for the account of the Fund as may from time to time be
requested by the Fund.
(b) Retention of Records. To preserve for the periods required
in Section 31a-2 of the General Rules and Regulations under the
Investment Company Act of 1940 such records maintained by it as are
required to be maintained by Section 31a-1 of such rules. Unless
otherwise instructed by the Fund, the Custodian shall maintain its
records in such form that the securities held by it for the Fund shall
at all times by identifiable by date of purchase and purchase price
per share or unit. Said records shall be available at the office of
the Custodian for inspection by the Fund or its agents are reasonable
times.
(c) Reports. To assist the Fund in the (a) preparation of
reports to shareholders of the Fund, the Federal Securities and
Exchange Commission, the various state "Blue Sky" authorities and
others, (b) audits of accounts and (c) other ministerial matters of
like nature.
(d) Miscellaneous. In general to attend to all non-
discretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealing with the portfolio
securities and cash of the Fund entrusted to its care except as
otherwise directed from time to time by proper instructions.
(5) MATTERS OF GENERAL APPLICATION
<PAGE>
(a) Investments and Limitations. In performing its duties
generally, and more particularly in connection with the purchase, sale
and exchange of securities made by or for the Fund, the Custodian may
take cognizance of the provisions of the Charter and By-Laws of the
Fund as from time to time amended, but, nevertheless, except as
otherwise expressly provided herein, it may assume unless and until
notified in writing to the contrary that so called proper instructions
received by it are not in conflict with or in any way contrary to any
provisions of said Charter or By-Laws, as amended, or resolutions or
proceedings of the Board of Directors of the Fund.
(b) Proper Instructions. For purposes of this Agreement, the
Custodian shall be deemed to have received "proper instructions" upon
receipt of written instructions signed by a majority of the Directors
of the Fund or by such person or persons as the Board of Directors
shall have from time to time authorized to give particular class of
instructions in question. DifferenT persons may be authorized to give
instructions for different purposes. A certified copy of a resolution
or action of the Board of Directors of the Fund including facsimile
signatures of such person or persons, may be received and accepted by
the Custodian as conclusive evidence of the authority of such person
or persons to act and may be considered as in full force and effect
until receipt of written notice to the contrary. Such instructions
may be general or specific in terms.
(c) Reliance Upon Instructions. The Custodian shall be
protected in acting upon any instruction, notice, request, consent,
certificate or other instrument or paper believed by it to be genuine,
and to have been properly authorized and executed and shall, unless
otherwise specifically provided herein, be entitled to receive as
conclusive proof for any fact or matter required to be ascertained by
its hereunder, a certificate signed by the Secretary of the Fund with
respect to corporate proceedings of the Fund or otherwise by two
officers of the Fund then authorized to give instructions under
paragraph 5(b) hereof.
(d) Indemnification. The Fund shall be indemnified for any loss
it sustains as a result of any embezzlement of the Fund's assets by
the Custodian, its agent, officers, directors or employees. The
Custodian shall provided a blanket indemnification to the Fund for any
loss it sustains as a result of any omission of the Custodian, its
agents, officers, directors, or employees in administering or
performing any and all of its obligations under the Agreement.
6. COMPENSATION. The Fund shall pay to the Custodian such
compensation and at such time as may from time to time be agreed upon
in writing by the Fund and the Custodian.
7. TERMINATION. Either party may terminate this Agreement by
notice in writing delivered or mailed, postage prepaid, to the other
party hereto not less than thirty (30) days prior to the date of which
such termination shall take place. In the event of the legal
inability of the Custodian to serve hereunder or of termination of
this Agreement as aforesaid by either party, the Fund shall forthwith
appoint a bank, Federal savings bank or trust company of good standing
as successor custodian, and the Custodian shall deliver all funds and
all securities of the Fund, duly endorsed and in form for transfer, to
such successor custodian. If while this Agreement is in force the
Fund shall be liquidated pursuant to law, the Custodian shall
distribute either in cash or (if the Fund so orders by proper
instructions), in kind, prorata among the holders of shares in the
Fund, the securities and property of the Fund which remains after
paying or satisfying all expenses and liabilities of the Fund.
