As Filed With The Securities And Exchange Commission on December 29, 1997.
File Nos. 2-99388 and 811-4369
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 21 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 23 (X)
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)
Timothy N. Coakley
4922 Fairmont Avenue
Bethesda, Maryland 20814
(Name and Address of Agent for Service of Process)
Approximate Date of Commencement of the Proposed Public Offering of the
Securities:
It is proposed that this filing will become effective (check appropriate box):
___ immediately upon filing pursuant to paragraph (b) of rule 485.
X on January 1, 1998 pursuant to paragraph (b)(1)(v) of rule 485.
___ 60 days after filing pursuant to paragraph (a)(1) of rule 485.
___ on (date) pursuant to paragraph (a) (1) of rule 485.
___ 75 days after filing pursuant to paragraph (a)(2) of rule 485.
___ on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
___ This post-effective amendment designates a new effective date for a
previously-filed post-effective amendment.
The Registrant has previously filed a declaration of indefinite registration
of its shares pursuant to Rule 24f-2 under the Investment Company Act of
1940. The Rule 24f-2 Notice for the Registrant's fiscal year ended
August 31, 1997 was filed on October 28, 1997.
<PAGE>
THE RUSHMORE FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
Form N-1A Location in
Item No Registration Statement
Part A. Information Required in Prospectus
1. Cover Page Outside Front Cover Page of Prospectus
2. Synopsis Fee Table
3. Condensed Financial Financial Highlights
Information
4. General Description of Organization and Description of
Registrant Common Stock; Investment Objective
and Policies; Management of the Fund
5. Management of the Fund Management of the Fund
5A. Management's Discussion of Management's Discussion
Fund Performance of Fund Performance
6. Capital Stock and Other Organization and
Securities Description Common Stock;
Dividends and Distribution; Taxes
7. Purchase of Securities How to Invest in the Portfolio;
Being Offered Exchanges; Net Asset Value
8. Redemption or Repurchase How to Redeem an Investment (Withdrawals)
9. Legal Proceedings Not Applicable
Part B: Information Required In
Statement of Additional Information
10. Cover Page Outside Front Cover Page of Statement
of Additional Information
11. Table of Contents Table of Contents
<PAGE>
Form N-1A Location in
Item No Registration Statement
12. General Information and Not Applicable
History
13. Investment Objectives and Investment Policies;
Policies Investment Restrictions
14. Management of the Management of the Fund
Registrant
15. Control Persons and Principal Holders of Securities
Principal Holders
of Securities
16. Investment Advisory and Management of the Fund
Other Services
17. Brokerage Allocation Investment Policies
18. Capital Stock and Other Not Applicable
Securities
19. Purchase, Redemption and Not Applicable
Pricing of Securities
Being Offered
20. Tax Status Dividends, Distributions, and Taxes
21. Underwriters Management of the Fund
22. Calculations of Performance Information;
Performance Data Calculation of Return Quotations
23. Financial Statements Financial Statements
Part C: Other Information
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Persons Controlled by or Persons Controlled by or
Under Common Control Under Common Control
26. Number of Holders of Numbers of Holders of
Securities Securities
27. Indemnification Indemnification
<PAGE>
Form N-1A Location in
Item No Registration Statement
28. Business and Other Business and Other
Connections Connections of Investment
of Investment Adviser Adviser
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and
Records Records
31. Management Services Management Services
32. Undertakings Undertakings
33. Signatures Signatures
<PAGE>
PART A
<PAGE>
THE RUSHMORE FUND, INC.
4922 Fairmont Avenue
Bethesda, Maryland 20814
(800) 343-3355
(301) 657-1500
RUSHMORE U.S. GOVERNMENT BOND PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The Rushmore U.S. Government Bond Portfolio (the "Portfolio") is a
portfolio of The Rushmore Fund, Inc. (the "Fund"), an open-end
management investment company. The objective of the Portfolio is to
provide investors with maximum current income to the extent that such
investment is consistent with safety of principal. In attempting to
achieve its objective, the Portfolio invests principally in the
current thirty-year U.S. Treasury bonds and in other U.S. Government
securities with maturities of ten years or more.
The shares offered by this Prospectus are not deposits or obligations
of any bank, are not endorsed or guaranteed by any bank, and are not
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other governmental agency.
ADDITIONAL INFORMATION
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 Portfolio. A Statement
of Additional Information, dated January 1, 1998, containing
additional information about the Fund and the Portfolio has been filed
with the Securities and Exchange Commission and is incorporated herein
by reference. A copy of the Statement of Additional Information may
be obtained, without charge, by writing or telephoning the Fund.
The date of this Prospectus is January 1, 1998.
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>
FEE TABLE
The following table illustrates all expenses and fees that a
shareholder of the Portfolio will incur:
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees Redemption Fees None
Monthly Account Fee (for accounts under $500)* $5.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.50%
12b-1 Fees None
Other Expenses** 0.30%
Total Fund Operating Expenses 0.80%
* A charge of $5 per month may be imposed on any account whose average
daily balance for the month falls below $500 due to redemptions. See
"Transaction Charges."
** Estimated.
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:
1 year 3 years 5 years 10 years
$8 $26 $46 $102
The same level of expenses would be incurred if the investment were
held throughout the period indicated.
The purpose of this table is to assist the investor in understanding
the various expenses that an investor in the Portfolio will bear
directly or indirectly. The five percent assumed annual return is for
comparison purposes only. As noted above, the Portfolio charges no
redemption fees. The actual annual return may be more or less
depending on market conditions. The actual expenses an investor
incurs will depend on the amount invested and actual expenses may be
greater or less than those shown. For more complete information about
the various costs and expenses, see "Management of the Fund" in this
Prospectus and "Management of the Fund" in the Statement of Additional
Information.
<PAGE>
<TABLE>
The Rushmore Fund, Inc.
Financial Highlights
Rushmore U.S. Government Bond Portfolio
Audited
<CAPTION>
For the Year Ended August 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 9.39 $ 9.89 $ 9.08 $ 11.55 $ 10.62
-------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income 0.549 0.563 0.606 0.599 0.650
Net Realized and Unrealized Gain (Loss)
on Investments 0.549 (0.502) 0.810 (1.884) 1,304
-------- -------- -------- -------- --------
Total from Investment Operations 1.098 0.061 1.416 (1.285) 1.954
-------- -------- -------- -------- --------
Distributions to Shareholders:
From Net Investment Income (0.551) (0.561) (0.606) (0.602) (0.650)
From Net Realized Capital Gain (0.017) - - (0.583) (0.374)
-------- -------- -------- -------- --------
Total Distributions (0.568) (0.561) (0.606) (1.185) (1.024)
-------- -------- -------- -------- --------
Net Increase (Decrease) in Net Asset Value 0.53 (0.50) 0.81 (2.47) 0.93
-------- -------- -------- -------- --------
Net Asset Value - End of Year $ 9.92 $ 9.39 $ 9.89 $ 9.08 $ 11.55
======== ======== ======== ======== ========
Total Investment Return 11.94% 0.41% 16.35% (10.29)% 20.92%
Ratios to Average Net Assets:
Expenses 0.80% 0.80% 0.80% 0.80% 0.80%
Net Investment Income 5.60% 5.59% 6.75% 5.97% 6.08%
Supplementary Data:
Portfolio Turnover Rate 19.2% 95.0% 63.3% 188.3% 173.6%
Net Assets at End of Year (000s omitted) $15,212 $21,424 $16,391 $29,276 $24,094
Number of Shares Outstanding at End of Year
(000's omitted) 1,534 2,281 1,658 3,225 2,085
</TABLE>
<PAGE>
<TABLE>
The Rushmore Fund, Inc.
