AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1999
REGISTRATION NOS. 333-28339
811-08239
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. 6 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 9 [X]
PROFUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
7900 WISCONSIN AVENUE, SUITE 300
BETHESDA, MARYLAND 20814
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(301) 657-1970
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
MICHAEL L. SAPIR, CHAIRMAN WITH A COPY TO:
PROFUND ADVISORS LLC WILLIAM J. TOMKO
7900 WISCONSIN AVENUE, SUITE 300 BISYS FUND SERVICES
Bethesda, Maryland 20814 3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service Process)
Approximate Date of Commencement of the Proposed Public Offering of the
Securities:
It is proposed that this filing will become effective:
- ------ Immediately upon filing pursuant to paragraph (b)
- ------ 60 days after filing pursuant to paragraph (a) (1)
X
- ------ 75 days after filing pursuant to paragraph (a) (2)
- ------ On (date) pursuant to paragraph (b)
- ------ On (date) pursuant to paragraph (a)(1)
- ------ On (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following:
- ------ This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
Explanatory Note
This Post-Effective Amendment No. 6 to Registrant's Registration Statement
on Form N-1A is filed for the purpose of adding disclosure regarding eleven new
series of Registrant, the "VP ProFunds", to the Registration Statement.
Accordingly, this Post-Effective Amendment No. 6 does not relate to the nine
existing series of Registrant, disclosure concerning which is hereby
incorporated by reference from the following documents ( File Nos. 333-28339,
811-08239): (1) Prospectus dated May 1, 1999 as filed pursuant to Rule 497 under
the Securities Act of 1933 on May 17, 1999 and as supplemented on July 29, 1999;
and (2) Statement of Additional Information dated May 1, 1999 as filed pursuant
to Rule 497 on May 17, 1999, as supplemented.
<PAGE>
October __, 1999
PROSPECTUS
THE VP PROFUNDS
Bull ProFund VP
UltraBull ProFund VP
UltraOTC ProFund VP
Europe ProFund VP
UltraEurope ProFund VP
SmallCap ProFund VP
Bear ProFund VP
UltraBear ProFund VP
UltraShort OTC ProFund VP
UltraShort Europe ProFund VP
Money Market ProFund VP
[Logo]
This prospectus should be read in conjunction with the separate account's
prospectus describing the variable insurance contract in which you invest.
Please read both prospectuses and retain them for future reference.
Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission, nor has the Securities
0and Exchange Commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
[Logo]
TABLE OF CONTENTS
Page
Benchmark VP ProFunds...........................................[ ]
Benchmark VP ProFunds Strategy..................................[ ]
Money Market ProFund VP.........................................[ ]
Money Market ProFund VP Strategy................................[ ]
Share Prices & Purchasing and Redeeming Shares..................[ ]
Tax Information.................................................[ ]
Management......................................................[ ]
Similar Fund Performance Information............................[ ]
ProFund Advisors LLC
Investment Advisor
<PAGE>
Benchmark VP ProFunds
Overview
The Benchmark VP ProFunds each seek to achieve a daily return equal to the
performance of a particular stock market benchmark.*
. For example, the Bull ProFund VP seeks to match the daily performance of a
stock market index--the S&P 500 Composite Stock Price Index(R) ("S&P 500
Index")--like a conventional index fund.
. Unlike conventional index funds, certain VP ProFunds seek to double the
daily return of a specified stock market index.
. Other VP ProFunds seek to produce a daily return of the inverse (opposite)
or double the inverse (opposite) of a particular stock market index. The value
of these VP ProFunds should go up when the index underlying their benchmark goes
down, and their value should go down when the index goes up.
* A stock index reflects the price of a group of stocks of specified
companies. A benchmark can be any standard of investment performance to
which a mutual fund seeks to match its return. For example, UltraBull
ProFund VP has a benchmark of twice the daily return of the S&P 500 Index.
<PAGE>
These VP ProFunds seek to match or double an index's daily performance:
<TABLE>
<S> <C> <C> <C>
VP ProFund Index Daily Objective Types of Companies in Index
Bull S&P 500 Match Diverse, widely traded, large
capitalization
UltraBull S&P 500 Double Diverse, widely traded, large
capitalization
UltraOTC NASDAQ 100 Double Large capitalization, most with
technology and/or growth orientation
Europe ProFunds Europe Match Large capitalization, widely traded
European stocks
UltraEurope ProFunds Europe Double Large capitalization, widely traded
European stocks
SmallCap Russell 2000 Match Diverse, widely traded, small
capitalization
These VP ProFunds seek to match or double the inverse (opposite) of an index's
daily performance:
VP ProFund Index Daily Objective Types of Companies in Index
Bear S&P 500 Inverse Diverse, widely traded, large
capitalization
UltraBear S&P 500 Double the inverse Diverse, widely traded, large
capitalization
UltraShort OTC NASDAQ 100 Double the inverse Large capitalization, most with
technology and/or growth orientation
UltraShort Europe ProFunds Europe Double the inverse Large capitalization, widely traded
European stocks
The VP ProFunds include the Money Market ProFund VP, which is discussed later in
this prospectus.
<PAGE>
Benchmark VP ProFunds Objectives
The investment objective of each of the Benchmark VP ProFunds is set forth
below:
. Bull ProFund VP - seeks daily investment results that correspond to the
performance of the S&P 500 Index.
. UltraBull ProFund VP - seeks daily investment results that correspond to
twice (200%) the performance of the S&P 500 Index. If the UltraBull ProFund VP
is successful in meeting its objective, it should gain approximately twice as
much as the Bull ProFund VP when the prices of the securities in the S&P 500
Index rise on a given day and should lose approximately twice as much when such
prices decline on that day.
. UltraOTC ProFund VP - seeks daily investment results that correspond to
twice (200%) the performance of the NASDAQ 100 Index(TM). If the UltraOTC
ProFund VP is successful in meeting its objective, it should gain approximately
twice as much as the growth oriented NASDAQ 100 Index(TM) when the prices of the
securities in that index rise on a given day and should lose approximately twice
as much when such prices decline on that day.
. Europe ProFund VP - seeks daily investment results that correspond to the
performance of the ProFunds Europe Index.
. UltraEurope ProFund VP - seeks daily investment results that correspond to
twice (200%) the performance of the ProFunds Europe Index. If the UltraEurope
ProFund VP is successful in meeting its objective, it should gain approximately
twice as much as the Europe ProFund VP when the prices of the securities in the
ProFunds Europe Index rise on a given day and should lose approximately twice as
much when such prices decline on that day.
<PAGE>
. SmallCap ProFund VP - seeks daily investment results that correspond to the
performance of the Russell 2000(R) Index.
. Bear ProFund VP - seeks daily investment results that correspond to the
inverse (opposite) of the performance of the S&P 500 Index. If the Bear ProFund
VP is successful in meeting its objective, the net asset value of Bear ProFund
VP shares will increase in direct proportion to any decrease in the level of the
S&P 500 Index. Conversely, the net asset value of Bear ProFund VP shares will
decrease in direct proportion to any increase in the level of the S&P 500 Index.
. UltraBear ProFund VP - seeks daily investment results that correspond to
twice (200%) the inverse (opposite) of the performance of the S&P 500 Index. The
net asset value of shares of the UltraBear ProFund VP should increase or
decrease approximately twice as much as does that of the Bear ProFund VP on any
given day.
- --------------------------------------------------------------------------------
For example, if the S&P 500 Index were to decrease by 1% on a particular day,
investors in the Bear ProFund VP should experience a gain in net asset value of
approximately 1% for that day. The UltraBear ProFund VP should realize an
increase of approximately 2% of its net asset value on the same day. Conversely,
if the S&P 500 Index were to increase by 1% by the close of business on a
particular trading day, investors in the Bear ProFund VP and the UltraBear
ProFund VP would experience a loss in net asset value of approximately 1% and 2%
respectively.
- --------------------------------------------------------------------------------
. UltraShort OTC ProFund VP - seeks daily investment results that correspond
to twice (200%) the inverse (opposite) of the performance of the NASDAQ 100
Index(TM). This VP ProFund operates similar to the UltraBear ProFund VP, but
UltraShort OTC ProFund VP is benchmarked to the NASDAQ 100 Index(TM).
<PAGE>
. UltraShort Europe ProFund VP - seeks daily investment results that
correspond to twice (200%) the inverse (opposite) of the performance of the
ProFunds Europe Index. This VP ProFund should reflect twice the inverse
(opposite) of the performance of the European companies included in the ProFunds
Europe Index.
The securities indexes that these VP ProFunds use as their benchmarks are
described below under "Benchmark Indexes."
Strategy
Investors should be aware that the investments made by a VP ProFund and the
results achieved by the VP ProFund at any given time are not expected to be the
same as those made by other mutual funds for which ProFund Advisors acts as
investment advisor, including mutual funds with names, investment objectives and
policies similar to the VP ProFund. Investors should carefully consider their
investment goals and willingness to tolerate investment risk before allocating
their investment to a VP ProFund.
ProFund Advisors uses quantitative and statistical analysis it developed in
seeking to achieve each Benchmark VP ProFund's investment objective. This
analysis determines the type, quantity and mix of investment positions that a
Benchmark VP ProFund should hold to approximate the performance of its
benchmark.
<PAGE>
The Bull, UltraBull, UltraOTC, Europe, UltraEurope and SmallCap VP ProFunds
principally invest in:
. Futures contracts on stock indexes, and options on futures contracts; and
. Financial instruments such as equity caps, collars, floors, and options
on securities and stock indexes.
