<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FUND FOR TAX-FREE INVESTORS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
- -------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
4922 FAIRMONT AVENUE
BETHESDA, MARYLAND 20814
(800) 622-1386
------------------------
RUSHMORE TAX-FREE MONEY MARKET PORTFOLIO
RUSHMORE MARYLAND TAX-FREE PORTFOLIO
RUSHMORE VIRGINIA TAX-FREE PORTFOLIO
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2000
------------------------
To the Shareholders of
FUND FOR TAX-FREE INVESTORS, INC.:
Notice is hereby given that an annual meeting of shareholders of the
Rushmore Tax-Free Money Market Portfolio, Rushmore Maryland Tax-Free Portfolio,
and Rushmore Virginia Tax-Free Portfolio of the Fund for Tax-Free Investors,
Inc. (the "Fund") will be held at 10:00 a.m. Eastern Time on June 1, 2000 at the
offices of the Fund, 4922 Fairmont Avenue, Bethesda, Maryland 20814, or as
adjourned from time to time (the "Meeting"), for the purposes listed below. The
Meeting will be held:
I. To elect the Board of Directors of the Fund;
II. To approve a new investment advisory contract;
III. To ratify the selection of independent auditors; and
IV. To transact such other business as may properly come before the Meeting.
After careful consideration, the Directors of the Fund unanimously approved
each of the nominees to the Board of Directors and unanimously approved each of
the other proposals, and recommend that shareholders vote "FOR" each of the
nominees and "FOR" each other proposal.
The matters referred to above are discussed in detail in the proxy statement
attached to this notice. The Board of Directors has fixed the close of business
on March 17, 2000 as the record date for determining shareholders entitled to
notice of and to vote at the Meeting. Each share of a Portfolio is entitled to
one vote with respect to proposals on which that Portfolio's shareholders are
entitled to vote, with fractional votes for fractional shares. If you held
shares of more than one Portfolio on the record date, you will receive separate
proxy cards for each Portfolio.
Regardless of whether you plan to attend the Meeting, PLEASE COMPLETE, SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, SO
THAT YOU WILL BE REPRESENTED AT THE MEETING.
If you have returned a proxy card and are present at the Meeting, you may
change the vote specified in the proxy at that time. However, attendance in
person at the Meeting, by itself, will not revoke a previously tendered proxy.
By Order of the Board of Directors,
Stephenie E. Adams,
SECRETARY
Bethesda, Maryland
April 11, 2000
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. IN
ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE YOU TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
<PAGE>
FUND FOR TAX-FREE INVESTORS, INC.
4922 FAIRMONT AVENUE
BETHESDA, MARYLAND 20814
(800) 622-1386
------------------------
RUSHMORE TAX-FREE MONEY MARKET PORTFOLIO
RUSHMORE MARYLAND TAX-FREE PORTFOLIO
RUSHMORE VIRGINIA TAX-FREE PORTFOLIO
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2000
------------------------
This proxy statement and enclosed proxy are being furnished in connection
with the solicitation of proxies by the Board of Directors (the "Board" or
"Directors") of the Fund for Tax-Free Investors, Inc. (the "Fund") for use at an
annual meeting of shareholders of the Rushmore Tax-Free Money Market Portfolio,
Rushmore Maryland Tax-Free Portfolio, and Rushmore Virginia Tax-Free Portfolio
to be held at 10:00 a.m. Eastern Time on June 1, 2000 at the offices of the
Fund, 4922 Fairmont Avenue, Bethesda, Maryland 20814, or as adjourned from time
to time (the "Meeting"). The Board is soliciting proxies from shareholders of
the Portfolios with respect to the proposals set forth in the accompanying
notice.
It is anticipated that the first mailing of proxies and proxy statements to
shareholders will be on or about April 11, 2000.
SHAREHOLDER REPORTS. Shareholders can find important information about the
Portfolios in the Fund's annual report dated December 31, 1999, which previously
has been furnished to shareholders. Shareholders may request another copy of
this report by writing to the Fund at the above address, or by calling the
telephone number above. A copy of such report will be provided free of charge.
INTRODUCTION. On October 20, 1999, Money Management Associates, L.P.
("MMA"), the Portfolios' investment adviser, entered into a definitive agreement
pursuant to which Friedman, Billings, Ramsey Group, Inc. ("FBR"), and two of its
affiliates, will acquire all of the outstanding ownership interests in MMA.
Under the Investment Company Act of 1940, as amended (the "1940 Act"),
consummation of the transaction will result in the assignment and automatic
termination of the Fund's current investment advisory contract with MMA. The
Board of the Fund has met and considered the proposed transaction and its
consequences for the Fund and has determined to (1) approve a new investment
advisory contract with MMA which would take effect upon consummation of the
transaction, (2) recommend that shareholders approve such contract, and
(3) take certain other actions necessitated by the transaction, including
reconstitution of the Fund's Board. For more information concerning the
transaction, see "Proposal II. Approval of New Investment Advisory
Contract--Description of the Transaction."
1
<PAGE>
PROPOSAL I.
ELECTION OF DIRECTORS
In light of the proposed transaction, the Board has determined to
reconstitute the Board so that at least 75% of the Directors are not "interested
persons", as defined in the 1940 Act, of the Fund, MMA or FBR. These persons are
commonly referred to as "independent Directors."
At its meeting held on January 27, 2000, the Board appointed a Nominating
Committee consisting of Patrick F. Noonan and Bruce C. Ellis, each of whom is an
independent Director, to consider and recommend to the Board nominees for
service on the Board. The Nominating Committee consulted with counsel and other
independent Directors, as well as representatives of MMA and FBR, and
recommended to the Board that the size of the Board be fixed at eight members
and that the following persons be nominated for election to the Board
("Nominees"):
<TABLE>
<S> <C>
Daniel L. O'Connor Jeffrey R. Ellis
Richard J. Garvey F. David Fowler
Louis T. Donatelli Patrick F. Noonan
Bruce C. Ellis Michael A. Willner
</TABLE>
Messrs. Daniel L. O'Connor, Richard J. Garvey, Bruce C. Ellis, Jeffrey R.
