As Filed With The Securities And Exchange Commission on October 28, 1999.
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. 9 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 10 (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 Commencement of the Proposed Public Offering of
the Securities:
It is proposed that this filing will become effective (check
appropriate box):
__X__ immediately upon filing pursuant to paragraph (b) of rule 485.
_____ on (date) pursuant to paragraph (b) (1) (v) of rule 485.
_____ 60 days after filing pursuant to paragraph (a) (1) of rule 485.
_____ on (date) pursuant to paragraph (a) (1) of rule 485.
_____ 75 days after filing pursuant to paragraph (a) (2) of rule 485.
_____ on (date) pursuant to paragraph (a) (2) of rule 485.
<PAGE>
CAPPIELLO-RUSHMORE TRUST
REGISTRATION STATEMENT ON FORM N-1A
Cross Reference Sheet
Required By Rule 495(a)
Under The Securities Act of 1933
Form N-1A Location in
Item No. Registration Statement
Part A. Information Required in Prospectus
1. Front and Back Cover Pages Front Cover Page of
Prospectus;
Back Cover Page of
Prospectus
2. Risk/Return Summary: Risk/Return Summary:
Investments, Risks and Investments, Risks and
Performance Performance
3. Risk/Return Summary: Fee Table Risk/Return Bar Chart and
Tables; Year-To-Date Total
Returns Table; Highest and
Lowest Quarterly Returns;
Performance Table; Fees and
Expenses
4. Investment Objectives, Principal Investment Objectives,
Investment Strategies, and Principal Investment
Related Risks Strategies, and Related
Risks
5. Management's Discussion of Fund Management Discussion of
Performance Fund Performance:
Performance Comparison
6. Management, Organization, and Management, Organization,
Capital Structure and 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
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
13. Management of the Fund Management of the Trust
14. Control Persons and Principal Control Persons and
Holders of Securities Principal Holders of
Securities
15. Investment Advisory and Other Investment Advisory and
Services Other Services: Investment
Adviser; Custodian and
Independent Public
Accountant
16. Brokerage Allocation and Other Brokerage Allocation and
Practices Other Practices
17. Capital Stock and Other Not Applicable
Securities
18. Purchase, Redemption and Purchase and Redemption of
Pricing 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
Common Control with the Fund Under Common Control with
the Trust
25. Indemnification Indemnification
26. Business and Other Connections Business and Other
of Investment Adviser Connections of Investment
Adviser
27. Principal Underwriters Not Applicable
28. Location of Accounts and Records Location of Accounts and
Records
29. Management Services Not Applicable
32. Undertakings Not Applicable
Signatures Signatures
<PAGE>
PART A
<PAGE>
CAPPIELLO-RUSHMORE TRUST
UTILITY INCOME FUND
GROWTH FUND
EMERGING GROWTH FUND
Prospectus
November 1, 1999
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 3
Risk/Return Bar Chart and Table 5
Performance Table 7
Fees and Expenses 7
Investment Objectives, Principal Investment Strategies,
and Related Risks
Cappiello-Rushmore Utility Income Fund 8
Cappiello-Rushmore Growth Fund 9
Cappiello-Rushmore Emerging Growth Fund 11
A Review of Risk Considerations 12
Management's Discussion of Fund Performances
Cappiello-Rushmore Utility Income Fund 15
Cappiello-Rushmore Growth Fund 15
Cappiello-Rushmore Emerging Growth Fund 16
Market Outlook 17
Performance Comparison 18
Shareholder Information
How to Invest In the Funds 19
How to Redeem Your Investment 20
Additional Information About the Funds
Exchanging Fund Shares 22
Pricing of Fund Shares 23
Dividends and Distributions 23
Tax Consequences of Investing In the Funds 24
Management, Organization, and Capital Structure
Investment Adviser 24
Year 2000 Preparations 25
Financial Highlights 26-28
<PAGE>
RISK and RETURN SUMMARY
Investments, Risks, and Performance
Cappiello-Rushmore Utility Income Fund
Fund Investment Objective
The Utility Income Fund's investment objective is to provide high
current income, with capital appreciation a secondary consideration.
Principal Fund Investment Strategies
The Utility Income Fund seeks to achieve its objective by investing up
to 65% of its total assets in the equity securities of public utility
companies and may also invest in the bonds of public utility
companies. We invest primarily in the equity securities of electric
utility companies and, to a lesser extent, in gas utility companies.
The Fund also may invest up to 35% of its total assets in the
securities of telecommunications companies. The Fund also may invest
up to 20% of its total assets in the securities of foreign issuers
which are traded on a recognized U.S. securities exchange or in dollar-
denominated American Depository Receipts ("ADRs"). The 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
The main risks that could adversely affect the value of the Utility
Income Fund's shares and the total return on your investment in this
Fund stem from the Fund's concentration policies. As with any stock-
oriented fund, the value of your investment in the Fund will rise or
fall depending on the performance of individual securities as well as
stock market movements. Because the Fund concentrates its investments
in the public utilities industry, and within that industry may focus
on a single sector, the electric utilities sector, the performance of
this Fund is subject to the risk that the public utilities industry,
and in particular the electric utilities sector of that industry, will
underperform the market as a whole. 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. To the
extent that the Fund may invest in the securities of foreign issuers,
the Fund also will be subject to foreign company risks, such as
changes in currency exchange rates, inadequate disclosure of company
information, and political instability.
Cappiello-Rushmore Growth Fund
Fund Investment Objective
The Growth Fund's investment objective is long-term capital
appreciation.
Principal Fund Investment Strategies
The Growth Fund seeks to achieve its objective by investing at least
65% of its total assets in stocks of larger-capitalization growth
companies (i.e., companies that have the potential to increase
earnings faster than the overall market and 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. The 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, but also may invest up to 20% of the Fund's total assets in
foreign securities which are traded on a recognized U.S. securities
exchange or in dollar-denominated ADRs.
Principal Risks of Investing In the Growth Fund
The main risks that could adversely affect the value of the Growth
Fund's shares and the total return on your investment in this Fund are
that the growth in earnings and the rates of return of the growth
companies in which the Fund invests suddenly slow or stop so that the
prices of these companies fall. In addition, while larger-company
stocks tend to be less volatile than smaller company stocks, the value
of your investment in the Fund will rise or fall depending on the
performance of individual securities as well as stock market
movements. These larger companies also may be slower to innovate or
respond to changing conditions than smaller companies.
Cappiello-Rushmore Emerging Growth Fund
Fund Investment Objective
The Emerging Growth Fund's investment objective is long-term capital
appreciation.
Principal Fund Investment Strategies
The Emerging Growth Fund seeks to achieve its objective by investing
at least 65% of its total assets in the stocks and convertible
securities of emerging growth companies (i.e., companies that have the
potential to increase earnings faster than the overall market and
whose total market capitalization is less than $750 million). The
Fund invests mainly in the common stocks of U.S. emerging growth
companies, but also may invest up to 20% of the Fund's total assets in
foreign emerging growth companies which are traded on a recognized
U.S. securities exchange or in dollar-denominated ADRs. We may also
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.
Principal Risks of Investing In the Emerging Growth Fund
The main risks of smaller-capitalization emerging growth companies
that could adversely affect the value of the Emerging Growth Fund's
shares and the total return on your investment in this Fund are that
the growth in earnings and the rates of return of the emerging growth
companies in which the Fund invests suddenly slow or stop so that the
prices of these companies fall and also that:
- Smaller-capitalization companies are usually younger and less
established with a relatively-short record of sales and earnings.
- Because of their size, smaller companies may lack the depth of
financial and management resources to weather economic or financial
turmoil.
- Smaller companies tend to be more volatile in their sales and
earnings performance, as well as in their stock price.
- 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.
Loss of money is a risk of investing in the Cappiello-Rushmore Funds.
An investment in the Funds is not a deposit 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 Table
The chart and table on the following two pages show the annual
calendar-year returns and the 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 the table 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 below and the table on the following page assume the
reinvestment of dividends and distributions. How the Funds have
performed in the past does not necessarily indicate how the Funds will
perform in the future.
Annual Total Returns
Utility Growth Fund Emerging Growth Fund
Income Fund
1993 6.1% 14.4% 22.5%
1994 -13.4% 4.6% -7.0%
1995 29.8% 37.1% 36.0%
1996 4.4% 7.2% 2.0%
1997 25.3% 22.2% 4.7%
1998 14.8% 7.2% -8.6%
<TABLE>
<CAPTION>
Year-To-Date
Best Quarter Worst Quarter Total Return
as of September 30, 1999
<S> <C> <C> <C>
Utility Income Fund 14.73% (10.32)% (4.28)%
4th Qtr of 1997 1st Qtr of 1994
Growth Fund 28.45% (24.30)% 10.36%
4th Qtr of 1998 3rd Qtr of 1998
Emerging Growth Fund 22.98% (24.75)% (6.07)%
4th Qtr of 1998 3rd Qtr of 1998
</TABLE>
Performance Table
Average Annual Total Returns
(for Periods Ended December 31, 1998)
Utility Emerging Russell
Income Growth Growth S&P 500 2000
Fund Fund Fund IndexTM Index
One Year 14.78% 7.18% (8.58)% 28.58% (2.55)%
Five Years 11.04% 15.01% 4.32% 24.06% 11.86%
FEES and EXPENSES of the FUNDS
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Funds.
Utility Emerging
Income Growth Growth
Fund Fund Fund
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%
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:
1 Year 3 Years 5 Years 10 Years
Utility Income Fund $ 107 $ 334 $ 579 $ 1,283
Growth Fund 153 474 818 1,791
Emerging Growth Fund 153 474 818 1,791
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, and RELATED RISKS
Cappiello-Rushmore Utility Income Fund
Fund Investment Objective
The Utility Income Fund's investment objective is to provide high
current income, with capital appreciation a secondary consideration.
Principal Fund Investment Strategies
The Utility Income Fund seeks to achieve its objective by investing up
to 65% of its total assets in the equity securities of public utility
companies and may also invest in the bonds of public utility
companies. We invest primarily in the equity securities of electric
utility companies and, to a lesser extent, in gas utility companies.
The Fund also may invest up to 35% of its total assets in the
securities of telecommunications companies. The Fund also may invest
up to 20% of its total assets in the securities of foreign issuers
which are traded on a recognized U.S. securities exchange or in dollar-
denominated ADRs. The Fund's investments may include common stocks,
preferred stocks, and convertible securities of both U.S. and foreign
issuers. The Fund, to a lesser extent, 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"
(i.e., the company's capital structure, operating characteristics, pre-
tax profit margins, and return on stockholders' equity) change for the
worse. Generally, company stock will also be sold when the stock
price of the company experiences significant, unexplained declines.
The Fund, from time to time, may take temporary defensive measures
that are inconsistent with the Fund's principle investment strategies
in attempting to respond to adverse market, economic, political, or
other conditions. Thus, the Fund may temporarily invest all or part
of its assets in cash or cash equivalents, which include, but are not
limited to short-term money market instruments, U.S. Government
securities, certificates of deposit, bankers' acceptances, or
repurchase agreements secured by U.S. Government securities. The
effect of taking these temporary defensive positions is that the Fund
may not achieve its investment objective.
Principal Risks of Investing In the Utility Income Fund
The main risks that could adversely affect the value of the Utility
Income Fund's shares and the total return on your investment in this
Fund stem from the Fund's concentration policies. As with any stock-
oriented fund, the value of your investment in the Fund will rise or
fall depending on the performance of individual securities as well as
stock market movements. Because the Fund concentrates its investments
in the public utilities industry, and within that industry may focus
on a single sector, the electric utilities sector, the performance of
this Fund is subject to the risk that the public utilities industry,
and in particular the electric utilities sector of that industry, will
underperform the market as a whole. Since the Fund focuses on a
single sector, the Fund's performance largely depends on that sector's
performance, which may differ from that of the overall public
utilities industry. 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. To the extent that the Fund may invest in
the securities of foreign issuers, the Fund also will be subject to
foreign company risks, such as changes in currency exchange rates,
inadequate disclosure of company information, and political
instability.
Cappiello-Rushmore Growth Fund
Fund Investment Objective
The Growth Fund's investment objective is long-term capital
appreciation.
Principal Fund Investment Strategies
The Growth Fund seeks to achieve its objective by investing at least
65% of its total assets in stocks of larger-capitalization growth
companies. 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. The
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, but also may
invest up to 20% of the Fund's total assets in foreign securities
which are traded on a recognized U.S. securities exchange or in dollar-
denominated ADRs. 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, the Fund may also invest up
to 10% of its total assets in warrants, preferred stocks, and
convertible debt securities, and up to 5% of its total assets in
certain "high-yield" securities (i.e., below investment-grade
corporate bonds, commonly known as "junk bonds," and which are
subject to greater risks, including default risks, than those found in
higher-rated securities). The Fund, to a lesser extent, 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, when that company shows deteriorating
fundamentals, or when the stock price of the company experiences
significant, unexplained declines.
The Fund, from time to time, may take temporary defensive measures
that are inconsistent with the Fund's principle investment strategies
in attempting to respond to adverse market, economic, political, or
other conditions. Thus, the Fund may temporarily invest all or part
of its assets in cash or cash equivalents. The effect of taking these
temporary defensive positions is that the Fund may not achieve its
investment objective.
As an anticipated result of these principal investment strategies, the
Growth Fund may engage in the active and frequent trading of portfolio
securities. This increased portfolio turnover for the Fund could
produce high brokerage costs for the Fund and result in taxable
distributions to Fund shareholders.
Principal Risks of Investing In the Growth Fund
The main risks that could adversely affect the value of the Growth
Fund's shares and the total return on your investment in this Fund are
that the growth in earnings and the rates of return of the growth
companies in which the Fund invests suddenly slow or stop so that the
prices of these companies fall. In addition, while larger company
stocks tend to be less volatile than smaller company stocks, the value
of your investment in the Fund will rise or fall depending on the
performance of individual securities as well as stock market
movements. 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
The Emerging Growth Fund's investment objective is long-term capital
appreciation.
Principal Fund Investment Strategies
The Emerging Growth Fund seeks to achieve its objective by investing
at least 65% of its total assets in the stocks and securities
convertible into common stocks and warrants of emerging companies with
market capitalization of less than $750 million. 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. The Fund invests mainly in the common
stocks of U.S. companies, but also may invest up to 20% of the Fund's
total assets in foreign emerging growth companies which are traded on
a recognized U.S. securities exchange or in dollar-denominated ADRs.
We may also 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 Emerging Growth Fund may also invest up to 10% of its total assets
in warrants, preferred stocks, and convertible debt securities, and up
to 5% of its total assets in certain high-yield securities. The Fund
may also engage in other investment practices designed to seek to
either enhance the Fund's returns or protect the portfolio from
losses. The Fund, to a lesser extent, 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).
We usually sell a company's stock when that company no longer is
considered an emerging growth company, when that company shows
deteriorating fundamentals, or when the stock price of the company
experiences significant, unexplained declines.
The Fund, from time to time, may take temporary defensive measures
that are inconsistent with the Fund's principle investment strategies
in attempting to respond to adverse market, economic, political, or
other conditions. Thus, the Fund may temporarily invest all or part
of its assets in cash or cash equivalents. The effect of taking these
temporary defensive positions is that the Fund may not achieve its
investment objective.
