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As Filed With The Securities And Exchange Commission On October
10, 1995
Registration No. 33-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. ( )
The Rushmore Fund, 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)
Mr. Richard J. Garvey
The Rushmore Fund, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
(Name and Address of Agent for Service of Process)
Copies to:
James Bernstein, Esq.
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D. C. 20007
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective.
It is proposed that this filing will become effective thirty days
after filing pursuant to paragraph (a) of Rule 488.
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The Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f) under
the Investment Company Act of 1940; accordingly, no fee is
payable herewith. The Registrant filed a Rule 24f-2 Notice for
its most recent fiscal year ended August 31, 1994 on October 31,
1994.
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THE RUSHMORE FUND, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages
and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letter to Shareholders
Notice of Special Meeting
PART A
Combined Prospectus/Proxy Statement
PART B
Statement of Additional Information
PART C
Other Information
Signatures
Exhibits
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THE RUSHMORE FUND, INC.
REGISTRATION STATEMENT ON FORM N-14
CROSS REFERENCE SHEET
N-14 Location in
Item No. Registration Statement
Part A: Information Required In
Prospectus/Proxy Statement
1. Beginning of Registration Cover Page; Cross and
Statement and Outside Front Reference Sheet
Cover Page of Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Synopsis and Risk Factors Synopsis; Principal
Risk Factors
4. Information about the Synopsis; The Proposed
Transaction Reorganization; Appendix A
5. Information about the Synopsis; Comparison
Registrant of Investment Objectives and
Policies; Principal Risk
Factors; Additional
Information About the
Acquiring Portfolio and the
Acquiring Portfolio Shares;
Miscellaneous; Current
Prospectus of The Rushmore
U.S. Government Long-Term
Securities Portfolio
6. Information about the Synopsis; Comparison
Company Being Acquired of Investment Objectives and
Policies; Principal Risk
Factors; Additional
Information About the Acquired
Portfolio and the Acquired
Portfolio Shares; Current
Prospectus of The Rushmore
U.S. Government Intermediate-
Term Securities Portfolio
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N-14 Location in
Item No. Registration Statement
7. Voting Information Introduction and Voting
Information; Synopsis
8. Interest of Certain Introduction and and and
Persons and Experts Voting Information; The
Proposed and Reorganization;
Miscellaneous
9. Additional Information Not Applicable
Required for Reoffering
by Persons Deemed to be
Underwriters
Part B: Information Required In
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information Current Statement of
about the Registrant Additional Information of The
Rushmore Fund, Inc.
13. Additional Information Current Statement of
about the Company Being Additional Information of The
Acquired Rushmore Fund, Inc.
14. Financial Statements Current Annual Report of The
Rushmore Fund, Inc.; Semi-
Annual Report of The Rushmore
Fund, Inc.; Pro Forma
Financial Statements
Part C: Other Information
15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
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November ___, 1995
Dear Shareholder:
Enclosed is a proxy statement and a detailed shareholder
letter describing the proposed combination of your Portfolio, the
Rushmore U.S. Government Intermediate-Term Securities Portfolio,
and the Rushmore U.S. Government Long-Term Securities Portfolio.
Your Portfolio and the Long-Term Securities Portfolio are similar
and are both series of The Rushmore Fund, Inc. These two
Portfolios have identical investment objectives and comparable
investment policies and can invest in most of the same types of
securities. This combination will provide the opportunity for
you to continue to pursue your investment goals and the potential
to benefit from the lower expenses paid by a larger fund. It is
being recommended by your Board of Directors.
Please review the attached materials carefully and return
your proxy as soon as possible.
/s/ Richard J. Garvey
Richard J. Garvey
President
The Rushmore Fund, Inc.
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THE RUSHMORE FUND, INC.
4922 Fairmont Avenue
Bethesda, Maryland 20814
November ___, 1995
To the Shareholders of
The Rushmore U.S. Government Intermediate-Term Securities
Portfolio
Dear Shareholder:
A special meeting of the shareholders of the Rushmore U.S.
Government Intermediate-Term Securities Portfolio, a series of
The Rushmore Fund, Inc. (the "Fund"), will be held at 10:00 A.M.,
Eastern Time, on Friday, December 22, 1995, at the offices of the
Fund, at 4922 Fairmont Avenue, Bethesda, Maryland 20814 (the
"Meeting"). At the Meeting, the shareholders of the
Intermediate-Term Securities Portfolio will vote on an Agreement
and Plan of Reorganization (the "Plan"). Under the Plan, the
Intermediate-Term Securities Portfolio will merge into the
Rushmore U.S. Government Long-Term Securities Portfolio, a
separate series of the Fund that has an investment objective that
is identical to that of the Intermediate-Term Securities
Portfolio and investment policies that are comparable to those of
the Intermediate-Term Securities Portfolio (the
"Reorganization"). Immediately following the Reorganization, the
Long-Term Securities Portfolio will be renamed "The Rushmore U.S.
Government Bond Portfolio."
If the Plan is approved by the shareholders and implemented by
the Fund, you will become a shareholder of the Long-Term
Securities Portfolio and will receive shares of the Long-Term
Securities Portfolio having an aggregate value equal to the
aggregate value of your investment in the Intermediate-Term
Securities Portfolio. No sales charge will be imposed as the
result of the Reorganization. The Reorganization will be
conditioned upon receipt of an opinion of counsel indicating that
the Reorganization will qualify as a tax-free reorganization for
Federal income tax purposes.
The Board of Directors of the Fund (the "Board") believes that
the proposed Reorganization should benefit shareholders by
facilitating a potentially larger mutual fund. A larger mutual
fund should enhance the ability of the adviser of the combined
mutual fund to effect portfolio transactions on more favorable
terms as well as promote more efficient operations and enable the
combined mutual fund to diversify investments to a greater
extent. The Board further anticipates that the Reorganization
should permit the reduction or elimination of certain duplicative
costs and expenses, presently incurred for services that are
separately performed for both the Intermediate-Term Securities
Portfolio and the Long-Term Securities Portfolio.
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The Board has carefully considered and has unanimously approved
the proposed Reorganization, as described in the accompanying
materials. The Board believes that the Reorganization is in the
best interests of the Rushmore U.S. Government Intermediate-Term
Securities Portfolio and its shareholders and, therefore,
recommends that you vote in favor of approving the Plan.
We strongly urge you to review, complete, and return your proxy
as soon as possible. Your vote is important no matter how many
shares you own. Voting your shares early will help to avoid
costly follow-up mail and telephone solicitation. After
reviewing the enclosed materials, please exercise your right to
vote today by completing, dating, and signing each proxy card you
receive and mailing the proxy in the self-addressed, postage-paid
envelope that has been enclosed for your convenience. It is very
important that you vote and that your voting instructions be
received no later than _________, December ___, 1995.
Please note that you may receive more than one proxy package if
you hold shares of the Intermediate-Term Securities Portfolio in
more than one account, and you should return separate proxy cards
for such accounts. If you have any questions, please call
Rushmore Trust and Savings, F.S.B., toll-free at (800) 343-3355.
Sincerely,
_________________________________
Richard J. Garvey
President
The Rushmore Fund, Inc.
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THE RUSHMORE FUND, INC.
4922 Fairmont Avenue
Bethesda, Maryland 20814
____________
The Rushmore U.S. Government Intermediate-Term Securities
Portfolio
____________
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
To be held on December 22, 1995
____________
TO THE SHAREHOLDERS:
Notice hereby is given that a special meeting of the
shareholders of The Rushmore U.S. Government Intermediate-Term
Securities Portfolio (the "Acquired Portfolio"), a series of The
Rushmore Fund, Inc. (the "Fund"), will be held at 10:00 A.M.,
Eastern Time, on Friday, December 22, 1995, at the offices of the
Fund, 4922 Fairmont Avenue, Bethesda, Maryland 20814 (the
"Meeting"), for the following purposes:
PROPOSAL 1.
To approve or disapprove an Agreement and Plan of
Reorganization among the Fund, the Acquired Portfolio,
and The Rushmore U.S. Government Long-Term Securities
Portfolio (the "Acquiring Portfolio"), another series
of the Fund (the "Plan"), and the transactions
contemplated thereby, pursuant to which Plan the
Acquired Portfolio would transfer all of its assets to
the Acquiring Portfolio in exchange for (i) shares of
common stock in the Acquiring Portfolio that would be
distributed to the shareholders of the Acquired
Portfolio and (ii) the assumption by the Acquiring
Portfolio of all the liabilities of the Acquired
Portfolio (the "Reorganization"). Immediately
following the Reorganization, the Acquiring Portfolio
will be renamed "The Rushmore U.S. Government Bond
Portfolio."
PROPOSAL 2.
To transact such other business as properly may come
before the Meeting or any adjournment(s) thereof.
The transactions contemplated by the Plan, and related
matters, are described in the attached Combined Prospectus/Proxy
Statement. A copy of the form of the Plan is attached as Exhibit
A thereto.
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You are entitled to vote at the Meeting, and any
adjournment(s) thereof, if you owned shares of the Acquired
Portfolio at the close of business on October 25, 1995. If you
attend the Meeting, you may vote your shares in person. If you
do not expect to attend the meeting, please complete, date, sign,
and return the enclosed proxy card in the enclosed self-
addressed, postage-paid return envelope.
By Order of the Board of Directors
__________________________________
Stephenie E. Dickerson
Secretary
The Rushmore Fund, Inc.
November ___, 1995
4922 Fairmont Avenue
Bethesda, Maryland 20814
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed
proxy card, then please date and sign the card and return the
proxy card in the envelope provided. If you sign, date, and
return the proxy card but give no voting instructions, your
shares will be voted "FOR" each applicable proposal noticed
above. In order to avoid the additional expense and delay of
further solicitation, we ask your cooperation in mailing in your
proxy card promptly so that a quorum may be ensured. Unless
proxy cards submitted by corporations and partnerships are signed
by the appropriate persons as indicated in the voting
instructions on the proxy card, such proxy cards cannot be voted.
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PART A
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THE RUSHMORE FUND, INC.
____________
The Rushmore U.S. Government
Intermediate-Term Securities Portfolio
____________
4922 Fairmont Avenue
Bethesda, Maryland 20814
(800) 343-3355
COMBINED PROSPECTUS/PROXY STATEMENT
This combined prospectus/proxy statement is being furnished in
connection with the solicitation of proxies by the Board of
Directors of The Rushmore Fund, Inc. (the "Fund"), for use at a
special meeting of shareholders ("Shareholders") of The Rushmore
U.S. Government Intermediate-Term Securities Portfolio (the
"Acquired Portfolio"), to be held at 10:00 A.M., Eastern Time, on
Friday, December 22, 1995, at the offices of the Fund, 4922
Fairmont Avenue, Bethesda, Maryland 20814, and at any
adjournment(s) thereof (the "Meeting"). The Fund is a
diversified, open-end management investment company incorporated
in the State of Maryland with four separate classes of common
stock outstanding, with each such class representing an interest
in a separate series of the Fund. The Acquired Portfolio is one
of the four series of the Fund. Only Shareholders of the
Acquired Portfolio are being solicited in connection with the
Meeting.
The purpose of the Meeting is to consider the Agreement and Plan
of Reorganization (the "Plan"), which would effect the
reorganization of the Acquired Portfolio into The Rushmore U.S.
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Government Long-Term Securities Portfolio (the "Acquiring
Portfolio"), another series of the Fund, and the transactions
contemplated thereby, as described below (the "Reorganization").
The Plan has been unanimously approved by the Board of Directors
of the Fund (the "Board"). Pursuant to the Plan, all of the
assets of the Acquired Portfolio would be acquired by the
Acquiring Portfolio, which has investment policies comparable to
those of the Acquired Portfolio, in exchange for shares of common
stock in the Acquiring Portfolio ("Acquiring Portfolio Shares")
and the assumption by the Acquiring Portfolio of all the
liabilities of the Acquired Portfolio. Following such transfer
of assets from the Acquired Portfolio to the Acquiring Portfolio,
the Acquiring Portfolio Shares received by the Acquired Portfolio
then would be distributed pro rata to the shareholders of the
Acquired Portfolio. As a result of the proposed transactions,
each Shareholder of the Acquired Portfolio would receive a number
of full and fractional Acquiring Portfolio Shares having a total
net asset value equal, on the effective date of the
Reorganization, to the net asset value of the Shareholder's
shares of common stock in the Acquired Portfolio. Immediately
following the Reorganization, the Acquiring Portfolio will be
renamed "The Rushmore U.S. Government Bond Portfolio."
This combined prospectus/proxy statement, which should be
retained for future reference, sets forth concisely the
information about the Acquired Portfolio and the Acquiring
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Portfolio, the Fund, and the transactions contemplated by
proposed Reorganization, that an investor should know before
voting on the proposed Reorganization. A copy of the current
Prospectus of the Fund (for both the Acquired Portfolio and the
Acquiring Portfolio), dated December 21, 1994, is included with
this combined prospectus/proxy statement for each Shareholder of
the Acquired Portfolio and is incorporated by reference herein.
A Statement of Additional Information regarding the Fund and both
the Acquired Portfolio and the Acquiring Portfolio, dated
December 21, 1994, has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated by
reference herein. Copies of this document also may be obtained
without charge by contacting Rushmore Trust and Savings, F.S.B.
("RTS"), which provides all administrative services to both the
Acquired Portfolio and the Acquiring Portfolio, at 4922 Fairmont
Avenue, Bethesda, Maryland 20814, or by telephoning RTS toll-free
at (800) 343-3355.
A Statement of Additional Information, dated November ___, 1995,
relating to the proposed transactions described in this combined
prospectus/proxy statement, including historical financial
statements, has been filed with the Commission and is
incorporated by reference herein. Copies of this Statement of
Additional Information may be obtained without charge by
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contacting RTS, at 4922 Fairmont Avenue, Bethesda, Maryland
20814, or by telephoning RTS toll-free at (800) 343-3355.
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_______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
______________________
The date of this Combined Prospectus/Proxy Statement is November
___, 1995.
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COMBINED PROSPECTUS/PROXY STATEMENT
TABLE OF CONTENTS
Page
Introduction and Voting Information . . . . . . . . . . . . . . .
Special Meeting; Voting of Proxies; Adjournment . . . . . .
Proxy Solicitation . . . . . . . . . . . . . . . . . . . . .
Revocation of Proxies . . . . . . . . . . . . . . . . . . .
No Dissenters' Rights of Appraisal . . . . . . . . . . . . .
Additional Voting Information . . . . . . . . . . . . . . .
Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Proposed Reorganization . . . . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . .
Operations of the Fund and the Acquiring Portfolio Following
the Reorganization Management Fees, Administrative Fees, and
Other Operating Expenses . . . . . . . . . . . . . . . . . .
Purchases and Exchanges . . . . . . . . . . . . . . . . . .
Redemption Procedures and Fees . . . . . . . . . . . . . . .
Dividends and Distributions; Automatic Reinvestment . . . .
Federal Tax Consequences of the Proposed Reorganization . .
Costs and Expenses of the Reorganization . . . . . . . . . .
Continuation of Shareholder Accounts; Share Certificates . .
Form of Organization of the Fund . . . . . . . . . . . . . .
Comparison of Investment Objectives and Policies . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . .
Investment Restrictions and Limitations . . . . . . . . . .
Principal Risk Factors . . . . . . . . . . . . . . . . . . . . .
The Proposed Reorganization . . . . . . . . . . . . . . . . . . .
Agreement and Plan of Reorganization . . . . . . . . . . . .
Reasons For the Proposed Reorganization . . . . . . . . . .
Description of Securities To Be Issued . . . . . . . . . . .
Federal Income Tax Consequences . . . . . . . . . . . . . .
Pro Forma Capitalization and Ratios . . . . . . . . . . . .
Cessation of Existence . . . . . . . . . . . . . . . . . . .
Required Vote and Board Recommendation With
Respect to the Reorganization Plan . . . . . . . . . . . .
Additional Information About the Acquiring Portfolio and the
Acquiring Portfolio Shares . . . . . . . . . . . . . . . . . . .
Additional Information About the Acquired Portfolio and the
Acquired Portfolio Shares . . . . . . . . . . . . . . . . . . . .
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Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . .
Available Information . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Experts . . . . . . . . . . . . . .
Other Business . . . . . . . . . . . . . . . . . . . . . . . . .
Proxy for a Special Meeting of Shareholders . . . . . . . . . . .
Appendix A: Form of Agreement and Plan of Reorganization
Appendix B: Form of Investment Management Agreement Between
The Rushmore Fund, Inc. and Money Management
Associates . . . . . . . . . . . . . . . . . . . .
Appendix C: Current Prospectus of The Rushmore U.S. Government
Intermediate-Term Securities Portfolio and The
Rushmore U.S. Government Long-Term Securities
Portfolio, Dated December 21, 1994 . . . . . . . .
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THE RUSHMORE FUND, INC.
____________
The Rushmore U.S. Government
Intermediate-Term Securities Portfolio
_______________
COMBINED PROSPECTUS/PROXY STATEMENT
Special Meeting of Shareholders
to be held on
December 22, 1995
______________
INTRODUCTION AND VOTING INFORMATION
Special Meeting; Voting of Proxies; Adjournment
This combined prospectus/proxy statement is being furnished to
the Shareholders of The Rushmore U.S. Government Intermediate-
Term Securities Portfolio (the "Acquired Portfolio"), which is a
series of The Rushmore Fund, Inc. (the "Fund"), in connection
with the solicitation by the Board of proxies to be used at a
special meeting of the shareholders of the Acquired Portfolio
(the "Shareholders") to be held on Friday, December 22, 1995, at
the offices of the Fund, 4922 Fairmont Avenue, Bethesda, Maryland
20814, and at any adjournment(s) thereof (the "Meeting"). The
purpose of the Meeting is to vote on the proposed Reorganization
of the Acquired Portfolio into The Rushmore U.S. Government Long-
Term Securities Portfolio (the "Acquiring Portfolio"), which also
is a series of the Fund, pursuant to the terms and conditions of
the Plan, as described below in greater detail.
Shareholders of record of the Acquired Portfolio at the close of
business on October 25, 1995 (the "Record Date"), will be
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entitled to vote at the Meeting. Such holders of shares of
Common Stock, $.001 par value per share, in the Acquired
Portfolio ("Acquired Portfolio Shares") are entitled to one vote
for each Acquired Portfolio Share held and to fractional votes
for fractional Acquired Portfolio Shares held. A quorum must be
present for the transaction of business at the Meeting. The
holders of record of a majority of the Acquired Portfolio Shares
outstanding at the close of business on that Record Date present
in person or represented by proxy will constitute a quorum for
the Meeting of the Shareholders. A quorum being present, the
approval of the Reorganization at the Meeting by the Shareholders
requires the affirmative vote of a majority of all the
outstanding voting shares of the Acquired Portfolio.
If, for the Acquired Portfolio, either (i) a quorum is not
present at the Meeting or (ii) a quorum is present but sufficient
votes in favor of a matter proposed at the Meeting (a
"Proposal"), as set forth in the Notice of this Meeting, are not
received by ________, December ___, 1995, then the persons named
as attorneys and proxies in the enclosed proxy ("Proxies") may
propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the
affirmative vote of at least a majority of the Acquired Portfolio
Shares represented, in person or by proxy, at the session of the
Meeting to be adjourned. The persons named as Proxies will vote
those proxies that such persons are required to vote FOR such
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Proposal in favor of such an adjournment and will vote those
proxies required to be voted AGAINST such Proposal against such
an adjournment. A Shareholder vote may be taken on a Proposal in
this combined prospectus/proxy statement prior to any such
adjournment if sufficient votes have been received and it is
otherwise appropriate.
The individuals named as Proxies on the enclosed proxy card will
vote in accordance with your direction, as indicated thereon, if
your proxy card is received and is properly executed. If you
properly execute your proxy and give no voting instructions with
respect to a Proposal, your shares will be voted in favor of the
Proposal. The duly-appointed Proxies, in their discretion, may
vote upon such other matters as may properly come before the
Meeting. The Board is not aware of any other matters to come
before the Meeting.
Since the Proposal to approve the Plan, or any other Proposal,
requires the affirmative vote of a majority of the outstanding
Acquired Portfolio Shares, an abstention from voting on the Plan,
or any other Proposal, effectively is a vote against the Plan, or
any such other Proposal. If a broker returns a "non-vote" proxy,
indicating a lack of authority to vote on the Plan, or any other
Proposal, then the Acquired Portfolio Shares covered by such
broker non-vote shall be deemed present at the Meeting for the
purposes of determining a quorum, but shall not be deemed to be
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represented at the Meeting for the purposes of calculating the
number of Acquired Portfolio Shares present in person or
represented by proxy at the Meeting with respect to the Plan or
any other Proposal.
Proxy Solicitation
Proxies will be solicited by mail and, if necessary to obtain the
requisite representation of Shareholders, the Fund also may
solicit proxies by telephone, telegraph, and/or personal
interview by representatives of the Fund, by employees of Money
Management Associates ("MMA"), the investment adviser to the
Fund, or their affiliates, and by representatives of any
independent proxy solicitation service retained for the Meeting.
MMA, whose principal location is No. 2201 East Tower, 4000 North
Ocean Drive, Singer Island, Florida 33404, will bear the costs of
the Meeting, including the costs such as the preparation and
mailing of the notice, the combined prospectus/proxy statement,
and the proxy, and the solicitation of proxies, including
reimbursement to persons who forward proxy materials to their
clients, and the expenses connected with the solicitation of
these proxies in person, by telephone, or by telegraph. MMA's
toll-free telephone number is (800) 343-3355. Banks, brokers,
and other persons holding Acquired Portfolio Shares registered in
their names or in the names of their nominees will be reimbursed
for their expenses incurred in sending proxy materials to and
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obtaining proxies from the beneficial owners of such Acquired
Portfolio Shares.
The vote of the shareholders of the Acquiring Portfolio is not
being solicited, since their approval or consent is not necessary
for the approval of the Reorganization.
Revocation of Proxies
You may revoke your proxy: (i) at any time prior to the proxy's
exercise by written notice to the Secretary or the Assistant
Secretary of the Fund, at 4922 Fairmont Avenue, Bethesda,
Maryland 20814, prior to the Meeting; (ii) by the subsequent
execution and return of another proxy prior to the Meeting; or
(iii) by being present and voting in person at the Meeting and
giving oral notice of revocation to the Chairman of the Meeting.
No Dissenters' Rights of Appraisal
The purpose of the Meeting is to vote on the proposed
Reorganization of the Acquired Portfolio into the Acquiring
Portfolio, as described below in greater detail. Each of the
Acquired Portfolio and the Acquiring Portfolio is a separate
series of the Fund, a Maryland corporation. The Articles of
Incorporation of the Fund, as amended (the "Rushmore Articles"),
do not entitle Shareholders to appraisal rights (i.e., to demand
the fair value of their shares) in the event of a reorganization
or merger. Consequently, the Shareholders will be bound by the
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terms of the Plan, if the Plan is approved at the Meeting. Any
Shareholder, however, may redeem his Acquired Portfolio Shares at
net asset value prior to the closing date of the proposed
Reorganization of the Acquired Portfolio.
Additional Voting Information
As of the Record Date, there were outstanding and entitled to be
voted ________ Acquired Portfolio Shares of the Acquired
Portfolio. As of the Record Date, Charles Schwab & Company, San
Francisco, California, held for the benefit of others _______% of
the Acquired Portfolio Shares, and _________________________,
______________________, _____________________, and
________________________, _______________,
______________________, held _______% and _______%, respectively,
of the Acquired Portfolio Shares. Directors and officers of the
Fund own in the aggregate less than 1% of the shares of the
Acquired Portfolio. To the knowledge of the Fund, no other
person then owned more than 5% of the outstanding shares of the
Acquired Portfolio.
As more fully described in this combined prospectus/proxy
statement, the Meeting has been called for the following
purposes:
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PROPOSAL 1.
To approve or disapprove an Agreement and Plan of
Reorganization among the Fund, the Acquired Portfolio,
and the Acquiring Portfolio (the "Plan"), and the
transactions contemplated thereby, pursuant to which
Plan the Acquired Portfolio would transfer all of its
assets to the Acquiring Portfolio in exchange for (i)
shares of common stock in the Acquiring Portfolio that
would be distributed to the shareholders of the
Acquired Portfolio and (ii) the assumption by the
Acquiring Portfolio of all the liabilities of the
Acquired Portfolio (the "Reorganization"). Immediately
following the Reorganization, the Acquiring Portfolio
will be renamed "The Rushmore U.S. Government Bond
Portfolio."
PROPOSAL 2.
To transact such other business as properly may come
before the Meeting or any adjournment(s) thereof.
As described below, a quorum being present, the approval by the
Acquired Portfolio of any Proposal considered at the Meeting
requires the affirmative vote of a majority of all the
outstanding voting shares of the Acquired Portfolio. In the
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event that the shareholders of the Acquired Portfolio do not
approve the Plan, and the Reorganization of the Acquired
Portfolio contemplated thereunder, the Board will consider
possible alternative arrangements and MMA will continue to render
services to the Acquired Portfolio.
The Board of Directors of the Fund has unanimously approved and
recommends that, with respect to the Reorganization of the
Acquired Portfolio into the Acquiring Portfolio, the Shareholders
of the Acquired Portfolio vote FOR Proposal One, the Proposed
Agreement and Plan of Reorganization for the Acquired Portfolio
and the transactions contemplated thereby, as described herein.
SYNOPSIS
The following is a summary of certain information contained
elsewhere in this combined prospectus/proxy statement, including
the prospectus of the Acquired Portfolio and the Acquiring
Portfolio and the Agreement and Plan of Reorganization.
Shareholders should read this entire combined prospectus/proxy
statement carefully.
The Proposed Reorganization
Shareholders of the Acquired Portfolio will be asked at the
Meeting to vote upon and approve the Plan, which provides for the
Reorganization of the Acquired Portfolio. A copy of the form of
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<PAGE>
the Plan is set forth in Appendix A to this combined
prospectus/proxy statement. Pursuant to the Plan, the Acquired
Portfolio, which is a series of the Fund, a diversified, open-end
management investment company incorporated under the laws of the
State of Maryland, would be reorganized into the Acquiring
Portfolio. The Acquiring Portfolio is also a series of the Fund.
The Plan sets forth the terms and conditions under which the
proposed transactions contemplated by the Reorganization may be
consummated. The Board, including the directors who are not
"interested persons" of the Fund (the "Independent Directors"),
as that term is defined at Section 2(a)(19) of the Investment
Company Act of 1940, as amended (the "1940 Act"), has unanimously
approved the Plan.
The consummation of the proposed transactions contemplated by the
Reorganization is subject to a number of conditions set forth in
the Plan, some of which conditions may be waived by the Board or
by an authorized officer of the Fund, as appropriate. See "The
Proposed Reorganization -- Agreement and Plan of Reorganization."
Among the significant conditions (which may not be waived) for
the Reorganization of the Acquired Portfolio are (i) the receipt
by the Fund of an opinion of counsel (or a revenue ruling of the
U.S. Internal Revenue Service) as to certain Federal income tax
aspects of the Reorganization (see "The Proposed Reorganization -
- - Federal Income Tax Consequences") and (ii) the approval of the
Plan at the Meeting by the affirmative vote of the holders of a
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<PAGE>
majority of all the outstanding Acquired Portfolio Shares of the
Acquired Portfolio. The Plan provides for the acquisition of all
the assets of the Acquired Portfolio by the Acquiring Portfolio
in exchange for Acquiring Portfolio Shares and the assumption by
that Acquiring Portfolio of all the liabilities of the Acquired
Portfolio. The Acquiring Portfolio Shares received by the
Acquired Portfolio then would be distributed pro rata to the
Shareholders of the Acquired Portfolio, and the outstanding
Acquired Portfolio Shares of the Acquired Portfolio would be
canceled and the Acquired Portfolio would cease to exist. The
Reorganization is anticipated to occur on December ___, 1995, or
such later date as the parties may agree (the "Closing Date").
As a result of the proposed transactions contemplated by the
Reorganization, each Shareholder would receive a number of full
and fractional shares of the Acquiring Portfolio having a total
net asset value equal in value to the net asset value of his or
her Acquired Portfolio Shares in the Acquired Portfolio as of the
Closing Date of the Reorganization. Immediately following the
Reorganization, the Acquiring Portfolio will be renamed "The
Rushmore U.S. Government Bond Portfolio."
For the reasons set forth below under "The Proposed
Reorganization -- Reasons for the Proposed Reorganization," the
Board, including all of the Independent Directors, has
unanimously concluded that the Reorganization would be in the
best interests of the Acquired Portfolio and its Shareholders and
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<PAGE>
that the interests of existing Shareholders will not be diluted
as a result of the transactions contemplated by the
Reorganization. The Board, therefore, has submitted the Plan
effecting the Reorganization for approval at the Meeting by the
Shareholders of the Acquired Portfolio, and recommends approval
of the Plan.
-18-
<PAGE>
Investment Objectives and Policies
The investment objective of both the Acquired Portfolio and the
Acquiring Portfolio is to provide investors with maximum current
income to the extent that such investment is consistent with
safety of principal. To achieve its investment objective, the
Acquired Portfolio invests principally in the current ten-year
U.S. Treasury note and in other U.S. Government securities with
maturities of ten years or less. To achieve its investment
objective, the Acquiring Portfolio invests principally in the
current thirty-year U.S. Treasury bond and in other U.S.
Government securities with maturities of ten years or more. Both
the Acquired Portfolio and the Acquiring Portfolio invest only in
securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, and in securities and
certificates evidencing ownership of future interest and
principal payments on the above securities (zero coupon bonds).
The most notable different between the investment policies of the
Acquired Portfolio and the investment policies of the Acquiring
Portfolio is that the maturities of the U.S. Government
securities in which the Acquired Portfolio invests generally are
shorter than the maturities of the U.S. Government securities in
which the Acquiring Portfolio invests. Both the Acquired
Portfolio and the Acquiring Portfolio seek to maximize current
income while, at the same time, to preserve principal.
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<PAGE>
The investment objective of each of the Acquired Portfolio and
the Acquiring Portfolio is a fundamental policy which may not be
changed without the approval of a vote of at least a "majority"
of the outstanding shares (as that term is defined at Section
2(a)(42) of the 1940 Act) of the Acquired Portfolio or the
Acquiring Portfolio, respectively. All other investment policies
of the Acquired Portfolio and the Acquiring Portfolio that are
not specified as fundamental are not fundamental policies and may
be changed by the Board without shareholder approval.
The market value of U.S. Government securities will fluctuate due
to the movement of interest rates, and is inversely related to
the such movement. When interest rates rise, therefore, one can
expect that the market value of the U.S. Government securities
held by either the Acquired Portfolio or the Acquiring Portfolio
will decline, and, conversely, when interest rates fall, one can
expect the market value of the U.S. Government securities held by
either the Acquired Portfolio or the Acquiring Portfolio to
increase. U.S. Government securities with longer maturities are
more sensitive to interest rate movements than are U.S.
Government securities with shorter maturities. In this respect,
the net asset value of both the Acquired Portfolio and the
Acquiring Portfolio will fluctuate as interest rates change.
For further discussion of the differences in the investment
policies of the Acquiring Portfolio and the Acquired Portfolio,
-20-
<PAGE>
see "Comparison of Investment Objectives and Policies" in this
combined prospectus/proxy statement.
Operations of the Fund and the Acquiring Portfolio Following the
Reorganization
The Fund and the Acquiring Portfolio will continue to operate
substantially the same as each did prior to the Reorganization.
Following the Reorganization, the Board of Directors of the Fund
will be composed of the same members and will be subject to the
same laws and corporate organizational documents as before the
Reorganization, and, therefore, will have the identical
responsibilities, powers, and fiduciary duties after the
Reorganization as such Board had prior to the Reorganization.
Subject to the provisions of the Fund's Articles of
Incorporation, dated July 14, 1985 (the "Rushmore Articles"), the
business of the Fund and the Acquiring Portfolio is managed by
the Board, which has all powers necessary and appropriate to
carry out that business responsibility. The Board supervises the
business affairs and investments of the Acquiring Portfolio. The
Acquiring Portfolio receives investment advisory services from
MMA. Administrative services for the Fund are provided for by
MMA.
Management Fees, Administrative Fees, and Other Operating
Expenses
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<PAGE>
1. Management Fees. MMA currently acts as the investment
adviser to the Acquired Portfolio and the Acquiring Portfolio
pursuant to an investment management agreement between the Fund
and MMA (the "Rushmore Management Agreement"). Under the
Rushmore Management Agreement, MMA manages the investment and
reinvestment of the assets of both the Acquired Portfolio and the
Acquiring Portfolio and administers the affairs of the Fund,
subject to the control of the officers and directors of the Fund.
Pursuant to this Rushmore Management Agreement, the Acquired
Portfolio and the Acquiring Portfolio each pays MMA a management
fee at the identical annual rate of 0.50% of the aggregate
average daily net assets of the Acquired Portfolio and the
Acquiring Portfolio, respectively.
MMA complies with any applicable state regulations which may
require MMA to make reimbursements, respectively, to the Acquired
Portfolio or the Acquiring Portfolio in the event that the
Acquired Portfolio's or the Acquiring Portfolio's respective
aggregate operating expenses, including the management fee, but
generally excluding taxes, interest, brokerage commissions,
distribution fees, and extraordinary expenses, are in excess of
specific applicable limitations.
2. Administrative Fees and Other Operating Expenses. Under a
service agreement between the Fund and Rushmore Trust and
Savings, F.S.B. ("RTS") (the "Service Agreement"), RTS provides
-22-
<PAGE>
both the Acquired Portfolio and the Acquiring Portfolio with
general administrative, shareholder, dividend disbursement,
transfer agent, and registrar services and pays all fees and
ordinary operating expenses that are directly related to the
services that RTS provides to the Acquired Portfolio and the
Acquiring Portfolio. Except for extraordinary legal expenses or
interest expense and the Acquired Portfolio's and the Acquiring
Portfolio's pro rata share of the fees paid to the Independent
Directors by the Fund, there are no additional expenses to the
Acquired Portfolio and the Acquiring Portfolio. Under the
Service Agreement, the Acquired Portfolio and the Acquiring
Portfolio each pays RTS an administrative fee at an annual rate
of 0.30% of the aggregate average daily net asset value of the
Acquired Portfolio and the Acquiring Portfolio, respectively.
The following sets forth the fund operating expenses (as a
percentage of the average daily net assets) for the Acquired
Portfolio for the Fund's fiscal year ended August 31, 1995, and
the expected fund operating expenses (as a percentage of the
average daily net assets) for the Acquiring Portfolio into which
the Acquired Portfolio would merge under the Plan:
-23-
<PAGE>
<TABLE>
<CAPTION> Acquired Portfolio Acquiring Portfolio
<C> <C>
0.50% 0.50%
<S>
Management 0.30% 0.30%
Fees:
Other 0.80% 0.80%
Expenses:
Total
Portfolio
Operating
Expenses:
</TABLE>
As reflected above, the Acquiring Portfolio has total operating
expenses equal to those historically incurred by the Acquired
Portfolio. See "The Proposed Reorganization -- Reasons For the
Proposed Reorganization."
Purchases and Exchanges
Acquiring Portfolio Shares and Acquired Portfolio Shares both are
sold in a continuous offering and are offered to the public, and
may be purchased through securities dealers or directly from the
Fund at the net asset value next computed after the receipt of a
purchase order. No sales charge is imposed by the Fund on any
purchase of Acquired Portfolio Shares or Acquiring Portfolio
Shares; however, securities dealers may charge a processing fee
for orders transmitted by such dealers to the Fund.
The Fund is composed of four separate series investment
portfolios, including The Rushmore Money Market Portfolio, The
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<PAGE>
Rushmore U.S. Government Intermediate-Term Securities Portfolio,
The Rushmore U.S. Government Long-Term Securities Portfolio, and
The Rushmore Nova Portfolio (collectively, the "Rushmore
Portfolios") (though shares in The Rushmore Nova Portfolio
currently are not available or sold to the public). Shareholders
may exchange shares of any Rushmore Portfolio for shares of any
other Rushmore Portfolio (other than The Rushmore Nova
Portfolio). Shares of any Rushmore Portfolio also may be
exchanged for shares of the Fund for Government Investors, Inc.,
the Fund for Tax-Free Investors, Inc., the Cappiello-Rushmore
Trust, or the American Gas Index Fund, Inc., each an open-end,
management investment company (i.e., a mutual fund) incorporated
in the State of Maryland. All of these exchanges are based upon
each mutual fund's net asset value per share next computed
following receipt of a properly-executed exchange request,
without any sales charge. Exchanges of Rushmore Portfolio shares
may be made only between identically-registered accounts, and
this exchange privilege is available only in states where the
shares to be acquired may be legally sold. Upon the
effectiveness of the Reorganization, Shareholders of the
Acquiring Portfolio Shares will continue to be entitled to the
exchange privilege currently offered by the Fund. There are no
material differences between the exchange privilege which
Shareholders of the Acquired Portfolio currently have and the
exchange privilege which such Shareholders will have as
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<PAGE>
shareholders of the Acquiring Portfolios upon effectiveness of
the Reorganization.
The Acquiring Portfolio has reserved the right to reject or
refuse, at the Acquiring Portfolio's discretion, any order for
the purchase of its shares in whole or in part.