Ellis, and Patrick F. Noonan, currently serve as Directors of the Fund and are
proposed for re-election to the Board.
On March 17, 2000, the Board met to consider the Nominating Committee's
recommendations and the background, experience and credentials of each Nominee,
as well as any relationships such Nominee has or has had with the Fund, MMA and
FBR. Based upon such consideration, the Board unanimously agreed to nominate
each such person and recommended that the nominations be submitted to
shareholders for approval.
If the Nominees are elected at the Meeting, there will be a total of eight
Directors on the Board, six of whom will be independent Directors.
The Nominees have indicated their willingness to serve as Directors. The
Board knows of no reason why the Nominees would be unable to serve, but in the
event of any such unavailability, the proxies received will be voted for such
substituted nominee as the Board may recommend.
The persons named as proxies on the enclosed proxy card will vote your
shares for the election of the Nominees unless you withhold authority to vote
for the Nominees in your proxy. If elected by shareholders, the Nominees will
continue to serve as Directors of the Fund until the next meeting of
shareholders, if any, called for the purpose of electing Directors, unless
sooner succeeded as provided in the Fund's Articles of Incorporation and Bylaws.
It is proposed, and the Board recommends, that shareholders elect the Nominees.
The following table sets forth certain information concerning each of the
Nominees.
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS SHARES OWNED BENEFICIALLY
NAME, ADDRESS AND AGE WITH FUND DURING LAST FIVE YEARS ON MARCH 17, 2000
- --------------------- ------------- ---------------------------- -------------------------
<S> <C> <C> <C>
Daniel L. O'Connor,* 58 .... Chairman, General Partner of MMA, N/A
100 Lakeshore Drive Treasurer, registered investment
Suite 1555 and Director adviser of four registered
North Palm Beach, FL 33408 investment companies (the
"Rushmore Funds"), since
1975. Director, Rushmore
Trust and Savings, FSB, the
Fund's transfer agent and
custodian. Director or
Trustee of four Rushmore
Funds. Trustee of the
Cappiello-Rushmore Trust.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS SHARES OWNED BENEFICIALLY
NAME, ADDRESS AND AGE WITH FUND DURING LAST FIVE YEARS ON MARCH 17, 2000
- --------------------- ------------- ---------------------------- -------------------------
<S> <C> <C> <C>
Richard J. Garvey,* 67 ..... President and Limited Partner of MMA and N/A
730 Southwest 67th Place Director Vice President of Rushmore
Portland, OR 97225 Services, Inc. until 1998.
Director or Trustee of four
Rushmore Funds.
Louis T. Donatelli, 63 ..... President of Donatelli and N/A
7200 Wisconsin Avenue Klein, Inc., engaged in the
Bethesda, MD 20814 acquisition of real estate,
primarily office buildings
and multi-family housing
projects, since 1973.
Director, American Gas Index
Fund, Inc.
Bruce C. Ellis,** 55 ....... Director A private investor in N/A
7108 Heathwood Court start-up companies. Vice
Bethesda, MD 20817 President, LottoPhone, Inc.,
a telephone state lottery
service,
September 1991-1995.
Director, The Torray Fund,
since 1994; Director, the
Sheppard Fund, since 1994.
Director or Trustee of three
Rushmore Funds, and Trustee
of the Cappiello-Rushmore
Trust.
Jeffrey R. Ellis,** 55 ..... Director President, Innovative LLC, a N/A
513 Kerry Lane manufacturing-marketing
Virginia Beach, VA 23451 company in Virginia Beach,
since January 1999. Private
investor prior thereto.
Director or Trustee of three
Rushmore Funds, and Trustee
of the Cappiello-Rushmore
Trust.
F. David Fowler, 66 ........ Private investor. Dean, The N/A
9450 Newbridge Drive George Washington University
Potomac, MD 20854 School of Business and
Public Management,
1992-1997; Partner, KPMG
Peat Marwick from
October 1969 to June 1992.
Trustee, The FBR Family of
Funds.
Patrick F. Noonan, 57 ...... Director Chairman and Chief Executive N/A
11901 Glen Mill Drive Officer of the Conservation
Potomac, MD 20854 Fund, a national non-profit
environmental organization,
since 1985. Director or
Trustee of four Rushmore
Funds. Director,
International Paper Co.,
Ashland Inc. and Saul
Centers.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS SHARES OWNED BENEFICIALLY
NAME, ADDRESS AND AGE WITH FUND DURING LAST FIVE YEARS ON MARCH 17, 2000
- --------------------- ------------- ---------------------------- -------------------------
<S> <C> <C> <C>
Michael A. Willner, 43 ..... President, Catalyst N/A
11521 Potomac Road Advisers, Inc., a news
Lorton, VA 22079 organization, from
September 1996 to Present;
President, Federal
Filings, Inc., a news
organization from July 1994
to July 1995. Trustee, The
FBR Family of Funds
</TABLE>
- ------------------------
* Messrs. O'Connor and Garvey are "interested persons" of the Fund (as that
term is defined in the 1940 Act) because of their current or former
affiliations with MMA and the Fund.
** Bruce C. Ellis and Jeffrey R. Ellis are brothers.
The following table sets forth certain information concerning the current
Directors who are not standing for re-election.
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS SHARES OWNED BENEFICIALLY
NAME, ADDRESS AND AGE WITH FUND DURING LAST FIVE YEARS ON MARCH 17, 2000
- --------------------- ------------- ---------------------------- -------------------------
<S> <C> <C> <C>
Michael D. Lange,* 58 ...... Director Vice President, Capital Hill N/A
P.O. Box 1348 Management Corporation since
Great Falls, VA 22066 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
Fund's transfer agent and
custodian. Director or
Trustee of three Rushmore
Funds.