As an anticipated result of these principal investment strategies, the
Emerging Growth Fund may engage in the active and frequent trading of
portfolio securities. This increased portfolio turnover for the Fund
could produce high brokerage costs for the Fund and result in taxable
distributions to Fund shareholders.
Principal Risks of Investing In the Emerging Growth Fund
The main risks of smaller-capitalization emerging growth companies
that could adversely affect the value of the Emerging Growth Fund's
shares and the total return on your investment in this Fund are that
the growth in earnings and the rates of return of the emerging growth
companies in which the Fund invests suddenly slow or stop so that the
prices of these companies fall and also that:
- Smaller-capitalization companies are usually younger and less
established with a relatively-short record of sales and earnings.
- 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.
- Smaller companies tend to be more volatile in their sales and
earnings performance, as well as in their stock price.
- 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.
Additional Risks
In addition to the specific principal risks identified above for each
of the Funds, a Fund also may encounter the following broad-based
risks:
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.
Concentration Risk - The risk that the particular industry in
which the Fund may focus its investments will underperform the
market as a whole.
Sector Risk - The risk that the particular 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.
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:
- 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.
- 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.
Money Market Investment Risk - Under adverse market conditions,
one or more of the Funds could invest some or even all 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
The Funds' fiscal year spanned a full-fledged bear market in U.S.
stocks and a dazzling recovery that turned into a new bull market that
reached all time highs - all in just twelve months. The bear market
started in the summer and fall of 1998, and a new bull market move
began in late October and continues to this date - quite a year!
Briefly, the market's plunge in mid-summer of 1998 turned into near-
panic by September. At this point, the Federal Reserve (the Fed)
began a series of three one-quarter of one-percent reductions in short-
term rates to counteract the temporary stock and bond market paralysis
triggered by the surprising Russian devaluation. The Fed's interest
rate actions stopped the market decline and by late October helped
engineer a dramatic reversal to a bull market that carried all major
stock indexes to continuing new highs in early 1999.
As the year 1999 progressed, the stock market, spurred by
improving corporate earnings, low interest rates, and even lower
inflation, crossed the 10,000 level on the Dow in March and continued
its move through most of April under the belief that the Federal
Reserve would maintain its accommodative stance on rates and money
supply for some time. Basic commodity prices continued to be well
behaved with the exception of oil, which had a significant rebound
from its lows. Small capitalization stock staged short sporadic
rallies during the year as did cyclical stocks but the gains were
ephemeral since investors continued to favor the more liquid larger
cap stocks.
During this period, there was no firm evidence that the economy
was overheating and that inflation was anything but benign. However,
there were isolated economic signs of a tightening labor market and
some indications of firmer basic commodities pricing, particularly oil
(usually a precursor to inflationary pressures). Surprisingly, in
late May, the Fed raised rates for the first time in more than a year
by 1/4 of 1%. Investors, shaken by the belief that the Fed was ending
its accommodative stance on rates and money supply, reacted
negatively. However, in short order, the market accepted this move on
the part of the Fed as a positive sign of vigilance as well as
prudence. Accordingly, as the Funds' fiscal year ended, stocks began
to recover, buoyed by indications of better than expected second
quarter earnings that were announced in July. Accordingly, we entered
the new fiscal year on an up-beat note.
Growth Fund
The Growth Fund continues to seek capital appreciation by
investing in larger established companies with favorable relationships
between price-earnings ratios and growth rates. Once again, as in
four of the past five years, the Fund had a total return of greater
that 20%. More importantly, this return beat the benchmark Standard &
Poor's 500 Index's total return of 22.76%.
The Fund's largest sector positions at year end were technology
(computer hardware and software, electronics, and telecommunications)
at 29.4% of the portfolio, financial services (banks, investment
companies, etc.) at 23.6%, business services at 8.7%, merchandising
and retail at 8.6%, and oil and gas services at 5.1%. Cash and
equivalents totaled 6% at year-end.
Among the best performing stocks at year-end were:
e4L Inc. +452.17%
Charles Schwab Corp. +234.10%
Frontier Corp. + 86.10%
The largest single stock position in the portfolio was shared by
three stocks: IBM, Shared Medical Systems Corp, and Franklin
Resources Inc., each representing 6.2% of the portfolio.
More importantly, at year's end the Growth Fund portfolio of
stocks had a better-than-average growth rate, 14% versus 13% for the
S&P 500 Index with a less-expensive price-earnings ratio, 25.8 times
earnings for the Fund versus 27.6 times earnings for the Index.
As in past years, we continue to believe that growth stocks
should fare well in the expected economic environment of the next
twelve months. However, unlike the past year, we believe earnings
growth in 1999-2000 will become more important since the stock market
will no longer be able to rely on a favorable interest rate
environment to drive price-earnings multiple expansion. Accordingly,
one expected trend is an increased focus on stocks representing growth
at a reasonable price. "Quality" earnings growth is defined as company
growth likely to persist over the next several years reported using
relatively conservative accounting procedures. Another expected trend
is the gradual broadening out of the market into sectors heretofore
shunned by most investors including defense and the energy sector, as
well as emphasis on mid-capitalization and smaller capitalization
stocks where growth is less expensive. In such a broadening market,
selectivity will be more important than ever before. High growth mid-
cap stocks with reasonable valuations should provide superior returns
in such a rotational market
Utility Income Fund
The Utility Income Fund is designed for investors who are seeking
a more conservative, income-oriented stock market investment. The
portfolio is likely to offer high dividend yields than the stock
market average with substantially lower volatility in share price. The
Fund is managed to provide such higher-than-average yields through
investing in utility stocks such as electric, natural gas, and
telephones. With dividend income as a focus, capital gains are a
secondary consideration. Total return for the Fund for the year was
12.24%, representing the second consecutive year of double-digit
returns for this conservative portfolio. At year's end, 84.0% of the
portfolio was concentrated in utilities as follows: gas and electric
power companies represented 44.5%, telecommunications 35.8%, with
natural gas distribution at 3.7%.
The balance of the portfolio was invested primarily in a
diversified grouping of Real Estate Investment Trusts. Cash and
equivalents represented 3.4% of assets at year's end.
Among the best performing stocks at year end were:
Frontier Corp. +86.10%
ALLTEL Corp. +53.76%
Bell Atlantic Corp. +43.29%
The utility industry continues to move from the full-fledged
regulation of the past (when state and federal regulators held the
industry in a static-state and reluctantly granted rates) to the
current period of deregulation, globalization and merger-mania. While
uncertainties, particularly in regards to deregulation, still abound
in the utility sector, most company managements seemed to have coped
reasonably well in managing the transition from a regulated status to
one of increasing competition. Nevertheless, these uncertainties have
pushed utilities, primarily electrics, to a lower valuation when
related to the S&P 500 stocks. Given the improving prospects for the
entire industry, we believe this makes for most attractive investment
situation. Telecommunication stocks (35.8% of portfolio) such as
regional telephone companies SBC Communications, Inc., Frontier Corp.,
and Bell Atlantic Corp., have been excellent performers during the
year. We expect further expansion and merger activity in this sector
as well as increased growth (from both rising basic demand and the
growing internet business) which should result in higher dividend
income. Further, gas stocks are becoming increasingly attractive.
They represent value based on earnings and book value relative to
current prices. We intend to increase our investments in this group
in the current year.
Emerging Growth Fund
The Emerging Growth Fund registered a negative return of 4.39%
for the twelve months ended June 30, 1999. The results, while
disappointing, reflected the small cap sector's continued
underperformance, particularly in comparison to the returns of the Dow
Jones Industrial Average and the Standard & Poor's 500 Index over the
past several years.
It has been more than six years (1992) since the small cap sector
has significantly outperformed the larger cap group. More distressing
is the fact that smaller stocks continued to reflect the same positive
characteristics that were in place last year; such as good earnings
momentum, in most cases established products or services, competent
and successful management and solid balance sheets. Further, most
small cap stocks have little or no exposure to the international
financial vagaries such as volatile currencies that belabored world
stock markets for the past two years. The major reason for this small
cap performance discrepancy between the solid growth characteristics
of small caps and their stock price underperformance seems to be
liquidity and risk aversion. Liquidity relates to the ability of
institutions to buy and sell large blocks of stocks without
essentially disturbing the market price. Risk aversion is the
continuing tendency of investors to seek safety and lower volatility
in the larger companies that possess big assets and a longer history
of operations as opposed to smaller stocks.
We ended fiscal 1999 with the portfolio assets focused in four
major sectors: technology (semiconductors, telecommunications , and
computer software and services) at 29.6%, merchandising and retailing
at 18.6%, healthcare at 13.9 %, and business services and equipment at
12.6%. Our largest single stock position was Stanford
Telecommunications, Inc. which represented 6.8% of the portfolio. At
year's end, cash and equivalents stood at 11% of assets.
Among the best performing stocks during the year were e4L, Inc.
up 452.17%, REMEC, Inc. up 41.76%, and Steven Madden, Ltd. up 17.30%.
Among the best stocks purchased after June 30, 1998 were:
Stanford Telecommunications, Inc. +228.71%
Labor Ready, Inc. +136.21%
Shared Medical Systems Corp. + 57.77%
As we have noted, small cap stocks are compelling values at
current levels. These values are reflected in the Fund's portfolio
holdings and the numbers are strikingly eloquent; this year's
projected earnings growth for the total portfolio is 18% versus 13%
for the market (S&P 500). Yet despite this superior projected growth,
the Fund's price-earnings ratio is significantly cheaper, 22.8 times
earnings versus 27.6 times earnings for the market (S&P 500). The
Fund continues to represent a "pure" small capitalization portfolio
with the average capitalization of $487 million.
Historically, the last great period of underperformance versus
large cap stocks occurred from 1969 to 1973. From 1975 to 1979, the
small cap stocks turned around and outperformed their large cap
counterparts by an average of 24.7% a year from 1975 to 1979. During
the past five years (1994 - 1998) small stock underperformance has
approached the distressed price levels last seen in 1969 - 1973. The
reversal this time around could be equally as powerful as it was in
the mid-to-late 1970's.
Market Outlook
As the summer of 1999 ends, rising interest rates have begun to
cast a shadow on the bull market. Rates are being pushed up by fear
of rising inflation. While inflation is currently benign (even with
unemployment at its lowest level in 29 years), there is a lingering
fear on the part of investors as well as the Fed that wage increases
are about to escalate with resulting inflationary pressure. Further,
the belief is that there is too much speculation in stocks and real
estate. This opts for further Fed rate increases. The goal of monetary
policy is to maximize sustainable growth and prosperity and the first
priority is to do no harm. Accordingly, the Fed has to be
particularly alert to those economic influences that pose a risk to
maximum sustainable growth. However, in perspective, it is well to
remember that the Fed cut rates last year in response to the world
financial crisis. Now the Fed seems to be intent on bringing rates
back to normal (i.e. where they were before the market crash in early
July 1998). More perspective: rate hikes, while they are badly
received initially by the market, are really positive signs long-term.
They indicate that steps are being taken that will ultimately
strengthen the economy. The danger is that if the Fed tightens too
much, it could shake the market and threaten worldwide growth as in
1997 and 1998. Likewise, if it does too little, inflation may heat
up. Our view is that the Fed will do less rather than more.
Another "plus" is the Y2K problem. To date, this has been
considered a "minus" but perversely, all this worrying about the
impact of the year 2000 on our computer systems and the economy has
served to moderate and in some cases depress, profits in various
sectors of our economy. Once the millennium is passed, spending on
Y2K will soon end, which will free up corporate resources for spending
on more productive technology and thus improve profitability.
Additionally, the drag on earnings from Y2K costs that are being
expensed will end thus boosting profits in the first and second
quarters of 2000.
Obviously, stocks always carry risks and some of the risks are
well known and advertised: for example corporate profits could
stagnate instead of grow. This would reduce capital spending, cause
dollar weakness, and affect the stock market. Any prolonged weakness
in the stock market could impact the consumer's sense of well being.
Since consumer spending accounts for about two-thirds of the U.S.
economy, the effect could be significant.
In summary, based on our expectation for rising corporate
profits, historically low interest rates (despite the recent run-up)
and lower inflation, we continue to be positive about the stock
market. Much of this forecast is based on consumer spending which,
while slowing slightly in the months ahead (reflecting the impact of
higher interest rates on the economy), will not slow enough to put the
economy at risk for a recession.
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.
<TABLE>
<CAPTION>
Utiility Growth Fund Emerging S&P 500 Russell 2000
Income Fund Growth Fund
<C> <C> <C> <C> <C> <C>
10/6/92 $10,000 $10,000 $10,000 $10,000 $10,000
6/30/93 $10,998 $10,634 $11,335 $11,297 $11,871
6/30/94 $ 8,998 $11,058 $10,506 $11,455 $12,386
6/30/95 $10,493 $14,667 $15,141 $14,442 $14,877
6/30/96 $12,655 $17,904 $17,315 $18,197 $18,431
6/30/97 $13,083 $19,711 $16,943 $24,511 $21,441
6/30/98 $16,425 $23,794 $16,919 $31,904 $24,980
6/30/99 $18,435 $29,343 $16,176 $39,159 $25,357
</TABLE>
Average Annual Total Returns as of June 30, 1999
Utility Growth Emerging
Income Fund Fund Growth Fund
One Year 12.24% 23.32% (4.39)%
Five Year 15.43% 21.55% 8.95 %
Since Inception 9.51% 17.33% 7.40 %
SHAREHOLDER INFORMATION
How to Invest In the Funds
Facts To Know Before You Invest:
- The minimum initial investment in each Fund is $2,500
- Retirement accounts may be opened with a $500 minimum investment
- There are no minimum amounts for subsequent investments
- There are no sales charges
- The Funds reserve the right to reject any purchase order
- All shares are electronically recorded; the Funds will not issue
certificates
- 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:
Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing # 0550-71084
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.
Invest Through Brokers
You may also invest in the Funds by purchasing shares through
registered broker-dealers, banks or other financial institutions
that purchase securities for their customers. When an authorized
third party, such as those mentioned, accepts an order, the Funds
will be deemed to have received the order. Orders accepted by an
authorized third party will be priced at the Funds' net asset
values next computed after acceptance. Such third parties who
process orders may charge a fee for their services. Certain third
party organizations may receive compensation from the Funds, the
Funds' transfer agent, or the Funds' Adviser for the shareholder
services they provide.
How To Redeem Your Investment
Redeem By Telephone
Contact Shareholder Services at (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.
Redeem By Mail or Fax
Mail your instructions for Fax your instructions for
redemption to: 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:
- the name of the Fund and account number you are redeeming from
- your name(s) and address as it appears on your account
- the dollar amount or number of shares you wish to redeem
- your signature(s) as it appears on your account
- a daytime telephone number
Additional Information You Should Know When You Redeem:
- There are no fees charged for redemptions.
- 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.
- 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).
- 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.
- If your monthly Fund account balance averages $500 or less 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 that fall below $500 after
providing 60 days written notice.
- 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 or 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
The Trust is comprised of four separate Cappiello-Rushmore Funds,
three of which, the Utility Income, Growth, and Emerging Growth Funds,
are described in this Prospectus. The fourth Cappiello-Rushmore Fund,
the Gold Fund, is described in a separate prospectus.
You may exchange shares of one Cappiello-Rushmore Fund, without cost,
for shares of another Cappiello-Rushmore Fund (excluding the Cappiello-
Rushmore Gold Fund), 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 fund you are exchanging into must be available for sale in
your state and the registration for both accounts must be identical.
