<PAGE>
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SEMI-ANNUAL REPORT, FEBRUARY 29, 1996
[RUSHMORE LOGO APPEARS HERE] THE RUSHMORE FUND, INC.
4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 343-3355 (301) 657-1500
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Dear Shareholders:
It could not have been a better environment for bond investors in 1995. During
the latter part of the year, slowing economic growth, falling inflation, and
fiscal restraint prompted the Federal Reserve to lower interest rates by a
quarter of a point in December 1995 and again in January 1996. These economic
factors caused interest rates to fall and bond prices to rise.
The trickle of data that was released in the latter part of the fourth quarter
of 1995 as a result of the Federal government shutdown suggested that economic
conditions may have deteriorated more than previously thought. These conditions
carried into early 1996 with the snow storms that buried nearly a third of the
United States in January.
RUSHMORE MONEY MARKET PORTFOLIO
The Rushmore Money Market Portfolio invests in the highest quality commercial
paper (80.90%) and U.S. Treasury repurchase agreements (19.10%). As of February
29, 1996, the Fund had an average maturity of 15 days. For the six month period
ended February 29, 1996, Rushmore Money Market Portfolio had an annualized
yield of 4.97%.
RUSHMORE U.S. GOVERNMENT BOND PORTFOLIO
On December 22, 1995, the majority of shareholders of the Rushmore U.S.
Government Intermediate-Term Securities Portfolio approved the Intermediate-
Term Portfolio's merger into the Rushmore U.S. Government Long-Term Securities
Portfolio effective December 31, 1995. The resulting Portfolio was renamed the
Rushmore U.S. Government Bond Portfolio. The U.S. Government Bond Portfolio
continues to invest in ten-year Treasury notes and thirty-year Treasury bonds.
The objective is to provide high current income while maintaining safety of
principal. For the six month period ended February 29, 1996, the Portfolio's
total return was 5.12%. The average maturity of the Portfolio as of February
29, 1996 was 27.8 years.
OUTLOOK
It appears that the economy has weathered recent sluggishness and is back on
track for steady growth with low inflation. According to Federal Reserve
Chairman Greenspan, "the current economic expansion seems to have exhibited
staying power." This change in the Federal Reserve's tone suggests the Federal
Reserve
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policy may be on hold. The economy appears to be growing at a reasonable pace,
and therefore we do not see any further reduction in interest rates for the
near term.
Thank you for your continued support.
Sincerely,
/s/ Daniel L. O'Conner /s/ Richard J. Garvey
Daniel L. O'Connor Richard J. Garvey
Chairman of the Board President
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THE RUSHMORE FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount (Note 1)
---------- -----------
<S> <C> <C>
COMMERCIAL PAPER 79.13%
American Express Credit Corp., 5.15%, 3/29/96........... $1,000,000 $ 995,994
AT&T Corp., 5.17%, 3/28/96.............................. 1,000,000 996,122
Bank America Corp., 5.18%, 3/21/96...................... 1,000,000 997,122
Bell South Telecommunications Corp., 5.16%, 3/20/96..... 800,000 797,821
Cargill, Inc., 5.20%, 3/6/96............................ 1,000,000 999,278
Chevron Oil Finance Co., 5.18%, 3/14/96................. 800,000 798,504
Dover Corp., 5.22%, 3/19/96............................. 1,000,000 997,390
Exxon Asset Management Corp., 5.17%, 3/18/96............ 1,000,000 997,559
Ford Motor Credit Co., 5.21%, 3/26/96................... 1,000,000 996,382
General Electric Capital Corp., 5.32%, 3/15/96.......... 800,000 798,345
Heinz Co., 5.18%, 3/22/96............................... 800,000 797,583
IBM Credit Corp., 5.16%, 3/18/96........................ 800,000 798,051
McDonald's Corp., 5.18%, 3/11/96........................ 1,000,000 998,561
Merrill Lynch Co., 5.23%, 3/7/96........................ 800,000 799,303
Philip Morris Co., 5.12%, 3/27/96....................... 1,000,000 996,302
Raytheon Co., 5.15%, 3/7/96............................. 800,000 799,313
Safeco Credit Corp., 5.12%, 4/12/96..................... 800,000 795,221
Texaco, Inc., 5.18%, 3/8/96............................. 800,000 799,194
Transamerica Finance Corp., 5.18%, 3/6/96............... 800,000 799,424
United Parcel Service of America, Inc., 5.12%, 4/1/96... 800,000 796,473
Xerox Corp., 5.18%, 3/4/96.............................. 800,000 799,655
-----------
Total Commercial Paper (Cost $18,553,597)............... 18,553,597
-----------
REPURCHASE AGREEMENTS 18.69%
With PaineWebber at 5.39%, dated 2/29/96, due 3/1/96,
collateralized by U.S. Treasury Bills, due 7/25/96
(Cost $4,381,455)...................................... 4,381,455
-----------
Total Investments 97.82% (Cost $22,935,052*)............ 22,935,052
-----------
Other Assets Less Liabilities 2.18%..................... 511,258
-----------
Net Assets (Note 7) 100.00%............................. $23,446,310
===========
Net Asset Value Per Share (Based on 23,446,310 Shares
