<PAGE>
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ANNUAL REPORT, June 30, 2000
Cappiello-Rushmore Trust
4922 Fairmont Avenue, Bethesda, MD 20814
(800) 622-1386 (301) 657-1510
[LOGO OF CAPPIELLO-RUSHMORE FUNDS]
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August 14, 2000
Dear Fellow Investor:
This is the Cappiello-Rushmore Trust's eighth annual report. The Funds'
performances for the fiscal year ended June 30, 2000 were as follows:
-------------------------------------------------------------------------------
Total Return Comparison
(Average annual total returns for the period ended June 30, 2000)
<TABLE>
<CAPTION>
Since
One Year Five Years Inception*
-------- ---------- ----------
<S> <C> <C> <C>
Cappiello-Rushmore Emerging Growth Fund 30.36% 6.85% 10.12%
Cappiello-Rushmore Utility Income Fund (7.05)% 10.31% 7.21%
Cappiello-Rushmore Growth Fund (8.86)% 12.76% 13.56%
Standard & Poor's 500 Index 7.25% 23.80% 20.38%
</TABLE>
* These performance figures are based on the Funds inception date of October
6, 1992, to June 30, 2000.
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 change in principal and reinvested
dividends and capital gains. Your return and principal will vary; as a result
you may have a gain or loss when you sell shares.
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Summary
The Funds' fiscal year spanned one of the wildest stock market rides in
decades spurred by fear of the Federal Reserve (the "Fed") and worries about
Y2K. The result produced increasing volatility in stock prices. In the summer
of 1999 (as the Funds started the new fiscal year), the prospect of the
Federal Reserve beginning a cycle of market tightening became a small but
growing worry on Wall Street. A rising stock market accompanied by a faster
rising real estate market seemed to set the stage for further rate increases.
The fear was that the Fed wanted to bring rates back to "normal" (where they
were before the market crash in 1998). This was to be the major market concern
through the fall and into early winter of the year 2000. A more apparent
threat was a possible disruption to the economy by the Y2K problem. Neither
threat seemed to affect investors as the Dow Jones Industrial Average (the
Dow) rallied from 10,552 on June 30, 1999, to 11,497 by December 31, 1999.
That performance was overwhelmed by the unprecedented volatility of the NASDAQ
100 that soared towards year-end, broke out into new record highs day after
day during January 2000, and experienced record one day declines. For example,
we are slightly more than halfway through the year 2000, and 60% of the
trading days have seen the NASDAQ move up or down more than 2% in one day. In
1999, only 25% of the trading days saw a move of 2% or more in one day.
In fact, volatility was the theme of the market through the twelve months
ended June 30, 2000. The Dow which had been at 10,552 on June 30, 1999, closed
at 10,447 on June 30, 2000, essentially flat for the year after recording new
highs along the way. The S&P 500 fared better.
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<PAGE>
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Besides volatility, a second theme of the last twelve months was
"selectivity". Only a small fraction of the thousands of stocks traded on the
New York Stock Exchange and NASDAQ managed to make money for investors
predominantly in the technology, Internet and biotech sectors. The vast
majority of stocks--the so-called "old economy" stocks, lost money. In point
of fact, nearly 250 stocks in the S&P 500 declined in the market last year!
To date, the Federal Reserve has raised its benchmark short-term Federal
Funds rate by 1.75 percentage points in six steps since June 1999 to 6.5% in
an effort to dampen inflation pressures before they take root in the economy.
As we begin a new fiscal year, constant volatility and extreme selectivity in
stock purchases continue to worry investors who are nervously attempting to
gauge how long the Federal Reserve tightening process will last.
Emerging Growth Fund
The Emerging Growth Fund registered a positive return of 30.36% for the
twelve months ended June 30, 2000. The satisfying results reflected the small
stock sector's improved performance after years of underperformance.
Simply put, emerging growth investing is nothing more than the growth stock
philosophy taken to its extreme. Since stock prices are normally driven by
earnings, the objective is to seek out companies that generate the highest
rate of earnings growth. Inevitably this means smaller companies, and no
sector of small business has grown as fast as technology in recent years.
We ended the fiscal year 2000 with stock portfolio assets concentrated in
three major sectors: computer software and services at 24.4%;
telecommunications at 17.4%; and technology at 14.9%. The largest single stock
position in the portfolio was Excel Technology, Inc. followed by Dot Hill
System Corp.
Among the best performing stocks at the year-end were:
.Polymedica Corp.
.Remec, Inc.
.Hain Food Group, Inc.
As we noted a year ago, the last great period of underperformance of small
cap stocks versus large cap stocks occurred from 1969 to 1973. From 1975 to
1979, 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 most
recent period (1994-2000), small stock underperformance has approached the
depressed price levels not seen since 1969-1973. The modest reversal this year
by the smaller stocks is likely to continue for the next several years based
on historical experience.
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
managed to provide higher dividend yields than the stock market average with
substantially lower volatility in share price. The Fund provides 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. In the past two fiscal years (1998 and 1999),
the Fund posted double-digit returns, a reflection of the lower interest rate
environment and improving utility earnings. Total return for the Fund for this
past year ended June 30, 2000 was a negative 7.05% reflecting the difficult
market environment mainly in the electric utility sector due to the
substantial rise in interest rates. It should be noted that the traditional
electric and gas companies have diverged dramatically in terms of performance
over the past twelve months. While gas company stocks have performed well and,
in most cases, posted positive total returns, most electric utility stocks
have recorded negative total returns. For example, Lehman Brothers Electric
Utility Index posted a decline of .05% for the twelve months ended May 31,
2000.