Financial Highlights
Rushmore U.S. Government Bond Portfolio
Audited (Continued)
<CAPTION>
For the Year Ended August 31,
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 9.97 $ 9.14 $ 9.96 $ 8.96 $ 9.19
--------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income 0.697 0.718 0.720 0.742 0.747
Net Realized and Unrealized Gain (Loss)
on Investments 0.649 0.829 (0.821) 1.000 (0.230)
--------- -------- -------- -------- --------
Total from Investment Operations 1.346 1.547 (0.101) 1.742 0.517
--------- -------- -------- -------- --------
Distributions to Shareholders:
From Net Investment Income (0.696) (0.717) (0.719) (0.742) (0.747)
From Net Realized Capital Gain - - - - -
--------- -------- -------- -------- --------
Total Distributions (0.696) (0.717) (0.719) (0.742) (0.747)
--------- -------- -------- -------- --------
Net Increase (Decrease) in Net Asset Value 0.65 0.83 (0.82) 1.00 (0.23)
--------- -------- -------- -------- --------
Net Asset Value - End of Year $ 10.62 $ 9.97 $ 9.14 $ 9.96 $ 8.96
========= ======== ======== ======== ========
Total Investment Return 13.97% 17.61% (1.24)% 20.17% 5.73%
Ratios to Average Net Assets:
Expenses 0.80% 0.80% 0.80% 0.80% 0.83%
Net Investment Income 6.80% 7.43% 7.28% 7.73% 8.05%
Supplementary Data:
Portfolio Turnover Rate 298.0% 235.7% 400.8% 411.8% 829.0%
Net Assets at End of Year (000s omitted) $ 22,803 $14,481 $13,039 $25,934 $ 7,227
Number of Shares Outstanding at End of Year
(000's omitted) 2,148 1,452 1,427 2,603 806
The Fund commenced operations on December 18, 1985.
The above financial highlights relating to the Portfolio, for the periods
identified, have been audited by Deloitte & Touche LLP, independent certified
public accountants, whose report thereon appears in the Fund's 1997 Annual
Report to Shareholders for the Rushmore U.S. Government Bond Portfolio and is
incorporated by reference in the Statement of Additional Information. This
information should be read in conjunction with the financial statements and
related notes thereto included in the Statement of Additional Information. A
copy of the Fund's 1997 Annual Report to Shareholders for the Rushmore U.S.
Government Bond Portfolio, and further information about the performance of
the Portfolio, may be obtained, without charge, by contacting the Fund at
4922 Fairmont Avenue, Bethesda, Maryland 20814, or by telephoning the Fund at
(800) 343-3355 or (301) 657-1500.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
During 1997, the economy has continued to show solid growth while
keeping inflation in check. The Federal Reserve has not made a change
to the Federal Funds rate since March of 1997, but they do maintain a
bias toward restraint. Due to this bias, the market remains
susceptible to volatility due to economic data releases, as market
participants try to gauge the Fed's reaction to possible inflationary
data. Yields on the 30 years Treasury Bond peaked in April 1997 at
7.17% before trending back downward to 6.57% by the Fund's fiscal year
end. The low end of the yield range for the 1997 fiscal year was 6.35%.
The U.S. Government Bond Portfolio invests primarily in ten and 30-
year Treasury issues. Our objective is to provide high current income
as well as maintain safety of principal. For the fiscal year ended
August 31, 1997, the total return of the Portfolio was 11.94%, as
compared with the Lehman Brothers Intermediate Government Index total
return of 7.96%, and the Lehman Brothers Long Government Index total
return of 13.24%. The average maturity of the Portfolio was 21.3
years on August 31, 1997.
The economy should continue to remain strong, and a watchful Fed will
keep vigil over inflation. To achieve this goal another rate hike may
be necessary, but as they have demonstrated in recent FOMC meetings,
the Fed is willing to be patient before making restrictive rate
increases. So far Fed policy has been successful in keeping the
economy moving forward while not being overly restrictive. The ever
present possibility of an increase in the Fed Funds' rate in the
future, however, does leave the market open to some volatility. We
anticipate a trading range in 30-year Treasury Bond yields between
5.75% and 6.75%. Until we see an upward move in inflation, yields
should remain in the lower end of this range.
PERFORMANCE DATA
From time to time, quotations of the 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 the 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 compounded rates of return
for all periods quoted and assume that all dividends and capital gains
distributions were reinvested. The "yield" of the Portfolio refers to
net income generated by an investment in the Portfolio over a
specified thirty-day period. This income is then "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 the Portfolio will vary based on changes in market conditions and
the level of the Portfolio's expenses.
The annualized yield for the Rushmore U.S. Government Bond Portfolio
was 5.77% for the year ended August 31, 1997.
<PAGE>
THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
Total Return Comparison
Lehman Lehman
Rushmore Brothers Brothers
U.S. Gov't Intermediate- Long
Bond Gov't Index T-Bond
12/31/85 $10,000 $10,000 $10,000
8/31/86 $10,614 $11,136 $12,440
8/31/87 $10,608 $11,341 $11,529
8/31/88 $11,215 $12,178 $12,458
8/31/89 $13,478 $13,516 $14,942
8/31/90 $13,310 $14,615 $15,169
8/31/91 $15,654 $16,470 $17,981
8/31/92 $17,841 $18,581 $20,865
8/31/93 $21,574 $20,194 $25,455
8/31/94 $19,354 $20,026 $23,829
8/31/95 $22,518 $21,814 $27,868
8/31/96 $22,611 $22,787 $28,275
8/31/97 $25,311 $24,601 $32,019
Past performance is not predictive of future performance. The Lehman
Brothers Intermediate Government Index and the Long T-Bond Index are
unmanaged indices and, unlike the Portfolio, have no management fee or
other operating expenses to reduce their reported return. Returns are
historical and include changes in principal and reinvested dividends
and capital gains.
Average Annual Total Return
Period Ending August 31, 1997
Since
One Year Five Years Inception
11.94% 7.24% 8.23%
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
General
The investment objective of the Rushmore U.S. Government Bond
Portfolio is to provide investors with maximum current income to the
extent that such investment is consistent with safety of principal. In
attempting to achieve its objective, the 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. The
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 coupons). The Portfolio also
may purchase U.S. Government securities under repurchase agreements
and may also lend Portfolio securities.
U.S. Government Securities
U.S. Treasury securities are backed by the full faith and credit of
the U.S. Treasury. U.S. Treasury securities differ only in their
interest rates, maturities, and dates of issuance. Treasury Bills
have maturities of one year or less. Treasury Notes have maturities
of one to ten years, and Treasury Bonds generally have maturities of
greater than ten years at the date of issuance. Yields on short-,
intermediate-, and long-term U.S. Government securities are dependent
on a variety of factors, including the general conditions of the money
and bond markets, the size of a particular offering, and the maturity
of the obligation. Debt securities with longer maturities tend to
produce higher yields and are generally subject to potentially greater
capital appreciation and depreciation than obligations with shorter
maturities and lower yields. The market value of U.S. Government
securities generally varies inversely with changes in market interest
rates. An increase in interest rates, therefore, would generally
reduce the market value of portfolio investments of the Portfolio in
U.S. Government securities, while a decline in interest rates would
generally increase the market value of portfolio investments of the
Portfolio in these securities.
Certain U.S. Government securities are issued or guaranteed by
agencies or instrumentalities of the U.S. Government including, but
not limited to, obligations of U.S. Government agencies or
instrumentalities such as the Federal National Mortgage Association
("FNMA"), the Government National Mortgage Association ("Ginnie Mae"),
the Federal Home Loan Mortgage Corporation, the Small Business
Administration ("SBA"), the Export-Import Bank, the Federal Farm
Credit Administration, the Federal Home Loan Banks ("FHLBs"), Banks
for Cooperatives (including the Central Bank for Cooperatives), the
Federal Land Banks, the Federal Intermediate Credit Banks, the
Tennessee Valley Authority, the Export-Import Bank of the United
States, the Commodity Credit Corporation, the Federal Financing Bank,
the Student Loan Marketing Association, and the National Credit Union
Administration.
Some obligations issued or guaranteed by agencies or instrumentalities
of the U.S. Government, such as Ginnie Mae and SBA certificates, are
backed by the full faith and credit of the U.S. Treasury. Such
agencies and instrumentalities may borrow funds from the U.S.
Treasury. No assurances can be given, however, that the U.S.
Government will provide such financial support to the obligations of
other U.S. Government agencies or instrumentalities in which the
Portfolio invests, such as the FHLBs and the FNMA, since the U.S.
