As Filed With The Securities And Exchange Commission On August 31, 1998.
FILE NOS. 33-46283 and 811-6601
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9 [X]
Cappiello-Rushmore Trust
(Exact Name of Registrant as Specified in Charter)
4922 Fairmont Avenue, Bethesda, Maryland 20814
(Address of Principal Executive Offices) (Zip Code)
(301) 657-1500
(Registrant's Telephone Number, Including Area Code)
Timothy N. Coakley
4922 Fairmont Avenue
Bethesda, Maryland 20814
(Name and Address of Agent for Service of Process)
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b).
[ ] on (date) pursuant to paragraph (b).
[ X ] 60 days after filing pursuant to paragraph (a) (1).
[ ] on (date) pursuant to paragraph (a) (1).
[ ] 75 days after filing pursuant to paragraph (a) (2).
[ ] on (date) pursuant to paragraph (a) (2).
<PAGE>
CAPPIELLO-RUSHMORE TRUST
REGISTRATION STATEMENT ON FORM N-1A
Cross Reference Sheet
Required By Rule 495(a)
Under the Securities Act of 1933
<TABLE>
<CAPTION>
Form N-1A Location in
Item No. Registration Statement
- ---------------- -------------------------
<S> <C>
Part A: Information Required in a Prospectus
--------------------------------------------
1. Front and Back Cover Pages Front Cover Page of Prospectus;
Back Cover Page of Prospectus
2. Risk/Return Summary: Investments, Risk and Return Summary; Investments,
Risks, and Performance Risks, and Performance
3. Risk/Return Summary: Fee Table Risk/Return Bar Chart and Tables: Year-to-Date Total
Returns Table; Highest and Lowest Quarterly Return;
Performance Table; Fees and Expenses
4. Investment Objectives, Principal Investment Objectives, Principal Investment
Investment Strategies, and Related Strategies, and Related Risks: A Review of
Risks Risk Considerations
5. Management's Discussion of Fund Management Discussion of Fund Performance:
Performance Performance Comparison
6. Management, Organization, and Management, Organization, and Capital Structure:
Capital Structure Investment Adviser; Year 2000 Preparations
7. Shareholder Information Shareholder Information: How to Invest In the Funds;
How to Redeem Your Investment; Additional
Information About the Funds: Exchanging Fund
Shares; Pricing of Fund Shares; Dividends and
Distributions; Tax Consequences of Investing In the
Funds
8. Distribution Arrangements Not Applicable
9. Financial Highlights Information Financial Highlights
Part B: Information Required in a
Statement of Additional Information
-----------------------------------
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History Not Applicable
12. Description of the Fund and Its Trust Description, Investments, and Risks;
Investments and Risks Investment Policies; Investment Limitations
i
<PAGE>
Form N-1A Location in
Item No. Registration Statement
- ------------ --------------------------
Part B: Information Required in a
Statement of Additional Information
-----------------------------------
13. Management of the Fund Management of the Trust
14. Control Persons and Principal Holders Control Persons and Principal Holders of
of Securities Securities
15. Investment Advisory and Other Investment Advisory and Other Services: Investment
Services Adviser; Administrator; Custodian and Independent
Public Accountant
16. Brokerage Allocation and Other Brokerage Allocation and Other Practices
Practices
17. Capital Stock and Other Securities Not Applicable
18. Purchase, Redemption, and Pricing of Purchase and Redemption of Shares
Shares
19. Taxation of the Fund Taxation of the Funds
20. Underwriters Not Applicable
21. Calculation of Performance Data Calculation of Performance Data: Average Annual
Total Return Quotation; Computation of Yield
22. Financial Statements Financial Statements
Part C: Other Information
-------------------------
23. Exhibits Exhibits
24. Persons Controlled By or Under Persons Controlled By or Under
Common Control With the Fund Common Control With the Fund
25. Indemnification Indemnification
26. Business and Other Connections of Business and Other Connections of
Investment Adviser Investment Adviser
27. Principal Underwriters Not Applicable
28. Location of Accounts and Records Location of Accounts and Records
29. Management Services Not Applicable
30. Undertakings Not Applicable
Signatures Signatures
</TABLE>
ii
<PAGE>
PART A
<PAGE>
CAPPIELLO-RUSHMORE TRUST
UTILITY INCOME FUND
GROWTH FUND
EMERGING GROWTH FUND
Prospectus
November 1, 1998
The Cappiello-Rushmore Trust (the "Trust") is a no-load mutual fund complex with
four separate investment portfolios, three of which (the "Funds") are described
in this Prospectus. This Prospectus contains important information about these
Funds. Please read this Prospectus before investing and keep this Prospectus on
file for future reference.
Neither the securities and exchange commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
Risk and Return Summary........................................
Investments, Risks, and Performance.........................
Risk/Return Bar Chart and Tables............................
Year-To-Date Total Returns Table............................
Highest and Lowest Quarterly Returns Table..................
Performance Table...........................................
Fees and Expenses..............................................
Investment Objectives, Principal Investment Strategies,
and Related Risks..............................................
Cappiello-Rushmore Utility Income Fund......................
Cappiello-Rushmore Growth Fund..............................
Cappiello-Rushmore Emerging Growth Fund.....................
A Review of Risk Considerations.............................
Management's Discussion of Fund Performances...................
Cappiello-Rushmore Utility Income Fund.....................
Cappiello-Rushmore Growth Fund.............................
Cappiello-Rushmore Emerging Growth Fund.....................
Market Outlook.............................................
Performance Comparison.....................................
Shareholder Information........................................
How to Invest In the Funds..................................
How to Redeem Your Investment...............................
Additional Information About the Funds.........................
Exchanging Fund Shares......................................
Pricing of Fund Shares......................................
Dividends and Distributions.................................
Tax Consequences of Investing In the Funds..................
Management, Organization, and Capital Structure................
Investment Adviser..........................................
Year 2000 Preparations......................................
Financial Highlights...........................................
2
<PAGE>
RISK and RETURN SUMMARY
Investments, Risks, and Performance
Cappiello-Rushmore Utility Income Fund
Fund Investment Objective and Goals
The Utility Income Fund's investment objective is to provide higher current
income, with capital appreciation a secondary consideration. The Utility Income
Fund seeks to achieve this objective by buying the equity securities and bonds
of public utility companies, mainly in the gas and electric public utility
industries. The Fund also may buy the securities of water and telecommunication
companies.
Principal Fund Investment Strategies
The Utility Income Fund's investments may include common stocks, preferred
stocks, and convertible securities of both U.S. and foreign issuers.
Principal Risks of Investing In the Utility Income Fund
As with any fund, the value of your investment in the Utility Income Fund will
rise or fall depending on the performance of individual securities as well as
stock market movements. Since the Utility Income Fund focuses on a single
sector, its performance largely depends on that sector's performance, which may
differ from that of the overall stock market. Rising interest rates or
deteriorating economic conditions may impair the performance of utility
companies' securities. Further, adverse rate regulation can result in a decline
in utility company sales and earnings.
Cappiello-Rushmore Growth Fund
Fund Investment Objective and Goals
The Growth Fund's objective is long-term capital appreciation. In attempting to
achieve this goal, we invest at least 65% of the Growth Fund's total assets in
stocks of larger-capitalization growth companies (i.e., companies whose total
market value is more than $5.0 billion). Larger-capitalization companies usually
are established companies with a track record of sales and earnings. From these
large capitalization companies, we select companies that we believe have the
potential to increase earnings faster than the overall market.
Principal Fund Investment Strategies
The Growth Fund's stock investments may include common stocks, preferred stocks,
and convertible securities of both U.S. and foreign issuers. We invest primarily
in the common stocks of U.S. companies and, to a lesser extent, in foreign
securities. We also may engage in other investment practices designed to seek
either to enhance the Fund's returns or to protect the portfolio from losses.
For example, we may also invest in warrants, preferred stocks, convertible debt
securities, and certain higher-risk securities. Depending upon the volatility in
the markets, the Fund also may employ short term-trading, which could produce
high brokerage costs and taxable distributions.
Principal Risks of Investing In the Growth Fund
While larger-company stocks tend to be less volatile than smaller company
stocks, the value of your investment in the Growth Fund will rise or fall
depending on the performance of individual securities as well as stock market
movements. Additionally, because of their size, larger companies usually have
financial and managerial resources to offset adversity. These larger companies,
however, also may be slower to innovate or respond to changing conditions than
smaller companies.
3
<PAGE>
Cappiello-Rushmore Emerging Growth Fund
Fund Investment Objective and Goals
The Emerging Growth Fund seeks long-term capital appreciation. In attempting to
achieve this goal, we invest in the stocks and convertible securities of
emerging companies with market capitalization of less than $750 million. Under
normal circumstances, we invest at least 65% of the Fund's assets in a
diversified portfolio of these companies. We search for those smaller companies
that show or have the potential to show rapid growth, but are not yet widely
recognized. We also may invest in older, established companies that, due to new
products, rising sales, expanding market, or other corporate changes, may have
the potential of increasing earnings growth.
Principal Fund Investment Strategies
The Emerging Growth Fund invests mainly in the common stocks of U.S. emerging
growth companies and, to a lesser extent, in foreign emerging growth companies.
However, we may invest up to 25% of the Fund's assets in stock and related
securities of larger-capitalized companies and up to 35% of the Fund's assets in
investment-grade corporate debt securities and preferred stocks, regardless of
whether these securities are issued by emerging growth companies. The Fund may
also invest in certain higher-risk securities and may engage in other investment
practices designed to seek to either enhance the Fund's returns or protect the
portfolio from losses. Depending upon the volatility in the markets, the Fund
also may employ short-term trading, which could produce high brokerage costs and
taxable distributions.
Principal Risks of Investing In the Emerging Growth Fund
Among the major risks of smaller-capitalization companies are the following:
o Smaller-capitalization companies are usually younger and less
established with a relatively-short record of sales and
earnings.
o Because of their size, smaller companies may lack the depth of
financial and management resources to weather economic or
financial turmoil. For the same reason, however, smaller
companies may have more flexibility and are usually quicker to
innovate or respond to changing conditions when compared to
larger capitalization companies.
o Smaller companies tend to be more volatile in their sales and
earnings performance, as well as in their stock price.
o Because stocks of smaller companies usually trade in lower
volumes than stocks of larger companies, these stocks may be
more vulnerable to market risk and may be harder to sell than
stocks of larger companies.
An investment in the Funds is not a deposit or obligation of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
4
<PAGE>
Risk/Return Bar Chart and Tables
The chart and three tables below show the annual returns and the long-term
performance of the Funds. Each Fund commenced operations on October 6, 1992, and
has a fiscal year-end of June 30th. The information in the chart and these
tables provides some indication of the risks of investing in the Funds by
showing changes in Fund performance from year to year and by showing how each
Fund's average annual returns for 1 year and 5 years compare with the
performance of both the Standard & Poor's 500 IndexTM (a widely-recognized,
broad-based measure of stock market performance) and the Russell 2000 Index (a
more-narrowly based index of stock market performance).
The chart immediately below compares the annual total return of the Funds with
the annual total return of both the Standard & Poor's 500 IndexTM and the
Russell 2000 Index for each calendar year from 1993 through 1997. The first of
the three tables that follow this chart shows the year-to-date total returns of
the Utility Income Fund, the Growth Fund, the Emerging Growth Fund, the Standard
& Poor's 500 IndexTM, and the Russell 2000 Index as of the end of the
most-recent fiscal quarter (ended September 30, 1998). The second of the three
tables shows the highest and lowest total returns of the Funds and the Standard
& Poor's 500 IndexTM and the Russell 2000 Index for a quarter from 1993 through
1997. The last of the three tables compares each Fund's average annual total
returns for 1 year and 5 years with those of the Standard & Poor's 500 Index and
the Russell 2000 Index for periods ended December 31, 1997, the most-recently
completely calendar year.
Please note that this chart and each of the three tables assume the reinvestment
of dividends and distributions. Please also keep in mind that how the Funds have
performed in the past does not necessarily indicate how the Funds will perform
in the future.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Year Ended Utility Income Growth Emerging S&P 500 Russell
(as of) Fund Fund Growth Fund Index(TM) 2000 Index
- -------------------- --------------- ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C> <C>
December 31, 1993 6% 14% 23% 10% 19%
December 31, 1994 (13%) 5% (7%) 1% (2%)
December 31, 1995 30% 37% 36% 38% 28%
December 31, 1996 4% 7% 2% 23% 16%
December 31, 1997 25% 22% 5% 33% 22%
</TABLE>
Year-To-Date Total Returns Table
(for the most-recent fiscal quarter)
<TABLE>
<CAPTION>
Utility Growth Emerging S&P 500 Russell 2000
Income Fund Growth IndexTM Index
Fund Fund
-------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Year-to-Date
Performance _______% _______% _______% _______% _______%
(1/1/98-9/30/98)
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Highest and Lowest Quarterly Returns Table
(since Fund inception on October 6, 1992)
Utility Growth Emerging S&P 500 Russell 2000
Income Fund Growth IndexTM Index
Fund Fund
- ------------------------ --------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Highest Return 14.73% 18.77% 23.05% 17.46% 16.21%
Quarter 4th Qtr. 1997 3rd Qtr. 1997 3rd Qtr. 1997 2nd Qtr. 1997 2nd Qtr. 1997
Lowest Return (10.32)% (7.79)% (17.85)% (3.79)% (5.17)%
Quarter 1st Qtr. 1994 4th Qtr. 1997 4th Qtr. 1997 1st Qtr. 1994. 1st Qtr.1997
</TABLE>
Performance Table
Average Annual Total Returns
(for Periods Ended December 31, 1997)
<TABLE>
<CAPTION>
Utility Growth Emerging S&P 500 Russell 2000
Income Fund Growth IndexTM Index
Fund Fund
- ------------------------- --------- ------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
One Year 25.25% 22.17% 4.72% 33.36% 22.36%
Five Years 9.31% 16.51% 10.61% 20.27% 16.40%
</TABLE>
FEES and EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
<TABLE>
<CAPTION>
Utility Emerging
Income Growth Growth
Fund Fund Fund
--------- ------ -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees 0.35% 0.50% 0.50%
Other Expenses 0.70% 1.00% 1.00%
----- ----- -----
Total Annual Fund Operating Expenses 1.05% 1.50% 1.50%
----- ----- -----
</TABLE>
If your monthly account balance per Fund averages $500 or less due to
redemptions you may be charged a $5 fee.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated below and then redeem all of your shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> . <C>
Utility Income Fund $ 107 $ 334 $ 579 $ 1,283
Growth Fund 153 474 818 1,791
Emerging Growth Fund 153 474 818 1,791
</TABLE>
6
<PAGE>
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES, and RELATED RISKS
Cappiello-Rushmore Utility Income Fund
Fund Investment Objective and Goals
The Utility Income Fund's investment objective is to provide higher current
income, with capital appreciation a secondary consideration. The Utility Income
Fund seeks to achieve this objective by buying the equity securities and bonds
of public utility companies, mainly in the gas and electric public utility
industries. The Fund also may buy the securities of water and telecommunication
companies.
Principal Fund Investment Strategies
The Fund's investments may include common stocks, preferred stocks, and
convertible securities of both U.S. and foreign issuers. The Fund may also
purchase U.S. Government securities and enter into repurchase agreements.
In the stock selection process, we seek to identify the ability of a utility
company to earn and pay an increasing stream of dividends. We use a number of
computer screens to identify stocks that appear to be favorably priced on the
basis of dividend yield and that may benefit from the current market and
economic environment. We then review these stocks for factors that could be
reflected in a rise in dividends and stock price such as: (i) favorable earnings
and dividend trends, including cash flow (net earnings plus depreciation), which
is critical to future dividends; (ii) reasonable utility rate regulations; (iii)
growing service area and/or market; and (iv) non-regulated earnings sources.
We usually sell a company's stock when that company's fundamentals change for
the worse. Generally, company stock will also be sold when the company
experiences significant, unexplained, price changes.
Principal Risks of Investing In the Utility Income Fund
As with any fund, the value of your investment in the Utility Income Fund will
rise or fall depending on the performance of individual securities as well as
stock market movements. Since the Fund focuses on a single sector, its
performance largely depends on that sector's performance, which may differ from
that of the overall stock market. Rising interest rates or deteriorating
economic conditions may hurt the performance of utility companies' stocks.
Further, adverse rate regulation can result in a decline in utility company
sales and earnings.
Cappiello-Rushmore Growth Fund
Fund Investment Objective and Goals
The Growth Fund's objective is long-term capital appreciation. In attempting to
achieve this goal, we invest at least 65% of the Fund's total assets in stocks
of larger-capitalization growth companies (i.e., companies whose total market
value is more than $5.0 billion). Larger-capitalization companies usually are
established companies with a track record of sales and earnings. From these
large capitalization companies, we select companies that we believe have the
potential to increase earnings faster than the overall market.
7
<PAGE>
Principal Fund Investment Strategies
The Growth Fund's stock investments may include common stocks, preferred stocks,
and convertible securities of both U.S. and foreign issuers. We invest primarily
in the common stocks of U.S. companies and, to a lesser extent, in foreign
securities. We also may engage in other investment practices designed to seek
either to enhance the Fund's returns or to protect the portfolio from losses.
For example, we may also invest in warrants, preferred stocks, convertible debt
securities, and certain higher-risk securities. The Fund may also purchase U.S.
Government securities and enter into repurchase agreements.
In the stock selection process, we look for growth companies that are growing or
have the potential to grow faster than the S&P 500 IndexTM. The nucleus of the
Growth Fund's portfolio will usually be stocks with lower price-earnings ratios
and above average yields.
In selecting a stock for inclusion in the portfolio, we employ computer screens
to identify stocks with attractive fundamentals and valuations. We then review
those companies seeking a catalyst for action, i.e., factors that could indicate
a future rise in stock prices, such as a new or changed management or a new
product. These computer screens are employed to determine: (i) fundamentals such
as sales and earnings growth; and (ii) relative valuations (those stocks that
appear to be attractively priced compared to the fundamentals).
We usually sell a company's stock when that company no longer is considered a
growth company, shows deteriorating fundamentals, or experiences significant
unexplained price changes.
Depending upon the volatility in the markets, the Growth Fund also may employ
short-term trading, which could produce high brokerage costs and taxable
distributions.
Principal Risks of Investing In the Growth Fund
While larger company stocks tend to be less volatile than smaller company
stocks, the value of your investment in the Growth Fund will rise or fall
depending on the performance of individual securities as well as stock market
movements. Additionally, because of their size, larger companies usually have
financial and managerial resources to offset adversity. These larger companies,
however, also may be slower to innovate or respond to changing conditions than
smaller companies.
Cappiello-Rushmore Emerging Growth Fund
Fund Investment Objective and Goals
The Emerging Growth Fund seeks long-term capital appreciation. In attempting to
achieve this goal, we invest in the stocks and securities convertible into
common stocks and warrants of emerging companies with market capitalization of
less than $750 million. Under normal circumstances, we invest at least 65% of
the Fund's assets in a diversified portfolio of these companies. We search for
those smaller companies that show or have the potential to show rapid growth,
but are not yet widely recognized. We also may invest in older, established
companies that, due to new products, rising sales, expanding market, or other
corporate changes, may have the potential of increasing earnings growth.
8
<PAGE>
Principal Fund Investment Strategies
The Emerging Growth Fund invests mainly in the common stocks of U.S. companies
and, to a lesser extent, in foreign emerging growth companies. We may also
invest up to 25% of the Fund's assets in stock and related securities of
larger-capitalized companies. Further, up to 35% of the Fund's assets may be
invested in investment-grade corporate debt securities and preferred stocks.
These investments may or may not be securities of emerging growth companies.
The Emerging Growth Fund may also invest in certain higher-risk securities and
may engage in other investment practices designed to seek to either enhance the
Fund's returns or protect the portfolio from losses. The Fund may also purchase
U.S. Government securities and enter into repurchase agreements.
In selecting a stock for inclusion in the portfolio, we employ computer screens
to identify stocks with attractive fundamentals and valuations. A catalyst for
action is sought. These computer screens are employed to determine: (i)
fundamentals such as sales and earnings growth; and (ii) relative valuations
(those stocks that appear to be attractively priced compared to fundamentals).
Depending upon the volatility in the markets, the Emerging Growth Fund also may
employ short-term trading, which could produce high brokerage costs and taxable
distributions.
Principal Risks of Investing In the Emerging Growth Fund
Among the major risks of smaller-capitalization companies are the following:
o Smaller-capitalization companies are usually younger and less
established with a relatively-short record of sales and
earnings.
o Because of their size, smaller companies may lack the depth of
financial and management resources to weather economic or
financial turmoil. For the same reason, however, smaller
companies may have more flexibility and are usually quicker to
innovate or respond to changing conditions when compared to
larger capitalized companies.
o Smaller companies tend to be more volatile in their sales and
earnings performance, as well as in their stock price.
o Because stocks of smaller companies usually trade in lower
volumes than stocks of larger companies, these stocks may be
more vulnerable to market risk and may be harder to sell than
stocks of larger companies.
A Review of Risk Considerations
Risk In General
The risks of a fund are usually defined by the fund's individual securities,
overall portfolio, and investment tactics. Over longer periods of time, stocks
have been among the most successful investments available to the public.
Nevertheless, stocks do fluctuate in price. Accordingly, there is a risk you
could lose as well as make money by investing in the Cappiello-Rushmore Funds.
As with any fund, there is no guarantee that the performance of the Funds will
be positive over any period of time, either short term or long term.
9
<PAGE>
Primary Risks
Set forth below are the primary, broad-based risks that a Fund may encounter:
Fund Risk -- The possibility that a Fund's performance during a
specific period may not meet or exceed that of the market as a whole.
Sector Risk -- The risk that the economic sector in which a Fund may
focus its investments will underperform the market as a whole. To the extent
that a Fund's investments are concentrated in issuers conducting business in the
same economic sector, the Fund is subject to the risks of investing in that
sector, including legislative or regulatory changes, adverse market conditions,
and/or increased competition.
Market Risk -- The possibility that stock prices in general will
decline over short, or even extended, periods of time. Stock markets tend to be
cyclical, with periods when stock prices generally rise and periods when stock
prices generally decline. Investors have noticed that when the stock market
surges up, many stocks post higher prices. On the other hand, when the stock
market falls sharply, many common stocks will drop even more sharply. A change
in market psychology can cause a security's price to decline irrespective of any
truly fundamental change in the company itself.
Interest Rate Risk -- The risk of a rise in interest rates that usually
depresses the prices of fixed-income type securities and often of equities as
well. In the short run, high interest rates reduce interest-sensitive investment
spending. Interest rate uncertainty is related to various factors. Among these
factors are swings in money growth, uncertainty about the policies of the
Federal Reserve Board, and inflationary expectations.
Small-Issuer Risk -- Small- and medium-capitalization companies may be
more vulnerable than larger, more-established organizations to adverse business
or economic developments. In particular, small-capitalization companies may have
limited product lines, markets, and financial resources, and also may be
dependent upon a relatively-small management group. These securities may be
traded over-the-counter or listed on an exchange and may not pay dividends.
Secondary Risks
In addition to the primary risks set forth above, as well as individual company
risks, the Funds, to varying degrees, also may be subject to the following types
of secondary risks:
Event Risk -- The possibility that corporate securities may suffer
substantial declines in market value due to corporate restructurings. While
event risk may be high for certain corporate securities held by a Fund, event
risk in the aggregate should be low because of each Fund's varied holdings.
Foreign Company Risks -- Investments in foreign securities involve
additional risks, such as changes in currency exchange rates, inadequate
disclosure of company information, and political instability. Some additional
significant risks associated with investing in foreign companies include:
o Volatility -- Investments in securities of foreign companies can
be more volatile than investments in U.S. companies. Diplomatic,
political, or economic developments could affect investments in
foreign companies.
o Regulatory Environment -- Foreign companies generally are not
subject to uniform accounting, auditing, and financial reporting
standards comparable to those applicable to U.S. domestic
companies. Foreign issuers may be subject to different
accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic issuers. There is generally less
government regulation of listed companies abroad than in the
United States.
10
<PAGE>
Money Market Investment Risk -- Under adverse market conditions, one or
more of the Funds could invest some of its assets in money market securities.
Although each Fund's objective would be to attempt to avoid losses, this
defensive tactic, if employed in a significant way, could have the effect of
reducing the benefit from any upswing in the market.
MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE
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.
Cappiello-Rushmore 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:
o Yield (relative to other utilities and the overall market)
o Company Management (particularly important in a deregulating industry)
o Financial Strength
o Future Dividend Growth
o 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.
11
<PAGE>
Cappiello-Rushmore 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% of the portfolio), health care (11.9% of the portfolio), and
computer hardware and equipment (10.1% of the portfolio).
Larger capitalization stocks fared well during the year, outperforming smaller
issues as investors placed a premium on the liquidity of larger stocks. This
preference reflected the prevailing economic conditions of slowing (but still
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 stocks, which comprise 11.9% of the portfolio. A second trend
relates to the "baby boomer" group. As they approach their forties and early
fifties, "baby boomers" have gradually recognized the need to save and invest.
Our concentration in this area includes finance companies such as American
Express Company, 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.
Cappiello-Rushmore 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 the
twelve months ended June 30, 1998, in which small cap stocks significantly
underperformed their larger peers. The last time that small companies
outperformed the S&P 500 IndexTM 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 Jones Industrial Average, the S&P 500 IndexTM, and the Russell 2000
Index have received the major portion of institutional flows over the past
months.
We ended fiscal year 1998 with the portfolio focused in three major sectors: (1)
health care 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. Our
health care stocks have performed well. Our largest position is KV
Pharmaceutical Co. (A) showing a cost of $293,949 and a market value of
$1,244,375 as of June 30, 1998.
12
<PAGE>
During the year, we sought to reduce risk associated with individual securities
by positioning more of the portfolio into lower P/E stocks. These stocks
represent solid values whose price we believe more than adequately reflects any
possible earnings disappointments.
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 year 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 give small companies strategic flexibility and enable
these companies 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 are not as likely to be affected by fluctuations in
earnings from overseas operations. For this reason, we believe the smaller stock
values are 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.
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. 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.
13
<PAGE>
Finally, we believe it is more important to evaluate each company individually
rather than focusing on general market trends. Forecasting 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.
Performance Comparison
Assuming a $10,000 initial investment, the following graph compares the total
returns of the Funds to the performance of the S&P 500 IndexTM and Russell 2000
Index since the Funds began operating on October 6, 1992. Please remember that
past performance does not necessarily reflect how the Funds may perform in the
future.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Acccount Value Utility Emerging
Total Return Income Growth Growth S&P 500 Russell 2000
(as of) Fund Fund Fund IndexTM Index
- ---------------------- ------------ ------------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
October 6, 1992 $10,000 $10,000 $10,000 $10,000 $10,000
June 30, 1993 $10,998 $10,634 $11,335 $11,297 $11,871
- ---------------------- ------------- ------------- -------------- ------------- ----------------
June 30, 1994 $ 8,998 $11,058 $10,506 $11,455 $12,386
- ---------------------- ------------- ------------- -------------- ------------- ----------------
June 30, 1995 $10,493 $14,667 $15,141 $14,442 $14,877
- ---------------------- ------------- ------------- -------------- ------------- ----------------
June 30, 1996 $12,655 $17,904 $17,315 $18,197 $18,431
- ---------------------- ------------- ------------- -------------- ------------- ----------------
June 30, 1997 $13,083 $19,711 $16,943 $24,511 $21,441
- ---------------------- ------------- ------------- -------------- ------------- ----------------
June 30, 1998 $16,425 $23,794 $16,919 $31,904 $24,980
- ---------------------- ------------- ------------- -------------- ------------- ----------------
</TABLE>
Average Annual Total Returns as of June 30, 1998
<TABLE>
<CAPTION>
Utility Income Growth Fund Emerging
Fund Growth Fund
-------------- ------------- ------------
<S> <C> <C> <C>
One Year 25.55% 20.72% (0.14)%
Five Year 8.35% 17.48% 8.34%
Since Inception 9.04% 16.32% 9.60%
</TABLE>
14
<PAGE>
SHAREHOLDER INFORMATION
How to Invest In the Funds
Facts To Know Before You Invest:
o The minimum initial investment in each Fund is $2,500
o Retirement accounts may be opened with a $500 minimum investment
o There are no minimum amounts for subsequent investments
o There are no sales charges
o The Funds reserve the right to reject any purchase order
o All shares are electronically recorded; certificated shares are not
available
o A $10 fee may be charged for items returned for insufficient or
uncollectible
Purchasing Shares:
By Mail
Complete an application and make a check payable to "Cappiello-Rushmore
Trust." Send your completed and signed application and check drawn on a
U.S. bank to:
Cappiello-Rushmore Trust
4922 Fairmont Avenue
Bethesda, Maryland 208l4
By Bank Wire
Speak to the branch manager of your bank. Request a transfer of federal
funds to Rushmore Trust and Savings, FSB, instructing your bank to wire
transfer the money before 4:00 P.M., Eastern Time, to:
Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing # 0550-71084
Account # 029385770
Specify the Fund name, your account number (if assigned), and the name(s)
in which the account is registered.