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2
<PAGE>
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Common stocks represented 85.7% of the portfolio at year-end. The sector
positions were: Gas and Electric 48.7%; Telecommunications 32.8%; and Natural
Gas Distribution 4.2%. The cash position (money market funds) totaled 6.4% of
the portfolio.
Among the best performing stocks at year-end were:
.KeySpan Corp.
.IDACORP, Inc.
.Washington Gas Light Co.
The largest single stock position in the portfolio was SBC Communications,
Inc. followed by Bell Atlantic Corp.
For years utility stocks have been on the wrong side of the investment
track. Whenever the stock market sold off, investors would flock to utilities
viewing them as a safe haven to park money until the market decline ended.
Once that happened, money would exit the utility sector as fast as it came in.
This recurrent cycle seems to be changing as investors view utility stocks as
more than income vehicles and a "safe haven" in times of market stress. Today
utilities are beginning to be perceived as being transformed through
deregulation into potential growth vehicles. Utilities continue to possess
financial virtues such as growing cash flow and solid balance sheets. In
addition, they are merging and acquiring to enhance their competitive
position, while at the same time investing in new technologies in generation,
as well as hiring non-utility executives who are effective in managing change
in an increasingly competitive industry.
In summary, while this year's performance was disappointing, we believe that
the current year's environment will be more rewarding for utility stocks and
the Fund's portfolio as investors recognize the group's relatively steady
income, lower than average price-earnings ratio and attractive income
(dividend yields ranging from 4-6%). These components make for an attractive
investment package in the face of mounting uncertainty, as well as heightened
volatility in the current stock market.
Growth Fund
The Growth Fund seeks capital appreciation by investing in larger
established companies with favorable relationships between price-earnings
ratios and growth rates. Compared to the total return of 23.32% recorded for
the year ended June 30, 1999, the Fund's performance for 2000 was negative
8.86%. The relatively poor performance this year versus the prior year was the
concentration in financial services, as well as the sell-off in
telecommunication stocks in the second half of the fiscal year.
Common stocks represented 93.5% of the portfolio at year-end. The Fund's
largest stock sector positions of the portfolio were financial services at
24.9%, telecommunications at 16.2%, healthcare at 11.8%, oil and gas services
at 10.3%, computer hardware and software at 9.6%, and merchandising and retail
at 9.1%.
Among the best performing stocks at year-end were:
.Hughes Electronics Corp.
.UnitedHealth Group, Inc.
.American Express Co.
The largest single stock position in the portfolio was UnitedHealth Group,
Inc. followed by Hughes Electronics Corp.
We continue to use a growth style of investment by investing in stocks,
which we believe, have some or all of the following characteristics:
.Dominant products or market niches
.Improved sales outlook or opportunities
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3
<PAGE>
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.Demonstrated sales growth and earnings
.Cost restructuring programs which are expected to positively affect
company earnings
. Increased order backlogs, new product introductions, or industry
developments, which are expected to positively affect company
earnings
Gold Fund
The outlook for gold continues to be questionable over the next twelve
months. Last year was a continuation of the relentless decline in value that
has lasted for nearly twenty years. The most bullish argument for gold is its
characteristic as a portfolio diversifier; there has been a negative
correlation between the returns on gold and the return on the S&P 500 over the
past ten years. Nevertheless, the offset to this argument is that a negative
correlation with the S&P 500, by itself, does not necessarily make for a good
investment.
Overall, an investment in a commodity such as gold should be based on
favorable supply/demand fundamentals which will likely lead to a higher price.
A look at the current and expected supply/demand characteristics can be
summarized as follows: gold production is expected to decline in the coming
year. Indeed, gold production in the first quarter seems to have declined by
1% to 2% driven by lower grades at Grasberg, the world's biggest gold mine.
Experts believe a significant decline in gold production of about 200 tonnes**
will be necessary in order to keep the gold price from declining further. This
is not likely to happen. In looking at the cost structure of the industry,
very little production will be forced to shut down if gold prices remain above
$250 per ounce. Thus far, the evidence seems to indicate fairly steady global
gold production over the next several years.
Beyond supply and demand, the relatively recent introduction of inflation
indexed securities by the U.S. is a further setback for gold as a hedge
against inflation. These newer instruments pay interest and maintain their
value since they are indexed to a benchmark of inflation.
Further, last fall, 15 European central banks signed a pledge to limit their
sales of gold to 400 tonnes** per year for the next five years. That was good
news. Nevertheless, this "Washington Agreement" has made it perfectly clear
that central banks will be significant sellers of gold for a very long time.
Many analysts raised their long-term forecasts because of this announcement.
Current Wall Street forecasts are for gold prices to average $325/ounce in
2001. These forecasts appear optimistic in light of the current price levels
of gold.
Longer-term gold may yet have its day in the sun. The United States and the
world economy in general have had an unusual run of good luck both
economically and diplomatically. Inevitably, economic mistakes will be made,
diplomatic disasters will occur and the possibility for nuclear mischief will
increase in the years ahead. At the juncture of any one of these events, gold
could well reclaim its title as "a store of value."
Market Outlook
Looking ahead, current expectations are that the economy in terms of Gross
Domestic Product (GDP) will slow from the unexpectedly strong economic growth
of the second quarter. Third quarter GDP growth is estimated at about 4%, the
fourth quarter at 3.5%, and the first quarter of 2001 at 3%. If GDP declines
to below 3% and inflation remains low, a "soft landing" has occurred by the
Fed's engineering. A situation that has happened only once since World War II
and that was in 1994-95.
