<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT, June 30, 1998
[LOGO] CAPPIELLO-RUSHMORE TRUST
4922 FAIRMONT AVENUE, BETHESDA, MARYLAND 20814
(800) 622-1386 (301) 657-1510
- --------------------------------------------------------------------------------
Dear Fellow Investor:
This is the Cappiello-Rushmore Trust's sixth annual report. The Funds'
performances for the fiscal year ended June 30, 1998, were as follows:
- --------------------------------------------------------------------------------
TOTAL RETURN COMPARISON
(AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 1998)
SINCE
ONE YEAR INCEPTION*
-------- ----------
Cappiello-Rushmore Utility Income
Fund 25.55% 9.04%
Cappiello-Rushmore Growth Fund 20.72% 16.32%
Cappiello-Rushmore Emerging Growth
Fund (0.14)% 9.60%
Standard & Poor's 500 Index 30.17% 22.41%
*************************************************************
Cappiello-Rushmore Gold Fund (33.62)% (16.21)%
Philadelphia Exchange Gold & Silver
Index (XAU) (24.98)% (11.19)%
THE S&P 500 AND PHILADELPHIA EXCHANGE GOLD & SILVER INDICES ARE UNMANAGED
INDICES, AND UNLIKE THE FUNDS, HAVE NO MANAGEMENT FEES OR OTHER OPERATING
EXPENSES TO REDUCE ITS REPORTED RETURN.
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN PRINCIPAL AND REINVESTED DIVIDENDS
AND CAPITAL GAINS. YOUR RETURN AND PRINCIPAL WILL VARY AND YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL SHARES.
*INCEPTION DATES: OCTOBER 6, 1992 FOR THE EMERGING GROWTH FUND, GROWTH FUND AND
UTILITY INCOME FUND; MARCH 7, 1994 FOR THE GOLD FUND.
- --------------------------------------------------------------------------------
SUMMARY
During the past twelve months, the stock market, as measured by the major
indices, moved to new all time highs propelled by a still growing economy,
falling inflation expectations, and lower interest rates. The effect of the
Asian crisis impacted stock prices in October 1997 and in early Spring of 1998
as the second wave of Asian economic woes affected some sectors of the economy.
One of the results of this crisis has been the two-tiered nature of the stock
market where "size" did count in producing the better investment returns as
nervous investors sought liquidity and safety in the large capitalization
stocks. Further, individual stock performances seemed to be directly related to
size rather than value, earnings growth, or management capability. More
remarkable has been foreign investment in the U.S. market. As the Asian crisis
began to become apparent about a year ago, it generated a flight of capital from
troubled Asian markets into the U.S. and to a lesser extent Europe. Most of this
foreign inflow sought liquidity and the money flowed into index funds (in the
case of equities) and U.S. Treasury securities. The latter helped to push rates
down, particularly on the 30-year Treasury Bond.
EMERGING GROWTH FUND
The Emerging Growth Fund recorded a slightly negative 0.14% investment
performance for the fiscal year ended June 30, 1998. This disappointing
performance was reflective of the small capitalization stock sector during
<PAGE>
the twelve months ended June 30, 1998, in which small cap stocks significantly
underperformed their larger peers in the big capitalization sector. The last
time small companies outperformed the S&P 500 Index was in 1991 and 1992. Since
then, the group has lagged the larger stock indices. This lag in smaller stocks
has persisted despite the fact that many of these companies have good earnings
momentum, established products, capable and seasoned management, and solid
balance sheets. Yet, despite these factors, small stocks continued to sell at
growing discounts. The answer to the discrepancy seems to be "liquidity" -- the
desire of institutional investors to put incoming cash to work in buying the
big-capitalization stocks where large amounts of stock can be bought (and sold)
without significantly disturbing the price of stocks. "Liquidity" rather than
valuation seems to be the rule in investment decisions for the past eight
months. Put another way, the stocks comprising the largest 10% of indices like
the Dow, the S&P 500 and the Russell 2000 have received the major portion of
institutional flows over the past months.
We ended fiscal 1998 with the portfolio focused in three major sectors: (1)
health care related is the largest sector at 22.0% of the portfolio followed by
(2) technology (computer, electronic and telecommunication) and (3) retailing.
Since we continue to believe the U.S. health care system is moving to one of
managed care, health care stocks now constitute 22.0% of the portfolio. Health
care stocks have performed well with our largest position being KV
PHARMACEUTICAL CO. (A) showing a cost of $293,949 and a market value of
$1,244,375 as of June 30, 1998.
During the year we sought to reduce risk in the portfolio by positioning
more of the Fund into lower P/E stocks. These stocks represent solid values
whose price more than adequately discounts any possible earnings
disappointments, thereby seeking to limit risk associated with individual
securities.
Among the best performing stocks during the year were FTI CONSULTING, INC.
(up 113%), KV PHARMACEUTICAL CO. (A) (up 105%), and IMMUNE RESPONSE CORP. (up
97%). New names in the portfolio in fiscal 1998 are BAY NETWORKS, INC., (up 30%)
and STEVEN MADDEN, LTD. (up 27%).
The Salomon/Smith Barney Emerging Growth Index Stocks are now at price
earnings levels not seen since 1979, during the market crash of 1987, and during
the 1990 recession. Future prospects for emerging growth stocks look promising,
particularly, from these depressed levels. Looking ahead to the next six to
twelve months, we believe that the momentum of the earnings growth rate of
smaller companies will continue to be favorable. These companies can have an
advantage in a growing economy with their unique ability to adapt relatively
swiftly to changing conditions. Lower inventories, limited product lines, and
leaner management also serve to give small companies strategic flexibility
enabling them to respond more rapidly to new opportunities in the marketplace.