After instructing your bank to transfer federal funds, you must telephone
Shareholder Services at (800) 622-1386 or (301) 657-1510 between 8:30 A.M.
and 4:00 P.M., Eastern Time, and tell us the amount you transferred and the
name of the bank sending the transfer. Your bank may charge a fee for such
services. Remember that it is important to complete the wire transfer
before 4:00 P.M., Eastern Time.
Through Brokers
You may invest in the Fund by purchasing shares through registered
broker-dealers, banks, or other financial institutions that purchase
securities for their customers. Please note that these third parties may
charge a fee for their services.
15
<PAGE>
How To Redeem Your Investment
Redeeming Shares:
By Telephone (1-800-622-1386)
As a Fund shareholder, you will automatically receive telephone redemption
privileges. If you choose to redeem your investment by telephone, please
contact Shareholder Services at 1-800-622-1386 between the hours of 8:30
A.M. and 4:30 P.M., Eastern Time. For your protection, we will take
measures to verify your identity by requiring some form of personal
identification prior to acting on telephone instructions and may also
record telephone transactions. A written confirmation will be mailed to you
within five business days after your redemption. Please note that we may
terminate or modify telephone redemption privileges upon 60 days notice.
By Mail or Fax
Mail your instructions for redemption to: Fax your instructions for
redemption to:
Rushmore Trust and Savings, FSB (301) 657-1520
4922 Fairmont Avenue Attn: Shareholder Services
Bethesda, MD 20814
Attn: Shareholder Services
Include the following information in your redemption request:
o the name of the Fund and account number you are redeeming from
o your name(s) and address as it appears on your account
o the dollar amount or number of shares you wish to redeem
o your signature(s) as it appears on your account
o a daytime telephone number
Additional Information You Should Know When You Redeem
There are no fees charged for redemptions.
o You may receive redemption proceeds by bank wire, check, or
through the Automated Clearing House System (ACH). When the amount
to be redeemed is at least $5,000, we will, upon instruction, wire
transfer the amount to your commercial bank or brokerage account
specified in your account application. For amounts less than
$5,000, you may have redemption proceeds deposited directly into
an account specified on the account application or request that a
redemption check be delivered by mail to your address of record.
o If you request payment of redemptions to a third party or to a
location other than an address on record, the request must be in
writing and your signature must be guaranteed by an eligible
institution (eligible institutions generally include banking
institutions, securities exchanges, associations, agencies or
broker/dealers, and "STAMP" program participants).
o Normally, payment for all shares redeemed will be issued within
one business day. However, withdrawal requests on investments that
have been made by check may be delayed up to ten calendar days
following the investment or until the check clears, whichever
occurs first. This delay is necessary to assure us that
investments made by check are good funds. You will receive
redemption proceeds promptly upon confirmation of receipt of good
funds.
16
<PAGE>
o If your monthly Fund account balance averages $500 or less due to
redemptions, you may be charged a $5 fee. The fee will not be
imposed on tax-sheltered retirement plans or accounts established
under the Uniform Gifts or Transfers to Minors Acts. Additionally,
we reserve the right to redeem involuntarily those accounts which
fall below $500 after providing 60 days written notice.
o The right of redemption may be suspended, or the date of payment
postponed, during the following periods: (a) periods during which
the New York Stock Exchange (the "NYSE") is closed (other than
customary weekend or holiday closings); (b) periods when trading
on the NYSE is restricted, or an emergency exists, as determined
by the Securities and Exchange Commission ("SEC"), so that
disposal of a Fund's investments for determination of net asset
value is not reasonably practicable; or (c) for such other periods
as the SEC, by order, may permit for protection of the Fund's
investors.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Exchanging Fund Shares
You may exchange shares of one Cappiello-Rushmore Fund for shares of another, or
may choose to exchange, without cost, Cappiello-Rushmore Fund shares for shares
of any of the following Rushmore Funds: Fund for Government Investors, Fund for
Tax-Free Investors, Inc., The Rushmore Fund, Inc., or American Gas Index Fund,
Inc. The registration for both accounts must be identical, and you should obtain
a current prospectus for the fund into which you are exchanging by calling
1-800-343-3355. Exchanges will be effected at the respective net asset values of
the Funds involved as next determined after receipt of the exchange request. The
Funds may change or cancel their exchange policies at any time, upon 60 days'
notice to shareholders.
Effective immediately, the Cappiello-Rushmore Gold Fund no longer will accept
purchase orders for new shares, and Gold Fund shares are no longer available
through the Trust's exchange privilege. Trust shareholders may continue to
exchange their Gold Fund shares for shares of other Rushmore Funds, including
shares of the three Funds in the Cappiello-Rushmore Trust other than the Gold
Fund, in accordance with the terms of the Trust's exchange privilege.
Pricing of Fund Shares
The price of a Fund's shares on any given day is the Fund's net asset value per
share. This figure is computed by dividing the total market value of the Fund's
investments and other assets, less any liabilities, by the number of Fund shares
outstanding. The net asset value per share of each Fund is determined as of 4:00
P.M., Eastern Time, on days when the NYSE is open for business. Orders accepted
by the Trust directly or by an authorized third party will be priced at the
Fund's net asset values next computed after orders are received. This means that
if you place a purchase or redemption order after 4:00 P.M., Eastern Time, this
order will be effected at the next calculation of net asset value, normally 4:00
P.M. the next business day.
The Funds value their portfolio securities based on the market value of these
securities. Each security held by the Funds, and which is listed on a securities
exchange, is valued at the last quoted sale price on the NYSE and other major
exchanges for a given day. Price information on each listed security is taken
from the exchange where the security is primarily traded. Over-the-counter
securities are valued at their last sales price. Options and futures contracts
are valued at the last sales price as of the close of trading on the applicable
exchanges. Unlisted securities for which market quotations are readily available
are valued at the closing sales prices. The value of assets for which no
quotations are readily available (including any restricted securities) are
valued at fair value in good faith by the Board of Trustees or at the direction
of the Trustees.
17
<PAGE>
Dividends and Distributions
All dividends and capital gain distributions of each Fund will be reinvested in
additional Fund shares (including fractional shares where necessary) at net
asset value, unless you elect on your application form or in writing, not less
than five full business days prior to the record date for a particular dividend
or distribution, to receive such dividend or distribution in cash. If you elect
to receive distributions in cash, your election will be effective until you give
other written instructions.
Although the timing and amount of all dividends and distributions are subject to
the discretion of the Board of Trustees, the distribution schedule for the Funds
is as follows:
o If you own shares of the Growth and/or Emerging Growth Funds, net
investment income and net capital gains will be distributed annually in
December.
o If you are a shareholder of the Utility Income Fund, you will receive
net investment income quarterly. Capital gains will be distributed
annually in December.
Tax Consequences of Investing In the Funds
Taxability of Distributions
The Funds intend to meet the requirements for being tax-qualified regulated
investment companies. As long as the Funds meet these requirements, the Funds
pay no federal income tax on the earnings distributed to shareholders. The Funds
intend to distribute all of their earnings to their shareholders. Dividends and
capital gains distributions you receive from any Cappiello-Rushmore Fund,
whether reinvested or taken as cash, are generally considered taxable to you as
ordinary income or as capital gains income. The Form 1099 that is mailed to you
each January details your dividends and their federal tax category. You should
verify your tax liability with your tax professional.
Taxability of Transactions
Any time you sell or exchange shares of the Funds, this transaction is
considered a taxable event for you. For example, if you exchange shares of one
Fund for shares of another, the transaction would be treated as a sale.
Consequently, any gain resulting from the transaction would be subject to
federal income tax.
MANAGEMENT, ORGANIZATION,
and CAPITAL STRUCTURE
Investment Adviser
McCullough, Andrews & Cappiello, Inc.
Main Office East Coast Office
-------------------- -------------------
Suite 4250 Suite 250
101 California Street 10751 Falls Road
San Francisco, CA 94111 Lutherville, MD 21093
18
<PAGE>
McCullough, Andrews & Cappiello, Inc. (the "Adviser") has served as the
investment adviser to the Funds since their inception on October 6, 1992. For
the advisory services performed, the Adviser received the following fees during
the Funds' fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
Utility Income Fund Growth Fund Emerging Growth Fund
--------------------- -------------- --------------------
<S> <C> <C> <C>
Advisory Fees Paid as a
Percentage of Net Assets 0.35% 0.50% 0.50%
</TABLE>
Portfolio Managers
Frank A. Cappiello and Robert F. McCullough, C.P.A., manage the Funds and have
done so since their inception in October, 1992. Mr. McCullough is Chairman of
the Board of the Adviser and Mr. Cappiello is President. Both have been in the
investment business for more than thirty years.
Mr. McCullough is a graduate of Santa Clara University and is a member of the
American Institute of CPAs and the California Society of CPAs.
Mr. Cappiello is a graduate of the University of Notre Dame (A.B.) and Harvard
University (M.B.A.) He is past President of the Baltimore Security Analysts
Society and former Trustees of the Maryland State Retirement Systems.
Year 2000 Preparations
The day-to-day operations of the Trust are dependent upon the Trust's
service providers, principally the Adviser, Money Management Associates,
Rushmore Trust and Savings, FSB, and Rushmore Services, Inc. (collectively, the
"Servicers"), and upon the smooth functioning of the computer systems that they
utilize. Many computer systems currently cannot properly recognize or process
date-sensitive information relating to the year 2000 and beyond. Like other
mutual funds and financial and business organizations around the world, the
Trust, therefore, could be adversely affected if the computer systems used by
these Servicers, and their vendors, do not properly process and calculate
date-related information and data on and after January 1, 2000. The Servicers
have been evaluating the impact that the year 2000 issue may have on the
computer systems that they utilize and are making appropriate modifications to
these systems in order to assure that these they will be prepared for the year
2000. The Trust and the Servicers expect that any further modifications to their
computer systems necessary to address the year 2000 issue will be made and
tested in a timely manner. The Servicers also are working with their outside
vendors, and other persons whose systems are linked to those of the Trust and
the Servicers, to obtain satisfactory assurances regarding the year 2000 issue.
The costs of this systems remediation will not be paid directly by the Trust.
Inadequate remediation could have an adverse effect on the Trust's operations,
including pricing and securities trading and settlement, and the provision of
shareholder services. Although, at this time, there can be no assurance that the
remedial action taken by the Servicers will be sufficient or timely, the
Servicers do not anticipate that the transition to the 21st century will have a
material impact on the ability of the Servicers to continue to service the Trust
at current levels.
19
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights tables are intended to help you understand
each Fund's financial performance for the past 5 years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that you would have earned (or lost) on an investment
in the Funds (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the financial statements of the Funds, is included in the annual report for the
Funds, which is available upon request.
<TABLE>
<CAPTION>
Utility Income Fund Growth Fund
For the Year Ended June 30, For the Year Ended June 30,
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value --
Beginning of Period $ 10.40 $ 10.60 $ 9.24 $ 8.39 $ 10.82 $ 19.02 $ 17.87 $ 14.64 $ 11.05 $ 10.63
------- -------- ------- ------- -------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net Investment Income 0.47 0.53 0.49 0.55 0.53 (0.18) (0.09) (0.07) 0.01 (0.02)
(Loss)
Net Realized and
Unrealized Gain (Loss)
on Securities (2.17) (0.19) 1.39 0.85 (2.42) (4.12) 1.83 3.30 3.60 0.44
------ ------ ---- ---- ------ ------ ---- ---- ---- ----
Total from Investment
Operations 2.64 0.34 1.88 1.40 (1.89) 3.94 1.74 3.23 3.61 0.42
------ ---- ---- ---- ------ ------ ---- ---- ---- ----
Less Distributions:
Dividends (from net
investment income) (0.48) (0.54) (0.52) (0.55) (0.53) -- -- -- (0.02) --
Distributions (from
capital gains) -- -- -- -- (0.01) -- (0.59) -- -- --
--------- --------- --------- --------- ------ --------- ------ --------- --------- ---------
Total Distribution to
Shareholders (0.48) (0.54) (0.52) (0.55) (0.54) -- (0.59) -- (0.02) --
------ ------ ------ ------ ------ -------- ------ --------- ------ ---------
Net Asset Value -- End
of Period $ 12.56 $ 10.40 $ 10.60 $ 9.24 $ 8.39 $ 22.96 $ 19.02 $ 17.87 $ 14.64 $ 11.05
Total Investment Return 25.55% 3.39% 20.60% 16.62% (18.18)% 20.72% 10.10% 22.06% 32.65% 3.99%
Ratios and Supplemental
Data:
Net Assets -- End of
Period (000s Omitted $ 9,799 $8,806 $15,106 $17,151 $9,117 $24,831 $24,899 $31,777 $19,337 $9,993
Ratio of Expenses to
Average Net Assets 1.05% 1.05% 1.05% 1.05% 1.05% 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Income to
Average Net Assets 4.01% 4.88% 4.82% 6.26% 5.21% (0.74)% (0.46)% (0.41)% 0.12% (0.18)%
Portfolio Turnover Rate 29.45% 17.33% 45.11% 147.04% 26.13% 65.08% 41.93% 74.50% 70.89% 119.03%
</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.
20
<PAGE>
FINANCIAL HIGHLIGHTS (Continued)
The following financial highlights tables are intended to help you understand
each Fund's financial performance for the past 5 years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that you would have earned (or lost) on an investment
in the Funds (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the financial statements of the Funds, is included in the annual report for the
Funds, which is available upon request.
<TABLE>
<CAPTION>
Emerging Growth Fund
For the Year Ended June 30,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value --
Beginning of Period $13.84 $ 16.99 $ 14.96 $ 10.41 $ 11.32
------ -------- -------- -------- --------
Income from Investment
Operations:
Net Investment Income
(Loss) (0.21) (0.24) (0.16) (0.08) (0.10)
Net Realized and
Unrealized Gain (Loss
on Securities 0.19A (0.24) 2.30 4.63 (0.69)
---- ------ ---- ---- ------
Total from Investment
Operations (0.02) (0.48) 2.14 4.55 (0.79)
-------- ------ ---- ---- ------
Less Distributions:
Dividends (from net
investment income) -- -- -- -- --
Distributions (from
capital gains) -- (2.67) (0.11) -- (0.12)
-------- ------ ------ -------- ------
Total Distribution to
Shareholders -- (2.67) (0.11) -- (0.12)
-------- ------ ------ --------- ------
Net Asset Value -- End
of Period $13.82 $ 13.84 $ 16.99 $ 14.96 $ 10.41
Total Investment Return (0.14)% (2.15)% 14.36% 43.71% (7.31)%
Ratios and Supplemental
Data:
Net Assets -- End of
Period (000s Omitted 14,159 $20,732 $44,985 $36,606 $18,133
Ratio of Expenses to
Average Net Assets 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Income to
Average Net Assets (1.07)% (1.20)% (0.98)% 0.61% (0.85)%
Portfolio Turnover Rate 121.20% 66.16% 121.22% 96.11% 128.13%
</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.
21
<PAGE>
In addition to this prospectus, the following information is available to assist
you in making an investment decision:
Information Available Upon Request Description
Statement of Additional Information A document that includes
additional information
about the Funds.
Annual and Semi-Annual Reports Bi-annual reports that contain
information about the investments
of the Funds. These reports also
discuss the market conditions and
investment strategies that
significantly affected the Funds'
performances during their last
fiscal year.
There are a variety of ways to receive the above information. You may contact
the Cappiello-Rushmore Trust directly by telephone, at 1-800-343-3355, or you
may send a written request to the Trust's offices, at 4922 Fairmont Avenue,
Bethesda, Maryland 20814. Additional information about the Funds can also be
reviewed and copied at the Securities and Exchange Commission's Public Reference
Room in Washington D. C. (for hours of operation please call the Commission at
1-800-SEC-0330). You may also obtain copies of the information by visiting the
Commission's internet site at http://www.sec.gov, or, upon payment of a
duplicating fee, by writing the Public Reference Section of the Commission at
450 Fifth Street, N.W. Washington, D. C. 20549.
Cappiello-Rushmore Trust
Investment Company Act File No. 811-6601
22
<PAGE>
CAPPIELLO-RUSHMORE TRUST
GOLD FUND
Prospectus
November 1, 1998
The Cappiello-Rushmore Trust (the "Trust") is a no-load mutual fund complex with
four separate investment portfolios, one of which (the "Fund") is described in
this Prospectus. This Prospectus contains important information about this Fund.
Please read this Prospectus before investing and keep this Prospectus on file
for future reference.
Effective immediately, the Gold Fund no longer will accept purchase orders for
new shares, and Gold Fund shares are no longer available through the Trust's
exchange privilege. Trust shareholders may continue to exchange their Gold Fund
shares for shares of other Rushmore Funds, including shares of the other three
Funds in the Cappiello-Rushmore Trust, in accordance with the terms of the
Trust's exchange privilege.
Neither the securities and exchange commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
Risk and Return Summary..............................................
Investments, Risks, and Performance...............................
Risk/Return Bar Chart and Tables..................................
Year-To-Date Total Returns Table..................................
Highest and Lowest Quarterly Returns Table........................
Performance Table.................................................
Fees and Expenses....................................................
Investment Objectives, Principal Investment Strategies,
and Related Risks....................................................
A Review of Risk Considerations...................................
Management's Discussion of Fund Performances.........................
Market Outlook....................................................
Performance Comparison............................................
Shareholder Information..............................................
How to Invest In the Funds........................................
How to Redeem Your Investment.....................................
Additional Information About the Funds...............................
Exchanging Fund Shares............................................
Pricing of Fund Shares............................................
Dividends and Distributions.......................................
Tax Consequences of Investing In the Fund.........................
Management, Organization, and Capital Structure......................
Investment Adviser................................................
Year 2000 Preparations............................................
Financial Highlights.................................................
2
<PAGE>
RISK and RETURN SUMMARY
Investments, Risks, and Performance
Fund Investment Objective and Goals
The Gold Fund seeks long-term capital appreciation. To pursue this goal, the
Fund invests in the stocks of companies engaged in gold and other precious
metals activities. Other precious metals include silver, platinum, and
palladium, and also diamonds and other precious minerals, as well as silver or
other precious metal bullion and coins. Precious metal activities include
mining, exploration, fabrication, processing, marketing, and distribution. Also
included are companies dealing or investing in gold and operating companies
principally engaged in financing, managing, controlling, or operating companies
engaged in these activities. The Fund may also invest in warrants, preferred
stock, and convertible debt securities, as well as bullion, coins and precious
metals, futures contacts, and options.
The Fund does not invest for income.
Principal Fund Investment Strategies
The Gold Fund invests mainly in the common stock of U.S. and foreign gold and
precious metal-related companies. At least 65% of the total assets of the Fund
are normally invested in the stock of companies engaged in these activities.
Principal Risks of Investing In the Gold Fund
As with any stock-oriented fund, the value of your investment will rise or fall
depending on the performance of individual securities as well as stock market
movements. The stocks of precious metal-related companies carry higher risks
than the stocks of other companies, in particular the risk of wide price
movements due to a variety of economic and political factors, including:
o changes in inflation or in expectations regarding inflation in
various countries
o the availability of supplies of precious metals and minerals
o changes in industrial and commercial demand o metal and mineral
sales by governments, central banks, or international agencies
o investment speculation
o monetary and other economic policies of various governments
o governmental restrictions on the private ownership of certain
precious metals and minerals
An investment in the Fund is not a deposit or obligation of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Risk/Return Bar Chart and Tables
The chart and three tables below show the annual returns and the long-term
performance of the Fund, which commenced operations on March 7, 1994, and whose
fiscal year-end is June 30th. The information in the chart and these tables
provides some indication of the risks of investing in the Fund by showing
changes in Fund performance from year to year and by showing how the Fund's
average annual returns for 1 year and 3 years compare with the performance of
the Philadelphia Stock Exchange Gold and Silver IndexTM (the "XAU Index") (a
capitalization-weighted index featuring eleven widely-held securities in the
gold and silver mining and production industry or companies investing in such
mining and production companies).
3
<PAGE>
The chart immediately below compares the annual total return of the Fund with
the annual total return of the XAU Index for each calendar year from 1995
through 1997. The first of the three tables that follow this chart shows the
year-to-date total returns of the Fund and the XAU Index as of the end of the
most-recent fiscal quarter (ended September 30, 1998). The second of the three
tables shows the highest and lowest total returns of the Fund and the XAU Index
for a quarter from 1995 through 1997. The last of the three tables compares the
Fund's average annual total returns for 1 year and 3 years with those of the XAU
Index for periods ended December 31, 1997, the most-recently completely calendar
year.
Please note that this chart and each of the three tables assume the reinvestment
of dividends and distributions. Please also keep in mind that how the Fund has
performed in the past does not necessarily indicate how the Fund will perform in
the future.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Year Ended Philadelphia Exchange
(as of) Gold Fund Gold and Silver Index
- ------------------- ----------- ----------------------
<S> <C> <C>
December 31, 1995 4% 10%
December 31, 1996 (6%) (3%)
December 31, 1997 (45%) (36%)
</TABLE>
Year-To-Date Total Returns Table
(for the most-recent fiscal quarter)
<TABLE>
<CAPTION>
Gold Fund XAU Index
--------- ---------
<S> <C> <C>
Year-to-Date
Performance _______% _______%
(1/1/98-9/30/98)
</TABLE>
<TABLE>
<CAPTION>
Highest and Lowest Quarterly Returns
(since Fund inception on March 7, 1994)
Gold Fund XAU Index
---------- ---------
<S> <C> <C>
Highest Return 20.74% _____%
Quarter 1st Qtr. 1996 _______ Qtr. 199__
Lowest Return (32.18)% (______)%
Quarter 4th Qtr. 1997 _______ Qtr. 199__
</TABLE>
<TABLE>
<CAPTION>
Performance Table
Average Annual Total Returns
(for Periods Ended December 31, 1997)
Gold Fund XAU Index
--------- ---------
<S> <C> <C>
One Year (1997) (45.22)% (36.46)%
Three Years (1995-1997) (18.87)% (12.13)%
</TABLE>
4
<PAGE>
FEES and EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees 0.70%
Other Expenses 1.00%
-----
Total Annual Fund Operating Expenses 1.70%
-----
If your monthly account balance per Fund averages $500 or less due to
redemptions you may be charged a $5 fee.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated below and then redeem all of your shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$ 173 $ 536 $ 923 $ 2,009
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES, and RELATED RISKS
Fund Investment Objective and Goals
The Gold Fund seeks long-term capital appreciation. To pursue this goal, the
Fund invests in the stocks of companies engaged in gold and other precious
metals activities. Other precious metals include silver, platinum, and
palladium, and also diamonds and other precious minerals, as well as silver or
other precious metal bullion and coins. Precious metal activities include
mining, exploration, fabrication, processing, marketing, and distribution. Also
included are companies dealing or investing in gold and operating companies
principally engaged in financing, managing, controlling, or operating companies
engaged in these activities. The Fund may also invest in warrants, preferred
stock, and convertible debt securities, as well as bullion, coins and precious
metals, futures contacts, and options.
The Fund does not invest for income.
Principal Fund Investment Strategies
The Fund invests mainly in the common stock of U.S. and foreign gold and
precious metal-related companies. At least 65% of the total assets of the Fund
are normally invested in the stock of companies engaged in these activities. The
Fund may also purchase U.S. Government securities and enter into repurchase
agreements.
5
<PAGE>
In selecting stocks, we look for companies that have: (i) steady growth in both
sales and earnings; (ii) extensive ore bodies and efficient mining operations
(where appropriate); and (iii) low melting and refinery costs with adequate
capital to continue to maintain and expand operations.
Principal Risks of Investing In the Gold Fund
As with any stock-oriented fund, the value of your investment will rise or fall
depending on the performance of individual securities as well as stock market
movements. The stocks of precious metal-related companies carry higher risks
than the stocks of other companies, in particular the risk of wide price
movements due to a variety of economic and political factors, including:
o changes in inflation or in expectations regarding inflation in
various countries
o the availability of supplies of precious metals and minerals
o changes in industrial and commercial demand
o metal and mineral sales by governments, central banks, or
international agencies
o investment speculation
o monetary and other economic policies of various governments
o governmental restrictions on the private ownership of certain
precious metals and minerals
A Review of Risk Considerations
Risk In General
The risks of a fund are usually defined by the fund's individual securities,
overall portfolio, and investment tactics. Over longer periods of time, stocks
have been among the most successful investments available to the public.
Nevertheless, stocks do fluctuate in price. Accordingly, there is a risk you
could lose as well as make money by investing in the Cappiello-Rushmore Gold
Fund. As with any fund, there is no guarantee that the performance of the Gold
Fund will be positive over any period of time, either short term or long term.
Primary Risks
Set forth below are the primary, broad-based risks that the Fund may encounter:
Fund Risk -- The possibility that the Fund's performance during a
specific period may not meet or exceed that of the market as a whole.
Sector Risk -- The risk that the economic sector in which the Fund may
focus its investments will underperform the market as a whole. To the extent
that the Fund's investments are concentrated in issuers conducting business in
the same economic sector, the Fund is subject to the risks of investing in that
sector, including legislative or regulatory changes, adverse market conditions,
and/or increased competition.
Market Risk -- The possibility that stock prices in general will
decline over short, or even extended, periods of time. Stock markets tend to be
cyclical, with periods when stock prices generally rise and periods when stock
prices generally decline. Investors have noticed that when the stock market
surges up, many stocks post higher prices. On the other hand, when the stock
market falls sharply, many common stocks will drop even more sharply. A change
in market psychology can cause a security's price to decline irrespective of any
truly fundamental change in the company itself.
6
<PAGE>
Interest Rate Risk -- The risk of a rise in interest rates that usually
depresses the prices of fixed-income type securities and often of equities as
well. In the short run, high interest rates reduce interest-sensitive investment
spending. Interest rate uncertainty is related to various factors. Among these
factors are swings in money growth, uncertainty about the policies of the
Federal Reserve Board, and inflationary expectations.
Foreign Company Risks -- Investments in foreign securities involve
additional risks, such as changes in currency exchange rates, inadequate
disclosure of company information, and political instability. Some additional
significant risks associated with investing in foreign companies include:
o Volatility -- Investments in securities of foreign companies can
be more volatile than investments in U.S. companies. Diplomatic,
political, or economic developments could affect investments in
foreign companies.
o Regulatory Environment -- Foreign companies generally are not
subject to uniform accounting, auditing, and financial reporting
standards comparable to those applicable to U.S. domestic
companies. Foreign issuers may be subject to different
accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic issuers. There is generally less
government regulation of listed companies abroad than in the
United States.
Leveraging Risk -- Leveraging activities include, among other things,
borrowing and the use of options and futures contracts. The risks associated
with leveraging activities include:
o The success of a leveraging strategy may depend on an ability
to predict movements in the prices of individual securities,
fluctuations in markets, and movements in interest rates.
o Leveraging may result in the Fund experiencing losses over
certain ranges in the market that exceed losses experienced by
a non-leveraged fund.
o There may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and
the prices of futures contracts and options on futures
contracts.
o Although the Fund will purchase only exchange-traded futures
contracts and options, due to market conditions there may not
be a liquid secondary market for a futures contract or an
option. As a result, the Fund may be unable to close out its
futures or options contracts at a time which is advantageous
to the Fund.
o Trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in
futures contracts and options.
Secondary Risks
In addition to the primary risks set forth above, as well as individual company
risks, the Fund, to varying degrees, also may be subject to the following types
of secondary risks:
Event Risk -- The possibility that corporate securities may suffer
substantial declines in market value due to corporate restructurings. While
event risk may be high for certain corporate securities held by the Fund, event
risk in the aggregate should be low because of the Fund's varied holdings.
7
<PAGE>
Small-Issuer Risk -- Small- and medium-capitalization companies may be
more vulnerable than larger, more-established organizations to adverse business
or economic developments. In particular, small-capitalization companies may have
limited product lines, markets, and financial resources, and also may be
dependent upon a relatively-small management group. These securities may be
traded over-the-counter or listed on an exchange and may not pay dividends.
Money Market Investment Risk -- Under adverse market conditions, the
Fund could invest some of its assets in money market securities. Although the
Fund's objective would be to attempt to avoid losses, this defensive tactic, if
employed in a significant way, could have the effect of reducing the benefit
from any upswing in the market.
MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE
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.
The factors that materially affected performance of the Gold Fund during the
fiscal year ended June 30, 1998 were:
o 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
o The sale and possibilities of future sales of gold bullion by
several central banks including Australia (sale) and Switzerland
(possible reduction of gold as backing for the Swiss Franc)
o European Monetary Union (EMU) limited gold backing of new
currency and placed no restrictions on future gold reserves
o The benign rate of inflation both in the U.S. and abroad,
particularly Europe
o 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
o BRE-X Scandal was a continuing demoralizing event
o Inability to raise capital forced marginal companies to abandon
projects or close properties o Foreign currency weakness served
to limit interest in precious metals
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 (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, as follows:
8
<PAGE>
o The new European Central Bank may place a moratorium (or limit)
on the sale of gold by its member nations
o Asian stability may develop which could weaken the dollar versus
the yen and other currencies leading to a more attractive gold
price
o Inflation may become a larger force and a fear than in the past
several years o 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
We believe that 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. 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 focusing on general market trends. Forecasting 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.