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.
Pricing of Fund Shares
The price of a fund's shares is its "net asset value per share." This
figure is computed by dividing the total market value of a fund's
investments and other assets, less any liabilities, by the number of
fund shares outstanding. The net asset value per share of each
Cappiello-Rushmore Fund is determined as of 4:00 P.M., Eastern Time,
on days when the New York Stock Exchange is open for business. Orders
accepted by the Funds directly or by an authorized third party will be
priced at the next computed net asset value after the orders are
received. This means that if you place a purchase or redemption order
after 4:00 P.M., Eastern Time, it will be effected at the next
calculation of net asset value, normally 4:00 P.M. the next business
day.
Each of the Funds values its 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.
If a Fund has portfolio securities that are primarily listed on
foreign exchanges that trade on weekends or other days when the Fund
does not price its shares, then the net asset value of the Fund's
shares may change on days when shareholders of the Fund will not be
able to purchase or redeem the Fund's shares.
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:
- 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.
- 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.
"Undeliverable" or "Uncashed" Dividend Checks
If you elect to receive dividends and distributions in cash and the
payment (1) is returned and marked as "undeliverable" or (2)
remains uncashed for six months, your cash election will be changed
automatically and future dividends will be reinvested in the Fund
at the per share net asset value determined as of the date of
payment. In addition, any undeliverable checks or checks that
remain uncashed for six months will be canceled and then reinvested
in the Fund at the per share net asset value determined as of the
date of cancellation.
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. Each of the Funds
expects that its distributions to shareholders, as a result of each
Fund's investment objective and strategies, will consist primarily of
dividends on ordinary income or capital gains. 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
McCullough, Andrews & Cappiello, Inc. (the "Adviser") has served as
the investment adviser to the Funds since their inception on October
6, 1992. The following advisory fees as a percentage of net assets
were paid to the adivser during the Funds' fiscal year ended June 30,
1999:
Utility Emerging
Income Fund Growth Fund Growth Fund
Advisory Fees Paid as a
Percentage of Net Assets: 0.35% 0.50% 0.50%
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 Trustee 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 evaluated the impact that the year 2000
issue may have on the computer systems that they utilize and have made
appropriate modifications to these systems in order to prepare for the
year 2000. The Servicers worked 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 the systems remediation was not 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.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables on the next three pages 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>
Utility Income Fund
<CAPTION>
For the Years Ended June 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $ 12.56 $ 10.40 $ 10.60 $ 9.24 $ 8.39
--------- -------- -------- --------- ----------
Income from Investment Operations:
Net Investment Income 0.40 0.47 0.53 0.49 0.55
Net Realized and Unrealized Gain
(Loss) on Securities 1.09 2.17 (0.19) 1.39 0.85
--------- -------- -------- --------- ----------
Total from Investment Operations 1.49 2.64 0.34 1.88 1.40
--------- -------- -------- --------- ----------
Less Distributions:
Dividends (from net investment income) (0.40) (0.48) (0.54) (0.52) (0.55)
Distributions (from capital gains) (0.82) - - - -
--------- -------- -------- --------- ----------
Total Distributions to Shareholders (1.22) (0.48) (0.54) (0.52) (0.55)
--------- -------- -------- --------- ----------
Net Asset Value-End of Year $ 12.83 $ 12.56 $ 10.40 $ 10.60 $ 9.24
Total Investment Return 12.24% 25.55% 3.39% 20.60% 16.62%
Ratios and Supplemental Data:
Net Assets-End of Period (in thousands) $ 8,397 $ 9,799 $ 8,806 $ 15,106 $ 17,151
Ratio of Expenses to Average Net Assets 1.05% 1.05% 1.05% 1.05% 1.05%
Ratio of Net Income to Average Net Assets 3.16% 4.01% 4.88% 4.82% 6.26%
Portfolio Turnover Rate 22.0% 29.5% 17.3% 45.1% 147.0%
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Growth Fund
<CAPTION>
For the Years Ended June 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $ 22.96 $ 19.02 $ 17.87 $ 14.64 $ 11.05
--------- --------- -------- --------- ---------
Income from Investment Operations:
Net Investment Income (Loss) (0.13) (0.18) (0.09) (0.07) 0.01
Net Realized and Unrealized Gain
on Securities 3.86 4.12 1.83 3.30 3.60
--------- --------- -------- --------- ---------
Total from Investment Operations 3.73 3.94 1.74 3.23 3.61
--------- --------- -------- --------- ---------
Less Distributions:
Dividends (from net investment income) - - - - (0.02)
Distributions (from capital gains) (4.66) - (0.59) - -
--------- --------- -------- --------- ---------
Total Distributions to Shareholders (4.66) - (0.59) - (0.02)
--------- --------- -------- --------- ---------
Net Asset Value-End of Year $ 22.03 $ 22.96 $ 19.02 $ 17.87 $ 14.64
Total Investment Return 23.32 % 20.72 % 10.10 % 22.06 % 32.65 %
Ratios and Supplemental Data:
Net Assets at End of Period
(in thousands) $ 20,871 $ 24,831 $ 24,899 $ 31,777 $ 19,337
Ratio of Expenses to Average Net Assets 1.50 % 1.50 % 1.50 % 1.50 % 1.50 %
Ratio of Net Income (Loss) to
Average Net Assets (0.62)% (0.74)% (0.46)% (0.41)% 0.12 %
Portfolio Turnover Rate 54.3 % 65.1 % 41.9 % 74.5 % 70.9 %
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Emerging Growth Fund
<CAPTION>
For the Years Ended June 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $ 13.82 $ 13.84 $ 16.99 $ 14.96 $ 10.41
--------- --------- --------- --------- -----------
Income from Investment Operations:
Net Investment Loss (0.09) (0.21) (0.24) (0.16) (0.08)
Net Realized and Unrealized Gain
(Loss) on Securities 0.52A 0.19A (0.25) 2.30 4.63
--------- --------- --------- --------- -----------
Total from Investment Operations (0.61) (0.02) (0.49) 2.14 4.55
--------- --------- --------- --------- -----------
Less Distributions:
Dividends (from net investment income) - - - - -
Distributions (from capital gains) (0.10) - (2.66) (0.11) -
--------- --------- --------- --------- -----------
Total Distributions to Shareholders (0.10) - (2.66) (0.11) -
--------- --------- --------- --------- -----------
Net Asset Value-End of Year $ 13.11 $ 13.82 $ 13.84 $ 16.99 $ 14.96
Total Investment Return (4.39)% (0.14)% (2.15)% 14.36 % 43.71 %
Ratios and Supplemental Data:
Net Assets at End of Period
(in thousands) $ 8,636 $ 14,159 $ 20,732 $ 44,985 $ 36,606
Ratio of Expenses to Average Net Assets 1.51 % 1.50 % 1.50 % 1.50 % 1.50 %
Ratio of Net Loss to Average Net Assets (0.49)% (1.07)% (1.20)% (0.98)% (0.61)%
Portfolio Turnover Rate 171.6 % 121.2 % 66.2 % 121.2 % 96.1 %
A The per share amount does not coincide with the net realized and unrealized
gain/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.
</TABLE>
<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 Semiannual Reports Reports that contain
information about the Funds'
investments. The 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 and make
other inquiries of the Funds. You may contact the Cappiello-Rushmore
Trust directly by telephone, at 1-800-343-3355, or visit our internet
site at http://www.rushmorefunds.com, 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
<PAGE>
CAPPIELLO-RUSHMORE TRUST
GOLD FUND
Prospectus
November 1, 1999
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.
The Gold Fund does not accept purchase orders for new shares, nor are
Gold Fund shares 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 3
Risk/Return Bar Chart and Table 4
Performance Table 5
Fees and Expenses 5
Investment Objectives, Principal Investment Strategies,
and Related Risks 6
A Review of Risk Considerations 8
Management's Discussion of Fund Performance 10
Market Outlook 11
Performance Comparison 12
Shareholder Information
How to Invest In the Fund 13
How to Redeem Your Investment 14
Additional Information About the Fund
Exchanging Fund Shares 16
Pricing of Fund Shares 16
Dividends and Distributions 17
Tax Consequences of Investing In the Fund 17
Management, Organization, and Capital Structure
Investment Adviser 18
Year 2000 Preparations 18
Financial Highlights 20
<PAGE>
RISK and RETURN SUMMARY
Investments, Risks, and Performance
Fund Investment Objective
The Gold Fund's investment objective is long-term capital
appreciation.
Principal Fund Investment Strategies
The Gold Fund seeks to achieve its objective by investing at least 65%
of its total assets in the stocks of companies that engage in gold and
other precious metal-related 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 invests mainly in the
common stock of U.S. and foreign gold and precious metal-related
companies. The Fund has no limit on investment in the securities of
foreign issuers, but does not invest more than 20% of its total assets
in those foreign securities which are not traded on a recognized U.S.
securities exchange or in dollar-denominated American Depository
Receipts ("ADRs"). The Fund, to a lesser extent, may also invest in
warrants, preferred stock, and convertible debt securities, as well as
bullion, coins and precious metals, futures contacts, and options.
Principal Risks of Investing In the Gold Fund
The main risks that could adversely affect the value of the Gold
Fund's shares and the total return on your investment in this Fund
stem from the Fund's concentration policies. As with any stock-
oriented fund, the value of your investment in the Fund will rise or
fall depending on the performance of individual securities as well as
stock market movements. Because the Fund concentrates its investments
in the precious metals-related securities industry, the performance of
the Fund is subject to the risk that this industry will underperform
the market as a whole. To the extent that the Fund may invest in the
securities of foreign issuers, the Fund also will be subject to
foreign company risks, such as changes in currency exchange rates,
inadequate disclosure of company information, and political
instability. The stocks of precious metals-related companies also
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:
- changes in inflation or in expectations regarding inflation in
various countries
- the availability of supplies of precious metals and minerals
- changes in industrial and commercial demand
- metal and mineral sales by governments, central banks, or
international agencies
- investment speculation
- monetary and other economic policies of various governments
- governmental restrictions on the private ownership of certain
precious metals and minerals
Loss of money is a risk of investing in the Gold Fund. An investment
in the Fund is not a deposit 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 Table
The chart below and table on the following page show the annual
calendar-year returns and the 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 the table 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 one-year, three-year and since inception periods
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).
The chart and the table assume the reinvestment of dividends and
distributions. How the Fund has performed in the past does not
necessarily indicate how the Fund will perform in the future.
1993 6.1%
1994 -13.4%
1995 4.1%
1996 -6.3%
1997 -45.2%
1998 -8.9%
Best Quarter: 20.74% 1st Qtr of 1996
Worst Quarter: (32.18)% 4th Qtr of 1997
The Fund's year-to-date total return as of September 30, 1999 was 6.54%.
Performance Table
Average Annual Total Returns
(for Periods Ended December 31, 1998)
Gold Fund XAU Index
One Year (8.94)% (12.43)%
Three Years (22.40)% (13.46)%
Since Inception (16.14)% (8.18)%
FEES and EXPENSES of the FUND
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
The Gold Fund's investment objective is long-term capital
appreciation.
Principal Fund Investment Strategies
The Gold Fund seeks to achieve its objective by investing at least 65%
of its total assets in the stocks of companies that engage 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 invests mainly in the common
stock of U.S. and foreign gold and precious metal-related companies.
The Fund has no limit on investment in the securities of foreign
issuers, but does not invest more than 20% of its total assets in
those foreign securities which are not traded on a recognized U.S.
securities exchange or in dollar-denominated ADRs. The Fund, to a
lesser extent, 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, to a lesser extent,
may also purchase U.S. Government securities and enter into repurchase
agreements. The Fund does not invest for income.
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.
We usually sell a company's stock when that company's "fundamentals"
(i.e., the company's capital structure, operating characteristics, pre-
tax profit margins, and return on stockholders' equity) change for the
worse. Generally, company stock will also be sold when the stock
price of the company experiences significant, unexplained declines.
The Fund, from time to time, may take temporary defensive measures
that are inconsistent with the Fund's principle investment strategies
in attempting to respond to adverse market, economic, political, or
other conditions. Thus, the Fund may temporarily invest all or part
of its assets in cash or cash equivalents, which include, but are not
limited to short-term money market instruments, U.S. Government
securities, certificates of deposit, bankers' acceptances, or
repurchase agreements secured by U.S. Government securities. The
effect of taking these temporary defensive positions is that the Fund
may not achieve its investment objective.
As an anticipated result of these principal investment strategies, the
Gold Fund may engage in the active and frequent trading of portfolio
securities. This increased portfolio turnover for the Fund could
produce high brokerage costs for the Fund and result in taxable
distributions to Fund shareholders.
Principal Risks of Investing In the Gold Fund
The main risks that could adversely affect the value of the Gold
Fund's shares and the total return on your investment in this Fund
stem from the Fund's concentration policies. As with any stock-
oriented fund, the value of your investment in the Fund will rise or
fall depending on the performance of individual securities as well as
stock market movements. Because the Fund concentrates its investments
in the precious metals-related securities industry, the performance of
the Fund is subject to the risk that this industry will underperform
the market as a whole. To the extent that the Fund may invest in the
securities of foreign issuers, the Fund also will be subject to
foreign company risks, such as changes in currency exchange rates,
inadequate disclosure of company information, and political
instability. The stocks of precious metals-related companies also
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:
- changes in inflation or in expectations regarding inflation in
various countries
- the availability of supplies of precious metals and minerals
- changes in industrial and commercial demand
- metal and mineral sales by governments, central banks, or
international agencies
- investment speculation
- monetary and other economic policies of various governments
- 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.
Additional Risks
In addition to the specific principal risks of the Gold Fund
identified above, the Fund also may encounter the following broad-
based risks:
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.
Concentration Risk - The risk that the particular industry in
which the Fund may focus its investments will underperform the
market as a whole.
Sector Risk - The risk that the particular 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.
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:
- 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.
- 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:
- 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.
- Leveraging may result in the Fund experiencing losses over
certain ranges in the market that exceed losses experienced by
a non-leveraged fund.
- 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.
- 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.
- Trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in
futures contracts and options.
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.
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
Gold, and particularly gold stocks, continues to disappoint
investors. The past twelve months have seen a series of announcements
which potentially could increase the supply of gold by Central Banks
regarding the sale or intended sale of gold bullion by Great Britain,
as well as the International Monetary Fund and the European Monetary
Union. The latter, with the launch of the Euro currency this year,
continues to threaten limited gold backing of its currency. Some
announcements have been intentions, such as the International Monetary
Fund's plan to sell some of its gold reserves. Other announcements
have been actual, such as the Bank of England's auction of 3.5% of its
gold reserves. No matter the cause, gold prices have plunged to 20-
year lows. Overall, the threat of increased supply continues to
dampen demand.
A more important psychological negative for gold stocks has been
the relatively low rate of inflation both in the U.S. and Europe.
Further, the lackluster response of gold prices during the financial
crisis of last summer and early fall was a psychological negative.
On the plus side, gold mining companies have begun to consolidate
through acquisitions and mergers, making for fewer but stronger
companies. Additionally, marginal gold producers are beginning to
shut down unprofitable facilities, further reducing supply.
Nevertheless, the outlook for the next twelve months is mixed, at
best. This belief is centered on the fact that present and prospective
gold investors are understandably cautious since gold has been in a
relative free-fall for the better part of three years. It will take
time for confidence to be restored in the gold market.