There are some indications that this successful slowdown is underway.
Housing is in a slowdown phase. In June, homebuilders reported the lowest
level of activity since November 1997. Interest rates have not risen enough to
put residential construction and sales in a recession mode, but there has
clearly been some impact. Further, recent Purchasing Managers Surveys reflect
a softening in the manufacturing sector. The largest and most important
variable is consumer spending. Retail sales have shown some slowing, but
consumer
**The standard by which gold is measured.
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4
<PAGE>
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confidence continues to be strong. While the Fed is in a tightening cycle,
stocks are going to have a difficult time sustaining a significant advance.
The one event that would drive the market back upward would be Fed easing.
This is not likely in the short term. While a "soft landing" may occur (and we
believe it will), and with inflation no longer a problem, it will take time
for this to be accepted as reality. In the meantime, the market in general is
unlikely to do very much in the next several months. It is, therefore, a time
to concentrate more than ever on individual stocks, and not broad market
movements.
Nevertheless, it is difficult to be bearish on individual stocks given the
sharp market declines of last spring. There are a growing number of good,
solid companies that are selling at single-digit or low double-digit ratios
with better-than-average growth rates, particularly in the mid-capitalization
group. Most of these stocks have been neglected by investors and have become
the poor performers of the past few years because they were not Internet or
high technology related. However, given their relative attractiveness, they
could well be the winners of the next twelve months.
/s/ Frank A. Cappiello
Frank A. Cappiello
Chairman
Cappiello-Rushmore Trust
-------------------------------------------------------------------------------
5
<PAGE>
Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Statements of Net Assets
June 30, 2000
Utility Income Fund
<TABLE>
------------------------------------------
<CAPTION>
Market Value
Shares (Note 1)
<C> <S> <C>
------------------------------------------
COMMON STOCKS -- 85.7%
Gas and Electric -- 48.7%
10,000 Allegheny
Energy, Inc. $ 273,750
13,000 Alliant Energy
Corp. 338,000
12,300 CMS Energy Corp. 272,138
1,500 Enron Corp. 96,750
8,000 Hawaiian
Electric
Industries,
Inc. 262,500
8,000 IDACORP, Inc. 258,000
13,400 KeySpan Corp. 412,050
14,500 Potomac Electric
Power Co. 362,500
12,500 Southern Co. 291,406
8,000 TXU Corp. 236,000
-----------
2,803,094
-----------
Natural Gas Distribution --
4.2%
10,000 Washington Gas
Light Co. 240,625
-----------
Telecommunication -- 32.8%
5,500 ALLTEL Corp. 340,656
7,000 AT&T Corp. 221,375
9,400 Bell Atlantic
Corp. 477,638
3,800 Global Crossing
Ltd.* 99,987
12,000 SBC
Communications,
Inc. 519,000
5,000 WorldCom, Inc.* 229,375
-----------
1,888,031
-----------
Total Common Stocks
(Cost $3,953,490) 4,931,750
-----------
CONVERTIBLE PREFERRED
STOCKS -- 5.0%
8,000 Kmart Financing,
7.75%
(Cost $408,425) 291,500
-----------
</TABLE>
<TABLE>
------------------------------------------
<CAPTION>
Market Value
Shares (Note 1)
<C> <S> <C>
------------------------------------------
MONEY MARKET FUNDS -- 6.4%
366,616 Fund for
Government
Investors (Cost
$366,616) $ 366,616
-----------
Total Investments -- 97.1%
(Cost $4,728,531) 5,589,866
Other Assets Less Liabili-
ties -- 2.9% 164,010
-----------
Net Assets -- 100.0% $ 5,753,876
===========
Net Asset Value Per Share
(Based on 519,333 Shares
Outstanding) $ 11.08
===========
Net Assets Consisting of:
Paid-in Capital $ 3,923,800
Accumulated Undistributed
Net Realized Gain on
Investments 968,741
Net Unrealized
Appreciation of
Investments 861,335
-----------
Net Assets $ 5,753,876
===========
</TABLE>
6
<PAGE>
Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Statements of Net Assets
June 30, 2000 (continued)
Growth Fund
<TABLE>
------------------------------------------
<CAPTION>
Market Value
Shares (Note 1)
<C> <S> <C>
------------------------------------------
COMMON STOCKS -- 93.5%
Beverages -- 4.6%
12,000 Coca-Cola Co. $ 689,250
-----------
Business Services -- 4.9%
15,000 First Data Corp. 744,375
-----------
Computer Hardware and
Software -- 9.6%
8,000 Commerce One,
Inc.* 363,000
10,000 International
Business
Machines Corp. 1,095,625
-----------
1,458,625
-----------
Data Processing &
Preparation -- 2.1%
10,000 SunGard Data
Systems, Inc.* 310,000
-----------
Financial Services -- 24.9%
22,500 American Express
Co. 1,172,812
27,000 Charles Schwab
Corp. 907,875
31,000 Franklin
Resources, Inc. 941,625
20,000 SLM Holding
Corp. 748,750
-----------
3,771,062
-----------
Healthcare--11.8%
7,000 American Home