Performance Comparison
Assuming a $10,000 initial investment, the following graph compares the Fund's
total returns to the performance of the Philadelphia Exchange Gold and Silver
Index since the Fund began operating on March 7, 1994. Please remember that past
performance does not necessarily reflect how the Fund may perform in the future.
9
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Acccount Value
Total Return Gold Philadelphia Exchange
(as of) Fund Gold and Silver Index
- ------------------------ --------------- ----------------------------------
<S> <C> <C>
March 7, 1994 $10,000 $10,000
- ------------------------ --------------- ----------------------------------
June 30, 1994 $ 9,520 $ 9,560
- ------------------------ --------------- ----------------------------------
June 30, 1995 $ 9,890 $ 9,970
- ------------------------ --------------- ----------------------------------
June 30, 1996 $ 9,930 $10,266
- ------------------------ --------------- ----------------------------------
June 30, 1997 $ 7,020 $ 7,914
- ------------------------ --------------- ----------------------------------
June 30, 1998 $ 4,660 $ 5,937
- ------------------------ --------------- ----------------------------------
</TABLE>
Average Annual Total Returns as of June 30, 1998
One Year (33.62)%
Since Inception (16.21)%
SHAREHOLDER INFORMATION
How to Invest In the Fund
Facts To Know Before You Invest:
o The minimum initial investment in is $2,500
o Retirement accounts may be opened with a $500 minimum investment
o There are no minimum amounts for subsequent investments
o There are no sales charges
o The Funds reserve the right to reject any purchase order o All shares
are electronically recorded; certificated shares are not available
o A $10 fee may be charged for items returned for insufficient or
uncollectible funds
Purchasing Shares:
By Mail
Complete an application and make a check payable to "Cappiello-Rushmore
Trust." Send your completed and signed application and check drawn on a
U.S. bank to:
Cappiello-Rushmore Trust
4922 Fairmont Avenue
Bethesda, Maryland 208l4
By Bank Wire
Speak to the branch manager of your bank. Request a transfer of federal
funds to Rushmore Trust and Savings, FSB, instructing your bank to wire
transfer the money before 4:00 P.M., Eastern Time, to:
10
<PAGE>
Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing # 0550-71084
Account # 029385770
Specify the Fund name, your account number (if assigned), and the name(s)
in which the account is registered.
After instructing your bank to transfer federal funds, you must telephone
Shareholder Services at (800) 622-1386 or (301) 657-1510 between 8:30 A.M.
and 4:00 P.M., Eastern Time, and tell us the amount you transferred and the
name of the bank sending the transfer. Your bank may charge a fee for such
services. Remember that it is important to complete the wire transfer
before 4:00 P.M., Eastern Time.
Through Brokers
You may invest in the Fund by purchasing shares through registered
broker-dealers, banks, or other financial institutions that purchase
securities for their customers. Please note that these third parties may
charge a fee for their services.
How To Redeem Your Investment
Redeeming Shares:
By Telephone (1-800-622-1386)
As a Fund shareholder, you will automatically receive telephone redemption
privileges. If you choose to redeem your investment by telephone, please
contact Shareholder Services at 1-800-622-1386 between the hours of 8:30
A.M. and 4:30 P.M., Eastern Time. For your protection, we will take
measures to verify your identity by requiring some form of personal
identification prior to acting on telephone instructions and may also
record telephone transactions. A written confirmation will be mailed to you
within five business days after your redemption. Please note that we may
terminate or modify telephone redemption privileges upon 60 days notice.
By Mail or Fax
Mail your instructions Fax your instructions
for redemption to: for redemption to:
Rushmore Trust and Savings, FSB (301) 657-1520
4922 Fairmont Avenue Attn: Shareholder Services
Bethesda, MD 20814
Attn: Shareholder Services
Include the following information in your redemption request:
o the name of the Fund and account number you are redeeming from
o your name(s) and address as it appears on your account
o the dollar amount or number of shares you wish to redeem
o your signature(s) as it appears on your account
o a daytime telephone number
11
<PAGE>
Additional Information You Should Know When You Redeem
There are no fees charged for redemptions.
o You may receive redemption proceeds by bank wire, check, or
through the Automated Clearing House System (ACH). When the amount
to be redeemed is at least $5,000, we will, upon instruction, wire
transfer the amount to your commercial bank or brokerage account
specified in your account application. For amounts less than
$5,000, you may have redemption proceeds deposited directly into
an account specified on the account application or request that a
redemption check be delivered by mail to your address of record.
o If you request payment of redemptions to a third party or to a
location other than an address on record, the request must be in
writing and your signature must be guaranteed by an eligible
institution (eligible institutions generally include banking
institutions, securities exchanges, associations, agencies or
broker/dealers, and "STAMP" program participants).
o Normally, payment for all shares redeemed will be issued within
one business day. However, withdrawal requests on investments that
have been made by check may be delayed up to ten calendar days
following the investment or until the check clears, whichever
occurs first. This delay is necessary to assure us that
investments made by check are good funds. You will receive
redemption proceeds promptly upon confirmation of receipt of good
funds.
o If your monthly Fund account balance averages $500 or less due to
redemptions, you may be charged a $5 fee. The fee will not be
imposed on tax-sheltered retirement plans or accounts established
under the Uniform Gifts or Transfers to Minors Acts. Additionally,
we reserve the right to redeem involuntarily those accounts which
fall below $500 after providing 60 days written notice.
o The right of redemption may be suspended, or the date of payment
postponed, during the following periods: (a) periods during which
the New York Stock Exchange ("NYSE") is closed (other than
customary weekend or holiday closings); (b) periods when trading
on the NYSE is restricted, or an emergency exists, as determined
by the Securities and Exchange Commission ("SEC"), so that
disposal of the Fund's investments for determination of net asset
value is not reasonably practicable; or (c) for such other periods
as the SEC, by order, may permit for protection of the Fund's
investors.
ADDITIONAL INFORMATION ABOUT THE FUND
Exchanging Fund Shares
You may exchange shares of one Cappiello-Rushmore Fund for shares of another, or
may choose to exchange, without cost, Cappiello-Rushmore Fund shares for shares
of any of the following Rushmore Funds: Fund for Government Investors, Fund for
Tax-Free Investors, Inc., The Rushmore Fund, Inc., or American Gas Index Fund,
Inc. The registration for both accounts must be identical, and you should obtain
a current prospectus for the fund into which you are exchanging by calling
1-800-343-3355. Exchanges will be effected at the respective net asset values of
the Funds involved as next determined after receipt of the exchange request. The
Fund may change or cancel their exchange policies at any time, upon 60 days'
notice to shareholders.
12
<PAGE>
Effective immediately, the Cappiello-Rushmore Gold Fund no longer will accept
purchase orders for new shares, and Gold Fund shares are no longer available
through the Trust's exchange privilege. Trust shareholders may continue to
exchange their Gold Fund shares for shares of other Rushmore Funds, including
shares of the three Funds in the Cappiello-Rushmore Trust other than the Gold
Fund, in accordance with the terms of the Trust's exchange privilege.
Pricing of Fund Shares
The price of the Fund's shares on any given day is the Fund's net asset value
per share. This figure is computed by dividing the total market value of the
Fund's investments and other assets, less any liabilities, by the number of Fund
shares outstanding. The net asset value per share of the Fund is determined as
of 4:00 P.M., Eastern Time, on days when the NYSE is open for business. Orders
accepted by the Trust directly or by an authorized third party will be priced at
the Fund's net asset values next computed after orders are received. This means
that if you place a purchase or redemption order after 4:00 P.M., Eastern Time,
this order will be effected at the next calculation of net asset value, normally
4:00 P.M. the next business day.
The Fund values its portfolio securities based on the market value of these
securities. Each security held by the Fund, and which is listed on a securities
exchange, is valued at the last quoted sale price on the NYSE and other major
exchanges for a given day. Price information on each listed security is taken
from the exchange where the security is primarily traded. Over-the-counter
securities are valued at their last sales price. Options and futures contracts
are valued at the last sales price as of the close of trading on the applicable
exchanges. Gold and other precious metals are valued daily at fair market value,
based upon price quotations in common use. Unlisted securities for which market
quotations are readily available are valued at the closing sales prices. The
value of assets for which no quotations are readily available (including any
restricted securities) are valued at fair value in good faith by the Board of
Trustees or at the direction of the Trustees.
Dividends and Distributions
All dividends and capital gain distributions of the Fund will be reinvested in
additional Fund shares (including fractional shares where necessary) at net
asset value, unless you elect on your application form or in writing, not less
than five full business days prior to the record date for a particular dividend
or distribution, to receive such dividend or distribution in cash. If you elect
to receive distributions in cash, your election will be effective until you give
other written instructions.
Although the timing and amount of all dividends and distributions are subject to
the discretion of the Board of Trustees, the Fund intends to distribute all net
investment income and net capital gains annually in December.
Tax Consequences of Investing In the Fund
Taxability of Distributions
The Fund intends to meet the requirements for being a tax-qualified regulated
investment company. As long as the Fund meets these requirements, the Fund pays
no federal income tax on the earnings distributed to shareholders. The Fund
intends to distribute all of its earnings to its shareholders. Dividends and
capital gains distributions you receive, whether reinvested or taken as cash,
are generally considered taxable to you as ordinary income or as capital gains
income. The Form 1099 that is mailed to you each January details your dividends
and their federal tax category. You should verify your tax liability with your
tax professional.
13
<PAGE>
Taxability of Transactions
Any time you sell or exchange shares of the Fund, this transaction is considered
a taxable event for you. For example, if you exchange shares of the Gold Fund
for shares of another Cappiello-Rushmore Fund, the transaction would be treated
as a sale. Consequently, any gain resulting from the transaction would be
subject to federal income tax.
MANAGEMENT, ORGANIZATION,
and CAPITAL STRUCTURE
Investment Adviser
McCullough, Andrews & Cappiello, Inc.
Main Office East Coast Office
Suite 4250 Suite 250
101 California Street 10751 Falls Road
San Francisco, CA 94111 Lutherville, MD
21093
McCullough, Andrews & Cappiello, Inc. (the "Adviser") has served as the Fund's
investment adviser since its inception on March 7, 1994. For the advisory
services performed, the Adviser received 0.70% of the average net assets of the
Fund for the fiscal year ended June 30, 1998.
Portfolio Manager
David H. Andrews, C.F.A., is the portfolio manager for the Fund. Mr. Andrews is
the Vice Chairman the Adviser and has managed the Fund since its inception. Mr.
Andrews has been in the securities business for more than forty years and is a
Chartered Financial Analyst (C.F.A.) and past President of the Security Analysts
of San Francisco. He is a graduate of Harvard College and the Stanford Graduate
School of Business.
Year 2000 Preparations
The day-to-day operations of the Trust are dependent upon the Trust's
service providers, principally the Adviser, Money Managemetn Associates,
Rushmore Trust and Savings, FSB, and Rushmore Services, Inc. (collectively, the
"Servicers"), and upon the smooth functioning of the computer systems that they
utilize. Many computer systems currently cannot properly recognize or process
date-sensitive information relating to the year 2000 and beyond. Like other
mutual funds and financial and business organizations around the world, the
Trust, therefore, could be adversely affected if the computer systems used by
these Servicers, and their vendors, do not properly process and calculate
date-related information and data on and after January 1, 2000. The Servicers
have been evaluating the impact that the year 2000 issue may have on the
computer systems that they utilize and are making appropriate modifications to
these systems in order to assure that they will be prepared for the year 2000.
The Trust and the Servicers expect that any further modifications to their
computer systems necessary to address the year 2000 issue will be made and
tested in a timely manner. The Servicers also are working with their outside
vendors, and other persons whose systems are linked to those of the Trust and
the Servicers, to obtain satisfactory assurances regarding the year 2000 issue.
The costs of this systems remediation will not be paid directly by the Trust.
Inadequate remediation could have an adverse effect on the Trust's operations,
including pricing and securities trading and settlement, and the provision of
shareholder services. Although, at this time, there can be no assurance that the
remedial action taken by the Servicers will be sufficient or timely, the
Servicers do not anticipate that the transition to the 21st century will have a
material impact on the ability of the Servicers to continue to service the Trust
at current levels.
14
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance since it commenced operations in 1994. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that you would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, is included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
For the
Period
For the Year Ended
Ended June 30, June 30,
-------------------------------------------------- ---------
1998 1997 1996 1995 1994*
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value--Beginning of Period............ $ 7.02 $ 9.93 $ 9.89 $ 9.52 $ 10.00
--------
Income from Investment Operations:
Net Investment Loss......................... (0.05) (0.08) (0.06) (0.05) (0.01)
Net Realized and Unrealized Gain
(Loss) on Securities...................... (2.31) (2.83) 0.10 0.42 (0.47)
------- ------- ------ ----- ------
Total from Investment Operations.......... (2.36) (2.91) 0.04 0.37 (0.48)
--------- ------- ------ ----- ------
Less Distributions:
Dividends (from net investment income) ---- -- -- -- --
Distributions (from capital gains) -- -- -- -- --
------- ------- ------ ----- -----
Total Distributions to Shareholders....... -- -- -- -- --
------- ------- ------ ----- ------
Net Asset Value--End of Period................ $ 4.66 $ 7.02 $ 9.93 $ 9.89 $ 9.52
============= ============= =============== ============= ================
Total Investment Return........................ (33.62)% (29.41) % 0.40 % 3.89 % (4.80) %A
Ratios and Supplemental Data:
Net Assets--End of Period (000s omitted)..... $ 2,187 $3,409 $6,122 $6,796 $6,395
Ratio of Expenses to Average Net Assets...... 1.70% 1.70 % 1.70 % 1.70 % 1.68 % B
Ratio of Net Loss to Average Net Assets...... (0.74)% (0.76) % (0.59) % (0.51) % (0.25) % B
Portfolio Turnover Rate...................... 56.49% 108.47 % 59.06 % 51.23 % 22.85 %
</TABLE>
* The Gold Fund commenced operations on March 7, 1994.
A Total Investment Return for periods of less than one year are not annualized.
B Annualized.
15
<PAGE>
In addition to this prospectus, the following information is available to assist
you in making an investment decision:
Information Available Upon Request Description
Statement of Additional Information A document that includes
additional information about the
Fund.
Annual and Semi-Annual Reports Bi-annual reports that contain
information about the Fund's
investments. These reports
also discuss the market
conditions and investment
strategies that significantly
affected the Fund's
performance during its last
fiscal year.
There are a variety of ways to receive the above information. You may contact
the Cappiello-Rushmore Trust directly by telephone, at 1-800-343-3355, or you
may send a written request to the Trust's offices, at 4922 Fairmont Avenue,
Bethesda, Maryland 20814. Additional information about the Funds can also be
reviewed and copied at the Securities and Exchange Commission's Public Reference
Room in Washington D. C. (for hours of operation please call the Commission at
1-800-SEC-0330). You may also obtain copies of the information by visiting the
Commission's internet site at http://www.sec.gov, or, upon payment of a
duplicating fee, by writing the Public Reference Section of the Commission at
450 Fifth Street, N.W. Washington, D. C. 20549.
Cappiello-Rushmore Trust
Investment Company Act File No. 811-6601
16
<PAGE>
PART B
<PAGE>
CAPPIELLO-RUSHMORE TRUST
Utility Income Fund
Growth Fund
Emerging Growth Fund
Gold Fund
4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 343-3355
(301) 657-1500
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1998
This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the Trust's Prospectuses, each dated November 1, 1998.
Copies of the Prospectuses may be obtained without charge by writing or
telephoning the Trust at the above address or telephone number.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Utility
Income Fund,
Growth Fund,
Page in and
Statement of Page in Emerging
Additional Gold Fund Growth Fund
Information Prospectus Prospectus
------------ ---------- -----------
<S> <C> <C> <C>
Trust Description, Investments, and Risks
Investment Policies
Investment Limitations
Management of the Trust
Control Persons and Principal Holders of
Securities
Investment Advisory and Other Services
Brokerage Allocation and Portfolio Transactions
Taxation of the Funds
Calculation of Performance Data
Financial Statements
</TABLE>
2
<PAGE>
Trust Description, Investments, and Risks
The Cappiello-Rushmore Trust is an open-end, management investment company
organized as a business trust under the laws of Delaware on March 12, 1992. The
following are the investment strategies and risks associated with investing in
the four Cappiello-Rushmore Funds (collectively, the "Funds"), each of which
Funds is diversified under the Investment Company Act of 1940: the Utility
Income Fund, the Growth Fund, the Emerging Growth Fund, and the Gold Fund.
Investment Policies
Repurchase Agreements
What is a Repurchase Agreement?
A repurchase agreement is an agreement where a Fund acquires a money market
instrument from a commercial bank or broker/dealer with the understanding
that the Fund will sell the instrument back at an agreed-upon price and
date (normally, the next business day). Essentially, a repurchase agreement
may be considered a loan backed by securities. The resale price reflects an
agreed-upon interest rate effective for the period the instrument is held
by the Fund. In these transactions, the value of the securities acquired by
the Fund (including accrued interest earned) must be greater than the value
of the repurchase agreement itself. The securities are held by the Fund's
custodian bank until repurchased.
Why Would a Fund Use Repurchase Agreements?
Each Fund may invest in repurchase agreements with commercial banks,
brokers or dealers: (i) for defensive purposes due to market conditions; or
(ii) to generate income from a Fund's excess cash balances.
The Board of Trustees will monitor each Fund's repurchase agreement
transactions and will review the creditworthiness of any party to a
repurchase agreement with the Funds. No more than an aggregate of 10% of a
Fund's assets, at the time of investment, will be invested in repurchase
agreements having maturities longer than seven days.
Risks of Repurchase Agreements
The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligations to repurchase
the underlying security at a time when the value of the security has
declined, the Fund may incur a loss when the security is sold. If the other
party to the agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a court may
determine that the underlying security is collateral for a loan by the Fund
not within the control of the Fund. Consequently, the Fund may not be able
to substantiate its interest in the underlying security and may be deemed
an unsecured creditor of the other party to the agreement. While the
Trust's management acknowledges these risks, it is expected that these
risks can be controlled through monitoring procedures.
3
<PAGE>
Lending of Securities
Each Fund may lend its securities to qualified institutional investors (i.e.,
brokers, dealers, banks or other financial institutions) who need to borrow
securities in order to complete certain transactions, such as covering short
sales, avoiding failures to deliver securities, or completing arbitrage
operations.
Why Would a Fund Lend Its Securities?
By lending its portfolio securities, a Fund attempts to increase its net
investment income through the receipt of interest on the loan. Any gain or
loss in the market price of the securities loaned that might occur during
the term of the loan would be for the account of the Fund.
To lend securities, the following requirements must be met:
1. the borrower must pledge and maintain with the Trust collateral
consisting of cash, a letter of credit issued by a domestic U.S.
bank, or securities issued or guaranteed by the federal
government having at least equal the value of the securities
loaned;
2. the borrower must add to the collateral whenever the price of the
securities loaned rises;
3. the Fund must be able to terminate the loan at any time; and
4. the Fund should receive reasonable interest on the loan (which
may include the Fund's investing any cash collateral in interest
bearing short-term investments), any distribution on the loaned
securities, and any increase in the market value of the loaned
securities.
Risks of Lending
A Fund will enter into securities lending and repurchase transactions only
with parties who meet creditworthiness standards approved by the Fund's
Board of Trustees. In the event of a default or bankruptcy by a seller or
borrower, the Fund will promptly liquidate collateral. However, the
exercise of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale of
collateral on a default of the seller or borrower were less than the
seller's or borrower's obligation, the Fund could suffer a loss.
Investment in Foreign Securities
The Utility Income, Growth, and Emerging Growth Funds may invest up to 20% of
their total assets in securities of foreign issuers which are traded on a
recognized U.S. securities exchange or in dollar denominated American Depository
Receipts ("ADRs").
The Gold Fund has no limit on investment in securities of foreign issuers, but
may not invest more than 20% of its total assets in such securities not traded
on a recognized U.S. securities exchange or in dollar denominated ADRs.
4
<PAGE>
Risks of Investing In Foreign Issuers
Investing in foreign companies involves risks not typically associated with
investing in U.S. companies, including the following risks:
1. There is generally less publicly-available information about
foreign companies compared to reports and ratings that are
published about issuers in the United States.
2. Foreign issuers also are not subject to uniform accounting and
auditing and financial reporting standards, practices, and
requirements comparable to those applicable to United States
issuers.
3. Foreign securities markets are generally not as developed or
as efficient as those in the United States. While growing in
volume, these markets usually have substantially less volume
than the New York Stock Exchange.
4. Securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers.
5. Fixed commissions on foreign exchanges are generally higher
than negotiated commissions on United States exchanges,
although each Fund will endeavor to achieve the most favorable
net results on its portfolio transactions.
6. There is generally less government supervision and regulation
of securities exchanges, brokers, and listed issuers than in
the United States.
7. With respect to certain foreign countries, there is the
possibility of adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of the
Funds, political or social instability, or diplomatic
developments which could affect U.S. investment in those
countries.
8. Individual foreign economies may differ favorable or
unfavorably from the United States' economy in such respects
as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency, and balance
of payments position.
9. The dividends and interest payable in certain foreign
portfolio securities may be subject to foreign withholding
taxes, thus reducing the net amount of income available for
distribution to the Funds' shareholders. A shareholder
otherwise subject to United States federal income taxes may,
subject to certain limitations, be entitled to claim a credit
or deduction for U.S federal income tax purposes for his or
her proportionate share of taxes paid by each of the Funds.
Options Transactions
Purchasing Call and Put Options
The Growth Fund and Utility Income Fund may purchase call options to
protect against anticipated increases in the prices of securities each Fund
wishes to acquire. Alternatively, call options could be purchased for
capital appreciation. Since the premium paid for a call option is typically
a small fraction of the price of the underlying security, a given amount of
money will purchase call options covering a much larger quantity of this
security than could be purchased directly.
5
<PAGE>
By purchasing call options, these Funds could benefit from any significant
increase in the price of the underlying security to a greater extent then
if the Funds invested the same amount in the security directly. However,
because of the extremely high volatility of option premiums, there is a
significant risk of losing the entire premium if the price of the
underlying security does not rise sufficiently, or if this price does not
rise before the option expires.
Conversely, put options could be purchased to protect against anticipated
declines in the market value of either specific portfolio securities or of
a Fund's assets generally. Alternatively, put options could be purchased
for capital appreciation in anticipation of a price decline in the
underlying security. A corresponding increase of put options for capital
risk appreciation involves the same significant risk of loss as described
above for call options.
In any case, the purchase of options for capital appreciation would
increase a Fund's volatility by increasing the impact of changes in the
market price of the underlying securities on the Fund's net asset value.
The Trust does not intend to invest more than 5% of the assets of any Fund
in purchasing put or call options.
Writing Call and Put Options
The Growth Fund, the Utility Income Fund, and the Gold Fund may write
covered call options and secured put options (the Emerging Growth Fund will
not engage in any option transactions).
By writing a call option, a Fund becomes obligated during the term of the
option to deliver the securities underlying the option at the exercise
price if the option is exercised.
By writing a put option, a Fund becomes obligated during the term of the
option to purchase the securities underlying the option at the exercise
price. The Fund will be considered secured in respect to put options the
Fund writes if the Fund maintains on deposit with its custodian bank liquid
high-quality debt securities having a value equal to the exercise value of
the option.
During the term of the option, the writer may be assigned an exercise
notice by the broker-dealer through whom the option was sold. The exercise
notice would require the writer to deliver, in the case of a call, or take
delivery of, in the case of a put, the underlying security against payment
of the exercise price. This obligation terminates upon expiration of the
option, or at the time the seller effects a closing purchase transaction by
purchasing an option covering the same underlying security and having the
same exercise price and expiration date as the option previously sold.
Once an option has been exercised, the writer of the option may not execute
a closing purchase transaction. To secure the obligation to deliver the
underlying security in the case of a call option, the writer of the option
is required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "OCC"),
an institution created to interpose itself between buyers and sellers of
options. The OCC assumes the other side of every purchase and sale
transaction on an exchange and, by doing so, gives its guarantee to the
transaction.
6
<PAGE>
Why Do The Funds Use Call and Put Options?
The principal reason for writing call options on stocks held by the Growth
Fund, the Utility Income Fund, and the Gold Fund is to attempt to realize,
through the receipt of premiums, a greater return than would be realized on
the underlying securities alone. In return for the premium, the call option
writer has given up the opportunity for profit from a price increase in the
underlying security above the exercise price so long as the option remains
open, but retains the risk of loss should the price of the security
decline.
Conversely, the put option writer gains a profit, in the form of the
premium, so long as the price of the underlying security remains above the
exercise price, but assumes an obligation to purchase the underlying
security from the buyer of the put option at the exercise price (even
though the security may fall below the exercise price) at any time during
the option period.
If an option expires, the writer realizes a gain in the amount of the
premium. Such a gain may, in the case of a covered call option, be offset
by a decline in the market value of the underlying security during the
option period. If a call option is exercised, the writer realizes a gain or
loss from the sale of the underlying security. If a put option is
exercised, the writer must fulfill his obligation to purchase the
underlying security at the exercise price, which will usually exceed the
market value of the underlying security.
Futures Contracts on Metals and Related Options - Gold Fund
Why Would the Gold Fund Purchase Futures Contracts on Metals and Related
Options?
The Gold Fund may enter into a metals futures contract or a related option
in order to profit from fluctuations in the price of a metal without
necessarily buying or selling the metal or other portfolio assets. For
example, if the Fund expects gold prices to increase, the Fund might
purchase gold futures contracts in anticipation of the future purchase of
gold or gold-related securities. Such a purchase would have much the same
effect as the Fund actually buying gold. If gold prices increase as
anticipated, the value of the gold futures contracts would increase at
approximately the same rate.
How Are The Contracts Purchased?
No consideration is paid or received by the Gold Fund upon the purchase of
a metals futures contract. Initially, the Fund will be required to deposit
with a broker an "initial margin" amount in cash equivalents, such as U.S.
Government securities or high-grade debt obligations. This initial margin
amount is subject to change by the exchange on which the contract is traded
and brokers may require a higher amount. The initial margin is in the
nature of a performance bond or good faith deposit on the contract and is
returned to the Fund upon termination of the futures contract, assuming
that all of the Fund's contractual obligations have been satisfied.
Subsequent payments to and from the broker (known as "maintenance margin")
will be made daily as the price of the commodity underlying the futures
contract fluctuates, making the Fund's positions in the futures contract
more or less valuable. This process is known as "marking-to-market."
Because the value of an option on a futures contract is fixed at the point
of sale, there are no daily cash payments by the purchaser to reflect
changes in the value of the underlying contract. However, the value of the
option does change daily and that change would be reflected in the net
asset value of the Fund.
7
<PAGE>
Once the daily limit has been reached in a particular contract, no trades
may be made that day at a price beyond that limit. It is possible that
futures contract prices could move to the daily limit for several
consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and subjecting the Gold Fund to
substantial losses. In this event, and in the event of adverse price
movements, the Fund would be required to make daily cash payments of
maintenance margin, and an increase, if any, in the value of the portion of
the portfolio being protected may partially or completely offset losses on
the futures contract. As described above, however, there is no guarantee
that the price of the assets being protected will, in fact, correlate with
the price movements in a futures contract or option, and provide an offset
to losses as intended.
If the Gold Fund's investment adviser wants to protect the Fund against the
possibility of a change in the price of the commodity adversely affecting
the value of the Fund's assets, and prices move in a direction opposite to
that which was anticipated, the Fund will probably lose part or all of the
benefit of the increased value of the assets hedged because of offsetting
losses in the Fund's futures positions. In addition, in such a situation,
if the Fund has insufficient cash, the Fund might have to sell assets to
meet daily maintenance margin requirements at a time when it would be
disadvantageous for the Fund to do so. These sales of assets could be at
increased prices which reflect the change in the value of the underlying
commodity.
Risks of Engaging In Metals Futures Contracts and Related Options
There are several risks in connection with the use of metals futures
contracts and related options. Successful use of futures contracts and
related options by the Gold Fund is subject to the ability of the Fund's
investment adviser to correctly predict movements in the price of the
commodity and other factors affecting markets for the commodity. These
predictions involve skills and techniques that are different from those
generally involved in the management of the Fund. In addition, there can be
no assurance that there will be a correlation between movements in the
price of futures contracts or an option on a futures contract and movements
in the price of the underlying assets.