Longer term, however, the picture may be getting brighter.
Global growth should start to ignite some moderate inflation fears
later this year. In addition , the Asian recovery should serve to
increase the demand for physical gold. Finally, a contrary indicator
is a recent cover of Fortune Magazine with the word "eMoney" in bold
text as if this is the moment when the world rejects the glittering
currency of the past and replaces it with the new (and more
economically correct) instantaneous version of currency along the
wire.
Gold is not an investment built for the short-term gratification
of e-commerce. However, experience tells us great investments,
whether they be stocks, real estate, or gold, unfold over long periods
of time and normally through periods of negative news stories.
Market Outlook
As the summer of 1999 ends, rising interest rates have begun to
cast a shadow on the bull market. Rates are being pushed up by fear
of rising inflation. While inflation is currently benign (even with
unemployment at its lowest level in 29 years), there is a lingering
fear on the part of investors as well as the Fed that wage increases
are about to escalate with resulting inflationary pressure. Further,
the belief is that there is too much speculation in stocks and real
estate. This opts for further Fed rate increases. The goal of monetary
policy is to maximize sustainable growth and prosperity and the first
priority is to do no harm. Accordingly, the Fed has to be
particularly alert to those economic influences that pose a risk to
maximum sustainable growth. However, in perspective, it is well to
remember that the Fed cut rates last year in response to the world
financial crisis. Now the Fed seems to be intent on bringing rates
back to normal (i.e. where they were before the market crash in early
July 1998). More perspective: rate hikes, while they are badly
received initially by the market, are really positive signs long-term.
They indicate that steps are being taken that will ultimately
strengthen the economy. The danger is that if the Fed tightens too
much, it could shake the market and threaten worldwide growth as in
1997 and 1998. Likewise, if it does too little, inflation may heat
up. Our view is that the Fed will do less rather than more.
Another "plus" is the Y2K problem. To date, this has been
considered a "minus" but perversely, all this worrying about the
impact of the year 2000 on our computer systems and the economy has
served to moderate and in some cases depress, profits in various
sectors of our economy. Once the millennium is passed, spending on
Y2K will soon end, which will free up corporate resources for spending
on more productive technology and thus improve profitability.
Additionally, the drag on earnings from Y2K costs that are being
expensed will end thus boosting profits in the first and second
quarters of 2000.
Obviously, stocks always carry risks and some of the risks are
well known and advertised: for example corporate profits could
stagnate instead of grow. This would reduce capital spending, cause
dollar weakness, and affect the stock market. Any prolonged weakness
in the stock market could impact the consumer's sense of well being.
Since consumer spending accounts for about two-thirds of the U.S.
economy, the effect could be significant.
In summary, based on our expectation for rising corporate
profits, historically low interest rates (despite the recent run-up)
and lower inflation, we continue to be positive about the stock
market. Much of this forecast is based on consumer spending which,
while slowing slightly in the months ahead (reflecting the impact of
higher interest rates on the economy), will not slow enough to put the
economy at risk for a recession.
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.
Gold Fund Philadelphia
Exchange Gold and
Silver Index
3/7/94 $10,000 $10,000
6/30/94 $9,520 $9,560
6/30/95 $9,890 $9,970
6/30/96 $9,930 $10,266
6/30/97 $7,020 $7,914
6/30/98 $4,660 $5,937
6/30/99 $4,000 $5,540
Average Annual Total Returns as of June 30, 1999
One Year (14.16)%
Since Inception (15.83)%
SHAREHOLDER INFORMATION
How to Invest In the Fund
Facts To Know Before You Invest:
The Gold Fund does not accept purchase orders for new shares, nor are
Gold Fund shares 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.
- The minimum initial investment in is $2,500
- Retirement accounts may be opened with a $500 minimum investment
- There are no minimum amounts for subsequent investments
- There are no sales charges
- The Funds reserve the right to reject any purchase order
- All shares are electronically recorded; the Fund will not issue
certificate
- 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:
Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing # 0550-71084
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.
Invest Through Brokers
You may also invest in the Fund by purchasing shares through
registered broker-dealers, banks or other financial institutions
that purchase securities for their customers. When an authorized
third party, such as those mentioned, accepts an order, the Fund
will be deemed to have received the order. Orders accepted by an
authorized third party will be priced at the Fund's net asset
values next computed after acceptance. Such third parties who
process orders may charge a fee for their services. Certain third
party organizations may receive compensation from the Fund, the
Fund's transfer agent, or the Fund's Adviser for the shareholder
services they provide.
How To Redeem Your Investment
Redeem By Telephone
Contact Shareholder Services at (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 Fax your instructions for
redemption to: 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:
- the name of the Fund and account number you are redeeming from
- your name(s) and address as it appears on your account
- the dollar amount or number of shares you wish to redeem
- your signature(s) as it appears on your account
- a daytime telephone number
Additional Information You Should Know When You Redeem:
- There are no fees charged for redemptions.
- 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.
- 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).
- 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.
- If your monthly Fund account balance averages $500 or less 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.
- 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 or 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
The Trust is comprised of four separate Cappiello-Rushmore Funds,
three of which, the Utility Income, Growth, and Emerging Growth Funds,
are described in this Prospectus. The fourth Cappiello-Rushmore Fund,
the Gold Fund, is described in a separate prospectus.
You may exchange shares of one Cappiello-Rushmore Fund, without cost,
for shares of another Cappiello-Rushmore Fund (excluding the Cappiello-
Rushmore Gold Fund), 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 fund you are exchanging into must be available for sale in
your state and the registration for both accounts must be identical.
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.
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 New York Stock Exchange is open for business.
Orders accepted by the Fund 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 New York Stock Exchange 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.
If a Fund has portfolio securities that are primarily listed on
foreign exchanges that trade on weekends or other days when the Fund
does not price its shares, then the net asset value of the Fund's
shares may change on days when shareholders of the Fund will not be
able to purchase or redeem the Fund's shares.
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.
"Undeliverable" or "Uncashed" Dividend Checks
If you elect to receive dividends and distributions in cash and the
payment (1) is returned and marked as "undeliverable" or (2)
remains uncashed for six months, your cash election will be changed
automatically and future dividends will be reinvested in the Fund
at the per share net asset value determined as of the date of
payment. In addition, any undeliverable checks or checks that
remain uncashed for six months will be canceled and then reinvested
in the Fund at the per share net asset value determined as of the
date of cancellation.
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 Fund expects that its distributions to
shareholders, as a result of the Fund's investment objective and
strategies, will consist primarily of dividends on ordinary income or
capital gains. 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 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,
1999.
Portfolio Managers
Frank A. Cappiello and Robert F. McCullough, C.P.A., manage the Fund.
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 Trustee 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 evaluated the impact that the year 2000
issue may have on the computer systems that they utilize and have made
appropriate modifications to these systems in order to prepare for the
year 2000. The Servicers worked 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 the systems remediation was not 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.
<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>
Gold Fund
<CAPTION>
For the Years Ended June 30,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value-Beginning of Year $ 4.66 $ 7.02 $ 9.93 $ 9.89 $ 9.52
---------- ---------- ----------- --------- ----------
Income from Investment Operations:
Net Investment Loss (0.05) (0.05) (0.08) (0.06) (0.05)
Net Realized and Unrealized Gain
(Loss) on Securities (0.47) (2.31) (2.83) 0.10 0.42
---------- ---------- ----------- --------- ----------
Total from Investment Operations (0.48) (2.36) (2.91) 0.04 0.37
---------- ---------- ----------- --------- ----------
Total Distributions to Shareholders - - - - -
---------- ---------- ----------- --------- ----------
Net Asset Value-End of Year $ 9.52 $ 4.66 $ 7.02 $ 9.93 $ 9.89
Total Investment Return (4.80)%A (33.62)% (29.31)% 0.40 % 3.89 %
Ratios and Supplemental Data:
Net Assets-End of Year
(000s omitted) $ 6,395 $ 2,187 $ 3,409 $ 6,122 $ 6,796
Ratio of Expenses to Average Net Assets 1.68 %B 1.70 % 1.70 % 1.70 % 1.70 %
Ratio of Net Loss to Average Net Assets (0.25)%B (0.74)% (0.76)% (0.59)% (0.51)%
Portfolio Turnover Rate 22.85 % 56.49 % 108.47 % 59.06 % 51.23 %
A Total Investment Return for periods of less than one year are not annualized.
B Annualized.
</TABLE>
<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 A document that includes
Information additional information about
the Fund.
Annual and Semiannual Reports 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 and make
other inquiries of the Fund. You may contact the Cappiello-Rushmore
Trust directly by telephone, at 1-800-343-3355, or visit our internet
site at http://www.rushmorefunds.com, or you may send a written
request to the Trust's offices, at 4922 Fairmont Avenue, Bethesda,
Maryland 20814. Additional information about the Fund 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
<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, 1999
This Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Trust's Prospectuses, each
dated November 1, 1999. Copies of the Prospectuses may be obtained
without charge by writing or telephoning the Trust at the above
address or telephone numbers.
The audited financial statements of the Trust, for the Trust's fiscal
year ended June 30, 1999, are included in the Trust's 1999 Annual
Report to Shareholders, which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. Copies
of the Trust's 1999 Annual Report are available, without charge, by
request by writing or telephoning the Trust at the above address or
telephone numbers.
<PAGE>
TABLE OF CONTENTS
Page in
Utility
Page in Income Fund,
Statement of Page in Growth Fund,
Additional Gold Fund and Emerging
Information Prospectus Growth Fund
Prospectus
Trust Description, Investments, 3 3 3
and Risks
Investment Policies 3 6 8
Investment Limitations 8 6 8
Management of the Trust 10 18 24
Control Persons and Principal 12 - -
Holders of Securities
Investment Advisory and Other 13 18 24
Services
Brokerage Allocation and Portfolio 14 - -
Transactions
Taxation of the Funds 15 17 24
Calculation of Performance Data 15 - -
Financial Statements 17 20 26-28
<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.
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.
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.
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.
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.
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.
High Yield Securities
Each of the Growth Fund and the Emerging Growth Fund may invest up to
5% of its total assets in "high-yield" securities. As described
below, high-yield securities are below investment-grade corporate
bonds, commonly known as "junk bonds," and which are subject to
greater risks, including default risks, than those found in higher-
rated securities.
The high-yield corporate bonds primarily purchased by a Fund will be
rated in below investment-grade categories by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("Standard & Poor's") ("Ba" or lower by Moody's, "BB" or lower by
Standard and Poor's). Neither Fund invests in securities rated lower
than "Caa" by Moody's or "CCC" by Standard & Poor's; these ratings are
applied to issues which are predominantly speculative and may be in
default or as to which there may be present elements of danger with
respect to principal and/or interest. Neither Fund invests in issues
which are in default. A Fund may invest in unrated securities when
the Fund's investment adviser believes that the financial condition of
the issuer or the protection afforded by the terms of the securities
limits risk to a level similar to that of securities eligible for
purchase by the Fund rated in below investment-grade categories by
Moody's or Standard & Poor's (between "Ba" and "Caa" ratings by
Moody's and between "BB" and "CCC" ratings by Standard & Poor's). If
the investment rating of a high-yield corporate security in which a
Fund is invested is downgraded to below "Caa" by Moody's or "CCC" by
Standard & Poor's, the Fund will sell the downgraded security as soon
as practicable and when the Fund's investment adviser considers it
desirable to do so. See Appendix A to this Statement of Additional
Information for a specific description of each corporate bond rating
category.
The high-yield securities in which a Fund invests offer a wide range
of maturities (from less than one year to thirty years) and yields.
These securities include short-term bonds or notes (maturing in less
than three years), intermediate-term bonds or notes (maturing in three
to ten years), and long-term bonds (maturing in more than ten years).
While there are no limitations on the average maturity of the
securities held by the Fund, the Fund's average portfolio maturity
will ordinarily be six years.
Both credit and market risks are increased by the Fund's investment in
debt securities rated below the top four grades by Standard & Poor's
or Moody's and comparable unrated debt securities. Below investment-
grade bonds by Moody's (categories "Ba," "B," "Caa") are of poorer
quality and may have speculative characteristics. Bonds rated "Caa"
may be in default or there may be present elements of danger with
respect to principal or interest. Below investment-grade bonds rated
by Standard & Poor's (categories "BB," "B," "CCC") include those which
are regarded, on balance, as predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal in
accordance with their terms; "BB" indicates the lowest degree of
speculation and "CCC" indicates a high degree of speculation. While
these bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
To the extent that a Fund invests in high-yield securities, the share
price and yield of the Fund may be expected to fluctuate more than in
the case of mutual funds that invest in higher-quality, shorter-term
securities. Moreover, a significant economic downturn or major
increase in interest rates may result in issuers of below investment-
grade securities experiencing increased financial stress, which could
adversely affect their ability to service their principal, interest,
and dividend obligations, meet projected business goals, and obtain
additional financing. In this regard, it should be noted that, while
the market for high-yield corporate bonds has been in existence for
many years and from time to time has experienced economic downturns in
recent years, this market has involved a significant increase in the
use of high-yield corporate debt securities to fund highly-leveraged
corporate acquisitions and restructurings. Past experience may not,
therefore, provide an accurate indication of future performance of the
high-yield bond market, particularly during periods of economic
recession. Furthermore, expenses incurred to recover an investment by
a Fund in a defaulted security may adversely affect the Fund's net
asset value. Finally, the secondary market for high-yield securities
may be less liquid than the market for higher-quality securities. The
reduced liquidity of the secondary market for high-yield securities
may adversely affect the market price of, and the ability of the Fund
to value, particular securities at certain times, thereby making it
difficult to make specific valuation determinations.
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;
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. As disclosed in the Trust's Prospectuses,
the Utilities Income Fund may concentrate in the public utilities
industry and the Gold Fund may concentrate in the gold and precious
metals-related 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;
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. If a percentage restriction is
adhered to by a Fund at the time of an investment, a later increase or
decrease in the investment's percentage of the value of the Fund's
total assets resulting from a change in these values or assets will
not constitute a violation of the percentage restriction.
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Name, Age, Address Position Held Principal Occupation(s)
With Trust During Past 5 Years
- --------------------------------------------------------------------------------------------------------
<S> <S> <S>
Frank A. Cappiello*, 73 Chairman of the President of McCullough, Andrews &
Greenspring Station Board and Trustee Cappiello, Inc., the Trust's investment
Suite 250 adviser, since 1983.
10751 Falls Road
Lutherville, MD 21093
Daniel L. O'Connor*, 57 President, General Partner of Money Management
100 Lakeshore Drive, Suite 1555 Treasurer, and Associates, registered investment adviser of
North Palm Beach, FL 33408 Trustee the Rushmore Funds, since 1975. Director,
Rushmore Trust and Savings, FSB, the Trust's
transfer agent and custodian. Director of
four Rushmore Fund Boards.
Peter J. DeAngelis, 63 Trustee President of PDA Associates, Inc., a
P.O. Box 284 financial consulting and investment firm,
Ironia, NJ 07945 since 1974; President of Dow Beaters, Inc.,
a registered investment advisor, since 1977.
Bruce C. Ellis,** 54 Trustee A private investor in start-up companies.
7108 Heathwood Court Vice President, LottoPhone, Inc., a
Bethesda, MD 20817 telephone state lottery service, September
1991-1995. Director, The Torray Fund, since
1994; Director, the Sheppard Fund, since
1994; Director of three Rushmore Fund
Boards.