Government is not obligated to guarantee these securities. These
other agencies and instrumentalities are supported by either the
issuer's right to borrow, under certain circumstances, an amount
limited to a specific line of credit from the U.S. Treasury, the
discretionary authority of the U.S. Government to purchase certain
obligations of an agency or instrumentality, or the credit of the
agency or instrumentality itself.
Government bonds typically pay coupon interest semi-annually and repay
the principal at maturity. Ginnie Mae certificates 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-insured or Veterans
Administration-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.
U.S. Government securities may be purchased at a discount. Such
securities, when held to maturity or retired, may include an element
of capital gain. Capital losses may be realized when such securities
purchased at a premium are held to maturity or are called or redeemed
at a price lower than their purchase price. Capital gains or losses
also may be realized upon the sale of securities.
Fixed Income Value and Yield Fluctuations
Fluctuation in the market value of the securities of the Portfolio
will occur due to interest rate movements. The market values of the
investment securities of the Portfolio will vary inversely with
interest rate movements and, therefore, the per share value of the
Portfolio will also fluctuate as interest rates change. Furthermore,
debt securities with longer maturities, such as Ginnie Mae
certificates, 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 Portfolio may not
be suitable for investors with short-term investment objectives.
Specialized Investment Practices and Risks
Zero Coupon Bonds
The Portfolio also may buy and sell U.S. Treasury zero coupon
securities. Unlike regular U.S. Treasury bonds which pay semi-annual
interest, U.S. Treasury zero coupon bonds do not generate semi-annual
coupon payments so that interest is not paid in cash during the term
of these securities. Instead, zero coupon bonds are purchased at a
substantial discount from the maturity value of such securities,
reflecting the current value of the deferred interest, and this
discount is amortized as interest income over the life of the security
and paid at maturity. The discount is taxable even though there is no
cash return until maturity. Zero coupon U.S. Treasury issues
originally were created by government bond dealers who bought U.S.
Treasury bonds and issued receipts representing an ownership interest
in the interest coupons or in the principal portion of the bonds.
Subsequently, the U.S. Treasury began directly issuing zero coupon
bonds with the introduction of "Separate Trading of Registered
Interest and Principal of Securities" (or "STRIPS"). While zero
coupon bonds eliminate the reinvestment risk of regular coupon issues,
that is, the risk of subsequently investing the periodic interest
payments at a lower rate than that of the security held, zero coupon
bonds fluctuate much more sharply than regular coupon-bearing bonds.
Thus, when interest rates rise, the value of zero coupon bonds will
decrease to a greater extent than will the value of regular bonds
having the same interest rate. The Portfolio will not invest more
than 10% of its assets in current value of the zero coupon securities
at any time.
Repurchase Agreements
In order to effectively utilize cash reserves kept for liquidity, the
Portfolio 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. The 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.
Lending of Securities
The Portfolio may lend its securities to National Association of
Securities Dealers, Inc. (the "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 Portfolio receives compensation for
lending its securities in the form of fees.
The Portfolio 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 Portfolio will promptly
liquidate collateral. However, the exercise of the Portfolio's 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 Portfolio could suffer a loss.
Borrowings
The Portfolio may borrow money to facilitate management of the
portfolio instruments by enabling the Portfolio to meet redemption
requests when the liquidation of portfolio instruments would be
inconvenient or disadvantageous. Such borrowing is not for investment
purposes and will be repaid by the Portfolio promptly. Such a
borrowing may not exceed 30% of the Portfolio's total assets, taken at
current net asset value before any borrowing. The Portfolio may not
purchase securities if a borrowing is outstanding.
In addition to the foregoing, the Portfolio is authorized to borrow
money from a bank as a temporary measure for extraordinary or
emergency purposes in amounts not in excess of 5% of the value of the
Portfolio's total assets. The Portfolio is authorized to pledge
portfolio securities as the Adviser deems appropriate in connection
with any borrowings.
PORTFOLIO TURNOVER
The portfolio turnover for the Portfolio was 19.2%, 95.0%, and 63.3%,
for the years ended August 31, 1997, 1996, and 1995, respectively.
HOW TO INVEST IN THE PORTFOLIO
The minimum initial investment in the Portfolio is $2,500. Retirement
accounts may be opened with a $500 minimum investment. The shares of
the Portfolio are offered at the daily public offering price which is
the net asset value per share (See "Net Asset Value") next computed
after receipt of your order. There is no minimum amount for subsequent
investments in the Portfolio. All accounts will be held in book-entry
form. NO CERTIFICATES FOR SHARES WILL BE ISSUED. The Portfolio
reserves the right to reject any purchase order. Foreign checks will
not be accepted.
Investment in the Portfolio can be made directly with the Fund or
through third parties such as broker-dealers, banks or other financial
institutions that purchase securities for their customers. Such third
parties may charge their customers a fee in connection with services
offered to customers. When an authorized third party accepts an
order, the Fund will be deemed to have received the order. Orders
accepted by an authorized third party will be priced at the Fund's net
asset value next computed after acceptance. When shares are purchased
through third parties, the third party, rather than the customer, may
be the shareholder of record of the shares. Investors who do not wish
to receive the services of a third party may invest directly with the
Trust without charge by mail or by bank wire, as described below.
Certain third party organizations may receive compensation from the
Fund, the Portfolio's transfer agent, or Money Management Associates
for the shareholder accounting services these organizations provide.
By Mail: Complete 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, Maryland 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.
By Bank Wire: Request a wire transfer to:
Rushmore Trust and Savings, FSB
Bethesda, Maryland
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 4:00 P.M., EASTERN TIME, AND TELL US THE AMOUNT YOU
TRANSFERRED AND THE NAME OF THE BANK SENDING THE TRANSFER. YOUR BANK
MAY CHARGE A FEE FOR SUCH SERVICES. IF THE PURCHASE IS CANCELED
BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE LIABLE FOR ANY
LOSS THE FUND MAY INCUR.
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 (800) 822-1386 or (301) 657-1510
between 8:30 A.M. and 4:00 P.M., Eastern time. 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
("NYSE") is closed (other than customary weekend or holiday closings);
or (b) when trading on the NYSE is restricted, or an emergency exists,
as determined by the Securities and Exchange Commission, so that
disposal of the Fund's investments for 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 two separate portfolios. This Prospectus
describes the features of the Rushmore U.S. Government Bond Portfolio.
The other portfolio of the Fund is the Rushmore Nova Portfolio;
however, shares of the Rushmore Nova Portfolio currently are not
available or sold to the public. Shares of The Rushmore Fund, Inc.
may also be exchanged for shares of Fund for Government Investors,
Fund for Tax-Free Investors, Inc., American Gas Index Fund, Inc., or
the Cappiello-Rushmore Trust 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, Maryland 20814, and should be signed
by the record owner or owners. Telephone exchange requests may be
made by calling the Fund at (800) 622-1386 or (301) 657-1510 between
8:30 A.M. and 4:00 P.M., Eastern time. Exchanges will be effected at
the respective net asset values of the portfolios 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, percentage or dollar value of shares to be redeemed, and 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 by the Fund 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. The fee may continue to be imposed
during months when the account balance remains below $500. This fee
will be paid to Rushmore Trust and Savings, FSB. The fee will not be
imposed on tax-sheltered retirement plans or accounts established
under the Uniform Gifts or Transfers to Minors Act. 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 due to redemptions or exchanges after providing 60 days
written notice. The Fund may also assess 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)
Defined Contribution Plans
(Profit-Sharing Plans)
Money Purchase Plans (Pension Plans)
Internal Revenue Code
Section 401(k) Plans
Internal Revenue Code
Section 403(b) Plans
Additional information regarding these accounts may be obtained by
contacting the Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends of the Portfolio 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 to
shareholders 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 Portfolio's shares will be determined daily
as of 4:00 P.M., Eastern time, except on customary national business
holidays which result in the closing of the NYSE and weekends. The
net asset value per share is calculated by dividing the net worth by
the number of shares. The securities of the Portfolio 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 of the Fund will value the
Portfolio's securities in good faith. The directors will continuously
review these methods of valuation and recommend changes which may be
necessary to assure that the Portfolio's investments are valued at
fair value.