At any time prior to the expiration of a futures contract or an option on a
futures contract, the Gold Fund may elect to close the position by taking
an opposite position, which will operate to terminate the Fund's existing
position in the contract. Positions in futures contracts and options on
futures contracts may be closed out only on the exchange on which the
futures contracts and related options were entered into (or through a
linked exchange). Although the Gold Fund intends to purchase futures
contracts and related options only if there is an active market for the
contracts or the related options, there is no assurance that an active
market will exist for the contracts or the related options at any
particular time. Most futures exchanges limit the amount of fluctuation
that is permitted in futures contract prices during a single trading day.
Investment Limitations
The following policies cannot be changed without approval of the holders of a
majority of the outstanding shares of each Fund.
Each Fund may not, under any circumstances:
1. change its investment objective;
8
<PAGE>
2. lend money to any person, except: (i) by purchasing a portion of an
issue of short-term debt securities or similar obligations (including
repurchase agreements) which are publicly distributed or customarily
purchased by institutional investors; and (ii) as provided under
"Lending of Securities;"
3. purchase securities on margin or sell securities short except that a
Fund may sell short against the box;
4. borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then only in amounts not exceeding 5% of the
total assets of a Fund, taken at market value;
5. issue senior securities or mortgage, pledge, hypothecate, or otherwise
encumber its assets, except: (i) insofar as any Fund may be deemed to
have issued a senior security by reason of borrowing money in
accordance with restriction (4), above; (ii) that the Fund may issue
senior securities in connection with foreign currency exchange
transactions and transactions in options, futures, options on futures,
and other similar investments; and (iii) as otherwise permitted herein;
6. underwrite the securities of other issuers;
7. invest for the purpose of controlling management of any company;
8. invest its assets in securities of other investment companies except by
purchase in the open market involving only customary broker's
commission or as part of a merger, consolidation, reorganization, or
purchase of assets approved by the portfolio's shareholders; or
9. invest in commodities or purchase real estate, although a Fund may
purchase securities of companies which deal in real estate or interest
therein, except that this shall not prevent the Gold Fund from (i)
trading in futures contracts and options on futures contracts or (ii)
investing in precious metals and precious minerals.
In addition, the Growth and Emerging Growth Funds will not concentrate in any
particular industry.
The following restrictions are not fundamental and may be changed by the Board
of Trustees -- each Fund may not:
1. purchase more than 10% of the outstanding voting securities of any
company;
2. purchase or retain securities of an issuer if those officers and
Trustees of the Trust owning more than 1/2 of 1% of such securities
together own more than 5% of such securities;
3. invest more than 5% of total assets in securities of companies which
have (with predecessor) a record of less than three years' continuous
operation;
4. invest in oil, gas, or mineral leases or exploration or development
programs;
5. purchase or acquire the security of another investment company if
immediately after such purchase or acquisition more than 3% of the
total outstanding stock of such investment company is owned by the
Fund and all affiliated persons of the Fund, unless this purchase or
acquisition is otherwise permitted under the Investment Company Act of
1940;
9
<PAGE>
6. invest more than 5% of the value of the Fund's net assets in warrants
valued at lower of cost or market. Included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be
warrants which are not listed on the New York Stock Exchange or the
American Stock Exchange;
7. purchase restricted securities if the value of the Fund's aggregate
investment will exceed 10% of the Fund's total assets; or
8. purchase or sell real property (including limited partnership
interests, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which
invest in real estate).
The above-mentioned investment limitations are considered at the time investment
securities are purchased.
Management of the Trust
The Trust is governed by a Board of Trustees. The Trustees are responsible for
overseeing the management of the Trust's business affairs and play a vital role
in protecting the interests of Fund shareholders. Among other things, the
Trustees approve and review the Trust's contracts and other arrangements and
monitor Fund performance and operations. The names and addresses of the Trustees
and officers of the Trust, together with information as to their principal
business occupations during the past five years are set forth below. Fees and
expenses for non-interested Trustees will be paid by the Trust:
10
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Address Position Held Principal Occupation(s)
With Trust During Past 5 Years
- -------------------------- ------------------------ ---------------------
<S> <C> <C>
Frank A. Cappiello*, 72 Chairman of the President of McCullough, Andrews & Cappiello, Inc.,
Greenspring Station Board and Trustee the Trust's investment adviser, since 1983.
Suite 250
10751 Falls Road
Lutherville, MD 21093
Daniel L. O'Connor*, 56 President, General Partner of Money Management Associates,
1001 Grand Isle Way Treasurer, and registered investment adviser of the Rushmore Funds,
Palm Beach Gardens, FL 33418 Trustee since 1975. Director, Rushmore Trust and Savings, FSB,
the Trust's transfer agent and custodian. Director on
four Rushmore Fund Boards.
Peter J. DeAngelis, 62 Trustee President of PDA Associates, Inc., a financial consulting
P.O. Box 284 and investment firm, since 1974; President of Dow
Ironia, NJ 07945 Beaters, Inc., a registered investment advisor, since
1977.
Bruce C. Ellis,** 53 Trustee Vice President, LottoPhone, Inc., a telephone state
7108 Heathwood Court lottery service, since September 1991. Director on three
Bethesda, MD 20817 Rushmore Fund Boards.
Jeffrey R. Ellis,** 53 Trustee Vice President, LottoPhone, Inc., a telephone state
513 Kerry Lane lottery service, since September 1993. Director on three
Virginia Beach, VA 23451 Rushmore Fund Boards.
Dr. Peter B. Petersen, 66 Trustee Professor of Management and Organization Theory,
Johns Hopkins University Division Johns Hopkins University since 1979.
of Business and Management
201 North Charles Street
Baltimore, MD 21201-4114
David H. Andrews, CFA*, 69 Vice President Vice Chairman of McCullough, Andrews & Cappiello,
101 California Street Inc., the Trust's investment adviser, since 1991.
San Francisco, CA 94111
Robert F. McCullough, CPA*, 66 Vice President Chairman of McCullough, Andrews & Cappiello, Inc.,
101 California Street the Trust's investment adviser, since 1983.
San Francisco, CA 94111
Timothy N. Coakley, CPA*, 30 Vice President Chief Financial Officer, Rushmore Trust and Savings,
4922 Fairmont Avenue FSB, since 1995. Vice President of four Rushmore
Bethesda, MD 20814 Funds. Formerly Audit Manager, Deloitte & Touche LLP
until 1994.
11
<PAGE>
Edward J. Karpowicz, CPA*, 35 Controller Vice President of Rushmore Trust and Savings, FSB,
4922 Fairmont Avenue since 1997. Controller of four Rushmore Funds.
Bethesda, MD 20814 Treasurer, Bankers Finance Investment Management
Corp., August 1993 to June 1997. Senior Accountant,
Ernst & Young, September 1989 to February 1993.
Stephenie E. Adams*, 29 Secretary Secretary of three Rushmore Funds. Assistant Secretary
4922 Fairmont Avenue of one Rushmore Fund. Manager, Fund Administration
Bethesda, MD 20814 and Marketing, Rushmore Services, Inc., from July 1994
to Present. Regional Sales Coordinator, Media General
Cable, from June 1993 to June 1994.
</TABLE>
* Indicates an "interested" person. An interested person has any one of
several close business or family ties to the Trust, the Trust's investment
adviser, or an affiliated company of the Trust.
** Bruce C. Ellis and Jeffrey R. Ellis are brothers.
The aggregate compensation paid by the Trust to each of its Trustees serving
during the fiscal year ended June 30, 1998, is set forth in the table below:
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits Estimated Annual
Name of Person Compensation Accrued as Part of Benefits Upon
& Position From the Trust Trust's Expenses Retirement
---------- -------------- ---------------- ----------
<S> <C> <C> <C>
Frank A. Cappiello,*
Chairman of the Board of Trustees $0 $0 $0
Daniel L. O'Connor,*
President, Treasurer, and Trustee $0 $0 $0
Peter J. DeAngelis,
Trustee $2,000 $0 $0
Bruce C. Ellis,
Trustee $2,000 $0 $0
Jeffrey R. Ellis,
Trustee $2,000 $0 $0
Dr. Peter B. Peterson,
Trustee $2,000 $0 $0
</TABLE>
* Indicates an "interested" person. An interested person has any one
of several close business or family ties to the Trust, the Trust's
adviser, or an affiliated company of the Trust.
12
<PAGE>
Control Persons and Principal Holders of Securities
As of August 14, 1998, the following persons were the only persons who were
record owners or, to the knowledge of the Trust, beneficial owners of 5% or more
of the shares of the Funds.
<TABLE>
<CAPTION>
Fund Shares Controlling Party or % Owned
Outstanding Principal Holder of Securities
Address
- ----------------------------- -------------- --------------------------------------- -----------
<S> <C> <C> <C>
Utility Income Fund 708,515.770 Charles Schwab & Co., Inc. 37.475%1/
101 California Street
San Francisco, CA 94101
Growth Fund 933,208.599 Charles Schwab & Co., Inc. 21.783%1/
101 California Street
San Francisco, CA 94101
Emerging Growth Fund 920,911.991 Charles Schwab & Co., Inc. 31.568%1/
101 California Street
San Francisco, CA 94101
National Financial Services Corporation 6.242%1/
82 Devonshire Street
Boston, MA 02109
Gold Fund 444,970.771 Charles Schwab & Co., Inc. 23.605%1/
101 California Street
San Francisco, CA 94101
National Financial Services Corporation 8.842%1/
82 Devonshire Street
Boston, MA 02109
Harold H. Cleaveland, Jr. 7.412%2/
3435 Westheimer Street
Houston, TX 77027
</TABLE>
1/ Record owner only.
2/ Beneficial owner only.
As of the date of this Statement of Additional Information, the Officers and
Trustees of the Trust, as a group, owned, of record and beneficially, less than
1% of the outstanding shares of each Fund.
13
<PAGE>
Investment Advisory and Other Services
Investment Adviser
The four Funds of the Trust receive investment advisory services from
McCullough, Andrews & Cappiello, Inc. (the "Adviser"), whose principal location
is 101 California Street, Suite 4250, San Francisco, California 94111, and who
has an office at Greenspring Station, Suite 250, 10751 Falls Road, Lutherville,
Maryland 21093. Pursuant to the investment advisory contract between the Trust
and the Adviser, the Growth Fund and the Emerging Growth Fund each pays the
Adviser an investment advisory fee at an annual rate of 0.50% of the net assets
of the respective Fund; the Utility Income Fund pays the Adviser an investment
advisory fee at an annual rate of 0.35% of the net assets of that Fund; and the
Gold Fund pays the Adviser an investment advisory fee at an annual rate of 0.70%
of the net assets of that Fund. The Adviser manages the investment and
reinvestment of the assets of each Fund in accordance with that Fund's
investment objective, policies, and limitations, subject to the general
supervision and control of the Trust's Officers and the Board of Trustees. The
Adviser bears all costs associated with providing these services. For the fiscal
years ended June 30, 1998, 1997, and 1996, the Funds paid the following
investment advisory fees to the Adviser:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Utility Income Fund $ 34,737 $ 38,223 $ 61,055
Growth Fund $130,057 $ 129,484 $ 137,107
Emerging Growth Fund $100,453 $ 151,476 $ 137,207
Gold Fund $ 20,816 $ 34,904 $ 53,459
</TABLE>
The Adviser is owned by its three principals: Robert F. McCullough, C.P.A.,
David H. Andrews, C.F.A., and Frank A. Cappiello. In addition to providing
investment advisory services to the Trust, the Adviser also manages investment
portfolios for employee retirement plans, charitable foundations, endowments,
taxable corporations, and individuals.
Administrator
The Trust has contracted with Money Management Associates (the "Administrator"),
1001 Grand Isle Way, Palm Beach Gardens, Florida 33418, to provide
administrative services to the Trust. Under the administrative services
agreement between the Trust and the Administrator, each of the Growth Fund, the
Emerging Growth Fund, and the Gold Fund pays the Administrator a fee at an
annual rate of 1.00% of the daily net assets of these respective Funds, and the
Utility Income Fund pays the Administrator a fee at an annual rate of 0.70% of
the daily net assets of that Fund. The Administrator is responsible for all
costs of the Funds except for the investment advisory fee, extraordinary legal
expenses, and interest. Specifically, the Administrator pays costs of
registration of the Trust and the Fund shares with the Securities and Exchange
Commission (the "SEC") and the various states, all expenses of dividend and
transfer agent services, outside auditing and legal fees, costs of maintenance
of business trust existence, preparation of prospectuses, including printing and
distribution to existing and potential shareholders, shareholder reports,
shareholder meetings, and portfolio pricing services, and all costs incurred in
providing the custodial services.
For the fiscal years ended June 30, 1998, 1997, and 1996, the Trust paid the
following administrative services fees to the Administrator:
14
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Utility Income Fund $ 69,475 $ 76,447 $ 122,110
Growth Fund $260,115 $ 258,968 $ 274,215
Emerging Growth Fund $200,000 $ 302,952 $ 507,600
Gold Fund $ 29,737 $ 49,863 $ 76,369
</TABLE>
Under a subcontractual agreement, the Administrator has engaged Rushmore Trust
and Savings, FSB ("RTS"), 4922 Fairmont Avenue, Bethesda, Maryland 20814, a
majority-held subsidiary of the Administrator, to provide transfer agency,
dividend disbursing, and other shareholder services to the Trust. Under a
separate subcontractual agreement, the Administrator also has engaged Rushmore
Services, Inc. ("RSI"), 4922 Fairmont Avenue, Bethesda, Maryland 20814, a
wholly-owned subsidiary of the Administrator, to provide administrative services
to the Funds.
Custodian and Independent Public Accountant
RTS is the Trust's custodian and is responsible for safeguarding and controlling
the Trust's cash and securities, handling the securities, and collecting
interest on the Funds' investments.
Independent certified public accountants, Deloitte & Touche LLP, 1900 M Street,
N.W., Washington, D.C. 20036- 3564, are responsible for auditing the annual
financial statements of the Trust.
Brokerage Allocation and Portfolio Transactions
Orders placed for the Funds are either agency transactions with a negotiated
commission or principal transactions at a net transaction price. Underwritings
have a fixed commission.
The Adviser is responsible for placing all orders for the purchase and sale of
portfolio securities for the Funds. The Adviser, in effecting purchases and
sales for the Funds, seeks out the best price and market for the execution of
each order. The Adviser has no formula for the distribution of the brokerage
business, and the Adviser's intention is to place orders for the purchase and
sale of securities with the primary objective of obtaining the most favorable
overall results for the Funds. The cost of securities transactions for the Funds
will consist primarily of brokerage commissions or dealer or underwriter
spreads. Bonds and money market instruments are generally traded on a net basis
and do not normally involve either brokerage commissions or transfer taxes.
Occasionally, securities may be purchased directly from issuer. For securities
traded primarily in the over-the-counter market, the Adviser, where possible,
will deal directly with dealers who make a market in the securities unless
better prices and execution are available elsewhere. These dealers usually act
as principals for their own account.
15
<PAGE>
In selecting brokers or dealers through whom to effect transactions, the Adviser
will give consideration to a number of factors, including price, dealer spread
or commission, if any, the reliability, integrity, and financial condition of
the broker-dealer, the size of the transaction, and the difficulty of execution.
Consideration of these factors by the Adviser, either in terms of a particular
transaction or the Adviser's overall responsibilities with respect to the Funds
and any other accounts managed by the Adviser, could result in a Fund paying a
commission or spread on a transaction that is in excess of the amount of
commission or spread another broker-dealer might have charged for executing the
same transaction. In selecting brokers and dealers, the Adviser also will give
consideration to the value and quality of any research, statistical, quotation,
or valuation services provided by the broker or dealer. In placing a purchase or
sale order, the Adviser may use a broker whose commission in effecting the
transaction is higher than that of some other broker if the Adviser determines
in good faith that the amount of higher commission is reasonable in relation to
the value of the brokerage and research services provided by this broker, viewed
in terms of either the particular transaction or the Adviser's overall
responsibilities with respect to the Funds and any other accounts managed by the
Adviser. Brokerage and research services provided by brokers and dealers to the
Adviser (in addition to the Adviser's own research efforts) include advice,
either directly or through publications or writings, as to the value of
securities, the advisability of purchasing or selling securities, the
availability of securities or purchasers of sellers of securities, and analyses
and reports concerning issuers, industries, securities, economic factors and
trends, and portfolio strategy, as well as technical market commentary, economic
commentary and forecasts, and additional company research. When placing orders
for a Fund, the Adviser is not authorized to pay a commission in excess of that
which another broker might have charged for doing the same transactions solely
on account of the receipt of research services. A higher-cost broker-dealer will
not be selected, however, solely on the basis of sale volume, but rather will be
selected in accordance with the criteria set forth above.
To the extent research services are used by the Adviser in rendering investment
advice to the Funds, these services would tend to reduce the Adviser's expenses.
The Adviser, however, does not believe that an exact dollar value can be
assigned to these services. Research services received by the Adviser from
brokers or dealers executing transactions for the Funds will be available and
utilized also for the benefit of other portfolios managed by the Adviser.
Similarly, orders for the Adviser's non-Fund accounts may result in research
utilized by the Funds.
The Adviser manages a number of accounts other than the Funds. Although
investment recommendations or determinations for each Fund will be made by the
Adviser independently from the investment recommendations and determinations
made by the Adviser for any other account, investments deemed appropriate for a
Fund by the Adviser may also be deemed appropriate by the Adviser for other
accounts, so that the same security may be purchased or sold at or about the
same time for both a Fund and other accounts. In these circumstances, the
Adviser may determine that orders for the purchase or sale of the same security
for a Fund and one or more other accounts should be combined, in which event the
transactions will be priced and allocated in a manner deemed by the Adviser to
be equitable and in the best interests of the Fund and such other accounts.
While, in some instances, combined orders could adversely affect the price or
volume of a security, the Trust believes that its participation in these
transactions on balance will produce better overall results for the Funds.
<TABLE>
<CAPTION>
Brokerage Commissions Paid
(for the Period Ended June 30)
Utility Income Emerging Growth
Fund Growth Fund Fund Gold Fund
---- ----------- ---- ---------
<S> <C> <C> <C> <C>
1998 $ 8,580 $50,162 $ 66,419 $15,770
1997 $16,832 $72,861 $ 70,456 $41,300
1996 $41,140 $77,043 $118,798 $42,749
</TABLE>
16
<PAGE>
Each of the Fund's assets have decreased each year since 1996. Therefore, the
above trade commissions (which are predominantly based on asset size) have also
decreased.
Taxation of the Funds
Each Fund currently is qualified, and will seek to continue to qualify, as a
regulated investment company (a "RIC") under Subchapter M of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"). As a RIC, each Fund will not be
subject to federal income taxes on the net investment income and capital gains
that the Fund distributes to its shareholders. The distribution of net
investment income and capital gains by a Fund to a Fund shareholder will be
taxable to the shareholder regardless of whether the shareholder elects to
receive these distributions in cash or in additional shares. Distributions
reported to a Fund shareholder as long-term capital gains shall be taxable as
such, regardless of how long the shareholder has owned the shares. Shareholders
of a Fund will be notified annually by the Trust as to the federal tax status of
all distributions made by the Fund. Distributions may be subject to state and
local taxes.
If a Fund fails to qualify as a RIC for any taxable year, the Fund would be
taxed in the same manner as an ordinary corporation. In that event, the Fund
would not be entitled to deduct the distributions which the Fund had paid to
shareholders and, thus, would incur a corporate income tax liability on all of
the Fund's taxable income whether or not distributed. The imposition of
corporate income taxes on the Fund would directly reduce the return a
shareholder would receive from an investment in the Fund.
Calculation of Performance Data
Average Annual Total Return Quotations
For purposes of quoting and comparing the performance of the Funds to that of
other mutual funds and to other relevant market indices in advertisements or in
reports to shareholders, performance may be stated in terms of total return.
Under the rules of the Securities and Exchange Commission (the "SEC Rules"),
Fund advertising stating performance must include total return quotes calculated
according to the following formula:
P (1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV= ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1-, 5-, or
10-year periods at the end of the 1-, 5-, or 10-year
periods (or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication, and will cover 1, 5, and
10 year periods or a shorter period dating from the effectiveness of the
Registration Statement of the Funds. In calculating the ending redeemable value,
all dividends and distributions by the Funds are assumed to have been reinvested
at net asset value as described in the Prospectuses for the Funds on the
reinvestment dates during the period. Total return, or "T" in the formula above,
is computed by finding the average annual compounded rates of return over the 1,
5, and 10 year periods (or fractional portion thereof) that would equate the
initial amount invested to the ending redeemable value.
17
<PAGE>
The Funds, from time to time, also may include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Funds with other
measures of investment return. For example, in comparing the total return of the
Funds with data published by Lipper Analytical Services, Inc., or with the
performance of the Standard & Poor's 500 Stock IndexTM, the Philadelphia Stock
Exchange Gold and Silver Index, or the Dow Jones Industrial Average, as
appropriate, the Funds calculate their aggregate total return for the specified
periods of time by assuming the investment of $10,000 in a Fund's shares and
assuming the reinvestment of each dividend or other distribution at net asset
value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. Such alternative total return
information will be given no greater prominence in such advertising than the
information prescribed under SEC Rules.
The average annual compounded rates of return, assuming the reinvestment of all
dividends and distributions, for each Cappiello-Rushmore Fund, as of June 30,
1998, are as follows:
<TABLE>
<CAPTION>
1 Year 5 Years Since Inception
------ ------- ---------------
<S> <C> <C> <C>
Growth Fund 20.72 % 17.48% 16.32 %
Emerging Growth Fund (0.14)% 8.34% 9.60 %
Utility Income Fund 25.55 % 8.35% 9.04 %
Gold Fund (33.62)% n/a (16.21)%
</TABLE>
Computation of Yield
In addition to the total return quotations discussed above, each of the Funds
also may advertise its yield based on a thirty-day (or one month) period ended
on the date of the most-recent balance sheet included in the Trust's
Registration Statement, computed by dividing the net investment income per share
of a fund earned during the period by the maximum offering price per Fund share
on the last day of the period, according to the following formula:
YIELD = 2[(a-b/cd+1)6-1]
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends; and
d = the maximum offering price per share on the last day of
the period.
Financial Statements
Copies of the Trust's audited financial statements for the fiscal year ended
June 30, 1998, may be obtained without charge by contacting the Trust at 4922
Fairmont Avenue, Bethesda, Maryland 20814, or by telephoning the Trust at (800)
622-1386 or (301) 657-1510.
19
<PAGE>
Cappiello-Rushmore Trust
Audited Financial Statements,
for the Fiscal Year Ended June 30, 1998
<PAGE>
<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
<PAGE>
CAPPIELLO-RUSHMORE TRUST
- --------------------------------------------------------------------------------
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
<PAGE>
PART C
<PAGE>
PART C: OTHER INFORMATION
Cappiello-Rushmore Trust
Item 23. Exhibits
(a)(1) Declaration of Trust of the Cappiello-Rushmore Trust
(the "Trust" or the "Registrant")1/
(a)(2) Declaration of Trust Amendment1/
(b) Bylaws of the Trust1/
(c) Instruments Defining Rights of Security Holders of the Trust2/
(d) Management Contract between the Trust and McCullough, Andrews
& Cappiello, Inc., as amended1/
(e) Underwriting Contracts2/
(f) Bonus or Profit Sharing Contracts2/
(g)(1) Administrative Services Agreement between the Trust and Money
Management Associates, as amended1/
(g)(2) Custody Agreement between the Trust and Rushmore Trust and Savings,
FSB, as amended1/
(h)(1) Administrative Services Agreement between Money Management Associates
and Rushmore Trust and Savings, FSB, as amended1/
(h)(2) Administrative Services Agreement between Money Management Associates
and Rushmore Services, Inc. as amended1/
(i) Opinion of Jorden Schulte & Burchette regarding the legality of
the securities of the Trust being registered1/
(j) Consent of Deloitte & Touche LLP, independent public accountants
for the Trust1/
(k) Omitted Financial Statements2/
(l) Initial Capital Agreements 2/
(m) Rule 12b-1 Plan2/
(n) Financial Data Schedules for the Trust1/
(o) Rule 18f-3 Plan2/
(p) Powers of Attorney3/
1/ Filed herewith.
2/ None.
3/ Incorporated by reference to Post-Effective Amendment No. 6 to this
Registration Statement, filed on October 25, 1996, and Post-Effective
Amendment No. 7 to this Registration Statement, filed on October 29, 1997.
1
<PAGE>
Item 24. Persons Controlled By or Under Common Control With the Trust
The following persons may be deemed to be directly or indirectly controlled by
or under common control with the Trust, a Delaware business trust:
<TABLE>
<CAPTION>
State of Organization Percentage of Voting Securities Owned
and Relationship and/or Controlled By the
(if any) to Controlling Person or
Company
- ------------------------ ---------------------------------------- ------------------------------------------------
<S> <C> <C>
Money Management a District of Columbia limited partnership 100% of the voting authority in MMA is held by
Associates ("MMA" or registered transfer agent, registered Daniel L. O'Connor in Daniel L. O'Connor's
the "Administrator") investment adviser, and the Trust's capacity as the sole general partner of MMA.
administrator
Rushmore Trust and a Maryland corporation, and a registered 72.2% of the voting securities of RTS is held by
Savings FSB ("RTS" or transfer agent, which provides transfer MMA, and 27.6% of the voting securities of RTS
the "Custodian") agency, dividend disbursing, and is held by Daniel L. O'Connor, the sole general
shareholder services to the Trust, and partner of MMA.
serves as the Trust's custodian
Rushmore Services, Inc. a Maryland corporation, and a registered 100% of the voting securities of RSI is owned by
("RSI") transfer agent, which provides certain fund MMA.
services to the Trust
The Rushmore Fund, a Maryland corporation, and a registered
Inc. investment company, which is advised by
MMA
Fund For Government a Delaware business trust, and a registered
Investors investment company, which is advised by
MMA
Fund For Tax-Free a Maryland corporation, and a registered
Investors, Inc. investment company, which is advised by
MMA
American Gas Index a Maryland corporation, and a registered
Fund, Inc. investment company, which is advised by
MMA
</TABLE>
2
<PAGE>
Item 25. Indemnification
Pursuant to Delaware Code Ann. title 12 ss.3817, a Delaware business trust may
provide in its governing instrument for the indemnification of its officers and
trustees from and against any and all claims and demands whatsoever. Article X,
Section 10.02, of the Declaration of Trust states that the Trust shall indemnify
any present or former trustee or officer to the fullest extent permitted by law
against liability, and all expenses reasonably incurred by him or her in
connection with any claim, action, suit or proceeding in which he or she is
involved by virtue of his or her service as a trustee, officer or both, and
against any amount incurred in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other adjudicatory body either to be
liable to the Trust or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of his or her duties
(collectively, "disabling conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the Trust.
In the event of a settlement, no indemnification may be provided unless there
has been a determination, as specified in the Declaration of Trust, that the
officer or trustee did not engage in disabling conduct.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer of controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 26. Business and Other Connections of the Investment Adviser
Each of the three directors of the Trust's investment adviser, McCullough
Andrews & Cappiello, Inc. (the "Adviser"), (i) Robert F. McCullough, the
Chairman of the Board of Directors (the "Board") and Treasurer of the Adviser,
(ii) David H. Andrews, the Vice Chairman of the Board and Secretary of the
Adviser, and (iii) Frank A. Cappiello, the President of the Adviser, is an
employee of the Adviser, which maintains offices at: (i) 101 California Street,
Suite 4250, San Francisco, California 94111; and (ii) 10751 Falls Road, Suite
250, Lutherville, Maryland 21093. Robert F. McCullough also has served (and
continues to serve) as: (i) a Vice President of the Trust (since the Trust's
organization as a Delaware business trust in 1992); and (ii) a portfolio manager
for the Cappiello-Rushmore Utility Income Fund, the Cappiello-Rushmore Growth
Fund, the Cappiello-Rushmore Emerging Growth Fund, and the Cappiello-Rushmore
Gold Fund, each a series of the Trust. David H. Andrews also has served (and
continues to serve) as a Vice President of the Trust (since the Trust's
organization as a Delaware business trust in 1992). Frank A. Cappiello also has
served (and continues to serve) as: (i) Chairman of the Board of Trustees of the
Trust (since the Trust's organization as a Delaware business trust in 1992); and
(ii) a portfolio manager for the Cappiello-Rushmore Utility Income Fund, the
Cappiello-Rushmore Growth Fund, and the Cappiello-Rushmore Emerging Growth Fund,
each a series of the Trust.
Item 27. Principal Underwriters
Not Applicable.
3
<PAGE>
Item 28. Location of Accounts and Records
The physical location of all accounts, books, and records required to be
maintained and preserved pursuant to Section 31(a) of the Investment Company Act
of 1940, as amended, and Rules 31-a-1 and 31-a-2 thereunder, is 4922 Fairmont
Avenue, Bethesda, Maryland 20814.
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
None
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in this City of Bethesda in the State of Maryland, on the 28th
day of August, 1998.