Redemption Procedures and Fees
Acquiring Portfolio Shares and Acquired Portfolio Shares both may
be redeemed at a redemption price equal to the net asset value of
the shares as next computed following the receipt of a request
for redemption in proper form. Payment of redemption proceeds
for redeemed Acquiring Portfolio Shares and for redeemed Acquired
Portfolio Shares ordinarily are made within seven days after
receipt of a redemption request in proper form and documentation.
Acquiring Portfolio Shares and Acquired Portfolio Shares may be
redeemed without charge.
Dividends and Distributions; Automatic Reinvestment
Both the Acquired Portfolio and the Acquiring Portfolio declare
dividends daily. Investors will receive dividends in additional
shares at the end of the month unless such persons elect in
writing to receive cash. Dividends paid in cash to those
investors so electing will be mailed on the second business day
of the following month. Statements of account showing dividends
paid will be sent at least quarterly.
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<PAGE>
Long-term capital gains, if any, will be distributed on an annual
basis while short-term capital gains, if any will be distributed
quarterly.
Federal Tax Consequences of the Proposed Reorganization
The Fund will receive, as a condition to the Reorganization, an
opinion of Jorden Burt Berenson & Johnson LLP, counsel to the
Fund, to the effect, for Federal income tax purposes, that the
proposed Reorganization will constitute a tax-free reorganization
within the meaning of Section 368(a)(1)(C) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, no
gain or loss generally will be recognized by the Fund, the
Acquiring Portfolio, or the Acquired Portfolio, or by their
respective shareholders (see "The Proposed Reorganization --
Federal Income Tax Consequences").
Costs and Expenses of the Reorganization
MMA will bear the costs of the Meeting. These costs and expenses
include the costs of the Meeting, such as the costs, expenses,
and professional fees incurred in the preparation and mailing of
the notice and this combined prospectus/proxy statement and the
proxy, and in the solicitation of proxies, which may include
reimbursement to broker-dealers and others who forward proxy
materials to their clients. See "Introduction and Voting
Information -- Proxy Solicitation."
-27-
<PAGE>
Continuation of Shareholder Accounts; Share Certificates
As a result of the proposed transactions contemplated by the
Reorganization of the Acquired Portfolio into the Acquiring
Portfolio, Shareholders would cease to be shareholders of the
Acquired Portfolio and would receive that number of full and
fractional Acquiring Portfolio Shares having an aggregate net
asset value equal to the aggregate net asset value of his or her
Acquired Portfolio Shares as of the close of business on the
Closing Date.
The Acquiring Portfolio will establish accounts on the Closing
Date for Shareholders which will contain the appropriate number
of Acquiring Portfolio Shares. Acceptance of Acquiring Portfolio
Shares by a Shareholder will be deemed to be authorization of the
Acquiring Portfolio and its agents to establish, with respect to
the Acquiring Portfolio, all of the account options, including
telephone redemptions, if any, and dividend and distribution
options, as have been established for the Shareholder's Acquired
Portfolio account. Shareholders who are receiving payments under
an Automatic Investment Plan, with respect to Acquired Portfolio
Shares, will retain the same rights and privileges as to
Acquiring Portfolio Shares under such an Automatic Investment
Plan after the Reorganization. Similarly, no further action will
be necessary in order to continue, with respect to Acquiring
Portfolio Shares, any retirement plan currently maintained by a
Shareholder with respect to Acquired Portfolio Shares.
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<PAGE>
As series of a Maryland corporation, the Acquiring Portfolio will
not issue certificates evidencing ownership of Acquiring
Portfolio Shares. Shareholders to whom Acquired Portfolio Share
certificates have been issued will be required to surrender their
certificates in order to receive or to redeem Acquiring Portfolio
Shares received as a result of the Reorganization.
No sales or other charges will be imposed in connection with the
issuance of Acquiring Portfolio Shares to the Shareholders
pursuant to the Reorganization.
Form of Organization of the Fund
The Fund was organized as a corporation under the laws of the
State of Maryland, pursuant to the Fund's Articles of
Incorporation, dated July 17, 1985, and as last amended on
October 29, 1991 (the "Rushmore Articles"). The operations of
the Fund, the Acquired Portfolio, and the Acquiring Portfolio are
governed by these Rushmore Articles, the Fund's By-Laws, and by
Maryland law, as applicable. The Fund, as well as its series
investment portfolios, are subject to the provisions of the 1940
Act, and the rules and regulations of the Commission thereunder.
The Fund is authorized to issue an unlimited number of shares of
common stock in one or more series investment portfolios or
funds. Currently, the Fund is composed of four separate
investment portfolios: The Rushmore Money Market Portfolio, The
Rushmore U.S. Government Intermediate-Term Securities Portfolio,
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<PAGE>
The Rushmore U.S. Government Long-Term Securities Portfolio, and
The Rushmore Nova Portfolio (though shares in The Rushmore Nova
Portfolio currently are not available or sold to the public).
See "The Proposed Reorganization -- Description of Securities To
Be Issued."
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
As discussed below, the investment objective and policies of the
Acquiring Portfolio and the Acquired Portfolio are similar,
except for certain differences as to particular investment
policies, which differences are outlined below.
Investment Objectives and Policies
General. The investment objective of both the Acquired Portfolio
and the Acquiring Portfolio is to provide investors with maximum
current income to the extent that such investment is consistent
with safety of principal. To achieve its investment objective,
the Acquired Portfolio invests principally in the current ten-
year U.S. Treasury note and in other U.S. Government securities
with maturities of ten years or less, whereas the Acquiring
Portfolio, to achieve its investment objective, invests
principally in the current thirty-year U.S. Treasury bond and in
other U.S. Government securities with maturities of ten years or
more. Both the Acquired Portfolio and the Acquiring Portfolio
invest only in securities issued or guaranteed by the U.S.
-30-
<PAGE>
Government, its agencies and instrumentalities, and in securities
and certificates evidencing ownership of future interest and
principal payments on the above securities (zero coupon bonds).
As noted above, the most notable different between the investment
policies of the Acquired Portfolio and the investment policies of
the Acquiring Portfolio is that the maturities of the U.S.
Government securities in which the Acquired Portfolio invests
generally are shorter than the maturities of the U.S. Government
securities in which the Acquiring Portfolio invests. Both the
Acquired Portfolio and the Acquiring Portfolio seek to maximize
current income while, at the same time, to preserve principal.
U.S. Government Securities. The Acquired Portfolio and Acquiring
Portfolio differ primarily in the maturities of the U.S.
Government securities in which the Acquired Portfolio and the
Acquiring Portfolio invest. Both the Acquired Portfolio and the
Acquiring Portfolio will invest only in securities issued or
guaranteed by the U.S. Government, its agencies and
instrumentalities, and in securities and certificates evidencing
ownership of future interest and principal payments on the above
securities (zero coupon bonds). Such U.S. Government agencies
and instrumentalities include organizations such as the
Government National Mortgage Association ("GNMA"), the Small
Business Administration ("SBA"), the Federal Home Loan Banks
("FHLBs"), the Federal Home Loan Mortgage Corporation, and the
Federal National Mortgage Association ("FNMA"). As described
-31-
<PAGE>
below, the Acquired Portfolio and the Acquiring Portfolio each
also may purchase U.S. Government securities under repurchase
agreements and lend portfolio securities held by the Acquired
Portfolio and the Acquiring Portfolio, respectively.
U.S. Government bonds typically pay coupon interest semi-annually
and repay the principal at maturity. GNMA certificates differ
from other U.S. Government securities in that monthly payments of
both principal and interest are made. GNMA certificates
represent an ownership in a pool of either Federal Housing
Administration (FHA) insured or Veterans Administration (VA)
guaranteed mortgages. These certificates have yield and maturity
characteristics corresponding to the underlying mortgages and a
certificate's term may be shortened by unscheduled or early
payments of principal on the underlying mortgages. The actual
yield of each certificate will be influenced by the prepayment
experience of the mortgage pool.
While U.S. Treasury securities and those Federal agency
securities issued by GNMA and SBA are backed by the full faith
and credit of the United States, other Federal agency securities,
such as the securities issued by the FHLBs and FNMA, are not
guaranteed by the U.S. Treasury, but rather are supported by the
ability of that agency to borrow from the U.S. Treasury or by the
credit of the agency itself.
-32-
<PAGE>
Zero-Coupon Bonds. Both the Acquired Portfolio and Acquiring
Portfolio may buy and sell zero coupon U.S. Treasury securities.
These securities are U.S. Treasury notes and bonds which have
been stripped of their unmatured interest coupons, the coupons
themselves, and receipts or certificates representing interests
in such stripped debt obligations and coupons. Interest on these
securities is not paid in cash during the term of these
securities, but is accrued and paid at maturity. These
securities are purchased at a discount from face value,
reflecting the current value of the deferred interest. The
discount on these securities is taxable even though there is no
cash return until maturity. Price volatility is greater than
normal interest-paying securities, and the value of the zero
coupon securities reacts more quickly to changes in interest
rates than do coupon bonds. Neither the Acquired Portfolio nor
the Acquiring Portfolio invests more than 10% of its assets in
the current value of zero coupon securities at any time.
Repurchase Agreements. In order to utilize cash reserves kept
for liquidity effectively, the Acquired Portfolio and the
Acquiring Portfolio each may invest in repurchase agreements
secured by securities issued or guaranteed by the U.S.
Government, and its agencies and instrumentalities, and in
securities and certificates evidencing ownership of future
interest and principal payments on such securities. A repurchase
agreement arises when a buyer purchases a security and
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<PAGE>
simultaneously agrees to sell the security back to the seller at
an agreed-upon future date, normally one day or a few days later;
the resale price is greater than the purchase price, reflecting
an agreed-upon interest rate. Each of the Acquired Portfolio and
the Acquiring Portfolio may enter into repurchase agreements only
with member banks of the Federal Reserve System or primary
dealers of U.S. Government securities. In the event of a default
or bankruptcy by the seller, the Acquired Portfolio and the
Acquiring Portfolio will liquidate those securities held under
repurchase agreements. Liquidation of these securities, however,
could involve costs or delays and, to the extent proceeds from
the sale of such securities were less than the agreed-upon
repurchase price, the Acquired Portfolio or the Acquiring
Portfolio, as the case may be, could suffer a loss.
Lending of Securities. Each of the Acquired Portfolio and the
Acquiring Portfolio may lend its portfolio securities to broker-
dealers registered as members with the National Association of
Securities Dealers, Inc. and to Federal Reserve member banks for
the purpose of earning additional income. Such loans will be
made pursuant to agreements requiring the broker-dealer or bank
fully and continuously to secure the loan by cash or other
securities in which the Acquired Portfolio or the Acquiring
Portfolio may invest equal to the market value of the securities
loan. The Acquired Portfolio and the Acquiring Portfolio receive
compensation for lending their securities in the form of fees.
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<PAGE>
The Acquired Portfolio and the Acquiring Portfolio will enter
into securities lending and repurchase agreement transactions
only with parties who meet credit-worthiness standards approved
by the Board. In the event of a default or bankruptcy by a
seller or borrower, the Acquired Portfolio and the Acquiring
Portfolio will promptly liquidate collateral. The exercise of
the Acquired Portfolio's or Acquiring Portfolio's right to
liquidate such collateral, however, could involve certain costs
or delays, and, to the extent that proceeds from any sale of
collateral on a default of the seller or borrower were less than
the seller's or borrower's obligation, the Acquired Portfolio or
the Acquiring Portfolio, as the case may be, could suffer a loss.
Borrowings. The Acquired Portfolio and the Acquiring Portfolio
each may borrow money only as a temporary measure to facilitate
redemptions. Such a borrowing may not exceed 30% of the Acquired
Portfolio's or the Acquiring Portfolio's total assets, taken at
current net asset value before any borrowing. Neither the
Acquired Portfolio nor the Acquiring Portfolio may purchase
securities if a borrowing by the Acquired Portfolio or the
Acquiring Portfolio, as the case may be, is outstanding.
Investment Restrictions and Limitations.
The respective investment restrictions and limitations of the
Acquired Portfolio and the Acquiring Portfolio (collectively, the
"Portfolios") are identical. Unless otherwise specified, the
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<PAGE>
investment restrictions and limitations are considered to be
"fundamental" policies, and, as such, may not be changed without
approval of the holders of a "majority" of the Acquired
Portfolio's or the Acquiring Portfolio's respective outstanding
voting shares. As defined at Section 2(a)(42) of the 1940 Act,
the term "majority" of the outstanding voting securities means
the vote of the lesser of: (i) 67% of the voting shares of the
Portfolio at a meeting where more than 50% of the outstanding
voting shares are present in person or represented by proxy; or
(ii) more than 50% of the outstanding voting shares of the
Portfolio.
PRINCIPAL RISK FACTORS
Because the investment objective and investment restrictions of
the Acquiring Portfolio are identical to those of the Acquired
Portfolio, and because the investment policies of the Acquiring
Portfolio and the Acquired Portfolio, other than with respect to
the maturities of the U.S. Government securities in which the
Acquiring Portfolio and the Acquired Portfolio each invests, also
are identical, the risks associated with the particular
investment policies and strategies that the Acquiring Portfolio
and the Acquired Portfolio are authorized to employ in seeking to
meet their investment objectives also are identical, except, as
described below, for the fluctuation due to interest rate
movements in the market value of certain of the securities in
which the Acquiring Portfolio and the Acquired Portfolio invest.
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<PAGE>
As described above, the Acquiring Portfolio invests principally
in the current thirty-year U.S. Treasury bond and in other U.S.
Government securities with maturities of ten years or more,
whereas the Acquired Portfolio invests principally in the current
ten-year U.S. Treasury note and in other U.S. Government
securities with maturities of ten years or less. The market
values of the investment securities of both the Acquiring
Portfolio and the Acquired Portfolio will vary inversely with
interest rate movements and, therefore, the per share value of
the Acquiring Portfolio and the Acquired Portfolio each also will
fluctuate as interest rates change. As interest rates fluctuate,
however, debt securities with longer maturities, such as GNMA
certificates and the longer-term securities in which the
Acquiring Portfolio may invest, generally experience greater
price movement compared to the shorter-term securities in which
the Acquired Portfolio may invest. Accordingly, investment in
the Acquiring Portfolio may involve a somewhat higher degree of
risk than investment in the Acquired Portfolio. Because of the
fluctuation of per share values, investment in either the
Acquired Portfolio or the Acquiring Portfolio (both before and
after the proposed Reorganization) may not be suitable for
investors with short-term investment objectives.
-37-
<PAGE>
THE PROPOSED REORGANIZATION
Agreement and Plan of Reorganization
The terms and conditions under which the proposed transactions,
as contemplated by the Reorganization, may be consummated are set
forth in the Plan. Significant provisions of the Plan are
summarized immediately below. This summary, however, is
qualified in its entirety by reference to the Plan, a form of
which is attached to this combined prospectus/proxy statement as
Appendix A.
The Plan contemplates (i) the Acquiring Portfolio, on the closing
date of the Reorganization, acquiring all of the assets of the
Acquired Portfolio in exchange for Acquiring Portfolio Shares and
the assumption by the Acquiring Portfolio of all the liabilities
of the Acquired Portfolio and (ii) the constructive distribution
of Acquiring Portfolio Shares to the Shareholders of the Acquired
Portfolio in exchange for the Acquired Portfolio Shares of such
Shareholders, all as provided for by the Plan. Immediately
following the Reorganization, the Acquiring Portfolio will be
renamed "The Rushmore U.S. Government Bond Portfolio."
The assets of the Acquired Portfolio to be acquired by the
Acquiring Portfolio include all property, including, without
limitation, all cash, securities, commodities and futures
interests, and dividends or interest receivables which are owned
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<PAGE>
by the Acquired Portfolio and any deferred or prepaid expenses
shown as an asset on the books of the Acquired Portfolio on the
closing date of the Reorganization. The Acquiring Portfolio will
assume from the Acquired Portfolio all liabilities, expenses,
costs, charges, and reserves reflected on an unaudited statement
of assets and liabilities of the Acquired Portfolio. The
Acquiring Portfolio also will deliver Acquiring Portfolio Shares
to the Acquired Portfolio, which Acquiring Portfolio Shares the
Acquired Portfolio then shall distribute to the Shareholders of
the Acquired Portfolio in exchange for such Shareholders'
Acquired Portfolio Shares. The exchange of the Acquired
Portfolio's assets for the Acquiring Portfolio Shares is
anticipated to occur on December ___, 1995, or such later date as
the parties may agree (the "Closing Date").
The value of the Acquired Portfolio's assets to be acquired by,
and the value of the Acquired Portfolio's liabilities to be
assumed by, the Acquiring Portfolio and the net asset value of a
share of the Acquiring Portfolio will be determined as of
immediately after the close of regular trading on the New York
Stock Exchange (the "NYSE") at 4:00 P.M., Eastern Time, on the
Closing Date, using the valuation procedures set forth in the
Acquiring Portfolio's then-current Prospectus and Statement of
Additional Information.
-39-
<PAGE>
Upon the Closing Date, the Acquired Portfolio will distribute pro
rata to its Shareholders of record the Acquiring Portfolio Shares
received by the Acquired Portfolio in exchange for such
Shareholders' interests in the Acquired Portfolio, as evidenced
by such Shareholders' Acquired Portfolio Shares. This
distribution will be accomplished by opening accounts on the
books of the Acquiring Portfolio in the name of each Shareholder
of record in the Acquired Portfolio and by crediting thereon the
shares previously credited to the Acquired Portfolio account of
the Shareholder on those books, as described above (see "Synopsis
- -- Continuation of Shareholder Accounts; Share Certificates").
Each such Acquiring Portfolio shareholder account shall represent
the respective pro-rata number of the Acquiring Portfolio Shares
due such Shareholder.
Accordingly, every Shareholder will own Acquiring Portfolio
Shares immediately after the Reorganization, the value of which
Acquiring Portfolio Shares will be equal to the value of such
Shareholder's Acquired Portfolio Shares immediately prior to the
Reorganization. Moreover, because the Acquiring Portfolio Shares
will be issued at net asset value in exchange for the net assets
of the Acquired Portfolio that will equal the aggregate value of
those Acquiring Portfolio Shares, the net asset value per share
of each Acquiring Portfolio will be unchanged. Thus, the
Reorganization will not result in a dilution of any Shareholder
account.
-40-
<PAGE>
The consummation of the proposed transactions contemplated by the
Reorganization is subject to a number of conditions set forth in
the Plan, some of which conditions may be waived by the Board, or
by an authorized officer of the Fund, as appropriate. Among the
significant conditions (which may not be waived) for the
Reorganization of the Acquired Portfolio are: (i) the receipt by
the Fund of an opinion of counsel to the Fund (or a revenue
ruling of the U.S. Internal Revenue Service) as to certain
Federal income tax aspects of the Reorganization (see "The
Proposed Reorganization -- Federal Income Tax Consequences"); and
(ii) the approval of the Plan at the Meeting by the affirmative
vote of the holders of a majority of all the outstanding voting
shares of the Acquired Portfolio. The Plan may be terminated and
the Reorganization abandoned at any time, before or after
approval by the Shareholders, prior to the applicable Closing
Date, by mutual consent of the Acquired Portfolio and the
Acquiring Portfolio. In addition, the Plan may be amended in any
mutually-agreeable manner, except that no amendment may be made
to the Plan subsequent to the Meeting that would be materially
detrimental to the Shareholders.
Management contemplates that the Acquired Portfolio's assets at
the date of the transactions of the Reorganization will be
invested in a manner consistent with the investment objectives
and policies of both the Acquired Portfolio and the corresponding
Acquiring Portfolio. To the extent that any portfolio asset of
-41-
<PAGE>
the Acquired Portfolio is inconsistent with the investment
requirements of the Acquiring Portfolio on that date, the
Acquired Portfolio will bear the transaction costs associated
with replacement of that asset, including any adverse tax
consequences if losses are incurred in replacing such asset. The
Acquired Portfolio, however, intends to conform its securities
portfolio to meet the investment objective and policies of the
Acquiring Portfolio prior to the Closing Date.
Reasons For the Proposed Reorganization
As described below in greater detail, the Board believes the
Reorganization would benefit Shareholders by enhancing the
ability of the Fund's adviser to effect portfolio transactions on
more favorable terms and give the Fund's adviser greater
investment flexibility as well as promote more efficient
operations and enable greater diversification of investments. In
addition, the Board also believes that the investment policies of
the Acquiring Portfolio may be more advantageous to Shareholders
than the investment policies of the Acquired Portfolio, and
present the potential for greater capital growth, and that the
Reorganization would result in certain economies which would
increase the ability of the combined fund to continue to obtain
management and administrative services in connection with
Shareholders' assets at acceptable levels. The Board, including
all of the Independent Directors, has determined that the
interests of the Shareholders of the Acquired Portfolio will not
-42-
<PAGE>
be diluted as a result of the proposed transactions contemplated
by the Reorganization and that the proposed transactions
contemplated by the Reorganization are in the best interests of
the Shareholders of the Acquired Portfolio. The proposed
Reorganization was recommended to the Board by MMA, the
investment adviser to the Acquired Portfolio, and was considered
and unanimously approved by the Board at a meeting held on July
27, 1995.
The unanimous decision by the Board to recommend that the
Shareholders of the Acquired Portfolio vote to approve the
Reorganization of the Acquired Portfolio was based on a number of
factors, first and foremost that the Reorganization would be a
means of combining similar portfolios with identical investment
objectives and comparable investment policies and would permit
the Shareholders of the Acquired Portfolio to pursue
substantially the same investment goals in a potentially larger
fund. The Board believes that the Reorganization, if effected,
would enable the resulting larger fund, with its larger asset
base, to achieve enhanced investment performance and distribution
capability. These goals are anticipated to be achieved by the
Reorganization because the expected increase in the size of the
combined Acquiring Portfolio-Acquired Portfolio should
potentially increase the larger, resulting fund's operating
efficiencies, enhance the ability of the investment adviser to
this larger fund to effect portfolio transactions on more
-43-
<PAGE>
favorable terms, and give the investment adviser greater
investment flexibility and the ability to select a larger number
of portfolio securities for the larger, resulting fund, with the
attendant ability to spread investment risks among a larger
number of portfolio securities.
The Board further considered that, without the larger asset base
resulting from the proposed Reorganization, the Acquired
Portfolio might not be able to continue to retain investment
management and administrative services assuming the continuation
of the relative low asset level of the Acquired Portfolio. The
Board considered that the present asset base of the Acquired
Portfolio may not be large enough to generate sufficient
management fees to MMA in order for this arrangement to continue
to be economically feasible for MMA, and could result in the
cancellation of the Rushmore Management Agreement by MMA. The
Board anticipates that the larger asset base of the fund
resulting from the Reorganization would produce economies that
would enable services to continue to be provided to the Acquiring
Portfolio at acceptable compensation levels. These economies
should permit the reduction or elimination of certain duplicative
costs and expenses, presently incurred for services that are
separately performed for both the Acquired Portfolio and the
Acquiring Portfolio. As a general rule, economies can be
expected to be realized primarily with respect to fixed expenses,
such as costs of printing and fees for professional services.
-44-
<PAGE>
Expenses that are based on the value of assets or the number of
shareholder accounts, such as custody and transfer agent fees,
however, would be largely unaffected by the Reorganization.
Achievement of these goals, of course, cannot be assured.
The Board believes that the essential aspect of the
Reorganization is that the interest of a Shareholder in the
Acquiring Portfolio would be virtually identical to that
Shareholder's interest in the predecessor Acquired Portfolio; the
Board further believes that the Reorganization would have no
material impact on the economic interests of the Shareholders
and, as discussed above, would not result in the dilution of any
Shareholder account. A condition precedent to the Reorganization
will be the receipt by the Fund of an opinion of counsel to the
effect that the Reorganization will not result in the recognition
of any gain or loss for Federal income tax purposes either to the
Acquiring Portfolio or the Acquired Portfolio or to the
shareholders of either the Acquiring Portfolio or the Acquired
Portfolio.
The Board based its decision to recommend the proposed
Reorganization, and the transactions contemplated thereby, to the
Shareholders for the reasons set forth above as well as on a
number of other factors, including the following:
-45-
<PAGE>
1. the terms and conditions of the Reorganization and
the fact that the Reorganization would not result
in dilution of Shareholder interests;
2. the relative, comparative past growth in assets
and investment performance of the Acquired
Portfolio and the Acquiring Portfolio;
3. the future prospects of the Acquired Portfolio and
the Acquiring Portfolio if the Reorganization of
such Acquired Portfolio into such Acquiring
Portfolio is effected and if such Reorganization
is not effected;
4. the fact that the investment objectives, policies,
and restrictions of the Acquired Portfolio and the
Acquiring Portfolio are compatible;
5. service features available to shareholders in the
Acquired Portfolio and the Acquiring Portfolio;
6. the anticipated benefits to the Shareholders of
continuing to be part of the same mutual fund;
7. the tax-free nature and consequences of the
Reorganization; and
-46-
<PAGE>
8. alternatives to the Reorganization.
Description of Securities To Be Issued
General. The Acquiring Portfolio Shares to be issued pursuant to
the proposed Reorganization represent shares of common stock in
the Fund, which is a diversified, open-end management investment
company, organized as a corporation under the laws of the State
of Maryland, pursuant to the Rushmore Articles. The Rushmore
Articles authorize the Board to issue an unlimited number of
shares of common stock in one or more series. Currently, the
Fund has authorized four series: The Rushmore Money Market
Portfolio, The Rushmore U.S. Government Intermediate-Term
Securities Portfolio, The Rushmore U.S. Government Long-Term
Securities Portfolio, and The Rushmore Nova Portfolio (though
shares in The Rushmore Nova Portfolio currently are not available
or sold to the public). Other series in the Fund, however, may
be added in the future. Each Acquiring Portfolio Share
represents an equal proportionate interest with each other
Acquiring Portfolio Share of the Fund, and each such Acquiring
Portfolio Share is entitled to equal voting, dividend,
liquidation, and redemption rights. Acquiring Portfolio Shares
entitle their holders to one vote per full share held and to
fractional votes for fractional shares held. The Acquiring
Portfolio Shares do not have cumulative voting rights, preemptive
rights, or subscription rights, and are fully paid,
nonassessable, redeemable, and freely transferable.
-47-
<PAGE>
Currently, each shareholder of an Acquiring Portfolio is
permitted to inspect the records, accounts, and books of the Fund
for any legitimate business purpose.
Meetings. As a Maryland corporation, the Fund is not required to
hold an annual shareholders' meeting if the 1940 Act does not
require such a meeting. The By-Laws of the Fund provide that a
special meeting of Fund shareholders of any series of the Fund
may be called by the directors of the Fund ("Directors") and
shall be called by the Directors upon the written request of
shareholders owning at least 25% of all of the outstanding voting
shares entitled to be cast at such meeting. The Fund will hold
special shareholder meetings as required or deemed desirable by
the Board for such purposes as electing Directors, changing
fundamental policies, or approving an investment advisory or
shareholder services agreement. Pursuant to Maryland law, any
Director may be removed from office with or without cause at any
time by the affirmative vote of a majority of all the votes of
Fund shareholders entitled to vote for the election of directors.
If requested by shareholders of at least 10% of the outstanding
voting shares of the Fund, the Fund will call a shareholder
meeting for the purpose of voting upon the question of the
removal of a Director and will assist in communications with
other Fund shareholders as required by Section 16(c) of the 1940
Act.
-48-
<PAGE>
Shareholder Liability. Shareholders of a Maryland corporation,
such as the Fund, except to the extent otherwise provided in the
governing instrument of the corporation, are entitled to limited
personal liability. The Fund's governing instrument, the
Rushmore Articles, specifically disclaims shareholder liability
for acts or obligations of the Fund and provides that Fund
shareholders shall not be subject to any personal liability for
the acts or obligations of the Fund. The Rushmore Articles
further provide for indemnification, out of the property of the
series of the Fund with respect to which such shareholder's
shares are issued, for all losses and expenses of any shareholder
held personally liable solely by reason of his or her being or
having been a shareholder of such series and not because of his
or her acts or omissions or for some other reason. Thus, the
risk of a shareholder of the Fund incurring financial loss on
account of shareholder liability is considered remote since such
liability is limited to circumstances in which a disclaimer is
inoperative and the Fund would be unable to meet its obligations.
Liability of Directors. Under the Rushmore Articles, a Director
will be held personally liable only for the Director's own
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of the office of
a Director. Under the Rushmore Articles, Directors and officers
of the Fund ("Officers") will be indemnified for the expenses of
litigation against such Directors and Officers unless it is
-49-
<PAGE>
determined that the person did not act in good faith in the
reasonable belief that the person's action was in or not opposed
to the best interests of the Fund or if the person's conduct is
determined to constitute willful misfeasance, bad faith, gross
negligence, or reckless disregard of that person's duties. The
Fund also may advance money for these expenses provided that the
Director or the Officer undertakes to repay the Fund if that
person's conduct later is determined to preclude indemnification.
The foregoing is only a summary of certain characteristics of (i)
the shares of common stock of the Fund to be issued pursuant to
the proposed Reorganization, (ii) the operations of the Fund and
the Rushmore Articles and the By-Laws of the Fund, and (iii)
Maryland law. The foregoing is not a complete description of the
shares of common stock of the Fund nor of the documents or laws
cited. Shareholders should refer to the provisions of Maryland
law directly for a more thorough description.
Federal Income Tax Consequences
The Fund will receive, as a condition to the Reorganization, an
opinion from Jorden Burt Berenson & Johnson LLP, counsel to the
Fund, to the effect, for Federal income tax purposes and with
respect to the Reorganization, that:
1. the proposed Reorganization and the transactions
contemplated thereby, as described herein, will
-50-
<PAGE>
constitute a tax-free "reorganization" within the
meaning of Section 368(a)(1)(C) of the U.S.
Internal Revenue Code of 1986, as amended (the
"Code");
2. no gain or loss generally will be recognized to
the Acquired Portfolio upon the transfer of all of
the Acquired Portfolio's assets to the Acquiring
Portfolio in exchange solely for Acquiring
Portfolio Shares and the assumption by the
Acquiring Portfolio of all the liabilities of the
Acquired Portfolio and the subsequent distribution
of those Acquiring Portfolio Shares to the
Acquired Portfolio's Shareholders of record;
3. no gain or loss will be recognized to the
Acquiring Portfolio upon the receipt of those
Acquired Portfolio assets in exchange solely for
Acquiring Portfolio Shares and the assumption by
the Acquiring Portfolio of those Acquired
Portfolio liabilities;
4. the Acquiring Portfolio's basis for those Acquired
Portfolio assets transferred by the Acquired
Portfolio to the Acquiring Portfolio will be the
same as the basis thereof in the Acquired
-51-
<PAGE>
Portfolio's hands immediately before the
Reorganization, and the Acquiring Portfolio's
holding period for those assets will include the
Acquired Portfolio's holding period therefor;
5. each Shareholder of record of the Acquired
Portfolio will recognize no gain or loss upon the
constructive exchange of all of his or her
Acquired Portfolio Shares solely for Acquiring
Portfolio Shares pursuant to the Reorganization;
6. each Shareholder's basis for the Acquiring
Portfolio Shares to be received by the Shareholder
pursuant to the Reorganization will be the same as
the Shareholder's basis in the Acquired Portfolio
Shares to be constructively surrendered in
exchange therefor; and
7. each such Shareholder's holding period for those
Acquiring Portfolio Shares will include the period
during which the Acquired Portfolio Shares to be
constructively surrendered in exchange therefor
were held, provided the Acquired Portfolio Shares
were held as capital assets by that Shareholder on
the date of the Reorganization.
-52-
<PAGE>
A revenue ruling of the Internal Revenue Service is not expected
to be obtained by the Fund.
The Acquired Portfolio, as of August 31, 1995, had a capital loss
carryover of $979,097, and the Acquiring Portfolio, as of August
31, 1995, had a capital loss carryover of $624,343. Pursuant to
the Reorganization of the Acquired Portfolio into the Acquiring
Portfolio, the Acquiring Portfolio would retain its capital loss
carryover and would succeed to the capital loss carryover of the
Acquired Portfolio, subject, in both cases, to the limitations of
Sections 381, 382, 383, and 384 of the Code. The Acquired
Portfolio and the Acquiring Portfolio, as of the foregoing dates,
had no other loss carryover.
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF THE PRINCIPAL
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION AND SHOULD
NOT BE CONSIDERED TO BE TAX ADVICE. THERE CAN BE NO ASSURANCE
THAT THE INTERNAL REVENUE SERVICE WILL CONCUR ON ALL OR ANY OF
THE ISSUES DISCUSSED ABOVE. SHAREHOLDERS OF THE ACQUIRED
PORTFOLIO MAY WISH TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES WITH
RESPECT TO THE FOREGOING MATTERS AND ANY OTHER CONSIDERATIONS
WHICH MAY BE APPLICABLE TO THE SHAREHOLDERS OF THE ACQUIRED
PORTFOLIO.
-53-
<PAGE>
Pro Forma Capitalization and Ratios
The following tables show the capitalization of the Acquired
Portfolio and the Acquiring Portfolio separately, as of August
31, 1995, and combined in the aggregate on a pro forma basis
(unaudited), as of that date, giving effect to the
Reorganization:
<TABLE>
<CAPTION>
Acquired Acquiring Pro Forma
Portfolio Portfolio Combined
<S> <C> <C> <C>
Net Assets: $11,592,845 $16,390,706 $27,983,551
Net Asset Value
Per Share: $9.44 $9.89 $9.89
Shares
Outstanding: 1,227,678 1,657,846 2,830,024
</TABLE>
Cessation of Existence
If the Plan is approved by the Shareholders of the Acquired
Portfolio and the Reorganization is completed, the Acquired
Portfolio, as described above, thereafter will cease to exist.
See "The Proposed Reorganization -- Agreement and Plan of
Reorganization."
Required Vote and Board Recommendation With Respect to the
Reorganization Plan
As described above, the Board, including all of the Independent
Directors, has unanimously concluded, after due consideration of
-54-
<PAGE>
the direct and indirect costs of the transactions contemplated by
the proposed Reorganization and all other factors and information
deemed by the Board to be relevant, that the Reorganization would
be in the best interests of the Acquired Portfolio and its
Shareholders and that the interests of existing Shareholders of
the Acquired Portfolio will not be diluted as a result of the
transactions contemplated by the Reorganization. The Board,
therefore, has submitted the Plan for the Reorganization, and the
transactions contemplated thereby, as set forth in the Plan, for
approval by the Shareholders at the Meeting. As described above,
a quorum being present, the approval of the Plan by the
Shareholders of the Acquired Portfolio under Proposal One
requires the affirmative vote of a majority of all the
outstanding voting shares of the Acquired Portfolio. In the
event that the Shareholders of the Acquired Portfolio do not
approve the Plan, and the Reorganization of the Acquired
Portfolio contemplated thereunder, the Board will consider
possible alternative arrangements and MMA will continue to render
services to the Acquired Portfolio.
The Board of Directors of The Rushmore Fund, Inc. has unanimously
approved and recommends that, with respect to the Reorganization
of the Acquired Portfolio into the Acquiring Portfolio, the
Shareholders of the Acquired Portfolio vote FOR Proposal One, the
proposed Agreement and Plan of Reorganization for the Acquired
-55-
<PAGE>
Portfolio and the transactions contemplated thereby, as described
above.
ADDITIONAL INFORMATION ABOUT THE ACQUIRING PORTFOLIO
AND THE ACQUIRING PORTFOLIO SHARES
Additional information about the Acquiring Portfolio is included
in the current Prospectus of The Rushmore U.S. Government Long-
Term Securities Portfolio, dated December 21, 1994. A copy of
this prospectus has been filed with the Securities and Exchange
Commission (the "Commission") and is incorporated by reference
herein. A Shareholder will receive with this combined
prospectus/proxy statement a copy of the prospectus for The
Rushmore U.S. Government Long-Term Securities Portfolio. Further
information about the Acquiring Portfolio is included in the
Statement of Additional Information for The Rushmore Fund, Inc.,
dated December 21, 1994, which also has been filed with the
Commission and is incorporated by reference herein. Copies of
this Statement of Additional Information for the Acquiring
Portfolio may be obtained without charge by contacting Rushmore
Trust and Savings, F.S.B. ("RTS"), which provides all
administrative services to the Acquiring Portfolio, at 4922
Fairmont Avenue, Bethesda, Maryland 20814, or by telephoning RTS
toll-free at (800) 343-3355.
-56-
<PAGE>
ADDITIONAL INFORMATION ABOUT THE ACQUIRED PORTFOLIO
AND THE ACQUIRED PORTFOLIO SHARES
Additional information about the Acquired Portfolio is included
in the current Prospectus of The Rushmore U.S. Government
Intermediate-Term Securities Portfolio, dated December 21, 1994.
A copy of each of this prospectus has been filed with the
Commission and is incorporated by reference herein. A
Shareholder will receive with this combined prospectus/proxy
statement a copy of the prospectus for The Rushmore U.S.
Government Intermediate-Term Securities Portfolio. Further
information about the Acquired Portfolio is included in the
Statement of Additional Information for The Rushmore Fund, Inc.,
dated December 21, 1994, which also has been filed with the
Commission and is incorporated by reference herein. A copy of
this Statement of Additional Information for the Acquired
Portfolio may be obtained without charge by contacting RTS, which
provides all administrative services to the Acquired Portfolio,
at 4922 Fairmont Avenue, Bethesda, Maryland 20814, or by
telephoning RTS toll-free at (800) 343-3355.
