<PAGE>
Annual Report, August 31, 2000
THE RUSHMORE FUND, INC.
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4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 343-3355 (301) 657-1500
October 6, 2000
Dear Shareholder:
During the past fiscal year, the yield of the new benchmark ten-year
Treasury note during the past year traded from a range of 5.75% in September
1999 to a high near 6.75% during January and then fell back to under 6.00%
during August of this year. As mentioned in the Fund's semiannual report, the
big news in the Treasury market continues to be the large budget surpluses due
to larger than forecasted tax receipts from U.S. taxpayers. The Treasury
department has been able to reduce the total U.S. Government debt by paying
down maturing obligations and purchasing its securities in the open market. We
expect the yields on Treasury debt to trade in the 5% to 6% range in the near
future and are still positive on the bond market.
The U.S. Government Bond Portfolio invests primarily in ten- and thirty-year
Treasury issues, and had an average maturity of 21.1 years as of August 31,
2000. Our objective is to provide high current income as well as maintain
safety of principal. For the year ended August 31, 2000, the total return of
the Portfolio was 10.8%.
We look forward to serving you as we move in 2001, and as always thank you
for your investment in the Fund.
Sincerely,
Daniel L. O'Connor
Chairman of the Board
Richard J. Garvey
President
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THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
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STATEMENT OF NET ASSETS
August 31, 2000
<TABLE>
<CAPTION>
Face Value
Amount (Note 1)
<S> <C> <C>
---------- -----------
U.S. TREASURY OBLIGATIONS: 92.4%
U.S. Treasury Notes, 5.625%, 5/15/08.................. $1,000,000 $ 980,313
U.S. Treasury Notes, 4.750%, 11/15/08................. 1,500,000 1,386,562
U.S. Treasury Bonds, 7.625%, 2/15/25.................. 3,300,000 4,023,938
U.S. Treasury Bonds, 6.875%, 8/15/25.................. 4,000,000 4,501,252
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Total U.S. Treasury Obligations (Cost $10,514,943).... 10,892,065
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REPURCHASE AGREEMENT: 7.2%
With Paine Webber dated 8/31/00 at 6.5% to be
repurchased at $850,552 on 9/1/00, collateralized by
$867,048 in U.S. Treasury Notes, due 12/31/00 (Cost
$850,398)............................................ 850,398
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Total Investments: 99.6% (Cost $11,365,341)............ 11,742,463
Other Assets less Liabilities: 0.4%.................... 46,567
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Net Assets: 100.0%..................................... $11,789,030
===========
Net Asset Value Per Share (Based on 1,100,878 Shares
Outstanding).......................................... $10.71
======
Net Assets Consist of:
Paid-in Capital....................................... $11,664,797
Accumulated Net Realized Loss on Investments.......... (252,889)
Net Unrealized Appreciation of Investments............ 377,122
-----------
Net Assets............................................ $11,789,030
===========
</TABLE>
Income Tax Information:
At August 31, 2000, the cost of the investment securities for Federal income
tax purposes was $11,365,341. Net unrealized appreciation was $377,122 of
which $533,762 related to appreciated investment securities and $156,640
related to depreciated investment securities.
At August 31, 2000, the Fund had capital loss carry forwards of $85,135 and
$167,754 which expire on August 31, 2005 and 2008, respectively.
Other Information:
For the year ended August 31, 2000, purchases of securities, excluding short-
term securities, were $983,281 and sales (including maturities) of securities
were $3,150,938.
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
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STATEMENT OF OPERATIONS
For the Year Ended August 31, 2000
<TABLE>
<S> <C>
Interest Income (Note 1).............................................. $ 696,584
----------
Expenses
Investment Advisory Fee (Note 2)..................................... 58,682
Administrative Fee (Note 2).......................................... 35,260
----------
Total Expenses...................................................... 93,942
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Net Investment Income................................................. 602,642
----------
Net Realized Loss on Investment Transactions.......................... (167,754)
Change in Net Unrealized Appreciation/Depreciation of Investments..... 711,405
----------
Net Gain on Investments............................................... 543,651
----------
Net Increase in Net Assets Resulting from Operations.................. $1,146,293
==========
</TABLE>
See Notes to Financial Statements.