TAXES
The Portfolio will seek to qualify for treatment as a regulated
investment company (a "RIC") under Subchapter M of the Internal
Revenue Code. If the Portfolio qualifies as a RIC, the Portfolio will
not be liable for Federal income taxes to the extent its earnings are
distributed within the time periods specified in the Code. To qualify
as a RIC under the Code, the Portfolio must satisfy certain
requirements, including the requirement that the Portfolio receive at
least 90% of its gross income each year from dividends, interest,
payments with respect to securities loans, gains from the sale or
other disposition of securities or foreign currencies, or other income
derived with respect to the Portfolio's investments in stock,
securities, and foreign currencies (the "90% Test"), and that the
Portfolio derive less than 30% of the Portfolio's gross income from
the sale or other disposition of any of the following instruments
which was held less than three months (the "30% Test"): (i) stock or
securities; (ii) options, futures, or forward contracts; or (iii)
foreign currencies (or options, futures, or forward contracts on such
foreign currencies). Provided that the Portfolio (i) is a RIC and
(ii) distributes at least 98% of the Portfolio's net investment income
(including, for this purpose, net realized short-term capital gains),
the Portfolio will not be liable for Federal income taxes to the
extent the Portfolio's net investment income and the Portfolio's net
realized long- and short-term capital gains, if any, are distributed
to the shareholders of the Portfolio.
Dividends paid by the Portfolio are taxable to shareholders whether
such dividends and distributions are reinvested in shares of the
Portfolio or are received in cash. Under current law, dividends
derived from interest and dividends received by the Portfolio,
together with distributions of any short-term capital gains, are
taxable to the shareholders at their applicable tax bracket.
Under current law, distributions of net long-term gains, if any,
realized by the Portfolio 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. The Taxpayers Relief Act of 1997 lowered the maximum
tax rate on net long-term capital gains for individuals from 28% to
20%. 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
Portfolio'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 31% on dividends, capital
gains distributions, and redemptions. Shareholders who are non-
resident aliens may be subject to a withholding tax on dividends
earned.
Ordinary dividends paid to corporate or individual residents of
foreign countries are subject to a 30% withholding tax. The rate of
withholding tax may be reduced if the United States has an income tax
treaty with the foreign country where the recipient resides. Capital
gains distributions received by foreign investors should, in most
cases, be exempt from U.S. tax. A foreign investor will have to
provide the Fund with any required documentation in order for the Fund
to apply a reduced rate or exemption from U.S. withholding tax.
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.
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. 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 ((800) 343-3355) or by
mail (4922 Fairmont Avenue, Bethesda, Maryland 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. As of the date of
this Prospectus, 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 investment adviser of the Fund is Money Management Associates,
1001 Grand Isle Way, Palm Beach Gardens, Florida 33418 (the
"Adviser"). Subject to the general supervision of the Board of
Directors of the Fund, the Adviser renders investment advice and is
responsible for the overall management of the Fund's business affairs.
Investment decision for the Portfolio are made by committee and no one
person is primarily responsible for making recommendations to the
committee.
The Adviser currently is the investment adviser of four registered
investment companies, including The Rushmore Fund, Inc., which was
established in 1985. The Adviser also advises: Fund for Government
Investors, a money market fund established in 1975 that invests only
in U.S. Treasury securities; Fund for Tax-Free Investors, Inc., which
was established in 1983 and currently consists of three series, each
of which invests primarily in securities the interest on which is
exempt either from federal income tax or from state income tax; and
American Gas Index Fund, Inc., a common stock index fund established
in 1989 that seeks to provide investment results that correlate to
those of an index comprising the common stocks of natural gas
distribution and transmission company members of the American Gas
Association. As of August 31, 1997, total assets under the Adviser's
management were approximately $900 million.
Under an Investment Advisory Agreement between the Fund and the
Adviser, the Portfolio pays the Adviser a fee at an annual rate based
on 0.50% of the net assets of the 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 and the fees and expenses of
the directors of the Fund who are affiliated persons of the Adviser.
For additional information concerning the Adviser and the Investment
Advisory Agreement, see "Management of the Fund" in the Statement of
Additional Information.
Under a Service Agreement between the Fund and Rushmore Trust and
Savings, FSB ("RTS"), 4922 Fairmont Avenue, Bethesda, Maryland 20814,
a majority-owned subsidiary of the Adviser, RTS provides transfer
agency, dividend-disbursing, and administrative services to the Fund.
Under the Service Agreement with RTS, which has been approved by the
Board of Directors, RTS receives an annual fee of 0.30% of the average
daily net assets of the Portfolio for these services. RTS pays all
fees and expenses that are directly related to the services provided
by RTS to the Fund. For additional information concerning RTS and the
Service Agreement, see "Management of the Fund" in the Statement of
Additional Information.
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>
THE RUSHMORE FUND, INC.
RUSHMORE U.S. GOVERNMENT BOND PORTFOLIO
PROSPECTUS
January 1, 1998
Table of Contents
Page
Fee Table
Financial Highlights
Management's Discussion of Portfolio Performance
Performance Data
Investment Objective and Policies
Portfolio Turnover
How to Invest in the Fund
How to Redeem an Investment (Withdrawals)
Exchanges
Transaction Charges
Tax-Sheltered Retirement Plans
Dividends and Distributions
Net Asset Value
Taxes
Organization and Description of Common Stock
Management of the Fund
<PAGE>
PART B
<PAGE>
THE RUSHMORE FUND, INC.
RUSHMORE U.S. GOVERNMENT BOND PORTFOLIO
4922 Fairmont Avenue, Bethesda, Maryland 20814
(301) 657-1517 (800) 621-7874
STATEMENT OF ADDITIONAL INFORMATION
The Rushmore U.S. Government Bond Portfolio (the "Portfolio") is one
of a series of portfolios in The Rushmore Fund, Inc. (the "Fund"), an
open-end management investment company. The objective of the
Portfolio is to provide investors with maximum current income to the
extent that such investment is consistent with safety of principal.
In attempting to achieve its objective, the 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.
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Portfolio's Prospectus, dated
January 1, 1998. A copy of the Portfolio's Prospectus may be obtained
without charge by writing or telephoning the Fund.
The date of this Statement of Additional Information is January 1, 1998.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Cross Reference to Related Item in Prospectus
Page in Statement
of Additional Page in
Information Prospectus
Investment Policies
Investment Restrictions
Management of the Fund
Principal Holders of Securities
Net Asset Value
Performance Information
Calculations of Yield and
Return Quotations
Dividends, Distributions, and
Taxes
Auditors and Custodian
Financial Statements
<PAGE>
INVESTMENT POLICIES
Lending of Securities
Subject to the investment restrictions set forth below, the Portfolio
may lend portfolio securities to brokers, dealers, and financial
institutions, provided that cash equal to at least 100% of the market
value of the securities loaned is deposited by the borrower with the
Portfolio and is maintained each business day in a segregated account
pursuant to applicable regulations. While such securities are on
loan, the borrower will pay the Portfolio any income accruing thereon,
and the Portfolio may invest the cash collateral in portfolio
securities, thereby earning additional income. The Portfolio will not
lend its portfolio securities if such loans are not permitted by the
laws or regulations of any state in which the Portfolio's shares are
qualified for sale, and the Portfolio will not lend more than 33-1/3%
of the value of the Portfolio's total assets. Loans would be subject
to termination by the Portfolio on four business days' notice, or by
the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market
price of the borrowed securities which occurs during the term of the
loan inures to the Portfolio and that Portfolio's shareholders. The
Portfolio may pay reasonable finders, borrowers, administrative, and
custodial fees in connection with a loan.
Repurchase Agreements
As discussed in the Portfolio's Prospectus, the Portfolio may enter
into repurchase agreements with financial institutions. The Portfolio
follows certain procedures designed to minimize the risks inherent in
such agreements. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-established
financial institutions whose condition will be continually monitored
by the Portfolio's investment adviser, Money Management Associates
(the "Adviser"). In addition, the value of the collateral underlying
the repurchase agreement will always be at least equal to the
repurchase price, including any accrued interest earned in the
repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Portfolio will seek to liquidate
such collateral. However, the exercising of the Portfolio's right to
liquidate such collateral could involve certain costs or delays and,
to the extent that proceeds from any sale upon a default of the
obligation to repurchase were less than the repurchase price, the
Portfolio could suffer a loss. It is the current policy of the
Portfolio not to invest in repurchase agreements that do not mature
within seven days if any such instrument, together with any other
illiquid assets held by the Portfolio, amounts to more than 10% of the
Portfolio's total assets. The investments of the Portfolio in
repurchase agreements, at times, may be substantial when, in the view
of the Adviser, liquidity or other considerations so warrant.