Products Corp. 411,250
16,000 UnitedHealth
Group Inc. 1,372,000
-----------
1,783,250
-----------
Merchandising and Retail --
9.1%
15,000 Federated
Department
Stores, Inc.* 506,250
9,000 Kimberly-Clark
Corp. 516,375
20,000 Masco Corp. 361,250
-----------
1,383,875
-----------
Oil and Gas Services --
10.3%
12,000 Burlington
Resources Inc. 459,000
10,000 Global Marine
Inc.* 281,875
6,500 Schlumberger,
Ltd. 485,062
6,258 Transocean Sedco
Forex, Inc. 334,412
-----------
1,560,349
-----------
</TABLE>
<TABLE>
------------------------------------------
<CAPTION>
Market Value
Shares (Note 1)
<C> <S> <C>
------------------------------------------
Telecommunications -- 16.2%
14,850 Global Crossing
Ltd.* $ 390,741
14,000 Hughes
Electronics
Corp.* 1,228,500
15,000 Primus Telecom-
munications
Group, Inc.* 373,125
10,000 WorldCom, Inc.* 458,750
-----------
2,451,116
-----------
Total Common Stocks
(Cost $8,009,205) 14,151,902
-----------
MONEY MARKET FUNDS -- 8.1%
1,220,123 Fund for
Government
Investors
(Cost
$1,220,123) 1,220,123
-----------
Total Investments -- 101.6%
(Cost $9,229,328) 15,372,025
Liabilities in Excess of
Other
Assets -- (1.6)% (235,201)
-----------
Net Assets -- 100.0% $15,136,824
===========
Net Asset Value Per Share
(Based on 928,676 Shares
Outstanding) $ 16.30
===========
Net Assets Consisting of:
Paid-in Capital $ 7,043,756
Accumulated Undistributed
Net Realized Gain on
Investments 1,950,371
Net Unrealized
Appreciation of
Investments 6,142,697
-----------
Net Assets $15,136,824
===========
</TABLE>
7
<PAGE>
Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Statements of Net Assets
June 30, 2000 (continued)
Emerging Growth Fund
<TABLE>
------------------------------------------
<CAPTION>
Market Value
Shares (Note 1)
<C> <S> <C>
------------------------------------------
COMMON STOCKS -- 91.6%
Computer Software and
Services -- 24.4%
2,400 BARRA, Inc.* $ 118,950
25,000 Communication
Intelligence
Corp.* 112,110
14,000 Corsair
Communications,
Inc.* 402,500
50,000 Dot Hill System
Corp.* 550,000
5,625 PC Connection,
Inc.* 320,625
18,000 Pilot Network
Services, Inc.* 267,750
4,300 SERENA Software,
Inc.* 195,247
15,000 Ticketmaster
Online-
CitySearch,
Inc.* 239,063
50,000 United Shipping
and Technology,
Inc.* 400,000
----------
2,606,245
----------
Electronics -- 1.6%
2,500 Molecular
Devices Corp.* 172,969
----------
Food Products -- 2.1%
6,000 Hain Celestial
Group, Inc.* 220,125
----------
Healthcare Products and
Services -- 11.1%
10,000 Endocare, Inc.* 202,500
3,300 Invitrogen
Corp.* 248,170
16,000 KV
Pharmaceutical
Co., Class A* 424,000
4,500 PolyMedica
Corp.* 194,625
2,400 Zoll Medical
Corp.* 117,600
----------
1,186,895
----------
Merchandising and Retail --
4.4%
12,000 Pacific Sunwear
of California,
Inc.* 225,000
25,000 Pier 1 Imports,
Inc. 243,750
----------
468,750
----------
Oil and Gas Services --
0.4%
2,000 Patina Oil & Gas
Corp. 41,500
----------
Semiconductors and
Related -- 12.9%
7,000 Alliance
Semiconductor
Corp.* $ 171,938
6,000 Cybex Computer
Products Corp.* 258,000
3,000 DuPont
Photomasks,
Inc.* 205,500
4,500 MKS Instruments,
Inc.* 176,062
12,000 Ramtron
International
Corp.* 235,500
5,100 TelCom
Semiconductor,
Inc.* 204,319
2,000 Zoran Corp.* 131,875
----------
1,383,194
----------
</TABLE>
<TABLE>
------------------------------------------
<CAPTION>
Market Value
Shares (Note 1)
<C> <S> <C>
------------------------------------------
Technology -- 14.9%
3,900 Aurora
Biosciences
Corp* 265,931
20,000 Excel
Technology,
Inc.* 1,006,250
6,500 II-VI, Inc.* 314,437
-----------
1,586,618
-----------
Telecommunications -- 17.4%
8,000 Adaptive
Broadband
Corp.* 294,000
12,000 Alamosa PCS
Holdings, Inc.* 250,500
12,200 Comtech Telecom-
munications
Corp.* 201,300
2,100 DSP Group, Inc.* 117,600
10,000 Primus Telecom-
munications
Group, Inc.* 248,750
3,000 Proxim, Inc.* 296,906
3,000 REMEC, Inc.* 125,625
2,400 ViaSat, Inc.* 130,200
4,000 Xircom, Inc.* 190,000
-----------
1,854,881
-----------
Utilities -- 2.4%
15,000 Avista Corp. 261,563
-----------
Total Common Stocks
(Cost $7,074,758) 9,782,740
-----------
MONEY MARKET FUNDS -- 24.3%
2,599,329 Fund for
Government
Investors
(Cost
$2,599,329) $ 2,599,329
-----------
Total Investments -- 115.9%
(Cost $9,674,087) 12,382,069
Other Assets
Less Liabilities -- 6.2% 667,120
Payable for Securities
Purchased -- (22.1)% (2,363,362)
-----------
Net Assets -- 100.0% $10,685,827
===========
Net Asset Value Per Share
(Based on 834,047 Shares
Outstanding) $ 12.81
===========
Net Assets Consisting of:
Paid-in Capital $ 8,935,728
Accumulated Undistributed
Net Realized Gain on
Investments (957,883)
Net Unrealized
Appreciation of
Investments 2,707,982
-----------
Net Assets $10,685,827
===========
</TABLE>
8
<PAGE>
Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Statements of Net Assets
June 30, 2000 (continued)
Gold Fund
See Notes to Financial Statements.