8. LAW OF CONTRACT. This agreement is executed and delivered in
the State of Maryland and shall be subject to and be construed
according to the laws of said State of Maryland.
9. NOTICES. Notices and other writings shall be deemed to have
been properly delivered or given hereunder to the respective addresses
if delivered or mailed, postage prepaid, to the appropriate party at
the address set forth below:
If to the Fund:
Fund for Tax-Free Investors, Inc.
4922 Fairmont Avenue
Bethesda, MD 20814
<PAGE>
If to the Custodian:
Rushmore Trust and Savings Bank, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
10. LIABILITY WAIVED. Neither the holders of shares in the
Funds nor the Directors of the Fund shall be personally liable
hereunder.
11. SUCCESSORS. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their
respective successors.
12. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by a duly
authorized officer on the day and year first above written.
ATTEST: THE FUND FOR TAX-FREE INVESTORS, INC.:
/s/ William L. Major By: /s/ Daniel L. O'Connor
Chairman of the Board
/s/ William L. Major By: /s/ Richard J. Garvey
President
ATTEST: RUSHMORE TRUST AND SAVINGS BANK, FSB:
/s/ Helen Pate By: /s/ Marjorie B. Deyo
<PAGE>
SCHEDULE A
Effective with the execution of this Agreement, the Custodian
shall be compensated for its services as follows:
Market Value Fee
2.25 basis points (0.0225%)
Transaction Fee
$10.00 per transaction settled in book entry form.
$25.00 per transaction for those securities not eligible for book-
entry form.
<PAGE>
RUSHMORE TRUST
January 24, 1997
Mr. Richard J. Garvey, President
Fund for Tax-Free Investors, Inc.
4922 Fairmont Avenue
Bethesda, MD 20814
Dear Mr. Garvey:
I have enclosed a revised Schedule A, the fee schedule, of the Custody
Agreement between the Fund for Tax-Free Investors, Inc. and Rushmore
Trust and Savings, FSB. This revision states that the compensation for
custody services provided is an internal allocation of a fees described
in the Administrative Services Agreement between our companies.
Please date and sign below to indicate acceptance of this revised
schedule.
Should you have any questions, call me at (301) 657-0291.
Sincerely,
/s/ David M. Shawler
David M. Shawler
Vice President and Trust Manager
Accepted: /s/ Richard J. Garvey
Date: 1-29-97
<PAGE>
SCHEDULE A
The fees for Custodian services is an internal allocation of the fee
described in the Administrative Services Agreement between Fund for Tax-
Free Investors, Inc. and Rushmore Trust and Savings, FSB.
Exhibit H (1)
Administrative Services Agreement between the Registrant and Rushmore
Trust and Savings, FSB
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
Between
FUND FOR TAX-FREE INVESTORS
And
RUSHMORE TRUST AND SAVINGS, FSB
This Administrative Services Agreement (the "Agreement") is
entered into this 1st day of September, 1993 by and between Fund for
Tax-Free Investors, Inc. (the "Fund") and Rushmore Trust and Savings,
FSB ("RTS" sometimes hereinafter to as the "Administrator").
RECITALS
I. WHEREAS RTS and its personnel have expertise and experience
in providing custodian, transfer agent, shareholder accounting and
other administrative services to registered investment management
companies, and
II. WHEREAS the parties wish to set forth herein the manner and
terms upon which services will be provided.
NOW THEREFORE, the parties hereto agree as follows:
EMPLOYMENT OF RTS
1. The Fund hereby employs RTS to perform the services as set
forth in Schedule I to this agreement.
2. As compensation for the services to be rendered, the Fund
shall pay RTS an annual fee as set forth in Schedule 2 to this
agreement.
The fee will be accrued by the Fund daily and paid on such terms
as may from time-to-time be mutually agreeable to the Fund and RTS.
In the event of termination of this contract, the fee shall be
computed on the basis of the period ending on the last business day on
which this contract is in effect subject to a pro rata adjustment
based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
In addition to the fees described above, RTS may impose a charge
of $5 per month on any account whose average daily balance for the
month falls below $500 due to redemptions. The fee will continue to
be imposed during the months when the account balance remains below
$500. The fee will be imposed on the last business day of the month.