Zero Coupon Securities
The Portfolio 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 the life
of the security. The value of the zero-coupon security to an investor
consists of the difference between the security's face value at the
time of maturity and the price for which the security was acquired,
which is generally an amount much less than the 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 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 Portfolio's 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 Portfolio's 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 Portfolio 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
lending 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.
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 the
Portfolio, but are not considered fundamental and may be changed by
the Board of Directors of the Fund.
The Portfolio 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 0.5% 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.
9. purchase put or call options.
10.sell securities short.
MANAGEMENT OF THE FUND
The names and addresses of the directors and officers of the Fund and
partners of Money Management Associates, the Fund's 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, 55 - Chairman of the Board of Directors and
Treasurer of the Fund. General Partner of the adviser since 1975.
President of Rushmore Trust and Savings, FSB since 1989. Address:
1001 Grand Isle Way, Palm Beach Gardens, FL 33418.
*Richard J. Garvey, 64 - President and Director of the Fund. Employee
of Rushmore Services, Inc., a subsidiary of the Adviser, since 1995.
Limited Partner of the Adviser since 1975. Address: 4922 Fairmont
Avenue, Bethesda, Maryland 20814.
Jeffrey R. Ellis, 53 - Director of the Fund. Vice President,
LottoFone, Inc., a telephone state lottery service, since 1993. Vice
President Shoppers Express, Inc. 1988-1992. Address: 513 Kerry Lane,
Virginia Beach, Virginia 23451.
Bruce C. Ellis, 53 - Director of the Fund. Vice President, LottoFone,
Inc., a telephone state lottery service, since 1991. Vice President,
Shoppers' Express, Inc. 1986-1992. Address: 7108 Heathwood Court
Bethesda, Maryland 20817.
Patrick F. Noonan, 54 - Director of the Fund. 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, Maryland 20854.
Michael D. Lange, 55 - Director of the Fund. Vice President, Capital
Hill Management Corporation since 1967. Owner of Michael D. Lange,
Ltd., a builder and developer since 1980. Partner of Greatful Falls,
a building developer since 1994. Address: 7521 Pepperell Drive,
Bethesda, Maryland 20817.
Leo Seybold, 83 - Director of the Fund. Retired 1988. Address: 5804
Rockmere Drive, Bethesda, Maryland 20816.
*Timothy N. Coakley, CPA, 30 - Vice President. Chief Financial
Officer, Rushmore Trust and Savings, FSB since 1995. Formerly Audit
Manager, Deloitte & Touche LLP until 1994. Address: 4922 Fairmont
Avenue, Bethesda, MD 20814.
*Edward J. Karpowicz, CPA, 34 - Controller since July 1997.
Treasurer, Bankers Finance Investment Management Corp., August 1993 to
June 1997. Senior Accountant, Ernst & Young, September 1989 to
February 1993. Address: 4922 Fairmont Avenue, Bethesda, MD 20814.
*Stephenie E. Adams, 28 - Secretary. Manager, Fund Administration and
Marketing, Rushmore Services, Inc., from July 1994 to present.
Regional Sales Coordinator, Media General Cable, from June 1993 to
June 1994. Graduate Student, Northwestern University, M.S., from
September 1991 to December 1992. Address: 4922 Fairmont Avenue,
Bethesda, Maryland 20814.
* Indicates interested person as defined in the Investment Company Act
of 1940.
Certain Directors and Officers of the Fund are also Directors and
Officers of Fund for Government Investors, Fund for Tax-Free
Investors, Inc., and American Gas Index Fund, Inc., other investment
companies that are managed by the Adviser. As of December 1, 1997,
the directors and officers of the Fund, as a group, owned, of record
and beneficially, less than 1% of the shares of the Portfolio.
The Adviser, Money Management Associates, which has its office at 1001
Grand Isle Way, Palm Beach Gardens, Florida 33418, 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, Fund for Tax-Free Investors, Inc., The Rushmore Fund, Inc.,
and American Gas Index Fund, Inc. Daniel L. O'Connor is the sole
general partner of the Adviser, and, as such, exercises control
thereof.
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 institutions for their expenses in connection with the
distribution of Fund shares.
For the fiscal year ended August 31, 1997, 1996, and 1995, the
Portfolio paid advisory fees to the Adviser of approximately $86,364,
$127,595, and $134,573, respectively.
Under an Agreement dated September 1, 1993, Rushmore Trust and
Savings, FSB ("RTS"), 4922 Fairmont Avenue, Bethesda, Maryland 20814,
a majority-owned subsidiary of the Adviser, provides transfer agency,
dividend-disbursing and administrative services to the Fund. The
services of RTS are provided to the Fund on a fee basis and are paid
by the Fund. RTS will charge an annual fee of 30 basis points (0.30%)
of the average daily net assets of the 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 1, 1997, there were 1,549,608 shares of the Portfolio
outstanding. Charles Schwab & Company, San Francisco, California, IUE
Strike Insurance Fund, Washington, D.C., and National Financial
Services Corporation, New York, New York, owned for the benefit of
others 20.21%, 7.50%, and 5.38%, shares of the Portfolio,
respectively. 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 Portfolio's shares will be determined daily
at 4:00 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
Portfolio will be valued on the basis of the average of quoted bid and
ask prices when market quotations are available.
PERFORMANCE INFORMATION
The Portfolio from time to time may include its total return in
advertisements or reports to shareholders or prospective shareholders.
Quotations of average annual total return for the Portfolio will be
expressed in terms of the average annual compounded rate of return on
a hypothetical investment in the Portfolio over a period of at least
one, five, and ten years (up to the life of the Portfolio) (the ending
date of the period will be stated). Total return is calculated from
two factors: the amount of dividends earned by each Portfolio share
and by the increase or decrease in value of the Portfolio's share
price. See "Calculation of Yield and Return Quotations."
Performance information for the Portfolio contained in reports and
marketing and other Portfolio promotional literature may be compared
to various unmanaged indexes, including, but not limited to, the
Shearson Lehman Government (LT) Index, the Standard & Poor's 500
Composite Stock Price IndexTM, and the Dow Jones Industrial Average.
Such unmanaged indexes may assume the reinvestment of dividends, but
generally do not reflect deductions for operating costs and expenses.
In addition, the Portfolio's total return may be compared to the
performance of broad groups of comparable mutual funds with similar
investment goals, as such performance is tracked and published by such
independent organizations as Lipper Analytical Services, Inc.
("Lipper"), and CDA Investment Technologies, Inc., among others. When
Lipper's tracking results are used, the Portfolio will be compared to
Lipper's appropriate fund category, that is, by fund objective and
portfolio holdings. The Portfolio, therefore, will be compared to
funds within Lipper's bond fund category. Rankings may be listed
among one or more of the asset-size classes as determined by Lipper.
Since the assets in all mutual funds are always changing, the
Portfolio may be ranked within one Lipper asset-size class at one time
and in another Lipper asset-size class at some other time. Footnotes
in advertisements and other marketing literature will include the time
period and Lipper asset-size class, as applicable, for the ranking in
question. Performance figures are based on historical results and are
not intended to indicate future performance.
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:
Under the rules of the Securities and Exchange Commission ("SEC
Rules"), yield is calculated is 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
Under this formula, interest earned on debt obligations for purposes
of "a" above, is calculated by (i) computing the yield to maturity of
each obligation held by the Portfolio based on the market value of the
obligation (including actual accrued interest) at the close of
business on the last day of each month, or, with respect to
obligations purchased during the month, the purchase price (plus
actual accrued interest), (ii) dividing that figure by 360 and
multiplying the quotient by the market value of the obligation
(including actual accrued interest as referred to above) to determine
the interest income on the obligation that is in the Portfolio's
portfolio (assuming a month of thirty days), and (iii) computing the
total of the interest earned on all debt obligations and all dividends
accrued on all equity securities during the thirty-day or one month
period. In computing dividends accrued, dividend income is recognized
by accruing 1/360 of the stated dividend rate of a security each day
that the security is in the Portfolio's portfolio. Undeclared earned
income, computed in accordance with generally accepted accounting
principles, may be subtracted from the maximum offering price
calculation required pursuant to "d" above.