MISCELLANEOUS
Available Information
The Fund is registered under the 1940 Act and is subject to the
informational requirements of the Securities Exchange Act of
1934, as amended, and the 1940 Act, and, in accordance therewith,
-57-
<PAGE>
files reports, proxy materials, and other information with the
Commission. Such reports, proxy materials, and other information
can be inspected at the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, D. C. 20549. Copies of such
material also can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities
and Exchange Commission, 450 Fifth Street, N.W., Washington, D.
C. 20549, at prescribed rates.
Legal Matters
Certain legal matters in connection with the issuance of the
Acquiring Portfolio Shares will be passed upon by Messrs. Jorden
Burt Berenson & Johnson LLP, 1025 Thomas Jefferson Street, N.W.,
Suite 400 East, Washington, D.C. 20007-0805 ("Counsel"). Counsel
also will render an opinion as to certain Federal income tax
consequences of the Reorganization.
Financial Statements and Experts
Both the audited financial statements of the Acquiring Portfolio
included in the Statement of Additional Information related to
this combined prospectus/proxy statement (the "SAI") and the
audited financial statements of the Acquired Portfolio included
in the SAI have been audited by Deloitte & Touche LLP,
independent accountants, for the periods indicated in the reports
of independent accountants thereon which appear in the SAI. Such
financial statements are incorporated herein by reference in
-58-
<PAGE>
reliance upon such reports of independent accountants given on
the authority of such firm as experts in accounting and auditing.
Copies of these financial statements, as included in the SAI, may
be obtained without charge by contacting RTS, at 4922 Fairmont
Avenue, Bethesda, Maryland 20814, or by telephoning RTS toll-free
at (800) 343-3355.
OTHER BUSINESS
The Board of Directors of The Rushmore Fund, Inc. knows of no
business to be brought before the Meeting other than the matters
set forth in this combined prospectus/proxy statement. Should
any other matter requiring a vote of Shareholders arise, however,
the Proxies will vote thereon according to their best judgment in
the interests of the Acquired Portfolio and the Shareholders of
the Acquired Portfolio.
By Order of the Board of Directors
Richard J. Garvey, President
The Rushmore Fund, Inc.
4922 Fairmont Avenue
Bethesda, Maryland
November ___, 1995
-59-
<PAGE>
P R O X Y P R O X Y
THE RUSHMORE U.S. GOVERNMENT
INTERMEDIATE-TERM SECURITIES PORTFOLIO
The Rushmore Fund, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
____________
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
December 22, 1995
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS of The
Rushmore Fund, Inc. (the "Fund") for use at a special meeting of
the shareholders of the Rushmore U.S. Government Intermediate-
Term Securities Portfolio, a series of the Fund, which meeting
will be held at 10:00 A.M., Eastern Time, on Friday, December 22,
1995, at the offices of the Fund, 4922 Fairmont Avenue, Bethesda,
Maryland 20814 (the "Meeting").
The undersigned shareholder of the Rushmore U.S. Government
Intermediate-Term Securities Portfolio, revoking any and all
previous proxies heretofore given for shares of the Rushmore U.S.
Government Intermediate-Term Securities Portfolio held by the
undersigned ("Shares"), does hereby appoint Daniel L. O'Connor,
Richard J. Garvey, and Stephenie E. Dickerson, and each and any
of them, with full power of substitution to each, to be the
attorneys and proxies of the undersigned (the "Proxies"), to
attend the Meeting of the shareholders of the Rushmore U.S.
Government Intermediate-Term Securities Portfolio, and to
represent and direct the voting interest represented by the
undersigned as of the record date for said Meeting for the
Proposals specified below.
This proxy, if properly executed, will be voted in the
manner as directed herein by the undersigned shareholder. Unless
otherwise specified below in the squares provided, the
undersigned's vote will be cast "FOR" each Proposal. If no
direction is made for any Proposals, this proxy will be voted
"FOR" any and all such Proposals. In their discretion, the
Proxies are authorized to transact and vote upon such other
matters and business as may come before the Meeting or any
adjournments thereof.
Proposal 1. To approve or disapprove an Agreement and Plan of
Reorganization among the Fund, the Rushmore U.S.
Government Intermediate-Term Securities Portfolio,
and the Rushmore U.S. Government Long-Term
Securities Portfolio, another series of the Fund
(the "Plan"), and the transactions contemplated
thereby, pursuant to which Plan the Intermediate-
Term Securities Portfolio would transfer all of
its assets to the Long-Term Securities Portfolio,
<PAGE>
in exchange for (i) shares of common stock in the
Long-Term Securities Portfolio that would be
distributed to the shareholders of the
Intermediate-Term Securities Portfolio and (ii)
the assumption by the Long-Term Securities
Portfolio of all the liabilities of the
Intermediate-Term Securities Portfolio (the
"Reorganization"). Immediately following the
Reorganization, the Long-Term Securities Portfolio
will be renamed "The Rushmore U.S. Government Bond
Portfolio."
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal 2. To transact such other business as properly may
come before the Meeting or any adjournment(s)
thereof.
To avoid the expense of adjourning the Meeting to a
subsequent date, please return this proxy in the enclosed self-
addressed, postage-paid envelope. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS OF THE RUSHMORE FUND, INC.,
WHICH RECOMMENDS A VOTE FOR THE PROPOSAL.
Dated: ________________, 1995
_______________________________
Signature of Shareholder
_______________________________
Signature of Shareholder
This proxy may be revoked by the shareholder(s) at any time
prior to the special meeting.
NOTE: Please sign exactly as your name appears hereon. If
shares are registered in more than one name, all registered
shareholders should sign this proxy; but if one shareholder
signs, this signature binds the other shareholder. When signing
as an attorney, executor, administrator, agent, trustee, or
guardian, or custodian for a minor, please give full title as
such. If a corporation, please sign in full corporate name by an
authorized person. If a partnership, please sign in partnership
name by an authorized person.
-61-
<PAGE>
APPENDIX A:
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
<PAGE>
APPENDIX A:
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
is made as of this ___ day of December, 1995, by and among The
Rushmore Fund, Inc. (the "Fund"), a Maryland corporation, The
Rushmore U.S. Government Long-Term Securities Portfolio (the
"Acquiring Portfolio"), a series of the Fund, and The Rushmore
U.S. Government Intermediate-Term Securities Portfolio (the
"Acquired Portfolio"), also a series of the Fund. The Fund, the
Acquiring Portfolio, and the Acquired Portfolio have their
respective principal places of business at 4922 Fairmont Avenue,
Bethesda, Maryland 20814.
This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code"),
with respect to the proposed reorganization of the Acquired
Portfolio, pursuant to which the Acquired Portfolio will become
part of the Acquiring Portfolio (the "Reorganization").
Specifically, this Agreement is intended to be and is adopted for
the purpose of providing for the Reorganization of the Acquired
Portfolio into the Acquiring Portfolio. The Reorganization will
consist of the transfer of all of the assets of the Acquired
Portfolio to the Acquiring Portfolio in exchange solely for (i)
shares of common stock in the Acquiring Portfolio (the "Acquiring
Portfolio Shares") and (ii) the assumption by the Acquiring
Portfolio of all the liabilities of the Acquired Portfolio, and
the distribution of the Acquiring Portfolio Shares to the
shareholders of the Acquired Portfolio, as provided herein, all
upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Acquired Portfolio and the Acquiring Portfolio
are series of an open-end, registered investment company of the
management type and the Acquired Portfolio owns securities which
generally are assets of the character in which such Acquiring
Portfolio is permitted to invest;
WHEREAS, the Board of Directors of the Fund has determined,
with respect to the Reorganization, that the exchange of all of
the assets of the Acquired Portfolio for Acquiring Portfolio
Shares and the assumption of all the liabilities of the Acquired
Portfolio by the Acquiring Portfolio is in the best interests of
the Acquired Portfolio and the Acquiring Portfolio and their
shareholders and that the interests of the existing shareholders
of the Acquired Portfolio and the Acquiring Portfolio would not
be diluted as a result of this transaction;
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WHEREAS, the purpose of the Reorganization is to combine the
assets of the Acquiring Portfolio with those of the Acquired
Portfolio in an attempt to achieve greater operating economies
and increased portfolio diversification.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties
hereto covenant and agree, with respect to the Reorganization, as
follows:
1. THE TRANSFER OF ASSETS OF THE ACQUIRED PORTFOLIO TO THE
ACQUIRING PORTFOLIO IN EXCHANGE FOR THE ACQUIRING PORTFOLIO
SHARES, AND THE ASSUMPTION OF ALL THE LIABILITIES OF THE
ACQUIRED PORTFOLIO
1.1 A closing shall take place as provided for in paragraph
3.1 ("Closing") and the provisions of paragraphs 1 through 8 of
this Agreement shall apply. At the Closing, subject to the terms
and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired
Portfolio agrees to transfer all of the Acquired Portfolio's
assets, as set forth in paragraph 1.2, to the Acquiring
Portfolio, and the Acquiring Portfolio agrees in exchange
therefor: (i) to deliver to the Acquired Portfolio the number of
Acquiring Portfolio Shares, including fractional Acquiring
Portfolio Shares, determined by dividing the value of the
Acquired Portfolio's net assets computed in the manner and as of
the time and date set forth in paragraph 2.1 by the net asset
value of one Acquiring Portfolio Share computed in the manner and
as of the time and date set forth in paragraph 2.2; and (ii) to
assume all the liabilities of the Acquired Portfolio, as set
forth in paragraph 1.3.
1.2 The assets of the Acquired Portfolio to be acquired by
the Acquiring Portfolio shall consist of all property, including,
without limitation, all cash, securities, commodities and futures
interests, and dividends or interest receivable which are owned
by the Acquired Portfolio and any deferred or prepaid expenses
shown as an asset on the books of the Acquired Portfolio on the
closing date provided in paragraph 3.1 (the "Closing Date").
1.3 The Acquired Portfolio will endeavor to discharge all
of its known liabilities and obligations prior to the Closing
Date. The Acquiring Portfolio shall assume all liabilities,
expenses, costs, charges, and reserves reflected on an unaudited
statement of assets and liabilities of the Acquired Portfolio
prepared by the administrator of the Acquiring Portfolio and the
Acquired Portfolio, as of the Valuation Date (as defined in
paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period.
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1.4 Immediately after the transfer of assets provided for
in paragraph 1.1, the Acquired Portfolio will distribute pro rata
to the Acquired Portfolio's shareholders of record, determined as
of immediately after the close of business on the Closing Date
(the "Acquired Portfolio Shareholders"), the Acquiring Portfolio
Shares received by the Acquired Portfolio pursuant to paragraph
1.1. Such distribution will be accomplished by the transfer of
the Acquiring Portfolio Shares then credited to the account of
the Acquired Portfolio on the books of the Acquiring Portfolio to
open accounts on the share records of the Acquiring Portfolio in
the names of the Acquired Portfolio Shareholders and representing
the respective pro rata number of the Acquiring Portfolio Shares
due such shareholders. All issued and outstanding shares of the
Acquired Portfolio will simultaneously be canceled on the books
of the Acquired Portfolio, although share certificates
representing interests in the Acquired Portfolio will represent a
number of Acquiring Portfolio Shares after the Closing Date as
determined in accordance with Section 2.3. The Acquiring
Portfolio shall not issue certificates representing the Acquiring
Portfolio Shares in connection with such exchange. Ownership of
Acquiring Portfolio Shares will be shown on the books of the
Acquiring Portfolio's transfer agent.
1.5 Immediately following the Reorganization, the Acquiring
Portfolio will be renamed "The Rushmore U.S. Government Bond
Portfolio."
2. VALUATION
2.1 The value of the Acquired Portfolio's assets to be
acquired by the Acquiring Portfolio hereunder shall be the value
of such assets computed as of immediately after the close of
business of the New York Stock Exchange (the "NYSE") at 4:00
P.M., Eastern Time, on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation
procedures set forth in the Fund's Articles of Incorporation and
the Acquired Portfolio's then-current prospectus or statement of
additional information.
2.2 The net asset value of an Acquiring Portfolio Share
shall be the net asset value per share computed as of immediately
after the close of business of the New York Stock Exchange on the
Valuation Date, using the valuation procedures set forth in the
Fund's Articles of Incorporation and the Acquiring Portfolio's
then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Portfolio Shares to be
issued (including fractional shares, if any) in exchange for the
Acquired Portfolio's assets shall be determined by dividing the
value of the net assets of the Acquired Portfolio determined
using the same valuation procedures referred to in paragraph 2.1
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by the net asset value of an Acquiring Portfolio Share determined
in accordance with paragraph 2.2.
2.4 All computations of value for the Fund, the Acquired
Portfolio, and the Acquiring Portfolio shall be made by Money
Management Associates ("MMA").
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December ___, 1995 or such
other date as the parties may agree to in writing. All acts
taking place at the Closing shall be deemed to take place
simultaneously as of immediately after the close of business on
the Closing Date unless otherwise agreed to by the parties. The
close of business on the Closing Date shall be as of 4:00 P.M.,
Eastern Time. The Closing shall be held at the offices of the
Fund, 4922 Fairmont Avenue, Bethesda, Maryland 20814, or at such
other time and/or place as the parties may agree.
3.2 Rushmore Trust and Savings, F.S.B., Bethesda, Maryland,
as custodian for the Acquired Portfolio (the "Custodian"), shall
deliver at the Closing a certificate of an authorized officer
stating that: (i) the Acquired Portfolio's portfolio securities,
cash, and any other assets shall have been delivered in proper
form to the Acquiring Portfolio within two business days prior to
or on the Closing Date; and (ii) all necessary taxes, including
all applicable Federal and state stock transfer stamps, if any,
shall have been paid, or provision for payment shall have been
made, in conjunction with the delivery of the Acquired
Portfolio's portfolio securities.
3.3 Rushmore Trust and Savings, F.S.B., Bethesda, Maryland,
as the transfer agent for the Fund (the "Transfer Agent"), on
behalf of the Acquiring Portfolio and the Acquired Portfolio,
shall deliver at the Closing a certificate of an authorized
officer stating that their records contain the names and
addresses of the Acquired Portfolio Shareholders and the number
and percentage ownership of outstanding shares owned by each such
shareholder immediately prior to the Closing. The Acquiring
Portfolio shall issue and deliver a confirmation evidencing the
Acquiring Portfolio Shares to be credited on the Closing Date to
the Secretary of the Acquired Portfolio or provide evidence
satisfactory to the Acquired Portfolio that such Acquiring
Portfolio Shares have been credited to the Acquired Portfolio's
account on the books of the Acquiring Portfolio. At the Closing,
each party shall deliver to the other such bills of sales,
checks, assignments, share certificates, if any, receipts, or
other documents as such other party or its counsel may reasonably
request.
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4. REPRESENTATIONS AND WARRANTIES
4.1 The Fund, on its own behalf and on behalf of the
Acquired Portfolio, represents and warrants to the Acquiring
Portfolio as follows:
(a) The Fund is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Maryland;
(b) The Fund is a registered investment company classified
as a management company of the open-end type, and its
registration with the Securities and Exchange Commission (the
"Commission"), as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the
registration of its shares, under the Securities Act of 1933, as
amended (the "1933 Act"), are in full force and effect;
(c) Neither the Fund nor the Acquired Portfolio is in, and
the execution, delivery, and performance of this Agreement will
not result in, a material violation of the Fund's Articles of
Incorporation or By-Laws or of any agreement, indenture,
instrument, contract, lease, or other undertaking to which the
Fund or the Acquired Portfolio is a party or by which either or
both of the Fund and the Acquired Portfolio are bound;
(d) Neither the Fund nor the Acquired Portfolio has any
material contracts or other commitments (other than this
Agreement) which will be terminated with liability to the Fund or
the Acquired Portfolio prior to the Closing Date;
(e) Except as otherwise disclosed in writing to and
accepted by the Fund, on behalf of the Acquiring Portfolio, no
material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending
or to their knowledge threatened against the Fund or the Acquired
Portfolio or any of their properties or assets which, if
adversely determined, would materially and adversely affect the
Fund's or the Acquired Portfolio's financial condition or the
conduct of either the Fund's or the Acquired Portfolio's
business. Neither the Fund nor the Acquired Portfolio knows of
any facts which might form the basis for the institution of such
proceedings and neither the Fund nor the Acquired Portfolio is a
party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body which materially and
adversely affects the business or the ability of the Fund or the
Acquired Portfolio to consummate the transactions herein
contemplated;
(f) The Statement of Assets and Liabilities of the Acquired
Portfolio at _________, 1995 has been audited by Deloitte &
Touche LLP, independent accountants, and is in accordance with
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generally accepted accounting principles consistently applied,
and such statement (a copy of which has been furnished to the
Fund, on behalf of the Acquiring Portfolio) fairly reflects the
financial condition of the Acquired Portfolio as of such date,
and there are no known contingent liabilities of the Acquired
Portfolio as of such date not disclosed therein;
(g) Since _________, 1995, there has not been any material
adverse change in the Acquired Portfolio's financial condition,
assets, liabilities, or business other than changes occurring in
the ordinary course of business, or any incurrence by the
Acquired Portfolio of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Fund, on behalf of the Acquiring
Portfolio. For the purposes of this subparagraph (g), a decline
in net asset value per share of the Acquired Portfolio, the
discharge of Acquired Portfolio liabilities, or the redemption of
Acquired Portfolio shares by Acquired Portfolio Shareholders
shall not constitute a material adverse change;
(h) At the Closing Date, all material Federal and other tax
returns and reports of the Fund and the Acquired Portfolio
required by law to have been filed by such date shall have been
filed and are or will be correct, and all Federal and other taxes
shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made
for the payment thereof, and to the best knowledge of the Fund
and the Acquired Portfolio no such return is currently under
audit and no assessment has been asserted with respect to such
returns;
(i) For each taxable year of its operation, the Acquired
Portfolio has met the requirements of Subchapter M of the Code
for qualification as a regulated investment company and has
elected to be treated as such;
(j) All issued and outstanding shares of the Acquired
Portfolio are, and at the Closing Date will be, duly and validly
issued and outstanding, fully paid, and non-assessable by the
Acquired Portfolio. All of the issued and outstanding shares of
the Acquired Portfolio will, at the time of closing, be held by
the persons and in the amount set forth in the records of the
Transfer Agent, on behalf of the Acquired Portfolio as provided
in paragraph 3.3. The Acquired Portfolio does not have
outstanding any options, warrants, or other rights to subscribe
for or to purchase any of the Acquired Portfolio shares, nor is
there outstanding any security convertible into any of the
Acquired Portfolio shares;
(k) At the Closing Date, the Acquired Portfolio will have
good and marketable title to the Acquired Portfolio's assets to
be transferred to the Acquiring Portfolio pursuant to paragraph
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1.2 and full right, power, and authority to sell, assign,
transfer, and deliver such assets hereunder, and, upon delivery
and payment for such assets, the Acquiring Portfolio will acquire
good and marketable title thereto, subject to any restrictions as
might arise under the 1933 Act, other than as disclosed to the
Acquiring Portfolio;
(l) The execution, delivery, and performance of this
Agreement will have been duly authorized prior to the Closing
Date by all necessary action on the part of the Fund's directors,
and, subject to the approval of the Acquired Portfolio
Shareholders, this Agreement will constitute a valid and binding
obligation of the Fund and the Acquired Portfolio, enforceable in
accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights, and to general
equity principles;
(m) The information to be furnished by the Fund and the
Acquired Portfolio for use in registration statements, proxy
materials, and other documents which may be necessary in
connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply
in all material respects with Federal securities and other laws
and regulations thereunder applicable thereto; and
(n) The proxy statement of the Fund (the "Proxy Statement")
to be included in the Registration Statement referred to in
paragraph 5.6 (other than information therein that relates to the
Acquiring Portfolio) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
such statements were made, not materially misleading.
4.2 The Fund, on its own behalf and on behalf of the
Acquiring Portfolio, represents and warrants to the Acquired
Portfolio as follows:
(a) The Fund is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Maryland;
(b) The Fund is a registered investment company classified
as a management company of the open-end type, and its
registration with the Commission, as an investment company under
the 1940 Act, and the registration of its shares, under the 1933
Act, are in full force and effect;
(c) The current prospectus and statement of additional
information of the Acquiring Portfolio conform in all material
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respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially
misleading;
(d) At the Closing Date, the Acquiring Portfolio will have
good and marketable title to the Acquiring Portfolio's assets;
(e) Neither the Fund nor the Acquiring Portfolio is in, and
the execution, delivery, and performance of this Agreement will
not result in, a material violation of the Fund's Articles of
Incorporation or By-Laws or of any agreement, indenture,
instrument, contract, lease, or other undertaking to which the
Fund or the Acquiring Portfolio is a party or by which the Fund
or the Acquiring Portfolio are bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or threatened against the Fund or the Acquiring
Portfolio or any of their properties or assets, except as
previously disclosed in writing to the Fund, on behalf of the
Acquired Portfolio. Neither the Fund nor the Acquiring Portfolio
knows of any facts which might form the basis for the institution
of such proceedings and neither the Fund nor the Acquiring
Portfolio is a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body
which materially and adversely affects the business or the
ability of the Fund or the Acquiring Portfolio to consummate the
transactions contemplated herein;
(g) The Statement of Assets and Liabilities of the
Acquiring Portfolio at _________, 1995, audited by Deloitte &
Touche LLP, independent accountants, and a copy of which has been
furnished to the Fund, on behalf of the Acquired Portfolio,
fairly and accurately reflects the financial condition of the
Acquiring Portfolio as of such date in accordance with generally
accepted accounting principles consistently applied;
(h) Since __________, 1995, there has not been any material
adverse change in the Acquiring Portfolio's financial condition,
assets, liabilities, or business other than changes occurring in
the ordinary course of business, or any incurrence by the
Acquiring Portfolio of indebtedness maturing more than one year
from the date such indebtedness was incurred. For the purposes
of this subparagraph (h), a decline in net asset value per share
of the Acquiring Portfolio shares, the discharge of Acquiring
Portfolio liabilities, or the redemption of Acquiring Portfolio
shares by Acquiring Portfolio Shareholders shall not constitute a
material adverse change;
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(i) At the Closing Date, all material Federal and other tax
returns and reports of the Fund and the Acquiring Portfolio
required by law to have been filed by such date shall have been
filed and are or will be correct, and all Federal and other taxes
shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made
for the payment thereof, and, to the best knowledge of the Fund
and the Acquiring Portfolio, no such return is currently under
audit and no assessment has been asserted with respect to such
returns;
(j) For each taxable year of its operation, the Acquiring
Portfolio has met the requirements of Subchapter M of the Code
for qualification as a regulated investment company and has
elected to be treated as such;
(k) All issued and outstanding Acquiring Portfolio Shares
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid, and non-assessable by the Acquiring
Portfolio. The Acquiring Portfolio does not have outstanding any
options, warrants, or other rights to subscribe for or to
purchase the Acquiring Portfolio Shares, nor is there outstanding
any security convertible into the Acquiring Portfolio Shares;
(l) The execution, delivery, and performance of this
Agreement will have been fully authorized prior to the Closing
Date by all necessary action, if any, on the part of the
directors of the Fund and this Agreement will constitute a valid
and binding obligation of the Acquiring Portfolio enforceable in
accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights, and to general
equity principles;
(m) The Acquiring Portfolio Shares to be issued and
delivered to the Acquired Portfolio, for the account of the
Acquired Portfolio Shareholders, pursuant to the terms of this
Agreement, will, at the Closing Date, have been duly authorized
and, when so issued and delivered, will be duly and validly
issued Acquiring Portfolio Shares, and will be fully paid and
non-assessable by the Acquiring Portfolio;
(n) The information to be furnished by the Acquiring
Portfolio for use in registration statements, proxy materials,
and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete
in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations
applicable thereto;
(o) The Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Fund and the
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Acquiring Portfolio) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statement herein, in light of the circumstances under which such
statements were made, not materially misleading; and
(p) The Fund and the Acquiring Portfolio each agrees to use
all reasonable efforts to obtain the approvals and authorizations
required by the 1933 Act, the 1940 Act, and such of the state
blue sky or securities laws as may be necessary in order to
continue their operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING PORTFOLIO AND THE ACQUIRED
PORTFOLIO
The following covenants of the Acquiring Portfolio and the
Acquired Portfolio, as applicable, are made on behalf of the
Acquiring Portfolio and the Acquired Portfolio, respectively, by
the Fund:
5.1 The Acquiring Portfolio and the Acquired Portfolio each
will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such
ordinary course of business will include the declaration and
payment of customary dividends and distributions, and any other
distribution that may be advisable.
5.2 The Acquired Portfolio will call a meeting of the
Acquired Portfolio Shareholders to consider and act upon this
Agreement and to take all other action necessary to obtain
approval of the transactions contemplated herein.
5.3 The Acquired Portfolio covenants that the Acquiring
Portfolio Shares to be issued hereunder are not being acquired
for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
5.4 The Acquired Portfolio will assist the Acquiring
Portfolio in obtaining such information as the Acquiring
Portfolio reasonably requests concerning the beneficial ownership
of the shares of the Acquired Portfolio.
5.5 Subject to the provisions of this Agreement, the
Acquiring Portfolio and the Acquired Portfolio will each take, or
cause to be taken, all action, and do, or cause to be done, all
things, reasonably necessary, proper, or advisable to consummate
and make effective the transactions contemplated by this
Agreement.
5.6 The Acquired Portfolio will provide the Acquiring
Portfolio with information reasonably necessary for the
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preparation of a prospectus (the "Prospectus") which will include
the Proxy Statement, referred to in paragraph 4.1(n), all to be
included in a Registration Statement on Form N-14 of the
Acquiring Portfolio (the "Registration Statement"), in compliance
with the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the 1940 Act, in connection with
the meeting of the Acquired Portfolio Shareholders to consider
approval of this Agreement and the transactions contemplated
herein (the "Meeting").
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUND AND THE
ACQUIRED PORTFOLIO
The obligations of the Fund and the Acquired Portfolio to
consummate the transactions provided for herein shall be subject,
at their election, to the performance by the Fund and the
Acquiring Portfolio of all the obligations to be performed by the
Fund and the Acquiring Portfolio hereunder on or before the
Closing Date, and, in addition thereto, to the following further
conditions:
6.1 All representations and warranties of the Fund and the
Acquiring Portfolio contained in this Agreement shall be true and
correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date; and
6.2 The Fund, on behalf of the Acquiring Portfolio, shall
have delivered to the Fund, on behalf of the Acquired Portfolio,
on the Closing Date, a certificate executed in the Fund's name by
the Fund's President or Vice President, and the Fund's Treasurer
or Assistant Treasurer, in a form reasonably satisfactory to the
Fund, on behalf of the Acquired Portfolio, and dated as of the
Closing Date, to the effect that the representations and
warranties of the Fund and the Acquiring Portfolio made in this
Agreement are true and correct at and as of the Closing Date,
except as these representations and warranties may be affected by
the transactions contemplated by this Agreement and as to such
other matters as the Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUND AND THE
ACQUIRING PORTFOLIO
The obligations of the Fund and the Acquiring Portfolio to
complete the transactions provided for herein shall be subject,
at their election, to the performance by the Fund and the
Acquired Portfolio of all of the obligations to be performed by
the Fund and the Acquired Portfolio hereunder on or before the
Closing Date and, in addition thereto, to the following
conditions:
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7.1 All representations and warranties of the Fund and the
Acquired Portfolio contained in this Agreement shall be true and
correct in all material respects as of the date hereof and,
except as these representations and warranties may be affected by
the transactions contemplated by this Agreement, as of the
Closing Date with the same force and effect as if made on and as
of the Closing Date;
7.2 The Fund shall have delivered to the Fund, on behalf of
the Acquiring Portfolio, a statement of the Acquired Portfolio's
assets and liabilities, as of the Closing Date, certified by the
Treasurer or the Assistant Treasurer of the Fund; and
7.3 The Fund shall have delivered to the Fund, on behalf of
the Acquiring Portfolio, on the Closing Date, a certificate
executed in the Fund's name and the Acquired Portfolio's name by
the Fund's President or Vice President, and the Fund's Treasurer
or Assistant Treasurer, in form and substance satisfactory to the
Fund, and dated as of the Closing Date, to the effect that the
representations and warranties of the Fund and the Acquired
Portfolio, with respect to the Fund and the Acquired Portfolio,
made in this Agreement are true and correct at and as of the
Closing Date, except as these representations and warranties may
be affected by the transactions contemplated by this Agreement,
and as to such other matters as the Fund shall reasonably
request.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
PORTFOLIO AND THE ACQUIRED PORTFOLIO
If any of the conditions set forth below do not exist on or
before the Closing Date, with respect to the Acquired Portfolio
or the Acquiring Portfolio, then the other party to this
Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of
the outstanding shares of Common Stock, $.001 par value per
share, of the Acquired Portfolio in accordance with the
provisions of the Fund's Articles of Incorporation and By-Laws,
and certified copies of the resolutions evidencing such approval
shall have been delivered to the Fund, on behalf of the Acquiring
Portfolio. Notwithstanding anything herein to the contrary, the
Fund, the Acquiring Portfolio, or the Acquired Portfolio may not
waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, no action, suit, or other
proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or
prohibit, or to obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;
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8.3 All consents of other parties and all other consents,
orders, and permits of Federal, state, and local regulatory
authorities deemed necessary by the Fund to permit consummation,
in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain any such
consent, order, or permit would not involve a risk of a material
adverse effect on the assets or properties of the Fund, the
Acquiring Portfolio, or the Acquired Portfolio, provided that the
parties hereto may, for themselves, waive any of such conditions;
8.4 The Registration Statement shall have become effective
under the 1933 Act and no stop orders suspending the
effectiveness thereof shall have been issued and, to the best
knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending,
threatened, or contemplated under the 1933 Act; and
8.5 The parties shall have received the opinion of Messrs.
Jorden Burt Berenson & Johnson LLP, addressed to the Fund, on
behalf of both the Acquiring Portfolio and the Acquired
Portfolio, substantially to the effect that the transactions
contemplated by this Agreement shall constitute a tax-free
reorganization for Federal income tax purposes. The delivery of
such opinion is conditioned upon receipt by Messrs. Jorden Burt
Berenson & Johnson LLP of representations that such firm shall
request of the Fund, the Acquiring Portfolio, and the Acquired
Portfolio. Notwithstanding anything herein to the contrary, the
Fund, the Acquiring Portfolio, or the Acquired Portfolio may not
waive the conditions set forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 The Fund, on behalf of the Acquiring Portfolio, and the
Fund, on behalf of the Acquired Portfolio, represents and
warrants to the other that there are no brokers or finders
entitled to receive any payments in connection with the
transactions provided for herein.
9.2 MMA will bear the aggregate expenses and costs of the
Reorganization.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Fund, on behalf of the Acquiring Portfolio, and
the Fund, on behalf of the Acquired Portfolio, agree that neither
party has made any representation, warranty, or covenant not set
forth herein and that this Agreement constitutes the entire
agreement between the parties.
10.2 The representations, warranties, and covenants
contained in this Agreement, or in any document delivered
A-13
<PAGE>
pursuant hereto or in connection herewith, shall survive the
consummation of the transactions contemplated hereunder.
11. TERMINATION
This Agreement and the transactions contemplated hereby may
be terminated and abandoned by either party by resolution of the
Fund's Board of Directors at any time prior to the Closing Date,
if circumstances should develop that, in the opinion of such
Board of Directors, make proceeding with the Agreement
inadvisable.
12. WAIVER
The Fund, on behalf of either or both of the Acquiring
Portfolio and the Acquired Portfolio, after consultation with the
Fund's counsel and by consent of the Fund's Board of Directors,
may waive any condition to the respective obligations of the
Acquiring Portfolio and the Acquired Portfolio hereunder, except
as provided herein.
13. AMENDMENTS
This Agreement may be amended, modified, or supplemented in
such manner as may be mutually agreed upon in writing by the
authorized officers of the Fund; provided, however, that,
following the Meeting of the Acquired Portfolio Shareholders
called by the Acquired Portfolio pursuant to paragraph 5.2 of
this Agreement, no such amendment may have the effect of changing
the provisions for determining the number of the Acquiring
Portfolio Shares to be issued to the Acquired Portfolio
Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
14. NOTICES
Any notice, report, statement, or demand required or
permitted by any provisions of this Agreement shall be in writing
and shall be given by prepaid telegraph, telecopy, or certified
mail addressed to the Fund at 4922 Fairmont Avenue, Bethesda,
Maryland 20814.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
15.1 The Article and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
15.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
A-14
<PAGE>
15.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
15.4 This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns,
but no assignment or transfer hereof or of any rights or
obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or to
give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
15.5 It is expressly agreed that the obligations of the
Fund, the Acquiring Portfolio, and the Acquired Portfolio
hereunder shall not be binding upon any of the directors,
shareholders, nominees, officers, agents, or employees of the
Fund personally, but shall bind only the corporate property of
the Fund, the Acquiring Portfolio, and the Acquired Portfolio, as
provided in the Articles of Incorporation of the Fund. The
execution and delivery by such officers of the Fund shall not be
deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the
corporate property of the Fund, the Acquiring Portfolio, and the
Acquired Portfolio as provided in the Articles of Incorporation
of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed by its President or Vice President
and its seal to be affixed hereto and attested by its Secretary
or Assistant Secretary.
Attest: THE RUSHMORE FUND, INC.
[Seal]
By: By:
Title: Title:
A-15
<PAGE>
Attest: THE RUSHMORE FUND, INC., on
behalf of THE RUSHMORE U.S.
[Seal] GOVERNMENT LONG-TERM SECURITIES
PORTFOLIO
By:
Title: By:
Title:
Attest: THE RUSHMORE FUND, INC., on
behalf of THE RUSHMORE U.S.
[Seal] GOVERNMENT INTERMEDIATE-TERM
SECURITIES PORTFOLIO
By:
Title: By:
Title:
A-16
<PAGE>
APPENDIX B:
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
THE RUSHMORE FUND, INC.
AND
MONEY MANAGEMENT ASSOCIATES
<PAGE>
Attachment A
Last approved October 27, 1994
MANAGEMENT CONTRACT
BETWEEN
THE RUSHMORE FUND, INC.
AND
MONEY MANAGEMENT ASSOCIATES
This Management Contract (the "Contract"), dated as of the
10th day of October, 1985, is entered into by and between The
Rushmore Fund, Inc. (hereinafter sometimes referred to as the
"Fund") and Money Management Associates (hereinafter sometimes
referred to as the "Manager").
WITNESSETH:
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 herein set forth, for
the compensation herein provided.
<PAGE>
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
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) 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
- 2 -
<PAGE>
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 or employees of the Manager; (h) maintaining
appropriate insurance coverage for the Fund and its directors and
officers; (i) its membership in trade associations; (j) federal
and state filing and registration fee; and (k) distribution
expenses pursuant to a distribution plan approved by a majority
of the shareholders and non-interested directors.
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 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
- 3 -
<PAGE>
Manager as provided in Section 2, the Fund shall pay the Manager
an annual fee of five tenths (0.50%) of one percent of the
averagedailynet assetvalue ofthe Fund.The feewill bepaid monthly.
If in any fiscal year the aggregate expenses of the Fund,
exclusive of taxes, brokerage, interest charges and extraordinary
legal expenses but including the management and distribution
fees, exceed 1.25% 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 1.25%. 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 "The Rushmore Fund, 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
- 4 -
<PAGE>
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 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.
The manager shall notify the Fund of any change in partners
of Money Management Associates within a reasonable time after
such change.
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 date hereof,
and thereafter only 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
- 5 -
<PAGE>
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. 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)(19) 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 expressly provided or authorized, have no
- 6 -
<PAGE>
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 reason 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
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.
WITNESS: THE RUSHMORE FUND, INC.
/s/Elizabeth L. Snider /s/J. Hugh Ward
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/Timothy P. Hagan /s/Daniel L. O'Connor
- 7 -
<PAGE>
AMENDMENT
TO
MANAGEMENT CONTRACT
BETWEEN
THE RUSHMORE FUND, INC.
AND
MONEY MANAGEMENT ASSOCIATES
The following amendment is hereby made to the Management
Contract dated October 10, 1985 between The Rushmore Fund, Inc.
and Money Management Associates. The following paragraph is
added to Section 4 of said contract:
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 Nova Portfolio of the Fund shall pay
the Manager an annual fee of three fourths (.75) of one percent
of the average daily net asset value of the Portfolio. The fee
will be paid monthly.
Witness THE RUSHMORE FUND, INC.
/s/Witness by /s/William L. Major
Secretary
Witness MONEY MANAGEMENT ASSOCIATES
/s/Witness by /s/Daniel L. O'Connor
Partner
Date: November 17, 1989
<PAGE>
RUSHMORE GROUP
FUND COST STRUCTURES
<TABLE>
<CAPTION>
MGT ADM
FEE FEE TOTAL
<S> <C> <C> <C>
Fund for Government Investors 0.50% 0.25 0.75
Fund for Tax-Free Investors:
Money Market Portfolio 0.50% 0.25 0.75
Virginia Portfolio 0.625% 0.30 0.925
Maryland Portfolio 0.625% 0.30 0.925
(the Adviser has voluntarily limited the total fees for
the Virginia and Maryland portfolios to 0.60%)
The Rushmore Fund:
Money Market Portfolio 0.50% 0.25 0.75
U.S.G. Intermediate Bond 0.50% 0.50 1.00
U.S.G. Long - Term Bond 0.50% 0.50 1.00
</TABLE>
<PAGE>
APPENDIX C:
CURRENT PROSPECTUS OF
THE RUSHMORE U.S. GOVERNMENT INTERMEDIATE-TERM SECURITIES
PORTFOLIO
AND
THE RUSHMORE U.S. GOVERNMENT LONG-TERM SECURITIES PORTFOLIO,
DATED DECEMBER 21, 1994
<PAGE>
THE RUSHMORE FUND, INC.
