October 14, 1999

Dear Shareholder:

The U.S. Government Bond Portfolio invests primarily in the ten- and thirty-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, 1999, the total return of the portfolio was (5.51)%. The Portfolio had an annualized net investment income 4.57% of net assets for the year ended August 31, 1999, and an average maturity of 21.6 years.

The past year in the bond market has been one of increasing market yields as the U.S. economy continues to be a cause for concern to investors worried about rising inflation. Almost one year after the yield on the benchmark thirty-year Treasury bond fell to 4.69%, it climbed back up to a 52 week high of 6.27% in August of this year before ending that month yielding 6.07%. The slowdown in the U.S. economy that many market watchers had predicted would happen in 1999 has yet to emerge, due in part to continued strong consumer demand as well as recovering global economies. Sustained low levels of unemployment and highly valued equity markets have also contributed to the renewed concern over rising inflation. The Federal Reserve has reacted to these fears of an overheating economy with two Federal Funds rate increase of 25 basis points, leaving the Fed Funds rate at 5.25%.

Unless more substantial negative economic data is released, we don't expect the Federal Reserve to make any further adjustments to interest rates in 1999. While some reports have shown signs of increasing price pressures, the overall inflation environment remains relatively benign. Another factor as the millennium comes to a close is the Y2K scenario. With all the concern surrounding the changeover to the year 2000, it is doubtful that the Federal Reserve would add to market anxiety by adjusting interest rates in the last few months of the year unless absolutely necessary. While another rate hike is not completely out of the question for this year, a more likely scenario seems to be for an increase in the first quarter of 2000 if the U.S. economy threatens to overheat.

As always, we thank you for your support and look forward to serving your investment needs in the future.

Sincerely,

{SIGNATURE}                                                                                 {SIGNATURE}

Daniel L. O'Connor                                                                            Richard J. Garvey
Chairman of the Board                                                                         President

1. 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.
2. 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 gain and loss from security transactions are computed on an identified cost basis.
3. 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.
4. 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.

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. 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 Funds assets and pays the operating expenses of the Fund. For these services, Rushmore Trust receives an annual fee of 0.30% of the average daily net assets of the Fund. The Fund has an agreement with Rushmore Trust to receive short-term borrowings to cover share redemptions. Borrowings pursuant to the credit facility are subject to interest at the overdraft Federal Funds rate. The credit facility may be drawn upon for temporary purposes and is subject to certain other customary restrictions. For each short-term borrowing the Fund pledges collateral. No borrowings were outstanding at August 31, 1999.

On October 20, 1999, the Adviser and Rushmore Trust reached a definitive agreement to be acquired by Friedman Billings Ramsey Group, Inc.  The transaction is subject to various regulatory approvals.