These VP ProFunds invest in the above instruments generally as a substitute for
investing directly in stocks. In addition, these VP ProFunds may invest in a
combination of stocks that in ProFund Advisors' opinion should simulate the
movement of the appropriate benchmark index.
The Ultra VP ProFunds generally invest in the above instruments to produce
economically "leveraged" investment results. Leverage is a way to change small
market movements into larger changes in the value of a Benchmark VP ProFund's
investments.
The Bear, UltraBear, UltraShort OTC and UltraShort Europe VP ProFunds generally
do not invest in traditional securities, such as common stock of operating
companies. Rather, these VP ProFunds principally invest in futures contracts,
options contracts and other financial instruments, and engage in short sales.
Using these techniques, these VP ProFunds will generally incur a loss if the
price of the underlying security or index increases between the date of the
employment of the technique and the date on which the VP ProFund terminates the
position. These VP ProFunds will generally realize a gain if the underlying
security or index declines in price between those dates.
The Europe, UltraEurope and UltraShort Europe VP ProFunds invest in financial
instruments with values that reflect the performance of stocks of European
companies.
<PAGE>
Benchmark VP ProFunds' Risks
Like all investments, the VP ProFunds entail risk. ProFund Advisors cannot
guarantee that any of the Benchmark VP ProFunds will achieve its objective. As
with any mutual fund, the Benchmark VP ProFunds could lose money, or their
performance could trail that of other investment alternatives.
In addition, the Benchmark VP ProFunds present some risks not traditionally
associated with most mutual funds. It is important that investors closely review
and understand these risks before making an investment in the ProFunds.
The following chart summarizes certain risks associated with the Benchmark VP
ProFunds:
Inverse Correlation
Market Risk Leverage Risk Risk Foreign Risk
Bull X
UltraBull X X
UltraOTC X X
Europe X X
UltraEurope X X X
SmallCap X
Bear X X
UltraBear X X X
UltraShortOTC X X X
UltraShortEurope X X X X
These and other risks are described below.
<PAGE>
Certain Risks Associated with Particular VP ProFunds
Leverage Risk The Ultra VP ProFunds employ leveraged investment techniques.
Leverage is the ability to get a return on a capital base that is larger than a
VP ProFund's investment. Use of leverage can magnify the effects of changes in
the value of these VP ProFunds and makes them more volatile. The leveraged
investment techniques that the Ultra VP ProFunds employ should cause investors
in these VP ProFunds to lose more money in adverse environments.
Inverse Correlation Risk Shareholders in the negatively correlated VP ProFunds
should lose money when the index underlying their benchmark rises - a result
that is the opposite from traditional equity mutual funds.
Foreign Investment Risk Europe ProFund VP, UltraEurope ProFund VP and UltraShort
Europe ProFund VP entail the risk of foreign investing, which may involve risks
not typically associated with investing in U.S. securities alone:
. Many foreign countries lack uniform accounting and disclosure
standards, or have standards that differ from U.S. standards.
Accordingly, these VP ProFunds may not have access to adequate or
reliable company information.
. Europe ProFund VP, UltraEurope ProFund VP and UltraShort Europe
ProFund VP will be subject to the market, economic and political risks
of the countries where they invest or where the companies represented
in the benchmark indexes are located.
. Securities purchased by these three VP ProFunds may be priced in
foreign currencies. Their value could change significantly as the
currencies strengthen or weaken relative to the U.S. dollar. ProFund
Advisors does not engage in activities designed to hedge against
foreign currency fluctuations.
<PAGE>
. On January 1, 1999, the eleven nations of the European Monetary
Union, including Germany and France, began the process of introducing
a uniform currency. The new currency, the euro, is expected to reshape
financial markets, banking systems and monetary policy in Europe and
throughout the world. The continued transition to the euro may also
have a worldwide impact on the economic environment and behavior of
investors.
Risks in Common
Each Benchmark VP ProFund faces certain risks in common:
Market Risk The Benchmark VP ProFunds are subject to market risks that will
affect the value of their shares, including general economic and market
conditions, as well as developments that impact specific industries or
companies. This risk may be especially acute with respect to the SmallCap
ProFund VP, which is benchmarked to an index of small company stocks. While
potentially offering greater opportunities for growth than larger, more
established companies, the stocks of smaller companies may be particularly
volatile, especially during periods of economic uncertainty. Shareholders in the
positively correlated VP ProFunds should lose money when the index underlying
their benchmark declines. Shareholders in the negatively correlated VP ProFunds
should lose money when the index underlying their benchmark rises. These indexes
are discussed in the next section.
Liquidity Risk In certain circumstances, such as a disruption of the orderly
markets for the financial instruments in which they invest, the VP ProFunds
might not be able to dispose of certain holdings quickly or at prices that
represent true market value in the judgment of ProFund Advisors. This may
prevent the VP ProFunds from limiting losses or realizing gains.
<PAGE>
Correlation Risk While ProFund Advisors expects that each of the Benchmark VP
ProFunds will track its benchmark with an average correlation of .90 or better
over a year, there can be no guarantee that the VP ProFunds will be able to
achieve this level of correlation. A failure to achieve a high degree of
correlation may prevent a Benchmark VP ProFund from achieving its investment
goal.
Non-Diversification Risk The Benchmark VP ProFunds are classified as
"non-diversified" under the federal securities laws. They have the ability to
concentrate a relatively high percentage of their investments in the securities
of a small number of companies. This would make the performance of a Benchmark
VP ProFund more susceptible to a single economic, political or regulatory event
than a more diversified mutual fund might be. Nevertheless, the Benchmark VP
ProFunds intend to invest on a diversified basis.
Risks of Aggressive Investment Techniques The Benchmark VP ProFunds use
investment techniques that may be considered aggressive. Risks associated with
the use of options, futures contracts, and options on futures contracts include
potentially dramatic price changes (losses) in the value of the instruments and
imperfect correlations between the price of the contract and the underlying
security or index.
Benchmark Indexes
. The S&P 500 Index is a widely used measure of large U.S. company stock
performance. It consists of the common stocks of 500 major corporations selected
for their size and the frequency and ease with which their stocks trade.
Standard & Poor's also attempts to assure that the Index reflects the full range
and diversity of the American economy. The companies in the S&P 500 account for
nearly three-quarters of the value of all U.S. stocks.
<PAGE>
. The NASDAQ 100 Index contains 100 of the largest and most active
non-financial domestic and international issues listed on the NASDAQ Stock
Market based on market capitalization. Eligibility criteria for the NASDAQ 100
Index includes a minimum average daily trading volume of 100,000 shares. If the
security is a foreign security, the company must have a world wide market value
of at least $10 billion, a U.S. market value of at least $4 billion, and average
trading volume of at least 200,000 shares per day.
. The Russell 2000(R) Index is an unmanaged index consisting of 2,000 small
company common stocks. The Index comprises 2,000 of the smallest U.S. domiciled
publicly traded common stocks that are included in the Russell 3000(R) Index.
These common stocks represent approximately 8% of the total market
capitalization of the Russell 3000(R) Index which, in turn, represents
approximately 98% of the publicly traded U.S. equity market.
. ProFunds Europe Index ("PEI") is a combined measure of European stock
performance created by ProFund Advisors from the leading stock indexes of
Europe's three largest economies giving equal weight to each index each day. The
PEI averages the daily results of:
. The Financial Times Stock Exchange 100 ("FTSE-100") Share Index, a
capitalization-weighted index of the 100 most highly capitalized
companies traded on the London Stock Exchange.
. The Deutsche Aktienindex ("DAX"), is a total rate of return index of
30 selected German blue-chip stocks traded on the Frankfurt Stock
Exchange.
. The CAC-40, a capitalization-weighted index of 40 companies listed on
the Paris Stock Exchange (the Bourse).
<PAGE>
The Board of Trustees may change benchmarks without shareholder approval if, for
example, it believes another benchmark might better suit shareholder needs.
Who May Want to Consider a VP ProFunds Investment
The Bull, Europe and SmallCap VP ProFunds may be appropriate for investors who
want to receive investment results approximating the performance of the S&P 500
Index, the ProFunds Europe Index or the Russell 2000(R) Index, which are,
respectively, broad based measures of large capitalization stock performance,
European stock performance, and small capitalization stock performance.
The UltraBull, UltraOTC, and UltraEurope VP ProFunds may be appropriate for
investors who:
. believe that over the long term, the value of a particular index will
increase, and that by investing with the objective of doubling the index's daily
return they will achieve superior results over time. Investors in these VP
ProFunds should understand that since each Ultra VP ProFund seeks to double the
daily performance of its benchmark index, it should have twice the volatility of
a conventional index fund and twice the potential risk of loss.
. are seeking to match an index's daily return with half the investment
required of conventional stock index mutual funds.
- --------------------------------------------------------------------------------
An investor might invest $100,000 in a conventional S&P 500 Index Fund.
Alternatively that same investor could invest half that amount-$50,000-in
UltraBull ProFund VP and target the same daily return.
- --------------------------------------------------------------------------------
<PAGE>
The Bear, UltraBear, UltraShort OTC and UltraShort Europe VP ProFunds may be
appropriate for investors who:
. expect the underlying index to go down and desire to earn a profit as a
result of the index declining.
. want to protect (or hedge) the value of a diversified portfolio of stocks
and/or stock mutual funds from a stock market downturn that they anticipate.