Additionally, small companies with promising products or services, or that
operate in dynamic industries, have the potential for more rapid earnings growth
than larger companies. Further, because their international exposure is usually
limited, small companies aren't as likely to be affected by fluctuations in
earnings from overseas operations. This makes the smaller stock values even more
compelling for the balance of 1998 and 1999, particularly in comparison to the
slowing growth rates of the large multi-national exporting companies.
Finally, we continue to be optimistic about the Fund's prospects. Many of
our holdings sell at attractive valuations relative to their expected growth
rates. For some time, investors have largely failed to fully appreciate the
values in the small capitalization sector. However, with a continued moderate
economic recovery and low inflation, small niche companies which can increase
their earnings and sell at historically low valuations should ultimately be
sought by investors.
GROWTH FUND
The Growth Fund seeks capital appreciation by investing in larger
established companies with favorable relationships between price/earnings ratios
and growth rates. This approach resulted in a satisfying return of 20.72% for
the year marking the fourth consecutive year of double-digit returns. Among the
best acting stocks for the year ended June 30, 1998, were FEDERATED DEPARTMENT
STORE WARRANTS, CLASS "C" (up 119%), GM HUGHES ELECTRONICS CORPORATION, (up 59%)
and AMERICAN EXPRESS COMPANY (up 53%). The largest sector positions are
financial services (25.5%), healthcare (11.9%) and computer hardware and
equipment (10.1%).
Larger capitalization stocks fared well during the year, outperforming
smaller issues as investors placed a premium on the liquidity of larger stocks
reflecting the prevailing economic conditions of slowing (but still
2
<PAGE>
growing) corporate earnings, moderately declining interest rates, and healthy
fund inflows into stocks. We continue to invest in well managed, growing, and
profitable businesses that we believe will benefit from long-term trends such as
economic and demographic changes. These trends usually result in increases in
demand for products and services and offer profitable business opportunities.
One example is the demographic trend of the aging of America. The elderly
population is growing much more rapidly than the general population and this
group has increasingly required more health care. Consequently, we have focused
on health care related stocks which comprise 11.9% of the portfolio. A second
trend relates to the "baby boomer" group approaching their forties and early
fifties who have gradually recognized the need to save and invest. Our
concentration in this area includes finance companies such as AMERICAN EXPRESS
CO., FRANKLIN RESOURCES INC., and CHARLES SCHWAB CORP. This sector comprises
25.5% of the portfolio.
During the year, we added to our telecommunication position with the
addition of FRONTIER CORPORATION and to the retail sector with the purchase of
TALBOTS, INC.
UTILITY INCOME FUND
The Utility Income Fund is managed to provide shareholders with a relatively
high dividend yield. Capital gains growth is a secondary consideration.
Nevertheless, for the fiscal year ended, June 30, 1998, the Fund's overall total
return was 25.55%, a satisfying mix of both capital appreciation and an
above-average dividend yield.
During the year, we accomplished some diversification from electric
utilities into more attractive valuations in telecommunications as well as
non-utility sectors. Nevertheless, electric utilities still comprise 46.4% of
the portfolio with telecommunication stocks at 22.1% and natural gas at 5.4% of
the portfolio. The best performing stocks from June 30, 1997 to June 30, 1998
were ALLTEL CORP. (up 39%), TNP ENTERPRISES INC. (up 33%) and SOUTHERN COMPANY
(up 27%).
We continue to exercise discipline in evaluating utility stocks for
purchase, stressing five factors:
1. Yield (relative to other utilities and the overall market);
2. Company Management (particularly important in a deregulating industry);
3. Financial Strength;
4. Future Dividend Growth; and
5. Level of Risk.
The uncertainties associated with deregulated markets will continue to pose
an operating risk for the electric utility industry. As utilities search for new
sectors of profitability, competition for new projects is increasing.
Acquisition through privatization is also an alternative to the increasingly
competitive domestic power market.
GOLD FUND
The factors that materially affected performance of the Gold Fund during the
fiscal year ended June 30, 1998 were:
- Market conditions for gold (both bullion gold shares and derivatives
relative to these shares) can be characterized as poor for most of the
entire fiscal year;
- The sale and possibilities of future sales of gold bullion by several
central banks including Australian (sale) and Switzerland (possible
reduction of gold as backing for the Swiss Franc);
- European Monetary Union (EMU) limited gold backing of new currency and
placed no restrictions on future gold reserves;
- The benign rate of inflation both in the U.S. and abroad, particularly,
Europe;
- Weakness in Asian demand also translated into weakness in foreign
purchases of platinum, silver and gold jewelry by Asians as well as
weakness in precious metal buying for industrial uses;
- BRE-X Scandal was a continuing demoralizing event;
- Inability to raise capital forced marginal companies to abandon projects
or close properties;
- Foreign currency weakness served to limit interest in precious metals.
3
<PAGE>
In this difficult environment we took steps to lower risks in the portfolio
by shifting from the smaller precious metal stocks to larger capitalization and
more diversified producers. Reflecting this change, two of our best performing
stocks were Stillwater Mining Company (up 22%), and Battle Mountain Gold Co. (up
4%).
The outlook for precious metals and the Fund's prospects for the fiscal year
ending June 30, 1999 is mixed. Some of the negative forces will likely continue
in 1999. However, new events and changed perceptions may lead to improved
conditions for the industry.
- The new European Central Bank may place a moratorium (or limit) on the
sale of gold by its member nations.