CAPPIELLO-RUSHMORE TRUST
By:
/s/ Frank A. Cappiello
Frank A. Cappiello, Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- --------------------------------- ------------------------------ ------------------
<S> <C> <C>
/s/ Frank A. Cappiello Chairman of the Board and August 28, 1998
Frank A. Cappiello Trustee
/s/ Daniel L. O'Connor President, Treasurer, and August 28, 1998
Daniel L. O'Connor Trustee
/s/ Bruce C. Ellis Trustee August 28, 1998
Bruce C. Ellis
/s/ Peter J. DeAngelis Trustee August 28, 1998
Peter J. DeAngelis
/s/ Dr. Peter Petersen Trustee August 28, 1998
Dr. Peter B. Petersen
/s/ Jeffrey R. Ellis Trustee August 28, 1998
Jeffrey R. Ellis
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
Exhibit (a)(1) Declaration of Trust of the Cappiello-Rushmore Trust
Exhibit (a)(2) Declaration of Trust Amendment
Exhibit (b) ByLaws of the Cappiello-Rushmore Trust
Exhibit (d) Management Contract between the Cappiello-Rushmore Trust and
McCullough, Andrews & Cappiello, Inc., as amended
Exhibit (g)(1) Administrative Services Agreement between the Cappiello-
Rushmore Trust and Money Management Associates, as amended
Exhibit (g)(2) Custody Agreement between the Cappiello-Rushmore Trust
and Rushmore Trust and Savings, FSB, as amended
Exhibit (h)(1) Administrative Agreement between Money Management Associates
and Rushmore Trust and Savings, FSB, as amended
Exhibit (h)(2) Administrative Agreement between Money Management Associates
and Rushmore Services, Inc., as amended
Exhibit (i) Opinion of Jorden Schulte & Burchette regarding the legality
of the securities of the Cappiello-Rushmore Trust being
registered
Exhibit (j) Consent of Deloitte & Touch, LLP, independent public
accountants for the Cappiello-Rushmore Trust
Exhibit (h) Financial Data Schedules for the Cappiello-Rushmore Trust
<PAGE>
Exhibit (a)(1)
Declaration of Trust
of the
Cappiello-Rushmore Trust
<PAGE>
RUSHMORE GROWTH AND INCOME SERIES TRUST
DECLARATION OF TRUST
DATED MARCH 11, 1992
<PAGE>
RUSHMORE GROWTH AND INCOME SERIES TRUST
DATED MARCH 11, 1992
DECLARATION OF TRUST (herein after "Trust Instrument") made
March 11, 1992 by Daniel L. O'Connor, Bruce Ellis and William L. Major (the
"Trustees").
WHEREAS, the Trustees desire to establish a business trust for
the investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and
property contributed to the trust hereunder shall be held and managed in trust
under this Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1.01. The name of the trust created hereby is
the "Rushmore Growth and Income Series Trust."
DEFINITIONS
Section 1.02. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) "Bylaws" means the Bylaws referred to in Article IV,
Section 4.01(e) hereof, as from time to time amended;
(b) The term "Commission" has the meaning given it in the 1940
Act (as defined below). The terms "Affiliated Person", "Assignment", "Interested
Person" and "Principal underwriter" shall have the meanings given them in the
1940 Act, as modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted or interpretive releases of the
Commission thereunder. "Majority Shareholder Vote" shall have the same meaning
as the term "vote of a majority of the outstanding voting securities" is given
in the 1940 Act, as modified by or interpreted by any applicable order or orders
1
<PAGE>
of the Commission or any rules or regulations adopted or interpretive releases
of the Commission thereunder.
(c) The "Delaware Act" refers to Chapter 38 of Title 12 of the
Delaware Code entitled "Treatment of Delaware Business Trusts," as it may be
amended from time to time.
(d) "Net Asset Value" means the net asset value of each Series
(as defined below) of the Trust determined in the manner provided in Article IX,
Section 9.03 hereof;
(e) "Outstanding Shares" means those Shares shown from time to
time in the books of the Trust or its Transfer Agent as then issued and
outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the treasury of the
Trust;
(f) "Series" means a series of Shares (as defined below) of
the Trust established in accordance with the provisions of Article II, Section
2.06 hereof;
(g) "Shareholder" means a record owner of Outstanding Shares
of the Trust;
(h) "Shares" means the equal proportionate transferable units
of beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(i) The "Trust" refers to all Rushmore Growth and Income
Series and reference to the Trust, when applicable to one or more Series of the
Trust, shall refer to any such Series;
(j) The "Trustees" means the person or persons who has or have
signed this Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their capacity as Trustees hereunder;
2
<PAGE>
(k) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the account
of one or more of the Trust or any Series, or the Trustees on behalf of the
Trust or any Series.
(l) The "1940 Act" refers to the Investment Company Act of
1940, as amended from time to time.
ARTICLE II
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 2.01. The beneficial interest in the Trust shall be
divided into such transferable Shares of one or more separate and distinct
Series or classes of a Series as the Trustees shall from time to time create and
establish. The number of Shares of each Series, and class thereof, authorized
hereunder is unlimited. Each Share shall have no par value. All Shares issued
hereunder, including without limitation, Shares issued in connection with a
dividend in Shares or a split or reverse split of Shares, shall be fully paid
and nonassessable.
ISSUANCE OF SHARES
Section 2.02. The Trustees in their discretion may, from time
to time, without vote of the Shareholders, issue Shares, in addition to the then
issued and outstanding Shares and Shares held in the treasury, to such party or
parties and for such amount and type of consideration, subject to applicable
law, including cash or securities, at such time or times and on such terms as
the Trustees may deem appropriate, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with, the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
3
<PAGE>
REGISTER OF SHARES AND SHARE CERTIFICATES
Section 2.03. A register shall be kept at the principal office
of the Trust or an office of the Trust's transfer agent which shall contain the
names and addresses of the Shareholders of each Series, the number of Shares of
that Series (or any class or classes thereof) held by them respectively and a
record of all transfers thereof. As to Shares for which no certificate has been
issued, such register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or other distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall
be entitled to receive payment of any dividend or other distribution, nor to
have notice given to him as herein or in the Bylaws provided, until he has given
his address to the transfer agent or such other officer or agent of the Trustees
as shall keep the said register for entry thereon. The Trustees, in their
discretion, may authorize the issuance of share certificates and promulgate
appropriate rules and regulations as to their use. Such certificates may be
issuable for any purpose limited in the Trustees discretion. In the event that
one or more certificates are issued, whether in the name of a shareholder or a
nominee, such certificate or certificates shall constitute evidence of ownership
of Shares for all purposes, including transfer, assignment or sale of such
Shares, subject to such limitations as the Trustees may, in their discretion,
prescribe.
TRANSFER OF SHARES
Section 2.04. Except as otherwise provided by the Trustees,
Shares shall be transferable on the records of the Trust only by the record
holder thereof of by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate, if one is
outstanding, and such evidence of the genuineness of each such execution and
authorization and of such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the register of the Trust. Until
such record is made, the Shareholder of record shall be deemed to be the holder
of such Shares for all purposes hereunder and neither the Trustees nor the
Trust, nor any transfer agent or registrar nor any officer, employee or agent of
the Trust shall be affected by any notice of the proposed transfer.
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TREASURY SHARES
Section 2.05. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
ESTABLISHMENT OF SERIES
Section 2.06. The Trust created hereby shall consist of one or
more Series and separate and distinct records shall be maintained by the Trust
of each Series and the assets associated with any such Series shall be held and
accounted for separately from the assets of the Trust or any other Series. The
Trustees shall have full power and authority, in their sole discretion, and
without obtaining any prior authorization or vote of the Shareholders of any
Series of the Trust, to establish and designate and to change in any manner such
Series of Shares or any classes of initial or additional Series and to fix such
preferences, voting powers, rights and privileges of such Series or classes
thereof as the Trustees may from time to time determine, to divide and combine
the Shares or any Series of classes thereof into a greater or lesser number, to
classify or reclassify any issued Shares or any Series or classes thereof into
one or more Series or classes of Shares, and to take such other action with
respect to the Shares as the Trustees may deem desirable. The establishment and
designation of any Series shall be effective upon the adoption of a resolution
by a majority of the Trustees setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Series. A Series
may issue any number of Shares and need not issue shares. At any time that there
are no Shares outstanding of any particular Series previously established and
designated, the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof.
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All references to Shares in this Trust Instrument shall be
deemed to be Shares of any or all Series, or classed thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally to each
Series of the Trust, and each class thereof, except as the context otherwise
requires.
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata share of distributions of
income and capital gains, if any, made with respect to such Series. Upon
redemption of his Shares, such Shareholder shall be paid solely out of the funds
and property of such Series of the Trust.
INVESTMENT IN THE TRUST
Section 2.07. The Trustees shall accept investments in any
Series of the Trust from such persons and on such terms as they may from time to
time authorize. At the Trustees' discretion, such investments, subject to
applicable law, may be in the form of cash or securities in which the affected
Series is authorized to invest, valued as provided in Article IX, Section 9.03
hereof. Investments in a Series shall be credited to each Shareholder's account
in the form of full Shares at the Net Asset Value per Share next determined
after the investment is received; provided, however, that the Trustees may, in
their sole discretion, (a) fix the Net Asset Value per Share of the initial
capital contribution, (b) impose a sales charge upon investments in the Trust in
such manner and at such time determined by the Trustees or (c) issue fractional
Shares.
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ASSETS AND LIABILITIES OF SERIES
Section 2.08. All consideration received by the Trust for the
issue or sale of Shares of a particular Series, together with all assets in
which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall be
held and accounted for separately from the other assets of the Trust and of
every other Series and may be referred to herein as "assets belonging to" that
Series. The assets belonging to a particular Series shall belong to that Series
for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated by the
Trustees between and among one or more of the Series in such manner as the
Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses, costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to a particular Series shall be allocated and
charged by the Trustees between or among any one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes. Without limitation of the foregoing provisions of this
Section 2.08, but subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of the Trust generally. Notice of this
contractual limitation on inter-Series liabilities may, in the Trustee's sole
discretion, be set forth in the certificate of trust of the Trust (whether
originally or by amendment) as filed or to be filed in the Office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act, and
upon the giving of such notice in the certificate of trust, the statutory
provisions of Section 3802 of setting forth such notice in the certificate of
trust shall become applicable to the Trust and each Series. Any person extending
credit to, contracting with or having any claim against any Series may look only
to the assets of that Series to satisfy or enforce any debt, liability,
obligation or expense incurred, contracted for or otherwise existing with
respect to that Series. No Shareholder or former Shareholder of any Series shall
have a claim on or any right to any assets allocated or belonging to any other
Series.
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NO PREEMPTIVE RIGHTS
Section 2.09. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities issued by the
Trust or the Trustees, whether of the same or other Series.
PERSONAL LIABILITY OF SHAREHOLDERS
Section 2.10. Each Shareholder of the Trust and of each Series
shall not be personally liable for the debts, liabilities, obligations and
expenses incurred by, contracted for, or otherwise existing with respect to, the
Trust or by or on behalf of any Series. The Trustees shall have no power to bind
any Shareholder personally or to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay by way of subscription for any Shares or
otherwise. Every note, bond, contract or other undertaking issued by or on
behalf of the Trust or the Trustees relating to the Trust or to a Series shall
include a recitation limiting the obligation represented thereby to the Trust or
to one or more Series and its or their assets (but the omission of such a
recitation shall not operate to bind any Shareholder or Trustee of the Trust)
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ASSENT TO TRUST INSTRUMENT
Section 2.11. Every Shareholder, by virtue of having purchased a Share
shall become a Shareholder and shall be held to have expressly assented and
agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 3.01. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Trust Instrument, the presumption shall be
in favor of a grant of power to the Trustees.
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The enumeration of any specific power in this Trust Instrument
shall not be construed as limiting the aforesaid power. The powers of the
Trustees may be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill
vacancies pursuant to Section 3.04 of this Article III, the Trustees shall be
elected by the Shareholders owning of record a plurality of the Shares voting at
a meeting of Shareholders. Such a meeting shall be held on a date fixed by the
Trustees. In the event that less than a majority of the Trustees holding office
have been elected by Shareholders, the Trustees then in office will call a
Shareholders' meeting for the election of Trustees.
INITIAL TRUSTEES
Section 3.02. The initial Trustees shall be the persons named
herein. On a date fixed by the Trustees, the Shareholders shall elect at least
three but not more than fifteen Trustees, as specified by the Trustees pursuant
to Section 3.06 of this Article III.
TERM OF OFFICE OF TRUSTEES
Section 3.03. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has died, become physically or mentally incapacitated by reason
of disease or otherwise, or is otherwise unable to serve, may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of Shareholders owning at least
two-thirds of the outstanding Shares.
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VACANCIES AND APPOINTMENT OF TRUSTEES
Section 3.04. In case of the declination to serve, death,
resignation, retirement, removal, physical or mental incapacity by reason of
disease or otherwise, or a Trustee is otherwise unable to serve, or an increase
in the number of Trustees a vacancy shall occur. Whenever a vacancy in the Board
of Trustees shall occur, until such vacancy is filled, the other Trustees shall
have all the powers hereunder and the certificate of the other Trustees of such
vacancy shall be conclusive. In the case of an existing vacancy, the remaining
Trustees shall fill such vacancy by appointing such other person as they in
their discretion shall see fit consistent with the limitations under the 1940
Act. Such appointment shall be evidenced by a written instrument signed by a
majority of the Trustees in office or by resolution of the Trustees, duly
adopted, which shall be recorded in the minutes of a meeting of the Trustees,
whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder. The power to appoint a Trustee pursuant to this
Section 3.04 is subject to the provisions of Section 16(a) of the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 3.05. Any Trustee may, by power of attorney, delegate
his power for a period not exceeding six months at any one time to any other
Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
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NUMBER OF TRUSTEES
Section 3.06. The number of Trustees shall be at least three
(3), and thereafter shall be such number as shall be fixed from time to time by
a majority of the Trustees, provided, however, that the number of Trustees shall
in no event be more than fifteen (15).
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 3.07. The declination to serve, death, resignation,
retirement, removal, incapacity, or inability of the Trustees, or any one of
them, shall not operate to terminate the Trust or to revoke any existing agency
created pursuant to the terms of this Trust Instrument.
OWNERSHIP OF ASSETS OF THE TRUST
Section 3.08. The assets of the Trust and of each Series shall
be held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or any successor Trustees. Legal
title in all of the assets of the Trust and the right to conduct any business
shall at all times be considered as vested in the Trustees on behalf of the
Trust, except that the Trustees may cause legal title to any Trust Property to
be held by, or in the name of the Trust, or in the name of any person as
nominee. No Shareholder shall be deemed to have a severable ownership in any
individual asset of the Trust or of any Series or any right of partition or
possession thereof, but each Shareholder shall have, except as otherwise
provided for herein, a proportionate undivided beneficial interest in the Trust
or Series. The Shares shall be personal property giving only the rights
specifically set forth in this Trust Instrument.
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ARTICLE IV
POWERS OF THE TRUSTEES
POWERS
Section 4.01. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to
hold cash or other property uninvested, without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees, and to sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all the assets of the Trust;
(b) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the conduct of
such operations;
(c) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust
either through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both, or otherwise pursuant to a plan of distribution of
any kind;
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(e) To adopt Bylaws not inconsistent with this Trust
Instrument providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to the
Shareholders; such Bylaws shall be deemed incorporated and included in this
Trust Instrument;
(f) To elect and remove such officers and appoint and
terminate such agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies
that are members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder
servicing agents, or both;
(i) To set record dates in the manner provided herein
or in the Bylaws;
(j) To delegate such authority as they consider desirable to
any officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of
the Trust, subject to the provisions of Article XI, Section
11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to execute
and deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
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(n) To hold any security or property in a form not indicating
any trust, whether in bearer, book entry, unregistered or other negotiable form;
or either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately
defined investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware
Act, to allocate assets, liabilities and expenses of the Trust to a particular
Series or to apportion the same between or among two or more Series, provided
that any liabilities or expenses incurred by a particular Series shall be
payable solely out of the assets belonging to that Series as provided for in
Article II hereof;
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(q) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy including, but not
limited to, claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of
the powers of the Trustees to said committees and to adopt a committee charter
providing for such responsibilities, membership (including Trustees, officers or
other agents of the Trust therein) and any other characteristics of said
committees as the Trustees may deem proper. Notwithstanding the provisions of
this Article IV, and in addition to such provisions or any other provision of
this Trust Instrument or of the Bylaws, the Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees then in office,
which committee may be empowered to act for and bind the Trustees and the Trust,
as if the acts of such committee were the acts of all the Trustees then in
office, with respect to the institution, prosecution, dismissal, settlement,
review or investigation of any action, suit or proceeding which shall be pending
or threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or
limitations of any Series;
(w) To establish a registered office and have a registered
agent in the state of Delaware; and
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(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
power, and the foregoing enumeration of specific powers shall not be held to
limit or restrict in any manner the general powers of the Trustees. Any action
by one or more of the Trustees in their capacity as such hereunder shall be
deemed an action on behalf of the Trust or the applicable Series, and not an
action in an individual capacity.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation
to make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
ISSUANCE AND REPURCHASE OF SHARES
Section 4.02. The Trustees shall have the power to issue,
sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue,
dispose of, and otherwise deal in Shares and, subject to the provisions set
forth in Article II and Article IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of the
Trust, or the particular Series of the Trust, with respect to which such Shares
are issued.
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TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 4.03. Any Trustee, officer or other agent of the Trust
may acquire, own and dispose of Shares to the same extent as if he were not a
Trustee, officer or agent; and the Trustees may issue and sell or cause to be
issued and sold Shares to and buy such Shares from any such person or any firm
or company in which he is interested, subject only to the general limitations
herein contained as to the sale and purchase of such Shares; and all subject to
any restrictions which may be contained in the Bylaws.
ACTION BY THE TRUSTEES
Section 4.04. The Trustees shall act by majority vote at a
meeting duly called or by unanimous written consent without a meeting or by
telephone meeting provided a quorum of Trustees participate in any such
telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman or
by any two other Trustees. Notice of the time, date and place of all meetings of
the Trustees shall be given by the party calling the meeting to each Trustee by
telephone, telefax, or telegram sent to his home or business address at least
twenty-four hours in advance of the meeting or by written notice mailed to his
home or business address at least seventy-two hours in advance of the meeting.
Notice need not be given to any Trustee who attends the meeting without
objecting to the lack of notice or who executes a written waiver of notice with
respect to the meeting. Any meeting conducted by telephone shall be deemed to
take place at the principal office of the Trust, as determined by the Bylaws or
by the Trustees. Subject to the requirements of the 1940 Act, the Trustees by
majority vote may delegate to any one or more of their number their authority to
approve particular matters or take particular actions on behalf of the Trust.
Written consents or waivers of the Trustees may be executed in one or more
counterparts. Execution of a written consent or waiver and delivery thereof to
the Trust may be accomplished by telefax.
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CHAIRMAN OF THE TRUSTEES
Section 4.05. The Trustees shall appoint one of their number
to be Chairman of the Board of Trustees. The Chairman shall preside at all
meetings of the Trustees, shall be responsible for the execution of policies
established by the Trustees and the administration of the Trust, and may be (but
is not required to be) the chief executive, financial and/or accounting officer
of the Trust.
PRINCIPAL TRANSACTIONS
Section 4.06. Except to the extent prohibited by applicable
law, the Trustees may, on behalf of the Trust, buy any securities from or sell
any securities to, or lend any assets of the Trust to, any Trustees or officer
of the Trust or any firm of which any such Trustee or officer is a member acting
as principal, or have any such dealings with any investment adviser, distributor
or transfer agent for the Trust or with any Interested Person of such person;
and the Trust may employ any such person, or firm or company in which such
person is an Interested Person, as broker, legal counsel, registrar, investment
adviser, distributor, transfer agent, dividend disbursing agent, custodian or in
any other capacity upon customary terms.
ARTICLE V
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 5.01. Subject to the provisions of Article II, Section
2.08 hereof, the Trustees shall be reimbursed from the Trust estate or the
assets belonging to the appropriate Series for their expenses and disbursements,
including, without limitation, fees and expenses of Trustees who are not
Interested Persons of the Trust, interest expense, taxes, fees and commissions
of every kind, expenses of pricing Trust portfolio securities, expenses of
issue, repurchase and redemption of shares, including expenses attributable to a
program of periodic repurchases or redemptions, expenses of registering and
qualifying the Trust and its Shares under Federal and State laws and regulations
or under the laws of any foreign jurisdiction, charges of third parties,
including investment advisers, managers, custodians, transfer agents, portfolio
accounting and/or pricing agents, and registrars, expenses of preparing and
setting up in type prospectuses and statements of additional information and
other related Trust documents, expenses of printing and distributing
prospectuses sent to existing Shareholders, auditing and legal expenses, reports
to Shareholders, expenses of meetings of Shareholders and proxy solicitations
therefor, insurance expenses, association membership dues and for such
non-recurring items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series, on the assets of each such Series,
prior to any rights or interests of the Shareholders thereto. This section shall
not preclude the Trust from directly paying any of the aforementioned fees and
expenses.
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ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
Section 6.01. The Trustees may in their discretion, from time
to time, enter into an investment advisory or management contract or contracts
with respect to the Trust or any Series whereby the other party or parties to
such contract or contracts shall undertake to furnish the Trustees with such
management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions, as the Trustees may in their discretion determine; provided,
however, that the initial approval and entering into of such contract or
contracts shall be subject to a Majority Shareholder Vote. Notwithstanding any
other provision of this Trust Instrument, the Trustees may authorize any
investment adviser (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales or exchanges of
portfolio securities, other investment instruments of the Trust, or other Trust
Property on behalf of the Trustees, or may authorize any officer, agent, or
Trustee to effect such purchases, sales or exchanges pursuant to recommendations
of the investment adviser (and all without further action by the Trustees). Any
such purchases, sales and exchanges shall be deemed to have been authorized by
all of the Trustees.
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The Trustees may authorize, subject to applicable requirements
of the 1940 Act, including those relating to Shareholder approval, the
investment adviser to employ, from time to time, one or more sub-advisers to
perform such of the acts and services of the investment adviser, and upon such
terms and conditions, as may be agreed upon between the investment adviser and
sub-adviser. Any reference in this Trust Instrument to the investment adviser
shall be deemed to include such sub-advisers, unless the context otherwise
requires.
PRINCIPAL UNDERWRITER
Section 6.02. The Trustees may in their discretion from time
to time enter into an exclusive or non-exclusive underwriting contract or
contracts providing for the sale of Shares, whereby the Trust may either agree
to sell Shares to the other party to the contract or appoint such other party
its sales agent for such Shares. In either case, the contract shall be on such
terms and conditions, if any, as may be prescribed in the Bylaws, and such
further terms and conditions as the trustees may in their discretion determine
not inconsistent with the provisions of this Article VI, or of the Bylaws; and
such contract may also provide for the repurchase or sale of Shares by such
other party as principal or as agent of the Trust.
TRANSFER AGENT
Section 6.03. The Trustees may in their discretion from time
to time enter into one or more transfer agency and shareholder service contracts
whereby the other party or parties shall undertake to furnish the Trustees with
transfer agency and shareholder services. The contract or contracts shall be on
such terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Trust Instrument or of the Bylaws.
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PARTIES TO CONTRACT
Section 6.04. Any contract of the character described in
Sections 6.01, 6.02 and 6.03 of this Article VI or any contract of the character
described in Article VIII hereof may be entered into with any corporation, firm,
partnership, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder and/or
Trustee, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02 and 6.03 of this Article VI or pursuant to Article VIII
hereof, and any individual may be financially interested or otherwise affiliated
with persons who are parties to any or all of the contracts mentioned in this
Section 6.04.
PROVISIONS AND AMENDMENTS
Section 6.05. Any contract entered into pursuant to Sections
6.01 or 6.02 of this Article VI shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act or other applicable Act of Congress
hereafter enacted with respect to its continuance in effect, its termination,
and the method of authorization and approval of such contract or renewal
thereof, and no amendment to any contract, entered into pursuant to Section 6.01
of this Article VI shall be effective unless assented to in a manner consistent
with the requirements of said Section 15, as modified by any applicable rule,
regulation or order of the Commission.
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ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 7.01. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article III, Sections 3.01 and
3.02 hereof, (ii) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (iii) with respect to any investment advisory or
management contract as provided in Article VI, Sections 6.01 and 6.05 hereof,
and (iv) with respect to such additional matters relating to the Trust as may be
required by law, by this Trust Instrument, or the Bylaws or any registration of
the Trust with the Commission or any State, or as the Trustees may consider
desirable.
On any matter submitted to a vote of the Shareholders, all
Shares shall be voted separately by individual Series, except (i) when required
by the 1940 Act, Shares shall be voted in the aggregate and not by individual
Series; and (ii) when the Trustees have determined that the matter affects the
interests of more than one Series, then the Shareholders of all such Series
shall be entitled to vote thereon. The Trustees may also determine that a matter
affects only the interests of one or more classes of a Series, in which case any
such matter shall be voted on by such class or classes. Each whole Share shall
be entitled to one vote as to any matter on which it is entitled to vote, and
each fractional Share shall be entitled to a proportionate fractional vote.
There shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy or in any manner provided for in the Bylaws. A proxy
may be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
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MEETINGS
Section 7.02. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.02 of Article III hereof at
the principal office of the Trust or such other place as the Trustees may
designate. Meetings may be held within or without the State of Delaware. Special
meetings of the Shareholders of any Series may be called by the Trustees and
shall be called by the Trustees upon the written request of Shareholders owning
at least one-tenth of the Outstanding Shares entitled to vote. Whenever ten or
more Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act, as the same may be amended from time to time, seek the opportunity of
furnishing materials to the other Shareholders with a view to obtaining
signatures on such a request for a meeting, the Trustees shall comply with the
provisions of said Section 16(c) with respect to providing such Shareholders
access to the list of the Shareholders of record of the Trust or the mailing of
such materials to such Shareholders of record, subject any rights provided to
the Trust or any Trustees provided by said Section 16(c). Notice determined by
the Trustees, at least 15 days prior to any such meeting.
QUORUM AND REQUIRED VOTE
Section 7.03. One-third of Shares entitled to vote in person
or by proxy shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Trust Instrument
permits or request that holders of any Series shall vote as a Series (or that
holders of a class shall vote as a class), then one-third of the aggregate
number of Shares of that Series (or that class) entitled to vote shall be
necessary to constitute a quorum for the transactions of business by that Series
(or that class). Any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument of the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series hall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series or, if required by law, a Majority Shareholder Vote of
that Series (or class), voted on the matter in person or by proxy shall decide
matter insofar as that Series (or class) is concerned. Shareholders may act by
unanimous written consent. Actions taken by Series (or class) may be consented
to unanimously in writing by Shareholders of that Series.
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ARTICLE VIII
CUSTODIAN
APPOINTMENT AND DUTIES
Section 8.01. The Trustees shall at all times employ a bank, a
company that is a member of a national securities exchange, or a trust company,
each having capital, surplus and undivided profits of at least two million
dollars ($2,000,000) as custodian with authority as its agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver
the same upon written order or oral order confirmed
in writing;
(2) to receive and receipt for any moneys due to the
Trust and deposit the same in its own banking
department or elsewhere as the Trustees may direct;
and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
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(4) to keep the books and accounts of the Trust or of any
Series or class and furnish clerical and accounting
services; and
(5) to compute, if authorized to do so by the Trustees,
the Net Asset Value of any Series, or class thereof,
in accordance with the provisions hereof; all upon
such basis of compensation as may be agreed upon
between the Trustees and the custodian.
The Trustees may also authorize the custodian to employ one or
more sub-custodians from time to time to perform such of the acts and services
of the custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank, a company that
is a member of a national securities exchange, or a trust company organized
under the laws of the United States or one of the states thereof and having
capital, surplus and undivided profits of at least two million dollars
($2,000,000) or such other person as may be permitted by the Commission, or
otherwise in accordance with the 1940 Act.
CENTRAL CERTIFICATE SYSTEM
Section 8.02. Subject to such rules, regulations and orders as
the Commission may adopt, the Trustees may direct the custodian to deposit all
or any part of the securities owned by the Trust in a system for the central
handling of securities established by a national securities exchange or a
national securities association registered with the Commission under the
Securities Exchange Act of 1934, as amended, or such other person as may be
permitted by the Commission, or otherwise in accordance with the 1940 Act,
pursuant to which system all securities of any particular class or series of any
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, subcustodians or other agents.
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ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 9.01.
(a) The Trustees may from time to time declare and pay
dividends or other distributions with respect to any Series. The amount of such
dividends or distributions and the payment of them and whether they are in cash
or any other Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to
the Shareholders of record at the time of declaring a dividend or other
distribution or among the Shareholders of record at such other date or time or
dates or times as the Trustees shall determine, which dividends or
distributions, at the election of the Trustees, may be paid pursuant to a
standing resolution or resolutions adopted only once or with such frequency as
the Trustees may determine. The Trustees may adopt and offer to Shareholders
such dividend reinvestment plans, cash dividend payout plans or related plans as
the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a stock
dividend pro rata among the Shareholders of a particular Series, or class
thereof, as of the record date of that Series fixed as provided in Section (b)
hereof.