This fee will not be imposed on tax-sheltered retirement plans or
accounts established under the Uniform Gifts or Transfers to Minors
Act.
3. Subject to and in accordance with the governing instruments
of the Fund and of RTS respectively, directors, officers, agents, and
stockholders of the Fund are or may be interested in RTS (or any
successor thereof) as shareholders or otherwise; and the effect of any
such inter-relationships shall be governed by said governing
instruments and the applicable provisions of the Investment Company
Act of 1940.
4. This contract shall continue in effect so long as such
continuance is approved at least annually by a vote of a majority of
the Fund's Board of Directors, including the votes of a majority of
the Directors who are not parties to such contract or interested
persons of any such party, cast in person at a meeting
<PAGE>
called for the purpose of voting such approval. Provided, however,
that (a) this Contract may be terminated without penalty either by
vote of the Board of Directors of the Fund or by vote of majority
of the outstanding voting securities of the Fund, on sixty days
prior written notice to RTS, (b) this Contract shall automatically
terminate in the event of its assignment (within the meaning of
the Investment Company Act of 1940), and (c) this Contract may be
terminated by RTS on sixty days prior written notice to the Fund.
Any notice under this Contract shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office
of such party. As used in this Agreement, the terms "interested persons"
and "vote of a majority of the outstanding securities" shall have the
respective meanings set forth in Section 2(a) (19) and Section 2(a)
(42) of the Investment Company Act of 1940.
5. The services of RTS to the Fund hereunder are not to be
deemed exclusive, and RTS shall be free to render similar services to
others so long as its services hereunder are not impaired thereby.
RTS shall for purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any
way or otherwise by deemed an agent of the Fund.
6. No provisions of this Agreement shall be deemed to protect
RTS against any liability to the Fund or its shareholders to which it
otherwise would be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or the
reckless disregard of its obligations under this Agreement. Nor shall
any provisions hereof be deemed to protect any Director or Officer of
the Fund against any such liability to which he might otherwise be
subject by reasons of any willful misfeasance, bad faith, or gross
negligence in the performance of his duties or the reckless disregard
of his obligations. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule, or otherwise, the
remainder of this Agreement shall not be affected thereby.
7. Upon delivery of services by RTS to the Fund, RTS shall
prepare and submit to the Fund, an invoice for the amounts to be paid
by the Fund under this Agreement. The invoice shall contain a
description of the services rendered. The calculation of the amount
of the invoice shall be in accordance with the fee schedule as set
forth in Section 2 which has been reviewed as to the reasonableness of
the amounts by the Directors of the Fund who are not "interested
persons" of the Fund. Unless agreed otherwise, within thirty (30)
days of receipt of such invoice, the Fund shall pay to RTS all amounts
indicated as due and payable notwithstanding the provisions of Section
8 of this Agreement.
8. If the Fund or its designees shall determine any discrepancy
in the invoice, the Fund shall give RTS written notice of such
discrepancy and the amount thereof. Within ten (10) days after
receipt of such notice, RTS shall either pay the Fund the amount of
the discrepancy or inform the Fund in writing that RTS disputes the
existence or amount of the discrepancy. If RTS disputes the existence
or amount of the discrepancy, the parties agree that for a period of
thirty (30) days they shall use their best efforts to resolve such
dispute on a mutually satisfactory basis.
9. Any dispute or disagreement arising between RTS and the Fund
in conjunction with any provision of this Agreement, or the compliance
or non-compliance therewith, or the validity or enforceability thereof
which is not settled within thirty (30) days (or such other period as
may be mutually agreed upon) from the date that either party informs
the other in writing that such dispute or disagreement exists, shall
be settled by arbitration in accordance with rules set by a three
member panel, one member each selected by RTS and the Fund and the
third being an attorney selected by mutual agreement of RTS and the
Fund, the aforesaid with all charges submitted by said attorney to be
shared equally by RTS and the Fund. The member representing the Fund
shall be selected by a majority of the Directors of the Fund who are
not "interested persons" of the Fund. A decision shall be rendered by
the panel within thirty (30) days of a meeting held in such place or
places as may be agreed by the panel, and RTS and the Fund shall
comply with such decision. The decision of the panel shall be final
and not subject to judicial review, and judgment may be entered
thereon in accordance with applicable law in any court having
jurisdiction thereof.