- --------------------------------------------------------------------------------
An investor with a diversified portfolio of stocks or stock mutual funds valued
at $100,000 might be concerned that the general stock market could decrease or
be volatile for the next six months. The investor could try to protect the
portfolio against downturns in the stock market by investing $50,000 in Bear,
UltraBear, UltraShort OTC or UltraShort Europe VP ProFund-or in a combination of
these VP ProFunds. Of course, the investor likely would also be giving up gains
that the portfolio would otherwise produce if the markets go up rather than down
in value. The VP ProFunds cannot assure that doing so would protect against
market downturns.
- --------------------------------------------------------------------------------
All of the VP ProFunds may be appropriate for investors who:
. are executing a strategy that relies on frequent buying, selling or
exchanging among stock mutual funds.
. want the impact of their investment to range from double the index to
double the inverse of the index based on their current view, positive or
negative, of the index.
<PAGE>
Benchmark ProFunds' Performance
Because the VP ProFunds are newly formed and have no investment track record,
they have no performance to compare against other mutual funds or broad measures
of securities market performance, such as indexes.
Annual Benchmark VP ProFund Operating Expenses
The tables below describe the estimated fees and expenses you may pay if you buy
and hold shares in any of the Benchmark VP ProFunds. These expenses are
reflected in the share prices of the VP ProFunds.
Annual Operating Expenses
(percentage of average daily net assets)
Bull UltraBull UltraOTC Europe UltraEurope
Management Fees 0.75% 0.75% 0.75% 0.90% 0.90%
Other Expenses ____% ____% ____% ____% ____%
Total Annual Operating ____% ____% ____% ____% ____%
Expenses
Fee Waiver* ____% ____% ____% ____% ____%
Net Expenses ____% ____% ____% ____% ____%
<PAGE>
SmallCap Bear UltraBear UltraShortOTC UltraShort Europe
Management Fees 0.75% 0.75% 0.75% 0.75% .90%
Other Expenses ____% ____% ____% ____% ____%
Total Annual Operating ____% ____% ____% ____% ____%
Expenses
Fee Waiver* ____% ____% ____% ____% ____%
Net Expenses ____% ____% ____% ____% ____%
- ------------------
[* ProFund Advisors has contractually agreed to waive fees through December 31,
1999 with respect to the indicated VP ProFunds.]
Expense Examples
The following examples illustrate the expenses you would incur on a $10,000
investment in each Benchmark VP ProFund, and are intended to help you compare
the cost of investing in the Benchmark VP ProFunds compared to other mutual
funds. The examples assume that you invest for the time periods shown and redeem
all of your shares at the end of each period, that each VP ProFund earns an
annual return of 5% over the periods shown, that you reinvest all dividends and
distributions, and that gross operating expenses remain constant. The examples
do not reflect separate account or insurance contract fees and charges. Because
these examples are hypothetical and for comparison only, your actual costs will
be different.
<PAGE>
1 Year 3 Years
------ -------
UltraBull $____ $____
UltraOTC $____ $____
Bull $____ $____
Bear $____ $____
UltraBear $____ $____
UltraShort OTC $____ $____
SmallCap $____ $____
Europe $____ $____
UltraEurope $____ $____
UltraShort Europe $____ $____
<PAGE>
Benchmark VP ProFunds
Strategy
What the Benchmark VP ProFunds Do
Each Benchmark VP ProFund:
. Seeks to provide its investors with predictable investment returns
approximating its benchmark by investing in securities and other financial
instruments, such as futures and options on futures.
. Uses a mathematical and quantitative approach.
. Pursues its objective regardless of market conditions, trends or direction.
. Seeks to provide correlation with its benchmark on a daily basis.
What the Benchmark VP ProFunds Do Not Do
ProFund Advisors does not:
. Conduct conventional stock research or analysis or forecast stock market
movement in managing the Benchmark VP ProFunds' assets.
. Invest the Benchmark VP ProFunds' assets in stocks or instruments based on
ProFund Advisors' view of the fundamental prospects of particular companies.
. Adopt defensive positions by investing in cash or other instruments in
anticipation of an adverse climate for their benchmark indexes.
. Seek to invest to realize dividend income from their investments.
<PAGE>
In addition, the Ultra VP ProFunds do not seek to provide correlation with their
benchmark over a period of time other than daily, such as monthly or annually,
since mathematical compounding prevents these VP ProFunds from achieving such
results.
Important Concepts
. Leverage offers a means of magnifying small market movements, up or down,
into large changes in an investment's value.
. Futures, or futures contracts, are contracts to pay a fixed price for an
agreed-upon amount of commodities or securities, or the cash value of the
commodity or securities, on an agreed-upon date.
. Option contracts grant one party a right, for a price, either to buy or
sell a security or futures contract at a fixed sum during a specified period or
on a specified day.
. Selling short, or borrowing stock to sell to a third party, is a technique
that may be employed by the VP ProFunds to seek gains when their benchmark index
declines. If a VP ProFund replaces the security to the lender at a price lower
than the price it borrowed it at plus interest incurred, it makes a profit on
the difference. If the current market price is greater when the time comes to
replace the stock, the VP ProFund will incur a loss on the transaction.
Portfolio Turnover
ProFund Advisors expects a significant portion of the Benchmark VP ProFunds'
assets to come from professional money managers and investors who use the VP
ProFunds as part of "market timing" investment strategies. These strategies
often call for frequent trading of VP ProFund shares to take advantage of
anticipated changes in market conditions. Although ProFund Advisors believes its
accounting methodology should minimize the effect on the VP ProFunds of such
trading, market timing trading could increase the rate of VP ProFunds' portfolio
turnover, increasing transaction expenses. In addition, while the VP ProFunds do
not expect it, large movements of assets into and out of the VP ProFunds may
negatively impact their abilities to achieve their investment objectives or
their levels of operating expenses.
<PAGE>
Money Market
ProFund VP
Objective
As its investment objective, the Money Market ProFund VP seeks as high a level
of current income as is consistent with liquidity and preservation of capital.
This VP ProFund seeks this objective by investing in high quality short-term
money market instruments.
Strategy
Money Market ProFund VP invests for current income. In order to maintain a
stable share price, it maintains a dollar-weighted average maturity of 90 days
or less. Generally, securities in the Money Market ProFund VP are valued in U.S.
dollars and have remaining maturities of 397 days (about 13 months) or less on
their purchase date. The Money Market ProFund VP may also invest in securities
that have features that reduce their maturities to 397 days or less on their
purchase date. The Money Market ProFund VP buys U.S. government debt
obligations, money market instruments and other debt obligations that at the
time of purchase:
. have received the highest short-term rating from two nationally recognized
statistical rating organizations; or
. have received the highest short-term rating from one rating organization
(if only one organization rates the security);
. if unrated, are determined to be of similar quality by ProFund Advisors; or
. have no short-term rating, but are rated in the top three highest long-term
rating categories, or are determined to be of similar quality by ProFund
Advisors.
<PAGE>
Risks
All money market instruments, including U.S. government debt obligations, are
subject to interest rate risk, which is the risk that an investment will change
in value when interest rates change. Generally, investments subject to interest
rate risk will decrease in value when interest rates rise and increase when
interest rates decline.
Money market instruments are subject to credit risk, which is the risk that the
issuer of the instrument will default, or fail to meet its payment obligations.
In addition, they may change in value if an issuer's creditworthiness changes,
although such a circumstance would be extremely unlikely in the case of U.S.
government debt obligations.
An investment in the Money Market ProFund VP is not a deposit of a bank, nor is
it insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. While the Money Market ProFund VP tries to maintain a
stable net asset value of $1.00 per share, there is no guarantee that it will do
so, and you could lose money by investing in this VP ProFund.
Considering a Money Market ProFund VP Investment
Investors can take advantage of the Money Market ProFund VP in two ways:
. during periods when investors want to maintain a neutral exposure to the
stock market, the income earned from an investment in the Money Market ProFund
VP can keep their capital at work.
. the Money Market ProFund VP can be invested in conjunction with other VP
ProFunds to adjust an investor's target exposure to an index.
<PAGE>
- --------------------------------------------------------------------------------
For instance, an investor who desires to target a daily return of 1.5 times the
daily performance of the S&P 500 Index could allocate 75% of his or her
investment to the UltraBull ProFund VP and 25% of the investment to the Money
Market ProFund VP.
- --------------------------------------------------------------------------------
Money Market ProFund VP's Performance
Because the Money Market ProFund VP is newly formed and has no investment track
record, it has no performance information to compare against other mutual funds,
or a broad measure of securities market performance.
Annual Operating Expenses
The table below describes the estimated fees and expenses you may pay if you buy
and hold shares of the Money Market ProFund VP. Theses fees and expenses are
reflected in the share price of the Money Market ProFund VP.
Annual Operating Expenses
(percentage of average daily net assets)
Management Fees ____%
Other Expenses ____%
Total Annual Operating Expenses ____%
Fee Waiver* ____%
Net Expenses ____%
- -------------------
[* ProFund Advisors has contractually agreed to waive fees through December 31,
1999.]
<PAGE>
Expense Examples
The examples below illustrate the expenses you would incur on a $10,000
investment shares of the Money Market ProFund VP, and are intended to help you
compare the cost of investing in this VP ProFund compared to other mutual funds.