REDEMPTIONS
Section 9.02. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.03 of this Article IX). The
Series shall make payment for any shares to be redeemed, as aforesaid, in cash
or property from the assets of that Series and payment for such Shares shall be
made by the Series or the principal underwriter of the Series to the Shareholder
of record within seven (7) days after the date upon which the request is
effective. Upon redemption, shares shall become Treasury shares and may be
re-issued from time to time.
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DETERMINATION OF NET ASSET VALUE
AND VALUATION OF PORTFOLIO ASSETS
Section 9.03. The term "Net Asset Value" of any Series shall
mean that amount by which the assets of that Series exceed its liabilities, all
as determined by or under the direction of the Trustees. Such value shall be
determined separately for each Series and shall be determined on such days and
at such times as the Trustees may determine. Such determination shall be made
with respect to securities for which market quotations are readily available, at
the market value of such securities; and with respect to other securities and
assets, at the fair value as determined in good faith by the Trustees; provided,
however, that the Trustees, without Shareholder approval, may alter the method
of valuing portfolio securities insofar as permitted under the 1940 Act and the
rules, regulations and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any Order of the Commission applicable to
the Series. The Trustees may delegate any of their powers and duties under this
Section 9.03 with respect to valuation of assets and liabilities. The resulting
amount, which shall represent the total Net Asset Value of the particular
Series, shall be divided by the total number of shares of that Series
outstanding at the time and the quotient so obtained shall be the Net Asset
Value per Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner and may
fix the time when such redetermined value shall become effective. If, for any
reason, the net income of any Series determined at any time, is a negative
amount, the Trustees shall have the power with respect to that Series (i) to
offset each Shareholder's pro rata share of such negative amount from the
accrued dividend account of such Shareholder, or (ii) to reduce the number of
Outstanding Shares of such Series by reducing the number of Shares in the
account of each Shareholder by a pro rata portion of the number of full and
fractional Shares which represents the amount of such excess negative net
income, or (iii) to cause to be recorded on the books of such Series an asset
account in the amount of such negative net income (provided that the same shall
thereupon become the property of such Series with respect to such Series and
shall not be paid to any Shareholder), which account may be reduced by the
amount, of dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero; (iv) to combine the methods described in clauses (i)
and (ii) and (iii) of the sentence; or (v) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net Asset
Value per Share of such Series to remain at a constant amount per Outstanding
Share immediately after each such determination and declaration. The Trustees
shall also have the power not to declare a dividend out of net income for the
purpose of causing the Net Asset Value per share to be increased. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
the practice of maintaining the Net Asset Value per Share of the Series at a
constant amount.
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SUSPENSION OF THE RIGHT OF REDEMPTION
Section 9.04. The Trustees may declare a suspension of the
right of redemption or postpone the date of payment as permitted under the 1940
Act. Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no right
of redemption or payment until the Trustees shall declare the suspension at an
end. In the case of a suspension of the right of redemption, a Shareholder may
either withdraw his request for redemption or receive payment based on the Net
Asset Value per Share next determined after the termination of the suspension.
In the event that any Series are divided into classes, the provisions of this
Section 9.03, to the extent applicable as determined in the discretion of the
Trustees and consistent with applicable law, may be equally applied to each such
class.
REDEMPTION OF SHARES IN ORDER TO
QUALIFY AS REGULATED INVESTMENT COMPANY
Section 9.05. If the Trustees shall, at any time and in good
faith, be of the opinion that direct or indirect ownership of Shares of any
Series has or may become concentrated in any Person to an extent which would
disqualify any Series as a regulated investment company under the Internal
Revenue Code, then the Trustees shall have the power (but not the obligation) by
lot or other means deemed equitable by them (i) to call for redemption by any
such person of a number, or principal amount, of Shares sufficient to maintain
or bring the direct or indirect ownership of Shares into conformity with the
requirements for such qualification and (ii) to refuse to transfer or issue
Shares to any person whose acquisition of the Shares in question would result in
such disqualification. The redemption shall be effected at the redemption price
and in the manner provided in this Article IX.
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The holders of Shares shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares as the Trustees deem necessary to comply with the provisions
of the Internal Revenue Code, or to comply with the requirements of any other
taxing authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 10.01. A Trustee, when acting in such capacity, shall
not be personally liable to any person other than the Trust or a beneficial
owner for any act, omission or obligation of the Trust or any Trustee. A Trustee
shall not be liable for any act or omission of any conduct whatsoever in his
capacity as Trustee, provided that nothing contained herein or in the Delaware
Act shall protect any Trustee against any liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
INDEMNIFICATION
Section 10.02.
(a) Subject to the exceptions and limitations contained in
Section (b) below:
(i) every Person who is, or has been, a Trustee
or officer of the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
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(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Covered Person:
(i) who shall have been adjudicated by a court
or body before which the proceeding was brought (A) to be liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there
has been a determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office,
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(A) by the court or other body approving
the settlement;
(B) by at least a majority of those
Trustees who are neither Interested Persons of the Trust nor are parties to the
matter based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or
(C) by written opinion of independent legal
counsel based upon a review of readily available facts (as opposed to a full
trial-type inquiry); provided, however, that any Shareholder may, by appropriate
legal proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who has ceased to be
a Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
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(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of the
character described in paragraph (a) of this Section 10.02 may be paid by the
Trust or Series from time to time prior to final disposition thereof upon
receipt of any undertaking by or on behalf of such Covered Person that such
amount will be paid over by him to the Trust or Series if it is ultimately
determined that he is not entitled to indemnification under this Section 10.02;
provided, however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust is insured against
losses arising out of any such advance payments or (c) either a majority of the
Trustees who are neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is a reason to believe
that such Covered Person will be found entitled to indemnification under this
Section 10.02.
SHAREHOLDERS
Section 10.03. In case any Shareholder or former Shareholder
of any Series shall be held to be personally liable solely by reason of his
being or having been a Shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his heirs, executors, administrators or other legal representatives, or, in the
case of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets belonging to the applicable Series to be
held harmless from and indemnified against all loss and expense arising from
such liability. The Trust, on behalf of the affected Series, shall, upon request
by the Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series.
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ARTICLE XI
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 11.01. It is hereby expressly declared that a trust
and not a partnership is created hereby. No Trustee hereunder shall have any
power to bind personally either the Trust's officers or any Shareholder. All
persons extending credit to, contracting with or having any claim against the
Trust or the Trustees shall look only to the assets of the appropriate Series or
(if the Trustees shall have yet to have established Series) of the Trust for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of their agents, whether past, present or future, shall be
personally liable therefore. Nothing in this Trust Instrument shall protect a
Trustee against any liability to which the Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 11.02. The exercise by the Trustees of their powers
and discretions hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested. Subject
to the provisions of Article X hereof and to Section 11.01 of this Article XI,
the Trustees shall not be liable for errors of judgment or mistakes of fact or
law. The Trustees may take advice of counsel or other experts with respect to
the meaning and operation of the Trust Instrument, and subject to the provisions
of Article X hereof and Section 11.01 of this Article XI, shall be under no
liability for any act or omission in accordance with such advice or for failing
to follow such advice. The Trustees shall not be required to given any bond as
such, nor any surety if a bond is obtained.
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ESTABLISHMENT OF RECORD DATES
Section 11.04. The Trustees may close the Share transfer books
of the Trust for a period not exceeding sixty (60) days preceding the date of
any meeting of Shareholders, or the date for the payment of any dividends or
other distributions, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect; or in lieu
of closing the stock transfer books as aforesaid, the Trustees may fix in
advance a date, not exceeding sixty (60) days preceding the date of any meeting
of Shareholders, or the date for payment of any dividend or other distribution,
or the date for the allotment of rights, or the date when any change or
conversion or exchange of shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such dividend or other
distribution, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of Shares, and in such case
such Shareholders and only such Shareholders as shall be Shareholders of record
on the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend or other distribution, or to
receive such allotment or rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any Shares on the books of the Trust after
any such date fixed as aforesaid.
TERMINATION OF TRUST
Section 11.04.
(a) This Trust shall continue without limitation of time but
subject to the provisions of sub-section (b) of this Section 11.04.
(b) The Trustees may, subject to a Majority Shareholder Vote
of each Series affected by the matter or, if applicable to a Majority
Shareholder Vote of the Trust, and subject to a vote of a majority of the
Trustees.
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(i) sell and covey all or substantially all of the assets of
the Trust or any affected Series to another trust,
partnership, association or corporation, or to a separate
series of shares thereof, organized under the laws of any
state which trust, partnership, association or corporation is
an open-end management investment company as defined in the
1940 Act, or is a series thereof, for adequate consideration
which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or
contingent, of the Trust or any affected Series, and which may
include shares of beneficial interest, stock or other
ownership interests of such trust, partnership, association or
corporation or of a series thereof; or
(ii) at any time sell and convert into money all of the assets
of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the
Trustees, for the payment of all such liabilities in either (i) or (ii), by such
assumption or otherwise, the Trustees shall distribute the remaining proceeds or
assets (as the case may be) of each Series (or class) ratably among the holders
of Shares of that Series then outstanding.
(c) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in subsection (b), the Trust or any
affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged.
Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be file in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.
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REORGANIZATION
Section 11.05. Notwithstanding anything else herein, the
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (i) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long as
the surviving or resulting entity is an open-end management investment company
under the 1940 Act, or is a series thereof, that will succeed to or assume the
Trust's registration under that Act and which is formed, organized or existing
under the laws of a state, commonwealth possession or colony of the United
States or (ii) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signature conveyed by electronic or
telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Trust Instrument, an agreement of merger or consolidation
approved by the Trustees in accordance with this Section 11.05 may effect any
amendment to the Trust Instrument or effect the adoption of a new trust
instrument of the Trust if it is the surviving or resulting trust in the merger
or consolidation.
FILING OF COPIES, REFERENCES, HEADINGS
Section 11.06. The original or a copy of this Trust Instrument
and of each amendment hereof or Trust Instrument supplemental hereto shall be
kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer or Trustee
of the Trust as to whether or not any such amendments or supplements have been
made and as to any matters in connection with the Trust hereunder, and with the
same effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this Trust Instrument or of any
such amendment or supplemental Trust Instrument, references to this Trust
Instrument, and all expressions like "herein," "hereof" and "hereunder," shall
be deemed to refer to this Trust Instrument as amended or affected by any such
supplemental Trust Instrument. All expressions like "his," "he" and "him", shall
be deemed to include the feminine and neuter, as well as masculine, genders.
Headings are placed herein for convenience of reference only and in case of any
conflict, the text of this Trust Instrument, rather than the headings, shall
control. This Trust Instrument may be executed in any number of counterparts
each of which shall be deemed an original.
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APPLICABLE LAW
Section 11.07. The trust set forth in this instrument is made
in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trust, the Trustees or this Trust Instrument (a) the provisions of
Section 3540 of Title 12 of the Delaware Code or (b) any provisions of the laws
(statutory or common) of the State of Delaware (other than the Delaware Act)
pertaining to trusts which relate to or regulate (i) the filing with any court
or governmental body or agency of trustee accounts or schedules of trustee fees
and charges, (ii) affirmative requirements to post bonds for trustees, officers,
agents or employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income and principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust", and without limiting the provisions hereof, the Trust may
exercise all powers or privileges afforded to trusts or actions that may be
engaged in by trusts under the Delaware Act, and the absence of a specific
reference herein to any such power, privilege or action shall not imply that the
Trust may not exercise such power or privilege or take such actions.
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AMENDMENTS
Section 11.08. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(i) on any amendment which would affect their right to vote granted in Section
7.01 of Article VII hereof, (ii) on any amendment to this Section 11.08, (iii)
on any amendment as may be required by law of by the Trust's registration
statement filed with the Commission and (iv) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected and no vote of shareholders of a Series not affected shall be
required. Notwithstanding anything else herein, any amendment to Article 10
hereof shall not limit the rights to indemnification or insurance provided
therein with respect to action or omission of Covered Persons prior to such
amendment.
FISCAL YEAR
Section 11.09. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
PROVISIONS IN CONFLICT WITH LAW
Section 11.10. The provisions of this Trust Instrument are
severable, and if the Trustees shall determine, with the advice of counsel, that
any of such provisions is in conflict with the 1940 Act, the regulated
investment company provisions of the Internal Revenue Code or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Trust Instrument; provided, however, that
such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any other
jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
39
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the initial Trustees
of the Trust, have executed this instrument this 11th day of March, 1992.
/s/Daniel L. O'Connor
Daniel L. O'Connor, as Trustee
and not individually
/s/Bruce Ellis
Bruce Ellis, as Trustee and
not individually
/s/William L. Major
William L. Major, as Trustee
and not individually
40
Exhibit (a)(2)
Declaration of Trust Amendment
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF TRUST
OF
THE RUSHMORE GROWTH AND INCOME SERIES TRUST
The undersigned certifies that:
1. The name of the business trust is RUSHMORE GROWTH AND INCOME SERIES TRUST
(the "business Trust").
2. The amendments to the Certificate of Trust of the Business Trust set
forth below have been duly authorized by the Board of Trustees of the
Business Trust:
The Preamble is hereby amended to read as follows:
"This Certificate of Trust of the CAPPIELLO-RUSHMORE TRUST,
a business trust registered under the Investment Company Act
of 1940 (the "Business Trust"), is filed in accordance with
the provisions of the Delaware Trust Act (12 Del. C. Section
3801 et seq.) and sets forth the following:"
1. The name of the trust is:
CAPPIELLO-RUSHMORE TRUST
2. Pursuant to 12 Del. C. Section 3810(b)(1)c, this
Certificate of Amendment shall become effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being a trustee of the Business
Trust, has duly executed this Certificate of Amendment this 26th day of June
1992.
/s/William L. Major
William L. Major
Exhibit (b)
Bylaws
of the
Cappiello-Rushmore Trust
<PAGE>
BYLAWS
of
RUSHMORE GROWTH AND INCOME SERIES TRUST
These Bylaws of Rushmore Growth and Income Series Trust (the
"Trust"), a Delaware business trust, are subject to the Trust's Declaration of
Trust dated March 11, 1992, as from time to time amended, supplemented or
restated (the "Trust Instrument"). Capitalized terms used herein which are
defined in the Trust Instrument are used as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in
Bethesda, Maryland or such other location as the Trustees may, from time to
time, determine. The Trust may establish and maintain such other offices and
places of business as the Trustees may, from time to time, determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
Officers
Section 1. The officers of the Trust shall be President, a
Treasurer, a Secretary, and such other officers as the Trustees may from time to
time elect. The Trustees may delegate to any officer or committee the power to
appoint any subordinate officers or agents. It shall not be necessary for any
Trustee or other officer to be a holder of Shares in the Trust.
Election of Officers
Section 2. The Treasurer and Secretary shall be chosen by the
Trustees. The President shall be chosen by and from the Trustees. Two or more
offices may be held by a single person except the offices or President and
Secretary. Subject to the provisions of Section 12 hereof, the President, the
Treasurer and the Secretary shall each hold office until their successors are
chosen and qualified and all other officers shall hold office at the pleasure of
the Trustees.
Resignations
Section 3. Any officer of the Trust may resign,
notwithstanding Section 2 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
1
<PAGE>
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
Management Of The Trust-General
Section 1. The business and affairs of the Trust shall be
managed by, or under the direction of, the Trustees, and they shall have all
powers necessary and desirable to carry out their responsibilities, so far as
such powers are not inconsistent with the laws of the State of Delaware, the
Trust Instrument or with these Bylaws.
Executive And Other Committees
Section 2. The Trustees may elect from their own number an
executive committee, which shall have any or all the powers of the Trustees
while the Trustees are not in session. The Trustees may also elect from their
own number other committees from time to time. The number composing such
committees and the powers conferred upon the same are to be determined by vote
of a majority of the Trustees. All members of such committees shall hold such
offices at the pleasure of the Trustees. The Trustees may abolish any such
committee at any time. Any committee to which the Trustees delegate any of their
powers or duties shall keep records of its meetings and shall report its actions
to the Trustees. The Trustees shall have power to rescind any action of any
committee, but no such rescission shall have retroactive effect.
Compensation
Section 3. Each Trustee and each committee member may receive
such compensation for his services and reimbursement for his expenses as may be
fixed from time to time by resolution of the Trustees.
Chairman Of The Trustees
Section 4. The Trustees shall appoint from among their number
a Chairman who shall serve as such at the pleasure of the Trustees. When
present, he shall preside at all meetings of the Shareholders and the Trustees,
and he may, subject to the approval of the Trustees, appoint a Trustee to
preside at such meetings in his absence. He shall perform such other duties as
the Trustees may from time to time designate.
2
<PAGE>
President
Section 5. The President shall be the chief executive officer
of the Trust and, subject to the direction of the Trustees, shall have general
administration of the business and policies of the Trust. Except as the trustee
may otherwise order, the President shall have the power to grant, issue, execute
or sign such powers of attorney, proxies, agreements or other documents as may
be deemed advisable or necessary in the furtherance of the interest of the Trust
or any Series thereof. He shall also have the power to employ attorneys,
accountants and other advisers and agents and counsel for the Trust. The
President shall perform such duties additional to all of the foregoing as the
Trustees may from time to time designate.
Treasurer
Section 6. The Treasurer shall be the principal financial and
accounting officer of the Trust. He shall deliver all funds and securities of
the Trust which may come into his hands to such company as the Trustees shall
employ as Custodian in accordance with the Trust Instrument and applicable
provisions of law. He shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he shall furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer shall perform
such additional duties as the Trustees may from time to time designate.
Secretary
Section 7. The Secretary shall record in books kept for the
purpose all votes and proceedings of the Trustees and the Shareholders at their
respective meetings. He shall have the custody of the seal of the Trust. The
Secretary shall perform such additional duties as the Trustees may from time to
time designate.
Vice President
Section 8. Any Vice President of the Trust shall perform such
duties as the Trustees or the President may from time to time designate. At the
request or in the absence or disability of the President, the Vice President
(or, if there are two or more Vice Presidents, then the senior of the Vice
Presidents present and able to act) may perform all the duties of the President
and, when so acting, shall have all the powers of and be subject to all the
restrictions upon the President.
3
<PAGE>
Assistant Treasurer
Section 8. Any Assistant Treasurer of the Trust shall perform
such duties as the Trustees or the Treasurer may from time to time designate,
and, in the absence of the Treasurer, the senior Assistant Treasurer, present
and able to act, may perform all the duties of the Treasurer.
Assistant Secretary
Section 9. Any Assistant Secretary of the Trust shall perform
such duties as the Trustees or the Secretary may from time to time designate,
and, in the absence of the Secretary, the senior Assistant Secretary, present
and able to act, may perform all the duties of the Secretary.
Subordinate Officers
Section 10. The Trustees from time to time may appoint such
other officers or agents as they may deem advisable, each of whom shall have
such title, hold office for such period, have such authority and perform such
duties as the Trustees may determine. The Trustees from time to time may
delegate to one or more officers or committees of Trustees the power to appoint
any such subordinate officers or agents and to prescribe their respective terms
of office, authorities and duties.
Surety Bonds
Section 11. The Trustees may require any officer or agent of
the Trust to execute a bond (including, without limitation, any bond required by
the Investment Company Act of 1940, as amended ("the 1940 Act") and the rules
and regulations of the Securities and Exchange Commission ("Commission")) to the
Trust in such sum and with such surety or sureties as the Trustees may
determine, conditioned upon the faithful performance of his duties to the Trust
including responsibility for negligence and for the accounting of any of the
Trust's property, funds or securities that may come into his hands.
4
<PAGE>
Removal
Section 12. Any officer may be removed from office whenever in
the judgment of the Trustees the best interest of the Trust will be served
thereby, by the vote of a majority of the Trustees given at any regular meeting
or any special meeting of the Trustees. In addition, any officer or agent
appointed in accordance with the provisions of Section 10 hereof may be removed,
either with or without cause, by any officer upon whom such power of removal
shall have been conferred by the Trustees.
Renumeration
Section 13. The salaries or other compensation, if any, of the
officers of the Trust shall be fixed from time to time by resolution of the
Trustees.
ARTICLE IV
SHAREHOLDERS' MEETING
Special Meetings
Section 1. A special meeting of the shareholders shall be
called by the Secretary whenever (i) ordered by the Trustees or (ii) requested
in writing by the holder or holders of at least 10% of the Outstanding Shares
entitled to vote. If the Secretary, when so ordered or requested, refuses or
neglects for more than 30 days to call such special meeting, the Trustees or the
Shareholders so requesting, may, in the name of the Secretary, call the meeting
by giving notice thereof in the manner required when notice is given by the
Secretary. If the meeting is a meeting of the Shareholders of one or more Series
or classes of Shares, but not a meeting of all Shareholders of the Trust, then
only special meetings of the Shareholders of such one or more Series or Classes
shall be called and only the Shareholders of such one or more Series or Classes
shall be entitled to notice of and to vote at such meeting.
5
<PAGE>
Notices
Section 2. Except as above provided, notices of any meeting of
the Shareholders shall be given by the Secretary by delivering or mailing,
postage prepaid, to each Shareholder entitled to vote at said meeting, written
or printed notification of such meeting at least fifteen days before the
meeting, to such address as may be registered with the Trust by the Shareholder.
Notice of any Shareholder meeting need not be given to any Shareholder if a
written waiver of notice, executed before or after such meeting, is filed with
the record of such meeting, or to any Shareholder who shall attend such meeting
in person or by proxy. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced at
the meeting and reasonable notice is given to persons present at the meeting and
the adjourned meeting is held within a reasonable time after the date set for
the original meeting.
Voting-Proxies
Section 3. Subject to the provisions of the Trust Instrument,
shareholders entitled to vote may vote either in person or by proxy, provided
that either (i) an instrument authorizing such proxy to act is executed by the
Shareholder in writing and dated not more than eleven months before the meeting,
unless this instrument specifically provides for a longer period or (ii) the
Trustees adopt by resolution an electronic, telephonic, computerized or other
alternative to execution of a written instrument authorizing the proxy to act,
which authorization is received no more than eleven months before the meeting.
Proxies shall be delivered to the Secretary of the Trust or other persons
responsible for recording the proceedings before being voted. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of providing invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting. Except as otherwise provided
herein or in the Trust Instrument, as these By-laws or such Trust Instrument may
be amended or supplemented from time to time, all matters relating to the
giving, voting or validity or proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware corporation and the
Shareholders were shareholders of a Delaware corporation.
6
<PAGE>
Place of Meeting
Section 4. All special meetings of the Shareholders shall be
held at the principal place of business of the Trust or at such other place in
the United States as the Trustees may designate.
Action Without a Meeting
Section 5. Any action to be taken by Shareholders may be taken
without a meeting if all shareholders entitled to vote on the matter consent to
the action in writing and the written consents are filed with the records of
meetings of Shareholders of the Trust. Such consent shall be treated for all
purposes as a vote at a meeting of the Trustees held at the principal place of
business of the Trust.
ARTICLE V
TRUSTEES' MEETINGS
Special Meetings
Section 1. Special meetings of the Trustees may be called
orally or in writing by the Chairman of the Board of Trustees or any two other
Trustees.
Regular Meetings
Section 2. Regular meetings of the Trustees may be held at
such places and at such times as the Trustees may from time to time determine;
each Trustee present at such determination shall be deemed a party calling the
meeting and no call or notice will be required to such Trustee provided that any
Trustee who is absent when such determination is made shall be given notice of
the determination by the Chairman or any two other Trustees, as provided for in
Section 4.04 of the Trust Instrument.
Quorum
Section 3. A majority of the Trustees shall constitute a
quorum for the transaction of business and an action of a majority of the quorum
shall constitute action of the Trustees.
7
<PAGE>
Notice
Section 4. Except as otherwise provided, notice of any special
meeting of the Trustees shall be given by the party calling the meeting to each
Trustee, as provided for in Section 4.04 of the Trust Instrument. A written
notice may be mailed, postage prepaid, addressed to him at his address as
registered on the books of the Trust or, if not so registered, at his last known
address.
Place Of Meeting
Section 5. All special meetings of the Trustees shall be held
at the principal place of business of the Trust or such other place as the
Trustees may designate. Any meeting may adjourn to any place.
Special Action
Section 6. When all the Trustees shall be present at any
meeting, however called or wherever held, or shall assent to the holding of the
meeting without notice, or shall sign a written assent thereto filed with the
record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held.
Action By Consent
Section 7. Any action by the Trustees may be taken without a
meeting if a written consent thereto is signed by all the Trustees and filed
with the records of the Trustees' meeting. Such consent shall be treated, for
all purposes, as a vote at a meeting of the Trustees held at the principal place
of business of the Trustees.
Participation in Meetings By Conference Telephone
Section 8. Trustees may participate in a meeting of Trustees
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting. Any meeting
conducted by telephone shall be deemed to take place at and from the principal
office of the Trust.
8
<PAGE>
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Beneficial Interest
Section 1. The beneficial interest in the Trust shall at all
times be divided into such transferable Shares of one or more separate and
distinct Series, or classes thereof, as the Trustees shall from time to time
create and establish. The number of Shares is unlimited, and each Share of each
Series or class thereof shall be without par value and shall represent an equal
proportionate interest with each other Share in the Series, none having priority
or preference over another, except to the extent that such priorities or
preferences are established with respect to one or more classes of shares
consistent with applicable law and any rule or order to the Commission.
Transfer of Shares
Section 2. The Shares of the Trust shall be transferable, so
as to affect the rights of the Trust, only by transfer recorded on the books of
the Trust, in person or by attorney.
Equitable Interest Not Recognized
Section 3. The Trust shall be entitled to treat the holder of
record of any Share or Shares of beneficial interest as the holder in fact
thereof, and shall not be bound to recognize any equitable or other claim or
interest in such Share or Shares on the part of any other person except as may
be otherwise expressly provided by law.
Share Certificate
Section 4. Each Shareholder shall be entitled to a certificate
or certificates which shall certify the number of shares owned by him in the
respective Fund. Each certificate shall be signed by the President or a Vice
President and counter signed by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and shall be sealed with the Trust Seal. The
signatures may be either manual or facsimile signatures and the seal may be
either facsimile or any other form. If certificates are not requested by the
shareholder, his shares will be held on deposit by the Trust. In case any
officer who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
9
<PAGE>
In lieu of issuing certificates for Shares, the Trustees or
the transfer or shareholder services agent may either issue receipts therefor or
may keep accounts upon the books of the Trust for the record holders of such
Shares, who shall in either case be deemed, for all purposes hereunder, to be
holders of certificates for such Shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
Loss of Certificate
Section 5. In the case of the alleged loss or destruction or
the mutilation of a Share certificates, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees may prescribe.
Discontinuance of Issuance of Certificates
Section 6. The Trustees may at any time discontinue the
issuance of Share certificates and may, by written notice to each Shareholder,
require the surrender of Share certificates to the Trust for cancellation. Such
surrender and cancellation shall not affect the ownership of Shares in the
Trust.
ARTICLE VII
OWNERSHIP OF ASSETS OF THE TRUST
The Trustees, acting for and on behalf of the Trust, shall be
deemed to hold legal and beneficial ownership of any income earned on securities
held by the Trust issued by any business entity formed, organized or existing
under the laws of any jurisdiction other than a state, commonwealth, possession
or colony of the United States or the laws of the United States.
ARTICLE VIII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees or by resolution of the Shareholders.
10
<PAGE>
ARTICLE IX
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
The Trust may purchase and maintain insurance on behalf of any
Covered person or employee of the Trust, including any Covered Person or
employee of the Trust who is or was serving at the request of the Trust as a
Trustee, officer or employee of a corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and incurred by
him in any such capacity or arising out of his status as such, whether or not
the Trustees would have the power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance
that protects or purports to protect any Trustee or officer of the Trust against
any liability to the Trust or its Shareholders to which he would otherwise be
subject by reason or willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE X
SEAL
The seal of the Trust shall be circular in form bearing the
inscription:
"RUSHMORE GROWTH AND INCOME SERIES TRUST
THE STATE OF DELAWARE"
The form of the seal shall be subject to alteration by the
Trustees and the seal may be used by causing it or a facsimile to be impressed
or affixed or printed or otherwise reproduced.
Any officer or Trustee of the Trust shall have authority to
affix the seal of the Trust to any document, instrument or other paper executed
and delivered by or on behalf of the Trust; however, unless otherwise required
by the Trustees, the seal shall not be necessary to be placed on and its absence
shall not impair the validity of any document, instrument, or other paper
executed by or on behalf of the Trust.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Trust shall end on such date as the
Trustees shall from time to time determine.
11
<PAGE>
ARTICLE XII
AMENDMENTS
These Bylaws may be amended at any meeting of the Trustees of
the Trust by a majority vote.
ARTICLE XIII
REPORT TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the Trust including financial
statements which shall be certified at least annually by independent public
accountants.
XIV
HEADINGS
Headings are placed in these Bylaws for convenience of
reference only and in case of any conflict, the text of these Bylaws rather than
the headings shall control.