Jeffrey R. Ellis,** 54 Trustee Executive Vice President, Buddy Systems,
513 Kerry Lane Inc., a manufacturing-marketing company,
Virginia Beach, VA 23451 Virginia Beach, Virginia, since January,
1996; Vice President, LottoPhone, Inc., a
telephone state lottery service, September
1993-1995. Director of three Rushmore Fund
Boards.
Dr. Peter B. Petersen, 67 Trustee Professor of Management and Organization
Johns Hopkins University Division Theory, Johns Hopkins University since 1979.
of Business and Management
201 North Charles Street
Baltimore, MD 21201-4114
Robert F. McCullough, CPA*, 67 Vice President Chairman of McCullough, Andrews & Cappiello,
101 California Street Inc., the Trust's investment adviser, since
San Francisco, CA 94111 1983.
Timothy N. Coakley, CPA*, 31 Vice President Chief Financial Officer and Treasurer,
4922 Fairmont Avenue Rushmore Trust and Savings, FSB, since 1995.
Bethesda, MD 20814 Vice President of four Rushmore Funds and
the Cappiello-Rushmore Trust (collectively,
the "Funds"). Controller of the Funds, 1995-
1997. Formerly Audit Manager, Deloitte &
Touche LLP until 1994.
Edward J. Karpowicz, CPA*, 36 Controller Vice President of Rushmore Trust and
4922 Fairmont Avenue Savings, FSB, since 1997. Controller of the
Bethesda, MD 20814 Funds. Treasurer, Bankers Finance
Investment Management Corp., August 1993 to
June 1997. Senior Accountant, Ernst &
Young, September 1989 to February 1993.
Stephenie E. Adams*, 30 Secretary Secretary of three Rushmore Funds and the
4922 Fairmont Avenue Cappiello-Rushmore Trust. Assistant
Bethesda, MD 20814 Secretary of one Rushmore Fund. Manager,
Fund Administration and Marketing, Rushmore
Services, Inc., from July 1994 to Present.
* 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.
</TABLE>
The aggregate compensation paid to each of the Trustees of the Trust serving
during the fiscal year ended June 30, 1999, is set forth in the table below:
<TABLE>
<CAPTION>
Total
Compensation
Pension or Estimated Paid to
Retirement Annual Trustees for
Benefits Accrued Benefits Services to the
Name of Person Aggregate as Part of Upon Fund and Fund
& Position Compensation Trust's Expenses Retirement Complex
<S> <C> <C> <C> <C>
Frank A. Cappiello,*
Chairman of the Board of Trustees $0 $0 $0 $0
Daniel L. O'Connor,*
President, Treasurer, and Trustee $0 $0 $0 $0
Peter J. DeAngelis,
Trustee $2,000 $0 $0 $2,000
Bruce C. Ellis,
Trustee $2,000 $0 $0 $2,000
Jeffrey R. Ellis,
Trustee $2,000 $0 $0 $2,000
Dr. Peter B. Peterson,
Trustee $2,000 $0 $0 $2,000
* 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.
</TABLE>
Control Persons and Principal Holders of Securities
As of October 4, 1999, 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> <S> <C>
Utility Income Fund Charles Schwab & Co., Inc. 37.708% 1/
101 California Street
San Francisco, CA 94101
National Financial Services Corporation 11.571% 1/
82 Devonshire Street
Boston, MA 02109
Growth Fund Charles Schwab & Co., Inc. 20.937% 1/
101 California Street
San Francisco, CA 94101
National Financial Services Corporation 5.103% 1/
82 Devonshire Street
Boston, MA 02109
Emerging Growth Fund Charles Schwab & Co., Inc. 30.816% 1/
101 California Street
San Francisco, CA 94101
Gold Fund Charles Schwab & Co., Inc. 15.497% 1/
101 California Street
San Francisco, CA 94101
National Financial Services Corporation 9.257%1/
82 Devonshire Street
Boston, MA 02109
Harold H. Cleaveland, Jr. 8.971%2/
3435 Westheimer Street
Houston, TX 77027
Joe H. Ward, Jr. 6.410%2/
Keogh Profit Sharing Account
2639 Mann Court
Falls Church, VA 22046
Rushmore Trust and Savings, FSB 6.316%1/
Profit Sharing Account
4922 Fairmont Avenue
Bethesda, MD 20814
1/ Record owner only.
2/ Beneficial owner only.
</TABLE>
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.
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, 1999, 1998, and 1997,
the Funds paid the following investment advisory fees to the Adviser:
1999 1998 1997
Utility Income Fund $30,479 $ 34,737 $ 38,223
Growth Fund $97,413 $ 130,057 $ 129,484
Emerging Growth Fund $63,027 $ 100,453 $ 151,476
Gold Fund $12,055 $ 20,816 $ 34,904
The Adviser is owned by two principals: Robert F. McCullough, C.P.A.
and Frank A. Cappiello. Former principal David H. Andrews is retired.
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"), 100 Lakeshore Drive, Suite 1555, North Palm Beach,
Florida 33408, 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, 1999, 1998, and 1997, the Trust
paid the following administrative services fees to the Administrator:
1999 1998 1997
Utility Income Fund $ 60,959 $ 69,475 $ 76,447
Growth Fund $ 194,827 $ 260,115 $ 258,968
Emerging Growth Fund $ 126,053 $ 200,907 $ 302,952
Gold Fund $ 17,228 $ 29,737 $ 49,863
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.
On October 20, 1999, MMA and RTS reached a definitive agreement to be
acquired by Friedman Billings Ramsey Group, Inc. The transaction is
subject to various regulatory approvals.
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, 1750
Tysons Boulevard, McLean, Virginia, 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.
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.
Brokerage Commissions Paid
(for the Period Ended June 30)
Utility Income Emerging
Fund Growth Fund Growth Fund Gold Fund
1999 $10,273 $34,455 $73,863 $ 885
1998 $ 8,580 $51,997 $67,467 $15,770
1997 $16,832 $71,017 $68,585 $41,300
Each of the Fund's assets have generally decreased each year since
1996. Therefore, the above trade commissions (which are predominantly
based on asset size) have also decreased. The variance from year to
year is also affected by increased or decreased portfolio activity.
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:
n
P (1+T) = 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.
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, 1999, are as follows:
1 Year 5 Years Since Inception
Growth Fund 23.32 % 21.55% 17.33%
Emerging Growth Fund (4.39)% 8.95% 7.40%
Utility Income Fund 12.24 % 15.43% 9.51%
Gold Fund (14.16)% (15.92)% (15.83)%
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:
6
YIELD = 2[(a-b/cd+1) -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, 1999, 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.
<PAGE>
APPENDIX A
<PAGE>
Bond Ratings
Below is a description of Standard & Poor's Ratings Group ("Standard &
Poor's") and Moody's Investors Service, Inc. ("Moody's") bond rating
categories. Each of the Growth Fund and the Emerging Growth Fund may
invest up to 5% of its total assets in bonds rated "BB" or lower by
Standard & Poor's and/or "Ba" or lower by Moody's.
Standard & Poor's Ratings
Group Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA - Bonds rated "AA" also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances these bonds differ from "AAA" issues only in
small degree.
A - Bonds rated "A" have a strong capacity to pay principal and
interest, although these bonds are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than bonds in higher rated categories.
BBB - Bonds rated "BBB" are regarded as having an adequate capability
to pay principal and interest. Whereas these bonds normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay principal and interest for bonds in this category than for
bonds in higher rated categories.
BB - Bonds rated "BB" have less near-term vulnerability to default
than other speculative issues. However, these bonds face major
ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments.
B - Bonds rated "B" have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay
principal.
CCC - Bonds rated "CCC" have a currently identifiable vulnerability to
default and are dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or
economic conditions, these bonds are not likely to have the capacity
to pay interest and repay principal.
Moody's Investors Service, Inc.
Corporate Bond Ratings
Aaa - Bonds rated "Aaa" are judged to be of the best quality. These
bonds carry the smallest degree of investment risk and are generally
referred to as "gilt-edged." Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure.
While the various protective elements are likely to change, these
changes as can be visualized are most unlikely to impair the
fundamentally strong position of these issues.
Aa - Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group, these bonds comprise what are
generally known as high grade bonds. These bonds are rated lower than
the best bonds because margins of protections may not be as large as
in "Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than in "Aaa" securities.
A - Bonds rated "A" possess many favorable investment attributes, and
are to be considered as upper medium grade obligations. Factors
giving security principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds rated "Baa" are considered as medium grade obligations
(i.e., these bonds are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. These
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds rated "Ba" are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or
maintenance of other terms of the contract over any longer period of
time may be small.
Caa - Bonds rated "Caa" are of poor standing. These issues may be in
default or there may be present elements of danger with respect to
principal or interest.
<PAGE>
Cappiello-Rushmore Trust
FINANCIAL STATEMENTS
<PAGE>
Cappiello-Rushmore Trust
Annual Report
June 30, 1999
<PAGE>
ANNUAL REPORT, June 30, 1999
CAPPIELLO
RUSHMORE FUNDS Cappiello-Rushmore Trust
4922 Fairmont Avenue, Bethesda, MD 20814
(800) 622-1386 (301) 657-1510
Dear Fellow Investor:
This is the Cappiello-Rushmore Trust's seventh annual report. The funds'
performances for the fiscal year ended June 30, 1999 were as follows:
Total Return Comparison
(Average annual total returns for the period ended June 30, 1999)
Since
One Year Five Years Inception
Cappiello-Rushmore Growth Fund 23.32% 21.55% 17.33%
Cappiello-Rushmore Utility Income Fund 12.24% 15.43% 9.51%
Cappiello-Rushmore Emerging Growth Fund (4.39)% 8.95% 7.40%
Standard & Poor's 500 Index 22.76% 27.87% 22.46%
The S&P 500 Index is an unmanaged index and, unlike the Funds, has 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. The Funds commenced
operations on October 6, 1992.
Summary
The Funds' fiscal year spanned a full-fledged bear market in U.S. stocks
and a dazzling recovery that turned into a new bull market that reached all
time highs - all in just twelve months. The bear market started in the
summer and fall of 1998, and a new bull market move began in last October
and continues to this date -- quite a year! Briefly, the market's plunge in
mid-summer of 1998 turned into near panic by September. At this point, the
Federal Reserve (the Fed) began a series of three one-quarter of one-
percent reductions in short-term rates to counteract the temporary stock and
bond market paralysis triggered by the surprising Russian devaluation. The
Fed's interest rate actions stopped the market decline and by late October
helped engineer a dramatic reversal to a bull market that carried all major
stock indexes to continuing new highs in early 1999.
As 1999 progressed, the stock market, spurred by improving corporate
earnings, low interest rates, and even lower inflation, crossed the 10,000
level on the Dow in March and continued its move through most of April
under the belief that the Fed would maintain its accommodative stance on
rates and money supply for some time. Basic commodity prices continued to
be well behaved with the exception of oil, which had a significant rebound
from its lows. Small capitalization stocks staged short sporadic rallies
during the year as did cyclical stocks but the gains were ephemeral since
investors continued to favor the more liquid larger cap stocks.
During this period, there was no firm evidence that the economy was
overheating and that inflation was anything but benign. However, there were
isolated economic signs of a tightening labor market and some indications
<PAGE>
of firmer basic commodities pricing, particularly oil (usually a precursor
to inflationary pressures). Surprisingly, in late May, the Fed raised rates
for the first time in more than a year by 1/4 of 1%. Investors, shaken
by the belief that the Fed was ending its accommodative stance on rates
and money supply, reacted negatively. However, in short order, the market
accepted this move on the part of the Fed as a positive sign of
vigilance as well as prudence. Accordingly, as the Funds' fiscal year ended,
stocks began to recover, buoyed by indications of better than expected
second quarter earnings that were announced in July. Accordingly, we
entered the new fiscal year on an up-beat note.
Growth Fund
The Growth Fund continues to seek capital appreciation by investing
in larger established companies with favorable relationships
between price-earnings ratios and growth rates. Once again, as in four
of the past five years, the Fund had a total return of greater than 20%.
More importantly, this return beat the benchmark Standard & Poor's 500
Index's total return of 22.76%.
The Fund's largest sector positions at year end were technology
(computer hardware and software, electronics, and telecommunications)
at 29.4% of the portfolio, financial services (banks, investment
companies, etc.) at 23.6%, business services at 8.7%, merchandising and
retail at 8.6%, and oil and gas services at 5.1%. Cash and equivalents
totaled 6% at year-end.
Among the best performing stocks at year-end were:
e4L, Inc. + 452.17%
Charles Schwab Corp. + 234.10%
Frontier Corp. + 86.10%
The largest single stock position in the portfolio was shared by three
stocks: IBM, Shared Medical Systems Corp, and Franklin Resources Inc., each
representing 6.2% of the portfolio.
More importantly, at year's end the Growth Fund portfolio of stocks had
a better-than-average growth rate, 14% versus 13% for the S&P 500 Index
with a less-expensive price-earnings ratio, 25.8 times earnings for the
Fund versus 27.6 times earnings for the Index.
As in past years, we continue to believe that growth stocks should fare
well in the expected economic environment of the next twelve months.
However, unlike the past year, we believe earnings growth in 1999-2000 will
become more important since the stock market will no longer be able to
rely on a favorable interest rate environment to drive price-earnings
multiple expansion. Accordingly, one expected trend is an increased focus
on stocks representing growth at a reasonable price. "Quality" earnings
growth is defined as company growth likely to persist over the next several
years reported using relatively conservative accounting procedures.
Another expected trend is the gradual broadening out of the market into
sectors heretofore shunned by most investors, including the defense
and energy sectors, as well as emphasis on midcapitalization and
smaller capitalization stocks where growth is less expensive. In such a
broadening market, selectivity will be more important than ever
before. High growth mid-cap stocks with reasonable valuations
should provide superior returns in such a rotational market.
Utility Income Fund
The Utility Income Fund is designed for investors who are
seeking a more conservative, income-oriented stock market
investment. The portfolio is designed to offer higher dividend
yields than the stock market average with substantially lower
volatility in share price. The Fund is managed to provide such
higher-than-average yields through investing in utility stocks
such as electric, natural gas, and telephones. With dividend
income as a focus, capital gains are a secondary consideration.
Total return for the Fund for the year was 12.24%, representing
the second consecutive year of double-digit returns for this
conservative portfolio. At year's end, 84.0% of the portfolio
was concentrated in utilities as follows: gas and electric power
companies represented 44.5%, telecommunications 35.8%, with
natural gas distribution at 3.7%.
2
<PAGE>
The balance of the portfolio was invested primarily in a diversified
grouping of Real Estate Investment Trusts. Cash and equivalents
represented 3.4% of assets at year's end.
Among the best performing stocks at year end were:
Frontier Corp. +86.10%
ALLTEL Corp. +53.76%
Bell Atlantic Corp. +43.29%
The utility industry continues to move from the full-fledged
regulation of the past (when state and federal regulators held
the industry in a static-state and reluctantly granted rates) to
the current period of deregulation, globalization and merger-
mania. While uncertainties, particularly in regards to
deregulation, still abound in the utility sector, most company
managements seemed to have coped reasonably well in managing the
transition from a regulated status to one of increasing
competition. Nevertheless, these uncertainties have pushed
utilities, primarily electrics, to a lower valuation when related
to the S&P 500 stocks. Given the improving prospects for the
entire industry, we believe this makes for a most attractive
investment situation. Telecommunication stocks (35.8% of
portfolio) such as regional telephone companies SBC
Communications, Inc., Frontier Corp., and Bell Atlantic Corp.,
have been excellent performers during the year. We expect
further expansion and merger activity in this sector as well as
increased growth (from both rising basic demand and the growing
internet business) which should result in higher dividend income.