The Portfolio from time to time may also advertise its yield based on
a thirty-day period ending on a date other than the most recent
balance sheet included in its Registration Statement, computed in
accordance with the yield formula described above, as adjusted to
conform with the differing period for which the yield computation is
based.
Any quotation of performance stated in terms of yield (whether based
on a thirty-day or one month period) will be given no greater
prominence than the information prescribed under SEC Rules. In
addition, all advertisements containing performance data of any kind
will include a legend disclosing that such performance data represents
past performance and that the investment return and principal value of
an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
For purposes of quoting and comparing the performance of the Portfolio
to that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be
stated in terms of total return. Under the SEC Rules, Portfolio
advertising performance must include total return quotes calculated
according to the following formula:
n
P (1+T) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years (1, 5, or 10); and
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10
year periods at the end of the 1, 5, or 10 year
periods (or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the
most recent quarter prior to submission of the advertising for
publication, and will cover 1, 5, and 10 year periods or a shorter
period dating from the effectiveness of the Registration Statement of
the Portfolio. In calculating the ending redeemable value, all
dividends and distributions by the Portfolio are assumed to have been
reinvested at net asset value as described in the Portfolio's
Prospectus on the reinvestment dates during the period. Total return,
or "T" in the formula above, is computed by finding the average annual
compounded rates of return over the 1, 5, and 10 year periods (or
fractional portion thereof) that would equate the initial amount
invested to the ending redeemable value.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
Dividends and Distributions. Dividends from net investment income
and any distributions of net realized capital gains from the Portfolio
will be distributed as described in the Portfolio's Prospectus under
"Dividends and Distributions." All such distributions of the
Portfolio normally automatically will be reinvested without charge in
additional shares of the Portfolio.
With respect to the investment by the Portfolio in U.S. Treasury zero
coupon bonds, a portion of the difference between the issue price of
zero coupon securities and the face value of such securities (the
"original issue discount") is considered to be income to the Portfolio
each year, even though the Portfolio will not receive cash interest
payments from these securities. This original issue discount (imputed
income) will comprise a part of the investment company taxable income
of the Portfolio which must be distributed to shareholders of the
Portfolio in order to maintain the qualification of the Portfolio as a
regulated investment company (a "RIC") under Subchapter M of the U.S.
Internal Revenue Code of 1986, as amended (the "Code"), as described
immediately below under "Regulated Investment Company Status," and to
avoid Federal income tax at the level of the Portfolio. Shareholders
of the Portfolio will be subject to income tax on such original issue
discount, whether or not such shareholders elect to receive their
distributions in cash.
Regulated Investment Company Status. As a RIC, the Portfolio would not
be subject to Federal income taxes on the net investment income and
capital gains that the Portfolio distributes to the Portfolio's
shareholders. The distribution of net investment income and capital
gains will be taxable to Portfolio shareholders regardless of whether
the shareholder elects to receive these distributions in cash or in
additional shares. Distributions reported to Portfolio shareholders
as long-term capital gains shall be taxable as such, regardless of how
long the shareholder has owned the shares. Portfolio shareholders
will be notified annually by the Portfolio as to the Federal tax
status of all distributions made by the Portfolio. Distributions may
be subject to state and local taxes.
The Portfolio will seek to qualify for treatment as a RIC under
Subchapter M of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"). Provided that the Portfolio (i) is a RIC and (ii)
distributes at least 98% of its net investment income (including, for
this purpose, net realized short-term capital gains), the Portfolio
will not be liable for Federal income taxes to the extent its net
investment income and its net realized long- and short-term capital
gains, if any, are distributed to the Portfolio's shareholders. One
of several requirements for RIC qualification is that the Portfolio
receives at least 90% of the Portfolio's gross income each year from
dividends, interest, payments with respect to securities loans, gains
from the sale or other disposition of securities or foreign
currencies, or other income derived with respect to the Portfolio's
investments in stock, securities, and foreign currencies (the "90%
Test"). In addition, under the Code, the Portfolio will not qualify
as a RIC for any taxable year if more than 30% of the Portfolio's
gross income for that year is derived from gains on the sale of
securities held less than three months (the "30% Test").
If the Portfolio does not satisfy the 30% Test for any taxable year of
the Portfolio, the Portfolio will not qualify as a RIC for that year.
If the Portfolio fails to qualify as a RIC for any taxable year, the
Portfolio would be taxed in the same manner as an ordinary
corporation. In that event, the Portfolio would not be entitled to
deduct the distributions which the Portfolio had paid to shareholders
and, thus, would incur a corporate income tax liability on all of the
Portfolio's taxable income whether or not distributed. The imposition
of corporate income taxes on the Portfolio would directly reduce the
return to an investor from an investment in the Portfolio.
In the event of a failure by the Portfolio to qualify as a RIC, the
Portfolio's distributions, to the extent such distributions are
derived from the Portfolio's current or accumulated earnings and
profits, would constitute dividends that would be taxable to
shareholders as ordinary income and would be eligible for the
dividends-received deduction for corporate shareholders. This
treatment would also apply to any portion of the distributions that
might have been treated in the shareholder's hands as long-term
capital gains, as discussed below, had the Portfolio qualified as a
RIC.
If the Portfolio were to fail to qualify as a RIC for one or more
taxable years, the Portfolio could then qualify (or requalify) as a
RIC for a subsequent taxable year only if the Portfolio had
distributed to the Portfolio's shareholders a taxable dividend equal
to the full amount of any earnings or profits (less the interest
charge mentioned below, if applicable) attributable to such period.
The Portfolio might also be required to pay to the Internal Revenue
Service ("IRS") interest on 50% of such accumulated earnings and
profits. In addition, pursuant to the Code and an interpretative
notice issued by the IRS, if the Portfolio should fail to qualify as a
RIC and should thereafter seek to requalify as a RIC, the Portfolio
may be subject to tax on the excess (if any) of the fair market of the
Portfolio's assets over the Portfolio's basis in such assets, as of
the day immediately before the first taxable year for which the
Portfolio seeks to requalify as a RIC.
If the Portfolio determines that the Portfolio will not qualify as a
RIC under Subchapter M of the Code, the Portfolio will establish
procedures to reflect the anticipated tax liability in the Portfolio's
net asset value.
As a RIC, 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 Portfolio. Distributions may be subject to state and
local taxes.
AUDITORS AND CUSTODIAN
Deloitte & Touche LLP, independent certified public accountants, are
the auditors of the Fund. Rushmore Trust and 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, 1997, which
must accompany this Statement of Additional Information.
<PAGE>
U.S. GOVERNMENT BOND PORTFOLIO FINANCIAL STATEMENTS
<PAGE>
ANNUAL REPORT, August 31, 1997
THE RUSHMORE FUND, INC.
4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 343-3355 (301) 657-1500
[Deleted Rushmore Logo]
October 20, 1997
Dear Shareholder:
Since our last semi-annual report, the economy has continued to show
solid growth while keeping inflation in check. The Federal Reserve
has not made a change to the Federal Funds rate since the 25 basis
point increase in March of this year, but they do maintain a bias
toward restraint. Due to this bias the market remains susceptible to
volatility due to economic data releases, as market participants try
to gauge the Fed's reaction to possible inflationary data. Yields on
the 30-year Treasury Bond peaked in April of this year at 7.17% before
trending back downward to 6.57% by our fiscal year end. The low lend
of the yield range for the 1997 fiscal year was 6.35%.
Rushmore U.S. Government Bond Portfolio
The U.S. Government Bond Portfolio invests primarily in the ten and 30-
year Treasury issues. Our objective is to provide high current income
as well as maintain safety of principal. For the fiscal year ended
August 31, 1997, the total return of the portfolio was 11.94%, as
compared with the Lehman Brothers Intermediate Government Index total
return of 7.96%, and the Lehman Brothers Long Government Index total
return of 13.24%. The average maturity of the portfolio was 21.3 years
on August 31, 1997.