- Asian stability may develop which could weaken the dollar versus the yen
and other currencies leading to a more attractive gold price.
- Inflation may become a larger force and a fear than in the past several
years.
- Gold production shortfall in 1997 and likely again in 1998 relative to
demand should eventually lead to higher price levels. The situation will
be magnified as the gold industry lacks financial resources to build
production going forward.
The time will come when the forces of supply and demand come to the fore and
will be reinforced with diminishing reliance on paper reserves such as the
dollar. In summary, 1999 may see the reversal in the forces that have depressed
the price of gold and other precious metals.
MARKET OUTLOOK
While interest rates remain low and consumer confidence is reaching previous
high levels, mutual fund cash inflows have moderated and the momentum in
industrial production is unlikely to accelerate. Currently, the overriding issue
for the market is the outlook for corporate profits. Profits depend on the
outlook for the economy and the extent of the Asian effect over the next six
months. Unquestionably, Asia has slowed the economy and corporate profits,
particularly in the technology sector. A stronger dollar has also slowed
exports. These factors are expected to persist but not enough to produce
weakness in other sectors such as business investment. Some counterbalance to
this weakness will be consumer spending (which is likely to continue its upward
trend), bolstered by "real" wage growth and the refinancing of home mortgages to
lower rates. This puts a "floor" under the ground in consumer buying. We believe
the underlying environment is still very positive for equities and this should
push the market higher in this fiscal year. Slow growth with modest inflation
should maintain earnings growth and keep interest rates within a narrow range.
Finally, we believe it is more important to evaluate each company
individually rather than spending substantial time on general market trends.
Attempting to forecast the direction or general level of the stock market is
difficult, if not impossible. Many of the best investors of this century made a
point of not focusing too much on the level of the market. Investors are best
served by emphasizing the fundamentals and buying companies with sustainable
earnings growth at reasonable valuations. If this is done consistently,
relatively good returns should be generated over time.
As always, thank you for your continued support.
[SIGNATURE]
Frank A. Cappiello
Chairman, Cappiello-Rushmore Trust
August 14, 1998
4
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CAPPIELLO-RUSHMORE TRUST
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PORTFOLIOS OF INVESTMENTS
JUNE 30, 1998
UTILITY INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 88.0%
BUSINESS SERVICES -- 3.7%
10,000 Metzler Group, Inc.* $ 366,250
------------
GAS AND ELECTRIC -- 46.4%
15,000 Allegheny Energy, Inc. 451,875
14,000 CMS Energy Corp. 616,000
15,540 Interstate Energy Corp. 505,050
19,360 MarketSpan Corp. 579,590
10,000 New Century Energies, Inc. 454,375
18,000 Potomac Electric Power Co. 451,125
20,000 Southern Co. 553,750
16,000 TNP Enterprises, Inc. 494,000
20,000 Washington Water Power Co. 448,750
------------
4,554,515
------------
NATURAL GAS DISTRIBUTION -- 5.4%
20,000 Washington Gas Light Co. 535,000
------------
REAL ESTATE INVESTMENT TRUSTS -- 7.0%
71,400 Crown American Realty Trust 691,687
------------
TELECOMMUNICATION -- 22.1%
10,000 ALLTEL Corp. 465,000
5,000 AT&T Corp. 285,625
10,000 Bell Atlantic Corp. 456,250
10,000 Frontier Corp. 315,000
10,000 Southern New England Telecom
Corp. 655,000
------------
2,176,875
------------
TRANSPORTATION -- 3.4%
8,650 Sea Containers, Ltd. Class A 330,863
------------
TOTAL COMMON STOCKS
(COST $6,209,433) 8,655,190
------------
MONEY MARKET FUNDS -- 12.0%
1,180,183 Fund for Government
Investors (Cost $1,180,183) 1,180,183
------------
TOTAL INVESTMENTS -- 100.0%
(COST $7,389,616) $ 9,835,373
------------
------------
</TABLE>
GROWTH FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 87.7%
BEVERAGES -- 5.7%
17,500 Coca-Cola Co. $ 1,496,250
-------------
BUSINESS SERVICES -- 5.2%
12,000 National Data Corp. 525,000
22,500 Metzler Group, Inc.* 824,062
-------------
1,349,062
-------------
COMPUTER HARDWARE AND
EQUIPMENT -- 10.1%
35,000 Bay Networks, Inc.* 1,128,750
40,000 Compaq Computer Corp. 1,135,000
30,000 Western Digital Corp.* 354,375
-------------
2,618,125
-------------
COMPUTER SOFTWARE AND
SERVICES -- 7.0%
25,000 Platinum Technology, Inc.* 714,063
15,000 Shared Medical Systems Corp. 1,101,562
-------------
1,815,625
-------------
FINANCIAL SERVICES -- 25.5%
12,800 American Express Co. 1,459,200
40,000 Charles Schwab Corp. 1,300,000
40,000 Franklin Resources, Inc. 2,160,000
35,000 SLM Holding Corp. 1,715,000
-------------
6,634,200
-------------
HEALTHCARE -- 11.9%
30,000 Foundation Health Systems,
Inc.* 791,250
40,000 Mylan Laboratories, Inc. 1,202,500
15,000 WellPoint Health Networks* 1,110,000
-------------
3,103,750
-------------
MERCHANDISING AND RETAIL -- 5.7%
30,000 Fleming Companies, Inc. 526,875
203,900 National Media Corp.* 229,388
27,600 Talbots, Inc. 722,775
-------------
1,479,038
-------------
OIL AND GAS -- 2.7%
22,000 Nuevo Energy Co.* 706,750
-------------
OIL AND GAS SERVICES -- 4.6%
60,000 Varco International, Inc.* 1,188,750
-------------
</TABLE>
5
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
PORTFOLIOS OF INVESTMENTS
JUNE 30, 1998 (CONTINUED)
GROWTH FUND (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATION -- 9.3%
15,000 AT&T Corp. $ 856,875
20,000 Frontier Corp. 630,000
20,000 GM Hughes Electronics Corp.* 942,500
-------------
2,429,375
-------------
TOTAL COMMON STOCKS
(COST $13,847,997) 22,820,925
-------------
WARRANTS -- 5.6%
50,000 Federated Department
Stores, Inc.