Leo Seybold, 86 ............ Director Retired 1988. Director or Maryland Tax-Free
5804 Rockmere Drive Trustee of three Rushmore Portfolio: 90,490.38
Bethesda, MD 20816 Funds. Tax-Free Money Market
Portfolio: 1,811.83
</TABLE>
- ------------------------
* Mr. Lange is an "interested person" of the Fund because of his affiliation
with Rushmore Trust and Savings, FSB.
During the fiscal year ended December 31, 1999, there were four meetings of
the Board. There was 100% attendance by Directors at the meetings of the Board
held throughout the period.
As of March 17, 2000, the Directors and officers of the Fund, as a group,
owned less than one percent of the outstanding shares of any Portfolio, or the
Fund in the aggregate, except Leo Seybold, who owned 90,490.38 shares (3.4%) of
the Maryland Tax-Free Portfolio.
BOARD OF DIRECTORS--COMMITTEES. In addition to the Nominating Committee,
the Fund has a standing Audit Committee that currently consists of
Messrs. Bruce C. Ellis, Jeffrey R. Ellis, Michael D. Lange, Patrick F. Noonan,
and Leo Seybold, each of whom (except Michael D. Lange) is an independent
Director. The Audit Committee reviews both the audit and non-audit work of the
Fund's independent public accountants, submits a recommendation to the Board as
to the selection of independent auditors, and reviews generally the maintenance
of the Fund's records and the safekeeping arrangements of the Fund's
4
<PAGE>
custodian. During the fiscal year ended December 31, 1999, the Audit Committee
met one time, and each member of the Audit Committee attended the meeting. There
were no meetings of any other committee during such fiscal year.
REMUNERATION OF DIRECTORS. The following table sets forth the compensation
received by the Directors for their services to the Fund during the fiscal year
ended December 31, 1999. In addition to the fees listed below, the Directors are
also reimbursed for all reasonable expenses incurred during the execution of
their duties.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED ESTIMATED FROM THE FUND
COMPENSATION AS PART OF THE ANNUAL BENEFITS COMPLEX* PAID TO THE
NAME OF DIRECTOR FROM THE FUND FUND EXPENSES UPON RETIREMENT DIRECTOR
- ---------------- ------------- ---------------- --------------- --------------------
<S> <C> <C> <C> <C>
Bruce C. Ellis................. $3,000 $0 $0 $9,000
Jeffrey R. Ellis............... $3,000 $0 $0 $9,000
Richard J. Garvey.............. $0 $0 $0 $0
Michael D. Lange............... $3,000 $0 $0 $9,000
Patrick F. Noonan.............. $3,000 $0 $0 $10,000
Daniel L. O'Connor............. $0 $0 $0 $0
Leo Seybold.................... $3,000 $0 $0 $9,000
</TABLE>
- ------------------------
* The "Fund Complex" includes the Fund, Fund for Government Investors, The
Rushmore Fund, Inc., and American Gas Index Fund, Inc.
MATERIAL INTEREST OF DIRECTOR. Daniel O'Connor has a direct material
interest in the transaction described below in Proposal II, pursuant to which
Mr. O'Connor, as the sole general partner of MMA, the investment adviser of the
Portfolios, and a shareholder of Rushmore Trust and Savings, FSB ("RTS"), will
receive compensation for consulting services and other benefits. For a complete
discussion of the transaction, see Proposal II.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE NOMINEES UNDER PROPOSAL I. UNMARKED PROXIES WILL BE
SO VOTED.
PROPOSAL II.
APPROVAL OF A NEW INVESTMENT
ADVISORY CONTRACT
INTRODUCTION. MMA, a District of Columbia limited partnership located at
100 Lakeshore Drive, Suite 1555, North Palm Beach, Florida 33408, has served as
the Portfolios' investment adviser since the organization of the Fund in 1983.
MMA currently serves as investment adviser to the Portfolios pursuant to an
investment advisory contract dated July 12, 1983 (the "Current Advisory
Contract"). RTS, a federal savings bank, serves as the administrator, transfer
agent, portfolio accountant, and custodian to the Portfolios, and provides
shareholder services to the Portfolios. MMA is the majority shareholder of RTS,
whose address is 4922 Fairmont Avenue, Bethesda, Maryland 20814.
MMA will undergo a "change in control" as a result of the consummation of
the transaction described below, which, under applicable law, will terminate the
Current Advisory Contract. It is proposed that MMA continue to serve as
investment adviser to the Portfolios following completion of the transaction.
Therefore, in connection with the transaction and as required by the 1940 Act,
shareholders of each
5
<PAGE>
Portfolio of the Fund are being asked in Proposal II to approve a new investment
advisory contract between the Fund, on behalf of each Portfolio, and MMA which
is substantially comparable to the Current Advisory Contract (the "New Advisory
Contract"). The Board recommends that shareholders approve the New Advisory
Contract, a form of which is attached as Appendix A.
DESCRIPTION OF THE TRANSACTION. On October 20, 1999, MMA, RTS, Daniel
O'Connor, the limited partners of MMA, Money Management Associates, Inc. ("MMA
Buyer"), Money Management Associates (LP), Inc. ("LP Buyer" and, together with
MMA Buyer, the "Buyers"), and FBR entered into a Purchase and Sale Agreement
(the "Agreement") pursuant to which the Buyers will acquire ownership of MMA and
RTS (the "Transaction").
The Agreement provides for the purchase by MMA Buyer of all of the
outstanding general partnership interests in MMA from Mr. O'Connor, the sole
general partner of MMA, and the purchase by LP Buyer of all of the outstanding
limited partnership interests in MMA from the current limited partners of MMA.