<PAGE>
10. Absent willful misfeasance, bad faith, gross negligence, or
reckless disregard of duties, RTS shall not be liable to the Fund for
any special, incidental, or consequential damages for losses arising
out of or relating to the performance of its obligations under this
Agreement, whether or not such damages or losses were caused by the
acts or omissions of RTS or its employees. RTS is fully responsible
for the accurate transmission to the Fund of information provided to
RTS by third parties but is not responsible for the accuracy of the
information so provided.
11. All documents and files which may be or have been furnished
by RTS to the Fund and which may be produced or prepared by RTS in
connection with this Agreement shall be and remain the exclusive
property of the Fund.
12. RTS will preserve for the period required in Rule 31a-2 of
the General Rules and Regulations under the Investment Company Act of
1940, such records maintained by RTS as are required to be maintained
by Rule 31a-1 of such rules.
13. At the option of a majority of the Directors of the Fund who
are not "interested persons" of the Fund, the books and records of
RTS, insofar as such books and records pertain to the services, shall
be available for inspection by the Fund and its agent at the offices
of RTS during regular business hours, upon prior written notice to RTS
by the Fund.
14. Neither RTS nor the Fund shall be considered to be in
default in the performance of their respective obligations hereunder
to the extent that the performance of any such obligation or
obligations is prevented or delayed by an act of God or any cause
beyond the control of RTS or the Fund, as the case may be. In the
event of equipment breakdown beyond its control, RTS shall take
reasonable steps to minimize service interruptions.
15. The services as provided by RTS in accordance with this
Agreement shall not be deemed accepted until the Fund has verified the
content and accuracy of those services provided by RTS. The Fund
shall notify RTS in writing within ten (10) days of the Fund's receipt
of services of its acceptance or rejection of such services. If such
notification is not received within ten (10) days of the Fund's
receipt of services, the services will be deemed to have been
accepted.
16. In the event that RTS fails to meet the performance
schedules (if any) contained herein and such failure is not caused by
the Fund, RTS shall take such steps as may be necessary to improve the
schedule(s) in such form as is required to meet such performance or
delivery schedules (if any) described herein.
17. RTS and the Fund may amend, modify, or supplement this
Agreement only by a written instrument executed by both RTS and the
Fund. If any such amendment, modification, or supplement causes an
increase or decrease in the price of, or time required for, the
performance of this Agreement, an equitable adjustment shall be made,
and this adjustment shall be mutually agreed upon by RTS and the Fund
and the Agreement modified in writing accordingly.
18. All notices, demand, and other communications required or
permitted to be given hereunder shall be made in writing and shall be
deemed to be duly given if personally delivered or if deposited in the
United States mail registered or certified mail, with postage prepaid,
and addressed to the appropriate party at the address set forth below,
or at such other address as the parties may designate in writing
delivered in accordance with the provisions of this Section 17.
If to RTS:
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
<PAGE>
Bethesda, Maryland 20814
Attention: ____________________________________
If to the Fund:
Fund for Tax-Free Investors
4922 Fairmont Avenue
Bethesda, Maryland 20814
Attention: Daniel L. O'Connor, Chairman
19. This Agreement is intended by the parties as a full
expression of their agreement with respect to the subject matter
hereof and a complete and exclusive statement of the terms thereof.
No course of prior dealings between the parties and no usage of trade
shall be relevant or admissible to supplement, explain, or vary any of
the terms of this Agreement. Acceptance of, or acquiescence in, a
course of performance rendered under this Agreement shall not be
relevant or admissible to vary the terms and meaning of this
Agreement, even though the accepting or acquiescing party has
knowledge of the nature of the performance and the opportunity to make
objection. No representations, undertakings, or agreements have been
made or relied upon in the making of this Agreement other than those
specifically set forth herein.
20. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland and shall be binding
upon and shall inure to the benefit of the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
Witness: Fund for Tax-Free Investors
/s/ Daniel L. O'Connor
Daniel L. O'Connor
By: Chairman
Witness: Rushmore Trust and Savings, FSB
/s/ William L. Major
By: Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT I
RUSHMORE TRUST AND SAVINGS, FSB
DESCRIPTION OF SERVICES
SHAREHOLDER SERVICING AND TRANSFER AGENT SERVICES
Services included:
Maintenance of individual shareholder accounts
Posting all transactions
Preparation of periodic shareholder statements
Preparation of transaction confirmations
Income distributions
Respond to inquiries from shareholders
Process account changes such as name or address
CUSTODIAN SERVICES
Services included:
Safekeeping of securities
Delivery of securities sold
Receipt of securities purchased
Retain Fund cash in separate account(s)
ADMINISTRATIVE SERVICES
Services included:
General ledger accounting
Portfolio accounting
Daily share pricing
Maintenance of records per SEC regulations
SEC registration fees
State "blue sky" fees
Directors fees and expenses
Insurance
Legal fees
Prospectus preparation
Tax return preparation
Shareholder report preparation
Printing
Postage
Printing of statement stock
Mailing envelopes
Postage
<PAGE>
SCHEDULE 2
RUSHMORE TRUST AND SAVINGS, FSB
SCHEDULE OF FEES
FUND FOR TAX-FREE INVESTORS, INC.
Money Market Portfolio 25 basis points per annum (.0025%)
Virginia Tax-Free Portfolio 30 basis points per annum (.0030%)
Maryland Tax-Free Portfolio 30 basis points per annum (.0030%)
Exhibit H (2)
Agreement between Money Management Associates and Rushmore Services, Inc.
<PAGE>
AGREEMENT
This Agreement by and between Money Management Associates, a
District of Columbia limited partnership located at Palm Beach
Gardens, Florida ("MMA") and Rushmore Services, Inc., a Maryland
corporation located at 4922 Fairmont Avenue, Bethesda, Maryland 20814
("RSI"). This Agreement is made and entered into on the 1st day of
October 1994.
WITNESSETH
WHEREAS MMA provides investment advisory services to mutual funds;
those mutual funds currently being advised by MMA are: Fund for Tax-
Free Investors, Inc., The Rushmore Fund, Inc., Fund for Government
Investors, and American Gas Index Fund, Inc.; MMA provides
administrative services to the Cappiello-Rushmore Trust (collectively
the "Mutual Funds"); and
WHEREAS RSI provides administrative services to MMA in connection
with its management, promotion and distribution of Mutual Funds; and
IT IS the purpose of this Agreement to clearly define the
obligations of each of the parties hereto with respect to services
rendered by RSI.
NOW THEREFORE in consideration of the mutual promises herein
exchanged the parties agree as follows:
1. RSI shall provide the administrative services as set forth
above to MMA. It shall also execute trades and monitor portfolios for
the Mutual Funds. It shall maintain MMA records in Bethesda, Maryland
at its offices and assemble, prepare and file required reports with
the Securities and Exchange Commission and the Office of Thrift
Supervision.
2. MMA shall pay a monthly service fee to RSI of $82,350.00 which
is intended to compensate RSI for management of the Mutual Funds,
salary, rental expense, and profit. Additional expenses which are
reimbursable include, but are not limited to, advertising, promotion,
distribution, professional fees, telephone, postage and travel
expense. The monthly service fee shall be paid at the beginning of
each month and the reimbursement shall be paid as billed monthly.
Payments will be first allocated to the service fee and then to
reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1995. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
4. The monthly fee, however, shall be renegotiable annually
between the parties. In the event that the parties cannot come to an
agreement on the amount of the monthly fee thirty (30) days in advance
of the termination of the current annual contract, such failure to
agree shall constitute a termination notice of the contract.