WTS C* (Cost $252,640) 1,465,625
-------------
MONEY MARKET FUNDS -- 6.7%
1,747,705 Fund for Government
Investors (Cost $1,747,705) 1,747,705
-------------
TOTAL INVESTMENTS -- 100.0%
(COST $15,848,342) $ 26,034,255
-------------
-------------
</TABLE>
EMERGING GROWTH FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 94.8%
BUSINESS SERVICES -- 17.9%
45,000 Barringer Technologies, Inc.* $ 424,687
40,000 FTI Consulting, Inc.* 680,000
7,000 Metzler Group, Inc.* 256,375
20,000 National Data Corp. 875,000
-------------
2,236,062
-------------
COMPUTER HARDWARE AND
EQUIPMENT -- 7.8%
30,000 Bay Networks, Inc.* 967,500
-------------
HEALTHCARE PRODUCTS -- 22.0%
20,000 Aradigm Corp.* 270,000
60,000 Immune Response Corp.* 900,000
55,000 KV Pharmaceutical Co., Class A* 1,244,375
37,000 PolyMedica Corp.* 333,000
-------------
2,747,375
-------------
LODGING -- 2.7%
45,000 Candlewood Hotel Co., Inc.* 337,500
-------------
MERCHANDISING AND RETAIL -- 20.7%
65,000 Braun's Fashion Corp.* 723,125
25,000 Jostens, Inc. 596,875
40,000 National Media Corp.* 45,000
45,000 Paul Harris Stores, Inc.* 596,250
54,000 Steven Madden, Ltd.* 624,375
-------------
2,585,625
-------------
OIL AND GAS SERVICES -- 10.0%
50,000 Bolt Technology Corp.* 456,250
35,000 R&B Falcon Corp.* 791,875
-------------
1,248,125
-------------
TELECOMMUNICATIONS -- 9.5%
30,000 Able Telecom Holding Corp.* 540,000
10,000 Comsat Corp. 285,625
30,000 P-Com, Inc.* 274,689
7,500 REMEC, Inc.* 85,313
-------------
1,185,627
-------------
</TABLE>
6
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
PORTFOLIOS OF INVESTMENTS
JUNE 30, 1998 (CONTINUED)
EMERGING GROWTH FUND (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------
<C> <S> <C>
TRANSPORTATION -- 4.2%
25,000 Hub Group, Inc. Class A* $ 528,125
-------------
TOTAL COMMON STOCKS
(COST $8,783,611) 11,835,939
-------------
MONEY MARKET FUNDS -- 5.2%
642,899 Fund for Government Investors
(Cost $642,899) 642,899
-------------
TOTAL INVESTMENTS -- 100.0%
(COST $9,426,510) $ 12,478,838
-------------
-------------
</TABLE>
GOLD FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- --------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 87.4%
METALS AND MINING
AFRICA -- 4.5%
12,000 Ashanti Goldfields Co. $ 97,500
------------
AUSTRALIA -- 11.1%
6,000 Lihir Gold, Ltd.* 146,250
8,000 WMC, Ltd. (ADR) 96,000
------------
242,250
------------
CANADA -- 34.6%
12,000 Aber Resources, Ltd.* 105,000
9,000 Barrick Gold Corp. 172,688
16,000 Cambior, Inc. 94,000
28,000 Golden Star Resources, Ltd.* 59,500
32,016 Kinross Gold Corp.* 104,052
60,000 Miramar Mining Corp.* 67,500
8,000 Placer Dome, Inc. 94,000
20,000 TVX Gold, Inc.* 61,250
------------
757,990
------------
UNITED STATES -- 37.2%
35,000 Battle Mountain Gold Co. 207,812
20,000 Crown Resources Corp.* 87,500
15,000 Homestake Mining Co. 155,625
4,000 Newmont Mining Corp. 94,500
10,000 Stillwater Mining Co.* 271,250
------------
816,687
------------
TOTAL COMMON STOCKS
(COST $2,862,429) 1,914,427
------------
MONEY MARKET FUNDS -- 12.6%
275,144 Fund for Government Investors
(Cost $275,144) 275,144
------------
TOTAL INVESTMENTS -- 100.0%
(COST $3,137,573) $ 2,189,571
------------
------------
</TABLE>
- ------------------------------
* NON-INCOME PRODUCING.