MMA currently owns 72.4% of the outstanding capital stock of RTS, and Daniel
O'Connor owns 27.6% of the outstanding capital stock of RTS. The Agreement
further provides that Mr. O'Connor will sell to MMA Buyer all of the RTS stock
owned by him. As a result of the Transaction, the Buyers will control MMA,
having acquired all of the outstanding general partnership and limited
partnership interests in MMA for a total consideration of $17.5 million, minus
the book value of the outstanding shares of RTS stock not owned by MMA, and an
installment note unconditionally guaranteed by FBR in the amount of $9.7
million. MMA Buyer also will purchase the shares of RTS stock owned by Daniel
O'Connor, and other shareholders, as part of the Transaction.
The purchase price of the RTS stock owned by Daniel O'Connor is expected to
be approximately $1,261,000, based on the October 20, 1999 book value of all
shares not owned by MMA, subject to adjustment to reflect any changes occurring
in the ordinary course of business prior to the closing of the Transaction.
Further, Daniel O'Connor will receive approximately $11,038,000 for the sale of
his partnership interests in MMA. In addition, Martin O'Connor and John Cralle,
each of whom is a Vice President of the Fund, will receive compensation for the
sale of their limited partnership interests in MMA. By virtue of these payments,
each of Daniel O'Connor, Martin O'Connor, and John Cralle may be considered to
have a material interest in the approval of the New Advisory Contract.
FBR and the Buyers are seeking federal approval to acquire Rushmore National
Bank, Bethesda, Maryland ("RNB"). RNB will be the successor institution to RTS,
which will convert from a federal savings bank to a national banking association
immediately prior to the proposed acquisition pursuant to a conversion
application filed with the Office of the Comptroller of the Currency. Upon
conversion, RNB will engage in the same activities as RTS, but will no longer be
subject to various legal restraints imposed upon federal savings banks, such as
holding at least 65% of the institution's assets in mortgage-related
investments. Moreover, FBR anticipates that RNB's activities will be augmented
by offering personal trust services.
The closing date for the Transaction has not yet been determined, and there
is no assurance that the Transaction will be completed. Completion of the
Transaction is subject to a number of conditions including, among others, (i)
the receipt of certain regulatory approvals, (ii) approval of the New Advisory
Contract by shareholders of each Portfolio, and (iii) assets under management
and net management fees (excluding market-based changes) for all accounts
managed by MMA as of two days prior to closing must be at least 80% of the
corresponding amounts during the second half of 1999. Accordingly, if the New
Advisory Contract is not approved by shareholders, the Transaction will not be
consummated unless this condition is waived. If the Transaction is not completed
for any reason, the Current Advisory Contract will remain in effect.
POST-TRANSACTION STRUCTURE AND OPERATIONS. Upon completion of the
Transaction, MMA will be controlled by the Buyers, each of which is a Delaware
corporation and a wholly owned subsidiary of FBR, a Virginia corporation. The
address of FBR and each Buyer is Potomac Tower, 1001 Nineteenth Street North,
Arlington, Virginia 22209. FBR is a public company that is a holding company for
a number of
6
<PAGE>
subsidiaries engaged in the business of investment banking and asset management.
Subsidiaries of FBR manage approximately $800 million for numerous clients,
including individuals, banks and thrift institutions, investment companies,
pension and profit sharing plans and trusts, estates and charitable
organizations.
Subsidiaries of FBR include Friedman, Billings, Ramsey & Co., Inc. and FBR
Investment Services, Inc., separately registered broker-dealers (the "Affiliated
Brokers"). Once the Transaction is completed, absent an SEC exemption or other
relief, the Portfolios generally would be precluded from effecting principal
transactions with the Affiliated Brokers, and their ability to purchase
securities being underwritten by an Affiliated Broker or to utilize the
Affiliated Brokers for agency transactions would be subject to restrictions. FBR
and MMA do not believe that the restrictions on transactions with the Affiliated
Brokers described above will materially adversely affect MMA's ability,
post-closing, to provide services to the Portfolios, the Portfolios' ability to
take advantage of market opportunities, or the Portfolios' overall performance.
ANTICIPATED IMPACT OF THE TRANSACTION ON MANAGEMENT OF THE
PORTFOLIOS. Except as described below, the Transaction should have no immediate
impact on the management of the Portfolios or MMA's capacity to provide the
type, quality, or quantity of services that it currently provides, and the
Portfolios should continue to receive high quality services after the
Transaction. Information about the current management of the Fund is presented
in Appendix B. To help ensure continuity in the operations of MMA, Daniel
O'Connor, Martin O'Connor, and John Cralle have contractually agreed to provide
consulting and other services to MMA for significant periods following the
Transaction.
Historically, each of the Portfolios has been managed by a portfolio
management team under which no individual is primarily responsible for making
investment decisions on behalf of the Portfolio. Following the Transaction, it
is anticipated that David Ellison will join such portfolio management team for a
transition period and eventually will have primary portfolio management
responsibility for each Portfolio. Mr. Ellison currently is a Director of FBR
Fund Advisers, Inc., an asset management subsidiary of FBR, and serves as the
portfolio manager of the FBR Financial Services Fund and FBR Small Cap Financial
Fund, two series of The FBR Family of Funds, a registered investment company.
Prior to joining FBR Fund Advisers, Inc. in 1997, Mr. Ellison was portfolio
manager of the Fidelity Select Home Finance Fund from December 1985 until
January 1997.