12
Exhibit (d)
Management Contract Between
the Cappiello-Rushmore Trust
and
McCullough, Andrews & Cappiello, Inc.,
as amended
<PAGE>
MANAGEMENT CONTRACT BETWEEN
THE CAPPIELLO-RUSHMORE TRUST
AND
McCULLOUGH, ANDREWS & CAPPIELLO
This Management Contract ( the "Contract"), dated as of the 13th day of
July, l992, is entered into by and between The Cappiello-Rushmore Trust (the
"Trust") and McCullough, Andrews
& Cappiello (the "Manager").
A. The Trust has engaged Money Management Associates ( the "Administrator") to
render or make available to the Funds, at their expense, all services needed for
management and operation of the Funds except for the management of the Funds'
investment portfolios.
B. The Trust wishes to engage the Manager, and the Manager wishes to be engaged,
to manage the Funds' investment portfolios.
WITNESSETH:
That in consideration of the mutual covenants hereinafter contained, it
is agreed as follows:
1. The Trust hereby employs the Manager to manage the investment and
reinvestment of the assets of each of the Funds comprising the Trust in
accordance with the investment objectives and policies as set forth in the
Trusts registration statement filed pursuant to the Investment Company Act of
1940 and the Securities Act of 1933 (the "Registration Statement") and subject
to the direction and control of the officers and Board of Trustees of the Trust,
for the period and on the terms set forth in this Contract. The Manager hereby
accepts such employment and agrees to render the services and to assume the
obligations herein set forth, for the compensation herein provided.
2. The Manager assumes and shall pay all expenses in connection with
the management of the investment and reinvestment of the portfolio assets of the
Funds, except that the Funds assume and shall pay all broker's commissions,
issue and transfer taxes chargeable to the Funds in connection with securities
transactions to which the Funds are a party.
<PAGE>
3. In connection with the investment and reinvestment of the assets of
the Funds, the Manager is authorized on behalf of the Funds, to place orders for
the execution of the Funds' portfolio transactions in accordance with the
applicable policies of the Funds as set forth in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time. The
Manager shall place orders for the purchase or sale of securities either
directly with the issuer or with a broker or dealer selected by the Manager. In
placing each Fund's securities trades, it is recognized that the Manager will
give primary consideration to securing the most favorable price and efficient
execution, so that each Fund's total cost or proceeds in each transaction will
be the most favorable under all the circumstances. Within the framework of this
policy, the Manager may consider the financial responsibility, research and
investment information, and other services provided by brokers or dealers who
may effect or be a party to any such transaction or other transactions to which
other clients of the Manager may be a party.
It is understood that it is desirable for the Funds that the Manager
have access to investment and market research and securities and economic
analyses provided by brokers and others. It is also understood that brokers
providing such services may execute brokerage transactions at a higher cost to
the Funds than might result from the allocation of brokerage to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, the purchase and sale of securities for the Funds may be made with
brokers who provide such research and analysis, subject to review by the Trust's
Board of Trustees from time to time with respect to the extent and continuation
of this practice to determine whether each fund benefits, directly or
indirectly, from such practice. It is understood by both parties that the
Manager may select broker-dealers for their execution of the funds portfolio
transactions who provide research and analysis as the Manager may lawfully and
appropriately use in its investment management and advisory capacities, whether
or not such research and analysis also may be useful to the Manager in
connection with its services to other clients.
Page 2
<PAGE>
On occasions when the Manager deems the purchase or sale of a security
to be in the best interests of one or more of the Funds as well as of other
clients, the Manager, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Manager in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Funds and to such other clients.
4. As compensation for the services to be rendered and the charges and
expenses to be assumed and paid by the Manager as provided in Section 2, each
Fund shall pay the Manager an annual fee based the average daily net asset value
of the respective Fund in accordance with the following schedule:
Growth Fund...........................0.50% (one-half of one percent)
Emerging Growth Fund..................0.50% (one-half of one percent
Utility Income Fund...................0.35% (35/100's of one percent)
The fee will be paid monthly not later than the fifth (5th) business day of the
month following the month for which services have been provided. In the event of
termination of this contract, the fee shall be computed on the basis of the
period ending on the last business day on which this contract is in effect
subject to a pro rata adjustment based on the number of days elapsed in the
current month as a percentage of the total number of days in such month, and
such fee shall be payable on the date of termination of this Contract with
respect to such Fund. For purposes of calculating the Manager's fee, the value
of the net assets of each Fund shall be determined in the same manner as that
Fund uses to compute the value of its net assets in connection with the
determination of the net asset value of its shares, all as set forth more fully
in such Fund's current Prospectus and Statement of Additional Information.
Page 3
<PAGE>
5. Subject to and in accordance with the Bylaws and Declaration of
Trust of the Trust and the Bylaws and Articles of Incorporation of the Manager
respectively, and the Investment Company Act of 1940, trustees, officers, agents
and shareholders of the Funds are or may be interested in the Manager or its
affiliates (or any successor thereof) as shareholders or officers, directors,
agents, or otherwise, and directors, officers, agents or shareholders of the
Manager or its affiliates are or may be interested in the Fund as trustees,
officers, agents, shareholders or otherwise, and the Manager or its affiliates
may be interested in the Fund as shareholders or otherwise; and the effect of
any such interrelationships shall be governed by said governing instruments and
the applicable provisions of the Investment Company Act of 1940. The Manager
shall notify the Trust of any change in ownership or control of McCullough,
Andrews & Cappiello that causes an "assignment" of this Contract (as the term
"assignment" is defined in the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder) within a reasonable time after such change.
6. During the term of this Contract, the Trust agrees (A) to provide
the Manager with copies of all prospectuses, statements of additional
information, proxy statements, registration statements, reports to shareholders,
sales literature, and other material prepared for distribution to shareholders
of the Trust or the public that refer in any way to the Manager not later than
the date such material is first distributed to the public, or sooner if
practicable, and the Trust shall not use such material, or shall discontinue use
of such material, if the Manager reasonably objects in writing within five
business days (or within such other time as may be mutually agreed) after the
Manager's receipt thereof; (B) to provide the Manager with true and correct
copies of each amendment or supplement to the Trust's Registration Statement
(including any prospectus and statement of additional information included
therein), By-Laws and Declaration of Trust not later than the date such
amendment or supplement first becomes effective, or sooner if practicable; and
(C) to provide the Manager with (i) written notice of any resolutions, policies,
restrictions or procedures adopted by the Trust's Board of Trustees which affect
the Manager's investment management responsibilities hereunder, and (ii) a list
of every natural person or entity deemed by the Trust to be an "affiliated
person or promoter of or principal underwriter for the Trust or an affiliated
person of such person," as such terms are defined or used in Sections 2(a) (3),
2(a) (29), 2(a) (30) and 17 of the Investment Company Act of 1940, and the Trust
shall promptly notify the Manager of any additions or deletions to such list.
Page 4
<PAGE>
7. This contract shall become effective with respect to such Fund on
the date first above written, and continue in effect until the first meeting of
the shareholders of such Fund occurring subsequent to the date hereof (but in no
event longer than two years from the date hereof), and if approved at such
shareholders' meeting, until two years from the date hereof, and thereafter only
so long as such continuance is approved with respect to such Fund at least
annually by a vote of a majority of the Trust's Board of Trustees, including the
votes of a majority of the Trustees who are not parties to such contract or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting such approval. Provided, however, that (a) this Contract may
be terminated without penalty either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of such
Fund, on sixty-days prior written notice to the Manager, (b) this Contract shall
automatically terminate in the event of its assignment (within the meaning of
the Investment Company Act of 1940), and (c) this Contract may be terminated by
the Manager on sixty-days prior written notice to the Trust. Any notice under
this Contract shall be given as provided in Section (11) below. As used in this
Contract, the terms "interested persons" and "vote of a majority of the
outstanding securities" shall have the respective meanings set forth in Section
2(a) (19) and Section 2(a) (42) of the Investment Company Act of 1940.
8. The services of the Manager to the Trust hereunder are not to be
deemed exclusive, and the Manager and each of its affiliates shall be free to
render similar services to others so long as its services hereunder are not
impaired thereby. The Manager shall for purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
9. No provisions of this Contract shall be deemed to protect the
Manager against any liability to the Trust or its shareholders to which it
otherwise would be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of its duties or the reckless disregard of
its obligations under this Contract. Nor shall any provisions hereof be deemed
to protect any trustee or officer of the Trust against any such liability to
which he might otherwise be subject by reason of any willful misfeasance, bad
faith or gross negligence in the performance of his duties or the reckless
disregard of his obligations. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations or duties hereunder,
the Manager shall not br subject to liability to the Trust, any of the Funds or
to any shareholder of any Fund for any act or omission in the course of
Page 5
<PAGE>
or connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security or other property by
any of the Funds. The Manager shall not be required to do or refrain from doing
or concur in anything which (by act or omission to act)may impose any liability
on it. Any person, even though also an officer, director, partner, employee or
agent of the Manager, who may be or become an officer, trustee, employee or
agent of the Trust, shall be deemed when rendering services to the Trust or
acting on any business of the Trust to be rendering such services to or acting
solely for the Trust and not as the Manager's officer, director, partner,
employee or agent or as one under the Manager's control or direction even though
paid by the Manager. The Manager shall not be required to take any legal action
on behalf of the Trust unless fully indemnified to the Manager's reasonable
satisfaction for all costs and liabilities likely to be incurred or suffered by
it. If the Trust requires the Manager to take any action which in the Manager's
opinion may make the Manager liable for payment of monies or liable in any other
way, the Manager shall be and kept indemnified in any reasonable amount and form
satisfactory to it as a prerequisite to taking such action. If any provision of
this Contract shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this contract shall not be affected thereby.
10. The Trust represents and warrants that it is duly registered with
the Securities and Exchange Commission under the Investment Company Act of 1940
as an open-end management investment company, and that all required action has
been taken by the Trust under the Securities Act of 1933 and the Investment
Company Act of 1940 to permit the public offering of and to consummate the sale
of, the shares of beneficial interest in the Trust pursuant to its current
prospectus.
11. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered or sent by prepaid,
first class letter posted to the following addresses, or to such other address
as shall be designated in a notice given in accordance with this section, and
such notice shall be deemed to have been given at the time of delivery of, if
sent by post, five weekdays after posting by airmail.
Page 6
<PAGE>
If to the Trust:
Cappiello-Rushmore Trust
4922 Fairmont Avenue
Bethesda, MD 20814
If to the Manager:
McCullough, Andrews & Cappiello
101 California Street
Suite 4250
San Francisco, CA 94111
12. This Contract shall be governed by and construed in accordance with
the laws of the State of California applicable to contracts between California
residents to be entered into and performed entirely within California.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed
on the date first above written.
WITNESS: THE CAPPIELLO-RUSHMORE TRUST
/s/Daniel O'Connor
By: President and Treasurer
WITNESS: McCULLOUGH, ANDREWS & CAPPIELLO
/s/Frank A. Cappiello
By: President
Page 7
<PAGE>
AMENDMENT
TO
MANAGEMENT CONTRACT
BETWEEN
CAPPIELLO-RUSHMORE TRUST
AND
McCULLOUGH, ANDREWS & CAPPIELLO, INC.
The following amendment is hereby made to the Management Contract dated
July 13, 1992 between the Cappiello-Rushmore Trust and McCullough, Andrews &
Cappiello, Inc. The following paragraph is added to Section 4 of said contract:
As compensation for the services to be rendered and the charges and
expenses to be assumed and paid by the manager as provided in Section 2, the
Gold Fund of the Trust shall pay the Manager an annual fee of .70 (.70%) of one
percent of the average daily net asset value of the Fund. The fee will be paid
monthly.
Witness CAPPIELLO-RUSHMORE TRUST
/s/Linda R. Paisley By/s/William L. Major
Secretary
Witness MCCULLOUGH, ANDREWS & CAPPIELLO, INC.
/s/Linda R. Paisley By/s/Frank A. Cappiello
President
Date: March 7, 1994
Exhibit (g)(1)
Administrative Services Agreement Between
the Cappiello-Rushmore Trust
and
Money Management Associates,
as amended
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
THE CAPPIELLO-RUSHMORE TRUST
AND
MONEY MANAGEMENT ASSOCIATES
This Administrative Services Agreement (the "Agreement") is entered
into this day 23rd of July, l992 by and between The Cappiello-Rushmore Trust
(the "Trust") and Money Management Associates ("MMA" sometimes hereinafter
referred to as the
"Administrator")
RECITALS
I. WHEREAS MMA and its personnel have expertise and experience in
providing administrative services to registered investment management companies,
and
II. WHEREAS The parties wish to set forth herein the manner and terms
upon which services will be provided.
NOW THEREFORE, the parties hereto agree as follows:
EMPLOYMENT OF MMA
1. MMA shall pay for all administrative costs of the Funds comprising
the Trust not hereinafter specifically assumed by the Funds where such expenses
are incurred by the Administrator in connection with the administration of the
affairs of the Funds. The Funds assume and shall pay or reimburse the
Administrator for interest expenses (if any) and extraordinary legal expenses.
2. As compensation for the services to be rendered and the charges and
expenses to be assumed and paid by the Administrator as provided above, the
Funds shall pay the Administrator an annual fee based on the average daily net
asset value of the respective Fund in accordance with the following schedule:
<PAGE>
Growth Fund......................1.00% (one percent)
Emerging Growth Fund.............1.00% (one percent)
Utility Income Fund..............0.70% (70/l00's of one percent)
The fee will be paid monthly. In the event of termination of this contract, the
fee shall be computed on the basis of the period ending on the last business day
on which this contract is in effect subject to a pro rata adjustment based on
the number of days elapsed in the current month as a percentage of the total
number of days in such month.
In addition to the fees described above, the Administrator may impose a
charge of $5 per month on any account whose average daily balance for the month
falls below $500 due to redemptions. The fee will continue to be imposed during
months when the account balance remains below $500. The fee will be imposed on
the last business day of the month. This fee will not be imposed on
tax-sheltered retirement plans or accounts established under the Uniform Gifts
or Transfers to Minors Act
3. Subject to and in accordance with the governing instruments of the
Trust and of the Administrator respectively, directors, officers, agents and
stockholders of the Funds are or may be interested in the Administrator (or any
successor thereof) as shareholders or otherwise; and the effect of any such
interrelationships shall be governed by said governing instruments and the
applicable provisions of the Investment Company Act of 1940.
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<PAGE>
4. This contract shall continue in effect until the first meeting of
the shareholders of the Funds (but in no event longer than two years from the
date hereof), and if approved at such shareholders' meeting, until two years
from the date hereof, and thereafter only so long as such continuance is
approved at least annually by a vote of a majority of the Trust's Board of
Trustees, including the votes of a majority of the Trustees who are not parties
to such contract or interested persons of any such party, cast in person at a
meeting called for the purpose of voting such approval. Provided, however, that
(a) this Contract may be terminated without penalty either by vote of the Board
of Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Funds, on sixty-days prior written notice to the
Administrator, (b) this Contract shall automatically terminate in the event of
its assignment (within the meaning of the Investment Company Act of 1940), and
(c) this Contract may be terminated by the Administrator on sixty-days prior
written notice to the Trust. Any notice under this Contract shall be given in
writing, addressed and delivered, or mailed postpaid, to the other party at any
office of such party. As used in this Agreement, the terms "interested persons"
and "vote of a majority of the outstanding securities" shall have the respective
meanings set forth in Section 2 (a) (19) and Section 2(a) (42) of the Investment
Company Act of 1940.
5. The services of the Administrator to the Trust hereunder are not to
be deemed exclusive, and the Administrator shall be free to render similar
services to others so long as its services hereunder are not impaired thereby.
The Administrator shall for purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
Page 3
<PAGE>
6. No provisions of this Agreement shall be deemed to protect the
Administrator against any liability to the Trust or its shareholders to which it
otherwise would be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of its duties or the reckless disregard at
its obligations under this Agreement. Nor shall any provisions hereof be deemed
to protect any Trustee or officer of the Trust against any such liability to
which he might otherwise be subject by reason of any willful misfeasance, bad
faith or gross negligence in the performance of his duties or the reckless
disregard of his obligations. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
7. Upon delivery of services by MMA to the Funds, MMA shall prepare and
submit to the Funds an invoice for the amounts to be paid by the Funds under the
Agreement. The invoice shall contain a description of the services rendered. The
calculation of the amount of the invoice shall be in accordance with the fee
schedule as set forth in Section 2. which has been reviewed as to the
reasonableness of the amounts by the Trustees of the Trust who are not
"interested persons" of the Trust. Within thirty (30) days of receipt of such
invoice, the Funds shall pay to MMA all amounts indicated as due and payable
notwithstanding the provisions of Section 8. of this Agreement.
8. If the Trust or its designees shall determine any discrepancy in the
invoice, the Trust shall give MMA written notice of such discrepancy and the
amount thereof. Within ten (10) days after receipt of such notice, MMA shall
either pay the Trust the amount of the discrepancy or inform the Trust in
writing that MMA disputes the existence or amount of the discrepancy. If MMA
disputes the existence or amount of the discrepancy, the parties agree that for
a period of thirty (30) days they shall use their best efforts to resolve such
dispute on a mutually satisfactory basis.
Page 4
<PAGE>
9. Any dispute or disagreement arising between MMA and the Trust in
conjunction with any provision of this Agreement, or the compliance or
non-compliance therewith, or the validity or enforceability thereof which is not
settled within thirty (30) days (or such other period as may be mutually agreed
upon) from the date that either party informs the other in writing that such
dispute or disagreement exists, shall be settled by arbitration in accordance
with rules set by a three member panel, one member each selected by MMA and the
Trust and the third being an attorney selected by mutual agreement of MMA and
the Trust, the aforesaid with all charges submitted by said attorney to be
shared equally by MMA and the Trust. The member representing the Trust shall be
selected by a majority of the Trustees of the Trust who are not interested
persons" of the Trust. A decision shall be rendered by the panel within thirty
(30) days of a meeting held in such place or places as may be agreed by the
panel, and MMA and the Trust shall comply with such decision. The decision of
the panel shall be final and not subject to judicial review, and judgment may be
entered thereon in accordance with applicable law in any court having
jurisdiction thereof.
10. Absent willful misfeasance, bad faith, gross negligence or reckless
disregard of duties, MMA shall not be liable to the Trust for any special,
incidental, or consequential damages for losses arising out of or relating to
the performance of its obligations under this Agreement, whether or not such
damages or losses were caused by the acts or omissions of MMA or its employees.
MMA is fully responsible for the accurate transmission to the Trust of
information provided to MMA by third parties but is not responsible for the
accuracy of the information so provided.
11. All documents and files which may be or have been furnished by MMA
to the Trust and which may be produced or prepared by MMA in connection with
this Agreement shall be and remain the exclusive property of the Trust.
12. MMA will preserve for the periods required in Rule 31a-2 of the
General Rules and Regulations under the Investment Company Act of 1940 such
records maintained by it as are required to be maintained by Rule 31a-l of such
rules.
Page 5
<PAGE>
13. At the option of a majority of the Trustees of the Trust who are
not "interested persons" of the Trust, the books and records of MMA , insofar as
such books and records pertain to the services, shall be available for
inspection by the Trust and its agents at the offices of MMA during regular
business hours, upon prior written notice to MMA by the Trust.
14. Neither MMA nor the Trust shall be considered to be in default in
the performance of their respective obligations hereunder to the extent that the
performance of any such obligation or obligations is prevented or delayed by Act
of God or any cause beyond the control of MMA or the Trust, as the case may be.
In the event of equipment breakdown beyond its control, MMA shall take
reasonable steps to minimize service interruptions.
15. The services as provided by MMA in accordance with this Agreement
shall not be deemed accepted until the Trust has verified the content and
accuracy of those services provided by MMA. The Trust shall notify MMA in
writing within ten (10) days of the Trust's receipt of services of its
acceptance or rejection of such services. If such notification is not received
within ten (10) days of the Trust's receipt of services, the services will be
deemed to have been accepted.
16. In the event that MMA fails to meet the performance schedules (if
any) contained herein and such failure is not caused by the Trust, MMA shall
take such steps as may be necessary to improve the schedule(s) in such form as
is required to meet such performance or delivery schedules (if any) described
herein.
17. MMA and the Trust may amend, modify or supplement this Agreement
only by a written instrument executed by both MMA and the Trust. If any such
amendment, modification, or supplement causes an increase or decrease in the
price of, or time required for, the performance of this Agreement, an equitable
adjustment shall be made, and this adjustment shall be mutually agreed upon by
MMA and the Trust and the Agreement modified in writing accordingly.
Page 6
<PAGE>
18. All notices, demand and other communications required or permitted
to be given hereunder shall be made in writing and shall be deemed to be duly
given if personally delivered or if deposited in the United States mail,
registered or certified mail, with postage prepaid, and addressed to the
appropriate party at the address set forth below, or at such other address as
the parties may designate in writing delivered in accordance with the provisions
of this section 18.
If to MMA
Money Management Associates
4922 Fairmont Avenue
Bethesda, MD. 20814
Attention: Daniel L. O'Connor, General Partner
If to the Trust:
The Cappiello-Rushmore Trust
4922 Fairmont Avenue
Bethesda, MD 20814
19. This Agreement is intended by the parties as a full expression of
their agreement with respect to the subject matter hereof and a complete and
exclusive statement of the terms thereof. No course of prior dealings between
the parties and no usage of trade shall be relevant or admissible to supplement,
explain, or vary any of the terms of this Agreement. Acceptance of, or
acquiescence in, a course of performance rendered under this Agreement shall not
be relevant or admissible to vary the terms and meaning of this Agreement, even
though the accepting or acquiescing party has knowledge of the nature of the
performance and the opportunity to make objection. No representations,
undertakings, or agreements have been made or relied upon in the making of this
Agreement other than those specifically set forth herein.
20. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland and shall be binding upon and shall inure
to the benefit of the parties hereto.
Page 7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/Daniel O'Connor
By: General Partner
WITNESS: CAPPIELLO-RUSHMORE TRUST
/s/William L. Major
By: Vice-President & Secretary
Page 8
<PAGE>
AMENDMENT
TO
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
CAPPIELLO-RUSHMORE TRUST
AND
MONEY MANAGEMENT ASSOCIATES
The following amendment is hereby made to the Administrative Services
Agreement dated July 23, 1992, by and between the Cappiello-Rushmore Trust and
Money Management Associates. The following paragraph is added to section 2 of
said contract:
As compensation for the services to be rendered and the charges and
expenses to be assumed and paid by the Administrator as provided in
Section 1, the Gold Fund of the Trust shall pay the Administrator an
annual fee of 1.00% (one percent) of the average daily net asset value
of the Fund. The fee will be paid monthly.
Witness CAPPIELLO-RUSHMORE TRUST
/s/ Linda R. Paisley By /s/ William L. Major
Secretary
Witness MONEY MANAGEMENT ASSOCIATES
/s/ Linda R. Paisley By /s/ Daniel O'Connor
General Partner
Date:March 7, 1994
<PAGE>
AMENDMENT
TO
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
CAPPIELLO-RUSHMORE TRUST
AND
MONEY MANAGEMENT ASSOCIATES
The following is an amendment to the Administrative Services Agreement
dated July 23, 1992, by and between the Cappiello-Rushmore Trust and Money
Management Associates. Section 4 is amended to read as follows:
This contract shall continue in effect only so long as such
continuance is approved at least annually by a vote of a majority of
the Trust's Board of Trustees, including the votes of a majority of
the Trustees who are not parties to such contract or interested
persons if any such party, cast in person at a meeting called for the
purpose of voting such approval. Provided, however, that (a) this
Contract may be terminated without penalty by vote of the Board of
Trustees of the Trust, on sixty-days prior written notice to the
Administrator, (b) this Contract shall automatically terminate in the
event of its assignment (within the meaning of the Investment Company
Act of 1940), and (c) this Contract may be terminated by the
Administrator on sixty-days prior written notice to the Trust. Any
notice under this Contract shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any office of
such party. As used in this Agreement, the term "interested persons"
shall have the meaning set forth in Section 2 (a) (19) of the
Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of July 28,
1994.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Daniel O'Connor
By General Partner
WITNESS: CAPPIELLO-RUSHMORE TRUST
/s/ William L. Major
By: Vice-President and Secretary
<PAGE>
AMENDMENT TO
ADMINISTRATION SERVICES AGREEMENT
BETWEEN
CAPPIELLO-RUSHMORE TRUST
AND
MONEY MANAGEMENT ASSOCIATES
The following amendment is hereby made to the Administrative Agreement
dated July 23, 1992 between the Cappiello-Rushmore Trust and Money Management
Associates.
The following shall be added under "Employment of MMA":
18. The Trust hereby employs MMA to
perform the services as set forth in
Schedule I to this Agreement.
Schedule I, Description of Services Provided by MMA to the Trust, is
also made part of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
April 24, 1997.
Witness CAPPIELLO-RUSHMORE TRUST
/s/ Stephenie E. Adams /s/ Frank A. Cappiello
by Stephenie E. Adams by: Frank A. Cappiello
Chairman
Witness MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
by: Stephenie E. Adams by: Daniel L. O'Connor
General Partner
Exhibit (g)(2)
Custody Agreement Between
the Cappiello-Rushmore Trust
and
Rushmore Trust and Savings, FSB,
as amended
<PAGE>
CUSTODY AGREEMENT BETWEEN
THE CAPPIELLO-RUSHMORE TRUST
AND
RUSHMORE TRUST AND SAVINGS BANK, FSB
This, Agreement (the "Agreement") is entered into this 23rd day of July
1992 by and between The Cappiello-Rushmore Trust (the "Trust") and Rushmore
Trust and Savings Bank, FSB (the "Custodian")
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the Trust
and the Custodian, intending to be legally bound hereby, agree as follows:
1. APPOINTMENT OF CUSTODIAN. The Trust hereby designates and appoints
the Custodian subject to the provisions hereof. In connection with such
appointment, the Trust shall promptly deliver to the Custodian certified or
authenticated copies of its Charter and By-laws, all amendments thereto,
certified resolutions of its Board of Trustees appointing the Custodian and
certified copies of such other resolutions of its Board of Trustees, contracts
and other documents as may be reasonably required by the Custodian.
2. DELIVERY OF ASSETS. The Trust shall, on receipt, promptly deliver
and pay or cause to be delivered and paid to the Custodian all securities and
cash hereafter acquired by the Trust.
3. DUTIES OF THE CUSTODIAN. The Custodian shall have and perform the
following powers and duties with reference to the portfolio securities and cash
of the Trust:
Page 1
<PAGE>
(a). Safekeeping of Securities. To keep safely the securities of the
Trust in its possession, in a depository or by book entry, and to receive for
such safekeeping delivery of securities acquired by the Trust from time to time.
The Custodian may hold such securities in bearer form, registered in the name of
the Trust, registered in the name of the nominee of the Custodian or registered
in the name of the nominee of any depository of the Custodian.
(b). Sales and Redemptions. To make delivery of securities which have
been sold for the account of the Trust upon receipt of proper instructions, or
which have been called, exchanged, redeemed, retired or otherwise become
payable, such delivery to be made only upon payment therefor, in cash or in such
other proper medium of payment as may be acceptable to the Custodian in the
reasonable exercise of its discretion, or as such instructions may designate.
(c). Cash Accounts. To retain all cash of the Trust in a separate
account or accounts in the name of the Trust subject only to draft or order by
the Bank, as Custodian, in accordance with the terms of this Agreement. All
monies received by the Custodian from or for the account of the Trust shall be
deposited in said account or accounts.
(d). Purchases. Upon receipt of proper instructions, and insofar as
funds are available for the purpose, to pay for all securities purchased from
the account of the Trust, payment being made only upon receipt of the securities
in bearer form or registered in form satisfactory to the Custodian.
(e). Collections. Unless otherwise directed by receipt of proper
instructions, to collect and receive all income with respect to the securities
held hereunder, and to do all other things necessary and proper in connection
with the collection of such items, including but not limited to the authority
to:
(i). present for payment all income items requiring presentation;
(ii). present for payment all securities which may mature or be called,
redeemed, retired, or otherwise become payable;
Page 2
<PAGE>
(iii). endorse for collection, for the account of the Trust checks,
drafts, or other negotiable instruments.
(f). Sales of Shares of the Funds. To receive all considerations paid
into the Trust in connection with the issuance of shares of the Funds of the
Trust and to deposit such considerations in the account or accounts maintained
hereunder.
(g). Redemption of Shares. Upon the request of the Trust, the Custodian
shall pay such sums to the Trust, its redemption agent or its shareholders as
the Trust may advise the Custodian are necessary in connection with a redemption
of shares of the Funds.
(h). Dividends and Distributions. Upon receipt of proper instructions,
to release available funds to the Trust or its disbursing agent for the payment
of dividends or other distributions payable in cash to shareholders of the
Funds.
(i). Transfer of Funds. prohibit the Custodian's transfer of funds upon
receipt by the Custodian directly of a telephone purchase or redemption request.
The Custodian should forward all requests for purchases and redemptions made by
telephone directly to the Trust for proper processing.