ADR AMERICAN DEPOSITORY RECEIPT
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<CAPTION>
UTILITY EMERGING
INCOME FUND GROWTH FUND GROWTH FUND GOLD FUND
<S> <C> <C> <C> <C>
ASSETS
Securities at Cost............... $7,389,616 $15,848,342 $ 9,426,510 $3,137,573
----------- ------------- ------------- -----------
----------- ------------- ------------- -----------
Securities at Value (Note 1)..... $9,835,373 $26,034,255 $12,478,838 $2,189,571
Receivable for Securities Sold... -- -- 2,712,280 --
Receivable for Shares Sold....... 2,400 230,604 132,534 --
Dividends Receivable............. 8,950 12,855 -- --
Interest Receivable.............. 9,796 5,328 3,757 276
----------- ------------- ------------- -----------
Total Assets................... 9,856,519 26,283,042 15,327,409 2,189,847
----------- ------------- ------------- -----------
LIABILITIES
Investment Advisory Fee
Payable........................ 3,007 9,494 5,921 1,259
Administration Fee Payable....... 6,013 18,988 11,842 1,800
Payable for Securities
Purchased...................... -- 1,405,093 1,086,731 --
Liability for Shares Redeemed.... 35,935 18,586 64,330 --
Dividends Payable................ 13,048 -- -- --
----------- ------------- ------------- -----------
Total Liabilities.............. 58,003 1,452,161 1,168,824 3,059
----------- ------------- ------------- -----------
NET ASSETS......................... $9,798,516 $24,830,881 $14,158,585 $2,186,788
----------- ------------- ------------- -----------
----------- ------------- ------------- -----------
SHARES OUTSTANDING................. 780,339 1,081,268 1,024,542 468,881
----------- ------------- ------------- -----------
----------- ------------- ------------- -----------
NET ASSET VALUE PER SHARE.......... $12.56 $22.96 $13.82 $4.66
----------- ------------- ------------- -----------
----------- ------------- ------------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
UTILITY EMERGING
INCOME FUND GROWTH FUND GROWTH FUND GOLD FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest..................... $ 44,376 $ 69,194 $ 61,633 $ 17,818
Dividends.................... 458,182 127,810 25,950 10,804
------------- ------------- ------------- -----------
Total Investment Income.... 502,558 197,004 87,583 28,622
------------- ------------- ------------- -----------
EXPENSES
Investment Advisory Fee (Note
2)......................... 34,737 130,057 100,453 20,816
Administrative Fee (Note
2)......................... 69,475 260,115 200,907 29,737
Other Fees................... 185 44 515 49
------------- ------------- ------------- -----------
Total Expenses............. 104,397 390,216 301,875 50,602
------------- ------------- ------------- -----------
NET INVESTMENT INCOME (LOSS)... 398,161 (193,212) (214,292) (21,980)
------------- ------------- ------------- -----------
Net Realized Gain (Loss) on
Investment Transactions...... 508,641 3,356,716 1,678,627 (935,910)
Net Change in Unrealized
Appreciation/ Depreciation of
Investments.................. 1,300,391 1,303,719 (1,834,311) (234,352)
------------- ------------- ------------- -----------
NET GAIN (LOSS) ON
INVESTMENTS.................. 1,809,032 4,660,435 (155,684) (1,170,262)
------------- ------------- ------------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................... $2,207,193 $4,467,223 $(369,976) ($1,192,242)
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
UTILITY
INCOME FUND GROWTH FUND
FOR THE YEARS ENDED JUNE 30,
1998 1997 1998 1997
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income (Loss).......... $ 398,161 $ 532,578 $ (193,212) $ (120,259)
Net Realized Gain (Loss) on Investment
Transactions........................ 508,641 462,173 3,356,716 (90,376)
Net Change in Unrealized
Appreciation/Depreciation of
Investments......................... 1,300,391 (763,657) 1,303,719 2,092,216
------------ ----------- ------------ ------------
Net Increase in Net Assets Resulting
from Operations................... 2,207,193 231,094 4,467,223 1,881,581
------------ ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income............ (400,295) (540,376) -- --
From Net Realized Gain on
Investments......................... -- -- -- (890,035)
------------ ----------- ------------ ------------
Total Distributions to
Shareholders...................... (400,295) (540,376) -- (890,035)
------------ ----------- ------------ ------------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares..... 16,647,062 2,791,305 29,015,150 24,857,946
Reinvestment of Distributions......... 321,286 429,181 -- 862,676
Cost of Shares Redeemed............... (17,782,741) (9,211,322) (33,550,866) (33,589,710)
------------ ----------- ------------ ------------
Net Decrease in Net Assets Resulting
from Share Transactions........... (814,393) (5,990,836) (4,535,716) (7,869,088)
------------ ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................ 992,505 (6,300,118) (68,493) (6,877,542)
NET ASSETS -- Beginning of Year......... 8,806,011 15,106,129 24,899,374 31,776,916
------------ ----------- ------------ ------------
NET ASSETS -- End of Year............... $ 9,798,516 $ 8,806,011 $ 24,830,881 $ 24,899,374
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
SHARES
Sold.................................. 1,393,270 272,300 1,333,472 1,435,617
Issued in Reinvestment of
Distributions....................... 26,251 42,219 -- 50,332
Redeemed.............................. (1,485,904) (892,574) (1,561,079) (1,955,558)
------------ ----------- ------------ ------------
Net Decrease in Shares.............. (66,383) (578,055) (227,607) (469,609)
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
EMERGING
GROWTH FUND GOLD FUND
FOR THE YEARS ENDED JUNE 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Loss....................................... $ (214,292) $ (363,496) $ (21,980) $ (37,734)
Net Realized Gain (Loss) on Investment Transactions....... 1,678,627 (650,708) (935,910) (527,830)
Net Change in Unrealized Appreciation/Depreciation of
Investments............................................. (1,834,311) (414,690) (234,352) (1,066,830)
------------ ------------ ------------ ------------
Net Decrease in Net Assets Resulting from Operations.... (369,976) (1,428,894) (1,192,242) (1,632,394)
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Realized Gain on Investments..................... -- (5,065,773) -- --