4922 Fairmont Avenue, Bethesda, MD 20814
(800) 343-3355 (301) 657-1500
U.S. Government Intermediate-Term Securities Portfolio
and
U.S. Government Long-Term Securities Portfolio
The Rushmore Fund, Inc. is an open-end investment company
consisting of three portfolios: the Money Market Portfolio, the
U.S. Government Intermediate-Term Securities Portfolio, and the
U.S. Government Long-Term Securities Portfolio. Each of the
portfolios in effect represents a different fund and investors
can exchange their holdings, without charge, among the three
separate portfolios as their investment outlook or objectives
change.
This prospectus sets forth concisely the information you should
know about the Fund and the U.S. Government Intermediate-Term
Securities Portfolio and the U.S. Government Long-Term Securities
Portfolio.
Investors should read this prospectus and retain it for future
reference. It is designed to set forth concisely the information
an investor should know before investing in the Fund. A
Statement of Additional Information dated December 21, 1994
containing additional information about the Fund has been filed
with the Securities and Exchange Commission and is incorporated
herein by reference. A copy of the Statement may be obtained,
without charge, by writing or telephoning the Fund.
The date of this Prospectus is December 21, 1994.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
FEE TABLE
U.S. Gov't U.S. Gov't
Intermediate- Long-
Term Term
Portfolio Portfolio
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases
(as a percentage of offering price) None None
Redemption Fees None None
Exchange Fees None None
Monthly Account Fee
(for accounts under $500) $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .50% .50%
12b-1 Fees None None
Other Expenses .30 .30
Total Fund Operating Expenses .80% .80%
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Intermediate-Term $8 $26 $45 $103
Long-Term Portfolio 8 26 45 103
</TABLE>
<PAGE> 2
<PAGE>
The same level of expenses would be incurred if the
investment were held throughout the period indicated.
The preceding table is provided to assist the investor in
understanding the various costs and expenses that the investor
will incur directly or indirectly. The five percent assumed
annual return is for comparison purposes only. The actual return
may be more or less depending on market conditions. The example
should not be considered a representation of past or future
expenses. Actual expenses may be greater or lessor than those
shown. For more complete information about the various costs and
expenses, see "Management of the Fund" in the prospectus and
Statement of Additional Information.
<PAGE> 3
<PAGE>
<TABLE>
<CAPTION>
The Rushmore Fund, Inc.
Financial Highlights
U.S. Government Intermediate-Term Securities Portfolio
Audited
For the Year Ended August 31,
1994 1993 1992
<S> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of
Period..................... $ 10.22 $ 10.73 $ 9.93
Net Investment Income........... 0.527 0.596 0.681
Net Realized and Unrealized Gains (1.080) 0.492 0.799
(Losses) on Securities....
Net Increase (Decrease) in Net
Asset Value
Resulting from Operations..... (0.553) 1.088 1.480
Dividends to Shareholders..... (0.530) (0.596) (0.680)
Distributions to Shareholders
from Net Realized
Capital Gains... (0.166) (1.002) ---
Net Increase (Decrease) in Net
Asset Value......... (1.25) (0.51) 0.80
Net Asset Value - End of
Period...................... $ 8.97 $ 10.22 $ 10.73
Total Investment Return........ (5.64)% 14.47% 15.37%
Ratios to Average Net Assets:
Expenses................. 0.80% 0.80% 0.80%
Net Investment Income......... 5.50% 5.91% 6.63%
Supplementary Data:
Portfolio Turnover Rate.... 174.0% 113.3% 199.8%
Number of Shares Outstanding at
End of Period (000 s 1,489 1,990 1,502
omitted)..
</TABLE>
*from inception December 18, 1985
The auditors report is incorporated by reference in the
registration statement. The auditors report and further
information about the performance of the Fund are contained in
the annual report to shareholders which may be obtained without
charge by calling or writing the Fund.
<PAGE> 4
<PAGE>
<TABLE>
<CAPTION>
The Rushmore Fund, Inc.
Financial Highlights
U.S. Government Intermediate-Term Securities Portfolio
Audited
For the Year Ended August 31,
1991 1990 1989
<S> <C> <C> <C>
Per Share Operating
Performance:
Net Asset Value - Beginning
of Period . . . . . . . . . $ 9.39 $ 10.01 $ 9.53
Net Investment Income . . . 0.702 0.733 0.784
Net Realized and Unrealized
Gains (Losses)
on Securities....... 0.539 (0.387) 0.480
Net Increase (Decrease) in Net
Asset Value
Resulting from Operations . . 1.241 0.346 1.264
Dividends to Shareholders.. (0.701) (0.732) (0.784)
Distributions to Shareholders
from NetRealized
Capital Gains... --- (0.234) ---
Net Increase (Decrease) in Net
Asset Value..... 0.54 (0.62) 0.48
Net Asset Value - End of
Period...................... $ 9.93 $ 9.39 $ 10.01
Total Investment Return.. 13.86% 3.28% 13.94%
Ratios to Average Net Assets:
Expenses.......... 0.80% 0.80% 0.80%
Net Investment Income..... 7.21% 7.47% 7.93%
Supplementary Data:
Portfolio Turnover Rate.... 195.8% 423.5% 461.0%
Number of Shares Outstanding
at End of Period
(000 s omitted)....... 2,322 372 695
</TABLE>
*from inception December 18, 1985
The auditors report is incorporated by reference in the
registration statement. The auditors report and further
information about the performance of the Fund are contained in
the annual report to shareholders which may be obtained without
charge by calling or writing the Fund.
<PAGE> 5
<PAGE>
<TABLE>
<CAPTION>
The Rushmore Fund, Inc.
Financial Highlights
U.S. Government Intermediate-Term Securities Portfolio
Audited
For the Year Ended August 31,
1988 1987 1986*
<S> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning
of Period.............. $ 9.70 $ 10.47 $ 10.00
Net Investment Income...... 0.800 0.629 0.471
Net Realized and Unrealized
Gains (Losses)
on Securities............ (0.170) (0.766) 0.460
Net Increase (Decrease) in
Net Asset Value
Resulting from Operations... 0.630 (1.370) .931
Dividends to Shareholders.. (0.800) (0.633) (0.461)
Distributions to Shareholders
from Net Realized
Capital Gains....... --- --- ---
Net Increase (Decrease) in
Net Asset Value.... (0.17) (0.77) 0.47
Net Asset Value - End of
Period................... $ 9.53 $ 9.70 $ 10.47
Total Investment Return..... 6.83% (1.42)% 9.62%
Ratios to Average Net Assets:
Expenses................ 0.81% 0.78% 1.00%
Net Investment Income....... 8.14% 6.17% 6.50%
Supplementary Data:
Portfolio Turnover Rate.. 1,753.7% 87.2% ---
Number of Shares Outstanding
at End of Period
(000 s omitted)...... 116 91 37
</TABLE>
*from inception December 18, 1985
The auditors report is incorporated by reference in the
registration statement. The auditors report and further
information about the performance of the Fund are contained in
<PAGE> 6
<PAGE>
the annual report to shareholders which may be obtained without
charge by calling or writing the Fund.
<PAGE> 7
<PAGE>
<TABLE>
<CAPTION>
The Rushmore Fund, Inc.
Financial Highlights
U.S. Government Long-Term Securities Portfolio
Audited
For the Year Ended August 31,
1994 1993 1992
<S> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning
of Period.... $ 11.55 $ 10.62 $ 9.97
Net Investment Income . . . . 0.599 0.650 0.697
Net Realized and Unrealized
Gains (Losses)
on Securities...... (1.880) 1.304 0.649
Net Increase (Decrease) in Net
Asset Value
Resulting from Operations... (1.281) 1.954 1.346
Dividends to Shareholders.. (0.602) (.650) (.696)
Distributions to Shareholders
from Net Realized (0.583) (.374) ---
Capital Gains . . . . . . .
Net Increase (Decrease) in Net
Asset Value . . . . . . . . . (2.47) 0.93 0.65
Net Asset Value - End
of Period . . . . . . . . . . $ 9.08 $ 11.55 $ 10.62
Total Investment Return....... (10.29)% 20.92% 13.97%
Ratios to Average Net Assets:
Expenses......... 0.80% 0.80% 0.80%
Net Investment Income.. 5.97% 6.08% 6.80%
Supplementary Data:
Portfolio Turnover Rate.. 188.3% 173.6% 298.0%
Number of Shares Outstanding
at End of Period
(000 s omitted)........... 3,225 2,085 2,148
</TABLE>
*from inception December 18, 1985
The auditors report is incorporated by reference in the
registration statement. The auditors report and further
information about the performance of the Fund are contained in
the annual report to shareholders which may be obtained without
charge by calling or writing the Fund.
<PAGE> 8
<PAGE>
<TABLE>
<CAPTION>
The Rushmore Fund, Inc.
Financial Highlights
U.S. Government Long-Term Securities Portfolio
Audited
For the Year Ended August 31,
1991 1990 1989
<S> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning
of Period.......... $ 9.14 $ 9.96 $ 8.96
Net Investment Income..... 0.718 0.720 0.742
Net Realized and Unrealized
Gains (Losses)
on Securities............. 0.829 (0.821) 1.000
Net Increase (Decrease) in Net
Asset Value
Resulting from Operations... 1.547 (.101) 1.742
Dividends to Shareholders... (.717) (.719) (.742)
Distributions to Shareholders
from Net Realized
Capital Gains....... --- --- ---
Net Increase (Decrease) in Net
Asset Value....... 0.83 (0.82) 1.00
Net Asset Value - End
of Period......... $ 9.97 $ 9.14 $ 9.96
Total Investment Return.... 17.61% (1.24)% 20.17%
Ratios to Average Net Assets:
Expenses............. 0.80% 0.80% 0.80%
Net Investment Income...... 7.43% 7.28% 7.73%
Supplementary Data:
Portfolio Turnover Rate...... 235.7% 400.8% 411.8
Number of Shares Outstanding at
End of Period
(000 s omitted)....... 1,452 1,427 2,603
</TABLE>
*from inception December 18, 1985
The auditors report is incorporated by reference in the
registration statement. The auditors report and further
information about the performance of the Fund are contained in
the annual report to shareholders which may be obtained without
charge by calling or writing the Fund.
<PAGE> 9
<PAGE>
<TABLE>
<CAPTION>
The Rushmore Fund, Inc.
Financial Highlights
U.S. Government Long-Term Securities Portfolio
Audited
For the Year Ended August 31,
1988 1987 1986*
<S> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning
of Period............. $ 9.19 $ 9.97 $ 10.00
Net Investment Income........ 0.747 0.772 0.614
Net Realized and Unrealized
Gains (Losses)
on Securities......... (0.230) (0.779) (0.031)
Net Increase (Decrease) in Net
Asset Value
Resulting from Operations.. .517 (.007) .583
Dividends to Shareholders.. (.747) (.773) (.613)
Distributions to Shareholders
from Net Realized
Capital Gains..... --- --- ---
Net Increase (Decrease) in Net
Asset Value............ (0.23) (0.78) (0.03)
Net Asset Value - End of
Period................... $ 8.96 $ 9.19 $ 9.97
Total Investment Return.... 5.73% (0.06)% 6.14%
Ratios to Average Net Assets:
Expenses........... 0.83% 0.78% 1.00%
Net Investment Income...... 8.05% 7.90% 8.83%
Supplementary Data:
Portfolio Turnover Rate.... 829.0% 226.0% 43.7%
Number of Shares Outstanding
at Endof Period
(000 s omitted)........ 806 1,175 776
</TABLE>
*from inception December 18, 1985
The auditors report is incorporated by reference in the
registration statement. The auditors report and further
information about the performance of the Fund are contained in
the annual report to shareholders which may be obtained without
charge by calling or writing the Fund.
<PAGE> 10
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
It has been a year since interest rates stopped falling. In
October 1993, the yield on the 30-year bond was 5.70%, the lowest
since 1977, when the Treasury began regular auctions. On August
31, 1994 the yield on the bond had risen to 7.45%.
Since February of this year the Federal Reserve has increased the
federal funds rate 175 basis points (1.75%). Though inflation
remains relatively low, there are some signs that inflationary
pressures are growing. For example, commodity prices have been
on the rise this year. Also, Federal Reserve Chairman Greenspan
has said in public statements that it is just as important to
reduce investor's expectations of higher inflation as it is to
reduce actual inflation. Adding to the concerns of bond holders
is uncertainty about weakness in the U.S. dollar. They fear it
will diminish the value of dollar-denominated assets and boost
inflation by increasing the cost of goods imported into the
United States. These factors are adding pressure to bond prices.
Rushmore U.S. Government Intermediate-Term Portfolio invests in
the current ten-year Treasury note. The objective of the Fund is
to provide high current income, while maintaining the safety of
principal.
Rushmore U.S. Government Long-Term Portfolio invests in 30-year
Treasury bonds, and, like the Intermediate Term Portfolio,
strives to earn the highest income possible, while maintaining
the safety of principal.
The prospect of further tightening by the Federal Reserve remains
very much alive. However, it is fair to say the economy has
shown remarkable resilience in the face of a sharp backup in
interest rates. Inflation remains low, so we feel that any
further increase in rates would be an opportunity to buy Treasury
securities. Treasury notes and bonds are clearly a better buy
now, with rates up sharply, than they were a year ago. The Fund
has a conservative investment policy which it expects to
continue.
PERFORMANCE DATA
From time to time, quotations of a Portfolio's "total return" and
"yield" may be included in advertisements, sales literature or
shareholder reports. Both "total return" and "yield" figures are
based on historical earnings and show the performance of a
hypothetical investment and are not intended to indicate future
performance. The "total return" of a Portfolio refers to return
assuming an investment has been held in the Portfolio for one
year, five years and for ten years (up to the life of the
Portfolio) , the ending date of which will be stated. The "total
return" quotations are expressed in terms of average annual
<PAGE> 11
<PAGE>
compounded rates of return for all periods quoted and assume that
all dividends and capital gains distributions were reinvested.
The "yield" of a Portfolio refers to net income generated by an
investment in the fund over a specified thirty-day period. This
income is thus "annualized". That is, the amount of income
generated by the investment during the thirty-day period is
assumed to be generated over a 12-month period and is shown as a
percentage of the investment. "Yield" and "total return" for a
Portfolio will vary based on changes in market conditions and the
level of the Portfolio's expenses.
The annualized yields for the U.S. Government Intermediate-Term
Securities Portfolio and the U.S. Government Long-Term Securities
Portfolio were 6.60% and 6.95%, respectively, for the year ended
August 31, 1994.
<PAGE> 12
<PAGE>
<TABLE>
<CAPTION>
Rushmore Rushmore Lehman Lehman
U.S. Gov't U.S. Gov't Brothers Brothers
Intermediate- Long-Term Intermediate- Long
Term Gov't Index T-Bond
<S> <C> <C> <C> <C>
12/31/85 $10,000 $10,000 $10,000 $10,000
8/31/86 $10,962 $10,614 $11,136 $12,440
8/31/87 $10,806 $10,608 $11,341 $11,529
8/31/88 $11,544 $11,215 $12,178 $12,458
8/31/89 $13,154 $13,478 $13,516 $14,942
8/31/90 $13,585 $13,310 $14,615 $15,169
8/31/91 $15,468 $15,654 $16,470 $17,981
8/31/92 $17,845 $17,841 $18,581 $20,865
8/31/93 $20,428 $21,574 $20,194 $25,455
8/31/94 $19,276 $19,354 $20,026 $23,829
</TABLE>
Past performance is not indicative of future performance.
<TABLE>
<CAPTION>
Total Return
Inception
One Year Five Years December 18,
Ended Ended 1985
August 31, August 31, to August 31,
1994 1994 1994
<S> <C> <C> <C>
Intermediate- -5.64% 7.94% 7.83%
Term Portfolio
Long-Term -10.29% 7.50% 7.88%
Portfolio
</TABLE>
<PAGE> 13
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
U.S. Government Intermediate-Term Securities Portfolio Objective
The investment objective of the U.S. Government Intermediate-Term
Securities Portfolio is to invest in Government securities with
maturities of ten years or less and to provide investors with
maximum current income to the extent that such investment is
consistent with safety of principal.
U.S. Government Long-Term Securities Portfolio Objective
The investment objective of the U.S. Government Long-Term
Securities Portfolio is to invest in Government securities with
maturities of ten years or more and to provide investors with
maximum current income to the extent that such investment is
consistent with safety of principal.
Investment Policies of the Portfolios
The Intermediate-Term and Long-Term Portfolios differ primarily
in the maturities of the Government securities in which they
invest. Both Portfolios will invest only in securities issued or
guaranteed by the U.S. Government, its agencies and
instrumentalities, and in securities and certificates evidencing
ownership of future interest and principal payments on the above
securities (zero coupons). Agencies and instrumentalities
include such organizations as the Government National Mortgage
Association ("Ginnie Mae"), the Federal Home Loan Banks, the
Federal Home Loan Mortgage Corporation, and the Federal National
Mortgage Association. The Portfolios may purchase U.S.
Government securities under repurchase agreements and may also
lend Portfolio securities.
Government bonds typically pay coupon interest semi-annually and
repay the principal at maturity. Government National Mortgage
Association certificates ("Ginnie Mae"), differ from other
Government securities in that monthly payments of both principal
and interest are made. Ginnie Mae certificates represent an
ownership in a pool of either Federal Housing Administration
(FHA) insured or Veterans Administration (VA) guaranteed
mortgages. These certificates have yield and maturity
characteristics corresponding to the underlying mortgages and a
certificate's term may be shortened by unscheduled or early
payments of principal on the underlying mortgages. The actual
yield of each certificate will be influenced by the prepayment
experience of the mortgage pool.
Fixed Income Value, Yield Fluctuations and Zero Coupons
Fluctuation in the market value of the securities of the U.S.
Government Intermediate-Term Securities and the U.S. Government
Long-Term Securities Portfolios will occur due to interest rate
<PAGE> 14
<PAGE>
movements. The market values of the investment securities of
these Portfolios will vary inversely with interest rate movements
and, therefore, the per share value of these Portfolios will also
fluctuate as interest rates change. Furthermore, debt securities
with longer maturities, such as Ginnie Maes, generally experience
greater price movement compared to shorter term securities as
interest rates fluctuate. Because of the fluctuation of per
share values, investment in the U.S. Government-Intermediate Term
and U.S. Government Long-Term Securities Portfolios may not be
suitable for investors with short-term objectives.
The fixed income Portfolios may buy and sell zero coupon Treasury
securities. This term is used by the Fund to describe U.S.
Treasury notes and bonds which have been stripped of their
unmatured interest coupons, the coupons themselves, and receipts
or certificates representing interests in such stripped debt
obligations and coupons. Interest is not paid in cash during the
term of these securities, but is accrued and paid at maturity.
They are purchased at a discount from face value, reflecting the
current value of the deferred interest. The discount is taxable
even though there is no cash return until maturity. Price
volatility is greater than normal interest paying securities and
the value of the zero coupon securities reacts more quickly to
changes in interest rates than do coupon bonds. No Portfolio
will have invested more than 10% of its assets in current value
of the zero coupon securities at any time.
Specialized Investment Practices and Risks
Repurchase Agreements and Federal Agency Securities
In order to effectively utilize cash reserves kept for liquidity,
the Portfolios may invest in repurchase agreements secured by
securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities and in securities and certificates
evidencing ownership of future interest and principal payments on
the above securities. A repurchase agreement arises when a buyer
purchases a security and simultaneously agrees to sell it to the
seller at an agreed upon future date, normally one day or a few
days later. The resale price is greater than the purchase price,
reflecting an agreed upon market rate. A Portfolio may enter
into repurchase agreements only with member banks of the Federal
Reserve system or primary dealers of U.S. Government securities.
In the event of a default or bankruptcy by the seller, the
Portfolio will liquidate those securities held under repurchase
agreements. However, liquidation of the securities could involve
costs or delays and, to the extent proceeds from their sale were
less than the agreed upon repurchase price, the Portfolio could
suffer a loss.
While U.S. Treasury securities and those of the Government
National Mortgage Association and the Small Business
<PAGE> 15
<PAGE>
Administration are backed by the full faith and credit of the
United States, other Federal agency securities such as the
Federal Home Loan Banks and the Federal National Mortgage
Association are not guaranteed by the U.S. Treasury. These
Federal agency securities are supported by the ability to borrow
from the U. S. Treasury or by the credit of the agency itself.
Lending of Securities
Each Portfolio may lend its securities to NASD registered broker-
dealers and Federal Reserve member banks for the purpose of
earning additional income. Such loans will be pursuant to
agreements requiring the broker-dealer or bank to fully and
continuously secure the loan by cash or other securities in which
the Portfolio may invest equal to the market value of the
securities loan. The Portfolios receive compensation for lending
their securities in the form of fees.
The Portfolios will enter into securities lending and repurchase
transactions only with parties who meet credit worthiness
standards approved by the Fund's Board of Directors. In the
event of a default or bankruptcy by a seller or borrower, the
Portfolios will promptly liquidate collateral. However, the
exercise of the Portfolios' right to liquidate such collateral
could involve certain costs or delays and, to the extent that
proceeds from any sale of collateral on a default of the seller
or borrower were less than the seller's or borrower's obligation,
the Portfolios could suffer a loss.
Borrowings
Each Portfolio may not borrow money except as a temporary measure
to facilitate redemptions. Such a borrowing may not exceed 30%
of the Portfolio's total assets, taken at current net asset
value before any borrowing. Each Portfolio may not purchase
securities if a borrowing is outstanding.
PORTFOLIO TURNOVER
The portfolio turnover for the U.S. Government Intermediate-Term
Securities Portfolio was 174.0% and 113.3% for the years ended
August 31, 1994 and 1993. For these same periods, the turnover
for the U.S. Government Long-Term Securities Portfolio was 188.3%
and 173.6%.
HOW TO INVEST IN THE FUND
The minimum initial investment is $2,500 which may be divided
among the separate Portfolios. Retirement accounts may be opened
with a $500 minimum investment. The shares of the Fund are
offered at the daily public offering price which is the net asset
<PAGE> 16
<PAGE>
value per share (See Net Asset Value) next computed after receipt
of your order.There isno minimum amountfor subsequentinvestments.
Investments in the Fund can be made directly with the Fund or
through securities dealers who have the responsibility to
transmit orders promptly and may charge a processing fee.
The Fund reserves the right to reject any purchase order. All
accounts will be held in book entry form. No certificates for
shares will be issued.
By Mail: Fill out an application and make a check payable to
"The Rushmore Fund, Inc." Mail the check along with the
application, to:
The Rushmore Fund, Inc.
4922 Fairmont Avenue
Bethesda, MD 20814
Purchases by check will normally be credited to an account within
one business day after receipt of payment. Foreign checks will
not be accepted. Be certain to specify the allocation of your
purchase among the Portfolios.
By Bank Wire: Request a wire transfer to:
Rushmore Trust & Savings, FSB
Bethesda, MD
Routing Number 0550-71084
For Account of The Rushmore Fund, Inc.
Account Number 029385-770
AFTER INSTRUCTING YOUR BANK TO TRANSFER MONEY BY WIRE, YOU MUST
TELEPHONE THE FUND AT (800) 622-1386 OR (301) 657-1510 BETWEEN
8:30 A.M. AND 2:45 P.M. EASTERN TIME AND TELL US THE AMOUNT YOU
TRANSFERRED AND THE NAME OF THE BANK SENDING THE TRANSFER. YOUR
BANK MAY CHARGE A FEE FOR SUCH SERVICES. IF THE PURCHASE IS
CANCELLED BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE
LIABLE FOR ANY LOSS THE FUND MAY INCUR.
Purchase orders which do not specify the portfolio in which an
investment is to be made will be invested in the Money Market
Portfolio.
HOW TO REDEEM AN INVESTMENT - (WITHDRAWALS)
On any day the Fund is open for business, an investor may
withdraw all or any portion of his investment by redeeming shares
at the next determined net asset value per share after receipt of
the order by writing the Fund or by telephoning 1-800-622-1386 or
(301) 657-1510 between 8:30 A.M. and 2:45 P.M. Eastern time.
<PAGE> 17
<PAGE>
Telephone redemption privileges may be terminated or modified by
the Fund upon 60 days notice to all shareholders of the Fund.
The privilege to initiate redemption transactions by telephone
will be made available to fund shareholders automatically.
Telephone redemptions will only be sent to the address of record
or to bank accounts specified in the account application. When
acting on instructions believed to be genuine, The Fund will not
be liable for any loss resulting from a fraudulent telephone
redemption request and the investor would bear the risk of any
such loss.
The Fund will employ reasonable procedures to confirm that
redemption instructions communicated by telephone are genuine;
and if the Fund does not employ such procedures, then the Fund
may be liable for any losses due to unauthorized or fraudulent
instructions. The Fund follows specific procedures for
transactions initiated by telephone, including among others,
requiring some form of personal identification prior to acting on
instructions received by telephone, providing written
confirmation not later than five business days after such
transactions, and/or tape recording of telephone transactions.
The proceeds of redemptions will be sent directly to the
investor's address of record. If the investor requests payment
of redemptions to a third party or to a location other than his
address of record listed on the account application, the request
must be in writing and the investor's signature must be
guaranteed by an eligible institution. Eligible institutions
generally include banking institutions, securities exchanges,
associations, agencies or broker/dealers, and ''STAMP'' program
participates. There are no fees charged for redemptions.
The Fund will redeem its shares at a redemption price equal to
their net asset value as next computed following the receipt of a
request for redemption. There is no redemption charge. Payment
for the redemption price will be made within seven days after the
Fund's receipt of the request for redemption. For investments
that have been made by check, payment on withdrawal requests may
be delayed for up to ten business days or until the check clears,
whichever occurs first. This delay is necessary to assure the
Fund that investments made by checks are good funds. The
proceeds of the redemption will be forwarded promptly upon
confirmation of receipt of good funds.
The right of redemption may also be suspended, or the date of
payment postponed, (a) for any period during which the New York
Stock Exchange is closed (other than customary weekend or holiday
closings); or (b) when trading on the Exchange is restricted, or
an emergency exists, as determined by the Securities and Exchange
Commission, so that disposal of the Fund's investments for
<PAGE> 18
<PAGE>
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. Investors should
also be aware that telephone redemptions or exchanges may be
difficult to implement in a timely manner during periods of
drastic economic or market changes. If such conditions occur,
redemption or exchange orders can be made by mail. Because of
the administrative expense of handling small accounts, the Fund
reserves the right to involuntarily redeem an investor's account
which falls below $500 in total value in all portfolios of the
Fund due to redemptions or exchanges after providing 60 days
written notice.
EXCHANGES
The Fund is composed of three separate portfolios. This
prospectus describes the features of the U.S.Government
Intermediate-Term Securities and U.S.Government Long-Term
Securities Portfolios. There is also a Money Market Portfolio.
Investors may invest in one or more of the portfolios, and may
exchange shares in one portfolio, at no charge, for shares of
another portfolio at their relative net asset values. Shares of
The Rushmore Fund, Inc. may also be exchanged for shares of Fund
for Government Investors, Inc., Fund for Tax-Free Investors, Inc.
or the American Gas Index Fund, Inc. on the basis of the
respective net asset values of the shares involved. Exchanges
may be made by telephone or letter. Written requests should be
sent to The Rushmore Fund, Inc., 4922 Fairmont Avenue, Bethesda,
MD 20814 and be signed by the record owner or owners. Telephone
exchange requests may be made by calling the Fund at 1-800-622-
1386 or (301) 657-1510 between 8:30 A.M. and 2:45 P.M. Eastern
time. Exchanges will be effected at the respective net asset
values of the portfolios involved as next determined after
receipt of the exchange request. To implement an exchange,
shareholders should provide the following information: account
registration including address and number, taxpayer
identification number, number, percentage or dollar value of
shares to be redeemed, name and account number of the portfolio
to which the investment is to be transferred. Exchanges may be
made only if they are between identically registered accounts.
Shareholders contemplating such an exchange should obtain and
review the prospectuses of those funds. The exchange privilege
is available only in states where the exchange may legally be
made. Telephone exchange privileges may be terminated or modified
upon 60 days notice to all shareholders of the Fund.
TRANSACTION CHARGES
In addition to charges described elsewhere in this prospectus,
the Fund may impose a charge of $5 per month for any account
whose average daily balance is below $500 due to redemptions.
The fee will continue to be imposed during months when the
<PAGE> 19
<PAGE>
account balance remains below $500. The fee will be imposed on
the last business day of the month. This fee will be paid to
Rushmore Trust & Savings, FSB. The fee will not be imposed on
tax-sheltered retirement plans or account established under the
Uniform Gifts or Transfers to Minors Act. The Fund may also make
a charge of $10 for items returned for insufficient or
uncollectible funds.
TAX-SHELTERED RETIREMENT PLANS
Tax-sheltered retirement plans of the following types will be
available to investors:
Individual Retirement Accounts - (IRAs)
Keogh Accounts - Defined
Contribution Plans (Profit-Sharing Plan)
Keogh Accounts - Money Purchase
Plans (Pension Plan)
401(k) Plans
403(b) Plans
Additional information regarding these accounts may be obtained
by contacting the Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends of the U.S. Government Intermediate-Term Securities and
U.S. Government Long-Term Securities Portfolios are declared
daily. Investors will receive dividends in additional shares at
month end unless they elect in writing to receive cash.
Dividends paid in cash to those investors so electing will be
mailed on the second business day of the following month.
Statements of account showing dividends paid will be sent at
least quarterly.
Long-term capital gains, if any, will be distributed on an annual
basis while short-term capital gains, if any, will be distributed
quarterly.
NET ASSET VALUE
The net asset value of the Portfolios' shares will be determined
daily as of 3:00 p.m. Eastern Time, except on customary national
business holidays which result in the closing of the New York
Stock Exchange and weekends. The net asset value per share is
calculated by dividing the net worth by the number of shares.
The securities of the U.S. Government Intermediate-Term
Securities and U.S. Government Long-Term Securities Portfolios
will be valued on the basis of the average of quoted bid and ask
price when quotations are available. If market quotations are
not readily available, the Board of Directors will value the
Portfolios' securities in good faith. The directors will
<PAGE> 20
<PAGE>
continuously review these methods of valuation and recommend
changes which may be necessary to assure that the Portfolios'
investments are valued at fair value.
TAXES
The Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. Because of this
qualification, the Fund will not be liable for Federal income
taxes to the extent its earnings are distributed.
Dividends derived from interest and dividends received by the
Fund, together with distributions of any short-term capital
gains, are taxable to shareholders as ordinary income whether or
not reinvested.
Distributions of net long-term gains, if any, realized by the
Fund and designated as capital gains distributions will be made
annually and will be taxed to shareholders as long-term capital
gains regardless of the length of time the shares have been held.
Currently, long-term capital gains are taxed at ordinary income
rates. Statements as to the Federal tax status of shareholders'
dividends and distributions will be mailed annually.
Shareholders should consult their tax advisers concerning the tax
status of the Fund's dividends in their own states and
localities.
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 20% on
dividends, capital gains distributions and redemptions.
Shareholders who are non-resident aliens may be subject to a
withholding tax on dividends earned.
ORGANIZATION AND DESCRIPTION OF COMMON STOCK
The Fund is an open-end, diversified investment company. It was
incorporated in Maryland on July 24, 1985 and has a present
authorized capital of 1,000,000,000 shares of $.001 par value
common stock which may be issued in three separate classes: U.S.
Government Intermediate-Term Securities Portfolio, U.S.
Government Long-Term Securities Portfolio, and the Money Market
Portfolio.
All shares of the Fund are freely transferable. The shares do
not have preemptive rights, and none of the shares have any
preference to conversion, exchange, dividends, retirements,
liquidation, redemption or any other feature. Shares have equal
voting rights, except that in a matter affecting only a
particular portfolio, such as a change in investment policy, only
shares of that portfolio may be entitled to vote on the matter.
<PAGE> 21
<PAGE>
Because the shares have non-cumulative voting rights, the holders
of more than 50% of the shares voting for the election of
directors can elect 100% of the directors, if they choose to do
so. In such event, the holders of the remaining less than 50% of
the shares voting will not be able to elect any directors.
Shareholder inquiries can be made by telephone (301-657-1500) or
by mail (4922 Fairmont Avenue, Bethesda, MD 20814).
Under Maryland Corporate law, a registered investment company is
not required to hold an annual shareholders' meeting if the
Investment Company Act of 1940 does not require a meeting. The
Act does require a meeting if the following actions are
necessary: ratification of the selection of independent public
accountants, approval of the investment advisory agreement,
election of the board of directors, or approval of the
appointment of directors to board vacancies when such vacancies
cause less than two-thirds of the board to have been elected or
approval of a change in a fundamental investment policy. Under
the Investment Company Act of 1940, shareholders have the right
to remove directors and, if holders of 10% of the outstanding
shares request in writing, a shareholders' meeting must be
called.
Officers and directors of the Fund, as a group, own less than 1%
of the shares outstanding.
MANAGEMENT OF THE FUND
Investment Adviser and Administrative Servicing Agent
The Fund is provided investment advice and management services by
Money Management Associates, 4922 Fairmont Avenue, Bethesda,
Maryland 20814. Money Management Associates provides investment
advice and management to other mutual funds including Fund for
Government Investors,Inc., Fund for Tax-Free Investors, Inc. and
the American Gas Index Fund, Inc. Net assets under management
currently approximate $920 million.
Under an Agreement with the Adviser, the Portfolios pay the
Adviser a fee at an annual rate based on 0.50% of the net assets
of each Portfolio. The Adviser manages the investment and
reinvestment of the assets of the portfolios of the Fund and
administers the affairs of the Fund, subject to the control of
the officers and the Board of Directors of the Fund. Investment
decisions are made by committee. The Adviser bears all costs
associated with providing these services. For the fiscal year
ended August 31, 1994, the Fund paid the Adviser investment
advisory fees of .50% (50/100 of 1%) of average daily net assets.
The Fund's net expenses exclusive of the investment fees were
.30% (30/100 of 1%) of the U.S.Government Intermediate-Term
Securities and the U.S. Government Long-Term Securities
Portfolios.
<PAGE> 22
<PAGE>
Effective September 1, 1993, the Board of Directors approved an
arrangement whereby Rushmore Trust & Savings, FSB provides the
Fund with shareholder servicing, transfer agent, custodian and
administrative services. The U.S. Government Intermediate-Term
and Long-Term Securities Portfolios pay an annual fee of .30%
(30/100 of 1%) of average daily net assets for these services.
Officers and Directors
The Fund has a Board of Directors which is responsible for the
general supervision of the Fund's business. The day-to-day
operations of the Fund are the responsibility of the Fund's
officers.
<PAGE> 23
<PAGE>
PART B
<PAGE>
THE RUSHMORE FUND, INC.
____________
The Rushmore U.S. Government Long-Term Securities Portfolio
____________
4922 Fairmont Avenue
Bethesda, Maryland 20814
(800) 343-3355
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the combined prospectus/proxy
statement dated November ___, 1995 (the "Combined
Prospectus/Proxy Statement"), for the special meeting (the
"Meeting") of the shareholders of the shares of Common Stock,
$.001 par value per share, of The Rushmore U.S. Government
Intermediate-Term Securities Portfolio (the "Acquired
Portfolio"), which Acquired Portfolio is a separate series of The
Rushmore Fund, Inc. (the "Fund"), a diversified, open-end
management investment company. This Meeting is to be held on
Friday, December 22, 1995.
The Combined Prospectus/Proxy Statement describes certain
transactions and other actions contemplated by the proposed
reorganization of the Acquired Portfolio into The Rushmore U.S.
Government Long-Term Securities Portfolio (the "the Acquiring
Portfolio"), a separate series of the Fund (the
"Reorganization"). Pursuant to an Agreement and Plan of
Reorganization in connection with the Reorganization (the
"Reorganization Plan"), the Acquiring Portfolio would acquire all
of the assets of the Acquired Portfolio in exchange solely for
shares of common stock in the Acquiring Portfolio and the
assumption by the Acquiring Portfolio of all the liabilities of
the Acquired Portfolio. Immediately following the
Reorganization, the Acquiring Portfolio will be renamed "The
Rushmore U.S. Government Bond Portfolio."
Pursuant to the Reorganization Plan, neither the Acquired
Portfolio nor the Acquiring Portfolio will bear any costs
associated with the Reorganization. As described in the Combined
Prospectus/Proxy Statement, the Acquiring Portfolio has an
investment objective that is identical to the investment
objective of the Acquired Portfolio and has investment policies
that are comparable to the investment policies of the Acquired
Portfolio. The shareholders of the Acquired Portfolio are being
requested to approve the Reorganization Plan at the Meeting.