Outlook
We look for the rest of 1997 and early 1998 to behave much like the
last 12 months. The economy should continue to remain strong, and a
watchful Fed will keep vigil over inflation. To achieve this goal
another rate hike may be necessary, but as they have demonstrated in
recent FOMC meetings, the Fed is willing to be patient before making
restrictive rate increases. So far Fed policy has been successful in
keeping the economy moving forward while not being overly restrictive.
The ever present possibility of an increase in the Fed Funds rate in
the future, however, does leave the market open to some volatility.
We anticipate a trading range in 30-year Treasury Bond yields between
6.25% and 7.25%. Until we see an upward move in inflation, yields
should remain in the lower end of this range.
As always, we thank you for your continued support.
Sincerely,
/s/ Daniel L. O'Connor
Daniel L. O'Connor
Chairman of the Board
/s/ Richard J. Garvey
Richard J. Garvey
President
<PAGE>
<TABLE>
THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
STATEMENT OF NET ASSETS
August 31, 1997
<CAPTION>
Face Value
Amount (Note 1)
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: 97.2% of Net Assets
U.S. Treasury Notes, 5.875%, 11/15/05 $ 2,100,000 $ 2,032,407
U.S. Treasury Notes, 6.25%, 2/15/07 1,000,000 990,000
U.S. Treasury Notes, 6.625%, 5/15/07 1,700,000 1,729,220
U.S. Treasury Notes, 6.125%, 8/15/07 500,000 492,187
U.S. Treasury Bonds, 7.625%, 2/15/25 4,050,000 4,525,875
U.S. Treasury Bonds, 6.875%, 8/15/25 4,900,000 5,022,500
-----------
Total U.S. Treasury Obligations (Cost $15,256,816) 14,792,189
-----------
REPURCHASE AGREEMENT: 2.2%
With PaineWebber dated 8/29/97 at 5.40% to be
repurchased at $333,102 on 9/2/97, collateralized
by $334,862 in U.S. Treasury Notes, due 6/30/98
(Cost $333,052) 333,052
-----------
Total Investments: 99.4% (Cost $15,589,868*) 15,125,241
Other Assets less Liabilities: 0.6% 86,720
-----------
Net Assets (Note 6): 100.0% $15,211,961
===========
Net Asset Value Per Share (Based on 1,534,148
Shares Outstanding) $9.92
===========
*Aggregate cost for Federal income tax purposes
See Notes to Financial Statements.
</TABLE>
2
<PAGE>
THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1997
Investment Income (Note 1) $ 1,104,729
-----------
Expenses
Investment Advisory Fee (Note 2) 86,364
Administrative Fee (Note 2) 51,818
-----------
Total Expenses 138,182
-----------
Net Investment Income 966,547
-----------
Net Realized Loss on Investment Transactions (260,096)
Net Unrealized Appreciation of Investments 1,358,287
-----------
Net Gain on Investments 1,098,191
-----------
Net Increase in Net Assets Resulting from Operations $ 2,064,738
===========
See Notes to Financial Statements.
3
<PAGE>
<TABLE>
THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended August 31,
<CAPTION>
1997 1996
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net Investment Income $ 966,547 $ 1,426,905
Net Realized Gain (Loss) on Investment Transactions (260,096) 1,147,575
Net Unrealized Appreciation (Depreciation) of Investments 1,358,287 (2,989,249)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 2,064,738 (414,769)
------------ ------------
Distributions to Shareholders
From Net Investment Income (971,703) (1,421,749)
From Net Realized Gain on Investments (31,134) -
------------ ------------
Total Distributions to Shareholders (1,002,837) (1,421,749)
------------ ------------
Share Transactions
Net Proceeds from Sales of Shares 10,275,496 27,184,950
Net Proceeds from Sales of Shares issued in connection with acquisition
of the Rushmore U.S. Government Intermediate-Term Portfolio (Note 5) - 12,773,496
Reinvestment of Distributions 838,080 1,242,904
Cost of Shares Redeemed (18,387,418) (34,331,636)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Share Transactions (7,273,842) 6,869,714
------------ ------------
Total Increase (Decrease) in Net Assets (6,211,941) 5,033,196
Net Assets - Beginning of Year 21,423,902 16,390,706
------------ ------------
Net Assets - End of Year $15,211,961 $21,423,902
============ ============
Shares
Sold 1,055,504 2,724,777
Shares issued in connection with acquisition of the Rushmore U.S.
Government Intermediate-Term Portfolio (Note 5) - 1,182,595
Issued in Reinvestment of Distributions 85,019 124,401
Redeemed (1,887,103) (3,408,891)
------------ ------------
Net Increase (Decrease) in Shares (746,580) 622,882
============ ============
See Notes to Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
FINANCIAL HIGHLIGHTS
For the Years Ended August 31,
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 9.39 $ 9.89 $ 9.08 $ 11.55 $ 10.62
-------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income 0.549 0.563 0.606 0.599 0.650
Net Realized and Unrealized Gain (Loss) on
Investments 0.549 (0.502) 0.810 (1.884) 1.304
-------- -------- -------- -------- --------
Total from Investment Operations 1.098 0.061 1.416 (1.285) 1.954
-------- -------- -------- -------- --------
Distributions to Shareholders:
From Net Investment Income (0.551) (0.561) (0.606) (0.602) (0.650)
From Net Realized Capital Gain (0.017) - - (0.583) (0.374)
-------- -------- -------- -------- --------
Total Distributions (0.568) (0.561) (0.606) (1.185) (1.024)
-------- -------- -------- -------- --------
Net Increase (Decrease) in Net Asset Value 0.53 (0.50) 0.81 (2.47) 0.93
-------- -------- -------- -------- --------
Net Asset Value - End of Year $ 9.92 $ 9.39 $ 9.89 $ 9.08 $ 11.55
======== ======== ======== ======== ========
Total Investment Return 11.94% 0.41% 16.35% (10.29)% 20.92%
Ratios to Average Net Assets:
Expenses 0.80% 0.80% 0.80% 0.80% 0.80%
Net Investment Income 5.60% 5.59% 6.75% 5.97% 6.08%
Supplementary Data:
Portfolio Turnover Rate 19.2% 95.0% 63.3% 188.3% 173.6%
Net Assets at End of Year (000's omitted) $15,212 $21,424 $16,391 $29,276 $24,094
Number of Shares Outstanding at End of Year
(000's omitted) 1,534 2,281 1,658 3,225 2,085
See Notes to Financial Statements.
</TABLE>
5
<PAGE>
THE RUSHMORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
The Rushmore Fund, Inc. (the 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 currently consists
of two separate portfolios each with its own investment objectives and
policies. These financial statements report on one of the two
portfolios: U.S. Government Bond Portfolio. On August 31, 1997, there
were 1,000,000,000 shares of $0.001 par value capital stock
authorized. The financial statements have been prepared in conformity
with generally accepted accounting principles which permit management
to make certain estimates and assumptions at the date of the financial
statements. The following is a summary of significant accounting
policies which the Fund consistently follows:
(a) Securities of the 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 U.S. Government Bond Portfolio.
Income dividends in this portfolio 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 FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Investment advisory and management services are provided by Money
Management Associates, (the Adviser). Under an agreement with the
Adviser, the U.S. Government Bond Portfolio pays a fee for such
services at an annual rate of 0.50% of the average daily net assets.
Certain Officers and Directors of the Fund are affiliated with the
Adviser.
Rushmore Trust and Savings, FSB (Rushmore Trust), a majority-owned
subsidiary of the Adviser, provides transfer agency, dividend-
disbursing and shareholder services to the Fund. In addition,
Rushmore Trust serves as custodian of the Fund's assets and pays the
operating expenses of the Fund.
6
<PAGE>
For these services, Rushmore Trust receives an annual fee of 0.30%
of the average daily net assets of the U.S. Government Bond Portfolio.
3. SECURITIES TRANSACTIONS
For the year ended August 31, 1997, purchases of securities, excluding
short-term securities, were $3,191,359 and sales (including maturities)
of securities were $10,187,063.
4. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
As of August 31, 1997, net depreciation of investments for Federal
income tax purposes was $464,627 of which $90,063 related to
appreciated investments and $554,690 related to depreciated
investments. At August 31, 1997, the cost of the Fund's securities
for Federal income tax purposes was $15,589,868.
5. 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:
Before After
Acquisition Acquisition
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 -
Immediately following the reorganization, the Rushmore U.S. Government
Long-Term Securities Portfolio was renamed The Rushmore U.S. Government
Bond Portfolio.
6. NET ASSETS
At August 31, 1997, net assets consisted of the following:
Paid-in-Capital $ 16,424,375
Accumulated Net Realized Loss on Investments (747,787)
Net Unrealized Depreciation on Investments (464,627)
--------------
NET ASSETS $ 15,211,961
==============
7
<PAGE>
7. CAPITAL LOSS CARRYOVERS
At August 31, 1997, 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:
Expires August 31,
2001 $253,964
2002 233,727
2005 260,096
--------
$747,787
========
8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
of The Rushmore Fund, Inc.:
We have audited the statement of net assets of the U.S. Government
Bond Portfolio (one of the Portfolios) of The Rushmore Fund, Inc., as
of August 31, 1997, and the related statements of operations and
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 from 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, 1997, by
correspondence with the custodian and broker. 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 U.S. Government Bond Portfolio (one of the Portfolios) of The
Rushmore Fund, Inc., at August 31, 1997, the results of its
operations, the changes in its net assets, and the financial
highlights for the presented periods in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
October 10, 1997
9
<PAGE>
[Deleted Rushmore Logo]
THE RUSHMORE FUND, INC.
Annual Report
August 31, 1997
<PAGE>
PART C
<PAGE>
PART C
OTHER INFORMATION
The Rushmore Fund, Inc.
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial statements: The following audited financial statements
are incorporated by reference in Part B of this registration
statement's amendment:
For the Rushmore U.S. Government Bond Portfolio:
Statement of Net Assets as of August 31, 1997;
Statement of Operations for the year ended August 31, 1997;
Statements of Changes in Net Assets for the years ended
August 31, 1997 and 1996; and
Financial Highlights for each of the five years in
the period ended August 31, 1997.
b. Exhibits:
(11) Consent of Deloitte & Touche LLP, independent public accountants
for Registrant.
(16) Schedule for computation of performance quotations.
(27) Financial Data Schedule.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Number of Shareholders
of Record at
Title of Class December 1, 1997
(Common Stock, $.001 par value)
The Rushmore U.S. Government Bond Portfolio 584
ITEM 27. INDEMNIFICATION
The Registrant 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, that
permit the Registrant to indemnify its directors and officers under
certain circumstances. Such indemnification, however, is subject to
the limitations imposed by the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended.
The Articles of Incorporation of the Fund provide that officers and
directors shall be indemnified by the Fund against liabilities and
expenses of defense in proceedings against them by reason of the
fact that they serve as officers or directors of the Fund or as an
officer or director of another entity at the request of the entity.
This indemnification is subject to the following conditions:
(a) no director or officer is indemnified against any liability
to the Fund or its security holders which was the result of any
willful misfeasance, bad faith, gross negligence, or reckless
disregard of his duties;
(b) officers and directors are indemnified only for actions
taken in good faith which the officers and directors believed
were in or not opposed to the best interests of the Fund; and
(c) expenses of any suit or proceeding will be paid in advance
only if the persons who will benefit by such advance undertake to
repay the expenses unless it is subsequently determined that they
are entitled to indemnification.
The Articles of Incorporation of the Registrant provide that if
indemnification is not ordered by a court, indemnification may be
authorized upon determination by shareholders, or by a majority vote
of a quorum of the directors who were not parties to the proceedings
or, if a quorum is not obtainable, or if directed by a quorum of
disinterested directors so directs, by independent legal counsel in
a written opinion that the persons to be indemnified have met the
applicable standard.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Money Management Associates ("MMA"), 1001 Grand Isle Way, Palm Beach
Gardens, Florida 33418, a limited partnership organized under the
laws of the District of Columbia on August 15, 1974, has one general
partner and three limited partners. Daniel L. O'Connor is the
general partner and sole employee of MMA. Limited partners Richard
J. Garvey, Martin M. O'Connor, and John R. Cralle, are full-time
employees of Rushmore Services, Inc. ("RSI"), a subsidiary of MMA,
at 4922 Fairmont Avenue, Bethesda, Maryland 20814.
MMA also serves as the investment adviser to Fund for Government
Investors, Fund for Tax-Free Investors, Inc., and American Gas Index
Fund, Inc., all regulated investment companies since their inception.
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The physical location for all accounts, books, and records required
to be maintained and preserved by Section 31(a) of the Investment
Company Act of 1940, as amended, and Rules 31a-1 and 31a-2
thereunder, is 4922 Fairmont Avenue, Bethesda, Maryland 20814.
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
(a) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in this City of Bethesda
and State of Maryland on the 26th day of December 1997.
The Rushmore Fund, Inc.
By:
/s/ Daniel L. O'Connor*
Daniel L. O'Connor, Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 20 to the Registration Statement has been signed below
by the following persons in the capacities and on the dates indicated.
Name Title Date
/s/ Daniel L. O'Connor* Chairman of the Board, December 26, 1997
Daniel L. O'Connor Treasurer, Director
/s/ Richard J. Garvey* President, Director December 26, 1997
Richard J. Garvey
/s/ Timothy N. Coakley Vice President, Controller December 26, 1997
Timothy N. Coakley
/s/ Jeffrey R. Ellis* Director December 26, 1997
Jeffrey R. Ellis
/s/ Bruce C. Ellis* Director December 26, 1997
Bruce C. Ellis
/s/ Michael D. Lange* Director December 26, 1997
Michael D. Lange
/s/ Patrick F. Noonan* Director December 26, 1997
Patrick F. Noonan
/s/ Leo Seybold* Director December 26, 1997
Leo Seybold
*Stephenie E. Adams, Attorney-in-Fact
<PAGE>
Exhibit 11
Consent of Deloitte & Touche LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Rushmore Fund, Inc.:
We consent to the incorporation by reference in Post-Effective
Amendment No. 21 to Registration Statement No. 2-99388 of our report
dated October 10, 1997 appearing in the Annual Report of The Rushmore
Fund, Inc. for the year ended August 31, 1997, and to the reference to
us under the caption "Financial Highlights" appearing in the
Prospectus, which is also a part of such Registration Statement.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
December 26, 1997
<PAGE>
Exhibit 16
Schedule for Computation of Performance Quotations
<PAGE>
THE RUSHMORE FUND, INC.
Rushmore U.S. Government Bond Portfolio
Computation of Yield Quotation
a. Interest Income $1,104,729
b. Less: Management Fees and Fund Expenses 138,182
----------
Net Income $ 966,547
==========
c. Average Number of Shares 1,687,316
Outstanding
d. Closing Share Price 8/31/97 $9.92
Value of Shares $15,211,961
6
Yield: 2 [(a-b/cd + 1) - 1] 5.77%
<PAGE>
THE RUSHMORE FUND, INC.
Rushmore U.S. Government Bond Portfolio
Computation of Average Annual Total Return
1 Year 5 Year Since Inception*
n n n
P (1+T) = ERV P (1+T) = ERV P (1+T) = ERV
P = $10,000 P = $10,000 P = $10,000
T = 11.94% T = 7.24% T = 8.23%
N = 1 N = 5 N = 10.71
ERV = 11,193 ERV = 14,186 ERV = 25,180
* Commencement of Operations December 18, 1985
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<NAME> U.S. GOVERNMENT BOND PORTFOLIO
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<PERIOD-TYPE> YEAR
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<PERIOD-END> AUG-31-1997
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<NET-CHANGE-FROM-OPS> 2,064,738
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<DISTRIBUTIONS-OF-GAINS> (31,134)
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<NUMBER-OF-SHARES-SOLD> 1,055,504
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<PER-SHARE-NAV-BEGIN> 9.390
<PER-SHARE-NII> 0.549
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<AVG-DEBT-PER-SHARE> 0.000
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