------------ ------------ ------------ ------------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares......................... 36,436,165 61,065,491 11,756,801 30,042,821
Reinvestment of Distributions............................. -- 4,754,104 -- --
Cost of Shares Redeemed................................... (42,639,433) (83,578,594) (11,786,315) (31,124,263)
------------ ------------ ------------ ------------
Net Decrease in Net Assets Resulting from Share
Transactions.......................................... (6,203,268) (17,758,999) (29,514) (1,081,442)
------------ ------------ ------------ ------------
TOTAL DECREASE IN NET ASSETS............................ (6,573,244) (24,253,666) (1,221,756) (2,713,836)
NET ASSETS -- Beginning of Year............................. 20,731,829 44,985,495 3,408,544 6,122,380
------------ ------------ ------------ ------------
NET ASSETS -- End of Year................................... $ 14,158,585 $ 20,731,829 $ 2,186,788 $ 3,408,544
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SHARES
Sold...................................................... 2,329,100 4,123,530 1,893,015 3,355,585
Issued in Reinvestment of Distributions................... -- 359,071 -- --
Redeemed.................................................. (2,802,091) (5,632,148) (1,909,526) (3,486,619)
------------ ------------ ------------ ------------
Net Decrease in Shares.................................. (472,991) (1,149,547) (16,511) (131,034)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
UTILITY INCOME FUND
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value --
Beginning of Year...... $10.40 $10.60 $ 9.24 $ 8.39 $10.82
------------ ------------ ---------- ---------- ----------
Income from Investment
Operations:
Net Investment Income... 0.47 0.53 0.49 0.55 0.53
Net Realized and
Unrealized Gain (Loss)
on Securities......... 2.17 (0.19) 1.39 0.85 (2.42)
------------ ------------ ---------- ---------- ----------
Total from Investment
Operations.......... 2.64 0.34 1.88 1.40 (1.89)
------------ ------------ ---------- ---------- ----------
Distributions to
Shareholders:
From Net Investment
Income................ (0.48) (0.54) (0.52) (0.55) (0.53)
From Net Realized
Capital Gain.......... -- -- -- -- (0.01)
------------ ------------ ---------- ---------- ----------
Total Distributions to
Shareholders........ (0.48) (0.54) (0.52) (0.55) (0.54)
------------ ------------ ---------- ---------- ----------
Net Increase (Decrease) in
Net Asset Value........ 2.16 (0.20) 1.36 0.85 (2.43)
------------ ------------ ---------- ---------- ----------
Net Asset Value -- End of
Year................... $12.56 $10.40 $10.60 $ 9.24 $ 8.39
------------ ------------ ---------- ---------- ----------
------------ ------------ ---------- ---------- ----------
TOTAL INVESTMENT RETURN... 25.55% 3.39% 20.60% 16.62% (18.18)%
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ 1.05% 1.05% 1.05% 1.05% 1.05%
Net Investment Income... 4.01% 4.88% 4.82% 6.26% 5.21%
SUPPLEMENTARY DATA:
Portfolio Turnover
Rate.................. 29.45% 17.33% 45.11% 147.04% 26.13%
Net Assets at End of
Year (000's
omitted).............. $9,799 $8,806 $15,106 $17,151 $9,117
Number of Shares
Outstanding at End of
Year (000's
omitted).............. 780 847 1,425 1,855 1,086
- --------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH FUND
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value -- Beginning of
Year.......................... $19.02 $17.87 $14.64 $11.05 $10.63
------------ ------------ ---------- ---------- ----------
Income from Investment
Operations:
Net Investment Income
(Loss)...................... (0.18) (0.09) (0.07) 0.01 (0.02)
Net Realized and Unrealized
Gain on Securities.......... 4.12 1.83 3.30 3.60 0.44
------------ ------------ ---------- ---------- ----------
Total from Investment
Operations................ 3.94 1.74 3.23 3.61 0.42
------------ ------------ ---------- ---------- ----------
Distributions to Shareholders:
From Net Investment Income.... -- -- -- (0.02) --
From Net Realized Capital
Gain........................ -- (0.59) -- -- --
------------ ------------ ---------- ---------- ----------
Total Distributions to
Shareholders.............. -- (0.59) -- (0.02) --
------------ ------------ ---------- ---------- ----------
Net Increase in Net Asset
Value......................... 3.94 1.15 3.23 3.59 0.42
------------ ------------ ---------- ---------- ----------
Net Asset Value -- End of
Year.......................... $22.96 $19.02 $17.87 $14.64 $11.05
------------ ------------ ---------- ---------- ----------
------------ ------------ ---------- ---------- ----------
TOTAL INVESTMENT RETURN........... 20.72% 10.10% 22.06% 32.65% 3.99%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................ 1.50% 1.50% 1.50% 1.50% 1.50%
Net Investment Income (Loss).... (0.74)% (0.46)% (0.41)% 0.12% (0.18)%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate......... 65.08% 41.93% 74.50% 70.89% 119.03%
Net Assets at End of Year (000's
omitted)...................... $24,831 $24,899 $31,777 $19,337 $9,993
Number of Shares Outstanding at
End of Year (000's omitted)... 1,081 1,309 1,778 1,321 904
- ----------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
EMERGING GROWTH FUND
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value -- Beginning of Year......................... $13.84 $16.99 $14.96 $10.41 $11.32
----------- ----------- ---------- ---------- ----------
Income from Investment Operations:
Net Investment Loss........................................ (0.21) (0.24) (0.16) (0.08) (0.10)
Net Realized and Unrealized Gain (Loss) on Securities...... 0.19(A) (0.24) 2.30 4.63 (0.69)
----------- ----------- ---------- ---------- ----------
Total from Investment Operations......................... (0.02) (0.48) 2.14 4.55 (0.79)
----------- ----------- ---------- ---------- ----------
Distributions to Shareholders:
From Net Realized Capital Gain............................. -- (2.67) (0.11) -- (0.12)
----------- ----------- ---------- ---------- ----------
Net Increase (Decrease) in Net Asset Value................... (0.02) (3.15) 2.03 4.55 (0.91)
----------- ----------- ---------- ---------- ----------
Net Asset Value -- End of Year............................... $13.82 $13.84 $16.99 $14.96 $10.41
----------- ----------- ---------- ---------- ----------