Further, gas stocks are becoming increasingly attractive. They
represent value based on earnings and book value relative to
current prices. We intend to increase our investments in this
group in the current year.
Emerging Growth Fund
The Emerging Growth Fund registered a negative return of 4.39%
for the twelve months ended June 30, 1999. The results, while
disappointing, reflected the small cap sector's continued
underperformance, particularly in comparison to the returns of
the Dow Jones Industrial Average and the Standard & Poor's 500
Index over the past several years.
It has been more than six years (1992) since the small cap
sector has significantly outperformed the larger cap group. More
distressing is the fact that smaller stocks continue to reflect
the same positive characteristics that were in place last year;
such as good earnings momentum, in most cases established
products or services, competent and successful management and
solid balance sheets. Further, most small cap stocks have little
or no exposure to the international financial vagaries such as
volatile currencies that belabored world stock markets for the
past two years. The major reason for this small cap performance
discrepancy between the solid growth characteristics of small
caps and their stock price underperformance seems to be liquidity
and risk aversion. Liquidity relates to the ability of
institutions to buy and sell large blocks of stocks without
essentially disturbing the market price. Risk aversion is the
continuing tendency of investors to seek safety and lower
volatility in the larger companies that possess big assets and a
longer history of operations as opposed to smaller stocks.
We ended fiscal 1999 with the portfolio assets focused in four
major sectors: technology (semiconductors, telecommunications,
and computer software and services) at 29.6%, merchandising and
retailing at 18.6%, healthcare at 13.9%, and business
services and equipment at 12.6%. Our largest single stock
position was Stanford Telecommunications, Inc. which represented
6.8% of the portfolio. At year's end, cash and equivalents stood
at 11% of net assets.
Among the best performing stocks during the year were e4L, Inc.
up 452.17%, REMEC, Inc. up 41.76%, and Steven Madden, Ltd. up
17.30%. Among the best stocks purchased after June 30, 1998,
were:
Stanford Telecommunications, Inc. + 228.71%
Labor Ready, Inc. + 136.21%
Shared Medical Systems Corp. + 57.77%
3
<PAGE>
As we have noted, small cap stocks are compelling values
at current levels. These values are reflected in the
Fund's portfolio holdings and the numbers are strikingly
eloquent: this years projected earnings growth
for the total portfolio is 18% versus 13% for the market
(S&P 500). Yet despite this superior projected growth, the
Fund's price-earnings ratio is significantly cheaper, 22.8
times earnings versus 27.6 times earnings for the
market (S&P 500). The Fund continues to represent a "pure"
small capitalization portfolio with the average capitalization
of $487 million.
Historically, the last great period of underperformance
versus large cap stocks occurred from l969 to 1973. From 1975
to 1979, the small cap stocks turned around and outperformed
their large cap counterparts by an average of 24.7% a year
from 1975 to 1979. During the past five years (1994-1998)
small stock underperformance has approached the distressed price
levels last seen in 1969 - 1973. The reversal this time around
could be equally as powerful as it was in the mid-to-late
1970's.
The Gold Fund
Gold, and particularly gold stocks, continues to disappoint
investors. The past twelve months have seen a series of
announcements which potentially could increase the supply of gold
by Central Banks with the sale or intended sale of gold bullion
by Great Britain, as well as the International Monetary Fund and
the European Monetary Union. The latter, with the launch of the
Euro this year, continues to threaten limited gold backing of its
currency. Some announcements have been intentions such as the
International Monetary Fund's plan to sell some of its gold
reserves. Other announcements have been actual, such as the Bank
of England's auction of 3.5% of its gold reserves. No matter the
cause, gold prices have plunged to 20-year lows. Overall, the
threat of increased supply continues to dampen demand.
A more important psychological negative for gold stocks has
been the relatively low rate of inflation both in the U.S. and
Europe. Further, the lackluster response of gold prices during
the financial crisis of last summer and early fall was a
psychological negative.
On the plus side, gold mining companies have begun to
consolidate through acquisitions and mergers, making for fewer
but stronger companies. Additionally, marginal gold producers
are beginning to shut down unprofitable facilities, further
reducing supply. Nevertheless, the outlook for the next twelve
months is mixed, at best. This belief is centered on the fact
that present and prospective gold investors are understandably
cautious since gold has been in a relative free-fall for the
better part of three years. It will take time for confidence to
be restored in the gold market.
Longer term, however, the picture may be getting brighter.
Global growth should start to ignite some moderate inflation
fears later this year. In addition, the Asian recovery should
serve to increase the demand for physical gold. Finally, a
contrary indicator is a recent cover of Fortune Magazine with the
word "emoney" in bold text as if this is the moment when the
world rejects the glittering currency of the past and replaces it
with the new (and more economically correct) instantaneous
version of currency along the wire.
Gold is not an investment built for the short-term
gratification of e-commerce. However, experience tells us great
investments, whether they be stocks, real estate, or gold, unfold
over long periods of time and normally through periods of
negative news stories.
Market Outlook
As the summer of 1999 ends, rising interest rates have begun to
cast a shadow on the bull market. Rates are being pushed up by
fear of rising inflation. While inflation is currently benign
(even with unemployment at its lowest level in 29 years), there
is a lingering fear on the part of investors as well as the Fed
that wage increases are about to escalate with resulting
inflationary pressure. Further, the belief is that there is too
much speculation in stocks and real estate. This opts for
further Fed rate increases. The goal of monetary policy is to
maximize sustainable growth and prosperity and the first priority
is to do no harm. Accordingly, the Fed has to be particularly
alert to those economic influences that pose a risk to maximum
sustainable growth
4
<PAGE>
However, in perspective, it is well to remember that the Fed
cut rates last year in response to the world financial crisis.
Now the Fed seems to be intent on bringing rates back to normal
(i.e. where they were before the market crash in early July
1998). More perspective: rate hikes, while they are badly
received initially by the market, are really positive signs long-
term. They indicate that steps are being taken that will
ultimately strengthen the economy. The danger is that if the Fed
tightens too much, it could shake the market and threaten
worldwide growth as in 1997 and 1998. Likewise, if it does too
little, inflation may heat up. Our view is that the Fed will do
less rather than more.
Another "plus" is the Y2K problem. To date, this has been
considered a "minus," but perversely, all this worrying about the
impact of the year 2000 on our computer systems and the economy
has served to moderate, and in some cases depress, profits in
various sectors of our economy. Once the millennium is passed,
spending on Y2K will soon end, which will free up corporate
resources for spending on more productive technology, thus
improving profitability. Additionally, the drag on earnings from
Y2K costs that are being expensed will end, boosting profits in
the first and second quarters of 2000.
Obviously, stocks always carry risks and some of the risks are
well known and advertised: for example corporate profits could
stagnate instead of grow. This would reduce capital spending,
cause dollar weakness. and affect the stock market. Any
prolonged weakness in the stock market could impact consumers'
sense of well being. Since consumer spending accounts for about
two-thirds of the U.S. economy, the effect could be significant.
In summary, based on our expectation for rising corporate
profits, historically low interest rates (despite the recent run-
up) and lower inflation, we continue to be positive about the
stock market. Much of this forecast is based on consumer
spending which, while slowing slightly in the months ahead
(reflecting the impact of higher interest rates on the economy),
will not slow enough to put the economy at risk for a recession.
As always, thank you for your continued support.
/s/ Frank A. Cappiello
Frank A. Cappiello
Chairman
Cappiello-Rushmore Trust
5
<PAGE>
Cappiello-Rushmore Trust
PORTFOLIOS OF INVESTMENTS
June 30, 1999
UTILITY INCOME FUND
Market Value
Shares (Note 1)
COMMON STOCKS - 92.4%
Business Services - 1.7%
5,000 Metzler Group, Inc.* $ 138,125
----------
Gas and Electric - 44.5%
11,200 Allegheny Energy, Inc. 359,100
13,000 Alliant Energy Corp. 368,875
13,500 CMS Energy Corp. 565,312
3,000 Hawaiian Electric Industries, Inc. 106,500
8,000 IDACORP, Inc. 252,000
13,400 KeySpan Corp. 353,425
9,500 New Century Energies, Inc. 368,719
14,500 Potomac Electric Power Co. 426,844
15,900 Southern Co. 421,350
4,000 Texas Utilities Company 165,000
9,500 TNP Enterprises, Inc. 344,375
----------
3,731,500
----------
Natural Gas Distribution - 3.7%
11,800 Washington Gas Light Co. 306,800
----------
Real Estate Investment Trusts - 6.7%
5,200 Archstone Communities Trust 114,075
5,000 FelCor Lodging Trust, Inc. 103,750
4,300 First Industrial Realty Trust, Inc. 117,981
3,600 Mack-Cali Realty Corp. 111,375
2,900 Spieker Properties, Inc. 112,738
----------
559,919
----------
Telecommunication - 35.8%
8,800 ALLTEL Corp. 629,200
7,000 AT&T Corp. 390,688
9,400 Bell Atlantic Corp. 614,525
11,300 Frontier Corp. 666,700
12,000 SBC Communications, Inc. 696,000
----------
2,997,113
----------
Total Common Stocks
(Cost $5,079,834) 7,733,457
----------
CONVERTIBLE PREFERRED
STOCKS - 4.2%
6,000 Kmart Financing, 7.75%
(Cost $334,325) 351,000
----------
MONEY MARKET FUNDS - 3.4%
282,495 Fund for Government Investors
(Cost $282,495) 282,495
----------
Total Investments - 100.0%
(Cost $5,696,654) $8,366,952
==========
6
<PAGE>
Cappiello-Rushmore Trust
PORTFOLIOS OF INVESTMENTS
June 30, 1999 (continued)
GROWTH FUND
Market Value
Shares (Note 1)
COMMON STOCKS - 88.1%
Automobile Parts and
Accessories - 2.4%
8,000 AlliedSignal, Inc. $ 504,000
----------
Beverages - 2.6%
8,800 Coca-Cola Co. 550,000
----------
Business Services - 8.7%
25,000 First Data Corp. 1,223,436
22,000 Metzler Group, Inc.* 607,750
----------
1,831,186
----------
Computer Hardware and
Equipment - 6.2%
10,000 International Business
Machines Corp. 1,292,500
----------
Computer Software and
Services - 6.2%
20,000 Shared Medical Systems Corp. 1,305,000
----------
Electronics - 2.0%
6,000 Raytheon Co., Class B 422,250
----------
Financial Services - 23.6%
8,500 American Express Co. 1,106,063
3,200 Bank of America Corp. 234,600
9,000 Charles Schwab Corp. 988,875
32,000 Franklin Resources, Inc. 1,300,000
7,700 H&R Block, Inc. 385,000
20,000 SLM Holding Corp. 916,250
----------
4,930,788
----------
Healthcare - 5.7%
19,000 United Healthcare Company 1,189,875
----------
Merchandising and Retail - 8.6%
22,500 Dollar General Corp. 652,500
160,000 e4L, Inc.* 1,150,000
----------
1,802,500
Oil and Gas Services - 5.1%
6,500 Schlumberger, Ltd. 413,969
60,000 Varco International. Inc.- 656,250
----------
1,070,219
----------
Paper Products - 2.0%
9,000 Willamette Industries, Inc. 414,563
----------
Telecommunication - 15.0%
15,000 AT&T Corp. 837,188
20,000 Frontier Corp. 1,180,000
20,000 Hughes Electronics Corp. 1,125,000
----------
3,142,188
----------
Total Common Stocks
(Cost $9,711,065) 18,455,069
----------
WARRANTS - 5.9%
44,000 Federated Department Stores,
Inc. WTS C* (Cost $216,340) 1,237,500
----------
MONEY MARKET FUNDS - 6.0%
1,253,753 Fund for Government Investors
(Cost $1,253,753) 1,253,753
----------
Total Investments - 100.0%
(Cost $11,181,158) $20,946,322
===========
7
<PAGE>
Cappiello-Rushmore Trust
PORTFOLIOS OF INVESTMENTS
June 30, 1999 (continued)
EMERGING GROWTH FUND
Market Value
Shares (Note 1)
COMMON STOCKS - 89.0%
Business Services and Equipment - 12.6%
14,000 Labor Ready, Inc.* $ 455,000
10,000 Miami Computer Supply Corp.* 188,750
5,000 National Data Corp. 213,750
3,900 Snyder Communications, Inc.* 127,725
4,000 World Color Press, Inc.* 110,000
-----------
1,095,225
-----------
Computer Software and Services - 12.7%
7,800 Actrade International Ltd* 99,938
3,000 Jack Henry & Associates, Inc.* 117,750
5,000 Mastech Corp.* 93,125
8,200 Shared Medical Systems Corp. 535,050
3,700 Visio Corp.* 140,831
3,900 Xircom, Inc.* 117,244
1,103,938
-----------
Financial Services - 4.4%
5,584 Investment Technology Group, Inc.* 180,782
7,200 Waddell & Reed Financial, Inc. 197,550
378,332
-----------
Food Products - 1.4%
6,000 Hain Food Group, Inc.* 123,750
-----------
Healthcare - 13.9%
2,900 Barr Laboratories, Inc.* 115,638
10,000 Eclipsys Corp.* 239,375
30,000 KV Pharmaceutical Co., Class A* 465,000
9,000 Orthodontic Centers of America, Inc.* 127,125
26,000 PolyMedica Corp.* 260,000
1,207,138
-----------
Merchandising and Retail - 18.6%
3,400 BEBE Stores, Inc.* 115,600
65,000 e4L, Inc.* 467,187
6,800 Nautica Enterprises, Inc.* 114,750
30,000 Paul Harris Stores, Inc.* 204,375
45,000 Pier 1 Imports, Inc. 506,250
16,000 Steven Madden, Ltd.* 217,000
-----------
1,625,162
-----------
Oil and Gas Services - 2.9%
20,000 Bolt Technology Corp 115,000
4,400 Tidewater, Inc. 134,200
-----------
249,200
-----------
Seminconductors - 2.4%
12,000 Smart Modular Technologies Inc.* 208,500
-----------
Telecommunications - 14.5%
18,000 Intervoice, Inc. * 259,875
3,000 Pacific Gateway Exchange, Inc.* 87,375
20,000 REMEC, Inc.* 322,500
20,000 Stanford Telecommunications, Inc.* 592,500
-----------
1,262,250
-----------
Transportation - 5.6%
30,000 Aramex International, Ltd.* 258,750
10,000 Hub Group, Inc. Class A* 224,375
-----------
483,125
-----------
Total Common Stocks
(Cost $5,397,328) 7,736,620
-----------
MONEY MARKET FUNDS - 11.0%
956,460 Fund for Government Investors
(Cost $956,460) 956,460
-----------
Total Investments - 100%
(Cost $6,353,788) $ 8,693,080
===========
8
<PAGE>
Cappiello-Rushmore Trust
PORTFOLIOS OF INVESTMENTS
June 30, 1999 (continued)
GOLD FUND
Market Value
Shares (Note 1)
COMMON STOCKS - 99.5%
Metals and Mining
Australia - 16.3%
6,000 Lihir Gold, Ltd.* $ 86,250
8,000 WMC, Ltd., ADR 140,000
-----------
226,250
-----------
Canada - 34.1%
9,000 Aber Resources, Ltd.* 78,188
9,000 Barrick Gold Corp. 174,375
16,000 Cambior, Inc. 52,000
32,016 Kinross Gold Corp.* 54,027
8,00 Placer Dome, Inc. 94,500
20,000 TVX Gold, Inc.* 20,000
-----------
473,090
-----------
Ghana - 6.0%
12,000 Ashanti Goldfields Co., Ltd. 83,250
-----------
United States - 43.1%
35,000 Battle Mountain Gold Co. 85,312
20,000 Crown Resources Corp.* 32,500
15,000 Homestake Mining Co. 122,812
4,000 Newmont Mining Corp. 79,500
8,500 Stillwater Mining Co.* 277,844
-----------
597,968
-----------
Total Common Stocks
(Cost $2,135,592) 1,380,558
-----------
MONEY MARKET FUNDS - 0.5%
6,409 Fund for Government Investors
(Cost $6,409) 6,409
-----------
Total Investments - 100%
(Cost $2,142,001) $1,386,967
============
* Non-income producing
ADR American Depository Receipts
See Notes to Financial Statements.