They assume that you invest for the time periods shown and redeem all of your
shares at the end of each period, that the Money Market ProFund VP earns an
annual return of 5% over the periods shown, that you reinvest all dividends and
distributions, and that gross operating expenses remain constant. They do not
reflect separate account or insurance contract fees and charges. Because these
examples are hypothetical and for comparison only, your actual costs will be
different.
1 Year 3 Years
------ -------
$--- $---
<PAGE>
Money Market ProFund
VP Strategy
The Money Market ProFund VP may invest in high-quality, short-term,
dollar-denominated money market instruments paying a fixed, variable or floating
interest rate. These include:
. Debt securities issued by U.S. and foreign banks, financial institutions,
and corporations, including certificates of deposit, euro-time deposits,
commercial paper (including asset-backed commercial paper), notes, funding
agreements and U.S. government securities. Securities that do not satisfy the
maturity restrictions for a money market fund may be specifically structured so
that they are eligible investments for money market funds. For example, some
securities have features which have the effect of shortening the security's
maturity.
. U.S. government securities that are issued or guaranteed by the U.S.
Treasury, or by agencies or instrumentalities of the U.S. Government.
. Repurchase agreements, which are agreements to buy securities at one price,
with a simultaneous agreement to sell back the securities at a future date at an
agreed-upon price.
. Asset-backed securities, which are generally participations in a pool of
assets whose payment is derived from the payments generated by the underlying
assets. Payments on the asset-backed security generally consist of interest
and/or principal.
Because many of the Money Market ProFund VP's principal investments are issued
or credit-enhanced by banks, it may invest more than 25% of its total assets in
obligations of domestic banks. The Money Market ProFund VP may invest in other
types of instruments, as described in the Statement of Additional Information.
<PAGE>
Specific Risks and Measures Taken to Limit Them
Credit Risk
A money market instrument's credit quality depends on the issuer's ability to
pay interest on the security and repay the debt: the lower the credit rating,
the greater the risk that the security's issuer will default, or fail to meet
its payment obligations. The credit risk of a security may also depend on the
credit quality of any bank or financial institution that provides credit
enhancement for it. The Money Market ProFund VP only buys high quality
securities with minimal credit risk. If a security no longer meets the Money
Market ProFund VP's credit rating requirements, ProFund Advisors will attempt to
sell that security within a reasonable time, unless selling the security would
not be in the Money Market ProFund VP's best interest.
Repurchase Agreement Risk
A repurchase agreement exposes the Money Market ProFund VP to the risk that the
party that sells the securities defaults on its obligation to repurchase them.
In this circumstance, the Money Market ProFund VP can lose money because:
. it may not be able to sell the securities at the agreed-upon time and price.
. the securities lose value before they can be sold.
ProFund Advisors seeks to reduce the Money Market ProFund VP's risk by
monitoring, under the supervision of the Board of Trustees, the creditworthiness
of the sellers with whom it enters into repurchase agreements. ProFund Advisors
also monitors the value of the securities to ensure that they are at least equal
to the total amount of the repurchase obligations, including interest.
<PAGE>
Interest Rate Risk
Money market instruments, like all debt securities, face the risk that the
securities will decline in value because of changes in interest rates.
Generally, investments subject to interest rate risk will decrease in value when
interest rates rise and increase when interest rates decline. To minimize such
price fluctuations, the Money Market ProFund VP adheres to the following
practices:
. it limits the dollar-weighted average maturity of the securities held by
the Money Market ProFund VP to 90 days or less. Generally, rates of short-term
investments fluctuate less than longer-term bonds.
. it primarily buys securities with remaining maturities of 13 months or
less. This reduces the risk that the issuer's creditworthiness will change, or
that the issuer will default on the principal and interest payments of the
obligations.
Market Risk
Although individual securities may outperform their market, the entire market
may decline as a result of rising interest rates, regulatory developments or
deteriorating economic conditions.
Security Selection Risk
While the Money Market ProFund VP invests in short-term securities, which by
nature are relatively stable investments, the risk remains that the securities
selected will not perform as expected. This could cause its returns to lag
behind those of similar money market funds. ProFund Advisors attempts to limit
this risk by diversifying the Money Market ProFund VP's investments so that a
single setback need not undermine the pursuit of its objective and by investing
in money market instruments that receive the highest short-term debt ratings as
described above.
Concentration Risk
Because the Money Market ProFund VP may invest more than 25% of its total assets
in the financial services industry, it may be vulnerable to setbacks in that
industry. Banks and other financial service companies are highly dependent on
short-term interest rates and can be adversely affected by downturns in the U.S.
and foreign economies or changes in banking regulations.
<PAGE>
Prepayment Risk
When a bond issuer, such as an issuer of asset-backed securities, retains the
right to pay off a high-yielding bond before it comes due, the Money Market
ProFund VP may have no choice but to reinvest the proceeds at lower interest
rates. Thus, prepayment may reduce its income. It may also create a capital
gains tax liability, because bond issuers usually pay a premium for the right to
pay off bonds early.
<PAGE>
Share Prices & Purchasing
and Redeeming Shares
Calculating the Benchmark VP ProFunds' Share Prices
Except for the Europe, UltraEurope and UltraShort Europe VP ProFunds, each
Benchmark VP ProFund calculates daily share prices on the basis of the net asset
value of its shares at the close of regular trading on the New York Stock
Exchange ("NYSE") (normally, 4:00 p.m., Eastern time) every day the NYSE and the
Chicago Mercantile Exchange are open for business. The Europe, UltraEurope and
UltraShort Europe VP ProFunds calculate their daily share prices on the basis of
net asset value of each class as of one half hour after the latest opening of
the three exchanges tracked by the PEI: the London Stock Exchange, the Frankfurt
Stock Exchange or the Paris Bourse (normally, 4:30 a.m., Eastern time), on each
day that all three of these exchanges and the NYSE are open.
Purchases and redemptions of shares are effected at the net asset value per
share next determined after receipt and acceptance of an order. If portfolio
investments of a VP ProFund are traded in markets on days when the VP ProFund's
principal trading market(s) is closed, the VP ProFund's net asset value may vary
on days when investors cannot purchase or redeem shares.
The VP ProFunds value shares by dividing the market value of the assets
attributable to a VP ProFund, less the liabilities attributable to the VP
ProFund, by the number of its outstanding shares. The Benchmark VP ProFunds use
the following methods for arriving at the current market price of investments
held by them:
. securities listed and traded on exchanges--the last price the stock traded
at on a given day, or if there were no sales, the mean between the closing bid
and asked prices.
. securities traded over-the-counter--NASDAQ-supplied information on the
prevailing bid and asked prices.
<PAGE>
. futures contracts and options on indexes and securities--the last sale
price prior to the close of regular trading on the NYSE (for all Benchmark VP
ProFunds except the Europe, UltraEurope and UltraShort Europe VP ProFunds).
. futures prices used to calculate net asset values for the Europe,
UltraEurope and UltraShort Europe VP ProFunds will be the last transaction
prices for the respective futures contracts that occur immediately prior to one
half hour after each underlying stock market opens.
. options on futures contracts--priced at fair value determined with
reference to established future exchanges.
. bonds and convertible bonds generally are valued using a third-party
pricing system.
. short-term debt securities are valued at amortized cost, which approximates
market value.
. the foreign exchange rates used to calculate the net asset values for the
Europe, UltraEurope and UltraShort Europe VP ProFunds will be the mean of the
bid price and the asked price for the respective foreign currency occurring
immediately after one half hour after the last underlying stock market opens.
When price quotes are not readily available, securities and other assets are
valued at fair value in good faith under procedures established by, and under
the general supervision and responsibility of, the Board of Trustees. This
procedure incurs the unavoidable risk that the valuation may be higher or lower
than the securities might actually command if the VP ProFunds sold them. In the
event that a trading halt closes the NYSE or a futures exchange early, portfolio
investments may be valued at fair value, or in a manner that is different from
the discussion above. See the Statement of Additional Information for more
details.
<PAGE>
The New York Stock Exchange and the Chicago Mercantile Exchange, a leading
market for futures and options, are open every week, Monday through Friday,
except when the following holidays are celebrated: New Year's Day, Martin Luther
King, Jr. Day (the third Monday in January), Presidents' Day (the third Monday
in February), Good Friday, Memorial Day (the last Monday in May), July 4th,
Labor Day (the first Monday in September), Thanksgiving Day (the fourth Thursday
in November) and Christmas Day. Either or both of these Exchanges may close
early on the business day before each of these holidays. Either or both of these
Exchanges also may close early on the day after Thanksgiving Day and the day
before Christmas holiday.
The London Stock Exchange, Frankfurt Stock Exchange or Paris Bourse closes for
the following holidays in 1999: May Day (May 3), Ascension (May 13), Pentecost
Monday (May 24), Spring Bank Holiday (May 31), Corpus Christi Day (June 3),
Independence Day (July 5), Bastille Day (July 14), Summer Bank Holiday (August
30), Labor Day (September 6), All Saints Day (November 1), Thanksgiving Day
(November 25), Christmas Eve, Christmas Day (observed December 27), Boxing Day
(observed December 28) and New Year's Eve. Holidays scheduled for 2000 include:
New Years Day (January 3), Good Friday (April 21) and Easter Monday (April 24).
Please note that holiday schedules are subject to change without notice.
Calculating the Money Market ProFund VP's Share Price
The Money Market ProFund VP calculates daily share prices on the basis of the
net asset value of its shares at the close of regular trading on the NYSE
(normally, 4:00 p.m., Eastern time) every day the NYSE is open for business.