----------- ----------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN........................................ (0.14)% (2.15)% 14.36% 43.71% (7.31)%
RATIOS TO AVERAGE NET ASSETS:
Expenses..................................................... 1.50% 1.50% 1.50% 1.50% 1.50%
Net Investment Loss.......................................... (1.07)% (1.20)% (0.98)% (0.61)% (0.85)%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate...................................... 121.20% 66.16% 121.22% 96.11% 128.13%
Net Assets at End of Year (000's omitted).................... $14,159 $20,732 $44,985 $36,606 $18,133
Number of Shares Outstanding at End of Year (000's
omitted)................................................... 1,025 1,498 2,647 2,447 1,742
- ---------------------------------------------------------------
</TABLE>
(A) The per share amount does not coincide with the net realized and
unrealized loss for the year because of the timing of sales and
redemptions of Fund shares and the amounts of per share realized and
unrealized gain and loss at such time.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GOLD FUND
FOR THE YEARS ENDED JUNE 30,
---------------------------------------------------
1998 1997 1996 1995
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value -- Beginning of Period.................................... $ 7.02 $ 9.93 $ 9.89 $ 9.52
----------- ----------- ---------- ----------
Income from Investment Operations:
Net Investment Loss..................................................... (0.05) (0.08) (0.06) (0.05)
Net Realized and Unrealized Gain (Loss) on Securities................... (2.31) (2.83) 0.10 0.42
----------- ----------- ---------- ----------
Total from Investment Operations...................................... (2.36) (2.91) 0.04 0.37
----------- ----------- ---------- ----------
Distributions to Shareholders:
Total Distributions to Shareholders................................... -- -- -- --
----------- ----------- ---------- ----------
Net Increase (Decrease) in Net Asset Value................................ (2.36) (2.91) 0.04 0.37
----------- ----------- ---------- ----------
Net Asset Value -- End of Period.......................................... $ 4.66 $ 7.02 $ 9.93 $ 9.89
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
TOTAL INVESTMENT RETURN..................................................... (33.62)% (29.31)% 0.40% 3.89%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................................. 1.70% 1.70% 1.70% 1.70%
Net Investment Loss....................................................... (0.74)% (0.76)% (0.59)% (0.51)%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate................................................... 56.49% 108.47% 59.06% 51.23%
Net Assets at End of Period (000's omitted)............................... $2,187 $3,409 $6,122 $6,796
Number of Shares Outstanding at End of Period (000's omitted)............. 469 485 616 687
- ----------------------------------------------------------------------------
<CAPTION>
FOR THE
PERIOD ENDED
JUNE 30,
1994*
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value -- Beginning of Period.................................... $10.00
------
Income from Investment Operations:
Net Investment Loss..................................................... (0.01)
Net Realized and Unrealized Gain (Loss) on Securities................... (0.47)
------
Total from Investment Operations...................................... (0.48)
------
Distributions to Shareholders:
Total Distributions to Shareholders................................... --
------
Net Increase (Decrease) in Net Asset Value................................ (0.48)
------
Net Asset Value -- End of Period.......................................... $ 9.52
------
------
TOTAL INVESTMENT RETURN..................................................... (4.80)%(A)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................................. 1.68%(B)
Net Investment Loss....................................................... (0.25)%(B)
SUPPLEMENTARY DATA:
Portfolio Turnover Rate................................................... 22.85%
Net Assets at End of Period (000's omitted)............................... $6,395
Number of Shares Outstanding at End of Period (000's omitted)............. 672
- ----------------------------------------------------------------------------
</TABLE>
(A) Total Investment Return for periods of less than one year are not
annualized.
(B) Annualized
*FROM COMMENCEMENT OF OPERATIONS MARCH 7, 1994
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. Significant Accounting Policies
Cappiello-Rushmore Trust (the "Trust") is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a no-load,
open-end investment company and is authorized to issue an unlimited number of
shares. The Trust consists of four separate portfolios (the "Funds"), each with
a different investment objective. As of March 10, 1998, shares of the Gold Fund
are no longer available for new purchases. Existing shareholders may continue to
hold previously purchased shares. 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 Funds follow:
(a) Listed securities are valued at the last sales price of the New York
Stock Exchange and other major exchanges. Over-the-Counter securities are
valued at the last sales price. If market quotations are not readily
available, the Board of Trustees will value the Funds' securities in good
faith. The trustees will periodically review this method of valuation and
recommend changes which may be necessary to assure that the Funds' instruments
are valued at fair value.
(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. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from securities transactions are computed on an identified cost basis.
(c) Dividends from net investment income are declared and paid annually in
the Growth, Emerging Growth and Gold Funds and quarterly in the Utility Income
Fund. Dividends are reinvested in additional shares unless shareholders
request payment in cash. Net capital gains, if any, are distributed annually.
(d) For Federal income tax purposes, each Fund of the Trust is treated as
a separate corporation. Each Fund intends to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and
distribute all net investment income, if any, and realized capital gains to
their shareholders. Therefore, no Federal income tax provision is required.