9
<PAGE>
<TABLE>
Cappiello-Rushmore Trust
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999
<CAPTION>
Utility Emerging
Income Fund Growth Fund Growth Fund Gold Fund
<S> <C> <C> <C> <C>
ASSETS
Securities at Cost $5,696,654 $11,181,158 $6,353,788 $2,142,001
========== =========== ========== ==========
Securities at Value (Note 1) $8,366,952 $20,946,322 $8,693,080 $1,386,967
Receivable for Securities Sold - - - 17,000
Receivable for Shares Sold 38,340 5,768 33 -
Dividends Receivable 10,873 17,424 1,722 -
Interest Receivable 763 3,597 1,160 24
--------- ----------- ---------- ----------
Total Assets 8,416,928 20,973,111 8,695,995 1,403,991
--------- ----------- ---------- ----------
LIABILITIES
Investment Advisory Fee Payable 2,436 8,274 3,689 764
Administration Fee Payable 4,873 16,548 7,378 1,091
Liability for Shares Redeemed 6,720 77,586 48,819 8,184
Distributions Payable 5,914 - - -
--------- ----------- ---------- ----------
Total Liabilities 19,943 102,408 59,886 10,039
--------- ----------- ---------- ----------
NET ASSETS $8,396,985 $20,870,703 $8,636,109 $1,393,952
========== =========== ========== ==========
Shares Outstanding 654,245 947,538 658,931 348,815
========== =========== ========== ==========
Net Asset Value Per Share $12.83 $22.03 $13.11 $4.00
========== =========== ========== ==========
See Notes to Financial Statements
</TABLE>
10
<PAGE>
<TABLE>
Cappiello-Rushmore Trust
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Emerging
Growth Fund Gold Fund
For the Years Ended June 30
1999 1998 1999 1998
--------- --------- --------- --------
<S> <C> <C> <C> <C>
From Investment Activities
Net Investment Loss $ (61,872) $ (214,292) $ (16,464) $ (21,980)
Net Realized Gain (Loss) on
Investment Transactions 1,345,716 1,678,627 (461,455) (935,910)
Net Change in Unrealized
Appreciation/Depreciation of
Investments (713,036) (1,834,311) 192,968 (234,352)
--------- --------- --------- --------
Net Increase (Decrease) in Net
Assets Resulting from
Operations 570,808 (369,976) (284,951) (1,192,242)
--------- -------- --------- --------
Distributions to Shareholders
From Net Realized Gain on
Investments (101,776) - - -
--------- -------- ------- --------
From Share Transactions
Net Proceeds from Sales
of Shares 42,030,888 36,436,165 - 11,756,801
Reinvestment of Distributions 91,112 - - -
Cost of Shares Redeemed (48,113,508) (42,639,433) (507,885) (11,786,315)
--------- --------- --------- --------
Net Decrease in Net Assets
Resulting from Share
Transactions (5,991,508) (6,203,268) (507,885) (29,514)
--------- --------- --------- --------
Total Decrease in Net Assets (5,522,476) (6,573,244) (792,836) (1,221,756)
Net Assets - Beginning of Year 14,158,585 20,731,829 2,186,788 3,408,544
--------- --------- --------- --------
Net Assets - End of Year $ 8,636,109 $ 14,158,585 $ 1,393,952 $ 2,186,788
=========== =========== ========== ==========
Shares
Sold 3,627,533 2,329,100 - 1,893,015
Issued in Reinvestment of
Distributions 7,530 - - -
Redeemed (4,000,674) (2,802,091) (120,066) (1,909,526)
--------- --------- --------- --------
Net Decrease in Shares (365,611) (472,991) (120,066) (16,511)
=========== ========== ========= ==========
See Notes to Financial Statements
</TABLE>
11
<PAGE>
<TABLE>
Cappiello-Rushmore Trust
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Utility
Income Fund Growth Fund
------------------------------------------------------------------
For the Years Ended June 30,
------------------------------------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
From Investment Activities
Net Investment Income (Loss) $ 275,125 $ 398,161 $ (120,824) $ (193,212)
Net Realized Gain on
Investment Transactions 474,361 508,641 4,333,506 3,356,716
Change in Net Unrealized
Appreciation/Depreciation of
Investments 224,539 1,300,391 (420,750) 1,303,719
------------ ----------- ------------ -----------
Net Increase in Net Assets
Resulting from Operations 974,025 2,207,193 3,791,932 4,467,223
------------ ----------- ------------ -----------
Distributions to Shareholders
From Net Investment Income (275,180) (400,295) - -
From Net Realized Gain on
Investments (554,083) - (4,104,765) -
------------ ----------- ------------ -----------
Total Distributions to
Shareholders (829,263) (400,295) (4,104,765) -
------------ ----------- ------------ -----------
From Share Transactions
Net Proceeds from Sales of Shares 6,111,444 16,647,062 13,234,395 29,015,150
Reinvestment of Distributions 743,808 321,286 3,959,935 -
Cost of Shares Redeemed (8,401,545) (17,782,741) (20,841,675) (33,550,866)
------------ ----------- ------------ -----------
Net Decrease in Net Assets
Resulting from Share
Transactions (1,546,293) (814,393) (3,647,345) (4,535,716)
------------ ----------- ------------ -----------
Total Increase (Decrease) in
Net Assets (1,401,531) 992,505 (3,960,178) (68,493)
Net Assets - Beginning of Year 9,798,516 8,806,011 24,830,881 24,899,374
------------ ----------- ------------ -----------
Net Assets - End of Year $ 8,396,985 $ 9,798,516 $ 20,870,703 $ 24,830,881
============ ============= ============= ============
Shares
Sold 487,318 1,393,270 667,460 1,333,472
Issued in Reinvestment of
Distributions 59,063 26,251 242,643 -
Redeemed (672,475) (1,485,904) (1,043,833) (1,561,079)
------------ ------------- -------------- -------------
Net Decrease in Shares (126,094) (66,383) (133,730) (227,607)
============ ============= ============= ============
See Notes to Financial Statements.
</TABLE>
12
<PAGE>
<TABLE>
Cappiello-Rushmore Trust
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1999
<CAPTION>
Utility Emerging
Income Fund Growth Fund Growth Fund Gold Fund
<S> <C> <C> <C> <C>
Investment Income
Interest $ 14,841 $ 59,248 $ 89,144 $ 4,120
Dividends 351,930 112,276 38,519 8,699
-------- ----------- ----------- ----------
Total Investment Income 366,771 171,524 127,663 12,819
-------- ----------- ----------- ----------
Expenses
Investment Advisory Fee (Note 2) 30,479 97,413 63,027 12,055
Administrative Fee (Note 2) 60,959 194,827 126,053 17,228
Other Fees 208 108 455 -
-------- ----------- ----------- ----------
Total Expenses 91,646 292,348 189,535 29,283
-------- ----------- ----------- ----------
Net Investment Income (Loss) 275,125 (120,824) (61,872) (16,464)
-------- ----------- ----------- ----------
Net Realized Gain (Loss) on
Investment Transactions 474,361 4,333,506 1,345,716 (461,455)
Net Change in Unrealized
Appreciation/Depreciation
of Investments 224,539 (420,750) (713,036) 192,968
-------- ----------- ----------- ----------
Net Gain (Loss) on Investments 698,900 3,912,756 632,680 268,487)
-------- ----------- ----------- ----------
Net Increase (Decrease) in Net
Assets Resulting from Operations $974,025 $3,791,932 $ 570,808 $(284,951)
======== ========== =========== ===========
See Notes to Financial Statements
</TABLE>
13
<PAGE>
<TABLE>
Cappiello-Rushmore Trust
FINANCIAL HIGHLIGHTS
<CAPTION>
Utility Income Fund
------------------------
For the Years Ended June 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 12.56 $ 10.40 $ 10.60 $ 9.24 $ 8.39
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.40 0.47 0.53 0.49 0.55
Net Realized and Unrealized
Gain (Loss) on Securities 1.09 2.17 (0.19) 1.39 0.85
------- ------- ------- ------- -------
Total from Investment Operations 1.49 2.64 0.34 1.88 1.40
------- ------- ------- ------- -------
Distributions to Shareholders:
From Net Investment Income (0.40) (0.48) (0.54) (0.52) (0.55)
From Net Realized Capital Gain (0.82) - - - -
------- ------- ------- ------- -------
Total Distributions to Shareholders (1.22) (0.48) (0.54) (0.52) (0.55)
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Value 0.27 2.16 (0.20) 1.36 0.85
------- ------- ------- ------- -------
Net Asset Value - End of Year $ 12.83 $ 12.56 $ 10.40 $ 10.60 $ 9.24
======= ======== ======= ======== ========
Total Investment Return 12.24% 25.55% 3.39% 20.60% 16.62%
Ratios to Average Net Assets:
Expenses 1.05% 1.05% 1.05% 1.05% 1.05%
Net Investment Income 3.16% 4.01% 4.88% 4.82% 6.26%
Supplementary Data:
Portfolio Turnover Rate 22.0% 29.5% 17.3% 45.1% 147.0%
Net Assets at End of Year
(in thousands) $ 8,397 $ 9,799 $ 8,806 $ 15,106 $17,151
Number of Shares Outstanding at
End of Year (in thousands) 654 780 847 1,425 1,855
See Notes to Financial Statements
</TABLE>
14
<PAGE>
<TABLE>
Cappiello-Rushmore Trust
FINANCIAL HIGHLIGHTS
<CAPTION>
Growth Fund
For the Years Ended June 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 22.96 $ 19.02 $ 17.87 $ 14.64 $ 11.05
-------- -------- ------- -------- --------
Income from Investment Operations:
Net Investment Income (Loss) (0.13) (0.18) (0.09) (0.07) 0.01
Net Realized and Unrealized
Gain on Securities 3.86 4.12 1.83 3.30 3.60
-------- -------- ------- -------- --------
Total from Investment Operations 3.73 3.94 1.74 3.23 3.61
-------- -------- ------- -------- --------
Distributions to Shareholders:
From Net Investment Income - - - - (0.02)
From Net Realized Capital Gain (4.66) - (0.59) - -
-------- -------- ------- -------- --------
Total Distributions to Shareholders (4.66) - (0.59) - (0.02)
-------- -------- ------- -------- --------
Net Increase (Decrease) in
Net Asset Value (0.93) 3.94 1.15 3.23 3.59
-------- -------- ------- -------- --------
Net Asset Value - End of Year $ 22.03 $ 22.96 $ 19.02 $ 17.87 $ 14.64
======== ======= ======= ======== ========
Total Investment Return 23.32% 20.72% 10.10% 22.06% 32.65%
Ratios to Average Net Assets:
Expenses 1.50% 1.50% 1.50% 1.50% 1.50%
Net Investment Income (Loss) (0.62)% (0.74)% (0.46)% (0.41)% 0.12%
Supplementary Data:
Portfolio Turnover Rate 54.3% 65.1% 41.9% 74.5% 70.9%
Net Assets at End of Year
(in thousands) $ 20,871 $ 24,831 $24,899 $ 31,777 $ 19,337
Number of Shares Outstanding at
End of Year (in thousands) 948 1,081 1,309 1,778 1,321
See Notes to Financial Statements.
</TABLE>
15
<PAGE>
<TABLE>
Cappiello-Rushmore Trust
FINANCIAL HIGHLIGHTS
<CAPTION>
Emerging Growth Fund
For the Years Ended June 30
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $13.82 $ 13.84 $ 16.99 $ 14.96 $10.41
------- ------- ------- -------- -------
Income from Investment Operations:
Net Investment Loss (0.09) (0.21) (0.24) (0.16) (0.08)
Net Realized and Unrealized
Gain (Loss) on Securities (0.52)A 0.19A (0.25) 2.30 4.63
------- ------- ------- -------- -------
Total from Investment Operations (0.61) (0.02) (0.49) 2.14 4.55
------- ------- ------- -------- -------
Distributions to Shareholders:
From Net Realized Capital Gain (0.10) - (2.66) (0.11) -
------- ------- ------- -------- -------
Net Increase (Decrease) in
Net Asset Value (0.71) (0.02) (3.15) 2.03 4.55
------- ------- ------- -------- -------
Net Asset Value - End of Year $13.11 $ 13.82 $ 13.84 $ 16.99 $14.96
======= ======= ======= ======== =======
Total Investment Return (4.39)% (0.14)% (2.15)% 14.36% 43.71%
Ratios to Average Net Assets:
Expenses 1.51% 1.50% 1.50% 1.50% 1.50%
Net Investment Loss (0.49)% (1.07)% (1.20)% (.98)% (0.61)%
Supplementary Data:
Portfolio Turnover Rate 171.6% 121.2% 66.2% 121.2% 96.1%
Net Assets at End of Year
(in thousands) $8,636 $14,159 $20,732 $44,985 $36,606
Number of Shares Outstanding
at End of Year (in thousands) 659 1,025 1,498 2,647 2,447
A - The per share amount does not coincide with the net realized and
unrealized gain/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
</TABLE>
16
<PAGE>
<TABLE>
Cappiello-Rushmore Trust
FINANCIAL HIGHLIGHTS
<CAPTION>
Gold Fund
For the Years Ended June 30
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 4.66 $ 7.02 $ 9.93 $ 9.89 $ 9.52
-------- ------- -------- -------- -------
Income from Investment Operations:
Net Investment Loss (0.05) (0.05) (0.08) (0.06) (0.05)
Net Realized and Unrealized Gain
(Loss) on Securities (0.61) (2.31) (2.83) 0.10 0.42
-------- ------- -------- -------- -------
Total from Investment Operations (0.66) (2.36) (2.91) 0.04 0.37
-------- ------- -------- -------- -------
Distributions to Shareholders:
Total Distributions to Shareholders - - - - -
-------- ------- -------- -------- -------
Net Increase (Decrease) in Net Asset
Value (0.66) (2.36) (2.91) 0.04 0.37
-------- ------- -------- -------- -------
Net Asset Value - End of Year $ 4.00 $ 4.66 $ 7.02 $ 9.93 $ 9.89
======== ======= ======== ======== =======
Total Investment Return (14.16)% (33.62)% (29.31)% 0.40% 3.89%
Ratios to Average Net Assets:
Expenses 1.70% 1.70% 1.70% 1.70% 1.70%
Net Investment Loss (0.96)% (0.74)% (0.76)% (0.59)% (0.51)%
Supplementary Data:
Portfolio Turnover Rate - 56.5% 108.5% 59.1% 51.2%
Net Assets at End of Year
(in thousands) $ 1,394 $2,187 $ 3,409 $ 6,122 $6,796
Number of Shares Outstanding at
End of Year (in thousands) 349 469 485 616 687
See Notes to Financial Statements.