Outstanding)........................................... $ 1.00
===========
</TABLE>
*Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
STATEMENT OF NET ASSETS
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount (Note 1)
----------- -----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS 99.20%
U.S. Treasury Notes, 5.875%, 11/15/05................. $ 2,100,000 $ 2,059,313
U.S. Treasury Bonds, 8.00%, 11/15/21.................. 100,000 116,375
U.S. Treasury Bonds, 7.50%, 11/15/24.................. 7,000,000 7,796,250
U.S. Treasury Bonds, 7.625%, 2/15/25.................. 4,850,000 5,495,656
U.S. Treasury Bonds, 6.875%, 8/15/25.................. 12,650,000 13,183,666
U.S. Treasury Bonds, 6.00%, 2/15/26................... 800,000 749,249
-----------
Total U.S. Treasury Obligations (Cost $28,983,664).... 29,400,509
-----------
REPURCHASE AGREEMENTS 2.14%
With PaineWebber at 5.39%, dated 2/29/96, due 3/1/96,
collateralized by U.S. Treasury Bills, due 7/25/96
(Cost $633,030)...................................... 633,030
-----------
Total Investments 101.34% (Cost $29,616,694*)......... 30,033,539
-----------
Liabilities in Excess of Other Assets (1.34%)......... (396,125)
-----------
Net Assets (Note 7) 100.00%........................... $29,637,414
===========
Net Asset Value Per Share (Based on 2,929,490 Shares
Outstanding)......................................... $ 10.12
===========
</TABLE>
*Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 1996
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Bond Portfolio
------------ ---------------
<S> <C> <C>
INVESTMENT INCOME (Note 1)........................ $670,814 $ 789,452
-------- ---------
EXPENSES
Investment Advisory Fee (Note 2)................. 58,653 63,603
Administrative Fee (Note 2)...................... 29,327 38,161
-------- ---------
Total Expenses.................................. 87,980 101,764
-------- ---------
NET INVESTMENT INCOME............................. 582,834 687,688
-------- ---------
Net Realized Gain on Investments................. -- 889,849
Net Change in Unrealized Appreciation (Deprecia-
tion) of Investments............................ -- (749,490)
-------- ---------
NET GAIN ON INVESTMENTS........................... -- 140,359
-------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERA-
TIONS............................................ $582,834 $ 828,047
======== =========
</TABLE>
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Bond Portfolio
-------------------------- --------------------------
February 29, February 28, February 29, February 28,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income..... $ 582,834 $ 508,602 $ 687,688 $ 1,120,819
Net Realized Gains
(Losses) on Investment
Transactions............. -- -- 889,849 (516,383)
Net Change in Unrealized
Appreciation
(Depreciation) of
Investments.............. -- -- (749,490) 744,990
----------- ----------- ----------- -----------
Net Increase in Net Assets
Resulting from
Operations............... 582,834 508,602 828,047 1,349,426
DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment
Income................... (582,834) (508,602) (687,688) (1,120,819)
From Net Realized Gains on
Investments.............. -- -- -- --
FROM SHARE TRANSACTIONS
(Notes 4 and 5)........... 1,461,027 (2,440,210) 13,106,349 7,876,451
----------- ----------- ----------- -----------
Net Increase (Decrease) in
Net Assets............... 1,461,027 (2,440,210) 13,246,708 8,105,058
NET ASSETS--Beginning of
Period.................... 21,985,283 22,260,525 16,390,706 29,276,393
----------- ----------- ----------- -----------
NET ASSETS--End of Period.. $23,446,310 $19,820,315 $29,637,414 $37,381,451
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended August 31,
February 29, -------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Per-
formance:
Net Asset Value--
Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Net Investment Income.. 0.025 0.049 0.027 0.024 0.037 0.061
Net Realized and
Unrealized Gains
(Losses) on
Securities............ -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Net Increase in Net
Asset Value Resulting
from Operations....... 0.025 0.049 0.027 0.024 0.037 0.061
Dividends to
Shareholders.......... (0.025) (0.049) (0.027) (0.024) (0.037) (0.061)
Distributions to
Shareholders From Net
Realized Capital
Gains................. -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Net Increase (Decrease)
in Net Asset Value.... 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- -------
Net Asset Value--End of
Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total Investment
Return................. 2.51%A 5.03% 2.88% 2.43% 3.71% 6.33%
Ratios to Average Net
Assets:
Expenses............... 0.75%B 0.75% 0.75% 0.78% 0.80% 0.79%
Net Investment Income.. 4.97%B 4.92% 2.73% 2.40% 3.71% 6.14%
Supplementary Data:
Portfolio Turnover
Rate.................. -- -- -- -- -- --
Number of Shares
Outstanding at End of
Period
(000's omitted)....... 23,446 21,985 22,261 56,759 98,606 115,539
</TABLE>
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A Total returns for periods of less than one year are not annualized.