2. Investment Advisory Fees and Other Transactions with Affiliates
Investment advisory services are provided by McCullough, Andrews and
Cappiello, Inc., (the "Adviser"). Under an agreement with the Adviser, the Trust
pays a fee at the annual rate of 0.50% of the daily net assets of the Growth and
Emerging Growth Funds, 0.70% of the daily net assets of the Gold Fund and 0.35%
of the daily net assets of the Utility Income Fund. Certain Officers and
Trustees of the Trust are affiliated with the Adviser.
The Trust has contracted with Money Management Associates (the
"Administrator") to provide Administrative services to the Trust. Under the
administrative services agreement with the Administrator, the Trust pays a fee
at the annual rate of 1.00% of the daily net assets of the Growth, Emerging
Growth and Gold Funds, and 0.70% of the daily net assets of the Utility Income
Fund. Certain Officers and Trustees of the Trust are affiliated with the
Administrator.
Certain of these administrative services are provided by Rushmore Trust and
Savings, FSB ("Rushmore Trust"), a majority-owned subsidiary of the
Administrator, under a subcontractual agreement with the Administrator. These
services include transfer agency functions, dividend disbursing and other
shareholder services and custody of the Trust's assets. The Trust has an
agreement with Rushmore Trust to receive short-term borrowings to cover share
redemptions. For each short-term borrowing the Fund pledges collateral. No
borrowings were outstanding at June 30, 1998.
Each fund of the Trust invests excess cash in Fund for Government Investors,
a money market mutual fund. Certain Officers and Trustees of Fund for Government
Investors are affiliated with the Trust.
16
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
3. Securities Transactions
For the year ended June 30, 1998, purchases and sales (including maturities)
of securities (excluding short-term securities) were as follows:
<TABLE>
<CAPTION>
UTILITY EMERGING
INCOME FUND GROWTH FUND GROWTH FUND GOLD FUND
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Purchases.............................................. $ 2,663,190 $15,999,457 $22,434,627 $1,515,774
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
Sales.................................................. $ 3,843,956 $19,285,494 $29,687,678 $1,648,460
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
</TABLE>
4. Net Unrealized Appreciation/Depreciation of Investments
Unrealized appreciation (depreciation) as of June 30, 1998 based on the cost
for Federal income tax purposes is as follows:
<TABLE>
<CAPTION>
UTILITY EMERGING
INCOME FUND GROWTH FUND GROWTH FUND GOLD FUND
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Gross Unrealized Appreciation........... $2,420,920 $10,902,430 $ 3,469,434 $ 150,975
Gross Unrealized Depreciation........... (6,188) (716,517) (445,860) (1,184,149)
----------- ------------ ------------ -----------
Net Unrealized Appreciation
(Depreciation)........................ $2,414,732 $10,185,913 $ 3,023,574 $(1,033,174)
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Cost of Investments for Federal Income
Tax Purposes.......................... $7,420,641 $15,848,342 $ 9,455,264 $ 3,222,745
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
</TABLE>
5. Net Assets
At June 30, 1998 net assets consisted of the following:
<TABLE>
<CAPTION>
UTILITY EMERGING
INCOME FUND GROWTH FUND GROWTH FUND GOLD FUND
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Paid-in-Capital......................... $7,030,653 $11,381,291 $11,394,732 $ 5,539,021
Undistributed Net Investment Income..... 191 -- -- --
Accumulated Net Realized Gain (Loss) on
Investments........................... 321,915 3,263,677 (288,475) (2,404,231)
Net Unrealized Appreciation
(Depreciation) on Investments......... 2,445,757 10,185,913 3,052,328 (948,002)
----------- ------------ ------------ ------------
Net Assets.............................. $9,798,516 $24,830,881 $14,158,585 $ 2,186,788
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
6. Federal Income Tax
Permanent differences between tax and financial reporting of net investment
income and realized gains are reclassified to paid-in-capital. As of June 30,
1998, net investment loss and accumulated net realized loss were reclassified to
paid-in-capital as follows:
<TABLE>
<CAPTION>
EMERGING
GROWTH GROWTH
FUND FUND GOLD FUND
--------- --------- -----------
<S> <C> <C> <C>
Net Investment Loss..................... $193,212 $214,292 $ 21,980
Expiration of Capital Loss Carryovers... -- -- 1,010,282
</TABLE>
17
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
At June 30, 1998, for Federal income tax purposes, the following Funds 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:
<TABLE>
<CAPTION>
EMERGING
GROWTH
EXPIRES JUNE 30, FUND GOLD FUND
- ---------------------------------------- --------- -----------
<S> <C> <C>
2000.................................... -- $ 434,866
2001.................................... -- 281,566
2005.................................... $259,721 648,259
2006.................................... -- 954,368
--------- -----------
Total............................. $259,721 $2,319,059
--------- -----------
--------- -----------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
of Cappiello-Rushmore Trust:
We have audited the statements of assets and liabilities, including the
portfolios of investments, of the Utility Income, Growth, Emerging Growth and
Gold Funds of Cappiello-Rushmore Trust as of June 30, 1998, and the related
statements 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 the periods presented. These financial statements and financial
highlights are the responsibility of the Trust'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 of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1998 by correspondence with the custodian and
brokers. 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 referred to
above present fairly, in all material respects, the financial position of the
Utility Income, Growth, Emerging Growth, and Gold Funds of Cappiello-Rushmore
Trust as of June 30, 1998, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
[SIGNATURE]
Washington, DC
August 7, 1998
- --------------------------------------------------------------------------------
19