Purchases and redemptions of shares are effected at the net asset value per
share next determined after receipt and acceptance of an order. If the market
for the primary investments in the Money Market ProFund VP closes early, the
Money Market ProFund VP may close early, and it will cease taking purchase
orders at that time. The Money Market ProFund VP's net asset value per share
will normally be $1.00, although ProFund Advisors cannot guarantee that this
will always be the case. The Money Market ProFund VP uses the amortized cost
method to account for any premiums or discounts above or below the face value of
any securities it buys. This method does not reflect daily fluctuations in
market value.
<PAGE>
Purchasing and Redeeming Shares
Shares of the VP ProFunds are available for purchase by insurance company
separate accounts to serve as an investment medium for variable insurance
contracts, and by qualified pension and retirement plans, certain insurance
companies, and ProFund Advisors. Shares of the VP ProFunds are purchased or
redeemed at the net asset value per share next determined after receipt of a
purchase order or redemption request.
Payment for shares redeemed normally will be made within seven days. The VP
ProFunds intend to pay cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, payment may be made wholly or
partly in portfolio securities at their then market value equal to the
redemption price. A shareholder may incur brokerage costs in converting such
securities to cash. Payment for shares may be delayed under extraordinary
circumstances or as permitted by the Securities and Exchange Commission in order
to protect remaining investors.
Investors do not deal directly with the VP ProFunds to purchase or redeem
shares. Please refer to the prospectus for the separate account for information
on the allocation of premiums and on transfers of accumulated value among
sub-accounts of the separate accounts that invest in the VP ProFunds.
The ProFunds currently do not foresee any disadvantages to investors if the VP
ProFunds served as investment media for both variable annuity contracts and
variable life insurance policies. However, it is theoretically possible that the
interest of owners of annuity contracts and insurance policies for which a VP
ProFund served as an investment medium might at some time be in conflict due to
differences in tax treatment or other considerations. The Board of Trustees and
each participating insurance company would be required to monitor events to
identify any material conflicts between variable annuity contract owners and
variable life insurance policy owners, and would have to determine what action,
if any, should be taken in the event of such a conflict. If such a conflict
occurred, an insurance company participating in the VP ProFund might be required
to redeem the investment of one or more of its separate accounts from the VP
ProFund, which might force the VP ProFund to sell securities at disadvantageous
prices.
<PAGE>
The VP ProFunds reserve the right to discontinue offering shares at any time. In
the event that a VP ProFund ceases offering its shares, any investments
allocated to the VP ProFund may, subject to any necessary regulatory approvals,
be invested in another VP ProFund deemed appropriate by the Board of Trustees.
Service Arrangements
Under an Investor Services Plan adopted by the Board of Trustees, each VP
ProFund may pay certain financial institutions, including ProFund Advisors
("authorized firms"), up to 0.25% on an annualized basis of average daily net
assets attributable to investors in the VP ProFunds who are customers of the
authorized firms. For this fee, the authorized firms may provide a variety of
support services to investors in the VP ProFunds.
Investors in the VP ProFunds indirectly pay all fees and expenses applicable to
their shares. Authorized firms may charge extra for services beyond those
provided under the Investor Services Plan, but they must furnish their clients
with a schedule explaining those fees.
<PAGE>
Tax Information
To comply with regulations under the Internal Revenue Code, each VP ProFund is
required to diversify its investments. Generally, a VP ProFund will be required
to diversify its investments so that on the last day of each quarter of a
calendar year no more than 55% of the value of its total assets is represented
by any one investment, no more than 70% is represented by any two investments,
no more than 80% is represented by any three investments, and no more than 90%
is represented by any four investments. For this purpose, securities of a given
issuer generally are treated as one investment, but each U.S. Government agency
and instrumentality is treated as a separate issuer. Any security issued,
guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. or
an agency or instrumentality of the U.S. is treated as a security issued by the
U.S. Government or its agency or instrumentality, whichever is applicable.
If a VP ProFund fails to meet this diversification requirement, income with
respect to variable insurance contracts invested in that VP ProFund at any time
during the calendar quarter in which the failure occurred could become currently
taxable to the owners of the contracts. Similarly, income for prior periods with
respect to such contracts also could be taxable, most likely in the year of the
failure to achieve the required diversification. Other adverse tax consequences
also could ensue.
Because you do not own shares in the VP ProFunds directly, generally you are not
taxed directly on distributions from the VP ProFunds. However, you may be
subject to taxation when you receive distributions from your variable annuity
contract or variable life insurance policy. You should refer to the prospectus
for your contract or policy for information on the taxes relating to your
investment and the tax consequences of any withdrawal of your investment. You
may also wish to consult with your own tax advisor about your particular
situation, and the tax consequences of your investment under state and local
laws.
Reference is made to the prospectus for the separate account and variable
insurance contract for information regarding the federal income tax treatment of
distributions to the separate account. See the Statement of Additional
Information for more information on taxes.
<PAGE>
Management
Board of Trustees and Officers
The VP ProFunds are series of ProFunds (the "Trust"), a registered investment
company. The Board of Trustees is responsible for the general supervision of all
series of the Trust, including the VP ProFunds. The Trust's officers are
responsible for day-to-day operations of the VP ProFunds.
Investment Advisor
ProFund Advisors LLC, located at 7900 Wisconsin Avenue, Suite 300, Bethesda,
Maryland 20814, serves as the investment advisor to the VP ProFunds, providing
investment advice and management services. ProFund Advisors oversees the
investment and reinvestment of the assets in each Benchmark VP ProFund. It
receives fees equal to 0.75% of the average daily net assets of each Benchmark
VP ProFund, except the Europe, UltraEurope and UltraShort Europe VP ProFunds,
for which it receives a fee equal to 0.90% of the average daily net assets.
ProFund Advisors bears the costs of advisory services.
Michael L. Sapir, Chairman and Chief Executive Officer of ProFund Advisors LLC,
served as senior vice president of Padco Advisors, Inc., which advised Rydex(R)
Funds. In addition, Mr. Sapir practiced law for over 13 years, most recently as
a partner in a Washington-based law firm. As an attorney, Mr. Sapir advised and
represented mutual funds and other financial institutions. He holds degrees from
Georgetown University Law Center (J.D.) and University of Miami (M.B.A. and
B.A.).
Louis M. Mayberg, President of ProFund Advisors LLC, co-founded National Capital
Companies, L.L.C., an investment bank in 1986, and manages its hedge fund. He
holds a Bachelor of Business Administration degree with a major in Finance from
George Washington University.
<PAGE>
William E. Seale, Ph.D., Director of Portfolio for ProFund Advisors LLC, has
more than 29 years of experience in the commodity futures markets. His
background includes a five-year presidential appointment as a commissioner of
the U.S. Commodity Futures Trading Commission. He earned his degrees at
University of Kentucky. Dr. Seale also holds an appointment as Professor of
Finance at George Washington University.
Each Benchmark VP ProFund is managed by an investment team chaired by Dr. Seale.
Other Service Providers
BISYS Fund Services, located at 3435 Stelzer Road, Suite 1000, Columbus, Ohio
43219, acts as the administrator to the VP ProFunds, providing operations,
compliance and administrative services. Each VP ProFund pays BISYS a fee, on a
sliding scale, for its administrative services. For average daily net assets up
to $300 million, the fee is 0.15% of the assets, and it declines to 0.05% for
average daily net assets of $1 billion or more.
ProFund Advisors also performs client support and administrative services for
the VP ProFunds. The Benchmark VP ProFunds each pay a fee equal, on an annual
basis, to 0.15% of average daily net assets for these services last year.
ProFund Advisors may receive a fee equal, on an annual basis, to [ ]% of average
daily net assets from the Money Market ProFund VP for these services.
Year 2000
Like other funds and business organizations around the world, the VP ProFunds
could be adversely affected if the computer systems used by their investment
advisor and other service providers do not properly process and calculate
date-related information for the Year 2000 and beyond. In addition, Year 2000
issues may adversely affect companies in which the VP ProFunds invest, which
could impact the prices of the VP ProFunds' shares. The VP ProFunds have been
assured that their service providers have developed and are implementing clearly
defined and documented plans intended to minimize risks to services critical to
the VP ProFunds' operations associated with Year 2000 issues. The service
providers are likewise seeking assurances from their respective vendors and
suppliers that these entities are addressing any Year 2000 issues.
<PAGE>
In the event that any systems upon which the VP ProFunds depend are not Year
2000 ready by December 31, 1999, administrative errors and account maintenance
failures would likely occur. While the ultimate costs or consequences of
incomplete or untimely resolution of Year 2000 issues by the VP ProFunds'
service providers cannot be accurately assessed at this time, the VP ProFunds
currently have no reason to believe that the Year 2000 plans of the investment
advisor and other service providers will not be completed by December 31, 1999.
The VP ProFunds will continue to closely monitor developments relating to this
issue.
Other Information
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500(R)," and
"500(R)" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by the Trust. "NASDAQ 100 Index" is a trademark of the NASDAQ
Stock Markets, Inc. ("NASDAQ"). The VP ProFunds are not sponsored, endorsed,
sold or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's
nor NASDAQ makes any representation regarding the advisability of investing in
the VP ProFunds. (Please see the Statement of Additional Information, which sets
forth certain additional disclaimers and limitations of liabilities on behalf of
S&P).