<TABLE>
------------------------------------------------------
<CAPTION>
Market Value
Shares (Note 1)
<C> <S> <C>
------------------------------------------------------
COMMON STOCKS -- 99.8%
Metals and Mining
Australia -- 21.8%
6,000 Lihir Gold, Ltd.* $ 48,750
7,500 WMC, Ltd., ADR 135,000
--------
183,750
--------
Canada -- 33.0%
7,500 Aber Resources, Ltd.* 46,875
8,500 Barrick Gold Corp. 154,594
8,000 Placer Dome, Inc. 76,500
--------
277,969
--------
Ghana -- 1.2%
6,000 Ashanti Goldfields Co., Ltd. 10,500
--------
United States -- 43.8%
18,000 Battle Mountain Gold Co. 39,375
14,000 Homestake Mining Co. 96,250
4,000 Newmont Mining Corp. 86,500
5,300 Stillwater Mining Co.* 147,737
--------
369,862
--------
Total Common Stocks
(Cost $1,308,971) 842,081
--------
</TABLE>
<TABLE>
-------------------------------------------------------
<CAPTION>
Market Value
Shares (Note 1)
<C> <S> <C>
-------------------------------------------------------
MONEY MARKET FUNDS -- 0.3%
2,456 Fund for Government Investors
(Cost $2,456) $ 2,456
----------
Total Investments -- 100.1%
(Cost $1,311,427) 844,537
Liabilities in Excess of Other
Assets -- (0.1)% (1,141)
----------
Net Assets -- 100.0% $ 843,396
==========
Net Asset Value Per Share
(Based on 266,113 Shares
Outstanding) $ 3.17
==========
Net Assets Consisting of:
Paid-in Capital $4,699,230
Accumulated Undistributed Net Realized
Loss on Investments (3,388,944)
Net Unrealized Depreciation of
Investments (466,890)
----------
Net Assets $ 843,396
==========
</TABLE>
----------------
* Non-income producing
ADR American Depository Receipts
9
<PAGE>
Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Statements of Operations
For the Year Ended June 30, 2000
<TABLE>
<CAPTION>
Utility Emerging
Income Fund Growth Fund Growth Fund Gold Fund
<S> <C> <C> <C> <C>
Investment Income
Interest.................. $ 16,070 $ 42,395 $ 26,847 $ 382
Dividends................. 310,871 98,194 9,220 5,513
----------- ----------- --------- ---------
Total Investment Income... 326,941 140,589 36,067 5,895
----------- ----------- --------- ---------
Expenses
Investment Advisory Fee
(Note 2)................. 25,256 87,039 46,173 7,636
Administrative Fee (Note
2)....................... 50,512 174,078 92,345 10,909
Other Fees................ 24 -- 221 24
----------- ----------- --------- ---------
Total Expenses............ 75,792 261,117 138,739 18,569
----------- ----------- --------- ---------
Net Investment Income
(Loss).................... 251,149 (120,528) (102,672) (12,674)
----------- ----------- --------- ---------
Net Realized Gain (Loss) on
Investment Transactions... 991,771 1,946,856 238,983 (523,258)
Change in Net Unrealized
Appreciation/
(Depreciation) of
Investments............... (1,808,963) (3,622,467) 368,690 288,144
----------- ----------- --------- ---------
Net Gain (Loss) on
Investments............... (817,192) (1,675,611) 607,673 (235,114)
----------- ----------- --------- ---------
Net Increase (Decrease) in
Net Assets Resulting from
Operations................ $ (566,043) $(1,796,139) $ 505,001 $(247,788)
=========== =========== ========= =========
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Utility
Income Fund Growth Fund
For the Years Ended June 30,
----------------------------------------------------
2000 1999 2000 1999
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
From Investment Activi-
ties
Net Investment Income
(Loss)................ $ 251,149 $ 275,125 $ (120,528) $ (120,824)
Net Realized Gain on
Investment
Transactions.......... 991,771 474,361 1,946,856 4,333,506
Change in Net
Unrealized
Appreciation of
Investments........... (1,808,963) 224,539 (3,622,467) (420,750)
----------- ----------- ------------ ------------
Net Increase (Decrease)
in Net Assets
Resulting
from Operations....... (566,043) 974,025 (1,796,139) 3,791,932
----------- ----------- ------------ ------------
Distributions to Share-
holders
From Net Investment
Income................ (251,419) (275,180) -- --
From Net Realized Gain
on Investments........ (265,222) (554,083) (3,471,862) (4,104,765)
----------- ----------- ------------ ------------
Total Distributions to
Shareholders.......... (516,641) (829,263) (3,471,862) (4,104,765)
----------- ----------- ------------ ------------
From Share Transactions
Net Proceeds from Sales
of Shares............. 5,150,330 6,111,444 6,441,280 13,234,395
Reinvestment of
Distributions......... 468,278 743,808 3,281,812 3,959,935
Cost of Shares
Redeemed.............. (7,179,033) (8,401,545) (10,188,970) (20,841,675)
----------- ----------- ------------ ------------
Net Decrease in Net
Assets Resulting from
Share Transactions.... (1,560,425) (1,546,293) (465,878) (3,647,345)
----------- ----------- ------------ ------------
Total Decrease in Net
Assets................ (2,643,109) (1,401,531) (5,733,879) (3,960,178)
Net Assets -- Beginning
of Year................ 8,396,985 9,798,516 20,870,703 24,830,881
----------- ----------- ------------ ------------
Net Assets -- End of
Year................... $ 5,753,876 $ 8,396,985 $ 15,136,824 $ 20,870,703
=========== =========== ============ ============
Shares
Sold................... 417,700 487,318 357,404 667,460
Issued in Reinvestment
of Distributions...... 39,224 59,063 203,208 242,643
Redeemed............... (591,836) (672,475) (579,474) (1,043,833)
----------- ----------- ------------ ------------
Net Decrease in Shares. (134,912) (126,094) (18,862) (133,730)
=========== =========== ============ ============
</TABLE>
See Notes to Financial Statements.