<PAGE>
The Combined Prospectus/Proxy Statement may be obtained free of
charge by contacting Rushmore Trust and Savings, F.S.B. ("RTS"),
which provides all administrative services to both the Acquired
Portfolio and the Acquiring Portfolio, at 4922 Fairmont Avenue,
Bethesda, Maryland 20814, or by telephoning RTS toll-free at
(800) 343-3355. This Statement of Additional Information
contains additional and more detailed information about the
operations and activities of the Acquiring Portfolio and the
operations and activities of the Acquired Portfolio.
The date of this Statement of Additional Information is November
___, 1995.
B-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Current Statement of Additional Information for The Rushmore U.S.
Government Intermediate-Term Securities Portfolio and The
Rushmore U.S. Government Long-Term Securities Portfolio,
Dated December 21, 1994
Current Annual Report of The Rushmore Fund, Inc., for the fiscal
year ended August 31, 1994
Semi-Annual Report of The Rushmore Fund, Inc., for the six-month
period ended February 28, 1995
Pro Forma Financial Statements
B-3
<PAGE>
CURRENT STATEMENT OF ADDITIONAL INFORMATION
OF THE RUSHMORE U.S. GOVERNMENT INTERMEDIATE-TERM
SECURITIES PORTFOLIO
AND
THE RUSHMORE U.S. GOVERNMENT LONG-TERM SECURITIES PORTFOLIO
DATED DECEMBER 21, 1994
<PAGE>
THE RUSHMORE FUND, INC.
Money Market Portfolio
U.S. Government Intermediate-Term Securities Portfolio
U.S. Government Long-Term Securities Portfolio
4922 Fairmont Avenue Bethesda, MD 20814
(301) 657-1517 (800) 621-7874
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Fund's prospectus, dated
December 21,1994. A copy of the prospectus may be obtained
without charge by writing or telephoning the Fund.
The date of this Statement of Additional Information is December
21, 1994.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross Reference to Related Item in Prospectus
U.S. Gov't
Long-Term
Securities
and
U.S. Gov't
Intermediate-
Money Term
Market Securities
Page Portfolio Portfolio
<S> <C> <C> <C>
Investment
Objectives and 3 4 7
Policies
Investment
Restrictions 3 4 8
Management of
the Fund 4 9 13
Principal Holders
of Securities 5 5 13
Net Asset Value 5 8 11
Yield and Return
Calculations 6 4 5
Taxes 6 8 12
Auditors and
Custodian 6 10 13
Financial
Statement 6 3 3,4
</TABLE>
<PAGE> 2
<PAGE>
INVESTMENT POLICIES
Lending of Securities
Each portfolio may lend its securities to broker-dealers and
Federal Reserve member banks for the purpose of earning
additional income. Such loans will be pursuant to agreements
requiring the broker-dealer or bank to fully and continuously
secure the loan by cash or other securities in which the
portfolio may invest equal to the market value of the securities
loan. The portfolios receive compensation for lending their
securities in the form of fees.
The portfolios will enter into securities lending and
repurchase transactions only with parties who meet credit
worthiness standards approved and monitored by the Fund's board
of directors. In the event of a default or bankruptcy by a
seller or borrower, the portfolios will promptly seek to
liquidate collateral. However, the exercise of the Portfolios'
right to liquidate such collateral could involve certain costs or
delays and, to the extent that proceeds from any sale of
collateral on a default of the seller or borrower were less than
the seller's or borrower's obligation, the Portfolios could
suffer a loss.
Zero Coupon Securities
The U.S. Government Intermediate-Term Securities and the
U.S. Government Long-Term Securities Portfolios may invest in
zero coupon securities. Zero coupon securities is the term used
by the Fund to describe U.S. Treasury notes and bonds which have
been stripped of their unmatured interest coupons, the coupons
themselves, and receipts or certificates representing interests
in such stripped debt obligations and coupons. A zero coupon
security pays no interest to its holder during its life. Its
value to an investor consists of the difference between its face
value at the time of maturity and the price for which it was
acquired, which is generally an amount much less than its face
value (sometimes referred to as a "deep discount" price).
Currently the only U.S. Treasury security issued without
coupons is the Treasury bill. However, in the last few years a
number of banks and brokerage firms have separated ("stripped")
the principal portions ("corpus") from the coupon portions of the
U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests
in these instruments (which instruments are generally held by a
bank in a custodial or trust account). More recently, the U.S.
Treasury Department has facilitated the stripping of Treasury
notes and bonds by permitting the separated corpus and coupons to
be transferred directly through the Federal Reserve Banks' book-
entry system. This program, which eliminates the need for
custodial or trust accounts to hold the Treasury securities, is
<PAGE> 3
<PAGE>
called "Separate Trading of Registered Interest and Principal of
Securities" ("STRIPS"). Each such stripped instrument (or
receipt) entitles the holder to a fixed amount of money from the
Treasury at a single, specified future date. The U.S. Treasury
redeems zero coupon securities consisting of the corpus for the
face value thereof at maturity, and those consisting of stripped
coupons for the amount of interest, and at the date, stated
thereon.
Portfolio Transactions
The Money Market, U.S. Government Intermediate-Term
Securities and U.S. Government Long-Term Securities Portfolios'
securities are normally purchased on a net basis which does not
involve payment of brokerage commissions.
INVESTMENT RESTRICTIONS
The following investment restrictions supplement those set
forth in the Prospectus. These restrictions are fundamental and
may not be changed without prior approval of a majority of the
Portfolio's outstanding voting shares. As defined in the
Investment Company Act of 1940, as amended, the term "majority"
means the vote of the lesser of (a) 67% of the shares of the
Portfolio 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 Portfolio.
The portfolios may not:
1. borrow money except as a temporary measure to facilitate
redemptions. Such borrowing may be in an amount not to exceed
30% of the Portfolio's total assets, taken at current value,
before such borrowing. The Portfolio may not purchase an
investment security if a borrowing by the Portfolio is
outstanding.
2. make loans except through repurchase agreements and through
the loans of portfolio securities provided the borrower maintains
collateral equal to at least 100% of the value of the borrowed
security, and marked to market daily.
3. underwrite securities of any other issuer.
4. purchase or sell real estate, including limited partnership
interests.
5. purchase or sell restricted securities or warrants, nor may
it issue senior securities.
6. purchase any security whereby it would account for more than
10% of any issuer's outstanding shares.
<PAGE> 4
<PAGE>
7. purchase securities of any issuer if, as a result of such a
purchase, such securities would account for more than 5%, (as
defined by Section 5 (b)(1) of the Investment Company Act of
1940), of the Fund's assets. There is no limitation, however, as
to investments issued or guaranteed by the United States
Government, its agencies or instrumentalities, or in obligations
of the United States Government, its agencies or
instrumentalities, which are purchased in accordance with the
Fund's investment objective and policies.
8. purchase or sell commodities or commodities contracts.
9. concentrate more than 25% of its assets in any one industry.
The following restrictions have been adopted by the Fund for
all portfolios but are not considered fundamental and may be
changed by the Board of Directors of the Fund.
The portfolios may not:
1. invest in companies for the purpose of exercising management
or control.
2. purchase more than 10% of the voting securities of any one
issuer, or more than 10% of the securities of any class of any
one issuer.
3. purchase or hold the securities of any issuer if those
officers or directors of the Fund, or of Money Management
Associates, who individually own beneficially more than .5% of
the outstanding securities of the issuer, together own
beneficially more than 5% of those securities.
4. invest in securities of other investment companies, except
at customary brokerage commission rates or in connection with
mergers, consolidations or offers of exchange.
5. purchase the securities of companies which, including
predecessors, have a record of less than three years continuous
operation if, as a result, more than 5% of the market value of
the Portfolio's assets would be invested in such companies.
6. invest more than 10% of their assets in illiquid securities.
7. invest in oil, gas or other mineral leases.
8. issue shares for other than cash.
<PAGE> 5
<PAGE>
Portfolio Turnover
The portfolio turnover for the U.S. Government Intermediate-
Term Securities Portfolio was 174.0% and 113.3% for the years
ended August 31, 1994 and 1993. For these same periods, the
turnover for the U.S. Government Long-Term Securities Portfolio
was 188.3% and 173.6%. The Portfolios are not managed, any
turnover results from the inflow and outflow of funds.
MANAGEMENT OF THE FUND
The names and addresses of the directors and officers of the
Fund and officers of the Fund's Adviser, Money Management
Associates (the "Adviser"), together with information as to their
principal business occupations during the past five years, are
set forth below. Fees and expenses for non-interested directors
will be paid by the Fund.
*Daniel L. O'Connor, III, 52 - Chairman of the Board,
President, Treasurer and Director of the Fund. Partner and
Chief Operating Officer of the Adviser. Address: 4922
Fairmont Avenue, Bethesda, MD 20814.
*Richard J. Garvey, 61 - Director. Limited Partner of the
Adviser. Address: 4922 Fairmont Avenue, Bethesda, MD 20814.
*William L. Major, 56 - Secretary. Employee of the Fund's
investment adviser since 1988, a limited partner since 1994.
Strategic Planning Manager, Leaseway Transportation, a
diversified transportation company. Address: 4922 Fairmont
Avenue, Bethesda, MD 20814.
Jeffrey R. Ellis, 50 - Director. Vice President of
LottoFone, a telephone lottery system, since 1993. Vice
President Shoppers Express, Inc. through 1992. Address:
5525 Dorsey Lane, Bethesda, MD 20816.
Patrick F. Noonan, 52 - Director. Chairman and Chief
Executive Officer of the Conservation Fund since 1986. Vice
Chairman, American Farmland Trust and Trustee, American
Conservation Association since 1985. President,
Conservation Resources, Inc. since 1981. Address: 11901
Glen Mill Drive, Potomac, MD 20854.
Arthur J. Rosenblatt, 82 - Director. Retired. Address:
2913 39th Street, NW, Washington, DC 20016.
Leo Seybold, 80 - Director. Retired. Address: 5804
Rockmere Drive, Bethesda, MD 20816.
<PAGE> 6
<PAGE>
*Rita A. Gardner, 51 - Director. Limited partner of the
Adviser. Vice President and Director of MMA Services, Inc.
until 1993. Address: 4922 Fairmont Avenue, Bethesda, MD
20814.
Michael G. Trainer, 53 - Director. Attorney at Law.
Address: 4922 Fairmont Avenue, Bethesda, MD 20814.
Timothy N. Coakley, CPA, 27 - Controller. Audit Manager
Deloitte & Touche LLP until 1994. Address: 4922 Fairmont
Avenue, Bethesda, MD 20814.
Certain Directors and Officers of the Fund are also
Directors and Officers of Fund for Government Investors, Inc.,
Fund for Tax-Free Investors, Inc. and American Gas Index Fund,
Inc., other investment companies managed by the Adviser.
The Adviser, Money Management Associates, which has its
office at 4922 Fairmont Avenue, Bethesda, Maryland 20814,
provides the Fund with investment advisory services. The Adviser
is a limited partnership which was formed under the laws of the
District of Columbia on August 15, 1974. Its primary business
since inception has been to serve as the Investment Adviser to
Fund for Government Investors, Inc., and to Fund for Tax-Free
Investors, Inc. Daniel L. O'Connor is the sole general partner of
the Adviser, and, as such, exercises control thereof.
* Indicates interested person as defined in the Investment
Company Act of 1940.
Under an Investment Advisory Agreement with the Adviser,
dated October 10, 1985 (the "Agreement"), the Adviser provides
investment advice to the Fund and oversees its day-to-day
operations, subject to direction and control by the Fund's Board
of Directors. Pursuant to the Agreement, the Fund pays the
Adviser a fee at an annual rate based on 0.50% of the net assets
of the Fund. Normal expenses which are borne by the Fund,
include, but are not limited to, taxes, corporate fees, federal
and state registration fees, interest expenses (if any), office
expenses, the costs incident to preparing, registering and
redeeming stock certificates for shareholders, custodian charges,
the expenses of shareholders' and directors' meetings, data
processing, preparation, printing and distribution of all reports
and proxy materials, legal services rendered to the Fund,
compensation for those directors who do not serve as employees of
the Adviser, insurance coverage for the Fund and its directors
and officers, and its membership in trade associations. The
Adviser will pay the costs of office space. 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
<PAGE> 7
<PAGE>
institutions for their expenses in connection with the
distribution of Fund shares.
For the fiscal year ending August 31, 1994, the Adviser
earned advisory fees of $156,752, $95,945, and $111,890 on the
Money Market, U.S. Government Intermediate-Term Securities, and
U.S. Government Long-Term Securities Portfolios, respectively.
Under an Agreement dated September 1, 1993, Rushmore Trust &
Savings, FSB (RTSB) provides the Fund with shareholder servicing,
transfer agent, custodian and administrative services. The
services of RTSB are provided to the Fund on a fee basis and are
paid by the Fund. RTSB will charge an annual fee of 25 basis
points (.25%) on the Money Market, 30 basis points (.30%) on the
U.S. Government Intermediate-Term and Long-Term Securities on the
average daily net assets of each portfolio. The non-interested
directors of the Fund have reviewed the fee structure and
determined that it is competitive and in the best interest of the
shareholders of the Fund. The fees will be reviewed and approved
annually by the non-interested directors. The Fund is subject to
the self-custodian rules of the Securities and Exchange
Commission. These rules require that the Custodian be subject to
three securities verification examinations each year conducted by
the Fund's independent accountant. Two of the examinations must
be performed on an unannounced surprise basis.
PRINCIPAL HOLDERS OF SECURITIES
On December 5, 1994 there were 22,597,986 shares of the
Money Market Portfolio, 1,174,115 shares of the U.S. Government
Intermediate-Term Securities Portfolio, 3,652,004 shares of the
U.S. Government Long-Term Securities Portfolio. Charles Schwab &
Company, San Francisco, California, held for the benefit of
others 21.71% of U.S. Government Intermediate-Term Securities
Portfolio and 70.48% of U.S. Government Long-Term Securities
Portfolio. Officers and Directors of the Fund, as a group, own
less than 1% of the shares outstanding.
NET ASSET VALUE
The net asset value of the Money Market Portfolio's shares
will be determined daily as of 4:00 p.m., Eastern time. The net
asset value of U.S. Government Intermediate-Term and Long-Term
Securities Portfolios' shares will be determined at 3:00 p.m.
except on customary national business holidays which result in
the closing of the New York Stock Exchange, and weekends. The
net asset value per share is calculated by dividing the net worth
by the number of shares. The securities of the U.S. Government
Intermediate-Term Securities and U.S. Government Long-Term
Securities Portfolios will be valued on the basis of the average
of quoted bid and ask price when market quotations are available.
<PAGE> 8
<PAGE>
CALCULATION OF YIELD AND RETURN QUOTATIONS
A current quotation of yield and total return may appear
from time to time in advertisements and in communications to
shareholders and others. The yields and returns quoted may be
calculated as follows:
Money Market Portfolio
(a) Yield - the net average annualized yield for a
specified 7-day period computed by dividing the net change in
value, exclusive of capital changes, of a hypothetical pre-
existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge for all fees and
expenses charged to all shareholders' accounts and dividing the
difference by the value of the account at the beginning of the
period. The resulting base period return is then multiplied by
365/7 with the resulting yield figure carried to the nearest
hundredth of one percent.
(b) Effective Yield - the net annualized yield giving
effect to compounding by adding 1, raising the sum to a power
equal to 365 divided by 7 and subtracting 1 from the result
according to the following formula:
EFFECTIVE YIELD =
[(BASE PERIOD RETURN + 1) 365/7] - 1.
U.S. Government Intermediate and Long-Term Securities Portfolios
Yield is calculated based on a specified 30 day period
computed by dividing the net investment income per share earned
during the period by the offering price per share on the last day
of the period according to the following formula:
YIELD = 2[(a-b/cd) + 1)6 - 1] where:
a = income earned during the period
b = expenses
c = average number of shares outstanding during the
period entitled to receive dividends
d = offering price on last day of the period
Average annual total return is computed by finding the
average annual compounded rate of return over the 1, 5 and 10
year periods (or from inception) that would equate the initial
amount invested to the ending redeemable value according to the
following formula:
P (1 + T)n = ERV where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value
<PAGE> 9
<PAGE>
TAXES
The Fund qualifies as a regulated investment company under
Subchapter M of the Internal Revenue Code. To qualify, at least
90% of the Fund's gross income must be derived from dividends,
interest, and gains from the sale of securities. No more than
30% of the Fund's gross income may be derived from gains on the
sale of securities held less than three months. These
requirements may restrict the extent of the Fund's activities in
option transactions.
As a regulated investment company, the Fund will not be
subject to Federal income taxes on the net investment income and
capital gains that it distributes to its shareholders. The
distribution of net investment income and capital gains will be
taxable to shareholders regardless of whether the shareholder
elects to receive these distributions in cash or in additional
shares. Distributions reported to shareholders as long-term
capital gains shall be taxable as such, regardless of how long
the shareholder has owned the shares. 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.
The Fund has available to it a number of elections under the
Internal Revenue Code concerning the treatment of option
transactions for tax purposes. The Fund will utilize the tax
treatment most favorable to a majority of investors. Taxation of
these transactions will vary according to the elections made by
the Fund. These tax considerations may have an impact on
investment decisions made by the Fund.
AUDITORS AND CUSTODIAN
Deloitte & Touche LLP, independent certified public
accountants, are the auditors of the Fund. Rushmore Trust &
Savings, FSB, Bethesda, Maryland acts as custodian bank for the
Fund.
FINANCIAL STATEMENTS
The Fund incorporates by reference in this Statement of
Additional Information the financial statements and notes
contained in its annual report to the shareholders for the year
ended August 31, 1994, which must accompany this Statement of
Additional Information.
<PAGE> 10
<PAGE>
CURRENT ANNUAL REPORT OF
THE RUSHMORE FUND, INC.,
FOR THE FISCAL YEAR ENDED
AUGUST 31, 1994
<PAGE>
ANNUAL REPORT, August 31, 1994
The Rushmore Fund, Inc.
4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 343-3355 (301) 657-1500
Dear Shareholders:
It has been a year since interest rates stopped falling. In
October 1993 the yield on the 30 year bond was 5.79%, the lowest
since 1977, when the Treasury began regular auctions. On August
31, 1994 the yield on the bond had risen to 7.45%.
Since February of this year the Federal Reserve has increased the
federal funds rate 175 basis points (1.75%). Though inflation
remains relatively low, there are some signs that inflationary
pressures are growing. For example, commodity prices have been on
the rise this year. Also, Federal Reserve Chairman Greenspan has
said in public statements that it is just as important to reduce
investor's expectations of higher inflation as it is to reduce
actual inflation. Adding to the concerns of bond holders is
uncertainty about weakness in the U.S. dollar. They fear it will
diminish the value of dollar-denominated assets and boost
inflation by increasing the cost of goods imported into the
United States. These factors are adding pressure to bond prices.
Rushmore Money Market Portfolio
Rushmore Money Market Portfolio invests in the highest quality
commercial paper (66.94%), U.S. Government Agency obligations
(13.36%) and U.S. Treasury repurchase agreements (19.70%). The
Fund had an average maturity of 40 days on August 31, 1994. For
the one year period ended August 31, 1994, the annualized yield
was 2.88%. We look for short term rates to continue to rise over
the next few months, which in turn will mean high rates on money
market funds.
Rushmore U.S. Government Intermediate-Term Securities and Long-
Term Securities Portfolios
Rushmore U.S. Government Intermediate-Term Securities Portfolio
invests in the current ten-year Treasury note. The objective of
the Fund is to provide high current income, while maintaining the
safety of principal. For the fiscal year ended August 31, 1994,
the Fund posted a total return of -5.64%.
Rushmore U.S. Government Long-Term Securities Portfolio invests
in 30-year Treasury bonds, and, like the Intermediate Term
Portfolio, strives to earn the highest income possible, while
maintaining the safety of principal. For the fiscal year ended
August 31, 1994, the Fund posted a total return of -10.29%.
<PAGE>
In conclusion, the prospect of further tightening by the Federal
Reserve remains very much alive. However, it is fair to say the
economy has shown remarkable resilience in the face of a sharp
backup in interest rates. Inflation remains low, so we feel that
any further increase in rates would be an opportunity to buy
Treasury securities. Treasury notes and bonds are clearly a
better buy now, with rates up sharply, than they were a year ago.
We want to stress that we will continue our conservative
investment philosophy and thank you for your continued support.
Sincerely,
/s/Daniel L. O'Connor /s/Richard J. Garvey
Daniel L. O'Connor Richard J. Garvey
Chairman President
<PAGE> 2
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
August 31, 1994
<TABLE>
<CAPTION>
Face AmountValue (Note 1)
<S> <C><C>
COMMERCIAL PAPER 66.99%
AT & T Corp.
4.40%,9/13/94 $1,000,000$998,533
Atlantic Richfield Co.
4.58%, 10/26/94 1,000,000993,003
American Express Credit Corp.
4.75%, 11/16/94 1,000,000989,972
Coca-Cola Co.
4.78%, 11/18/94 1,000,000989,643
Cargill, Inc.
4.71%, 9/29/94 1,000,000996,337
Chevron Oil Finance Co.
4.70%, 11/08/94 1,000,000991,122
Exxon Credit Corp.
4.50%, 10/18/94 1,000,000994,125
Ford Motor Credit Corp.
4.56%, 11/04/94 1,000,000991,893
General Electric Capital Corp.
4.42%, 9/14/94 1,000,000998,404
IBM Corp.
3.60%, 9/15/94 1,000,000998,211
Merrill Lynch & Company, Inc.
4.78%,11/23/94 1,000,000988,979
Phillip Morris Co.
4.75%, 11/17/94 1,000,000989,840
Pitney Bowes Credit Corp.
4.65%, 10/12/94 1,000,000994,704
<PAGE> 3
<PAGE>
Texaco, Inc.
4.4%, 9/07/94 1,000,000999,267
Transamerica Finance Corp.
4.45%, 9/21/94 1,000,000 997,528
Total Commercial Paper
(Cost $14,911,561) 14,911,561
</TABLE>
<TABLE>
<CAPTION>
Face AmountValue (Note 1)
<S> <C><C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS 13.37%
Federal Home Loan Bank Discount
Notes 4.44%, 10/25/94 $1,000,000$ 993,340
Federal Farm Credit Discount
Notes 4.56%, 11/02/94 1,000,000 992,147
Freddie Mac Discount Notes
4.65%, 11/07/94 1,000,000 991,346
Total U.S. Government Agency
Obligations (Cost $2,976,833) 2,976,833
REPURCHASE AGREEMENTS
19.71%
With Paine Webber at 4.75%, dated
8/31/94, due 9/1/94,
collateralized by U.S. Treasury
Bills, due 9/22/94
(Cost $4,387,201) 4,387,201
Total Investments 100.07%
(Cost $22,275,595*) 22,275,595
Other Liabilities in excess of Assets
-0.07% (15,070)
Net Assets (Note 7) 100.00% $ 22,260,525
Net Asset Value Per Share (Based
on 22,260,525 Shares
Outstanding) $ 1.00
</TABLE>
<PAGE> 4
<PAGE>
* Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
<PAGE> 5
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENT OF NET ASSETS
U.S. GOVERNMENT INTERMEDIATE-TERM SECURITIES PORTFOLIO
August 31, 1994
<TABLE>
<CAPTION>
Face AmountValue (Note 1)
<S> <C><C>
U.S. TREASURY OBLIGATIONS 95.48%
U.S. Treasury Notes
5.875%, 2/15/04
(Cost $13,009,658) $14,000,000$12,758,900
REPURCHASE AGREEMENTS 4.41%
With Paine Webber at 4.75%,
dated 8/31/94, due 9/1/94,
collateralized by
U.S. Treasury Bills, due 9/22/94
(Cost $588,953) 588,953
Total Investments 99.89%
(Cost $13,598,611*) 13,347,853
Other Assets Less Liabilities 0.11% 14,419
Net Assets (Note 7) 100.00% $13,362,272
Net Asset Value Per Share
(Based on 1,489,141
shares outstanding) $ 8.97
</TABLE>
* Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
<PAGE> 6
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENT OF NET ASSETS
U.S. GOVERNMENT LONG-TERM SECURITIES PORTFOLIO
August 31, 1994
<TABLE>
<CAPTION>
Face Amount Value (Note 1)
<S> <C><C>
U.S. TREASURY OBLIGATIONS 96.40%
U.S. Treasury Bonds 8.00%,
11/15/21 $ 8,000,000$ 8,365,040
U.S. Treasury Bonds 6.25%,
8/15/23 23,400,00019,856,538
Total Investments 96.40%
(Cost $28,995,018*) 28,221,578
Other Assets Less Liabilities 3.60% 1,054,815
Net Assets (Note 7) 100.00% $29,276,393
Net Asset Value Per Share
(Based on 3,225,132
Shares Outstanding) $ 9.08
</TABLE>
* Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
<PAGE> 7
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENTS OF OPERATIONS
For the Year Ended August 31, 1994
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
INVESTMENT INCOME $1,128,365 $1,209,008 $1,515,573
EXPENSES
Investment Advisory
Fee 156,752 95,945 111,890
Administrative Fee
(Note 2) 86,641 58,072 67,293
Total Expenses 243,393 154,017 179,183
NET INVESTMENT INCOME 884,972 1,054,991 1,336,390
Net Realized Loss
on Investments -0- (746,062) (271,328)
Net Change in
Unrealized
Depreciation of
Investment -0- (1,585,722) (2,738,037)
NET LOSS ON
INVESTMENTS -0- (2,331,784) (3,009,365)
NET INCREASE
(DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $ 884,972 $(1,276,793) $(1,672,975)
</TABLE>
See Notes to Financial Statements.
<PAGE> 8
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1994
<TABLE>
<CAPTION>
Money Market
Portfolio
1994 1993
<S> <C><C>
FROM INVESTMENT ACTIVITIES
Net Investment Income $ 884,972 $ 1,512,232
Net Realized Gains (Losses)
on Investment Transactions -
Net Change in Unrealized Appreciation
(Depreciation) of Investments -
Net Increase (Decrease) in Net Assets
Resulting From Operations 884,972 1,512,232
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income (895,876) (1,512,230)
FROM SHARE TRANSACTIONS
(Note 5) . . . . (34,498,161) (41,846,837)
Net Increase (Decrease)
in Net Assets . . (34,509,065) (41,846,835)
NET ASSETS-Beginning of Year 56,769,590 98,616,425
NET ASSETS-End of Year $ 22,260,525 $ 56,769,590
</TABLE>
See Notes to Financial Statements.
<PAGE> 9
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1994
<TABLE>
<CAPTION>
U.S. Government
Intermediate-Term
Securities
Portfolio
1994 1993
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income $ 1,054,991 $ 1,283,334
Net Realized Gains (Losses) on
Investment Transactions (746,062) 331,837
Net Change in Unrealized Appreciation
(Depreciation) of Investments (1,585,722) 1,266,772
Net Increase (Decrease) in Net Assets
Resulting From Operations (1,276,793) 2,881,943
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income (1,059,384) (1,282,332)
From Realized Gains on Investments (331,837) (2,156,689)
FROM SHARE TRANSACTIONS
(Note 5) . . . . . . . . . (4,320,098) 4,794,390
Net Increase (Decrease)
in Net Assets . . (6,988,112) 4,237,312
NET ASSETS-Beginning of Year 20,350,384 16,113,072
NET ASSETS-End of Year 13,362,272 $ 20,350,384
</TABLE>
See Notes to Financial Statements.
<PAGE> 10
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1994
<TABLE>
<CAPTION>
U.S. Government
Long-Term
Securities
Portfolio
1994 1993
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income $ 1,336,390 $ 1,210,927
Net Realized Gains (Losses) on
Investment Transactions (271,328) 1,300,316
Net Change in Unrealized
Appreciation (Depreciation)
of Investments (2,738,037) 1,374,652
Net Increase (Decrease)
in Net Assets Resulting
From Operations (1,672,975) 3,885,895
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income (1,341,699) (1,210,403)
From Realized Gains on Investments (1,300,316) (696,214)
FROM SHARE TRANSACTIONS
(Note 5) 9,497,713 (688,561)
Net Increase (Decrease)
in Net Assets 5,182,723 1,290,717
NET ASSETS-Beginning of Year 24,093,670 22,802,953
NET ASSETS-End of Year $29,276,393 $24,093,670
</TABLE>
See Notes to Financial Statements.
<PAGE> 11
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
Money Market Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1994 1993
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 1.00 $ 1.00
Net Investment Income . . 0.027 0.024
Net Realized and Unrealized
Gains (Losses) on Securities
Net Increase in Net Asset Value
Resulting from Operations 0.027 0.024
Dividends to Shareholders (0.027) (0.024)
Distributions to Shareholders
From Net Realized Capital Gains
Net Increase (Decrease) in
Net Asset Value . . . . . 0.00 0.00
Net Asset Value End of Year $ 1.00 $ 1.00
Total Investment Return . . . 2.88% 2.43%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.75% 0.78%
Net Investment Income . . 2.73% 2.40%
Supplementary Data:
Portfolio Turnover Rate .
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 22,261 56,759
</TABLE>
See Notes to Financial Statements.
<PAGE> 12
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
Money Market Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1992 1991
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 1.00 $ 1.00
Net Investment Income . . 0.037 0.061
Net Realized and Unrealized
Gains (Losses) on Securities
Net Increase in Net Asset
Value Resulting
from Operations . . . . 0.037 0.061
Dividends to Shareholders (0.037) (0.061)
Distributions to Shareholders
From Net Realized Capital Gains
Net Increase (Decrease) in
Net Asset Value . . . . . 0.00 0.00
Net Asset Value End of Year $ 1.00 $ 1.00
Total Investment Return . . . 3.71% 6.33%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.80% 0.79%
Net Investment Income . . 3.71% 6.14%
Supplementary Data:
Portfolio Turnover Rate .
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 98,606 115,539
</TABLE>
See Notes to Financial Statements.
<PAGE> 13
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
Money Market Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1990
<S> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 1.00
Net Investment Income . . 0.076
Net Realized and Unrealized
Gains (Losses) on Securities
Net Increase in Net Asset
Value Resulting
from Operations . . . . 0.076
Dividends to Shareholders (0.076)
Distributions to Shareholders
From Net Realized Capital Gains
Net Increase (Decrease) in
Net Asset Value . . . . . 0.00
Net Asset Value End of Year $ 1.00
Total Investment Return . . . 7.92%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.80%
Net Investment Income . . 7.62%
Supplementary Data:
Portfolio Turnover Rate .
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 140,718
</TABLE>
See Notes to Financial Statements.
<PAGE> 14
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Intermediate-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1994 1993
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 10.22 $ 10.73
Net Investment Income . . 0.527 0.596
Net Realized and Unrealized
Gains (Losses) on Securities (1.080) 4.492
Net Increase (Decrease) in
Net Asset Value Resulting
from Operations (0.553) 1.088
Dividends to Shareholders (0.530) (0.596)
Distributions to Shareholders
From Net Realized Capital Gains (0.166) (1.002)
Net Increase (Decreases) in
Net Asset Value . . . . . (1.25) (0.51)
Net Asset Value End of Year $ 8.97 $ 10.22
Total Investment Return . . . (5.64)% 14.47%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.80% 0.80%
Net Investment Income . . 5.50% 5.91%
Supplementary Data:
Portfolio Turnover Rate . 174.0% 113.3%
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 1,489 1,990
</TABLE>
See Notes to Financial Statements.
<PAGE> 15
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Intermediate-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1992 1991
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 9.93 $ 9.39
Net Investment Income . . 0.681 0.702
Net Realized and Unrealized
Gains (Losses) on Securities 0.799 0.539
Net Increase (Decrease) in
Net Asset Value Resulting
from Operations 1.480 1.241
Dividends to Shareholders (0.680) (0.701)
Distributions to Shareholders
From Net Realized Capital Gains
Net Increase (Decreases) in
Net Asset Value . . . . . 0.80 0.54
Net Asset Value End of Year $ 10.73 $ 9.93
Total Investment Return . . . 15.37% 13.86%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.80% 0.80%
Net Investment Income . . 6.63% 7.21%
Supplementary Data:
Portfolio Turnover Rate . 199.8% 195.8%
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 1,502 2,322
</TABLE>
See Notes to Financial Statements.
<PAGE> 16
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Intermediate-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1990
<S> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 10.01
Net Investment Income . . 0.733
Net Realized and Unrealized
Gains (Losses) on Securities (0.387)
Net Increase (Decrease) in
Net Asset Value Resulting
from Operations 0.346
Dividends to Shareholders (0.732)
Distributions to Shareholders
From Net Realized Capital Gains (0.234)
Net Increase (Decreases) in
Net Asset Value . . . . . (0.62)
Net Asset Value End of Year $ 9.39
Total Investment Return . . . 3.28%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.80%
Net Investment Income . . 7.47%
Supplementary Data:
Portfolio Turnover Rate . 423.5%
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 372
</TABLE>
See Notes to Financial Statements.
<PAGE> 17
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Long-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1994 1993
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 11.55 $ 10.62
Net Investment Income . . 0.599 0.650
Net Realized and Unrealized
Gains (Losses) on Securities (1.880) 1.304
Net Increase (Decrease) in
Net Asset Value Resulting
from Operations (1.281) 1.954
Dividends to Shareholders (0.602) (0.650)
Distributions to Shareholders
From Net Realized Capital Gains (0.583) (0.374)
Net Increase (Decreases) in
Net Asset Value . . . . . (2.47) 0.93
Net Asset Value End of Year $ 9.08 $ 11.55
Total Investment Return . . . (10.29)% 20.92%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.80% 0.80%
Net Investment Income . . 5.97% 6.08%
Supplementary Data:
Portfolio Turnover Rate . 188.3% 173.6%
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 3,225 2,085
</TABLE>
See Notes to Financial Statements.
<PAGE> 18
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Long-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1992 1991
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 9.97 $ 9.14
Net Investment Income . . 0.697 0.718
Net Realized and Unrealized
Gains (Losses) on Securities 0.649 0.829
Net Increase (Decrease) in
Net Asset Value Resulting
from Operations 1.346 1.547
Dividends to Shareholders (0.696) (0.717)
Distributions to Shareholders
From Net Realized Capital Gains
Net Increase (Decreases) in
Net Asset Value . . . . . 0.65 0.83
Net Asset Value End of Year $ 10.62 $ 9.97
Total Investment Return . . . 13.97% 17.61%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.80% 0.80%
Net Investment Income . . 6.80% 7.43%
Supplementary Data:
Portfolio Turnover Rate . 298.0% 235.7%
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 2,148 1,452
</TABLE>
See Notes to Financial Statements.
<PAGE> 19
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Long-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1990
<S> <C>
Per Share Operating Performance:
Net Asset Value Beginning
of Year $ 9.96
Net Investment Income . . 0.720
Net Realized and Unrealized
Gains (Losses) on Securities (0.821)
Net Increase (Decrease) in
Net Asset Value Resulting
from Operations (0.101)
Dividends to Shareholders (0.719)
Distributions to Shareholders
From Net Realized Capital Gains ( -- )
Net Increase (Decreases) in
Net Asset Value . . . . . (0.82)
Net Asset Value End of Year $ 9.14
Total Investment Return . . . 1.24%
Ratios to Average Net Assets:
Expenses . . . . . . . . . 0.80%
Net Investment Income . . 7.28%
Supplementary Data:
Portfolio Turnover Rate . 400.8%
Number of Shares Outstanding
at End of Year
(000's omitted) . . . . 1,427
</TABLE>
See Notes to Financial Statements.
<PAGE> 20
<PAGE>
THE RUSHMORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
August 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
The Rushmore Fund, Inc. ("Fund") is registered with the
Securities and Exchange Commission under the Investment Company
Act of 1940 as an open end, diversified investment company. The
Fund consists of three separate portfolios each with its own
investment objectives and policies. The following is a summary of
significant accounting policies which the Fund follows.
(a) Securities of the Money Market Portfolio are valued at
amortized cost which approximates market value. Securities
of the U.S. Government Intermediate-Term Securities
Portfolio and U.S. Government Long-Term Securities Portfolio
are valued on the basis of the average of quoted bid and ask
prices when market quotations are available. If market
quotations are not readily available, the Board of Directors
will value the portfolios' securities in good faith.
(b) Security transactions are recorded on the trade date (the
date the order to buy or sell is executed). Interest income
is accrued on a daily basis. Realized gains and losses from
securities transactions are computed on an identified cost
basis.
(c) Net investment income is computed, and dividends are
declared daily, in the Money Market, U.S. Government
Intermediate-Term Securities and U.S. Government Long-Term
Securities Portfolios. Income dividends in these portfolios
are paid monthly. Dividends are reinvested in additional
shares unless shareholders request payment in cash.
Generally, short-term capital gains are distributed
quarterly in the Money Market, U.S. Government Intermediate-
Term Securities and U.S. Government Long-Term Securities
Portfolios. Long-term capital gains, if any, are distributed
annually.
(d) The Fund complies with the provisions of the Internal
Revenue Code applicable to regulated investment companies
and distributes all net investment income to its
shareholders. Therefore, no Federal income tax provision is
required.
2. INVESTMENT ADVISORY AND SHAREHOLDER SERVICES
Investment advisory and management services are provided by
Money Management Associates, ("Adviser"). Under an agreement with
the Adviser, each portfolio of the Fund pays a fee for such
<PAGE> 21
<PAGE>
services at an annual rate of 0.50% of the average daily net
assets of the portfolio.
Rushmore Trust & Savings FSB (Trust) provides transfer
agency, dividend-disbursing and shareholder services to the Fund.
