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THE RUSHMORE FUND, INC.
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Semiannual Report
February 28, 1998
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SEMIANNUAL REPORT, February 28, 1998
THE RUSHMORE FUND, INC.
4922 FAIRMONT AVENUE, BETHESDA, MARYLAND 20814
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(800) 343-3355 (301) 657-1500
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April 20, 1998
Dear Shareholder:
The turmoil in the Asian financial markets at the end of 1997 spurred a
"flight-to-quality" to U.S. Government securities, and began speculation of a
slowdown in the U.S. economy. These were major factors in the decrease of over
65 basis points of the yield on the bellwether thirty-year Treasury bond since
our last report in August. The yield of 5.70% reached in January of this year
was the lowest yield on the bond since auctions began on a regular basis in
1977.
There was more evidence of lowered inflationary fears with the Federal Reserve
changing their policy stance on interest rates to neutral from a bias of
restraint in their December meeting. The Fed has not made an adjustment to the
Federal Funds rate since March of 1997 and we do not look for them to make any
changes in the near future. The unanticipated turmoil in the Asian financial
markets was a major factor in the decline in bond yields, but unless the Fed was
to ease the Fed Funds rate below the current 5 1/2%, there does not appear to be
any room for the longer maturity bond yields to drop below their current ranges.
RUSHMORE U.S. GOVERNMENT BOND PORTFOLIO
The U.S. Government Bond Portfolio continues to invest primarily in the ten- and
thirty-year Treasury issues, and had an average maturity of 21 years as of
February 28, 1998. Our objective is to provide high current income as well as
maintain safety of principal. For the six-month period ending February 28, 1998,
the total return of the portfolio was 9.96%.
As always, we thank you for your continued support.
Sincerely,
/s/ Daniel L. O'Connor /s/ Richard J. Garvey
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, 1998
(UNAUDITED)
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FACE VALUE
AMOUNT (NOTE 1)
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U.S. TREASURY OBLIGATIONS: 95.4% OF NET ASSETS
U.S. Treasury Notes, 6.125%, 8/15/07.................................... $5,700,000 $5,876,346
U.S. Treasury Bonds, 7.625%, 2/15/25.................................... 4,050,000 4,928,344
U.S. Treasury Bonds, 6.875%, 8/15/25.................................... 4,900,000 5,477,284
U.S. Treasury Bonds, 6.125%, 11/15/27................................... 700,000 719,687
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Total U.S. Treasury Obligations (Cost $16,527,234)...................... 17,001,661
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REPURCHASE AGREEMENT: 4.4%
With PaineWebber dated 2/27/98 at 5.5% to be repurchased at $783,721 on
3/2/98, collateralized by $790,401 in U.S. Treasury Notes, due 6/30/98
(Cost $783,362)....................................................... 783,362
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TOTAL INVESTMENTS: 99.8% (COST $17,310,596*)............................ 17,785,023
OTHER ASSETS LESS LIABILITIES: 0.2%..................................... 30,149
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NET ASSETS (NOTE 5): 100.0%............................................. $17,815,172
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NET ASSET VALUE PER SHARE (BASED ON 1,674,479 SHARES OUTSTANDING)....... $10.64
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*Aggregate cost for Federal income tax purposes
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998
(UNAUDITED)
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INTEREST INCOME (Note 1)......................................... $ 484,344
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EXPENSES
Investment Advisory Fee (Note 2)............................... 41,240
Administrative Fee (Note 2).................................... 24,744
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Total Expenses............................................... 65,984
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NET INVESTMENT INCOME............................................ 418,360
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Net Realized Gain on Investment Transactions..................... 130,022
Change in Net Unrealized Appreciation/Depreciation of
Investments.................................................... 939,054
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NET GAIN ON INVESTMENTS.......................................... 1,069,076
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 1,487,436
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See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
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FOR THE SIX
MONTHS ENDED
FEBRUARY 28, FOR THE YEAR
1998 ENDED AUGUST
(UNAUDITED) 31, 1998
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INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income........................... $ 418,360 $ 966,547
Net Realized Gain (Loss) on Investment
Transactions.................................. 130,022 (260,096)
Change in Net Unrealized
Appreciation/Depreciation of Investments...... 939,054 1,358,287
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Net Increase in Net Assets Resulting from
Operations.................................. 1,487,436 2,064,738
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DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income...................... (418,360) (971,703)