SECTION 15(F) OF THE 1940 ACT. Section 15(f) provides that an investment
adviser to an investment company or any affiliated person thereof may receive
any amount or benefit in connection with a "change in control" of the investment
adviser as long as two conditions are satisfied. First, an "unfair burden" (as
defined in the 1940 Act) must not be imposed on investment company clients of
the adviser as a result of the transaction, or any express or implied terms,
conditions or understandings applicable to the transaction. The Board has been
advised by FBR and MMA that they are not aware of any circumstances arising from
the Transaction that might result in an unfair burden being imposed on the Fund
or any Portfolio. The second condition of Section 15(f) is that during the
three-year period after the transaction, at least 75% of the investment
company's board of directors must not be "interested persons" (as defined in the
1940 Act) of the investment adviser (or predecessor or successor adviser). The
Board of the Fund has determined to reconstitute the Board, subject to
shareholder approval, to comply with this requirement and MMA and MMA Buyer have
agreed to use commercially reasonable best efforts to ensure compliance with
Section 15(f) for the applicable periods following completion of the
Transaction.
THE CONTRACTS. THE CURRENT ADVISORY CONTRACT. MMA has served as investment
adviser to the Portfolios since each Portfolio's commencement of investment
operations. The Current Advisory Contract was last submitted for approval by
shareholders of the Portfolios at a meeting held on May 27, 1984, for the
purpose of implementing the Portfolios' current investment advisory
arrangements.
Under the terms of the Current Advisory Contract, MMA is responsible for
making investment decisions and placing orders for the purchase and sale of each
Portfolio's investments directly with the issuers or with brokers or dealers
selected by it in its discretion. MMA also furnishes to the Board, which
7
<PAGE>
has overall responsibility for the business and affairs of the Portfolios,
periodic reports on the investment performance of the Portfolios.
MMA is obligated to manage each Portfolio in accordance with the applicable
policies of the Portfolio. The investment advisory services of MMA to the
Portfolios are not exclusive under the terms of the Current Advisory Contract.
MMA is free to, and does, render investment advisory services to others.
Information about MMA's other investment company clients is presented in
Appendix C.
Consistent with the requirements of the 1940 Act, the Current Advisory
Contract provides that MMA generally is not liable to the Portfolios for any
mistake in judgment, or otherwise, except by reason of willful misfeasance, bad
faith or gross negligence in the performance of MMA's duties or by reason of its
reckless disregard of its obligations under the Current Advisory Contract.
The Current Advisory Contract may be terminated by a Portfolio without
penalty upon 60 days' notice by the Board or by a vote of the holders of a
majority of the Portfolio's outstanding voting securities, or upon 60 days'
notice by MMA. As noted above, the Current Advisory Contract terminates
automatically in the event of its "assignment" (as defined in the 1940 Act).
For its services, MMA receives an investment advisory 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 year ended December 31, 1999, the Portfolios
paid the following investment advisory fees to MMA: Money Market Portfolio
- -$91,951; Maryland Portfolio - $284,560; and Virginia Portfolio - $206,583.
THE NEW ADVISORY CONTRACT. The New Advisory Contract is substantially
identical to the Current Advisory Contract, except for the absence of a
provision in the Current Advisory Contract whereby MMA undertakes to reimburse
expenses of a Portfolio, exclusive of taxes, brokerage, interest and
extraordinary legal expenses, if the Portfolio's aggregate expenses in any
fiscal year exceed 1.00% of the average market value of the Portfolio's net
assets. However, this expense reimbursement obligation will be set forth in a
separate agreement between MMA and the Fund, which shall continue until the
first anniversary of the New Advisory Contract, and shall thereafter
automatically continue for one-year periods unless terminated in accordance with
its terms. During the fiscal year ended December 31, 1999, as well as all prior
fiscal years since the Fund's inception, MMA did not reimburse any Portfolio
expenses in accordance with the Current Advisory Contract.
As noted previously, MMA does not anticipate that the Transaction will cause
any reduction in the quality or types of services now provided to the Portfolios
or have any adverse effect on MMA's ability to fulfill its obligations to the
Portfolios. No change is anticipated in the investment philosophies and
practices currently followed by the Portfolios. There will be no change in
advisory fees for the Portfolios.
At the March 17, 2000 meeting of the Board, the New Advisory Contract was
approved unanimously by the Board, including all of the Directors who are not
parties to the New Advisory Contract or "interested persons" (as defined in the
1940 Act) of any such party (other than as Directors of the Fund). The New
Advisory Contract, as approved by the Board, is submitted for approval by the
shareholders of the Portfolios.
If the New Advisory Contract is approved by shareholders, it will take
effect immediately upon the closing of the Transaction. The New Advisory
Contract will remain in effect for two years from the date it takes effect, and,
unless earlier terminated, will continue from year to year with respect to each
Portfolio thereafter, provided that each such continuance is approved annually
with respect to the contract and Portfolio (i) by the Board or by the vote of a
majority of the outstanding voting securities of the particular Portfolio, and,
in either case, (ii) by a majority of the Directors who are not parties to the
New Advisory Contract or interested persons of any such party (other than as
Directors of the Fund).
PAYMENTS TO RTS/RNB. RTS provides administrative services to each
Portfolio, as well as transfer agency, shareholder servicing, custodial and
portfolio accounting services, for which it receives compensation from the
Portfolios at an annual rate of 0.25% of the average net assets of the Money
Market
8
<PAGE>
Portfolio and 0.30% of the average net assets of the Maryland and Virginia
Portfolios. For the fiscal year ended December 31, 1999, the Portfolios paid RTS
the following fees for such services: Money Market Portfolio - $45,976; Maryland
Portfolio - $136,589; and Virginia Portfolio - $99,192. RNB, the successor to
RTS, will continue to provide these services after the Transaction.
EVALUATION BY THE BOARD OF DIRECTORS. The Board, advised by counsel, has
determined that in approving the New Advisory Contract on behalf of the
Portfolios, the Fund can best assure itself that the services currently provided
to the Portfolios by MMA will continue without interruption after the
Transaction. The Board believes that, like the Current Advisory Contract, the
New Advisory Contract will enable the Portfolios to obtain high quality services
at a cost that is appropriate, reasonable, and in the best interests of each
Portfolio and its shareholders.