In addition, the Trust serves as custodian of the Fund's assets
and pays the operating expenses of the Fund. For these services,
the Trust receives an annual fee of 0.25% of the average assets
of the Money Market Portfolio, 0.30% of the average assets of the
U.S. Government Intermediate Securities and U.S. Government Long-
Term Securities Portfolios.
3. SECURITIES TRANSACTIONS
For the year ended August 31, 1994, purchases and sales
(including maturities) of securities (excluding short-term
securities) were as follows:
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Purchases - -- $ 30,011,891 $ 55,721,500
Sales ---- $ 31,568,180 $ 39,484,875
</TABLE>
4. ORGANIZATION OF THE FUND
Under agreements approved by the shareholders, the
Rushmore equity portfolios merged with similar portfolios of the
Cappiello-Rushmore Trust. The Stock Market Index Plus Portfolio
merged with the Cappiello-Rushmore Growth Fund; the Over-the-
Counter Index Plus Portfolio merged with the Cappiello-Rushmore
Emerging Growth Fund; and the Precious Metals Index Plus
Portfolio merged with the Cappiello-Rushmore Gold Fund. The
mergers occurred on March 7, 1994, when shares of each Rushmore
portfolio were converted to shares of the respective Cappiello-
Rushmore portfolio based on the relative net asset value per
share of each of the portfolios on that date. Therefore, no
financial information is provided for the Stock Market Index Plus
Portfolio, the Over-the-Counter Index Plus Portfolio, and the
Precious Metals Index Plus Portfolio.
<PAGE> 22
<PAGE>
5. SHARE TRANSACTIONS
On August 31, 1994, there were 1,000,000,000 shares of
$.001 par value capital stock authorized. Transactions in shares
of the Fund for the year ended August 31, 1994 were as follows:
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
In Shares
Shares Sold . . . 186,493,281 2,367,327 6,740,435
Shares Issued in
Reinvestment of
Dividends . . . . 785,648 125,167 235,699
187,278,929 2,492,494 6,976,134
Shares Redeemed . (221,777,090) (2,993,817) (5,836,329)
(34,498,161) (501,323) 1,139,805
In Dollars . . . .
Shares Sold . . . $186,493,281 $23,290,679 $69,119,197
Shares Issued in
Reinvestment of
Dividends . . . . 785,648 1,171,779 2,351,026
187,278,929 24,462,458 71,470,223
Shares Redeemed . (221,777,090) (28,782,556) (61,972,510)
$ (34,498,161) $(4,320,098) $ 9,497,713
</TABLE>
6. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
Unrealized appreciation (depreciation) as of August 31,
1994, based on the cost for Federal income tax purposes is
as follows:
<PAGE> 23
<PAGE>
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Gross Unrealized
Appreciation . . . $ 0 $ 41,397
Gross Unrealized
Depreciation . . . (250,758) (814,837)
Net Unrealized
Depreciation . . . $ (250,758) $ (773,440)
Cost of Investments
for Federal Income
Tax purposes . . . $22,275,595 $13,598,611 $28,995,018
</TABLE>
7. NET ASSETS
At August 31, 1994, net assets consisted of the following:
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Paid-in Capital . . . . . $22,260,525 $14,359,731 $31,102,593
Undistributed Net
Investment Income . . . 0 0 0
Accumulated Net Realized
Loss on Investments . . 0 (746,701) (1,052,760)
Net Unrealized Depreciation
on Investments . . . . 0 (250,758) (773,440)
Net Assets . . . . . . . $ 22,260,525 $13,362,272 $29,276,393
</TABLE>
<PAGE> 24
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
of The Rushmore Fund, Inc.:
We have audited the statements of net assets of the Money Market,
U.S. Government Intermediate-Term Securities, and U.S. Government
Long-Term Securities Portfolios of The Rushmore Fund, Inc. as of
August 31, 1994 and the related statements of operations for the
year then ended, and the statements of changes in net assets and
the financial highlights for the periods presented. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned at August 31, 1994 by correspondence with the
custodian and brokers; where replies were not received from
brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the
financial position of the Money Market, U.S. Government
Intermediate-Term Securities, and U.S. Government Long-Term
Securities Portfolios of The Rushmore Fund, Inc. at August 31,
1994, the results of their operations, the changes in their net
assets and the financial highlights for the respective stated
periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Washington, D.C.
October 20, 1994
<PAGE> 25
<PAGE>
SEMI-ANNUAL REPORT OF
THE RUSHMORE FUND, INC.,
FOR THE SIX-MONTH PERIOD ENDED
FEBRUARY 28, 1995
<PAGE>
SEMI-ANNUAL REPORT, February 28, 1995
The Rushmore Fund, Inc.
4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 343-3355 (301) 657-1500
Dear Shareholders:
The 1994 calendar year ranks as one of the worst in the bond
market's history, and the bear market environment has not abated
through February 1995. The Federal Reserve raised the Fed Funds
rate a total of three percent in seven incremental increases
during the period February 1994 through February 1995, primarily
in response to the persistence of a strong economy. Much of the
increase in interest rates can be attributed to persistent
economic strength.
Rushmore Money Market Portfolio
Rushmore Money Market Portfolio invests in the highest quality
commercial paper (75.11%), U.S. Government Agency obligations
(15.02%), and U.S. Treasury repurchase agreements (9.87%). As of
February 28, 1995, the Fund had an average maturity of 17 days
which proved to be beneficial, as short-term rates continued to
rise. For the six month period ended February 28, 1995, Rushmore
Money Market Portfolio had an annualized yield of 4.56%.
Rushmore U.S. Government Intermediate-Term Securities and Long-
Term Securities Portfolios
Rushmore U.S. Government Intermediate-Term Securities Portfolio
invests in the current ten-year Treasury note. The objective of
the Fund is to provide high current income, while maintaining the
safety of principal. For the six month period ended February 28,
1995, the Fund's total return was 2.72%.
Rushmore U.S. Government Long-Term Securities Portfolio invests
in 30-year Treasury bonds, and like the Intermediate-Term
Portfolio, strives to earn the highest income possible, while
maintaining the safety of principal. For the six month period
ended February 28, 1995, the Fund's total return was 3.44%.
Outlook
If the current weakness of the dollar persists, it could have a
slight impact on the economy by increasing the chances of
inflation as foreign producers raise dollar prices to keep their
revenue from falling. However, the most important factor for the
bond market will be the strength of the economy. In the short
term, we believe the economic evidence will build to support
<PAGE> 1
<PAGE>
another increase in interest rates by mid-year. By that time, the
lagging effects of the numerous interest rate increases over the
past year should cause the economy to show signs of cooling off.
We are already seeing investors becoming more cautious as they
appear to be funneling more money into higher yielding U.S.
Government securities.
Thank you for your continued support.
Sincerely,
/s/ Daniel L. O'Connor /s/ Richard J.
Garvey
Daniel L. O'Connor Richard J. Garvey
Chairman President
<PAGE> 2
<PAGE>
THE RUSHMORE FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
February 28, 1995
<TABLE>
<CAPTION>
Face Amount Value (Note 1)
<S> <C> <C>
COMMERCIAL PAPER 75.45%
American Tel. & Tel. Corp.
5.95%, 4/07/95 $ 1,000,000 $ 993,885
Atlantic Richfield Co.
5.83%, 3/24/95 1,000,000 996,275
American Express Credit Corp.
5.98%, 3/23/95 1,000,000 996,345
Cargill, Inc.
5.90%, 3/24/95 1,000,000 996,231
Chevron Oil Finance Co.
5.95%, 3/10/95 1,000,000 998,512
Coca-Cola Co.
5.80%, 3/27/95 1,000,000 995,811
Consolidated Natural Gas, Inc.
5.82%, 3/02/95 1,000,000 999,838
Exxon Credit Corp.
5.75%, 3/22/95 1,000,000 996,646
Ford Motor Credit Corp.
6.00%, 3/07/95 1,000,000 999,000
General Electric Capital Corp.
5.98%, 3/15/95 1,000,000 997,674
Merrill Lynch & Company, Inc.
6.07%, 3/06/95 1,000,000 999,157
Philip Morris Co.
5.78%, 3/21/95 1,000,000 996,789
Southern Cal Edison
6.00%, 4/14/95 1,000,000 992,667
Texaco, Inc.
<PAGE> 3
<PAGE>
6.02%, 3/03/95 1,000,000 999,666
U.S. West Capital Funding, Inc.
5.80%, 3/20/95 1,000,000 996,939
Total Commercial Paper
(Cost $14,955,435) 14,955,435
</TABLE>
<TABLE>
<CAPTION>
Face Amount Value (Note 1)
<S> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS 15.09%
Fannie Mae Discount Notes
5.75%, 3/10/95 1,000,000 998,563
Federal Home Loan Bank Discount
Notes 5.85%, 4/10/95 1,000,000 993,500
Freddie Mac Discount Notes
5.78%, 3/06/95 1,000,000 999,197
Total U.S. Government Agency
Obligations (Cost $2,991,260) 2,991,260
REPURCHASE AGREEMENTS 9.92%
With Paine Webber at 6.00%,
dated 2/28/95, due 3/1/95,
collateralized by U.S.
Treasury Notes, due 8/15/96
(Cost $1,965,464) 1,965,464
Total Investments 100.46%
(Cost $19,912,159*) 19,912,159
Other Liabilities in excess
of Assets (0.46%) (91,844)
Net Assets (Note 6) 100.00% $19,820,315
Net Asset Value Per Share (Based
on 19,820,315 Shares Outstanding) $ 1.00
</TABLE>
* Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
<PAGE> 4
<PAGE>
THE RUSHMORE FUND, INC.
U.S. GOVERNMENT INTERMEDIATE-TERM SECURITIES PORTFOLIO
STATEMENT OF NET ASSETS
February 28, 1995
<TABLE>
<CAPTION>
Face Amount Value (Note 1)
<S> <C> <C>
U.S. TREASURY OBLIGATIONS 94.38%
U.S. Treasury Notes
5.875%, 2/15/04 $9,700,000 $8,833,063
U.S. Treasury Notes
7.875%, 11/15/04 300,000 313,312
Total U.S. Treasury Obligations
(Cost $9,338,935) 9,146,375
REPURCHASE AGREEMENTS 5.52%
With Paine Webber at 6.00%,
dated 2/28/95, due 3/1/95,
collateralized by U.S.
Treasury Notes, due 8/15/96
(Cost $535,060) 535,060
Total Investments 99.90%
(Cost $9,873,995*) 9,681,435
Other Assets Less Liabilities 0.10% 9,487
Net Assets (Note 6) 100.00% $ 9,690,922
Net Asset Value Per Share
(Based on 1,086,779 Shares Outstanding) $ 8.92
</TABLE>
* Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
<PAGE> 5
<PAGE>
THE RUSHMORE FUND, INC.
U.S. GOVERNMENT LONG-TERM SECURITIES PORTFOLIO
STATEMENT OF NET ASSETS
February 28, 1995
<TABLE>
<CAPTION>
Face Amount Value (Note 1)
<S> <C> <C>
U.S. TREASURY OBLIGATIONS 97.56%
U.S. Treasury Bonds
8.00%, 11/15/21 $7,700,000 $ 8,058,527
U.S. Treasury Bonds
6.25%, 8/15/23 22,000,000 18,713,750
U.S. Treasury Bonds
7.50%, 11/15/24 8,700,000 8,675,527
U.S. Treasury Bonds
7.625%, 2/15/25 1,000,000 1,019,687
Total U.S. Treasury Obligations
(Cost $36,495,941) 36,467,491
REPURCHASE AGREEMENTS 1.27%
With Paine Webber at 6.00%,
dated 2/28/95, due 3/1/95,
collateralized by U.S.
Treasury Notes, due 8/15/96
(Cost $476,027) 476,027
Total Investments 98.83%
(Cost $36,971,968*) 36,943,518
Other Assets Less Liabilities 1.17% 437,933
Net Assets (Note 6) 100.00% $37,381,451
Net Asset Value Per Share
(Based on 4,122,238 Shares Outstanding) $ 9.07
</TABLE>
* Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
<PAGE> 6
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENTS OF OPERATIONS
For the Six Months Ended February 28, 1995
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
INVESTMENT INCOME (Note 1) $ 591,593 $ 391,070 $1,247,179
EXPENSES
Investment Advisory Fee
(Note 2) 55,328 26,668 78,975
Administrative Fee (Note 2) 27,663 16,001 47,385
Total Expenses 82,991 42,669 126,360
NET INVESTMENT INCOME 508,602 348,401 1,120,819
Net Realized Loss on
Investments (268,047) (516,383)
Net Change in Unrealized
Appreciation of
Investments 58,198 744,990
NET GAIN (LOSS) ON
INVESTMENTS (209,849) 228,607
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $508,602 $138,552 $1,349,426
</TABLE>
See Notes to Financial Statements.
<PAGE> 7
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended February 28,
<TABLE>
<CAPTION>
Money Market
Portfolio
1995 1994
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income $ 508,602 $ 463,202
Net Realized Gains (Losses)
on Investments Transactions -- --
Net Change in Unrealized
Appreciation (Depreciation)
of Investments -- --
Net Increase (Decrease) in
Net Assets Resulting
From Operations 508,602 463,202
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income (508,602) (474,106)
From Realized Gains on
Investments -- --
FROM SHARE TRANSACTIONS
(Note 4) (2,440,210) (29,320,973)
Net Increase (Decrease)
in Net Assets (2,440,210) (29,331,877)
NET ASSETS Beginning of Period 22,260,525 56,769,590
NET ASSETS End of Period $19,820,315 $ 27,437,713
</TABLE>
See Notes to Financial Statements.
<PAGE> 8
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended February 28,
<TABLE>
<CAPTION>
U.S. Government
Intermediate-Term
Securities
Portfolio
1995 1994
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income $ 348,401 $ 521,168
Net Realized Gains (Losses)
on Investments Transactions (268,047) 142,500
Net Change in Unrealized
Appreciation (Depreciation)
of Investments 58,198 (1,165,078)
Net Increase (Decrease) in
Net Assets Resulting
From Operations 138,552 (501,410)
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income (349,493) (525,562)
From Realized Gains on
Investments (331,837)
FROM SHARE TRANSACTIONS
(Note 4) (3,460,409) 1,792,643
Net Increase (Decrease)
in Net Assets (3,671,350) 433,834
NET ASSETS Beginning of Period 13,362,272 20,350,384
NET ASSETS End of Period $ 9,690,922 $ 20,784,218
</TABLE>
See Notes to Financial Statements.
<PAGE> 9
<PAGE>
THE RUSHMORE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended February 28,
<TABLE>
<CAPTION>
U.S. Government
Long-Term
Securities
Portfolio
1995 1994
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income $ 1,120,819 $ 536,256
Net Realized Gains (Losses)
on Investments Transactions (516,383) (139,695)
Net Change in Unrealized
Appreciation (Depreciation)
of Investments 744,990 (1,238,810)
Net Increase (Decrease) in
Net Assets Resulting
From Operations 1,349,426 (842,249)
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income (1,120,819) (541,565)
From Realized Gains on
Investments (1,300,316)
FROM SHARE TRANSACTIONS
(Note 4) 7,876,451 (6,465,684)
Net Increase (Decrease)
in Net Assets 8,105,058 (9,149,814)
NET ASSETS Beginning of Period 29,276,393 24,093,670
NET ASSETS End of Period $37,381,451 $ 14,943,856
</TABLE>
See Notes to Financial Statements.
<PAGE> 10
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
Money Market Portfolio
<TABLE>
<CAPTION>
For the Six
Months Ended
February 28, 1995
<S> <C>
Per Share Operating Performance:
Net Asset Value Beginning of Period $ 1.00
Net Investment Income . . . 0.023
Net Realized and Unrealized Gains
(Losses) on Securities . . --
Net Increase (Decrease) in Net Asset Value
Resulting from Operations 0.023
Dividends to Shareholders . (0.023)
Distributions to Shareholders From Net Realized
Capital Gains . . . . . . --
Net Increase (Decrease) in Net Asset Value 0.00
Net Asset Value End of Period $ 1.00
Total Investment ReturnB . . . 2.31%
Ratios to Average Net Assets:
Expenses . . . . . . . . . . 0.75%A
Net Investment Income . . . 4.56%A
Supplementary Data:
Portfolio Turnover Rate . . --
Number of Shares Outstanding at End of Period
(000's omitted) . . . . . 19,820
</TABLE>
_______________________
A Annualized.
B Total returns for periods of less than one year are not
annualized.
See Notes to Financial Statements.
<PAGE> 11
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
Money Market Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1994 1993
<S> <C> <C>
Per Share Operating
Performance:
Net Asset Value
Beginning of Period $ 1.00 $ 1.00
Net Investment Income 0.027 0.024
Net Realized and
Unrealized Gains (Losses)
on Securities - -
Net Increase (Decrease)
in Net Asset Value
Resulting from Operations 0.027 0.024
Dividends to Shareholders (0.027) (0.024)
Distributions to Shareholders
From Net Realized
Capital Gains -- --
Net Increase (Decrease)
in Net Asset Value 0.00 0.00
Net Asset Value End of Period $ 1.00 $ 1.00
Total Investment ReturnB 2.88% 2.43%
Ratios to Average Net Assets:
Expenses 0.75% 0.78%
Net Investment Income 2.73% 2.40%
Supplementary Data:
Portfolio Turnover Rate
Number of Shares
Outstanding at End of Period
(000's omitted) 22,261 56,759
</TABLE>
_________________________
A Annualized.
B Total returns for periods of less than one year are not
annualized.
See Notes to Financial Statements.
<PAGE> 12
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
Money Market Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1992 1991
<S> <C> <C>
Per Share Operating
Performance:
Net Asset Value
Beginning of Period $ 1.00 $ 1.00
Net Investment Income 0.037 0.061
Net Realized and
Unrealized Gains (Losses)
on Securities -- --
Net Increase (Decrease)
in Net Asset Value
Resulting from Operations 0.037 0.061
Dividends to Shareholders (0.037) (0.061)
Distributions to Shareholders
From Net Realized
Capital Gains -- --
Net Increase (Decrease)
in Net Asset Value 0.00 0.00
Net Asset Value End of Period $ 1.00 $ 1.00
Total Investment ReturnB 3.71% 6.33%
Ratios to Average Net Assets:
Expenses 0.80% 0.79%
Net Investment Income 3.71% 6.14%
Supplementary Data:
Portfolio Turnover Rate -- --
Number of Shares
Outstanding at End of Period
(000's omitted) 98,606 155,539
</TABLE>
___________________________
A Annualized.
B Total returns for periods of less than one year are not
annualized.
See Notes to Financial Statements.
<PAGE> 13
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Intermediate-Term Portfolio
<TABLE>
<CAPTION>
For the Six
Months Ended
February 28, 1995
<S> <C>
Per Share Operating Performance:
Net Asset Value Beginning of Period $ 8.97
Net Investment Income . . . 0.281
Net Realized and Unrealized Gains
(Losses) on Securities . . (0.049)
Net Increase (Decrease) in Net Asset Value
Resulting from Operations 0.232
Dividends to Shareholders . (0.282)
Distributions to Shareholders From Net Realized
Capital Gains . . . . . . --
Net Increase (Decrease) in Net Asset Value (0.05)
Net Asset Value End of Period $ 8.92
Total Investment ReturnB . . . 2.72%
Ratios to Average Net Assets:
Expenses . . . . . . . . . . 0.80%A
Net Investment Income . . . 6.50%A
Supplementary Data:
Portfolio Turnover Rate . . 14.58%A
Number of Shares Outstanding at End of Period
(000's omitted) . . . . . 1,087
</TABLE>
____________________________
A Annualized.
B Total returns for periods of less than one year are not
annualized.
See Notes to Financial Statements.
<PAGE> 14
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Intermediate-Term Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1994 1993
<S> <C> <C>
Per Share Operating
Performance:
Net Asset Value
Beginning of Period $ 10.22 $ 10.73
Net Investment Income 0.527 0.596
Net Realized and
Unrealized Gains (Losses)
on Securities (1.080) 0.492
Net Increase (Decrease)
in Net Asset Value
Resulting from Operations (0.553) 1.088
Dividends to Shareholders (0.530) (0.596)
Distributions to Shareholders
From Net Realized
Capital Gains (0.166) (1.002)
Net Increase (Decrease)
in Net Asset Value (1.25) (0.51)
Net Asset Value End of Period $ 8.97 $ 10.22
Total Investment ReturnB (5.64)% 14.47%
Ratios to Average Net Assets:
Expenses 0.80% 0.80%
Net Investment Income 5.50% 5.91%
Supplementary Data:
Portfolio Turnover Rate 174.0% 113.3%
Number of Shares
Outstanding at End of Period
(000's omitted) 1,489 1,990
</TABLE>
____________________________
A Annualized.
B Total returns for periods of less than one year are not
annualized.
See Notes to Financial Statements.
<PAGE> 15
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Intermediate-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1992 1991
<S> <C> <C>
Per Share Operating
Performance:
Net Asset Value
Beginning of Period $ 9.93 $ 9.39
Net Investment Income 0.681 0.702
Net Realized and
Unrealized Gains (Losses)
on Securities 0.799 0.539
Net Increase (Decrease)
in Net Asset Value
Resulting from Operations 1.480 1.241
Dividends to Shareholders (0.680) (0.701)
Distributions to Shareholders
From Net Realized
Capital Gains - -
Net Increase (Decrease)
in Net Asset Value 0.80 0.54
Net Asset Value End of Period $ 10.73 $ 9.93
Total Investment ReturnB 15.37% 13.86%
Ratios to Average Net Assets:
Expenses 0.80% 0.80%
Net Investment Income 6.63% 7.21%
Supplementary Data:
Portfolio Turnover Rate 199.8% 195.8%
Number of Shares
Outstanding at End of Period
(000's omitted) 1,502 2,322
</TABLE>
A Annualized.
<PAGE> 16
<PAGE>
B Total returns for periods of less than one year are not
annualized.
See Notes to Financial Statements.
<PAGE> 17
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Long-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Six
Months Ended
February 28, 1995
<S> <C>
Per Share Operating Performance:
Net Asset Value Beginning of Period $ 9.08
Net Investment Income . . . 0.306
Net Realized and Unrealized Gains
(Losses) on Securities . . (0.010)
Net Increase (Decrease) in Net Asset Value
Resulting from Operations 0.296
Dividends to Shareholders . (0.306)
Distributions to Shareholders From Net Realized
Capital Gains . . . . . . -
Net Increase (Decrease) in Net Asset Value (0.01)
Net Asset Value End of Period $ 9.07
Total Investment ReturnB . . . 3.44%
Ratios to Average Net Assets:
Expenses . . . . . . . . . . 0.80%A
Net Investment Income . . . 7.02%A
Supplementary Data:
Portfolio Turnover Rate . . 20.06%A
Number of Shares Outstanding at End of Period
(000's omitted) . . . . . 4,122
</TABLE>
A Annualized.
B Total returns for periods of less than one year are not
annualized.
See Notes to Financial Statements.
<PAGE> 18
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Long-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1994 1993
<S> <C> <C>
Per Share Operating
Performance:
Net Asset Value
Beginning of Period $ 11.55 $ 10.62
Net Investment Income 0.599 0.650
Net Realized and
Unrealized Gains (Losses)
on Securities (1.880) 1.304
Net Increase (Decrease)
in Net Asset Value
Resulting from Operations (1.281) (1.954)
Dividends to Shareholders (0.602) (0.650)
Distributions to Shareholders
From Net Realized
Capital Gains (0.583) (0.374)
Net Increase (Decrease)
in Net Asset Value (2.47) 0.093
Net Asset Value End of Period $ 9.08 $ 11.55
Total Investment ReturnB (10.29)% 20.92%
Ratios to Average Net Assets:
Expenses 0.80% 0.80%
Net Investment Income 5.97% 6.80%
Supplementary Data:
Portfolio Turnover Rate 188.3% 173.6%
Number of Shares
Outstanding at End of Period
(000's omitted) 3,225 2,085
</TABLE>
A Annualized.
B Total returns for periods of less than one year are not
annualized.
<PAGE> 19
<PAGE>
See Notes to Financial Statements.
<PAGE> 20
<PAGE>
THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. Government Long-Term Securities Portfolio
<TABLE>
<CAPTION>
For the Year Ended August 31,
1992 1991
<S> <C> <C>
Per Share Operating
Performance:
Net Asset Value
Beginning of Period $ 9.97 $ 9.14
Net Investment Income 0.697 0.718
Net Realized and
Unrealized Gains (Losses)
on Securities 0.649 0.829
Net Increase (Decrease)
in Net Asset Value
Resulting from Operations 1.346 1.547
Dividends to Shareholders (0.696) (0.717)
Distributions to Shareholders
From Net Realized
Capital Gains - -
Net Increase (Decrease)
in Net Asset Value 0.65 0.83
Net Asset Value End of Period $ 10.62 $ 9.97
Total Investment ReturnB 13.97% 17.61%
Ratios to Average Net Assets:
Expenses 0.80% 0.80%
Net Investment Income 6.80% 7.43%
Supplementary Data:
Portfolio Turnover Rate 298.0% 235.7%
Number of Shares
Outstanding at End of Period
(000's omitted) 2,148 1,452
</TABLE>
A Annualized.
B Total returns for periods of less than one year are not
annualized.
<PAGE> 21
<PAGE>
See Notes to Financial Statements.
<PAGE> 22
<PAGE>
THE RUSHMORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
February 28, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
The Rushmore Fund, Inc. (''Fund'') is registered with
the Securities and Exchange Commission under the Investment
Company Act of 1940 as an open-end, diversified investment
company. The Fund consists of three separate portfolios each
with its own investment objectives and policies. The
following is a summary of significant accounting policies
which the Fund follows.
(a) Securities of the Money Market Portfolio are
valued at amortized cost which approximates market
value. Securities of the U.S. Government Intermediate-
Term Securities Portfolio and U.S. Government Long-Term
Securities Portfolio are valued on the basis of the
average of quoted bid and ask prices when market
quotations are available. If market quotations are not
readily available, the Board of Directors will value
the portfolios' securities in good faith.
(b) Security transactions are recorded on the trade
date (the date the order to buy or sell is executed).
Interest income is accrued on a daily basis. Realized
gains and losses from securities transactions are
computed on an identified cost basis.
(c) Net investment income is computed, and dividends
are declared daily, in the Money Market, U.S.
Government Intermediate-Term Securities and U.S.
Government Long-Term Securities Portfolios. Income
dividends in these portfolios are paid monthly.
Dividends are reinvested in additional shares unless
shareholders request payment in cash. Generally, short-
term capital gains are distributed quarterly in the
Money Market, U.S. Government Intermediate-Term
Securities and U.S. Government Long-Term Securities
Portfolios. Long-term capital gains, if any, are
distributed annually.
(d) The Fund complies with the provisions of the
Internal Revenue Code applicable to regulated
investment companies and distributes all net investment
income to its shareholders. Therefore, no Federal
income tax provision is required.
<PAGE> 23
<PAGE>
2. INVESTMENT ADVISORY AND SHAREHOLDER SERVICES
Investment advisory and management services are
provided by Money Management Associates, (''Adviser'').
Under an agreement with the Adviser, each portfolio of the
Fund pays a fee for such services at an annual rate of 0.50%
of the average daily net assets of the portfolio.
Rushmore Trust & Savings, FSB (Trust) provides transfer
agency, dividend-disbursing and shareholder services to the
Fund. In addition, the Trust serves as custodian of the
Fund's assets and pays the operating expenses of the Fund.
For these services, the Trust receives an annual fee of
0.25% of the average assets of the Money Market Portfolio,
0.30% of the average assets of the U.S. Government
Intermediate-Term Securities and U.S. Government Long-Term
Securities Portfolios.
3. SECURITIES TRANSACTIONS
For the period ended February 28, 1995, purchases and
sales (including maturities) of securities (excluding short-
term securities) were as follows:
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Purchases $ 735,250 $11,059,859
Sales $ 4,199,516 $ 3,091,094
</TABLE>
4. SHARE TRANSACTIONS
On February 28, 1995, there were 1,000,000,000 shares
of $.001 par value capital stock authorized. Transactions in
shares of the Fund were as follows:
<PAGE> 24
<PAGE>
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
In Shares
Shares Sold 21,473,144 170,779 1,874,812
Shares Issued
in Reinvestment
of Dividends 496,460 34,472 118,028
21,969,604 205,251 1,992,840
Shares Redeemed (24,409,814) (607,613) (1,095,734)
(2,440,210) (402,362) 897,106
In Dollars
Shares Sold $ 21,473,144 $ 1,483,567 $16,399,370
Shares Issued in
Reinvestment of
Dividends 496,460 298,695 1,032,991
21,969,604 1,782,262 17,432,361
Shares Redeemed (24,409,814) (5,242,671) (9,555,910)
$ (2,440,210) $(3,460,409) $ 7,876,451
</TABLE>
5. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
Unrealized appreciation (depreciation) as of February 28,
1995, based on the cost for Federal income tax purposes is as
follows:
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Gross Unrealized
Appreciation $ 12,582 $343,714
Gross Unrealized
Depreciation --- (205,142) (372,164)
<PAGE> 25
<PAGE>
Net Unrealized
Depreciation --- (192,560)
(28,450)
Cost of Investments
for Federal
Income Tax
purposes $19,912,159 $9,873,995
$36,971,968
</TABLE>
6. NET ASSETS
At February 28, 1995, net assets consisted of the following:
<TABLE>
<CAPTION>
U.S. U.S.
Government Government
Intermediate- Long-
Money Term Term
Market Securities Securities
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Paid-in Capital $19,820,315 $10,898,230 $38,979,044
Undistributed
Net Investment
Income
Accumulated Net
Realized Loss
on Investments (1,014,748) (1,569,143)
Net Unrealized
Depreciation on
Investments (192,560)
(28,450)
NET ASSETS $19,820,315 $ 9,690,922 $37,381,451
</TABLE>
7. CAPITAL LOSS CARRYOVERS
At August 31, 1994, for Federal income tax purposes, the
following portfolio's had capital loss carryovers which may be
applied against future net taxable realized gains of each
<PAGE> 26
<PAGE>
succeeding year until the earlier of its utilization or its
expiration:
<TABLE>
<CAPTION>
Expires in 2002
<S> <C>
U.S. Government Intermediate-Term
Securities Portfolio $ 746,701
U.S. Government Long-Term
Securities Portfolio $1,052,760
</TABLE>
<PAGE> 27
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
PRO FORMA COMBINED
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Rushmore
Rushmore U.S.
U.S. Government
Government Intermediate-
Long-Term Term
Securities Securities
Portfolio Portfolio
<S> <C> <C>
ASSETS
Securities at Value
(Cost $15,027,044 and $11,069,172) $16,193,379 $ 11,470,766
Receivable for Securities Sold - 389,835
Investment Income Receivable 203,720 64,401
Receivable for Shares Purchased 30,200 10,747
Total Assets 16,427,299 11,935,749
LIABILITIES
Dividends Payable 17,678 15,030
Investment Advisory Fee Payable 7,008 5,045
Administration Fee Payable 4,204 3,027
Liability for Shares Redeemed 7,703 319,802
Total Liabilities 36,593 342,904
Net Assets $16,390,706 $ 11,592,845
Net Assets Consist of:
Capital paid in on shares of
common stock $16,439,871 $ 12,171,679
Accumulated net realized gain (loss) (1,215,500) (980,428)
Net change in unrealized appreciation
of investments 1,166,335 401,594
$16,390,706 $ 11,592,845
Shares Outstanding 1,657,846 1,227,678
Net Asset Value Per Share $9.89 $9.44
</TABLE>
<PAGE>
<PAGE>
PRO FORMA COMBINED
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
(unaudited) (continued)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Combined
<S> <C> <C>
ASSETS
Securities at Value
(Cost $15,027,044 and $11,069,172) $ 27,664,145
Receivable for Securities Sold 389,835
Investment Income Receivable 268,121
Receivable for Shares Purchased 40,947
Total Assets 28,363,048
LIABILITIES
Dividends Payable 32,708
Investment Advisory Fee Payable 12,053
Administration Fee Payable 7,231
Liability for Shares Redeemed 327,505
Total Liabilities 379,497
Net Assets $ 27,983,551
Net Assets Consist of:
Capital paid in on shares of
common stock $ 28,611,550
Accumulated net realized gain (loss) (2,195,928)
Net change in unrealized appreciation
of investments 1,567,929
$ 27,983,551
Shares Outstanding (55,500) 2,830,024
Net Asset Value Per Share $9.89
</TABLE>
<PAGE>
<PAGE>
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Rushmore
Rushmore U.S.
U.S. Government
Government Intermediate-
Long-Term Term
Securities Securities
Portfolio Portfolio
<S> <C> <C>
INVESTMENT INCOME $ 2,029,836 $ 784,865
EXPENSES
Investment Advisory Fee 134,573 55,386
Administrative Fee 80,744 33,231
Total Expenses 215,317 88,617
Net Investment Income 1,814,519 696,248
Net Realized Loss on Investments (162,740) (233,727)
Net Change in Unrealized Appreciation of
Investments 1,939,775 652,352
Net Gain on Investments 1,777,035 418,625
Net Increase in Net Assets Resulting
from Operations $ 3,591,554 $ 1,114,873
</TABLE>
<PAGE>
<PAGE>
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1995
(unaudited) (continued)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Combined
<S> <C> <C>
INVESTMENT INCOME $ 2,814,701
EXPENSES
Investment Advisory Fee 189,959
Administrative Fee 113,975
Total Expenses 303,934
Net Investment Income 2,510,767
Net Realized Loss on Investments (396,467)
Net Change in Unrealized Appreciation of
Investments 2,592,127
Net Gain on Investments 2,195,660
Net Increase in Net Assets Resulting
from Operations $ 4,706,427
</TABLE>
<PAGE>
<PAGE>
RUSHMORE U.S. GOVERNMENT LONG-TERM SECURITIES PORTFOLIO
AND
RUSHMORE U.S. GOVERNMENT INTERMEDIATE-TERM SECURITIES PORTFOLIO
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
AUGUST 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Face Amount
Rushmore
Rushmore U.S.
U.S. Government
Government Intermediate-
Long-Term Term
Securities Securities Pro Forma
Portfolio Portfolio Combined
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS 96.95%
U.S. Treasury Notes
5.875%, 2/15/04 8,900,000 8,900,000
U.S. Treasury Notes
7.875%, 11/15/04 300,000 300,000
U.S. Treasury Bonds
7.50%, 2/15/05 700,000 700,000
U.S. Treasury Notes
6.50%, 5/15/05 1,600,000 1,600,000
U.S. Treasury Bonds
8.00%, 11/15/21 800,000 800,000
U.S. Treasury Bonds
7.50%, 11/15/24 7,400,000 7,400,000
U.S. Treasury Bonds
7.625%, 2/15/25 4,850,000 4,850,000
U.S. Treasury Bonds
6.875%, 8/15/25 1,000,000 1,000,000
</TABLE>
<PAGE>
<PAGE>
RUSHMORE U.S. GOVERNMENT LONG-TERM SECURITIES PORTFOLIO AND
RUSHMORE U.S. GOVERNMENT INTERMEDIATE-TERM SECURITIES PORTFOLIO
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
AUGUST 31, 1995
(unaudited) (continued)
[CAPTION]
<TABLE>
Value
Rushmore
Rushmore U.S.
U.S. Government
Government Intermediate-
Long-Term Term
Securities Securities Pro Forma
Portfolio Portfolio Combined
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS 96.95%
U.S. Treasury Notes
5.875%, 2/15/04 8,644,125 8,644,125
U.S. Treasury Notes
7.875%, 11/15/04 331,500 331,500
U.S. Treasury Bonds
7.50%, 2/15/05 756,438 756,438
U.S. Treasury Notes
6.50%, 5/15/05 1,620,499 1,620,499
U.S. Treasury Bonds
8.00%, 11/15/21 917,749 917,749
U.S. Treasury Bonds
7.50%, 11/15/24 8,112,250 8,112,250
U.S. Treasury Bonds
7.625%, 2/15/25 5,409,263 5,409,263
U.S. Treasury Bonds
6.875%, 8/15/25 1,029,062 1,029,062
Total U.S. Treasury Obligations 15,468,324 11,352,562 26,820,886
REPURCHASE AGREEMENTS 3.05%
With Paine Webber at 5.75%,
dated 8/31/95, due 9/1/95,
collateralized by U.S. Treasury
Notes, due 11/15/96 725,055 118,204 843,259
Total Investments - Market 100.00% $16,193,379 $11,470,766 $27,664,145
Total Investments - Cost $15,027,044 $11,069,172 $26,096,216
</TABLE>
<PAGE>
<PAGE>
RUSHMORE U.S. GOVERNMENT LONG-TERM SECURITIES PORTFOLIO AND
RUSHMORE U.S. GOVERNMENT INTERMEDIATE-TERM SECURITIES
PORTFOLIO
Notes to Pro Forma Combined Financial Statements
August 31, 1995
(unaudited)
1. BASIS OF PRESENTATION
Subject to the Agreement and Plan of Reorganization
("Agreement") by the shareholders of the Rushmore U.S.
Government Intermediate-Term Securities Portfolio
("Intermediate-Term Portfolio"), the Rushmore U.S.