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Cappiello-Rushmore Trust
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Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Emerging
Growth Fund Gold Fund
For the Years Ended June 30,
--------------------------------------------------
2000 1999 2000 1999
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
From Investment Activities
Net Investment Loss....... $ (102,672) $ (61,872) $ (12,674) $ (16,464)
Net Realized Gain (Loss)
on Investment
Transactions............. 238,983 1,345,716 (523,258) (461,455)
Net Change in Unrealized
Appreciation/Depreciation
of Investments........... 368,690 (713,036) 288,144 192,968
------------ ------------ ---------- ----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations.......... 505,001 570,808 (247,788) (284,951)
------------ ------------ ---------- ----------
Distributions to Sharehold-
ers
From Net Realized Gain on
Investments.............. (2,152,331) (101,776) -- --
------------ ------------ ---------- ----------
From Share Transactions
Net Proceeds from Sales of
Shares................... 23,118,023 42,030,888 -- --
Reinvestment of
Distributions............ 2,082,991 91,112 -- --
Cost of Shares Redeemed... (21,503,966) (48,113,508) (302,768) (507,885)
------------ ------------ ---------- ----------
Net Increase (Decrease)
in Net Assets Resulting
from Share Transactions.. 3,697,048 (5,991,508) (302,768) (507,885)
------------ ------------ ---------- ----------
Total Increase (Decrease)
in Net Assets............ 2,049,718 (5,522,476) (550,556) (792,836)
Net Assets -- Beginning of
Year...................... 8,636,109 14,158,585 1,393,952 2,186,788
------------ ------------ ---------- ----------
Net Assets -- End of Year.. $ 10,685,827 $ 8,636,109 $ 843,396 $1,393,952
============ ============ ========== ==========
Shares
Sold...................... 1,670,766 3,627,533 -- --
Issued in Reinvestment of
Distributions............ 192,158 7,530 -- --
Redeemed.................. (1,687,808) (4,000,674) (82,702) (120,066)
------------ ------------ ---------- ----------
Net Increase (Decrease)
in Shares................ 175,116 (365,611) (82,702) (120,066)
============ ============ ========== ==========
</TABLE>
See Notes to Financial Statements.
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Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
Utility Income Fund
For the Years Ended June 30,
----------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of
Year............................ $12.83 $12.56 $10.40 $10.60 $ 9.24
------ ------ ------ ------ -------
Income from Investment
Operations:
Net Investment Income............ 0.44 0.40 0.47 0.53 0.49
Net Realized and Unrealized Gain
(Loss) on Securities............ (1.31) 1.09 2.17 (0.19) 1.39
------ ------ ------ ------ -------
Total from Investment
Operations..................... (0.87) 1.49 2.64 0.34 1.88
------ ------ ------ ------ -------
Distributions to Shareholders:
From Net Investment Income....... (0.44) (0.40) (0.48) (0.54) (0.52)
From Net Realized Capital Gain... (0.44) (0.82) -- -- --
------ ------ ------ ------ -------
Total Distributions to
Shareholders................... (0.88) (1.22) (0.48) (0.54) (0.52)
------ ------ ------ ------ -------
Net Increase (Decrease) in Net
Asset Value..................... (1.75) 0.27 2.16 (0.20) 1.36
------ ------ ------ ------ -------
Net Asset Value -- End of Year... $11.08 $12.83 $12.56 $10.40 $ 10.60
====== ====== ====== ====== =======
Total Investment Return........... (7.05)% 12.24% 25.55% 3.39% 20.60%
Ratios to Average Net Assets:
Expenses......................... 1.05% 1.05% 1.05% 1.05% 1.05%
Net Investment Income............ 3.49% 3.16% 4.01% 4.88% 4.82%
Supplementary Data:
Portfolio Turnover Rate.......... 12.4% 22.0% 29.5% 17.3% 45.1%
Net Assets at End of Year (in
thousands)...................... $5,754 $8,397 $9,799 $8,806 $15,106
Number of Shares Outstanding at
End of Year (in thousands)...... 519 654 780 847 1,425
</TABLE>
See Notes to Financial Statements.