<PAGE>
Similar Fund
Performance Information
The following table provides information concerning the historical total return
performance of the Investor Class shares of the Bull ProFund, UltraBull ProFund,
UltraOTC ProFund, Bear ProFund, and UltraBear ProFund (the "Similar Funds"),
each a series of the Trust, which are similar to the Bull ProFund VP, UltraBull
ProFund VP, UltraOTC ProFund VP, Bear ProFund VP, and UltraBear ProFund VP,
respectively. Each Similar Funds' investment objectives, policies and strategies
are substantially similar to those of its corresponding VP ProFund, and each is
currently managed by the same investment team. While the investment objectives,
policies and risks of the Similar Funds and the VP ProFunds are similar, the
performance of a Similar Fund and its corresponding VP ProFund will vary. The
data is provided to illustrate the past performance of ProFund Advisors in
managing a substantially similar investment portfolio and does not represent the
past performance of the VP ProFunds or the future performance of the VP ProFunds
or their investment team. Consequently, potential investors should not consider
this performance data as an indication of the future performance of the VP
ProFunds or of their investment team.
The performance data shown below reflects the operating expenses of the Similar
Funds, which are lower than the expenses of the VP ProFunds. Performance would
have been lower for each Similar Fund if its corresponding VP ProFund's expenses
were used. In addition, the Similar Funds, unlike the VP ProFunds, are not sold
to insurance company separate accounts to fund variable insurance contracts. As
a result, the performance results presented below do not take into account
charges or deductions against a separate account or variable insurance contract
for cost of insurance charges, premium loads, administrative fees, maintenance
fees, premium taxes, mortality and expense risk charges, or other charges that
may be incurred under a variable insurance contract for which the VP ProFunds
serve as an underlying investment vehicle. By contrast, investors with contract
value allocated to the VP ProFunds will be subject to charges and expenses
relating to variable insurance contracts and separate accounts.
<PAGE>
The Similar Funds' performance data shown below is calculated in accordance with
standards prescribed by the Securities and Exchange Commission for the
calculation of average annual total return information. The investment results
of the Similar Funds presented below are unaudited and are not intended to
predict or suggest results that might be experienced by the Similar Funds or the
VP ProFunds. Share prices and investment returns will fluctuate reflecting
market conditions. The performance data for the benchmark index identified below
does not reflect the fees or expenses of the Similar Funds or the VP ProFunds.
Average Annual Total Return for the Similar Funds and for their Benchmark
Indexes for Periods Ended December 31, 1998
Similar Fund/Benchmark Index One Year Since Inception Inception Date
Bull ProFund 26.57% 23.07% 12/02/97
S&P 500 Index* 26.67% 24.18%
UltraBull ProFund 42.95% 42.34% 11/28/97
S&P 500 Index* 26.67% 26.92%
UltraOTC ProFund 185.34% 123.30% 12/02/97
NASDAQ 100 IndexTM* 85.31% 70.12%
Bear ProFund -19.46% -19.41% 12/31/97
S&P 500 Index* 26.67% 26.67%
UltraBear ProFund -38.34% -35.43% 12/23/97
S&P 500 Index* 26.67% 28.27%
- ----------------------
* Excludes dividends.
</TABLE>
<PAGE>
[Back Cover]
You can find more detailed information about each of the VP ProFunds in their
current Statement of Additional Information, dated October __, 1999, which we
have filed electronically with the Securities and Exchange Commission (SEC) and
which is incorporated by reference into, and is legally a part of, this
prospectus. To receive your free copy of a Statement of Additional Information,
or if you have questions about the VP ProFunds, write to us at:
ProFunds
P.O. Box 182800
Columbus, OH 43218-2800
or call our toll-free numbers:
(888) PRO-FNDS (888) 776-3637 For Investors
(888) PRO-5717 (888) 776-5717 Financial Professionals Only
or visit our website www.profunds.com.
You can find other information about the VP ProFunds on the SEC's website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the VP ProFunds, including their
Statement of Additional Information, can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. For information on the Public
Reference Room, call the SEC at (800) SEC-0330.
ProFunds Executive Offices
Bethesda, MD
[Logo]
811-08239
<PAGE>
PROFUNDS
STATEMENT OF ADDITIONAL INFORMATION
7900 WISCONSIN AVENUE, SUITE 300
BETHESDA, MARYLAND 20814
(888) 776-3637 RETAIL SHAREHOLDERS
(888) 776-5717 (FINANCIAL PROFESSIONALS ONLY)
This statement of additional information describes eleven series of the
ProFunds, the "VP ProFunds." The VP ProFunds may be used by professional money
managers and investors as part of an asset-allocation or market-timing
investment strategy or to create specified investment exposure to a particular
segment of the securities market or to hedge an existing investment portfolio.
Each non-money market ("Benchmark") VP ProFund seeks investment results that
correspond each day to a specified benchmark. The VP ProFunds may be used
independently or in combination with each other as part of an overall investment
strategy. Additional VP ProFunds may be created from time to time.
Shares of the VP ProFunds are available for purchase by insurance company
separate accounts to serve as an investment medium for variable insurance
contracts, and by qualified pension and retirement plans, certain insurance
companies, and ProFund Advisors (the "Advisor").
The VP ProFunds involve special risks, some not traditionally associated
with mutual funds. Investors should carefully review and evaluate these risks in
considering an investment in the VP ProFunds to determine whether an investment
in a particular VP ProFund is appropriate. None of the VP ProFunds alone
constitutes a balanced investment plan. Each Benchmark VP ProFund is not
intended for investors whose principal objective is current income or
preservation of capital. Because of the inherent risks in any investment, there
can be no assurance that the VP ProFunds' investment objectives will be
achieved.
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the VP ProFunds' Prospectus, dated October __, 1999,
which incorporates this Statement of Additional Information by reference. Words
or phrases used in the Statement of Additional Information without definition
have the same meaning as ascribed to them in the prospectus. A copy of the
Prospectus is available, without charge, upon request to the address above or by
telephoning at the telephone numbers above.
The date of this Statement of Additional Information is October __, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
ProFunds.................................................................__
Investment Policies and Techniques ......................................__
Investment Restrictions..................................................__
Determination of Net Asset Value.........................................__
Portfolio Transactions and Brokerage.....................................__
Management of ProFunds...................................................__
Costs and Expenses.......................................................__
Organization and Description of Shares of Beneficial Interest............__
Taxation ................................................................__
Performance Information .................................................__
Financial Statements.....................................................__
Appendix -- Description of Securities Ratings ...........................__
<PAGE>
PROFUNDS
ProFunds (the "Trust") is an open-end management investment company, and
currently comprises twenty separate series. Other series may be added in the
future.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL
Reference is made to the VP ProFunds' Prospectus for a discussion of the
investment objectives and policies of the VP ProFunds. In addition, set forth
below is further information relating to the VP ProFunds. The discussion below
supplements and should be read in conjunction with the Prospectus.
The investment objectives (except the specific benchmarks which are tracked
by the VP ProFunds) and certain investment restrictions of the VP ProFunds
specifically identified as fundamental policies may not be changed without the
affirmative vote of at least the majority of the outstanding shares of that VP
ProFund, as defined in the Investment Company Act of 1940, as amended (the "1940
Act"). All other investment policies of the VP ProFunds not specified as
fundamental (including the benchmarks of the VP ProFunds) may be changed by the
trustees of the VP ProFunds without the approval of shareholders.
A Benchmark VP ProFund may consider changing its benchmark if, for example,
the current benchmark becomes unavailable, the VP ProFund believe the current
benchmark no longer serves the investment needs of a majority of shareholders or
another benchmark better serves their needs, or the financial or economic
environment makes it difficult for the VP ProFund's investment results to
correspond sufficiently to its current benchmark. If believed appropriate, the
VP ProFunds may specify a benchmark for a VP ProFund that is "leveraged" or
proprietary. Of course, there can be no assurance that a VP ProFund will achieve
its objective.
Fundamental securities analysis is not generally used by the Advisor in
seeking to correlate with the respective benchmarks. Rather, the Advisor
primarily uses statistical and quantitative analysis to determine the
investments a Benchmark VP ProFund makes and techniques it employs. While the
Advisor attempts to minimize any "tracking error" (that statistical measure of
the difference between the investment results of a Benchmark VP ProFund and the
performance of its benchmark), certain factors will tend to cause a Benchmark VP
ProFund's investment results to vary from a perfect correlation to its
benchmark. The Benchmark VP ProFunds, however, do not expect that their total
returns will vary adversely from their respective current benchmarks by more
than ten percent over the course of a year. See "Special Considerations."
It is the policy of the Benchmark VP ProFunds to pursue their investment
objectives of correlating with their benchmarks regardless of market conditions,
to remain nearly fully invested and not to take defensive positions.
The investment strategies of the VP ProFunds discussed below, and as
discussed in the Prospectus, may be used by a VP ProFund if, in the opinion of
the Advisor, these strategies will be advantageous to the VP ProFund. The VP
ProFund is free to reduce or eliminate the VP ProFund's activity in any of those
areas without changing the VP ProFund's fundamental investment policies. There
is no assurance that any of these strategies or any other strategies and methods
of investment available to a VP ProFund will result in the achievement of the VP
ProFund's objectives.
THE BULL PROFUND VP AND ULTRABULL PROFUND VP
The investment objective of the Bull ProFund VP is to provide daily
investment results that correspond to the performance of the S&P 500 Index. The
investment objective of the UltraBull ProFund VP is to provide daily investment
results that correspond to twice (200%) the performance of the S&P 500 Index.