Government Long-Term Securities Portfolio ("Long-Term
Portfolio") would acquire substantially all of the assets of
the Intermediate-Term Portfolio in exchange for shares of
the Long-Term Portfolio at the net asset value of the Long-
Term Portfolio as of the Valuation Date as defined in the
Agreement. Shares of the Long-Term Portfolio would then be
distributed pro-rata to the shareholders of the
Intermediate-Term Portfolio.
The pro forma information is intended to provide the
shareholders of the Intermediate-Term Portfolio with
information about the impact of the proposed merger by
showing how it might have affected historical financial
statements if the transaction had been consummated at an
earlier time. The pro forma combined Schedule of
Investments and Statement of Assets and Liabilities have
been presented as if the proposed merger had taken place on
August 31, 1995; the pro forma combined Statement of
Operations for the year Ended August 31, 1995 has been
presented as if the proposed merger had taken place on
September 1, 1994. This information is based upon
historical financial statement data giving effect to the pro
forma adjustments described below. The accounting policies
of the Intermediate-Term Portfolio and the Long-Term
Portfolio are not materially different. The pro forma
financial statements should be read in conjunction with the
separate financial statements of the Intermediate-Term
Portfolio and the Long-Term Portfolio incorporated by
reference into this Registration Statement on Form N-14.
2. PRO FORMA ADJUSTMENTS
The pro forma combined Statement of Assets and Liabilities
reflects the number of shares that will be outstanding after
the conversion of the Intermediate-Term Portfolio shares
<PAGE>
<PAGE>
into the Long-Term Portfolio shares as part of the
Agreement. The combined shares outstanding are calculated
by dividing the total net assets of the Intermediate-Term
Portfolio by the net asset value per share of the Long-Term
Portfolio (the "converted shares"). These converted shares
are then added to the shares outstanding in the Long-Term
Portfolio to arrive at the combined shares outstanding.
<PAGE>
<PAGE>
PART C
<PAGE>
<PAGE>
THE RUSHMORE FUND, INC.
PART C. OTHER INFORMATION
ITEM 15. Indemnification
The Rushmore Fund, Inc. (the "Registrant" or the "Fund"),
was incorporated in the State of Maryland on July 24,
1985, and is operated pursuant to the Articles of
Incorporation of the Registrant, dated as of July 17,
1985, and as last amended October 29, 1991 (the "Rushmore
Articles"). The Rushmore Articles 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 (the "1933 Act"), and the Investment Company
Act of 1940, as amended (the "1940 Act").
The Articles of Incorporation of the Fund provide that
officers and directors of the Fund shall be indemnified
by the Fund against liabilities and expenses of defense
in proceedings against such persons by reason of the fact
that such persons 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 of the Fund is indemnified
against any liability to the Fund or the Fund's
security holders which was the result of any willful
misfeasance, bad faith, gross negligence, or reckless
disregard of such person's duties;
(b) officers and directors of the Fund 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 such persons are
entitled to indemnification.
The Rushmore Articles provide that if indemnification of
the directors and/or the officers of the Fund is not
ordered by a court, such indemnification may be
authorized upon determination by the shareholders of the
Fund, or by a majority vote of a quorum of the directors
who were not parties to the proceedings or, if a quorum
is not obtainable, or if a quorum of disinterested di-
rectors so directs, by independent legal counsel in a
<PAGE>
written opinion that the persons to be indemnified have
met the applicable standard.
Insofar as indemnification for liability arising under
the 1933 Act may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has
been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the 1933 Act and, there-
fore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit,
or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities
being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question as to whether such
indemnification by the Registrant is against public
policy as expressed in the 1933 Act and will be governed
by the final adjudication of such issue.
<PAGE> C-2
<PAGE>
ITEM 16. Exhibits
(1)(a) Articles of Incorporation of Registrant.5/
(1)(b) Articles of Amendment.5/
(1)(c) Articles Supplementary.5/
(2) By-Laws of Registrant.5/
(3) Voting Trust Agreement.2/
(4) Agreement and Plan of Reorganization.3/
(5) Specimen share certificate.1/
(6) Form of Management Contract between Registrant and
Money Management Associates.4/
(7) Form of Underwriting Agreement.2/
(8) Bonus, Profit Sharing, or Pension Plans.2/
(9) Form of Custody and Administrative Services
Agreement between Registrant and Rushmore Trust and
Savings, F.S.B.5/
(10) Form of Rule 12b-1 Distribution Plan.2/
(11) Opinion of Jorden Burt Berenson & Johnson LLP,
regarding the legality of securities being
registered.5/
(12) Opinion of Jorden Burt Berenson & Johnson LLP,
regarding certain tax matters and consequences to
shareholders discussed in Part A.5/
(13) Form of Transfer Agent and Shareholder Services
Agent Agreement between Registrant and Rushmore
Trust and Savings, F.S.B. (see exhibit (9)).
(14)(a) Consent of Deloitte & Touche LLP, independent
accountants for Registrant. 5/
(14)(b) Consent of Deloitte & Touche LLP, independent
accountants for The Rushmore Fund, Inc.5/
(14)(c) Consent of Jorden Burt Berenson & Johnson LLP (see
exhibit (11)).
(14)(d) Consent of Jorden Burt Berenson & Johnson LLP (see
exhibit (12)).
(15) Financial Statements Omitted Pursuant to Item
14(a)(1).2/
(16) Powers of Attorney.2/
(17) Rule 24f-2 Notice.5/
________________________
1/ Incorporated by reference to Pre-Effective Amendment No.
1 to the Registrant's Registration Statement on Form N-
1A, previously filed December 2, 1985 (Registration Nos.
2-99388 and 811-4369).
2/ None.
3/ Filed herewith as Appendix A to Part A.
4/ Filed herewith as Appendix B to Part A.
5/ Filed herewith.
<PAGE> C-3
<PAGE>
ITEM 17. Undertakings
(1) The Registrant agrees that prior to any public reoffering
of the securities registered through the use of a
prospectus which is a part of this Registration Statement
by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) under the Securities
Act of 1933, as amended, the reoffering prospectus will
contain the information called for by the applicable
registration form for reofferings by persons who may be
deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed
under paragraph (1), above, will be filed as a part of an
amendment to this Registration Statement and will not be
used until the amendment is effective, and that, in
determining any liability under the Securities Act of
1933, as amended, each post-effective amendment shall be
deemed to be a new registration statement for the
securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial
bona fide offering of them.
<PAGE> C-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed on behalf of the
Registrant, in the City of Bethesda and the State of Maryland,
on the 9th day of October, 1995.
Registrant:
THE RUSHMORE FUND, INC.
By: /s/ Daniel L. O'Connor
Daniel L. O'Connor
Chairman of the Board
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signatures Title Date
/s/ Daniel L. O'Connor Chairman of the October 9, 1995
Daniel L. O'Connor Board, Treasurer,
and Director
/s/ Richard J. Garvey Director and October 9, 1995
Richard J. Garvey President
/s/ Jeffrey R. Ellis Director October 9, 1995
Jeffrey R. Ellis
/s/ Patrick F. Noonan Director October 9, 1995
Patrick F. Noonan
/s/ Leo Seybold Director October 9, 1995
Leo Seybold
/s/ Rita A. Gardner Director October 9, 1995
Rita A. Gardner
/s/ Timothy N. Coakley Vice President October 9, 1995
Timothy N. Coakley and Controller
<PAGE> S-1
<PAGE>
EXHIBIT 1(a):
ARTICLES OF INCORPORATION
<PAGE>
ARTICLES OF INCORPORATION
OF
THE RUSHMORE FUND, INC.
FIRST: I, the undersigned, Daniel L. O'Connor, III, whose
address is 4922 Fairmont Avenue, Bethesda, Maryland 20814, being
at least twenty-one years of age, do under and by virtue of the
General Laws of the State of Maryland authorizing the formation
of corporations, associate myself as incorporator with the
intention of forming a corporation (hereinafter called the
"Corporation").
SECOND: The name of the Corporation is The Rushmore Fund,
Inc.
THIRD: The purpose for which the Corporation is formed is
to act as a diversified, open-end investment company under the
Federal Investment Company Act of 1940 (hereinafter referred to
as "Investment Company Act of 1940") and to exercise and enjoy
all of the powers, rights and privileges granted to, or conferred
upon corporations of a similar character by the General Laws of
the State of Maryland now or hereafter in force.
FOURTH: The post office address of the principal
office of the Corporation in this State is 4922 Fairmont Avenue,
Bethesda, Maryland 20814. The RESIDENT AGENT of the corporation
in this State is Michael G. Trainer, whose address is 1010
Bonifant Street, Silver Spring, Maryland 20910.
FIFTH: (a) The total number of shares of stock which the
Corporation shall have authority to issue is 1,000,000,000
<PAGE>
shares, called Common Stock, of the par value of one-tenth cent
($.001) per share and of the aggregate par value of $1,000,000.
(b) The holders of each share of stock of the Corporation
shall be entitled to one vote for each full share and a
fractional vote for each fractional share of stock then standing
in his or her name in the books of the Corporation. On any matter
submitted to a vote of shareholders, all shares of the
Corporation then issued and outstanding and entitled to vote,
shall be voted in the aggregate.
The shares shall be divided into five classes to be known as
the Money Market Portfolio consisting of 600,000,000 shares,
Intermediate Government Portfolio consisting of 100,000,000
shares, Long-Term Government Portfolio consisting of 100,000,000
shares,
New York Index Plus Portfolio consisting of 100,000,000 shares
and Over-the-Counter Index Plus Portfolio consisting of
100,000,000. The Board of Directors of the Corporation shall
have the power to classify or reclassify any unissued shares by
fixing the number of shares in each of the aforesaid classes or
by altering in any one or more respects, from time to time before
issuance of such shares, the preferences, rights, voting powers,
restrictions or qualifications of any unissued shares.
SIXTH: (a) The shares of the Common Stock of the
Corporation may be issued to such persons and at such prices from
time to time as the Board of Directors may determine. Such
issuance shall be on a non-assessable basis. No holder of shares
2
<PAGE>
of Common Stock shall have preemptive rights and the Corporation
shall have the right to issue and sell to any person or persons
any shares of its Common Stock without first offering such shares
to the holders of any shares of its Common Stock.
(b) Holders of Common Stock of the Corporation shall have
the right, at any time after purchase, to require the Corporation
to redeem their shares at a redemption price per share equal to
the net asset value per share of the Corporation's Common Stock
determined in accordance with the provisions of the Investment
Company Act of 1940, as amended, and the Rules and Regulations
promulgated thereunder, and under procedures set forth in the
Corporation's prospectus.
SEVENTH: The number of directors of the Corporation shall
be five (5), provided however, that the number may be increased
or decreased in accordance with the By-Laws, so long as the
number is never less than three. The names of the directors who
shall act until the first annual meeting or until their suc-
cessors are duly chosen and qualify are:
Daniel L. O'Connor, III
Jeffrey R. Ellis
Arthur J. Rosenblatt
William L. Major
J. Hugh Ward
EIGHTH: The Corporation is expressly empowered as
3
<PAGE>
follows:
(a) The Corporation may enter into a written contract or
contracts with any person, including any firm, corporation, trust
or association in which any officer, other employee, director or
stockholder of this Corporation may be interested, providing for
a delegation of the management of all or part of this
Corporation's securities portfolio and also for the delegation of
the performance of administrative corporate functions, subject
always to the direction of the Board of Directors. The
compensation payable by this Corporation under such contracts
shall be such as is deemed fair and equitable to both parties by
the said Board of Directors.
Any such contracts shall in all respects be consistent with
and subject to the requirements of the Investment Company Act of
1940 as then in effect and regulations of the Securities and
Exchange Commission (or any succeeding governmental authority
promulgated thereunder).
(b) The Corporation may employ such custodian or custodians
for the safekeeping of the property of the Corporation and of its
shares, such dividend disbursing agent or agents, and such
transfer agent or agents and registrar or registrars for its
shares, and may make and perform such contracts for the aforesaid
purposes as in the opinion of the Board of Directors of this
Corporation may be reasonable, necessary, or proper for the
conduct of the affairs of the Corporation, and may pay the fees
and disbursements of such custodian, dividend disbursing agents,
4
<PAGE>
transfer agents and registrars out of the income and/or any other
property of the Corporation. Notwithstanding any other
provisions of these Articles of Incorporation, or the By-Laws of
the Corporation, the Board of Directors may cause any or all of
the property of the Corporation to be transferred or to be
acquired and held in the name of a custodian so appointed or in
the name of any nominee of such custodian satisfactory to the
said Board of Directors.
(c) The same person, partnership (general or limited),
association, trust, or corporation may be employed in any
multiple capacity under subsections (a) and (b) of this Article
EIGHTH and may receive compensation from the Corporation in as
many capacities in which such persons, partnerships (general or
limited), associations, trusts or corporation shall serve the
Corporation.
NINTH: (a) The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than any action by or in the right of the Corporation) by reason
of the fact that he is or was a director or officer of the
Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
5
<PAGE>
him in connection with such action, suit or proceeding if he
acted in good faith in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, has no reasonable
cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent
creates a rebuttable presumption that the direction did not meet
the requisite standard of conduct set forth in this subsection.
(b) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation
and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the
extent that a court shall determine upon application that,
6
<PAGE>
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall
deem proper.
(c) To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
subsections (a) and (b), or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under subsections (a) and (b)
(unless otherwise ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is
proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding or (2) if such a
quorum is not obtainable, or even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel
in a written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or
7
<PAGE>
proceeding as authorized by the Board of Directors in the
specific case upon receipt of any undertaking by or on behalf of
the director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by
the Corporation as authorized in this Article.
(f) The indemnification provided by this Article shall not
be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any By-Laws, agreement,
vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as
to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators
of such a person.
(g) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the
Corporation, or is or was serving at the request of the
Corporation as a director, or officer of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against
such liability under the provisions of this section.
(h) Anything to the contrary in the foregoing clauses
(a) through (g) notwithstanding, no director or officer shall be
indemnified against any liability to the Corporation or to its
8
<PAGE>
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
TENTH: In furtherance and not in limitation of the
powers conferred by the laws of the State of Maryland, the Board
of Directors is expressly authorized:
(a) To make, alter or repeal the By-Laws of the
Corporation,
except where such power is reserved by the By-Laws to the
stockholders, and except as otherwise required by the Investment
Company Act of 1940.
(b) From time to time to determine whether and to what
extent and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of
them other than the stock ledger, shall be open to the inspection
of the stockholders, and no stockholder shall have any right to
inspect any account or book or document of the Corporation,
except as conferred by law or authorized by resolution of the
Board of Directors or of the stockholders.
(c) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured and
unsecured, as the Board of Directors may determine, and to auth-
orize and cause to be executed mortgages and liens upon the
property of the Corporation, real or personal but only to the
extent permitted by the fundamental policies of the Corporation
9
<PAGE>
recited in its registration statement filed pursuant to the
Investment Company Act of 1940.
(d) In addition to the powers and authorities granted
herein by statute expressly conferred upon it, the Board of
Directors may exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of Maryland law, of these
Articles of Incorporation and of the By-Laws of the Corporation.
ELEVENTH: The books of the Corporation may be kept (subject
to any provisions contained in the statutes) outside the State of
Maryland at such place or places as may be designated from time
to time by the Board of Directors or in the By-Laws of the
Corporation. Elections of directors need not be by ballot unless
the By-Laws of the Corporation shall so provide.
TWELFTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in these Articles
of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
THIRTEENTH: Notwithstanding any provision of Maryland Law
requiring more than a majority vote of the Common Stock in
connection with any corporate action (including but not limited
to the amendment of the Articles of Incorporation) unless other-
wise provided in the Articles of Incorporation, the Corporation
may take or authorize such action upon the favorable vote of the
holders
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<PAGE>
of a majority of the outstanding shares of Common Stock.
FOURTEENTH: The duration of the Corporation shall be
perpetual.
IN WITNESS WHEREOF, the undersigned incorporator of The
Rushmore Fund, Inc. who executed the foregoing Articles of
Incorporation hereby acknowledges the same to be his act and
further acknowledges that, to the best of his knowledge the
matters and facts set forth therein are true in all material
respects under the penalties of perjury.
Dated this 17th day of July, 1985.
/s/ Daniel L. O'Connor, III
Daniel L. O'Connor, III
STATE OF MARYLAND )
) ss.:
COUNTY OF MONTGOMERY)
This is to certify that on this 17th day of July, 1985, by
me, the subscriber, a Notary Public in and for the State of
Maryland, County of Montgomery, personally appeared Daniel L.
O'Connor, III, and acknowledged the foregoing Articles of
Incorporation to be his act and deed and that the facts therein
stated are truly set forth.
11
<PAGE>
Witness my hand and Notarial Seal the day and year last
above written.
/s/ Notary Public
Notary Public
My Commission expires: 7/1/86
12
<PAGE>
EXHIBIT 1(b):
ARTICLES OF AMENDMENTS
<PAGE>
Amendment Articles of Incorporation
As filed on October 10, 1985
THE RUSHMORE FUND, INC.
ARTICLES OF AMENDMENT
THE RUSHMORE FUND, INC., a Maryland corporation, having its
principal office at 4922 Fairmont Avenue, Bethesda, Maryland
20814, (hereinafter referred to as the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of
Maryland (hereinafter referred to as the "Department") that:
FIRST: The Charter of the Corporation is hereby amended by
deleting therefrom in its entirety Article V and by substituting
in lieu thereof the following new Article V:
(a) The total number of shares of stock which the
Corporation shall have authority to issue is 1,000,000,000
shares, called Common Stock, of the par value of one-tenth cent
($.001) per share and of the aggregate par value of $1,000,000.
(b) The holders of each share of stock of the Corporation
shall be entitled to one vote for each full share and a
fractional vote for each fractional share of stock then standing
in his or her name in the books of the Corporation. On any
matter submitted to a vote of shareholders, all shares of the
Corporation then issued and outstanding and entitled to vote,
shall be voted in the aggregate.
The shares shall be divided into five classes to be known as
the Money Market Portfolio consisting of 600,000,000 shares, U.S.
Government Securities Portfolio consisting of 100,000,000 shares,
Ginnie Mae Portfolio consisting of 100,000,000 shares, Stock
<PAGE>
Market Index Plus Portfolio consisting of 100,000,000 shares and
Over-the-Counter Index Plus Portfolio consisting of 100,000,000
shares. The Board of Directors of the Corporation shall have the
power to classify or reclassify any unissued shares by fixing the
number of shares in each of the aforesaid classes or by altering
in any one or more respects, from time to time before issuance of
such shares, the preferences, rights, voting powers, restrictions
or qualifications of any unissued shares.
SECOND: By Resolution, unanimously taken by the Board of
Directors of the Corporation, pursuant to and in accordance with
section 2-603(c) of the Corporations and Associations Article of
the Annotated Code of Maryland, the Board of Directors of the
Corporation duly advised the foregoing amendments, and that no
stock entitled to vote on the matter was outstanding or subscrib-
ed for at the time of approval.
IN WITNESS WHEREOF, THE RUSHMORE FUND, INC. has caused these
presents to be signed in its name and on its behalf by its
President and its corporate seal to be hereunder affixed and
attested by its Secretary on this 10th day of October 1985, and
its President acknowledges that these Articles of Amendment are
the act and deed of THE RUSHMORE FUND, INC. and, under the
penalties of perjury, that the matters and facts set forth herein
with respect to authorization and approval are true in all
material respects to the best of his knowledge, information and
belief.
ATTEST: THE RUSHMORE FUND, INC.
2
<PAGE>
/s/Charles G. Myers By: /s/J. Hugh Ward
Secretary, Charles G. Myers President, J. Hugh Ward
3
<PAGE>
THE RUSHMORE FUND, INC.
ARTICLES OF AMENDMENT
THE RUSHMORE FUND, INC., a Maryland corporation, having its
principal office at 4922 Fairmont Avenue, Bethesda, Maryland
20814 (hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland
(hereinafter referred to as the "Department") that:
FIRST: Article FIFTH (b) of the Charter of the
Corporation is hereby amended by changing the names of two of the
portfolios of the Corporation as follows:
The U.S. Government Securities Portfolio will be changed to
the U.S. Government Intermediate-Term Securities Portfolio, and
The Ginnie Mae Portfolio will be changed to the U.S.
Government Long-Term Securities Portfolio.
SECOND: By Resolution, unanimously taken by the Board
of Directors of the Corporation, pursuant to and in accordance
with Section 2-603(c) of the Corporations and Associations
Article of the Annotated Code of Maryland, the Board of Directors
of the Corporation duly advised the foregoing amendment, and that
no stock entitled to vote on the matter was outstanding or
subscribed for at the time of approval.
IN WITNESS WHEREOF, THE RUSHMORE FUND, INC. has caused these
presents to be signed in its name and on its behalf by its
President and its corporate seal to be hereunder affixed and
attested by its Secretary on this 31st day of December, 1987, and
its President acknowledges that these Articles of Amendment are
the act and deed of THE RUSHMORE FUND, INC. and, under the
<PAGE>
penalties of perjury, that the matters and facts set forth herein
with respect to authorization and approval are true in all
material respects to the best of his knowledge, information and
belief.
ATTEST THE RUSHMORE FUND, INC.
/s/J. Hugh Ward By:/s/Daniel L. O'Connor
Secretary President
2
<PAGE>
ARTICLES OF AMENDMENT
OF
THE RUSHMORE FUND, INC.
THE RUSHMORE FUND, INC. a Maryland corporation, having its
principal office at 4922 Fairmont Avenue, Bethesda, Maryland
20814 (hereinafter referred to as the "Corporation"), hereby
certifies to the Maryland Department of Assessments and Taxation
(hereinafter referred to as the "Department") that:
FIRST: The Corporation's Articles of Incorporation are
hereby amended by deleting therefrom in its entirety Article
FIFTH and by substituting in lieu thereof the following new
Article FIFTH:
FIFTH: (a) The total number of shares of
stock which the Corporation shall have
authority to issue is 1,000,000,000 shares,
called Common Stock, of the par value of one
tenth cent ($.001) per share and of the
aggregate par value of $1,000,000,000.
(b) The holders of each share of
stock of the Corporation shall be entitled to
one vote for each full share and a fractional
vote for each fractional share of stock then
standing in his or her name in the books of
the Corporation. On any matter submitted to
a vote of shareholders, all shares of the
Corporation then issued and outstanding and
entitled to vote, shall be voted in the
aggregate.
The shares shall be divided into
classes to be known as portfolios. The Board
of Directors of the Corporation shall have
the power to establish the portfolios and to
define the preferences, rights, voting
powers, restrictions or qualifications, and
the investment policies and objectives for
any such portfolios. In addition, the Board
of Directors shall be authorized to classify
or reclassify any unissued shares between
<PAGE>
such portfolios.
SECOND: The amendment to the Articles of
Incorporation as hereinabove set forth has been duly authorized
by the Board of Directors and approved by the Stockholders of the
Corporation.
IN WITNESS WHEREOF, THE RUSHMORE FUND, INC. has caused these
presents to be signed in its name and on its behalf by its
Chairman and its corporate seal to be hereunto affixed and
attested by its Secretary this 28th day of October 1991.
ATTEST THE RUSHMORE FUND, INC.
/s/William L. Major By:/s/Daniel L. O'Connor
William L. Major, Secretary Daniel L. O'Connor, Chairman
THE UNDERSIGNED, Chairman of THE RUSHMORE FUND, INC., who
executed on behalf of said Corporation the foregoing Articles of
Amendment, of which this certification is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the
foregoing Articles of Amendment to be the corporate act of said
Corporation and further certifies that to the best of his
knowledge information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all
material respects under penalties of perjury.
/s/Daniel L. O'Connor
Daniel L. O'Connor, Chairman
2
<PAGE>
EXHIBIT 1(c):
ARTICLES SUPPLEMENTARY
<PAGE>
ARTICLES SUPPLEMENTARY
OF
THE RUSHMORE FUND, INC.
WHEREAS, Article FIFTH of THE RUSHMORE FUND, INC.'s
("Corporation") Articles of Incorporation, as amended, authorizes
the Corporation to issue One Billion (1,000,000,000) shares of
Common Stock at a par value of one tenth cent ($.001) per share
and an aggregate par value of One Million Dollars ($1,000,000);
WHEREAS, said Article FIFTH of the Corporation's Articles of
Incorporation, as amended, states that the shares of the
Corporation's Common Stock shall be divided into classes to be
known as portfolios;
WHEREAS, said Article FIFTH of the Corporation's Articles of
Incorporation, as amended, authorizes the Board of Directors of
the Corporation to establish the portfolios and to define the
preferences, rights, voting power, restrictions or qualifications
and the investment policies and objectives for any such
portfolio; and
WHEREAS, said Article FIFTH also authorizes the Board of
Directors to classify or reclassify any unissued shares between
such portfolios.
NOW, THEREFORE, the Corporation having its principal office
in Bethesda, Maryland, hereby certifies to the Maryland
Department of Assessments and Taxation that:
<PAGE>
FIRST: Pursuant to the authority granted the Board of
Directors in Article FIFTH of the Articles of Incorporation, as
amended, One Billion (1,000,000,000) shares of the Corporation's
authorized Common Stock, with a par value of one tenth cent
($.001), have been classified by the Board of Directors into the
portfolios listed below in the amounts indicated:
Money Market Portfolio Common Stock 700,000,000 Shares
U. S. Government Intermediate-Term
Securities Portfolio Common Stock 50,000,000 Shares
U. S. Government Long-Term
Securities Portfolio Common Stock 50,000,000 Shares
Stock Market Index Plus Portfolio
Common Stock 50,000,000 Shares
Over-the-Counter Index Plus Portfolio
Common Stock 50,000,000 Shares
Precious Metals Index Plus Portfolio
Common Stock 50,000,000 Shares
Nova Portfolio Common Stock 50,000,000 Shares
SECOND: The preferences, rights, voting powers,
restrictions and qualifications of the shares of the above-
referenced portfolios as follows:
(a) All such shares of Common Stock shall be freely
transferable.
(b) Dividends or distributions on shares of any
portfolio, whether payable in shares or cash, shall be paid only
out of earnings, surplus or other assets belonging to such
portfolio.
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<PAGE>
(c) Where a vote of the holders of the shares of any
particular portfolio, or of more than one portfolio, is required
as to any matter by the 1940 Act or Maryland law, only the
holders of shares of such portfolio or portfolios, voting by
portfolio, shall be entitled to vote upon such proposal.
(d) In all other respects, the rights, preferences, voting
power, restrictions and qualifications of the above-referenced
Common Stock are as set forth in Article FIFTH and SIXTH of the
Corporation's Articles of Incorporation, as amended and Article
VI of the Corporation's Bylaws.
THIRD: The classification of the Corporation's authorized
shares as set forth in these Articles Supplementary has effected
no change in the authorized capital of the Corporation.
IN WITNESS WHEREOF, THE RUSHMORE FUND, INC. has caused these
presents to be signed in its name and on its behalf by its
Chairman and its corporate seal to be hereunto affixed and
attested by its Secretary this 28th day of October, 1991.
ATTEST THE RUSHMORE FUND, INC.
/s/William L. Major By:/s/Daniel L. O'Connor
William L. Major, Secretary Daniel L. O'Connor, Chairman
THE UNDERSIGNED, Chairman of THE RUSHMORE FUND, INC., who
executed on behalf of said Corporation the foregoing Articles
Supplementary, of which this certificate is made a part, hereby
3
<PAGE>
acknowledges, in the name and on behalf of said Corporation, the
foregoing Articles Supplementary to be the corporate act of said
Corporation and further certifies that to the best of his
knowledge, information and belief, the matters and facts set
forth therein with respect to the approval thereof are true in
all material respects under penalties of perjury.
/s/Daniel L. O'Connor
Daniel L. O'Connor, Chairman
4
<PAGE>
EXHIBIT 2:
BY-LAWS
<PAGE>
By-Laws of The Rushmore Fund,
Inc.
BY LAWS
THE RUSHMORE FUND, INC.
ARTICLE I
Section 1. The title of this corporation is THE RUSHMORE
FUND, INC.
Section 2. The post office address of the principal office
of the Corporation in this State is 4922 Fairmont Avenue,
Bethesda, Maryland 20814. The name of the resident agent of the
Corporation in this State is Michael G. Trainer, Esquire, a
resident of this State, and the post office address of the
resident agent is 4922 Fairmont Avenue, Bethesda, Maryland 20814.
The Corporation may also have an office and keep its records
at such places as the Board of Directors may from time to time
designate.
Section 3. The corporate seal shall be circular in form and
have inscribed thereon the name of the Corporation and the year
of its incorporation and the words "Corporate Seal, Maryland".
Said seal may be used by causing it or a facsimile thereof to be
imprinted or affixed or otherwise reproduced.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of the Stockholders for the election of
Directors shall be held in such places as the Board of Directors
may by resolution establish. Meetings of Stockholders for any
<PAGE>
other purpose may be held at such place and time as shall be
stated in the notice of the meeting, or in a duly executed waiver
of notice thereof.
Section 2. Meetings of the Stockholders may be called by
the President, or by a majority of the Board of Directors and
shall be called by the President or Secretary upon the written
request of the holders of stock entitled to cast not less than
25% of all the votes entitled to be cast at such meeting. Costs
of preparing and mailing the notice of such meeting shall be paid
in advance by the requesting shareholders.
Section 3. Not less than ten nor more than sixty days
before the date of every Stockholders' Meeting, the Secretary
shall give to each Stockholder entitled to vote at such meeting
written notice stating time and place of the meeting and the
purpose or purposes for which the meeting is called. Business
transacted at any Meeting of Stockholders shall be limited to the
purposes stated in the Notice.
Section 4. The Board of Directors may fix in advance a date
not less than ten days nor more than sixty days, prior to the
date of any Meeting of the Stockholders, as a record date for the
determination of the Stockholders entitled to receive a notice
of, and to vote at any meeting and any adjournment thereof, and
in such case such Stockholders and only such Stockholders as
shall be Stockholders of record on the date so fixed shall be
entitled to receive notice of and to vote at such meeting and any
2
<PAGE>
adjournment thereof, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any
such record date fixed as aforesaid.
Section 5. At any meeting of Stockholders, the presence in
person or by proxy of the Stockholders entitled to cast majority
of the votes thereof shall constitute a quorum. If, however,
such quorum shall not be present or represented at any meeting,
the Stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the
meeting until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been
transacted at the meeting as originally convened.
Section 6. The vote of the holders of a majority of the
stock having voting power, present in person or represented by
proxy, at a meeting duly called and at which a quorum is present,
shall decide any question brought before such meeting, unless a
greater proportion than a majority is required for such question
by applicable statutes, the Certificate of Incorporation, or
these By-Laws.
Section 7. Each stockholder shall have one vote in person
or by proxy for each share of stock having voting power held by
such Stockholder on each matter submitted to a vote at a meeting
of Stockholders, but no proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all
3
<PAGE>
meetings of Stockholders, unless the voting is conducted by
inspectors, all questions relating to the qualification of voters
and the validity of proxies and the acceptance or rejection of
votes shall be decided by the Chairman of the meeting.
Section 8. At any election of Directors, the Board of
Directors prior thereto may, or if they have not so acted, the
Chairman of the meeting may, and upon the request of the holders
of ten percent (10%) of the shares entitled to vote at such
election shall, appoint two inspectors of election who shall
first subscribe an oath or affirmation to execute faithfully the
duties of inspectors at such election with strict impartiality
and according to the best of their ability, and shall after the
election make a certification of its result of the vote taken.
No candidate for the Board of Directors shall be appointed such
inspector. The Chairman of the meeting may cause a vote by
ballot to be taken upon the request of the holders of ten percent
(10%) of the stock entitled to vote on such election or matter.
Section 9. The officer who has charge of the stock ledger
of the Corporation shall, at least ten days before every action
of Directors, prepare and make a complete list of the
Stockholders entitled to vote at said election, arranged in
alphabetical order, showing the address of and the number of
shares registered in the name of each Stockholder. Such list
shall be available to the inspectors so appointed at any
Stockholders' meeting. If no inspectors are appointed, all
questions relating to the qualification of voters and the
4
<PAGE>
validity of proxies and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting.
Section 10. Notwithstanding anything contained in these By-
Laws to the contrary, there shall be no requirement to have an
Annual Meeting of Stockholders in any year in which none of the
following matters are required to be acted upon by the
stockholders pursuant to the Investment Company Act of 1940, as
amended: (i) the election of directors; (ii) approval of the
investment advisory agreement; (iii) approval of a distribution
agreement; or (iv) ratification of the selection of independent
public accountants for the Corporation.
ARTICLE III
DIRECTORS
Section 1. The business of the Corporation shall be managed
by its Board of Directors, which may exercise all powers of the
Corporation, except such as are by statute, or Certificate of
Incorporation, or by these By-Laws conferred upon or reserved to
the Stockholders.
Section 2. The number of Directors which shall constitute
the whole Board shall be determined from time to time by the
Board of Directors, but shall not be fewer than three or more
than fifteen. Each Director elected shall hold office until his
successor is elected and qualifies. Directors need not be
Stockholders.
Section 3. The Directors shall be elected by the
Stockholders, except that any vacancy in the Board resulting from
5
<PAGE>
any cause other than an increase in the authorized number of
Directors may be filled by majority vote of the entire Board of
Directors. However, if at any time after the filling of any
vacancy, less than a majority of the Directors then holding
office were elected by Stockholders, a Stockholders' meeting
shall be called as soon as possible, and in any event, within
sixty days, for the purpose of electing an entire new Board of
Directors.
Section 4. Meetings of the Board of Directors, regular or
special, may be held at any place within or outside the State of
Maryland as the Board may from time to time determine.
Section 5. At all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a
quorum for the transaction of business and the action of a
majority of the Directors present at any meeting at which a
quorum is present shall be the action of the Board of Directors
unless the concurrence of a greater proportion is required for
such action by the laws of Maryland, these By-Laws or the
Articles of Incorporation. If a quorum shall not be present at
any meeting of Directors, the Directors present thereat may by a
majority vote adjourn the meeting from time to time, without
notice other than announcement at the meeting until a quorum
shall be present.
Section 6. The first meeting of each newly elected Board of
Directors shall be held as soon as practical following the
Meeting of Stockholders. The meeting may be held at such time
6
<PAGE>
and place as shall be specified in a notice given as hereinafter
provided for Special Meetings of the Board of Directors, or as
shall bespecified ina writtenwaiver signed byall ofthe Directors.
Section 7. Regular meetings of the Board of Directors may
be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
Section 8. Special Meetings of the Board of Directors may
be called by the President on one day's notice to each Director;
Special Meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of two
Directors.
Section 9. Any action required or permitted to be taken at
any meeting of the Board of Directors or of the Committee thereof
may be taken without a meeting, if a written consent to such
action is signed in one or more counterparts by all members of
the Board or of such Committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the
Board or Committee.
Section 10. The Board of Directors may, by resolution
passed by a majority of the whole Board, appoint from among its
members an Executive Committee and other Committees composed of
two or more Directors, and may delegate to such Committees, in
the intervals between meetings of the Board of Directors, any or
all of the powers of the Board of Directors in the management of
the business and affairs of the Corporation, except the power to
declare dividends, to issue stock or to recommend to Stockholders
7
<PAGE>
any action requiring Stockholders' approval. In the absence of
any member of such committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a
member of the Board of Directors to act in the place of such
absent member.
Section 11. The Committees shall keep minutes of their
proceedings and shall report the same to the Board of Directors
at the meeting next succeeding, and any action by the Committees
shall be subject to revision and alteration by the Board of
Directors, provided that no rights of third persons shall be
affected by any such revision or alteration.
Section 12. Any Director, whether or not he is a salaried
officer or employee of the Corporation, may be compensated for
his services as Director or as a member of a Committee of
Directors, or as Chairman of the Board or Chairman of a
Committee, by fixed periodic payments or by fees for attendance
at meetings or by both, and in any event, may be reimbursed for
transportation and other expenses, in such manner and amounts as
the Board of Directors may from time to time determine.
ARTICLE IV
NOTICES
Section 1. Notices to Stockholders shall be in writing and
delivered personally or mailed to the Stockholders at their
addresses appearing on the books of the Corporation. Notices to
Directors shall be oral or by telephone or telegram or in writing
or delivered personally or mailed to the Directors at their
8
<PAGE>
addresses appearing on the books of the Corporation. Notices by
mail shall be deemed to be given at the time when the same shall
be mailed. Notice to Directors need not state the purpose of a
Regular or Special Meeting.
Section 2. Whenever any notice of the time, place or
purpose of any meeting of Stockholders, Directors or Committee is
required to be given under the provisions of Maryland Law or
under the provisions of the Articles of Incorporation or these
By-Laws, a waiver thereof in writing, signed by the person or
persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual
attendance at the meeting of Stockholders in person or by proxy,
or at the meeting of Directors or Committee in person, shall be
deemed equivalent to the giving of such notice to such persons.
ARTICLE V
OFFICERS
Section 1. The Officers of the Corporation shall be chosen
by the Board of Directors and shall include a President, who
shall be a Director, a Secretary and a Treasurer. The Board of
Directors may also choose one or more Vice-Presidents, Assistant
Secretaries and Assistant Treasurers. Two or more offices may be
held by the same, person but no Officer shall execute,
acknowledge or verify any instrument in more than one capacity,
if such instrument is required by law, the Articles of
9
<PAGE>
Incorporation or these By-Laws to be executed, acknowledged or
verified by two or more Officers.