In determining whether or not it was appropriate to approve the New Advisory
Contract and to recommend approval to shareholders, the Board, including the
Directors who are not parties to the New Advisory Contract or interested persons
of such parties, considered various materials and representations provided by
MMA and FBR (including information concerning compensation and consulting
arrangements to be implemented in connection with the Transaction), information
provided by representatives of the Buyers, and was advised by legal counsel with
respect to these matters.
The Directors also considered the following information, among other things:
(1) Daniel O'Connor and others have agreed to provide consulting and other
services to MMA for significant periods following the Transaction, thus helping
to ensure continuity of management; (2) the compensation to be received by MMA
under the New Advisory Contract is the same as the compensation paid under the
Current Advisory Contract; (3) the fairness of the compensation payable to MMA
under the Current Advisory Contract; (4) the commonality of the terms and
provisions of the New Advisory Contract with the terms of the Current Advisory
Contract; (5) representations made by FBR concerning the potential impact of
affiliated brokerage relationships on MMA's ability to provide services to the
Portfolios, and on the Portfolios' ability to engage in portfolio transactions;
and (6) the financial condition of FBR and the expertise of its personnel and
the personnel of its affiliates, particularly those who will be involved in the
management of the Portfolios.
Based upon its review, the Board determined that, by approving the New
Advisory Contract, the Portfolios can best be assured that services from MMA
will be provided without interruption. The Board also determined that the New
Advisory Contract is in the best interests of each Portfolio and its
shareholders. Accordingly, after consideration of the above factors, and such
other factors and information it considered relevant, the Board unanimously
approved the New Advisory Contract and voted to recommend its approval by each
Portfolio's shareholders.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT AS
PROVIDED UNDER PROPOSAL II. UNMARKED PROXIES WILL BE SO VOTED.
9
<PAGE>
PROPOSAL III.
RATIFICATION OF INDEPENDENT AUDITORS
The Board, including a majority of the independent Directors, has selected
the firm of Deloitte & Touche LLP, to serve as the Fund's independent auditors
and to examine the Portfolios' financial statements for the current fiscal year.
The Fund knows of no direct or indirect financial interest of such firm in the
Fund or its Portfolios. Representatives of Deloitte & Touche LLP, if requested
by any shareholder, will be present at the Meeting, will be available to respond
to appropriate questions from shareholders, and will have the opportunity to
make a statement if they so desire.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE
LLP AS INDEPENDENT AUDITORS. UNMARKED PROXIES WILL BE SO VOTED.
OTHER BUSINESS
The Directors do not know of any matters to be presented at the Meeting
other than those set forth in this proxy statement. If other business should
properly come before the Meeting, proxies will be voted in accordance with the
judgment of the persons named in the accompanying proxy.
VOTING INFORMATION
PROXY SOLICITATION. The costs of the Meeting, including the solicitation of
proxies, will be paid by FBR. The principal solicitation will be by mail, but
proxies also may be solicited by telephone, telegraph, the Internet or personal
interview by officers or agents of the Fund. The Fund will forward to record
owners proxy materials for any beneficial owners that such record owners may
represent.
SHAREHOLDER VOTING. Shareholders of record at the close of business on
March 17, 2000 (the "Record Date") are entitled to notice of, and to vote at,
the Meeting. Each shareholder is entitled to one vote for each full share and an
appropriate fraction of a vote for each fractional share held.
As of the Record Date, the following number of shares of each Portfolio,
representing the corresponding number of votes, were outstanding:
<TABLE>
<CAPTION>
NUMBER OF SHARES
PORTFOLIO OUTSTANDING (VOTES)
- --------- -------------------
<S> <C>
Rushmore Tax-Free Money Market Portfolio.................... 17,196,998.190
Rushmore Maryland Tax-Free Portfolio........................ 3,744,761.062
Rushmore Virginia Tax-Free Portfolio........................ 2,664,448.640
</TABLE>
The persons owning of record or beneficially 5% or more of any Portfolio as
of the Record Date are set forth in Appendix D.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of each Portfolio is required to constitute a quorum at the
Meeting. Shares held by shareholders present in person or represented by proxy
at the Meeting will be counted both for the purposes of determining the presence
of a quorum and for calculating the votes cast on the issues before the Meeting.
Proxies that reflect abstentions or broker "non-votes" (that is, shares held
by brokers or nominees as to which (a) such persons have not received
instructions from the beneficial owner or other persons entitled to vote and
(b) the brokers or nominees do not have discretionary voting power on a
particular matter) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Pursuant to the
rules and policies of the New York Stock Exchange (the "Exchange"), members of
the Exchange may vote on the proposals to be considered at the Meeting without
instructions from the beneficial owners of the Portfolios' shares.
10
<PAGE>
In the event that a quorum is present at the Meeting but sufficient votes to
approve any proposal are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies or to obtain the vote required for approval of one or more proposals.
Any such adjournment will require the affirmative vote of a majority of those
shares represented at the Meeting in person or by proxy. If a quorum is present,
the persons named as proxies will vote those proxies which they are entitled to
vote FOR the proposal in favor of such an adjournment and will vote those
proxies required to be voted AGAINST the proposal against any such adjournment.
A shareholder vote may be taken prior to any adjournment of the Meeting on any
proposal for which there are sufficient votes for approval, even though the
Meeting is adjourned as to other proposals.
Timely, properly executed proxies will be voted as instructed by
shareholders. A shareholder may revoke his or her proxy at any time prior to its
exercise by written notice addressed to the Secretary of the Fund at 4922
Fairmont Avenue, Bethesda, Maryland 20814 or by voting in person at the Meeting.
However, attendance in person at the Meeting, by itself, will not revoke a
previously tendered proxy.
ELECTRONIC VOTING. Shareholders may give voting instructions via the
Internet (WWW.PROXYVOTE.COM) or by touchtone telephone (1-800-690-6903) by
following the instructions enclosed with the proxy card.