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Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
Growth Fund
For the Years Ended June 30,
-----------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net Asset Value --
Beginning of Year...... $ 22.03 $ 22.96 $ 19.02 $ 17.87 $ 14.64
------- ------- ------- ------- -------
Income from Investment
Operations:
Net Investment Loss...... (0.13) (0.13) (0.18) (0.09) (0.07)
Net Realized and
Unrealized Gain (Loss)
on Securities........... (1.86) 3.86 4.12 1.83 3.30
------- ------- ------- ------- -------
Total from Investment
Operations............. (1.99) 3.73 3.94 1.74 3.23
------- ------- ------- ------- -------
Distributions to
Shareholders:
From Net Realized Capital
Gain.................... (3.74) (4.66) -- (0.59) --
------- ------- ------- ------- -------
Net Increase (Decrease)
in Net Asset Value...... (5.73) (0.93) 3.94 1.15 3.23
------- ------- ------- ------- -------
Net Asset Value -- End of
Year.................... $ 16.30 $ 22.03 $ 22.96 $ 19.02 $ 17.87
======= ======= ======= ======= =======
Total Investment Return... (8.86)% 23.32% 20.72% 10.10% 22.06%
Ratios to Average Net
Assets:
Expenses................. 1.50% 1.50% 1.50% 1.50% 1.50%
Net Investment Loss...... (0.69)% (0.62)% (0.74)% (0.46)% (0.41)%
Supplementary Data:
Portfolio Turnover Rate.. 35.3% 54.3% 65.1% 41.9% 74.5%
Net Assets at End of Year
(in thousands).......... $15,137 $20,871 $24,831 $24,899 $31,777
Number of Shares
Outstanding at End of
Year (in thousands)..... 929 948 1,081 1,309 1,778
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
Emerging Growth Fund
For the Years Ended June 30,
----------------------------------------------
2000 1999 1998 1997 1996
------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net Asset Value --
Beginning of Year....... $ 13.11 $13.82 $ 13.84 $ 16.99 $ 14.96
------- ------ ------- ------- -------
Income from Investment
Operations:
Net Investment Loss....... (0.12) (0.09) (0.21) (0.24) (0.16)
Net Realized and
Unrealized Gain (Loss) on
Securities............... 3.44 (0.52)A 0.19A (0.25) 2.30
------- ------ ------- ------- -------
Total from Investment
Operations.............. 3.32 (0.61) (0.02) (0.49) 2.14
------- ------ ------- ------- -------
Distributions to
Shareholders:
From Net Realized Capital
Gain..................... (3.62) (0.10) -- (2.66) (0.11)
------- ------ ------- ------- -------
Net Increase (Decrease) in
Net Asset Value.......... (0.30) (0.71) (0.02) (3.15) 2.03
------- ------ ------- ------- -------
Net Asset Value -- End of
Year..................... $ 12.81 $13.11 $ 13.82 $ 13.84 $ 16.99
======= ====== ======= ======= =======
Total Investment Return.... 30.36% (4.39)% (0.14)% (2.15)% 14.36%
Ratios to Average Net
Assets:
Expenses.................. 1.50% 1.51% 1.50% 1.50% 1.50%
Net Investment Loss....... (1.11)% (0.49)% (1.07)% (1.20)% (0.98)%
Supplementary Data:
Portfolio Turnover Rate... 362.8% 171.6% 121.2% 66.2% 121.2%
Net Assets at End of Year
(in thousands)........... $10,686 $8,636 $14,159 $20,732 $44,985
Number of Shares
Outstanding at End of
Year (in thousands)...... 834 659 1,025 1,498 2,647
</TABLE>
-----------------------------
A The per share amount does not coincide with the net realized and
unrealized loss for the year because of the timing of sales and
redemptions of Fund shares and the amounts of per share realized and
unrealized gain and loss at such time.
See Notes to Financial Statements.
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Cappiello-Rushmore Trust
--------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
Gold Fund
For the Years Ended June 30,
------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net Asset Value -- Beginning
of Year...................... $ 4.00 $ 4.66 $ 7.02 $ 9.93 $ 9.89
------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment Loss........... (0.05) (0.05) (0.05) (0.08) (0.06)
Net Realized and Unrealized
Gain (Loss) on Securities.... (0.78) (0.61) (2.31) (2.83) 0.10
------ ------ ------ ------ ------
Total from Investment
Operations.................. (0.83) (0.66) (2.36) (2.91) 0.04
------ ------ ------ ------ ------
Distributions to Shareholders:
Total Distributions to
Shareholders................ -- -- -- -- --
------ ------ ------ ------ ------
Net Increase (Decrease) in Net
Asset Value.................. (0.83) (0.66) (2.36) (2.91) 0.04
------ ------ ------ ------ ------
Net Asset Value -- End of
Year......................... $ 3.17 $ 4.00 $ 4.66 $ 7.02 $ 9.93
====== ====== ====== ====== ======
Total Investment Return........ (20.75)% (14.16)% (33.62)% (29.31)% 0.40%
Ratios to Average Net Assets:
Expenses...................... 1.71% 1.70% 1.70% 1.70% 1.70%
Net Investment Loss........... (1.16)% (0.96)% (0.74)% (0.76)% (0.59)%
Supplementary Data:
Portfolio Turnover Rate....... -- -- 56.5% 108.5% 59.1%
Net Assets at End of Year (in
thousands)................... $ 843 $1,394 $2,187 $3,409 $6,122
Number of Shares Outstanding
at End of Year (in
thousands)................... 266 349 469 485 616
</TABLE>
See Notes to Financial Statements.
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Cappiello-Rushmore Trust
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Notes to Financial Statements
June 30, 2000
1. Significant Accounting Policies
Cappiello-Rushmore Trust (the "Trust") is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a no-load,
open-end investment company and is authorized to issue an unlimited number of
shares. The Trust consists of four separate portfolios (the "Funds"), each
with a different investment objective. As of March 10, 1998, shares of the
Gold Fund are no longer available for new purchases. Existing shareholders may
continue to hold previously purchased shares. The financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the date
of the financial statements. The following is a summary of significant
accounting policies which the Funds follow:
(a) Listed securities are valued at the last sales price of the New York
Stock Exchange and other major exchanges. Over-the-Counter securities are
valued at the last sales price. If market quotations are not readily
available, the Board of Trustees will value the Funds' securities in good
faith. The trustees will periodically review this method of valuation and
recommend changes which may be necessary to assure that the Funds'
instruments are valued at fair value.