From Net Realized Gain on Investments........... -- (31,134)
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Total Distributions to Shareholders........... (418,360) (1,002,837)
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SHARE TRANSACTIONS
Net Proceeds from Sales of Shares............... 10,758,104 10,275,496
Reinvestment of Distributions................... 350,985 838,080
Cost of Shares Redeemed......................... (9,574,954) (18,387,418)
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Net Increase (Decrease) in Net Assets
Resulting from Share Transactions........... 1,534,135 (7,273,842)
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TOTAL INCREASE (DECREASE) IN NET ASSETS........ 2,603,211 (6,211,941)
NET ASSETS -- Beginning of Period................. 15,211,961 21,423,902
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NET ASSETS -- End of Period....................... $17,815,172 $15,211,961
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SHARES
Sold............................................ 1,015,757 1,055,504
Issued in Reinvestment of Distributions......... 33,342 85,019
Redeemed........................................ (908,768) (1,887,103)
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Net Increase (Decrease) in Shares............. 140,331 (746,580)
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See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
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FOR THE SIX
MONTHS ENDED
FEBRUARY 28, FOR THE YEARS ENDED AUGUST 31,
1998 ----------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
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PER SHARE OPERATING PERFORMANCE
Net Asset Value -- Beginning of
Period........................... $9.92 $9.39 $9.89 $9.08 $11.55 $10.62
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Income from Investment Operations
Net Investment Income............ 0.26 0.55 0.56 0.61 0.60 0.65
Net Realized and Unrealized Gain
(Loss) on Investments.......... 0.72 0.55 (0.50) 0.81 (1.88) 1.30
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Total from Investment
Operations................... 0.98 1.10 0.06 1.42 (1.28) 1.95
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Distributions to Shareholders
From Net Investment Income....... (0.26) (0.55) (0.56) (0.61) (0.60) (0.65)
From Net Realized Capital Gain... -- (0.02) -- -- (0.59) (0.37)
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Total Distributions............ (0.26) (0.57) (0.56) (0.61) (1.19) (1.02)
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Net Increase (Decrease) in Net
Asset Value...................... 0.72 0.53 (0.50) 0.81 (2.47) 0.93
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Net Asset Value -- End of Period... $10.64 $9.92 $9.39 $9.89 $9.08 $11.55
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TOTAL INVESTMENT RETURN.............. 9.96% (A) 11.94% 0.41% 16.35% (10.29)% 20.92%
RATIOS TO AVERAGE NET ASSETS
Expenses........................... 0.80% (B) 0.80% 0.80% 0.80% 0.80% 0.80%
Net Investment Income.............. 5.07% (B) 5.60% 5.59% 6.75% 5.97% 6.08%
SUPPLEMENTARY DATA
Portfolio Turnover Rate............ 31.0% 19.2% 95.0% 63.3% 188.3% 173.6%
Net Assets at End of Period (000's
omitted)......................... $17,815 $15,212 $21,424 $16,391 $29,276 $24,094
Number of Shares Outstanding at End
of Period (000's omitted)........ 1,674 1,534 2,281 1,658 3,225 2,085
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(A) Total Investment Return for periods of less than one year are not
annualized.
(B) Annualized
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1998
(UNAUDITED)
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 one portfolio,
U.S. Government Bond Portfolio. On February 28, 1998, 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.
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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 six months ended February 28, 1998, purchases of securities, excluding
short-term securities, were $6,115,094 and sales (including maturities) of
securities were $4,955,406.
4. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
As of February 28, 1998, net appreciation of investments for Federal income tax
purposes was $474,427 of which $544,525 related to appreciated investments and
$70,098 related to depreciated investments. At February 28, 1998, the cost of
the Fund's securities for Federal income tax purposes was $17,310,596.
5. NET ASSETS
At February 28, 1998, net assets consisted of the following:
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Paid-in-Capital........................................................... $17,958,510
Accumulated Net Realized Loss on Investments.............................. (617,765)
Net Unrealized Appreciation on Investments................................ 474,427
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NET ASSETS................................................................ $17,815,172
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6. 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:
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Expires August 31,
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2001................................................................. $ 253,964
2002................................................................. 233,727
2005................................................................. 260,096
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$ 747,787
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