</TABLE>
17
<PAGE>
Cappiello-Rushmore Trust
NOTES To FINANCIAL STATEMENTS
June 30, 1999
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 O.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. No borrowings were outstanding at June 30, 1999.
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.
18
<PAGE>
Cappiello-Rushmore Trust
3. Securities Transactions
For the year ended June 30, 1999, purchases and sales (including
maturities) of securities (excluding short-term securities) were as
follows:
Utility Emerging
Income Fund Growth Fund Growth Fund Gold Fund
Purchases $1,834,388 $ 9,973,053 $18,078,409 $ -
========== =========== =========== ==========
Sales $3,103,965 $18,465,357 $22,669,624 $ 265,383
========== =========== =========== ==========
4. Unrealized Appreciation and Depreciation of Investments
Unrealized appreciation (depreciation) as of June 30, 1999 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 $2,619,408 $ 9,781,637 $ 2,396,859 $ 222,310
Gross Unrealized Depreciation (46,684) (16,473) (82,945) 1,062,516)
---------- ----------- ----------- ----------
Net Unrealized Appreciation
(Depreciation) $2,644,724 $ 9,765,164 $ 2,313,914 $ (840,206)
========== =========== =========== ==========
Cost of Investments for Federal
Income Tax Purposes $5,722,228 $11,181,158 $ 6,379,166 $2,227,173
========== =========== =========== ==========
</TABLE>
5. Net Assets
At June 30, 1999 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 $5,484,359 $ 7,613,121 $ 5,341,352 $ 5,014,672
Undistributed Net Investment
Income 136 - - -
Accumulated Net Realized
Gain (Loss) on Investments 242,192 3,492,418 955,465 (2,865,686)
Net Unrealized Appreciation
(Depreciation) on Investments 2,670,298 9,765,164 2,339,292 (755,034)
========= ========== =========== ==========
Net Assets $8,396,985 $ 20,870,703 $ 8,636,109 $ 1,393,952
========== =========== =========== ==========
</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,
1999, net investment losses were reclassified to paid-in-capital as follows:
Utility Emerging
Income Fund Growth Fund Growth Fund Gold Fund
Net Investment Loss - $ 120,824 $ 61,872 $ 16,464
19
<PAGE>
Cappiello-Rushmore Trust
At June 30, 1999, 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:
Emerging
Expires June 30, Growth Fund Gold Fund
2000 - $ 434,866
2001 $56,256 281,566
2005 - 648,259
2006 - 954,368
2007 - 461,455
------- ----------
Total $56,256 $2,780,514
======= ==========
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
of Cappiello-Rushmore Trust:
We have audited the accompanying statements of assets and
liabilities, including the portfolios of investments, of the Utility Income,
Growth, Emerging Growth and Gold Funds of the Cappiello-Rushmore Trust
(the "Trust") as of June 30, 1999 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 each
of the five years in the period then ended. 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. Our procedures included confirmation of
securities owned at June 30, 1999, by correspondence with the custodian and
broker. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Utility Income, Growth, Emerging Growth, and Gold Funds
of the Cappiello-Rushmore Trust, as of June 30, 1999, 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 their financial highlights for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Washington, DC
August 6, 1999
21
<PAGE>
PART C
<PAGE>
PART C
OTHER INFORMATION
Cappiello-Rushmore Trust
ITEM 23. Exhibits
(a)(1) Declaration of Trust (the "Trust" or the "Registrant").3/
(a)(2) Declaration of Trust Amendment.3/
(b) Bylaws of Registrant.3/
(c) Instruments Defining Rights of Security Holders of the Trust. 2/
(d) Management Contract between the Trust and McCullough, Andrews &
Cappiello, Inc., as amended. 3/
(e) Underwriting Contracts. 2/
(f) Bonus or Profit Sharing Contracts. 2/
(g)(1) Administrative Services Agreement between the Trust and
Money Management Associates, as amended. 3/
(g)(2) Custody Agreement between the Trust and Rushmore Trust and
Savings, FSB. 3/
(h)(1) Administrative Services Agreement between Money Management
Associates and Rushmore Trust and Savings, FSB, as amended. 3/
(h)(2) Administrative Services Agreement between Money Management
Associates and Rushmore Services, Inc., as amended. 3/
(i) Opinion of Jorden Schulte & Burchette, regarding the legality of
securities being registered. 3/
(j) Consent of Deloitte & Touche LLP, independent public accountants
for the Trust. 1/
(k) Omitted Financial Statements. 2/
(l) Initial Capital Agreements. 2/
(m) Rule 12b-1 Plan. 2/
(n) Financial Data Schedule for the Registrant. 1/
(o) Rule 18f-3 Plan. 2/
(p) Powers of Attorney. 4/
1/ Filed herewith.
2/ None.
3/ Incorporated by reference to Post-Effective Amendment No. 9 on
Form N-1A, previously filed with the Securities and Exchange
Commission on August 31, 1998.
4/ Incorporated by reference to Post-Effective Amendment No. 6 on
Form N-1A, previously filed with the Securities and Exchange
Commission on October 2, 1996, and Post-Effective Amendment No. 7
filed on October 29, 1997.
ITEM 24. Persons Controlled By or Under Common Control with the Fund
The following persons may be deemed to be directly or indirectly
controlled by or under common control with the Fund, a Maryland
corporation:
<TABLE>
<CAPTION>
Percentage of Voting Securities
Owned and/or Controlled by the
State of Organization and Controlling Persons or
Company Relationship (if any) to the Fund Other Basis of Common Control
<S> <S> <S>
Money Management Associates a District of Columbia limited 100% of the voting authority in
("MMA" or the "Administrator") partnership, registered transfer MMA is held by Daniel L.
agent and registered investment O'Connor in Daniel L.
adviser, and the Trust's O'Connor's capacity as the sole
administrator. general partner of MMA.
Rushmore Trust and Savings, FSB a Maryland corporation, and a 72.2% of the voting securities
("RTS" or the "Custodian") registered transfer agent, which of RTS is held by MMA, and
provides transfer agency, 27.6% of the voting securities
dividend disbursing, and of RTS is held by Daniel L.
shareholder services to the Trust O'Connor, the sole general
via a sub-contractual agreement partner of MMA.
between MMA and RTS, and serves
as the Trust's custodian
Rushmore Services, Inc. ("RSI") a Maryland Corporation which 100% of the voting securities
provides certain services to the of RSI is owned by MMA.
Fund
The Rushmore Fund, Inc. a Maryland corporation, and a
registered investment company,
which is advised by MMA
Fund for Tax-Free Investors, Inc. a Maryland corporation, and a
registered investment company,
which is advised by MMA
Fund for Government Investors a Delaware business trust, and a
registered investment company,
which is advised by MMA
American Gas Index Fund, Inc. a Maryland corporation, and a
registered investment company,
which is advised by MMA
</TABLE>
ITEM 25. Indemnification
Pursuant to Delaware Code Ann. Title 12 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 persons adjudged by a court
or other adjudicatory body either to 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 be 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 two 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 and (ii) 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, and the Cappiello-Rushmore Emerging Growth Fund, and the
Cappiello-Rushmore Gold Fund, each a series of the Trust. 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, and the
Cappiello-Rushmore Gold Fund, each a series of the Trust.
ITEM 27. Principal Underwriters
Not applicable
ITEM 28. Location of Accounts and Records
The physical location for all accounts, books, and records required to
be maintained and preserved by Section 31(a) of the Investment Company
Act of 1940, as amended, and Rules 31a-1 and 31a-2 thereunder, is 4922
Fairmont Avenue, Bethesda, Maryland 20814.
ITEM 29. Management Services
Not Applicable
ITEM 30. Undertakings
None.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the city of Bethesda in the
State of Maryland on the 25th day of October, 1999.
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.
Name Title Date
/s/ Frank A. Cappiello* Chairman of the October 25, 1999
Frank A. Cappiello Board, Trustee
/s/ Daniel L. O'Connor* President, October 25, 1999
Daniel L. O'Connor Treasurer,
Trustee
/s/ Bruce C. Ellis* Trustee October 25, 1999
Bruce C. Ellis
/s/ Peter J. DeAngelis* Trustee October 25, 1999
Peter J. DeAngelis
/s/ Dr. Peter B. Petersen* Trustee October 25, 1999
Dr. Peter B. Petersen
/s/ Jeffrey R. Ellis* Trustee October 25, 1999
Jeffrey R. Ellis
*Timothy N. Coakley, Attorney-in-Fact
Exhibit J
Consent of Independent Auditors
Deloitte & Touche LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Cappiello-Rushmore Trust:
We consent to the incorporation by reference in this Post-Effective
Amendment No. 9 to Registration Statement Nos. 33-46283 and 811-6601
of our report dated August 6, 1999 appearing in the Annual Report of
the Cappiello-Rushmore Trust for the year ended June 30, 1999, and to
the reference to us under the caption "Financial Highlights" appearing
in the Prospectuses which are also a part of such Registration
Statement.
/s/ Deloitte & Touche LLP
Washington, D.C.
October 26, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> UTILITY INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 5,696,654
<INVESTMENTS-AT-VALUE> 8,366,952
<RECEIVABLES> 49,976
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,416,928
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19,943
<TOTAL-LIABILITIES> 19,943
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,484,359
<SHARES-COMMON-STOCK> 654,245
<SHARES-COMMON-PRIOR> 780,339
<ACCUMULATED-NII-CURRENT> 136
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 242,192
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,670,298
<NET-ASSETS> 8,396,985
<DIVIDEND-INCOME> 351,930
<INTEREST-INCOME> 14,841
<OTHER-INCOME> 0
<EXPENSES-NET> (91,646)
<NET-INVESTMENT-INCOME> 275,125
<REALIZED-GAINS-CURRENT> 474,361
<APPREC-INCREASE-CURRENT> 224,539
<NET-CHANGE-FROM-OPS> 974,025
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (275,180)
<DISTRIBUTIONS-OF-GAINS> (554,083)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 487,318
<NUMBER-OF-SHARES-REDEEMED> (672,475)
<SHARES-REINVESTED> 59,063
<NET-CHANGE-IN-ASSETS> (1,401,531)
<ACCUMULATED-NII-PRIOR> 2,325
<ACCUMULATED-GAINS-PRIOR> (186,726)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30,479
<INTEREST-EXPENSE> 208
<GROSS-EXPENSE> 91,646
<AVERAGE-NET-ASSETS> 8,701,454
<PER-SHARE-NAV-BEGIN> 12.560
<PER-SHARE-NII> 0.400
<PER-SHARE-GAIN-APPREC> 1.090
<PER-SHARE-DIVIDEND> (0.400)
<PER-SHARE-DISTRIBUTIONS> (0.820)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.830
<EXPENSE-RATIO> 1.050
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 11,181,158
<INVESTMENTS-AT-VALUE> 20,946,322
<RECEIVABLES> 26,789
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,973,111
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102,408
<TOTAL-LIABILITIES> 102,408
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,613,121
<SHARES-COMMON-STOCK> 947,538
<SHARES-COMMON-PRIOR> 1,081,268
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,492,418
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,765,164
<NET-ASSETS> 20,870,703
<DIVIDEND-INCOME> 59,248
<INTEREST-INCOME> 112,276
<OTHER-INCOME> 0
<EXPENSES-NET> (292,348)
<NET-INVESTMENT-INCOME> (120,824)
<REALIZED-GAINS-CURRENT> 4,333,506
<APPREC-INCREASE-CURRENT> (420,750)
<NET-CHANGE-FROM-OPS> 3,791,932
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (400,295)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,393,270
<NUMBER-OF-SHARES-REDEEMED> (1,485,904)
<SHARES-REINVESTED> 26,251
<NET-CHANGE-IN-ASSETS> 992,505
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (93,039)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 97,413
<INTEREST-EXPENSE> 108
<GROSS-EXPENSE> 292,348
<AVERAGE-NET-ASSETS> 19,473,448
<PER-SHARE-NAV-BEGIN> 22.960
<PER-SHARE-NII> (0.130)
<PER-SHARE-GAIN-APPREC> 3.860
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (4.660)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 22.030
<EXPENSE-RATIO> 1.500
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> EMERGING GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 6,353,788
<INVESTMENTS-AT-VALUE> 8,693,080
<RECEIVABLES> 2,915
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,695,995
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 59,886
<TOTAL-LIABILITIES> 59,886
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,341,353
<SHARES-COMMON-STOCK> 658,931
<SHARES-COMMON-PRIOR> 1,024,542
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 955,465
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,339,292
<NET-ASSETS> 8,636,110
<DIVIDEND-INCOME> 38,520
<INTEREST-INCOME> 89,144
<OTHER-INCOME> 0
<EXPENSES-NET> (189,535)
<NET-INVESTMENT-INCOME> (61,871)
<REALIZED-GAINS-CURRENT> 1,345,716
<APPREC-INCREASE-CURRENT> (713,036)
<NET-CHANGE-FROM-OPS> 570,809
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4,104,765)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 667,460
<NUMBER-OF-SHARES-REDEEMED> (1,043,833)
<SHARES-REINVESTED> 242,643
<NET-CHANGE-IN-ASSETS> (3,960,178)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,967,102)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 63,027
<INTEREST-EXPENSE> 455
<GROSS-EXPENSE> 189,535
<AVERAGE-NET-ASSETS> 12,575,031
<PER-SHARE-NAV-BEGIN> 13.820
<PER-SHARE-NII> (0.090)
<PER-SHARE-GAIN-APPREC> (0.520)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.100)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.110
<EXPENSE-RATIO> 1.510
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> GOLD FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 2,142,001
<INVESTMENTS-AT-VALUE> 1,386,967
<RECEIVABLES> 17,024
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,403,991
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,039
<TOTAL-LIABILITIES> 10,039
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,014,672
<SHARES-COMMON-STOCK> 348,815
<SHARES-COMMON-PRIOR> 468,881
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,865,686)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (755,034)
<NET-ASSETS> 1,393,952
<DIVIDEND-INCOME> 8,699
<INTEREST-INCOME> 4,120
<OTHER-INCOME> 0
<EXPENSES-NET> (29,283)
<NET-INVESTMENT-INCOME> (16,464)
<REALIZED-GAINS-CURRENT> (461,455)
<APPREC-INCREASE-CURRENT> 192,968
<NET-CHANGE-FROM-OPS> (284,951)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,333,472
<NUMBER-OF-SHARES-REDEEMED> (1,561,079)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (68,493)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,478,604)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,055
<INTEREST-EXPENSE> 6
<GROSS-EXPENSE> 29,283
<AVERAGE-NET-ASSETS> 1,720,504
<PER-SHARE-NAV-BEGIN> 4.660
<PER-SHARE-NII> (0.050)
<PER-SHARE-GAIN-APPREC> (0.610)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 4.000
<EXPENSE-RATIO> 1.700
</TABLE>