(b) Security transactions are recorded on the trade date (the date the
order to buy or sell is executed). Interest income is accrued on a daily
basis. Dividend income is recorded on the ex-dividend date. Realized gains
and losses from securities transactions are computed on an identified cost
basis.
(c) Dividends from net investment income are declared and paid annually
in the Growth, Emerging Growth and Gold Funds and quarterly in the Utility
Income Fund. Dividends are reinvested in additional shares unless
shareholders request payment in cash. Net capital gains, if any, are
distributed annually.
(d) For Federal income tax purposes, each Fund of the Trust is treated as
a separate corporation. Each Fund intends to comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies and
distribute all net investment income, if any, and realized capital gains to
their shareholders. Therefore, no Federal income tax provision is required.
2. Investment Advisory Fees and Other Transactions with Affiliates
Investment advisory services are provided by McCullough, Andrews and
Cappiello, Inc., (the "Adviser"). Under an agreement with the Adviser, the
Trust pays a fee at the annual rate of 0.50% of the daily net assets of the
Growth and Emerging Growth Funds, 0.70% of the daily net assets of the Gold
Fund and 0.35% of the daily net assets of the Utility Income Fund. Certain
Officers and Trustees of the Trust are affiliated with the Adviser.
The Trust has contracted with Money Management Associates (the
"Administrator") to provide Administrative services to the Trust. Under the
administrative services agreement with the Administrator, the Trust pays a fee
at the annual rate of 1.00% of the daily net assets of the Growth, Emerging
Growth and Gold Funds, and 0.70% of the daily net assets of the Utility Income
Fund. Certain Officers and Trustees of the Trust are affiliated with the
Administrator.
Certain of these administrative services are provided by Rushmore Trust and
Savings, FSB ("Rushmore Trust"), a majority-owned subsidiary of the
Administrator, under a subcontractual agreement with the Administrator. These
services include transfer agency functions, dividend disbursing and other
shareholder services and custody of the Trust's assets. The Trust has an
agreement with Rushmore Trust to receive short-term borrowings to cover share
redemptions. No borrowings were outstanding at June 30, 2000.
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.
17
<PAGE>
Cappiello-Rushmore Trust
-------------------------------------------------------------------------------
3. Securities Transactions
For the year ended June 30, 2000, purchases and sales (including maturities)
of securities (excluding short-term securities) were as follows:
<TABLE>
<CAPTION>
Utility Emerging
Income Fund Growth Fund Growth Fund Gold Fund
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Purchases..................... $ 843,513 $5,769,077 $34,846,786 $ --
========== ========== =========== ==========
Sales......................... $2,887,527 $9,614,695 $33,247,942 $ 303,363
========== ========== =========== ==========
4. Net Unrealized Appreciation/Depreciation of Investments
Unrealized appreciation (depreciation) as of June 30, 2000, based on the
cost for Federal income tax purposes is as follows:
<CAPTION>
Utility Emerging
Income Fund Growth Fund Growth Fund Gold Fund
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Gross Unrealized Appreciation. $1,115,576 $6,202,997 $2,849,081 $ 124,333
Gross Unrealized Depreciation. (279,806) (60,300) (181,130) (618,445)
---------- ---------- ----------- ----------
Net Unrealized Appreciation
(Depreciation)............... $ 835,770 $6,142,697 $2,667,951 $ (494,112)
========== ========== =========== ==========
Cost of Investments for
Federal Income Tax Purposes.. $4,754,096 $9,229,328 $9,714,118 $1,338,649
========== ========== =========== ==========
5. 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,
2000, net investment loss and accumulated net realized loss were reclassified
to paid-in-capital and accumulated net realised gain/loss on investment
transactions as follows:
<CAPTION>
Utility Emerging
Income Fund Growth Fund Growth Fund Gold Fund
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Reduction of paid-in capital.. -- $ 103,487 $ 102,672 $ 12,674
Reduction of accumulated net
realized gain................ -- $ 17,041 -- --
</TABLE>
At June 30, 2000, for Federal income tax purposes, the following Funds had
capital loss carryovers which may be applied against future net taxable
realized gains of each succeeding year until the earlier of its utilization or
its expiration:
<TABLE>
<CAPTION>
Expires June 30, Gold Fund
---------------- ----------
<S> <C>
2002................................................................ $ 281,566
2003................................................................ 434,866
2005................................................................ 648,259
2006................................................................ 954,368
2007................................................................ 461,455
2008................................................................ 581,208
----------
Total.............................................................. $3,361,722
==========
</TABLE>
6. Agreement with Friedman Billings Ramsey Group, Inc.
On October 20, 1999, the Adviser and Rushmore Trust reached a definitive
agreement to be acquired by Friedman Billings Ramsey Group, Inc. The
transaction is subject to various regulatory approvals.
18
<PAGE>
-------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
of Cappiello-Rushmore Trust:
We have audited the accompanying statements of net assets of the Utility
Income, Growth, Emerging Growth, and Gold Funds of the Cappiello-Rushmore
Trust (the "Trust") as of June 30, 2000, 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free 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 as of June 30, 2000, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, 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, 2000, the results of their operations, the
changes in their net assets, and their financial highlights for the respective
stated periods, in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
August 8, 2000
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19
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