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FGHIJ
THE RUSHMORE FUND, INC.
----------------------------------------------------
Semi-Annual Report
February 28, 1997
<PAGE>
SEMI-ANNUAL REPORT, February 28, 1997
THE RUSHMORE FUND, INC.
4922 FAIRMONT AVENUE, BETHESDA, MARYLAND 20814
FGHIJ
<TABLE>
<S> <C>
(800) 343-3355 (301) 657-1500
</TABLE>
Dear Shareholder:
After a 25 basis point cut in the Federal Funds rate in January of 1996, the
Federal Reserve left rates alone for the remainder of the calendar year. The 30
year Treasury bond peaked above 7%, reacting to inflationary fears, but by the
end of 1996 most of this increase had been retraced. The first two months of
1997 were again met with inflationary caution as each economic release was
anticipated for any signs of an increase in inflation. This uneasiness resulted
in higher rates at the end of the two month period.
RUSHMORE U.S. GOVERNMENT BOND PORTFOLIO
The U.S. Government Bond Portfolio continues to invest in ten-year Treasury
notes and thirty year Treasury bonds. The objective is to provide high current
income while maintaining safety of principal. For the six month period ended
February 28, 1997, the Portfolio's total return was 6.50%.
OUTLOOK
The much anticipated hike in the Fed Funds rate finally came in March of this
year as the Fed increased the rate by 25 basis points, and the market reacted by
taking the yield on the 30 year Treasury above 7% once again. The market
consensus appears to be that at least one more rate hike is in store for 1997,
perhaps as early as the FOMC meeting in May. The economy is still showing signs
of strength, but we are not expecting any significant inflation, especially with
the restrictive bias of the Fed on interest rates.
Although we expect to see some fluctuations in the interim as the market weighs
further economic data for further Fed action, we look for interest rates to
begin to creep back down by year end, as inflationary fears subside.
Thank you for your continued support.
Sincerely,
[SIG] [SIG]
Daniel L. O'Connor Richard J. Garvey
Chairman of the Board President
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THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
STATEMENT OF NET ASSETS
FEBRUARY 28, 1997
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 99.06%
U.S. Treasury Notes, 5.875%, 11/15/05............................. $ 2,100,000 $ 2,004,843
U.S. Treasury Notes, 6.50%, 2/15/07............................... 1,000,000 978,125
U.S. Treasury Bonds, 7.50%, 11/15/24.............................. 3,400,000 3,638,000
U.S. Treasury Bonds, 7.625%, 2/15/25.............................. 4,050,000 4,400,576
U.S. Treasury Bonds, 6.875%, 8/15/25.............................. 4,900,000 4,884,687
-------------
Total U.S. Treasury Obligations (Cost $16,387,945)................ 15,906,231
-------------
REPURCHASE AGREEMENTS -- 3.36%
With Paine Webber at 5.32%, dated 2/28/97, due 3/3/97,
collateralized
by U.S. Treasury Notes, due 12/31/98 (Cost $539,589)............ 539,589
-------------
TOTAL INVESTMENTS -- 102.42% (COST $16,927,534*).................. 16,445,820
-------------
LIABILITIES LESS OTHER ASSETS -- 2.42%............................ (388,151)
-------------
NET ASSETS (NOTE 5) -- 100.00%.................................... $ 16,057,669
-------------
-------------
NET ASSET VALUE PER SHARE (BASED ON 1,654,432 SHARES
OUTSTANDING).................................................... $9.71
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-------------
</TABLE>
*Same cost is used for Federal income tax purposes.
See Notes to Financial Statements.