B Annualized.
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT BOND PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended August 31,
February 29, --------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Per-
formance:
Net Asset Value--
Beginning of Period... $ 9.89 $ 9.08 $ 11.55 $ 10.62 $ 9.97 $ 9.14
------- ------- ------- ------- ------- -------
Net Investment Income.. 0.280 0.606 0.599 0.650 0.697 0.718
Net Realized and
Unrealized Gains
(Losses) on
Securities............ 0.230 0.810 (1.880) 1.304 0.649 0.829
------- ------- ------- ------- ------- -------
Net Increase (Decrease)
in Net Asset Value
Resulting from
Operations............ 0.510 1.416 (1.281) 1.954 1.346 1.547
Dividends to
Shareholders.......... (0.280) (0.606) (0.602) (0.650) (0.696) (0.717)
Distributions to
Shareholders from Net
Realized Capital
Gains................. -- -- (0.583) (0.374) -- --
------- ------- ------- ------- ------- -------
Net Increase (Decrease)
in Net Asset Value.... 0.23 0.81 (2.47) 0.93 0.65 0.83
------- ------- ------- ------- ------- -------
Net Asset Value--End of
Period................ $ 10.12 $ 9.89 $ 9.08 $ 11.55 $ 10.62 $ 9.97
======= ======= ======= ======= ======= =======
Total Investment
Return................. 5.12%A 16.35% (10.29)% 20.92% 13.97% 17.61%
Ratios to Average Net
Assets:
Expenses............... 0.80%B 0.80% 0.80% 0.80% 0.80% 0.80%
Net Investment Income.. 5.41%B 6.75% 5.97% 6.08% 6.80% 7.43%
Supplementary Data:
Portfolio Turnover
Rate.................. 67.9% 63.3% 188.3% 173.6% 298.0% 235.7%
Number of Shares
Outstanding at End of
Period (000's
omitted).............. 2,929 1,658 3,225 2,085 2,148 1,452
</TABLE>
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A Total returns for periods of less than one year are not annualized.
B Annualized.
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996
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. These financial
statements report on two of the three portfolios: Money Market Portfolio and
U.S. Government Bond Portfolio. 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 Bond 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 portfolio's 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 security transactions
are computed on an identified cost basis.
(c) Net investment income is computed and dividends are declared daily
in the Money Market and U.S. Government Bond Portfolios. Income
dividends in these portfolios are paid monthly. Dividends are
reinvested in additional shares unless shareholders request payment
in cash. 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 services at an annual rate of 0.50% of the
average daily net assets of the portfolio. Certain Officers and Directors of
the Fund are affiliated with Money Management Associates.
Rushmore Trust and Savings, FSB (Trust), a majority-owned subsidiary of the
Adviser, 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 daily net assets of the
Money Market Portfolio and 0.30% of the average daily net assets of the U.S.
Government Bond Portfolio.
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3. SECURITIES TRANSACTIONS
For the period ended February 29, 1996, purchases and sales (including
maturities) of securities (excluding short-term securities) were as follows:
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Bond Portfolio
------------ ---------------
<S> <C> <C>
Purchases.......................................... -- $17,729,813
----- -----------
Sales.............................................. -- $15,305,391
----- -----------
</TABLE>
4. REORGANIZATION
On December 31, 1995, the Rushmore U.S. Government Long-Term Securities
Portfolio acquired all the net assets of the Rushmore U.S. Government
Intermediate-Term Securities Portfolio; pursuant to a plan of reorganization
approved by the Rushmore U.S. Government Intermediate-Term Securities
Portfolio shareholders on December 22, 1995. The acquisition was accomplished
by a tax-free exchange of 1,182,595 shares of Rushmore U.S. Government Long-
Term Securities Portfolio (valued at $12,773,496) for 1,291,408 shares of
Rushmore U.S. Government Intermediate-Term Securities Portfolio, outstanding
on December 31, 1995. The transferred Portfolio's net assets at that date were
$12,773,496, including $962,905 of unrealized appreciation and $980,429 of
accumulated loss carryforwards, which combined with those of the Rushmore U.S.