VOTING BY MAIL. In addition to voting in person at the Meeting, via the
Internet, or by touchtone telephone, shareholders also may sign and mail the
proxy card received with the proxy statement.
REQUIRED VOTE. Shareholders of all Portfolios vote together on Proposals I
and III, shareholders vote separately by Portfolio on Proposal II, and
shareholders will vote as necessary on any other proposal. Approval of Proposals
I and III requires the vote of shareholders owning of record a plurality of the
shares of the Fund voting at the Meeting, if a quorum is present. Approval of
Proposal II requires the vote of a "majority of the outstanding voting
securities" entitled to vote on the proposal, as defined in the 1940 Act, which
means the vote of 67% or more of the voting securities entitled to vote on the
proposal that are present at the Meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or the vote of more than
50% of the outstanding voting securities entitled to vote on the proposal,
whichever is less. Accordingly, assuming the presence of a quorum, abstentions
and non-votes have the effect of a negative vote on Proposal II, and will have
no effect on Proposals I and III.
SHAREHOLDER PROPOSALS. The Fund does not hold regular shareholders'
meetings. Shareholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent shareholders' meeting should send their written
proposals to the Secretary of the Fund at the address set forth on the cover of
this proxy statement.
Proposals must be received a reasonable time prior to the date of a meeting
of shareholders to be considered for inclusion in the proxy materials for a
meeting. Timely submission of a proposal does not, however, necessarily mean
that the proposal will be included. Persons named as proxies for any subsequent
shareholders' meeting will vote in their discretion with respect to proposals
submitted on an untimely basis.
TO ENSURE THE PRESENCE OF A QUORUM AT THE MEETING, PROMPT EXECUTION AND
RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
Stephenie E. Adams,
SECRETARY
Bethesda, Maryland
April 11, 2000
11
<PAGE>
APPENDIX A
INVESTMENT ADVISORY CONTRACT
BETWEEN
FUND FOR TAX-FREE INVESTORS, INC.
AND
MONEY MANAGEMENT ASSOCIATES, L.P.
This Contract (the "Contract"), dated as of the day of , 2000,
is entered into by and between Fund for Tax-Free Investors, Inc. (the
"Corporation") on behalf of its portfolios, Rushmore Tax-Free Money Market
Portfolio, Rushmore Maryland Tax-Free Portfolio and Rushmore Virginia Tax-Free
Portfolio (hereinafter individually sometimes referred to as the "Fund" and
collectively as the "Funds") and Money Management Associates, L. P. (hereinafter
sometimes referred to as the "Manager").
THAT in consideration of the mutual covenants hereinafter contained, it is
agreed as follows:
1. The Corporation hereby employs the Manager to manage the investment
and reinvestment of the assets of each Fund and to administer the affairs of
each Fund, subject to the control of the officers and Board of Directors of
the Corporation, 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 each Fund for:
(a) all expenses in connection with the management of the investment and
reinvestment of the assets of such Fund, except that each 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 Corporation who also serve as directors, officers or employees of the
Manager; and (c) all expenses not hereinafter specifically assumed by the
Corporation or a Fund where such expenses are incurred by the Manager or by
a Fund in connection with the administration of the affairs of the Fund.
Each 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 Corporation who do not also serve as
directors, officers of employees of the Manager; (h) maintaining appropriate
insurance coverage for the Corporation and its directors and officers; and
(i) its membership in trade associations.
At the request of the Corporation, the Manager shall make available to
each 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
A-1
<PAGE>
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 each Fund, the Manager is authorized on behalf of such
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 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
Funds shall pay the Manager an annual fee of one-half of one percent of the
average daily net asset value of the Rushmore Tax-Free Money Market
Portfolio, and five-eights of one percent of the average daily net asset
value of each of the Rushmore Maryland Tax-Free Portfolio and the Rushmore
Virginia Tax-Free Portfolio. The fees will be paid monthly.
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 Corporation 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 Corporation.
6. Subject to and in accordance with the governing instruments of the
Corporation and of the Manager respectively, directors, officers, agents and
stockholders of the Corporation 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 Corporation as directors, officers,
agents, stockholders or otherwise; the Manager (or any successor) is or may
be interested in the Corporation 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 two years from the data
hereof, and thereafter only so long as such continuance is approved at least
annually by votes of a majority of the Corporation'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 on 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 a 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 Corporation or by vote of a majority of the
outstanding voting securities of a 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 a 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.
A-2
<PAGE>
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 each 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 expressly provided or authorized,
have no authority to act for or represent any Fund in any way or otherwise
be deemed an agent of any Fund.
9. No provision of this Contract shall be deemed to protect the Manager
against any liability to a 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 provision hereof be
deemed to protect any director or officer of the Corporation against any
such liability to which he might otherwise be subject by reason 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:
By:
- ------------------------------ ------------------------------
MONEY MANAGEMENT ASSOCIATES, L.P.
WITNESS:
By:
- ------------------------------ ------------------------------
A-3
<PAGE>
APPENDIX B
OFFICERS OF THE FUND
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME, ADDRESS, AND AGE POSITION WITH FUND DURING LAST FIVE YEARS
- ---------------------- -------------------- ----------------------------------
<S> <C> <C>
Daniel L. O'Connor, 58 ........... Chairman, Treasurer, General Partner of MMA, registered
100 Lakeshore Drive and Director investment adviser of the Rushmore
Suite 1555 Funds, since 1975. Director, RTS.
North Palm Beach, FL 33408 Director or Trustee of four
Rushmore Funds. Trustee of the
Cappiello-Rushmore Trust.
Richard J. Garvey, 67 ............ President and Limited Partner of MMA and Vice
730 Southwest 67th Place Director President of Rushmore
Portland, OR 97225 Services, Inc. until 1998.
Director or Trustee of four
Rushmore Funds.