2
<PAGE>
THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME (Note 1)....................................... $ 593,547
------------
EXPENSES
Investment Advisory Fee (Note 2)............................... 46,563
Administrative Fee (Note 2).................................... 27,938
------------
Total Expenses............................................... 74,501
------------
NET INVESTMENT INCOME............................................ 519,046
------------
Net Realized Loss on Investment Transactions..................... (600,779)
Net Change in Unrealized Appreciation (Depreciation) of
Investments.................................................... 1,341,200
------------
NET GAIN ON INVESTMENTS.......................................... 740,421
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 1,259,467
------------
------------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income........................... $ 519,046 $ 687,688
Net Realized Gain (Loss) on Investment
Transactions.................................. (600,779) 889,849
Net Change in Unrealized Appreciation
(Depreciation) of Investments................. 1,341,200 (749,490)
------------ ------------
Net Increase in Net Assets Resulting from
Operations.................................. 1,259,467 828,047
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income...................... (524,202) (687,688)
From Net Realized Gain on Investments........... (31,134) --
------------ ------------
Total Distributions to Shareholders........... (555,336) (687,688)
------------ ------------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares............... 5,434,615 19,571,881
Net Proceeds from Sales of Shares issued in
connection with acquisition of the Rushmore
U.S. Government Intermediate-Term Portfolio... -- 12,791,020
Reinvestment of Distributions................... 462,572 599,636
Cost of Shares Redeemed......................... (11,967,551) (19,856,188)
------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Share Transactions........... (6,070,364) 13,106,349
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ (5,366,233) 13,246,708
NET ASSETS -- Beginning of Period................. 21,423,902 16,390,706
------------ ------------
NET ASSETS -- End of Period....................... $16,057,669 $29,637,414
------------ ------------
------------ ------------
SHARES
Sold............................................ 556,214 1,941,910
Shares issued in connection with acquisition of
the Rushmore U.S. Government Intermediate-Term
Portfolio..................................... -- 1,182,595
Issued in Reinvestment of Distributions......... 46,847 57,434
Redeemed........................................ (1,229,357) (1,910,295)
------------ ------------
Net Increase (Decrease) in Shares............. (626,296) 1,271,644
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED AUGUST 31,
FEBRUARY 28, ----------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value -- Beginning of
Period........................... $ 9.39 $ 9.89 $ 9.08 $ 11.55 $ 10.62 $ 9.97
------------ ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net Investment Income............ 0.272 0.563 0.606 0.599 0.650 0.697
Net Realized and Unrealized Gains
(Losses) on Securities......... 0.340 (0.502) 0.810 (1.880) 1.304 0.649
------------ ---------- ---------- ---------- ---------- ----------
Total from Investment
Operations................... 0.612 0.061 1.416 (1.281) 1.954 1.346
------------ ---------- ---------- ---------- ---------- ----------
Distributions to Shareholders:
From Net Investment Income....... (0.275) (0.561) (0.606) (0.602) (0.650) (0.696)
From Net Realized Capital
Gains.......................... (0.017) -- -- (0.583) (0.374) --
------------ ---------- ---------- ---------- ---------- ----------
Total Distributions to
Shareholders................. (0.292) (0.561) (0.606) (1.185) (1.024) (0.696)
------------ ---------- ---------- ---------- ---------- ----------
Net Increase (Decrease) in Net
Asset Value...................... 0.32 (0.50) 0.81 (2.47) 0.93 0.65
------------ ---------- ---------- ---------- ---------- ----------
Net Asset Value -- End of Period... $9.71 $9.39 $9.89 $9.08 $11.55 $10.62
------------ ---------- ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN.............. 6.50%A 0.41% 16.35% (10.29)% 20.92% 13.97%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.80%B 0.80% 0.80% 0.80% 0.80% 0.80%
Net Investment Income.............. 5.57%B 5.59% 6.75% 5.97% 6.08% 6.80%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate............ 5.52% 95.0% 63.3% 188.3% 173.6% 298.0%
Net Assets at End of Period (000's
omitted)......................... $16,058 $21,424 $16,391 $29,276 $24,094 $22,803
Number of Shares Outstanding at End
of Period (000's omitted)........ 1,654 2,281 1,658 3,225 2,085 2,148
</TABLE>
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ATotal Investment Return for periods of less than one year are not annualized.
BAnnualized.
See Notes to Financial Statements.
5
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THE RUSHMORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 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 February 28, 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 Fund pays
a fee for such services at an annual rate of 0.50% of the average daily net
assets of U.S. Government Bond Portfolio. 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
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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 period ended February 28, 1997, purchases of securities were $995,000
and sales (including maturities) of securities were $6,537,734. These totals
exclude short-term securities.
4. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
As of February 28, 1997, net depreciation of investments for Federal income tax
purposes was $481,714, of which $363,809 related to appreciated investments and
$845,523 related to depreciated investments. At February 28, 1997, the cost of
the Fund's securities for Federal income tax purposes was $16,927,534.
5. NET ASSETS
At February 28, 1997, net assets consisted of the following:
<TABLE>
<S> <C>
Paid-in-Capital......................................................... $ 17,627,853
Undistributed Net Investment Income..................................... --
Accumulated Net Realized Loss on Investments............................ (1,088,470)
Net Unrealized Depreciation on Investments.............................. (481,714)
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NET ASSETS.............................................................. $ 16,057,669
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-------------
</TABLE>
6. CAPITAL LOSS CARRYOVERS
Permanent differences between tax and financial reporting of net investment
income and realized gains/(losses) are reclassified to paid-in-capital. As of
August 31, 1996, realized losses of $692 were reclassified to paid-in-capital.
At August 31, 1996, for Federal income tax purposes, the U.S. Government Bond
Portfolio had capital loss carryovers which may be applied against future net
taxable realized gains of each succeeding year until the earlier of its
utilization or its expiration as follows:
<TABLE>
<CAPTION>
Expires August 31,
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<S> <C>
2001.............................................................. $ 253,963
2002.............................................................. 233,727
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$ 487,690
----------
----------
</TABLE>
7