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<PAGE>
THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
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STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
------------ ------------
Increase (Decrease) in Net Assets
Operations
Net Investment Income.............................. $ 602,642 $ 820,522
Net Realized Gain (Loss) on Investment
Transactions...................................... (167,754) 502,177
Change in Net Unrealized Appreciation/Depreciation
of Investments ................................... 711,405 (1,977,128)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. 1,146,293 (654,429)
------------ ------------
Distributions to Shareholders
From Net Investment Income......................... (602,642) (820,522)
------------ ------------
Share Transactions
Net Proceeds from Sales of Shares.................. 10,651,038 45,396,394
Reinvestment of Distributions...................... 549,700 740,600
Cost of Shares Redeemed............................ (12,792,513) (59,085,077)
------------ ------------
Net Decrease in Net Assets Resulting from Share
Transactions..................................... (1,591,775) (12,948,083)
------------ ------------
Total Decrease in Net Assets...................... (1,048,124) (14,423,034)
Net Assets--Beginning of Year....................... 12,837,154 27,260,188
------------ ------------
Net Assets--End of Year............................. $ 11,789,030 $ 12,837,154
============ ============
Shares
Sold............................................... 1,043,790 4,034,097
Issued in Reinvestment of Distributions............ 53,658 67,288
Redeemed........................................... (1,258,527) (5,258,021)
------------ ------------
Net Decrease in Shares............................ (161,079) (1,156,636)
============ ============
</TABLE>
See Notes to Financial Statements.
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<PAGE>
THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Years Ended August 31,
-------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value--Beginning of
Year ........................... $ 10.17 $ 11.27 $ 9.92 $ 9.39 $ 9.89
------- ------- ------- ------- -------
Income from Investment
Operations:
Net Investment Income .......... 0.52 0.50 0.53 0.55 0.56
Net Realized and Unrealized Gain
(Loss) on Investments ......... 0.54 (1.10) 1.35 0.55 (0.50)
------- ------- ------- ------- -------
Total from Investment
Operations ................... 1.06 (0.60) 1.88 1.10 0.06
------- ------- ------- ------- -------
Distributions to Shareholders:
From Net Investment Income ..... (0.52) (0.50) (0.53) (0.55) (0.56)
From Net Realized Gain ......... -- -- -- (0.02) --
------- ------- ------- ------- -------
Total Distributions............ (0.52) (0.50) (0.53) (0.57) (0.56)
------- ------- ------- ------- -------
Net Increase (Decrease) in Net
Asset Value .................... 0.54 (1.10) 1.35 0.53 (0.50)
------- ------- ------- ------- -------
Net Asset Value--End of Year .... $ 10.71 $ 10.17 $ 11.27 $ 9.92 $ 9.39
======= ======= ======= ======= =======
Total Investment Return .......... 10.82% (5.51)% 19.35% 11.94% 0.41%
Ratios to Average Net Assets:
Expenses ........................ 0.80% 0.80% 0.80% 0.80% 0.80%
Net Investment Income ........... 5.12% 4.57% 4.98% 5.60% 5.59%
Supplementary Data:
Portfolio Turnover Rate ......... 9% 46% 49% 19% 95%
Net Assets at End of Period (in
thousands) ..................... $11,789 $12,837 $27,260 $15,212 $21,424
Number of Shares Outstanding at
End of Period (in thousands) ... 1,101 1,262 2,419 1,534 2,281
</TABLE>
See Notes to Financial Statements.
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THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
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NOTES TO FINANCIAL STATEMENTS
August 31, 2000
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,
the U.S. Government Bond Portfolio. On August 31, 2000, 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 gain and loss 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. 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, 2000.
3. AGREEMENT WITH FRIEDMAN BILLINGS RAMSEY GROUP, INC.
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.
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THE RUSHMORE FUND, INC.
U.S. Government Bond Portfolio
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INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
of The Rushmore Fund, Inc.:
We have audited the accompanying statement of net assets of the U.S.
Government Bond Portfolio of The Rushmore Fund, Inc. as of August 31, 2000,
and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Funds 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 auditing standards generally
accepted in the United States of America. 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, 2000, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
U.S. Government Bond Portfolio of The Rushmore Fund, Inc. as of August 31,
2000, the results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
October 6, 2000
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<PAGE>
The Rushmore Fund, Inc.
[photo of Mt. Rushmore appears here]
Annual Report
August 31, 2000