These VP ProFunds seek to achieve this correlation on each trading day. Under
their investment objectives, the UltraBull ProFund VP should produce greater
gains to investors when the S&P 500 Index rises and greater losses when the S&P
500 Index declines over the corresponding gain or loss of the Bull ProFund VP.
<PAGE>
In attempting to achieve their objectives, the Bull ProFund VP and the
UltraBull ProFund VP expect that a substantial portion of their respective
assets usually will be devoted to employing certain specialized investment
techniques. These techniques include engaging in certain transactions in stock
index futures contracts, options on stock index futures contracts, and options
on securities and stock indexes. The amount of any gain or loss on an investment
technique may be affected by any premium or amounts in lieu of dividends or
interest income the VP ProFund pays or receives as the result of the
transaction. These VP ProFunds may also invest in shares of individual
securities which are expected to track the S&P 500 Index.
THE BEAR PROFUND VP AND ULTRABEAR PROFUND VP
The Bear ProFund VP and the UltraBear ProFund VP are designed to allow
investors to speculate on anticipated decreases in the S&P 500 Index or to hedge
an existing portfolio of securities or mutual fund shares. The Bear ProFund VP's
investment objective is to provide daily investment results that correspond to
the inverse (opposite) of the performance of the S&P 500 Index. The UltraBear
ProFund VP's investment objective is to provide daily investment results that
correspond to twice (200%) the inverse (opposite) of the performance of the S&P
500 Index.
If the Bear ProFund VP achieved a perfect inverse correlation for any
single trading day, the net asset value of the shares of the Bear ProFund VP
would increase for that day in direct proportion to any decrease in the level of
the S&P 500 Index. Conversely, the net asset value of the shares of the Bear
ProFund VP would decrease for that day in direct proportion to any increase in
the level of the S&P 500 Index for that day. The net asset value of the
UltraBear ProFund VP on the same days would increase or decrease approximately
twice as much as the price change of the Bear ProFund VP.
For example, if the S&P 500 Index were to decrease by 1% on a particular
day, investors in the Bear ProFund VP should experience a gain in net asset
value of approximately 1% for that day. The UltraBear ProFund VP should realize
an increase of approximately 2% of its net asset value on the same day.
Conversely, if the S&P 500 Index were to increase by 1% by the close of business
on a particular trading day, investors in the Bear ProFund VP and the UltraBear
ProFund VP would experience a loss in net asset value of approximately 1% and
2%, respectively.
Due to the nature of the Bear ProFund VP and the UltraBear ProFund VP,
investors in these VP ProFunds could experience substantial losses during
sustained periods of rising equity prices, with losses to investors in the
UltraBear VP ProFund approximately twice as large as the losses to investors in
the Bear ProFund VP. This is the opposite likely result expected of investing in
a traditional equity mutual fund in a generally rising stock market.
In pursuing its investment objectives, the Bear ProFund VP and the
UltraBear ProFund VP generally do not invest in traditional securities, such as
common stock of operating companies. Rather, the Bear ProFund VP and the
UltraBear ProFund VP employ certain investment techniques, including engaging in
short sales and in certain transactions in stock index futures contracts,
options on stock index futures contracts, and options on securities and stock
indexes.
Under these techniques, the Bear ProFund VP and the UltraBear ProFund VP
will generally incur a loss if the price of the underlying security or index
increases between the date of the employment of the technique and the date on
which the VP ProFund terminates the position. These VP ProFunds will generally
realize a gain if the underlying security or index declines in price between
those dates. The amount of any gain or loss on an investment technique may be
affected by any premium or amounts in lieu of dividends or interest that the VP
ProFund pays or receives as the result of the transaction.
<PAGE>
THE ULTRAOTC PROFUND VP AND THE ULTRASHORT OTC PROFUND VP
The investment objective of the UltraOTC ProFund VP is to provide daily
investment results that correspond to twice (200%), the performance of the
NASDAQ 100 Index(TM).
The UltraOTC ProFund VP does not intend to hold the 100 securities included
in the NASDAQ 100 Index(TM). Instead, the UltraOTC VP ProFund intends to engage
in transactions on stock index futures contracts, options on stock index futures
contracts, and options on securities and stock indexes. As a nonfundamental
policy, the UltraOTC ProFund VP will invest, under normal conditions, at least
65% of its total assets in securities traded on the over-the-counter markets and
instruments with values that are representative of such securities such as
futures and option contracts in such securities or indices.
The investment objective of the UltraShort OTC ProFund VP is to provide
daily investment results that correspond to twice (200%) the inverse (opposite)
of the performance of the NASDAQ 100 Index(TM). It is the policy of the
UltraShort ProFund VP to pursue its investment objective of correlating with its
benchmark regardless of market conditions, to remain nearly fully invested and
not to take defensive positions.
The UltraShort ProFund VP is designed to allow investors to seek to profit
from anticipated decreases in the NASDAQ 100 Index(TM) or to hedge an existing
portfolio of securities or mutual fund shares. The UltraShort OTC ProFund VP's
investment objective is to provide investment results that will inversely
correlate to 200% of the performance of the NASDAQ 100 Index(TM). The UltraShort
ProFund VP seeks to achieve this inverse correlation on each trading day.
If the VP ProFund achieved a perfect inverse correlation for any single
trading day, the net asset value of the shares of the UltraShort OTC VP ProFund
would increase for that day proportional to twice any decrease in the level of
the NASDAQ 100 Index(TM). Conversely, the net asset value of the shares of the
UltraShort OTC ProFund VP would decrease for that day proportional to twice any
increase in the level of the NASDAQ 100 Index(TM) for that day.
For example, if the NASDAQ 100 Index(TM) were to decrease by 1% on a
particular day, investors in the UltraShort ProFund VP should experience a gain
in net asset value of approximately 2% for that day. Conversely, if the NASDAQ
100 Index(TM) were to increase by 1% by the close of business on a particular
trading day, investors in the UltraShort ProFund VP would experience a loss in
net asset value of approximately 2%.
In pursuing its investment objective, the UltraShort ProFund VP generally
does not invest in traditional securities, such as common stock of operating
companies. Rather, the UltraShort OTC ProFund VP employs certain investment
techniques, including engaging in short sales and in certain transactions in
stock index futures contracts, options on stock index futures contracts, and
options on securities and stock indexes.
Under these techniques, the UltraShort ProFund VP will generally incur a
loss if the price of the underlying security or index increases between the date
of the employment of the technique and the date on which the UltraShort OTC
ProFund VP terminates the position. The UltraShort OTC ProFund VP will generally
realize a gain if the underlying security or index declines in price between
those dates. The amount of any gain or loss on an investment technique may be
affected by any premium or amounts in lieu of dividends or interest that the
UltraShort ProFund VP pays or receives as the result of the transaction. Due to
the nature of the UltraShort ProFund VP, investors could experience substantial
losses during sustained periods of rising equity prices. This is the opposite
likely result expected of investing in a traditional equity mutual fund in a
generally rising stock market.
Companies whose securities are traded on the over-the-counter ("OTC")
markets generally have smaller market capitalization or are newer companies than
those listed on the NYSE or the American Stock Exchange (the "AMEX"). OTC
companies often have limited product lines, or relatively new products or
services, and may lack established markets, depth of experienced management, or
financial resources and the ability to generate funds. The securities of these
companies may have limited marketability and may be more volatile in price than
securities of larger capitalized or more well-known companies. Among the reasons
for the greater price volatility of securities of certain smaller OTC companies
are the less certain growth prospects of comparably smaller firms, the lower
degree of liquidity in the OTC markets for such securities, and the greater
sensitivity of smaller capitalization companies to changing economic conditions
than larger capitalization, exchange-traded securities. Conversely, because many
of these OTC securities may be overlooked by investors and undervalued in the
marketplace, there is potential for significant capital appreciation.
<PAGE>
THE SMALLCAP PROFUND VP
The investment objective of the SmallCap ProFund VP is to provide daily
investment results that correspond to the performance of the Russell 2000(R)
Index.
The SmallCap ProFund VP does not intend to hold the 2,000 securities
included in the Russell 2000(R) Index. Instead, the SmallCap ProFund VP intends
to engage in transactions in equities, stock index futures contracts, options on
stock index futures contracts, and options on securities and stock indexes. As a
nonfundamental policy, the SmallCap ProFund VP will invest, under normal
conditions, at least 65% of its total assets in the securities comprising the
Russell 2000(R) Index and instruments with values that are representative of
such securities, such as futures and option contracts on such securities or such
index.
The Russell 2000(R) Index is a capitalization-weighted index of domestic
equities traded on the NYSE, AMEX and NASDAQ. The index represents the bottom
2,000 companies of the 3,000 U.S. stocks with the largest market
capitalizations. As of June 30, 1999, the market capitalization of these 2,000
companies represented about 8% of the total market capitalization of the 3,000
companies. Companies whose stock comprises the Russell 2000(R) Index often have
limited product lines, or relatively new products or services, and may lack
established markets, depth of experienced management, or financial resources and
the ability to generate funds. The securities of these companies may have
limited marketability and may be more volatile in price than securities of
larger capitalized or more well-known companies. Among the reasons for the
greater price volatility of securities of smaller companies whose stock
comprises the Russell 2000(R) Index are the less certain growth prospects of
smaller firms, the lower degree of liquidity in the markets for such securities,
and the greater sensitivity of smaller capitalization companies to changing
economic conditions than larger capitalization companies. Conversely, because
many of these securities may be overlooked by investors and undervalued in the
marketplace, there is potential for significant capital appreciation.