5. Any dispute or disagreement arising between MMA and RSI in
conjunction with any provision of this Agreement, or the compliance or
non-compliance therewith, which is not settled within thirty (30) days
(or such period as may be mutually agreed upon) from the date that
either party informs the other in writing that such dispute or
disagreement exists, shall be settled by arbitration in accordance
with rules set by a three member panel, one member each selected by
MMA and RSI and the third being an attorney selected by mutual
agreement of MMA and RSI, with all charges submitted by said attorney
to be shared equally by MMA and RSI. The decision of the panel shall
be by majority vote and final and not subject to judicial review, and
judgment may be entered thereon in accordance with applicable law in
any court having jurisdiction thereof.
6. All notices, demands and other communications required or
permitted to be given hereunder shall be made in writing and shall be
deemed to be duly given if personally delivered or if deposited in the
United States mail, registered or certified mail, with postage
prepaid, and addressed to the appropriate party at the address set
forth below, or at such other address as the parties may designate in
writing delivered in accordance with the provisions of this paragraph.
<PAGE>
If to MMA:
Money Management Associates
P.O. Box 31237
Palm Beach Gardens, Florida 33420
Attention: Daniel L. O'Connor
If to RSI:
Rushmore Services, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
Attention: Martin M. O'Connor
7. This Agreement is intended by the parties as a full expression
of their agreement with respect to the subject matter hereof and a
complete and exclusive statement of the terms thereof. No course of
prior dealings between the parties and no usage of trade shall be
relevant or admissible to supplement, explain, or vary any of the
terms of this Agreement. Acceptance of, or acquiescence in, a course
of performance rendered under this Agreement shall not be relevant or
admissible to vary the terms and meaning of this Agreement, even
though the accepting or acquiescing party has knowledge of the nature
of the performance and the opportunity to make objection. No
representations, undertakings, or agreements have been made or relied
upon in the making of this Agreement other than those specifically set
forth herein.
8. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland and shall be binding upon and
shall inure to the benefit of the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
WITNESS: MONEY MANAGEMENT ASSOCIATES:
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the original Agreement:
2. MMA shall pay a monthly service fee to RSI of $63,500.00 which
is intended to compensate RSI for management of the Mutual Funds,
salary, rental expense, and profit. Additional expenses which are
reimbursable include, but are not limited to, advertising, promotion,
distribution, professional fees, telephone, postage and travel
expense. The monthly service fee shall be paid at the beginning of
each month and the reimbursement shall be paid as billed monthly.
Payments will be first allocated to the service fee and then to
reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1996. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
December 24, 1995
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $56,000.00 which
is intended to compensate RSI for management of the Mutual Funds,
salary, rental expense, and profit. Additional expenses which are
reimbursable include, but are not limited to, advertising, promotion,
distribution, professional fees, telephone, postage and travel
expense. The monthly service fee shall be paid at the beginning of
each month and the reimbursement shall be paid as billed monthly.
Payments will be first allocated to the service fee and then to
reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1997. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
December 23, 1996
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $75,000.00 which
is intended to compensate RSI for management of the Mutual Funds,
salary, rental expense, and profit. Additional expenses which are
reimbursable include, but are not limited to, advertising, promotion,
distribution, professional fees, telephone, postage and travel
expense. The monthly service fee shall be paid at the beginning of
each month and the reimbursement shall be paid as billed monthly.
Payments will be first allocated to the service fee and then to
reimbursement.
3. The term of this Agreement shall be six months beginning on the
1st day of July, 1997. This Agreement shall be automatically renewed
between the parties on an annual basis unless within thirty (30) days
of an annual termination date notice is given by one party or the
other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
June 30, 1997
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $60,000.00 which
is intended to compensate RSI for management of the Mutual Funds,
salary, rental expense, and profit. Additional expenses which are
reimbursable include, but are not limited to, advertising, promotion,
distribution, professional fees, telephone, postage and travel
expense. The monthly service fee shall be paid at the beginning of
each month and the reimbursement shall be paid as billed monthly.
Payments will be first allocated to the service fee and then to
reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1998. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
December 31, 1997
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $70,000.00 which
is intended to compensate RSI for management of the Mutual Funds,
salary, rental expense, and profit. Additional expenses which are
reimbursable include, but are not limited to, advertising, promotion,
distribution, professional fees, telephone, postage and travel
expense. The monthly service fee shall be paid at the beginning of
each month and the reimbursement shall be paid as billed monthly.