Section 2. The Board of Directors at its first meeting
after each Meeting of Stockholders shall choose a President, a
Secretary and a Treasurer.
Section 3. The Board of Directors from time to time may
appoint such other Officers and agents as it shall deem
advisable, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be
determined from time to time by the Board. The Board of
Directors from time to time may delegate to one or more Officers
or agents the power to appoint any such subordinate Officers or
agents and to prescribe the respective rights, terms of office,
authorities and duties.
Section 4. The salaries or other compensation of all
Officers and agents of the Corporation shall be fixed by the
Board of Directors, except that the Board of Directors may
delegate to any person or group of persons the power to fix the
salary or other compensation of any subordinate officers or
agents appointed pursuant to Section 3 of this Article V.
Section 5. The Officers of the Corporation shall serve for
one year and until the successors are chosen and qualify. Any
Officer or agent may be removed by the affirmative vote of a
majority of the Board of Directors whenever, in its judgment, the
best interests of the Corporation will be served thereby. Any
vacancy occurring in any office of the Corporation by death,
10
<PAGE>
resignation, removal or otherwise shall be filled by the Board of
Directors.
Section 6. The Chairman of the Board shall be the Chief
Executive officer of the Corporation; he shall preside at all
meetings of the Stockholders and Directors, shall be ex-officio a
member of all standing committees and shall see that all orders
and resolutions of the Board are carried into effect.
Section 7. The President shall be the Chief Administrative
Officer of the Corporation. In addition, he shall, at the
request or in the absence or disability of the Chairman of the
Board perform the duties and exercise the powers of the Chairman
of the Board, and shall perform such other duties and have such
other powers as the Board of Directors may from time to time
prescribe.
Section 8. The Vice Presidents, in the order of their
seniority, shall in the absence or disability of the President,
perform the duties and exercise the powers of the President and
shall perform such other duties as the Board of Directors may
from time to time prescribe.
Section 9. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the Stockholders and
record all the proceedings thereof and shall perform like duties
for any committee when required. He shall give, or cause to be
given, notice of meetings of the Stockholders and of the Board of
Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or President, under whose
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<PAGE>
supervision he shall be. He shall keep in safe custody the seal
of the Corporation and when authorized by the Board of Directors,
affix and attest the name to any instrument requiring it. The
Board of Directors may give general authority to any other
Officer to affix the seal of the Corporation and to attest the
affixing of his signature.
Section 10. The Assistant Secretaries, in order of their
seniority, shall in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and
shall perform such other duties as the Board of Directors shall
prescribe.
Section 11. The Treasurer shall be the Chief Financial
Officer of the Corporation. He shall be responsible for the
maintenance of its accounting records and shall render to the
Board of Directors, at its Regular Meetings, or when the Board of
Directors so requires, an account of all the Corporation's
financial transactions and a report of the financial condition of
the Corporation.
Section 12. The Assistant Treasurers, in order of their
seniority, shall in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and
shall perform such other duties as the Board of Directors shall
from time to time prescribe.
ARTICLE VI
SALE AND REDEMPTION OF SHARES
12
<PAGE>
Section 1. The shares of stock of the Corporation shall be
issued and redeemed at the net asset value of the shares, with
such net asset value being calculated in good faith at such times
and in accordance with such procedures as the Board of Directors
may from time to time establish in accordance with applicable
law.
Section 2. All consideration received by the Corporation
for the issue or sale of stock of each class, together with all
income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably
belong to the class of shares of stock with respect to which such
assets, payments or funds were received by the Corporation for
all purposes, subject only to the rights of creditors, and shall
be so handled upon the books of account of the Corporation. Such
assets, income, earnings, profits and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation
thereof and any asset derived from any reinvestment of such
proceeds in whatever form the same may be, are herein referred to
as "assets belonging to" such class.
Section 3. In the event of the liquidation or dissolution
of the Corporation, shareholders of each class shall be entitled
to receive, as a class, out of the assets of the Corporation,
available to distribution to shareholders, but other than general
assets not belonging to any particular class of stock, the assets
13
<PAGE>
belonging to such class, and the assets so distributable to the
shareholders of any class shall be distributed among such
shareholders in proportion to the number of shares of such class
held by them and recorded on the books of the Corporation. In
the event that there are any general assets not belonging to any
particular class of stock and available for distribution, such
distribution shall be made to the holders of stock of all classes
in proportion to the asset value of the respective classes
determined as hereinafter provided.
Section 4. The assets belonging to any class of stock shall
be charged with the liabilities in respect to such class, and
shall also be charged with its share of the general liabilities
of the Corporation, in proportion to the asset value of the
respective classes determined as hereinafter set out. The
determination of the Board of Directors shall be conclusive as to
the amount of liabilities, including accrued expenses and
reserves, as to the allocation of the same as to a given class,
and as to whether the same or general assets of the Corporation
are allocable to one or more classes.
Section 5. Each holder of any class of stock of the
Corporation, who surrenders his certificate in good delivery form
to the Corporation or, if the shares in question are not
represented by certificates, who delivers to the Corporation a
written request in good order signed by the shareholder, shall be
entitled to convert the shares in question on the basis
hereinafter set forth, into shares of any other class of the
14
<PAGE>
Corporation. The Corporation shall determine the net asset
value, as hereinafter defined, of the shares to be converted and
shall deduct therefrom such conversion cost, hereinafter
described and, within five (5) business days after such
surrender,and payment, shall issue to the shareholder such number
of shares of stock of the class desired, taken at the net asset
value thereof determined in the same manner and at the same time
as that of the shares surrendered, necessary to equal the net
asset value of the shares surrendered less the conversion cost as
aforesaid. Any amount representing a fraction of a share may be
paid in cash at the option of the Corporation. The conversion
cost above mentioned shall be determined by adding a transaction
charge as determined by the Board of Directors. The transaction
charge may be paid and/or assigned by the Corporation to the
underwriter and/or to any other agency, as it may elect. Upon
the conversion taking place, proper transfer shall be made
between the assets belonging to the respective classes of stock.
The Board of Directors may limit this conversion privilege to
shares which have been held for such reasonable period of time as
the Directors may determine.
ARTICLE VII
STOCK
Section 1. Each Stockholder shall be entitled to a
certificate or certificates which shall certify the number of
shares owned by him in the Corporation. Each certificate shall
be signed by the President or a Vice President and countersigned
15
<PAGE>
by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer and shall be sealed with the Corporate Seal.
The signatures may be either manual or facsimile signatures and
the seal may be either facsimile or any other form. If
certificates are not requested by the Stockholder, his shares
will be held on deposit by the Corporation.
Section 2. In case any Officer who has signed any
certificate ceases to be an Officer of the Corporation before the
certificate is issued, the certificate may nevertheless be issued
by the Corporation with the same effect as if the Officer had not
ceased to be such officer as of the date of its issue.
Section 3. Notwithstanding the foregoing provisions of this
Article VII the Corporation shall have full power to participate
in any program approved by the Board of Directors providing for
the recording and transfer of ownership of shares of the
Corporation's
stock by electronic or other means without the issuance of
certificates.
Section 4. The Board of Directors may direct a new
certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation
alleged to have been stolen, lost or destroyed, upon the taking
of an affidavit of that fact by the person claiming the
certificate of stock to be stolen, lost or destroyed, or upon
other satisfactory evidence of such loss or destruction. When
authorizing such issuance of a new certificate or certificates,
16
<PAGE>
the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such
stolen, lost or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it
shall require and to give the Corporation a bond, with sufficient
surety to the Corporation to indemnify it against any loss or
claim that may be made by reason of the issuance of a new
certificate.
Section 5. The Board of Directors may fix, in advance, a
record date in order to make a determination of Stockholders for
any proper purpose as provided in Article II, Section 5 of these
By-Laws.
Section 6. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares
endorsed or accompanied by proper evidence of succession,
assignment, or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction
upon its books.
Section 7. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner.
The Corporation shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other
17
<PAGE>
notice thereof, except as otherwise provided by the Laws of
Maryland.
Section 8. The Board of Directors may from time to time
appoint or remove transfer agents and/or registrars of transfers
of shares of stock of the Corporation, and it may appoint the
same person as both transfer agent and registrar. Upon any such
appointment being made, all certificates representing shares of
stock thereafter issued shall be countersigned by one of such
transfer agents or by one of such registrars of transfers or by
both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one
countersignature by such person shall be required.
Section 9. The Corporation shall maintain an original stock
ledger containing the names and addresses of all Stockholders and
the number of shares held by each Stockholder. Such stock ledger
may be in written form or any other form capable of being
converted into written form within a reasonable time for visual
inspection.
ARTICLE VIII
AMENDMENTS OF BY-LAWS
Section 1. These By-Laws may be amended, altered, repealed,
or added to at any meeting of the Stockholders or Board of
Directors by affirmative vote of a majority of the stock issued
and outstanding entitled to vote or of a majority of the whole
authorized number of Directors, as the case may be.
18
<PAGE>
EXHIBIT 9:
FORM OF
CUSTODY AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
REGISTRANT AND RUSHMORE TRUST AND SAVINGS, F.S.B.
<PAGE>
Last approved October 27, 1994
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
RUSHMORE FUND, INC.
AND
RUSHMORE TRUST AND SAVINGS, FSB
This Administrative Services Agreement (the "Agreement") is
entered into this 1st day of September, 1993 by and between
Rushmore Fund, Inc. (the "Fund") and Rushmore Trust and Savings,
FSB ("RTS" sometimes hereinafter referred 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 1 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.
<PAGE>
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 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
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 a 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 be 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 any 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
Page 2
<PAGE>
protect any Director or officer of the Fund 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 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 the 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 3
<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.
11. RTS will preserve for the periods required in Rule 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 Rule 31a-1 of such rules.
12. 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
agents at the offices of RTS during regular business hours, upon
prior written notice to RTS by the Fund.
13. 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 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 its control, RTS
shall take reasonable steps to minimize service interruptions.
14. 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 Trust's receipt of services, the services
will be deemed to have been accepted.
15. 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.
Page 4
<PAGE>
16. 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.
17. 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
Bethesda, MD. 20814
Attention: _______________________________________
If to the Fund:
Rushmore Fund, Inc.
4922 Fairmont Avenue
Bethesda, MD 20814
Attention: Daniel L. O'Connor, Chairman
18. 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.
19. 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.
Page 5
<PAGE>
Page 6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
WITNESS: RUSHMORE FUND, INC.
/s/Daniel L. O'Connor
By: Chairman
WITNESS: RUSHMORE TRUST AND SAVINGS
/s/William L. Major
By: Senior Vice President and
Chief Financial Officer
Page 7
<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
RUSHMORE FUND, INC.
MONEY MARKET PORTFOLIO . . . . . . . . . 25 basis points per
annum (.0025%)
U.S. GOV'T INTERMEDIATE-TERM PORTFOLIO . 30 basis points per
annum (.0030%)
U.S. GOV'T LONG-TERM PORTFOLIO . . . . . 30 basis points per
annum (.0030%)
STOCK MARKET INDEX PLUS PORTFOLIO . . . 50 basis points per
annum (.0050%)
OVER-the-COUNTER INDEX PLUS PORTFOLIO . 50 basis points per
annum (.0050%)
PRECIOUS METALS INDEX PLUS PORTFOLIO . . 50 basis points per
annum (.0050%)
NOVA PORTFOLIO . . . . . . . . . . . . . 75 basis points per
annum (.0075%)
<PAGE>
EXHIBIT 11:
OPINION AND CONSENT OF
JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
October 10, 1995
The Rushmore Fund, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
Re: The Rushmore Fund, Inc.
Registration Statement/Proxy Statement on Form N-14
Ladies and Gentlemen:
This opinion is furnished in connection with the registra-
tion under the Securities Act of 1933, as amended, of shares (the
"Shares") of The Rushmore Fund, Inc. (the "Fund"), an open-end,
diversified management investment company under the Investment
Company Act of 1940 whose Shares are the subject of a
Registration Statement/Proxy Statement on Form N-14 to be filed
with the Securities and Exchange Commission (the "Commission") in
connection with the proposed reorganization of the Rushmore U.S.
Government Intermediate-Term Securities Portfolio into the
Rushmore U.S. Government Long-Term Securities Portfolio (the
"Reorganization").
In rendering our opinion, we have examined such documents,
records, and matters of law as we deemed necessary for purposes
of this opinion, including the Registration Statement/Proxy Stat-
ement on Form N-14, the Fund's Articles of Incorporation, the
Fund's By-Laws, and the proceedings of the Fund's Board of Direc-
tors. We have assumed the genuineness of all signatures of all
parties, the authenticity of all documents submitted as origi-
nals, the correctness of all copies, the correctness of all facts
set forth in the certificates delivered to us, and the correct-
ness of all written or oral statements made to us.
Based upon and subject to the foregoing, it is our opinion
that the Shares that will be issued by the Fund in connection
with the Reorganization, when sold, will be legally issued, fully
paid, and nonassessable.
Our opinion is rendered solely in connection with the Regis-
tration Statement/Proxy Statement on Form N-14 under which the
Shares will be registered and may not be relied upon for any oth-
er purposes without our written consent first had and obtained.
We hereby consent to the use of this opinion as an exhibit to
such Registration Statement/Proxy Statement and to our being
named under the "Legal Matters" section therein.
Sincerely,
/s/JORDEN BURT BERENSON &
JOHNSON LLP
JORDEN BURT BERENSON &
<PAGE>
JOHNSON LLP
<PAGE>
EXHIBIT 12:
OPINION AND CONSENT OF
JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
October 10, 1995
Board of Directors
The Rushmore Fund, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
Re: Federal Income Tax Consequences of Proposed Reorganization
Ladies and Gentlemen:
We have acted as counsel to The Rushmore Fund, Inc.
(the "Fund"), a Maryland corporation, in connection with a
reorganization transaction, described herein, that is to be
entered into by
(i) The Rushmore U.S. Government
Intermediate-Term Securities Portfolio
(the "Acquired Portfolio"), a series of
the Fund, and
(ii) The Rushmore U.S. Government Long-
Term Securities Portfolio (the
"Acquiring Portfolio"), another series
of the Fund,
pursuant to the Agreement and Plan of Reorganization (the
"Reorganization Plan") unanimously approved by the Board of
Directors of the Fund (the "Board") on July 27, 1995. The
Reorganization Plan provides that, pursuant to the reorganization
transactions, all of the assets of the Acquired Portfolio (the
"Acquired Portfolio Assets") are to be transferred to the
Acquiring Portfolio in exchange solely for voting shares of
common stock in the Acquiring Portfolio ("Acquiring Portfolio
Shares") and the assumption by the Acquiring Portfolio of all the
liabilities of the Acquired Portfolio (the "Reorganization").
This opinion is given pursuant to Section 8.5 of the
Reorganization Plan.
SOURCES OF INFORMATION
In forming our opinion, we have examined those
documents and legal authorities that we deemed appropriate for
this purpose. These authorities included various provisions of
the Internal Revenue Code of 1986, as amended (the "Code" or
"I.R.C."), and the U.S. Treasury Income Tax Regulations
promulgated thereunder ("Treasury Regulations" or "Treas.
Regs."), judicial decisions, and administrative pronouncements by
the Internal Revenue Service (the "Service"). In addition to the
legal authorities mentioned above, we also have reviewed various
documents, including:
(1) the Reorganization Plan;
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 2
(2) Post-Effective Amendment No. 15 to
the Registration Statement on Form N-1A
of the Fund, as filed with the
Securities and Exchange Commission (the
"Commission") on December 21, 1994;
(3) the Articles of Incorporation of
the Fund, dated July 17, 1985, as last
amended October 29, 1991 (the "Rushmore
Articles");
(4) the By-Laws of the Fund; and
(5) the minutes of the July 27, 1995
meeting of the Board (collectively, the
"Fund Documents").
SUMMARY OF OPINION
Our opinion set forth below assumes:
(1) the accuracy of the statements and
facts concerning the Reorganization, as
set forth in this letter, the
Reorganization Plan, and the Fund
Documents, including the business
purposes for consummating the
Reorganization as stated therein; and
(2) the accuracy of the representations
made to us by the Fund on behalf of the
Acquired Portfolio and the Acquiring
Portfolio, which representations are set
forth in the Fund Officer's Certificate
of even date herewith (the
"Representations"), and are set forth
below under the heading "ASSUMPTIONS";
and
(3) that the Reorganization will be
consummated in the manner contemplated
by and in accordance with the terms and
conditions set forth in the
Reorganization Plan and in the
Registration Statement on Form N-14 of
the Fund, as filed with the Commission
on October 10, 1995 (the "Reorganization
Registration Statement").
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 3
This opinion is conditioned upon there being no change
in the Code, Treasury Regulations, judicial decisions, or
administrative pronouncements by the Service between the date
hereof and the closing date of the Reorganization. This opinion
is further conditioned upon our receiving such executed letters
of representation from the Fund, on behalf of the Acquired
Portfolio and the Acquiring Portfolio, as we shall request. This
opinion shall be effective only at such time as we receive those
letters and confirm our opinion in writing on the closing date of
the Reorganization and, in the absence of such confirmation, will
be deemed to have been withdrawn.
Based upon the facts and assumptions stated herein, and
for the reasons set forth below, it is our opinion that, for
federal income tax purposes, the Reorganization will constitute a
tax-free "reorganization" within the meaning of Section
368(a)(1)(C) of the Code. The consequences of this tax treatment
of the Reorganization are described more fully below under the
heading "CONCLUSIONS."
FACTS
1. The Rushmore Fund, the Acquired Portfolio, and the
Acquiring Portfolio
The Fund was organized as a corporation under the laws
of the State of Maryland pursuant to the Rushmore Articles. The
Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end, diversified management
investment company. Accordingly, the Fund is subject to the
provisions of the 1940 Act, and the rules and regulations of the
Commission thereunder. The operations of the Fund are further
governed by the Rushmore Articles, by the Fund's By-Laws, and by
Maryland law, as applicable. The Fund presently is authorized to
issue 1,000,000,000 shares of Common Stock, $.001 par value per
share, which may be issued in four separate classes: the
Rushmore Money Market Portfolio, the Rushmore Nova Portfolio, the
Rushmore U.S. Government Intermediate-Term Securities Portfolio,
and the Rushmore U.S. Government Long-Term Securities Portfolio.
The Fund is qualified to be taxed as a regulated investment
company ("RIC") under the Code, has elected to be taxed as a RIC
for federal income tax purposes under Section 851 of the Code
continually since the Fund's organization, and has qualified to
be taxed as a RIC under Section 851 of the Code continually since
the Fund's organization.
Article TENTH, Section (d), of the Rushmore Articles
provides that:
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 4
In furtherance and not in limitation of the
powers conferred by the laws of the State of
Maryland, the Board of Directors is expressly
authorized: (d) In addition to the powers
and authorities granted herein by statute
expressly conferred upon it, the Board of
Directors may exercise all such powers and do
all such acts and things as may be exercised
or done by the Corporation, subject,
nevertheless, to the provisions of Maryland
law, of these Articles of Incorporation, and
of the By-Laws of the Corporation.
Article THIRTEENTH, of the Rushmore Articles provides
that:
Notwithstanding any provision of Maryland Law
requiring more than a majority vote of the
Common Stock in connection with any corporate
action (including, but not limited to, the
amendment of the Articles of Incorporation)
unless otherwise provided in the Articles of
Incorporation, the Corporation may take or
authorize such action upon the favorable vote
of the holders of a majority of the
outstanding shares of Common Stock.
Article II, Section 5, "Meetings of Stockholders," of
the Fund's By-Laws provides that:
At any meeting of Stockholders, the presence
in person or by proxy of the Stockholders
entitled to cast a majority of the votes
thereof shall constitute a quorum. If,
however, such quorum shall not be present or
represented at any meeting, the Stockholders
entitled to vote thereat, present in person
or represented by proxy, shall have the power
to adjourn the meeting from time to time,
without notice other than announcement at the
meeting until a quorum shall be present or
represented. At such adjourned meeting at
which a quorum shall be present or
represented any business may be transacted
which might have been transacted at the
meeting as originally convened.
Article II, Section 6, "Meetings of Stockholders," of
the Fund's By-Laws provides that:
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 5
The vote of the holders of a majority of the
stock having voting power, present in person
or represented by proxy, at a meeting duly
called and at which a quorum is present,
shall decide any question brought before such
meeting, unless a greater proportion than a
majority is required for such question by
applicable statutes, the Certificate of
Incorporation, or these By-Laws.
Article III, Section 1, "Directors," of the Fund's By-
Laws provides that:
The business of the Corporation shall be
managed by the Board of Directors, which may
exercise all powers of the Corporation,
except as are, by statute, or Certificate of
Incorporation, or by these By-Laws, conferred
or reserved to the Stockholders.
The provisions of Article TENTH, Section (d), and
Article THIRTEENTH of the Rushmore Articles, and Article II,
Section 5, Article II, Section 6, and Article III, Section 1, of
the Fund's By-Laws, as set forth above, thus, provide the
authority under which the Reorganization was proposed and will be
undertaken by the Fund.
2. The Reorganization
The Reorganization must be approved at a special
meeting of the Acquired Portfolio Shareholders (the "Special
Meeting") by at least a majority of the outstanding Acquired
Portfolio Shares. Neither the proxy rules under the Securities
Exchange Act of 1934, as amended, nor the Rushmore Articles
entitle Acquired Portfolio Shareholders to appraisal rights
(i.e., to demand the fair value of their shares) in the event of
a reorganization or merger. Consequently, the Acquired Portfolio
Shareholders will be bound by the terms of the Reorganization
Plan if such Reorganization Plan is approved at the Special
Meeting. Any Acquired Portfolio Shareholder, however, may redeem
his Acquired Portfolio Shares at net asset value prior to the
closing date of the proposed Reorganization.
Pursuant to the Reorganization, the Acquired Portfolio
will transfer to the Acquiring Portfolio all of the existing
Acquired Portfolio Assets and the Acquiring Portfolio will assume
all the liabilities of the Acquired Portfolio. The Acquiring
Portfolio will also deliver full and fractional Acquiring
Portfolio Shares to the Acquired Portfolio in an amount equal in
value to the net asset value of the issued and outstanding full
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 6
and fractional shares of common stock in the Acquired Portfolio
as of the date of the Reorganization. The exact number of such
Acquiring Portfolio Shares to be transferred will be determined
by using a net asset value exchange ratio.
On the effective date of the Reorganization, pursuant
to the Reorganization Plan, the Acquiring Portfolio Shares
received by the Acquired Portfolio in the transaction will be
distributed pro rata to the shareholders of the Acquired
Portfolio (the "Acquired Portfolio Shareholders"), the Acquired
Portfolio will cease to exist, and all Acquired Portfolio shares
of common stock of the Acquired Portfolio ("Acquired Portfolio
Shares") will be canceled. As affirmed in the Representations
(and as described more fully below under the heading
"ASSUMPTIONS"), with respect to the Reorganization:
(1) to the best knowledge of the
management of the Fund, there is no plan
or intention on the part of the Acquired
Portfolio Shareholders to sell, to
exchange, or otherwise to dispose of any
of the Acquiring Portfolio Shares
received in the Reorganization, except
pursuant to investment decisions made in
the ordinary course of investing in
mutual funds;
(2) the Acquiring Portfolio will
continue to use the Acquired Portfolio's
historic business assets received by the
Acquiring Portfolio in the
Reorganization in the Acquiring
Portfolio's continuing business
enterprises;
(3) there is no plan or intention by
the Acquiring Portfolio to sell or
dispose of the Acquired Portfolio Assets
received in the Reorganization (other
than in the normal course of the
Acquiring Portfolio's business
operations as a mutual fund); and
(4) the Reorganization is not a tax-
motivated transaction and has been
proposed and is being undertaken for a
number of business and economic reasons,
such as promoting more efficient
operations, enabling greater
diversification, and continuing to
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 7
obtain management and administrative
services at acceptable levels, as
described in the Reorganization
Registration Statement.
The Reorganization Plan provides that Money Management
Associates ("MMA"), the investment advisor to the Acquired
Portfolio and the Acquiring Portfolio, will bear the aggregate
expenses and costs of the Reorganization.
ASSUMPTIONS
Our opinion assumes the accuracy of the following
assumptions in connection with the proposed Reorganization (the
"Assumptions"):
1. Immediately following the consummation
of the Reorganization, every Acquired
Portfolio Shareholder will own full and
fractional Acquiring Portfolio Shares,
the value of which Acquiring Portfolio
Shares will be approximately equal to
the value of such Acquired Portfolio
Shareholder's full and fractional
Acquired Portfolio Shares immediately
prior to the Reorganization, and every
such Acquired Portfolio Shareholder will
own such full and fractional Acquiring
Portfolio Shares solely by reason of the
ownership by the Acquired Portfolio
Shareholder of full and fractional
Acquired Portfolio Shares immediately
prior to the Reorganization.
2. To the best knowledge of the management
of the Fund, there is no plan or
intention on the part of the Acquired
Portfolio Shareholders to sell, to
exchange, or otherwise to dispose of any
of the Acquiring Portfolio Shares
received in the Reorganization, except
pursuant to investment decisions made in
the ordinary course of investing in
mutual funds.
3. Immediately following the consummation
of the Reorganization, the Acquiring
Portfolio will possess all of the assets
and liabilities possessed by the
Acquired Portfolio immediately prior to
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 8
the Reorganization. The Acquired
Portfolio will continue to make
redemptions required by Section 22(e) of
the 1940 Act and regular, normal
dividends declared and paid in order to
ensure the Acquired Portfolio's
continued RIC qualification under
Section 851 of the Code, but none of
these redemptions or distributions will
be made in anticipation of, or in
connection with, the Reorganization.
4. The Acquiring Portfolio has no plan or
intention to issue additional Acquiring
Portfolio Shares following the
Reorganization, except such shares as
the Acquiring Portfolio will issue in
the ordinary course of business as an
investment company which continuously
offers its shares to the public at net
asset value.
5. The Acquiring Portfolio has no plan or
intention to reacquire any of the
Acquiring Portfolio Shares issued in the
Reorganization, except as required by
Section 22(e) of the 1940 Act.
6. The Acquiring Portfolio has no plan or
intention to sell or otherwise to
dispose of any of the Acquired Portfolio
Assets acquired in the Reorganization,
except for dispositions made in the
ordinary course of the Acquiring
Portfolio's business operations as an
investment company.
7. The Acquired Portfolio will distribute
the Acquired Portfolio Shares it
receives in the Reorganization in
pursuance of the Reorganization Plan.
8. All of the liabilities of the Acquired
Portfolio that are to be assumed by the
Acquiring Portfolio and all of the
liabilities, if any, to which the
transferred Acquired Portfolio Assets
are subject were incurred by the
Acquired Portfolio in the ordinary
course of the Acquired Portfolio's
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 9
business and are associated with the
Acquired Portfolio Assets transferred in
the Reorganization.
9. Following the Reorganization, the
Acquiring Portfolio will continue the
historic business of the Acquired
Portfolio and will use a significant
portion of the Acquired Portfolio's
historic business assets, received by
the Acquiring Portfolio in the
Reorganization, in the Acquiring
Portfolio's continuing business
enterprises.
10. All expenses and costs incurred in
connection with the Reorganization and
the transactions and other actions
contemplated thereby will be paid by
MMA, including legal and accounting
expenses, and administrative costs of
the Reorganization, such as printing,
clerical work, security underwriting and
registration costs, transfer taxes, and
transfer agent's fees, and as otherwise
provided for in the Reorganization
Registration Statement.
11. The Acquiring Portfolio does not own,
directly or indirectly, nor has the
Acquiring Portfolio owned during the
past five (5) years, directly or
indirectly, any stock of the Acquired
Portfolio.
12. At the time of the Reorganization, the
Acquired Portfolio will not have
outstanding any warrants, options,
convertible securities, or any other
type of right pursuant to which any
person could acquire stock in the
Acquired Portfolio, except for the right
to purchase stock at its fair market
value in the ordinary course of
business.
13. There is no intercorporate indebtedness
existing between the Acquiring Portfolio
and the Acquired Portfolio that was
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 10
issued, was acquired, or will be settled
at a discount.
14. The fair market value of the Acquired
Portfolio Assets transferred to the
Acquiring Portfolio will equal or exceed
the sum of the liabilities of the
Acquired Portfolio assumed by the
Acquiring Portfolio, plus the amount of
liabilities, if any, to which the
transferred Acquired Portfolio Assets
are subject.
15. The Acquired Portfolio is not under the
jurisdiction of a court in a Title 11 or
similar case within the meaning of
Section 368(a)(3)(A) of the Code.
CONCLUSIONS
For the reasons set forth above, and based solely on
the information and the Assumptions set forth above, our opinion
is that, for federal income tax purposes, the Reorganization will
qualify for non-recognition treatment under Section 368(a)(1)(C)
of the Code. Accordingly, the following tax consequences should
result with respect to the Reorganization:
1. The acquisition by the Acquiring
Portfolio of all of the Acquired
Portfolio Assets solely in exchange for
the Acquiring Portfolio Shares received
in the Reorganization and the assumption
of the accrued liabilities of the
Acquired Portfolio, followed by the
distribution by the Acquired Portfolio
to the Acquired Portfolio Shareholders
of such Acquiring Portfolio Shares and
any remaining Acquired Portfolio Assets
will constitute a reorganization within
the meaning of Section 368(a)(1)(C) of
the Code.
2. The Acquired Portfolio and the Acquiring
Portfolio each will be treated as a
"party to a reorganization" within the
meaning of Code Section 368(b).
3. Pursuant to Sections 361(a) and 357(a)
of the Code, no gain or loss will be
recognized to the Acquired Portfolio
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 11
upon the transfer of substantially all
of the Acquired Portfolio Assets to the
Acquiring Portfolio solely in exchange
for the Acquiring Portfolio Shares
received in the Reorganization and the
assumption by the Acquiring Portfolio of
all the liabilities of the Acquired
Portfolio. In addition, pursuant to
Section 361(c)(1) of the Code, no gain
or loss will be recognized to the
Acquired Portfolio upon the distribution
by the Acquired Portfolio to the
Acquired Portfolio Shareholders of the
Acquiring Portfolio Shares received in
the Reorganization in exchange for the
Acquired Portfolio Shareholders'
Acquired Portfolio Shares pursuant to
the Reorganization Plan.
4. Pursuant to Section 362(b) of the Code,
the tax basis of the Acquired Portfolio
Assets in the hands of the Acquiring
Portfolio will be the same as the tax
basis of such assets in the hands of the
Acquired Portfolio immediately prior to
the proposed Reorganization.
5. Pursuant to Section 1032(a) of the Code,
no gain or loss will be recognized to
the Acquiring Portfolio upon the
Acquiring Portfolio's receipt of the
Acquired Portfolio Assets pursuant to
the Reorganization in exchange solely
for the Acquiring Portfolio Shares or
upon the distribution of those Acquiring
Portfolio Shares to the Acquired
Portfolio Shareholders in exchange for
the Acquired Portfolio Shareholders'
Acquired Portfolio Shares.
6. Pursuant to Section 1223(2) of the Code,
the holding period of the Acquired
Portfolio Assets to be received by the
Acquiring Portfolio in the
Reorganization will include the holding
period during which such Acquired
Portfolio Assets were held by the
Acquired Portfolio immediately prior to
the Reorganization.
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 12
7. Pursuant to Section 354(a)(1) of the
Code, no gain or loss will be recognized
to the Acquired Portfolio Shareholders
pursuant to the Reorganization upon the
receipt by the Acquired Portfolio
Shareholders of the full and fractional
Acquiring Portfolio Shares received
solely in exchange for the Acquired
Portfolio Shareholders' full and
fractional Acquired Portfolio Shares.
8. Pursuant to Section 358(a)(1) of the
Code, the tax basis of the full and
fractional Acquiring Portfolio Shares to
be received by the Acquired Portfolio
Shareholders pursuant to the
Reorganization will be the same as the
tax basis of the full and fractional
Acquired Portfolio Shares surrendered by
the Acquired Portfolio Shareholders in
exchange therefor.
9. Pursuant to Section 1223(1) of the Code,
the holding period of the full and
fractional Acquiring Portfolio Shares to
be received by the Acquired Portfolio
Shareholders in the Reorganization will
include the holding period during which
the full and fractional Acquired
Portfolio Shares surrendered by the
Acquired Portfolio Shareholders in
exchange therefor were held; provided,
that those full and fractional Acquired
Portfolio Shares were held as capital
assets in the hands of the Acquired
Portfolio Shareholders on the date of
the Reorganization.
10. Pursuant to Section 381(a) of the Code
and Section 1.381(a)-1 of the Treasury
Regulations, the Acquiring Portfolio
will succeed to and take into account
the items of the Acquired Portfolio
described in Section 381(c) of the Code,
subject to the provisions and
limitations specified in Sections 381,
382, 383, and 384 of the Code and the
Treasury Regulations thereunder.
<PAGE>
Board of Directors October 10, 1995
The Rushmore Fund, Inc. Page 13
11. Pursuant to Section 381(c)(2) of the
Code and Section 1.381(c)(2)-1 of the
Treasury Regulations, the Acquiring
Portfolio will succeed to and take into
account the earnings and profits, or
deficit in earnings and profits, of the
Acquired Portfolio as of the date of
transfer. Any deficit in earnings and
profits of either the Acquired Portfolio
or the Acquiring Portfolio will be used
only to offset the earnings and profits
accumulated after the date of the
transfer.
As stated above, our opinion is based upon and subject
to the facts, Assumptions, and reasons discussed herein. No
opinion is expressed or implied with respect to any entity's
qualification as a RIC or with respect to any other tax matters
aside from the qualification of the Reorganization under
Section 368(a)(1)(C) of the Code and the related tax consequences
as set forth above. Our opinion is based upon our analysis of
the current law, but neither the courts nor the Service are, in
any way, bound by our analysis. We consent to the use of this
opinion as an exhibit to the Reorganization Registration
Statement on Form N-14 under which the Acquiring Portfolio Shares
will be registered.
Sincerely,
/s/JORDEN BURT BERENSON & JOHNSON
LLP
JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
EXHIBIT 14(a):
CONSENT OF
DELOITTE & TOUCHE LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Rushmore Fund, Inc.
We consent to the incorporation by reference in this Registration
Statement on Form N-14 of our report dated October 20, 1994,
appearing in the Annual Report to Shareholders for the year ended
August 31, 1994, and to the reference to us under the caption
"Financial Statements and Experts" appearing in the Combined
Prospectus/Proxy Statement, which is a part of such Registration
Statement. We also consent to the reference to us under the
caption "Financial Highlights" included in the current Prospectus
of the Rushmore U.S. Government Intermediate-Term Securities
Portfolio and the Rushmore U.S. Government Long-Term Securities
Portfolio dated December 21, 1994, which is part of such
Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Washington, DC
October 4, 1995
<PAGE>
EXHIBIT 14(b):
CONSENT OF
DELOITTE & TOUCHE LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Rushmore Fund, Inc.
We consent to the incorporation by reference in this Registration
Statement on Form N-14 of our report dated October 20, 1994,
appearing in the Annual Report to Shareholders for the year ended
August 31, 1994, and to the reference to us under the caption
"Financial Statements and Experts" appearing in the Combined
Prospectus/Proxy Statement, which is a part of such Registration
Statement. We also consent to the reference to us under the
caption "Financial Highlights" included in the current Prospectus
of the Rushmore U.S. Government Intermediate-Term Securities
Portfolio and the Rushmore U.S. Government Long-Term Securities
Portfolio dated December 21, 1994, which is part of such
Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Washington, DC
October 4, 1995
<PAGE>
EXHIBIT 17:
RULE 24f-2 NOTICE
<PAGE>
THE RUSHMORE FUND, INC.
4922 Fairmont Avenue
Bethesda, Maryland 20814
(301) 657-1500
October 27, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: The Rushmore Fund, Inc.
Registration Nos. 2-99388 and 811-4369
Rule 24f-2 Notice
Dear Sir/Madam:
The following is duly submitted pursuant to Rule 24f-2 of
the Investment Company Act of 1940 as amended:
1. For fiscal year ended August 31, 1994.
2. There were no registered shares under the Securities
Act of 1933 remaining unsold at the beginning of said
fiscal year.
3. No shares were registered during the fiscal year other
than pursuant to the Investment Company Act as Amended.
4. The aggregate number of shares sold during the fiscal
year was 200,059,302, as follows:
Money Market Portfolio . . . . . . . . . . 187,160,069
U.S. Government Intermediate
Term Securities Portfolio . . . . . . . . . 2,492,488
U.S. Government Long-Term
Securities Portfolio . . . . . . . . . . . 6,976,138
Stock Market Index Plus
Portfolio . . . . . . . . . . . . . . . . . . 137,925
Over-the-Counter Index Plus
Portfolio . . . . . . . . . . . . . . . . . . 139,899
Precious Metals Index Plus
Portfolio . . . . . . . . . . . . . . . . . 3,152,783
<PAGE>
5. The aggregate number of shares sold during the fiscal
year in reliance on the relevant section of the Act was
200,059,302 as outlined above.
6. Proceeds from the sale of fund shares in the fiscal
year ended August 31, 1994 totalled $316,313,326.
Disbursements due to the redemption of Fund shares in
the fiscal year ended August 31, 1994 were
$375,651,908. As redemptions exceeded sales of Fund
shares, no registration fee is due.
Sincerely,
/s/William L. Major
William L. Major
Vice President
<PAGE>