John R. Cralle, 59 ............... Vice President A limited partner of MMA since
4922 Fairmont Avenue 1979. Employee of Rushmore
Bethesda, MD 20814 Services, Inc. until 1999. Vice
President of three Rushmore Funds.
Martin M. O'Connor, 55 ........... Vice President A limited partner of MMA since
4922 Fairmont Avenue 1979. Employee of Rushmore
Bethesda, MD 20814 Services, Inc. until 1999. Vice
President of three Rushmore Funds.
Edward J. Karpowicz, CPA, 37 ..... Controller Vice President of RTS since 1997.
4922 Fairmont Avenue Controller of the Rushmore Funds
Bethesda, MD 20814 and the Cappiello-Rushmore Trust.
Treasurer, Bankers Finance
Investment Management Corp.,
August 1993 to June 1997.
Stephenie E. Adams, 30 ........... Secretary Secretary of three Rushmore Funds
4922 Fairmont Avenue and the Cappiello-Rushmore Trust.
Bethesda, MD 20814 Assistant Secretary of one
Rushmore Fund. Manager, Fund
Administration and Compliance,
RTS, from October 1999 to Present.
Manager, Fund Administration and
Marketing, Rushmore
Services, Inc., from July 1994 to
October 1999.
</TABLE>
B-1
<PAGE>
APPENDIX C
OTHER INVESTMENT COMPANY CLIENTS
MMA also serves as investment adviser to the following investment companies,
at the fee rates set forth below, which had the indicated net assets as of
December 31, 1999.
<TABLE>
<CAPTION>
NAME OF FUND ADVISORY FEE RATE APPROXIMATE ASSETS
- ------------ ------------------------------------- ------------------
<S> <C> <C>
American Gas Index Fund, Inc. ....... .40% of the average daily net assets $183,943,443
Fund for Government Investors ....... .50% of the first $500 million of net $492,627,189
assets, .45% of the next $250 million
of net assets, .40% of the next $250
million of net assets, and .35% of
the net assets over $1 billion
The Rushmore Fund, Inc. ............. .50% of the average daily net assets $11,105,541
</TABLE>
C-1
<PAGE>
APPENDIX D
As of the Record Date, the following persons owned of record or beneficially
5% or more of the shares of the following Portfolios:
<TABLE>
<CAPTION>
CONTROLLING PARTY OR
PORTFOLIO PRINCIPAL HOLDER OF SECURITIES AND ADDRESS SHARES OWNED % OWNED
- --------- ------------------------------------------ ------------ --------
<S> <C> <C> <C>
Tax-Free Money Market Portfolio ..... Eugene R. Elrod 1,091,664.24 6.3%(1)
4300 Hawthorne Street, N.W.
Washington, D.C. 20016-3571
Wendie L. Wachtel 869,537.82 5.1%(1)
1101 Fourteenth Street, N.W.
Washington, D.C. 20005-5061
Virginia Tax-Free Portfolio ......... Charles Schwab & Co, Inc. 265,721.16 10.0%(2)
101 California Street
San Francisco, CA 94101
Roger W. Jones 254,973.04 9.6%(1)
P.O. Box 248
Sperryville, VA 22740
Robert P. and Maryann Nirschl 175,750.17 6.6%(1)
4143 North River Street
McLean, VA 22101
Maryland Tax-Free Portfolio ......... Charles Schwab & Co., Inc. 189,322.98 5.1%(2)
101 California Street
San Francisco, CA 94101
</TABLE>
- ------------------------
(1) Beneficial owner.
(2) Record owner only.
D-1
<PAGE>
To vote by telephone:
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903.
3) Enter the 12-digit control number set forth on the proxy card and
follow the simple instructions.
To vote by Internet:
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com.
3) Enter the 12-digit control number set forth on the Proxy card and
follow the simple instructions.
- -------------------------------------------------------------------------------
PROXY
FUND FOR TAX-FREE INVESTORS, INC.
[NAME OF PORTFOLIO]
ANNUAL MEETING OF SHAREHOLDERS
JUNE 1, 2000
The undersigned hereby appoints Stephanie E. Adams and Edward J.
Karpowicz, and each of them, as his/her attorneys and proxies with full power
of substitution to vote and act with respect to all shares of the ___________
Portfolio held by the undersigned at the annual meeting of shareholders to be
held at 10:00 a.m. Eastern Time on June 1, 2000 at 4922 Fairmont Avenue,
Bethesda, Maryland 20814, or as adjourned from time to time (the "Meeting'),
and instructs them to vote as indicated on the matters referred to in the
Proxy Statement for the Meeting, receipt of which is hereby acknowledged,
with discretionary power to vote upon such other business as may properly
come before the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE FUND. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES AND
FOR EACH OF THE FOLLOWING PROPOSALS:
I. To elect the Board of Directors of the Fund.
Daniel L. O'Connor Jeffrey R. Ellis
Richard J. Garvey F. David Fowler
Louis T. Donatelli Patrick F. Noonan
Bruce C. Ellis Michael A. Willner
<PAGE>
[ ] FOR ALL [ ] WITHHOLD ALL
[ ] FOR ALL EXCEPT___________________________________________
(To withhold authority to vote, mark "For All Except" and write
the Nominee's number on the line below)
II. To approve a new investment advisory contract.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
III. To ratify the selection of independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. To transact such other business as may properly come before the
Meeting.
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND FOR ALL OF THE PROPOSALS.
<PAGE>
Receipt of the Notice of Meeting and Proxy Statement is hereby acknowledged.
Dated , 2000
______________________________________
_________________________________________________
Name of Shareholder(s) -- Please print or type
_________________________________________________
Signature(s) of Shareholder(s)
_________________________________________________
Signature(s) of Shareholder(s)
This proxy must be signed by the beneficial owner of Portfolio shares.
If signing as attorney, executor, guardian or in some representative capacity or
as an officer of a corporation, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