Page 3
<PAGE>
(j). Other Payments of Cash. Upon receipt of proper instructions, to
release available funds to the Trust or cause to be paid on behalf of the Trust,
insofar as funds are available, for the following particular purposes: such
taxes, interest charges, investment advisory fees, administrative fees, and
legal fees as well as such amounts payable in connection with the conversion or
exchange of securities owned by the Trust or for other proper purposes of the
Trust as may be approved generally or from time to time by the Treasurer or such
other person or persons as the Board of Trustees of the Trust may authorize,
except that if such payment is made for other proper corporate purposes not
otherwise specified above in this Agreement, it shall be made only upon receipt
of proper instructions together with a certified copy of a resolution of the
Board of Trustees of the Trust setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper corporate purpose and
naming the person or persons to whom such payment is to be made.
(4). OTHER DUTIES AS CUSTODIAN. The Custodian shall perform other
duties on behalf of the Trust as follows:
(a). Accounts and Statements. To send daily statements of cash
transactions to the Trust and such listings of securities held by the Custodian
for the account of the Trust as may from to time be requested by the Trust.
(b). Retention of Records. To preserve for the periods required in
Section 31a-2 of the General Rules and Regulations under the Investment Company
Act of 1940 such records maintained by it as are required to be maintained by
Section 31a-l of such rules. Unless otherwise instructed by the Trust, the
Custodian shall maintain its records in such form that the securities held by it
for the Trust shall at all times be identifiable by date of purchase and
purchase price per share or unit. Said records shall be available at the office
of the Custodian for inspection by the Trust or its agents at reasonable times.
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<PAGE>
(c). Reports. To assist the Trust in the (a) preparation of reports to
shareholders of the Trust, the Federal Securities and Exchange Commission, the
various state "Blue Sky" authorities and others, (b) audits of accounts and (c)
other ministerial matters of like nature.
(d). Miscellaneous. In general to attend to all non-discretionary
details in connection with the sale, exchange, substitution, purchase, transfer
or other dealing with the portfolio securities and cash of the Trust entrusted
to its care except as otherwise directed from time to time by proper
instructions.
(5). MATTERS OF GENERAL APPLICATION.
(a) Investments and Limitations. In performing its duties generally,
and more particularly in connection with the purchase, sale and exchange of
securities made by or for the Trust, the Custodian may take cognizance of the
provisions of the Charter and By-Laws of the Trust as from time to time amended,
but, nevertheless, except as otherwise expressly provided herein, it may assume
unless and until notified in writing to the contrary that so called proper
instructions received by it are not in conflict with or in any way contrary to
any provisions of said Charter or By-Laws as amended, or resolutions or
proceedings of the Board of Trustees of the Trust
(b). Proper Instructions. For purposes of this Agreement, the Custodian
shall be deemed to have received "proper Instructions" upon receipt of written
instructions signed by a majority of the Trustees of the Trust or by such person
or persons as the Board of Trustees shall have from time to time authorized to
give the particular class of instructions in question. Different persons may be
authorized to give instructions for different purposes. A certified copy of a
resolution or action of the Board of Trustees of the Trust including facsimile
signatures of such person or persons, may be received and accepted by the
Custodian as conclusive evidence of the authority of such person or persons to
act and may be considered as in full force and effect until receipt of written
notice to the contrary. Such instructions may be general or specific in terms.
Page 5
<PAGE>
(c). Reliance Upon Instructions. The Custodian shall be Protected in
acting upon any instruction, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine, and to have been properly
authorized and executed and shall, unless otherwise specifically provided
herein, be entitled to receive as conclusive proof for any fact or matter
required to be ascertained by it hereunder, a certificate signed by the
Secretary of the Trust with respect to corporate proceedings of the Trust or
otherwise by two officers of the Trust then authorized to give instructions
under paragraph 5(b) hereof.
(d). Indemnification. The Trust shall be indemnified for any loss it
sustains as a result of any embezzlement of the Trust's assets by the Custodian,
its agents, officers, directors or employees. The Custodian shall provide a
blanket indemnification to the Trust for any loss it sustains as a result of any
omission of the Custodian, its agents, officers, directors, or employees in
administering or performing any and all of its obligations under the Agreement.
6. COMPENSATION. Money Management Associates (the "Administrator")
shall pay to the Custodian such compensation and at such time as may from time
to time be agreed upon in writing by the Administrator and the Custodian.
7. TERMINATION. Either party may terminate this Agreement by notice in
writing delivered or mailed, postage prepaid, to the other party hereto not less
than thirty (30) days prior to the date of which such termination shall take
place. In the event of the legal inability of the Custodian to serve hereunder
or of termination of this Agreement as aforesaid by either party, the Trust
shall forthwith appoint a bank, Federal savings bank or trust company of good
standing as successor custodian, and the Custodian shall deliver all funds and
all securities of the Trust, duly endorsed and in form for transfer, to such
successor custodian. If while this Agreement is in force the Trust shall be
liquidated pursuant to law, the Custodian shall distribute either in cash or (if
the Trust so orders by proper instructions), in kind, prorata among the holders
of shares in the Funds comprising the Trust, the securities and property of the
Trust which remains after paying or satisfying all expenses and liabilities of
the Trust.
Page 6
<PAGE>
8. LAW OF CONTRACT. This agreement is executed and delivered in the
State of Maryland and shall be subject to and be construed according to the laws
of said State of Maryland.
9. NOTICES. Notices and other writings shall be deemed to have been
properly delivered or given hereunder to the respective addresses if delivered
or mailed, postage prepaid, to the appropriate party at the address set forth
below:
If to the Trust:
Cappiello-Rushmore Trust
4922 Fairmont Avenue
Bethesda, MD 20814
If to the Custodian:
Rushmore Trust and Savings Bank, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
10. LIABILITY WAIVED. Neither the holders of shares in the Funds nor
the Trustees of the Trust shall be personally liable hereunder
11. SUCCESSORS. This Agreement shall be binding on and shall inure to
the benefit of the Trust and the Custodian and their respective successors.
12. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original.
Page 7
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by a duly authorized
officer on the day and year first above written.
ATTEST CAPPIELLO-RUSHMORE TRUST
/s/John Cralle By/s/Daniel L. O'Connor
President and Treasurer
/s/Richard J. Garvey By/s/William L. Major
Vice-President & Secretary
ATTEST: RUSHMORE TRUST AND SAVINGS
BANK, FSB
/s/Diane Gloyd By/s/Majorie B. Deyo
Page 8
<PAGE>
RUSHMORE TRUST
January 24, 1997
Mr. Richard J. Garvey, Partner
Money Management Associates
4922 Fairmont Avenue
Bethesda, MD 20814
Dear Mr. Garvey:
I have enclosed a revised Schedule A, the fee schedule, of the Custody Agreement
between Cappiello-Rushmore Trust and Rushmore Trust and Savings, FSB. This
revision states that the compensation for custody services provided is an
internal allocation of a fee described in the Administrative Services Agreement
between Money Management Associates and Rushmore Trust and Savings, FSB.
Please date and sign below to indicate acceptance of this revised schedule.
Should you have any questions, call me at (301) 657-0291.
Sincerely,
/s/David M. Shawler
David M. Shawler
Vice President and
Trust Manager
Accepted: /s/Richard J. Garvey
Date: January 29, 1997
4922 Fairmont Avenue o Bethesda, Maryland 208l4 o (301) 657-0291
o Fax (301) 657-0294
<PAGE>
SCHEDULE A
The fee for Custodian services is an internal allocation of the fee described in
the Administrative Services Agreement between Money Management Associates and
Rushmore Trust and Savings, FSB.
Exhibit (h)(1)
Administrative Agreement Between
Money Management Associates
and
Rushmore and Savings, FSB,
as amended
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE TRUST & SAVINGS, FSB
This Administrative Services Agreement (the "Agreement") is entered
into this 6th day of July, 1993 by and between Money Management Associates a
District of Columbia limited partnership and Rushmore Trust & Savings, FSB
(RTS), a Maryland corporation sometimes referred to as the "Administrator".
RECITALS
I. WHEREAS, MMA is a registered transfer agent and
II. WHEREAS, MMA has entered into a contract with the
Cappiello-Rushmore Trust to provide all administrative services to all Funds
comprising the Trust including transfer agent, shareholder accounting and
custodian services, and
III. WHEREAS RTS is a registered transfer agent and its personnel have
expertise and experience in providing administrative services to registered
investment management companies, and
IV. WHEREAS, MMA wishes to engage RTS to provide the administrative
services required under the agreement, and
V. WHEREAS The parties wish to set forth herein the manner and terms
upon which services will be provided.
NOW THEREFORE, the parties hereto agree as follows:
<PAGE>
EMPLOYMENT OF RTS
1. RTS shall pay for all administrative costs of the Funds comprising
the Trust not hereinafter specifically assumed by the Funds where such expenses
are incurred by the Administrator in connection with the administration of the
affairs of the Funds. The Funds assume and shall pay or reimburse the
Administrator for interest expenses (if any) and extraordinary legal expenses.
2. As compensation for the services to be rendered and the charges and
expenses to be assumed and paid by the Administrator as provided above, the
Funds shall pay the Administrator an annual fee based on the average daily net
asset value of the respective Fund in accordance with the following schedule:
Growth Fund..... 0.50% (1/2 of one percent)
Emerging Growth Fund 0.50% (1/2 of one percent)
Utility Income Fund0.35% (35/100's of one percent)
The minimum fee shall be $7,500 per month per fund.
The fee will be paid monthly. In the event of termination of this contract, the
fee shall be computed on the basis of the period ending on the last business day
on which this contract is in effect subject to a pro rata adjustment based on
the number of days elapsed in the current month as a percentage of the total
number of days in such month.
In addition to the fees described above, the Administrator may impose a
charge of $5 per month on any account whose average daily balance for the month
falls below $500 due to redemptions. The fee will continue to be imposed during
months when the account balance remains below $500. The fee will be imposed on
the last business day of the month. This fee will not be imposed on
tax-sheltered retirement plans or accounts established under the Uniform Gifts
or Transfers to Minors Act
3. Subject to and in accordance with the governing instruments of MMA
and of the Administrator respectively, partners or officers, of MMA are or may
be interested in the Administrator (or any successor thereof) as shareholders or
otherwise; and the effect of any such inter-relationships shall be governed by
said governing instruments and the applicable provisions of the Investment
Company Act of 1940.
Page 2
<PAGE>
4. This contract shall continue in effect indefinitely, provided
however, that (a) this Contract may be terminated without penalty on sixty-days
prior written notice to the Administrator by MMA, (b) this Contract shall
automatically terminate in the event of its assignment (within the meaning of
the Investment Company Act of 1940), and (c) this Contract may be terminated by
the Administrator on sixty-days prior written notice to the MMA. Any notice
under this Contract shall be given in writing, addressed and delivered, or
mailed postpaid, to the other party at any office of such party. As used in this
Agreement, the term "interested persons' shall have the meaning set forth in
Section 2(a) (19) of the Investment Company Act of 1940.
5. The services of the Administrator to hereunder are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others so long as its services hereunder are not impaired thereby. The
Administrator shall for purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent in any way or otherwise be deemed an agent of
MMA.
6. No provisions of this Agreement shall be deemed to protect the
Administrator against any liability to MMA or its partners to which it otherwise
would be subject by reason of any willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this Agreement. Nor shall any provisions hereof be deemed to
protect any partner or officer of MMA against any such liability to which he
might otherwise be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of his duties or the reckless disregard of
his obligations. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
7. Upon delivery of services by RTS to MMA, RTS shall prepare and
submit to MMA an invoice for the amounts to be paid by MMA under the Agreement.
The invoice shall contain a description of the services rendered. The
calculation of the amount of the invoice shall be in accordance with the fee
schedule as set forth in Section 2. Within thirty (30) days of receipt of such
invoice, MMA shall pay to RTS all amounts indicated as due and payable
notwithstanding the provisions of Section 8. of this Agreement.
Page 3
<PAGE>
8. If MMA or its designees shall determine any discrepancy in the
invoice, MMA shall give RTS written notice of such discrepancy and the amount
thereof. Within ten (10) days after receipt of such notice, RTS shall either pay
the amount of the discrepancy or inform MMA in writing that RTS disputes the
existence or amount of the discrepancy. If RTS disputes the existence or amount
of the discrepancy, the parties agree that for a period of thirty (30) days they
shall use their best efforts to resolve such dispute on a mutually satisfactory
basis.
9. Any dispute or disagreement arising between RTS and MMA in
conjunction with any provision of this Agreement, or the compliance or
non-compliance therewith, or the validity or enforceability thereof which is not
settled within thirty (30) days (or such other period as may be mutually agreed
upon) from the date that either party informs the other in writing that such
dispute or disagreement exists, shall be settled by arbitration in accordance
with rules set by a three member panel, one member each selected by RTS and MMA
and the third being an attorney selected by mutual agreement of RTS and MMA,
with all charges submitted by said attorney to be shared equally by RTS and MMA.
A decision shall be rendered by the panel within thirty (30) days of a meeting
held in such place or places as may be agreed by the panel, and RTS and MMA
shall comply with such decision. The decision of the panel shall be final and
not subject to judicial review, and judgment may be entered thereon in
accordance with applicable law in any court having jurisdiction thereof.
10. Absent willful misfeasance, bad faith, gross negligence or reckless
disregard of duties, RTS shall not be liable to MMA for any special, incidental,
or consequential damages for losses arising out of or relating to the
performance of its obligations under this Agreement, whether or not such damages
or losses were caused by the acts or omissions of RTS or its employees. RTS is
fully responsible for the accurate transmission to of information provided to
RTS by third parties but is not responsible for the accuracy of the information
so provided.
11. All documents and files which may be or have been furnished by RTS
to MMA and which may be produced or prepared by RTS in connection with this
Agreement shall be and remain the exclusive property of MMA.
12. RTS will preserve for the periods required in Rule 31a-2 of the
General Rules and Regulations under the Investment Company Act of 1940 such
records maintained by it as are required to be maintained by Rule 31a-1 of such
rules.
Page 4
<PAGE>
13. At the option of MMA, the books and records of RTS insofar as such
books and records pertain to the services, shall be available for inspection by
MMA and its agents at the offices of RTS during regular business hours, upon
prior written notice to RTS by MMA.
14. Neither RTS nor MMA shall be considered to be in default in the
performance of their respective obligations hereunder to the extent that the
performance of any such obligation or obligations is prevented or delayed by Act
of God or any cause beyond the control of RTS or MMA, as the case may be. In the
event of equipment breakdown beyond its control, RTS shall take reasonable steps
to minimize service interruptions.
15. The services as provided by RTS in accordance with this Agreement
shall not be deemed accepted until MMA has verified the content and accuracy of
those services provided by RTS. MMA shall notify RTS in writing within ten (10)
days of MMA's receipt of services of its acceptance or rejection of such
services. If such notification is not received within ten (10) days of MMA's
receipt of services, the services will be deemed to have been accepted.
16. In the event that RTS fails to meet the performance schedules (if
any) contained herein and such failure is not caused by MMA, RTS shall take such
steps as may be necessary to improve the schedule(s) in such form as is required
to meet such performance or delivery schedules (if any) described herein.
17. RTS and MMA may amend, modify or supplement this Agreement only by
a written instrument executed by both RTS and MMA. If any such amendment,
modification, or supplement causes an increase or decrease in the price of, or
time required for, the performance of this Agreement, an equitable adjustment
shall be made, and this adjustment shall be mutually agreed upon by RTS and MMA
and the Agreement modified in writing accordingly.
18. All notices, demand and other communications required or permitted
to be given hereunder shall be made in writing and shall be deemed to be duly
given if personally delivered or if deposited in the United States mail,
registered or certified mail, with postage prepaid, and addressed to the
appropriate party at the address set forth below, or at such other address as
the parties may designate in writing delivered in accordance with the provisions
of this Section 18.
Page 5
<PAGE>
If to MMA:
Money Management Associates
4922 Fairmont Avenue
Bethesda, MD. 20814
Attention: Daniel L. O'Connor, General Partner
If to RTS:
Rushmore Trust & Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
19. This Agreement is intended by the parties as a full expression of
their agreement with respect to the subject matter hereof and a complete and
exclusive statement of the terms thereof. No course of prior dealings between
the parties and no usage of trade shall be relevant or admissible to supplement,
explain, or vary any of the terms of this Agreement. Acceptance of, or
acquiescence in, a course of performance rendered under this Agreement shall not
be relevant or admissible to vary the terms and meaning of this Agreement, even
though the accepting or acquiescing party has knowledge of the nature of the
performance and the opportunity to make objection. No representations,
undertakings, or agreements have been made or relied upon in the making of this
Agreement other than those specifically set forth herein.
20. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland and shall be binding upon and shall inure
to the benefit of the parties hereto.
Page 6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
WITNESS: MONEY ASSOCIATES
/s/ Richard J. Garvey
By: Richard J. Garvey
Partner
WITNESS: RUSHMORE TRUST & SAVINGS, FSB
/s/ William L. Major
By: William L. Major
Sr. Vice-President
& Chief Financial Officer
Page 7
<PAGE>
ADDENDUM
TO
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE TRUST & SAVINGS, FSB
The Administrative Services Agreement between Money Management
Associates and Rushmore Trust & Savings, FSB dated July 6th, 1993 is hereby
amended this 1st day March, 1994 as follows
Paragraph 2. is amended to include:
Gold Fund0.50% (1/2 of one percent)
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date first above written.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/Richard J. Garvey
By: Richard J. Garvey
Partner
WITNESS: RUSHMORE TRUST & SAVINGS, FSB
/s/William L. Major
By: William L. Major
Sr. Vice-President
& Chief Financial Officer
<PAGE>
AMENDMENT TO
ADMINISTRATION SERVICES AGREEMENT
BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE TRUST AND SAVINGS, FSB
The following amendment is hereby made to the Administrative Agreement
dated July 6, 1993 between Money Management Associates and Rushmore Trust and
Savings, FSB.
The following Recital shall replace in its entirety Recital IV of said
Agreement:
IV. WHEREAS, MMA wishes to engage RTS to
provide the administrative services
required as set forth in Schedule I to
this Agreement, and
Schedule I, Description of Services Provided, is also made part of this
Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
April 24, 1997.
Witness MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
by: Stephenie E. Adams by: Daniel L. O'Connor
General Partner
Witness RUSHMORE TRUST AND SAVINGS, FSB
/s/ Leslie Smith /s/ Linda R. Paisley
by: Leslie Smith by: Linda R. Paisley
Chief Executive Officer
<PAGE>
SCHEDULE I
DESCRIPTION OF SERVICES PROVIDED
Custodian Services
Services Included:
o Safekeeping of securities
o Delivery of securities sold
o Receipt of securities purchased
o Retain Fund cash in separate account(s)
Shareholder Servicing and Transfer Agent Services
Services Included:
o Maintenance of individual shareholder accounts
o Posting of all transactions
o Preparation of periodic shareholder statements
o Preparation of transaction confirmations
o Income distributions
o Respond to inquiries from shareholders
o Process account changes such as name or address
Administrative Services
Services Included:
o General ledger accounting
o Portfolio accounting
o Daily share pricing
o Maintenance of records per SEC regulations
o SEC registration fees
o State "Blue Sky" fees
o Trustees fees and expenses
o Insurance
o Legal fees
o Prospectus preparation
o Tax return preparation
o Shareholder report preparation
o Printing
o Postage
o Printing of statement stock and envelopes
Exhibit (h)(2)
Administrative Agreement Between
Money Management Associates
and
Rushmore Services, Inc.,
as amended
<PAGE>
AGREEMENT
This Agreement by and between Money Management Associates, a District
of Columbia limited partnership located at Palm Beach Gardens, Florida ("MMA")
and Rushmore Services, Inc., a Maryland corporation located at 4922 Fairmont
Avenue, Bethesda, Maryland 20814 ("RSI,'). This Agreement is made and entered
into on the 1st day of October 1994.
WITNESSETH
WHEREAS MMA provides investment advisory services to mutual funds;
those mutual funds currently being advised by MMA are: Fund for Tax-Free
Investors, Inc., The Rushmore Fund, Inc., Fund for Government Investors, and
American Gas Index Fund, Inc.; MMA provides administrative services to the
Cappiello-Rushmore Trust (collectively the "Mutual Funds"); and
WHEREAS RSI provides administrative services to MMA in connection with
its management, promotion and distribution of Mutual Funds; and
IT IS the purpose of this Agreement to clearly define the obligations
of each of the parties hereto with respect to services rendered by RSI.
NOW THEREFORE in consideration of the mutual promises herein exchanged
the parties agree as follows:
1. RSI shall provide the administrative services as set forth above to
MMA. It shall also execute trades and monitor portfolios for the Mutual Funds.
It shall maintain MMA records in Bethesda, Maryland at its offices and assemble,
prepare and file required reports with the Securities and Exchange Commission
and the Office of Thrift Supervision.
2. MMA shall pay a monthly service fee to RSI of $82,350.00 which is
intended to compensate RSI for management of the Mutual Funds, salary, rental
expense, and profit. Additional expenses which are reimbursable include, but are
not limited to, advertising, promotion, distribution, professional fees,
telephone, postage and travel expense. The monthly service fee shall be paid at
the beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then to
reimbursement.
<PAGE>
3. The term of this Agreement shall be one year beginning on the 1st
day of January, 1995. This Agreement shall be automatically renewed between the
parties on an annual basis unless within thirty (30) days of an annual
termination date notice is given by one party or the other of its intention not
to renew.
4. The monthly fee, however, shall be renegotiable annually between the
parties. In the event that the parties cannot come to an agreement on the amount
of the monthly fee thirty (30) days in advance of the termination of the current
annual contract, such failure to agree shall constitute a termination notice of
the contract.
5. Any dispute or disagreement arising between MMA and RSI in
conjunction with any provision of this Agreement, or the compliance or
non-compliance therewith, which is not settled within thirty (30) days (or such
period as may be mutually agreed upon) from the date that either party informs
the other in writing that such dispute or disagreement exists, shall be settled
by arbitration in accordance with rules set by a three member panel, one member
each selected by MMA and RSI and the third being an attorney selected by mutual
agreement of MMA and RSI, with all charges submitted by said attorney to be
shared equally by MMA and RSI. The decision of the panel shall be by majority
vote and final and not subject to judicial review, and judgment may be entered
thereon in accordance with applicable law in any court having jurisdiction
thereof.
6. All notices, demands and other communications required or permitted
to be given hereunder shall be made in writing and shall be deemed to be duly
given if personally delivered or if deposited in the United States mail,
registered or certified mail, with postage prepaid, and addressed to the
appropriate party at the address set forth below, or at such other address as
the parties may designate in writing delivered in accordance with the provisions
of this paragraph.
If to MMA:
Money Management Associates
P.O. Box 31237
Palm Beach Gardens, Florida 33420
Attention: Daniel L. O'Connor
2
<PAGE>
If to RSI:
Rushmore Services, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
Attention: Martin M. O'Connor
7. This Agreement is intended by the parties as a full expression of
their agreement with respect to the subject matter hereof and a complete and
exclusive statement of the terms thereof. No course of prior dealings between
the parties and no usage of trade shall be relevant or admissible to supplement,
explain, or vary any of the terms of this Agreement. Acceptance of, or
acquiescence in, a course of performance rendered under this Agreement shall not
be relevant or admissible to vary the terms and meaning of this Agreement, even
though the accepting or acquiescing party has knowledge of the nature of the
performance and the opportunity to make objection. No representations,
undertakings, or agreements have been made or relied upon in the making of this
Agreement other than those specifically set forth herein.
8. This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland and shall be binding upon and shall inure to
the benefit of the parties hereto.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President and Secretary
4
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated October 1, 1994
between Money Management Associates and Rushmore Services, Inc. The following
paragraphs shall replace in their entirety paragraphs (2) and (3) of the
original Agreement:
2. MMA shall pay a monthly service fee to RSI of $63,500.00 which is
intended to compensate RSI for management of the Mutual Funds, salary, rental
expense, and profit. Additional expenses which are reimbursable include, but are
not limited to, advertising, promotion, distribution, professional fees,
telephone, postage and travel expense. The monthly service fee shall be paid at
the beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then to
reimbursement.
3. he term of this Agreement shall be one year beginning on the 1st day
of January, 1996. This Agreement shall be automatically renewed between the
parties on an annual basis unless within thirty (30) days of an annual
termination date notice is given by one party or the other of its intention not
to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President and
Secretary
December 24, 1995
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated October
1, 1994 between Money Management Associates and Rushmore Services, Inc. The
following paragraphs shall replace in their entirety paragraphs (2) and (3) of
the amended
Agreement:
2. MMA shall pay a monthly service fee to RSI of $56,000.00 which is
intended to compensate RSI for management of the Mutual Funds. salary, rental
expense, and profit. Additional expenses which are reimbursable include, but are
not limited to, advertising, promotion, distribution, professional fees,
telephone, postage and travel expense. The monthly service fee shall be paid at
the beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then to
reimbursement.
3. The term of this Agreement shall be one year beginning on the 1st
day of January, 1997. This Agreement shall be automatically renewed between the
parties on an annual basis unless within thirty (30) days of an annual
termination date notice is given by one party or the other of its intention not
to renew. WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President and
Secretary
December 23, 1996
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated October
1, 1994 between Money Management Associates and Rushmore Services, Inc. The
following paragraph shall replace in their entirety paragraphs (2) and (3) of
the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $75,000.00 which is
intended to compensate RSI for management of the Mutual Funds, salary, rental
expense, and profit. Additional expenses which are reimbursable include, but are
not limited to, advert) promotion, distribution, professional fees, telephone,
postage and travel expense. The monthly service fee shall be paid at the
beginning of each month and the reimbursement shall be billed monthly. Payments
will be first allocated to the service fee and then to reimbursement.
3. The term of this Agreement shall be six months beginning on the 1st
day of 1997. This Agreement shall be automatically renewed between the parties
on an annual unless within thirty (30) days of an annual termination date notice
is given by one party o other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President and
Secretary
June 30, 1997
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated October
1, 1994 between Money Management Associates and Rushmore Services, Inc. The
following paragraphs shall replace in their entirety paragraphs (2) and (3) of
the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $60,000.00 which is
intended to compensate RSI for management of the Mutual Funds, salary, rental
expense, and profit. Additional expenses which are reimbursable include, but are
not limited to, advertising, promotion, distribution, professional fees,
telephone, postage and travel expense. The monthly service fee shall be paid at
the beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then to
reimbursement.
3. The term of this Agreement shall be one year beginning on the 1st
day of January, 1998. This Agreement shall be automatically renewed between the
parties on an annual basis unless within thirty (30) days of an annual
termination date notice is given by one party or the other of its intention not
to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President and
Secretary
December 31, 1997
Exhibit (i)
Opinion of Jorden Schulte & Burchette
regarding the legality of the securities of
the Cappiello-Rushmore Trust being registered
<PAGE>
JORDEN SCHULTE & BURCHETTE
Suite 400 East
1024 Thomas Jefferson Street, N.W.
Washington, D.C. 20007-0805
(202) 965-8100
July 31, 1992
Rushmore Growth and Income Series Trust
4922 Fairmont Avenue
Bethesda, MD 20814
Ladies and Gentlemen:
This opinion is furnished in connection with the registration under the
Securities Act of 1933, as amended, of shares ("Shares") that will be offered
and sold by Rushmore Growth and Income Series Trust (the "Trust").
In rendering our opinion, we have examined such documents, records and
matters of law as we deemed necessary for purposes of this opinion. We have
assumed the genuineness of all signatures of all parties, the authenticity of
all documents submitted as originals, the correctness of all copies, and the
correctness of all facts set forth in the certificates delivered to us or
written or oral statements made to us. We have also assumed that all documents
necessary to authorize and effectuate the change of the name of the Trust to
Cappiello-Rushmore Trust have been properly executed, filed and recorded.
Based upon and subject to the foregoing, it is our opinion that the
Shares that will be issued by the Trust when sold will be legally issued, fully
paid and nonassessable.
Our opinion is rendered solely in connection with the Registration
Statement on Form N-1A under which the Shares will be registered and may not be
relied upon for any other purpose without our written consent. We hereby consent
to the use of this opinion as an exhibit to such Registration Statement.
Very truly yours,
/s/Jorden Schulte & Burchette
Jorden Schulte & Burchette
Exhibit (j)
Consent of Deloitte & Touche, LLP,
independent public accountants for
the Cappiello-Rushmore Trust
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Cappiello-Rushmore Trust:
We consent to the incorporation by reference in Post-Effective Amendment No. 8
to Registration Statement Nos. 33-46283 and 811- 6601 of our report dated August
7, 1998 appearing in the Annual Report of Cappiello-Rushmore Trust for the year
ended June 30, 1998, and to the reference to us under the caption "Financial
Highlights" appearing in the Prospectus, which is also a part of such
Registration Statement.
/s/DELOITTE & TOUCHE LLP
1900 M Street, N.W.
Washington, D. C. 20036-3564
August 28, 1998
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