Payments will be first allocated to the service fee and then to
reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1999. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
December 31, 1998
Exhibit J
Consent of Independent Auditors
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. 17 to Registration Statement No. 2-83299 of our report
dated January 27, 1999, appearing in the Annual Report of Fund for Tax-
Free Investors, Inc. for the year ended December 31, 1998, and to the
reference to us under the caption "Financial Highlights" appearing in
the Prospectus, which also is a part of such Registration Statement.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
February 24, 1999
Exhibit P
Powers of Attorney
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard J. Garvey, John R. Cralle, and Stephenie E. Adams,
and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place, and stead, in and all of his or her
capacities as a Director of Fund for Tax-Free Investors, Inc. (the
"Fund"), a Maryland Corporation, to sign on his or her behalf any and
all Registration Statements (including any post-effective amendments
to Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as amended, filed
by the Fund and any amendments and supplements thereto, and other
documents in connection therewith, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and
purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, and each of
them, may lawfully do or cause to be done by virtue hereof. This
power of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 31st day of October, 1995.
/s/ Leo Seybold
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard J. Garvey, John R. Cralle, and Stephenie E. Adams,
and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place, and stead, in and all of his or her
capacities as a Director of Fund for Tax-Free Investors, Inc. (the
"Fund"), a Maryland Corporation, to sign on his or her behalf any and
all Registration Statements (including any post-effective amendments
to Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as amended, filed
by the Fund and any amendments and supplements thereto, and other
documents in connection therewith, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and
purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, and each of
them, may lawfully do or cause to be done by virtue hereof. This
power of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 31st day of October, 1995.
/s/ Patrick F. Noonan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard J. Garvey, John R. Cralle, and Stephenie E. Adams,
and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place, and stead, in and all of his or her
capacities as a Director of Fund for Tax-Free Investors, Inc. (the
"Fund"), a Maryland Corporation, to sign on his or her behalf any and
all Registration Statements (including any post-effective amendments
to Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as amended, filed
by the Fund and any amendments and supplements thereto, and other
documents in connection therewith, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and
purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, and each of
them, may lawfully do or cause to be done by virtue hereof. This
power of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 31st day of October, 1995.
/s/ Daniel L. O'Connor
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard J. Garvey, John R. Cralle, and Stephenie E. Adams,
and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place, and stead, in and all of his or her
capacities as a Director of Fund for Tax-Free Investors, Inc. (the
"Fund"), a Maryland Corporation, to sign on his or her behalf any and
all Registration Statements (including any post-effective amendments
to Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as amended, filed
by the Fund and any amendments and supplements thereto, and other
documents in connection therewith, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and
purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, and each of
them, may lawfully do or cause to be done by virtue hereof. This
power of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 31st day of October, 1995.
/s/ Jeffrey R. Ellis
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard J. Garvey, John R. Cralle, and Stephenie E. Adams,
and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place, and stead, in and all of his or her
capacities as a Director of Fund for Tax-Free Investors, Inc. (the
"Fund"), a Maryland Corporation, to sign on his or her behalf any and
all Registration Statements (including any post-effective amendments
to Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as amended, filed
by the Fund and any amendments and supplements thereto, and other
documents in connection therewith, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and
purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, and each of
them, may lawfully do or cause to be done by virtue hereof. This
power of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 27th day of November, 1995.
/s/ Bruce Ellis
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard J. Garvey, John R. Cralle, and Stephenie E. Adams,
and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place, and stead, in and all of his or her
capacities as a Director of Fund for Tax-Free Investors, Inc. (the
"Fund"), a Maryland Corporation, to sign on his or her behalf any and
all Registration Statements (including any post-effective amendments
to Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as amended, filed
by the Fund and any amendments and supplements thereto, and other
documents in connection therewith, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and
purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, and each of
them, may lawfully do or cause to be done by virtue hereof. This
power of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 27th day of December, 1995.
/s/ Michael D. Lange