Government Long-Term Securities Portfolio.
The aggregate net assets of the Portfolios immediately before and after the
acquisition were as follows:
<TABLE>
<CAPTION>
Before After
Acquisition Acquisition
----------- -----------
<S> <C> <C>
Rushmore U.S. Government Long-Term Securities
Portfolio............................................ $20,593,589 $33,367,085
Rushmore U.S. Government Intermediate-Term Securities
Portfolio............................................ $12,773,496 --
</TABLE>
Immediately following the Reorganization, the Rushmore U.S. Government Long-
Term Securities Portfolio was renamed "The Rushmore U.S. Government Bond
Portfolio."
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5. SHARE TRANSACTIONS
On February 29, 1996, there were 1,000,000,000 shares of $.001 par value
capital stock authorized. Transactions in shares and dollars of the Fund were
as follows:
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Government Bond Portfolio
For the Six Months Ended For the Six Months Ended
----------------------------------- -----------------------------------
February 29, 1996 February 28, 1995 February 29, 1996 February 28, 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
In Shares
Shares Sold............ 33,967,347 21,473,144 1,941,910 1,874,812
Shares Issued in
connection with
acquisition of the
Rushmore U.S. Government
Intermediate-Term
Securities Portfolio.. -- -- 1,182,595 --
Shares Issued in
Reinvestment of
Dividends............. 556,625 496,460 57,434 118,028
------------ ------------ ------------ -----------
34,523,972 21,969,604 3,181,939 1,992,840
Shares Redeemed........ (33,062,945) (24,409,814) (1,910,295) (1,095,734)
------------ ------------ ------------ -----------
1,461,027 (2,440,210) 1,271,644 897,106
============ ============ ============ ===========
In Dollars
Shares Sold............ $ 33,967,347 $ 21,473,144 $ 19,571,881 $16,399,370
Shares Issued in
connection with
acquisition of the
Rushmore U.S. Government
Intermediate-Term
Securities Portfolio.. -- -- 12,791,020 --
Shares Issued in
Reinvestment of
Dividends............. 556,625 496,460 599,636 1,032,991
------------ ------------ ------------ -----------
34,523,972 21,969,604 32,962,537 17,432,361
Shares Redeemed........ (33,062,945) (24,409,814) (19,856,188) (9,555,910)
------------ ------------ ------------ -----------
$ 1,461,027 $ (2,440,210) $ 13,106,349 $ 7,876,451
============ ============ ============ ===========
</TABLE>
6. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
Unrealized appreciation (depreciation) as of February 29, 1996, based on the
cost for Federal income tax purposes is as follows:
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Bond Portfolio
------------ ---------------
<S> <C> <C>
Gross Unrealized Appreciation.................... -- $ 1,269,533
Gross Unrealized Depreciation.................... -- (852,688)
----------- -----------
Net Unrealized Appreciation...................... -- $ 416,845
=========== ===========
Cost of Investments for Federal Income Tax
purposes........................................ $22,935,052 $29,616,694
=========== ===========
</TABLE>
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<PAGE>
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7. NET ASSETS
At February 29, 1996, net assets consisted of the following:
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Bond Portfolio
------------ ---------------
<S> <C> <C>
Paid-in Capital................................... $23,446,310 $29,934,852
Undistributed Net Investment Income............... -- --
Accumulated Net Realized Loss on Investments...... -- (714,283)
Net Unrealized Appreciation on Investments........ -- 416,845
----------- -----------
NET ASSETS........................................ $23,446,310 $29,637,414
=========== ===========
</TABLE>
8. CAPITAL LOSS CARRYOVERS
At February 29, 1996, for Federal income tax purposes, the U.S. Government Bond
Portfolio had capital loss carryovers which may be applied against future net
taxable realized gains of each succeeding year until the earlier of its
utilization or its expiration as follows:
<TABLE>
<CAPTION>
U.S. Government
Expires August 31, Bond Portfolio
- ------------------ ---------------
<S> <C>
2001............................................................ $ 746,062
2002............................................................ 233,727
2003............................................................ 624,343
----------
$1,604,132
==========
</TABLE>
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RUSHMORE FUND
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SEMI-ANNUAL REPORT
February 29, 1996
[RUSHMORE LOGO APPEARS HERE]