THE EUROPE, ULTRAEUROPE, AND ULTRASHORT EUROPE VP PROFUNDS
The investment objective of the Europe ProFund VP is to provide daily
investment results that correspond to the performance of the PEI.
The investment objective of the UltraEurope ProFund VP is to provide daily
investment results that correspond to twice (200%) the performance of the PEI.
Under its investment objective, the UltraEurope ProFund VP should produce
greater gains to investors when the PEI rises and greater losses when the PEI
declines over the corresponding gain or loss of the PEI itself.
The UltraShort Europe ProFund VP is designed to allow investors to seek to
profit from anticipated decreases in the PEI or to hedge an existing portfolio
of securities or mutual fund shares. The UltraShort Europe ProFund VP's
investment objective is to provide daily investment results that correspond to
twice (200%) the inverse (opposite) of the performance of the PEI.
If the UltraShort Europe ProFund VP achieved a perfect inverse correlation
for any single trading day, the net asset value of the shares of the VP ProFund
would increase for that day proportional to twice any decrease in the level of
the PEI. Conversely, the net asset value of the shares of the UltraShort Europe
ProFund VP would decrease for that day proportional to twice any increase in the
level of the PEI for that day.
<PAGE>
For example, if the PEI were to decrease by 1% on a particular day,
investors in the UltraShort Europe ProFund VP should experience a gain in net
asset value of approximately 2% for that day. Conversely, if the PEI were to
increase by 1% by the close of business on a particular trading day, investors
in the UltraShort Europe ProFund VP would experience a loss in net asset value
of approximately 2%.
In pursuing their investment objectives, the Europe ProFund VP, UltraEurope
ProFund VP, and UltraShort Europe ProFund VP generally do not invest in
traditional securities, such as common stock of operating companies. Rather, the
Europe ProFund VP, UltraEurope ProFund VP, and UltraShort Europe ProFund VP
employ certain investment techniques, including engaging in short sales and in
certain transactions in stock index future contracts, options on stock index
future contracts, and options on securities and stock indexes.
Investing in foreign companies or financial instruments by these VP
ProFunds (directly or indirectly) may involve risks not typically associated
with investing in U.S. companies. The value of securities denominated in foreign
currencies, and of dividends from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. Dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices in some foreign markets can be extremely volatile. Many
foreign countries lack uniform accounting and disclosure standards. Because
these VP ProFunds will invest indirectly in foreign markets, they will be
subject to the market, economic and political risks prevalent in these foreign
markets.
Changes in foreign exchange rates will affect the value of securities of
financial instruments denominated or quoted in currencies other than the U.S.
Dollar, and these VP ProFunds will not engage in activities designed to hedge
against foreign currency exchange rate fluctuations. Foreign currency exchange
rates may fluctuate significantly over short periods of time. They generally are
determined by forces of supply and demand in the foreign exchange markets and
the relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention (or failure to intervene) by U.S. or foreign
governments or central banks, by currency controls or by political developments
in the U.S. or abroad.
On January 1, 1999, the European Monetary Union (EMU) began to implement a
new currency unit, the Euro, which is expected to reshape financial markets,
banking systems and monetary policy in Europe and other parts of the world.
Although it is not possible to predict the impact of the Euro implementation
plan on the Europe ProFund VP, UltraEurope ProFund VP, and UltraShort Europe
ProFund VP, the transition to the Euro may change the economic environment and
behavior of investors, particularly in European markets.
THE MONEY MARKET PROFUND VP
The Money Market ProFund VP seeks as high a level of current income as is
consistent with liquidity and the preservation of capital. It seeks this
objective by investing in high quality money market instruments. The Money
Market ProFund VP offers investors a convenient means of diversifying their
holdings of short-term securities while relieving those investors of the
administrative burdens typically associated with purchasing and holding these
instruments, such as coordinating maturities and reinvestments, providing for
safekeeping and maintaining detailed records. High quality, short-term
instruments may result in a lower yield than instruments with a lower quality
and/or a longer term.
There can be no assurance that the investment objective of the Money Market
ProFund VP will be achieved.
The Money Market ProFund VP invests in money market instruments, including
corporate debt obligations, U.S. government securities, bank obligations and
repurchase agreements. The Money Market ProFund VP follows practices which are
designed to enable the Money Market ProFund VP to maintain a $1.00 share price:
limiting dollar-weighted average maturity of the securities held by the Money
Market ProFund VP to 90 days or less; buying securities which have remaining
maturities of 397 days or less; and buying only high quality securities with
minimal credit risks. Of course, the Money Market ProFund VP cannot guarantee a
$1.00 share price, but these practices help to minimize any price fluctuations
that might result from rising or declining interest rates. While the Money
Market ProFund VP invests in high quality money market securities, you should be
aware that your investment is not without risk. All money market instruments can
change in value when interest rates or an issuer's creditworthiness changes.
<PAGE>
FUTURES CONTRACTS AND RELATED OPTIONS
The VP ProFunds (other than the Money Market ProFund VP) may purchase or
sell stock index futures contracts and options thereon as a substitute for a
comparable market position in the underlying securities or to satisfy regulation
requirements. A futures contract obligates the seller to deliver (and the
purchaser to take delivery of) the specified commodity on the expiration date of
the contract. A stock index futures contract obligates the seller to deliver
(and the purchaser to take) an amount of cash equal to a specific dollar amount
multiplied by the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of the underlying stocks in the index is
made.
When a VP ProFund purchases a put or call option on a futures contract, the
VP ProFund pays a premium for the right to sell or purchase the underlying
futures contract for a specified price upon exercise at any time during the
option period. By writing (selling) a put or call option on a futures contract,
a VP ProFund receives a premium in return for granting to the purchaser of the
option the right to sell to or buy from the VP ProFund the underlying futures
contract for a specified price upon exercise at any time during the option
period.
Whether a VP ProFund realizes a gain or loss from futures activities
depends generally upon movements in the underlying commodity. The extent of the
VP ProFund's loss from an unhedged short position in futures contracts or from
writing options on futures contracts is potentially unlimited. The VP ProFunds
may engage in related closing purchase or sale transactions with respect to
options on futures contracts by buying an option of the same series as an option
previously written by a VP ProFund, or selling an option of the same series as
an option previously purchased by a VP ProFund. The VP ProFunds will engage in
transactions in futures contracts and related options that are traded on a U.S.
exchange or board of trade or that have been approved for sale in the U.S. by
the Commodity Futures Trading Commission.
When a VP ProFund purchases or sells a stock index futures contract, or
sells an option thereon, the VP ProFund "covers" its position. To cover its
position, a VP ProFund may enter into an offsetting position or maintain with
its custodian bank (and mark-to-market on a daily basis) a segregated account
consisting of liquid instruments that, when added to any amounts deposited with
a futures commission merchant as margin, are equal to the market value of the
futures contract or otherwise "cover" its position.
The Benchmark VP ProFunds may purchase and sell futures contracts and
options thereon only to the extent that such activities would be consistent with
the requirements of Section 4.5 of the regulations promulgated by the Commodity
Futures Trading Commission (the "CFTC Regulations") under the Commodity Exchange
Act under which each of these VP ProFunds would be excluded from the definition
of a "commodity pool operator." Under Section 4.5 of the CFTC Regulations, a VP
ProFund may engage in futures transactions, either for "bona fide hedging"
purposes, as this term is defined in the CFTC Regulations, or for non- bona fide
hedging purposes to the extent that the aggregate initial margins and option
premiums required to establish such non- bona fide hedging positions do not
exceed 5% of the liquidation value of the VP ProFund's portfolio. In the case of
an option on futures contracts that is "in-the-money" at the time of purchase
(i.e., the amount by which the exercise price of the put option exceeds the
current market value of the underlying security or the amount by which the
current market value of the underlying security exceeds the exercise price of
the call option), the in-the-money amount may be excluded in calculating this 5%
limitation.
The VP ProFunds will cover their positions when they write a futures
contract or option on a futures contract. A VP ProFund may "cover" its long
position in a futures contract by purchasing a put option on the same futures
contract with a strike price (i.e., an exercise price) as high or higher than
the price of the futures contract, or, if the strike price of the put is less
than the price of the futures contract, the VP ProFund will maintain in a
segregated account cash or liquid instruments equal in value to the difference
between the strike price of the put and the price of the future. A VP ProFund
may also cover its long position in a futures contract by taking a short
position in the instruments underlying the futures contract, or by taking
positions in instruments the prices of which are expected to move relatively
consistently with the futures contract. A VP ProFund may cover its short
position in a futures contract by taking a long position in the instruments
underlying the futures contract, or by taking positions in instruments the
prices of which are expected to move relatively consistently with the futures
contract.
<PAGE>
A VP ProFund may cover its sale of a call option on a futures contract by
taking a long position in the underlying futures contract at a price less than
or equal to the strike price of the call option, or, if the long position in the
underlying futures contract is established at a price greater than the strike
price of the written (sold) call, the VP ProFund will maintain in a segregated
account liquid instruments equal in value to the difference between the strike
price of the call and the price of the future. A VP ProFund may also cover its
sale of a call option by taking positions in instruments the prices of which are
expected to move relatively consistently with the call option. A VP ProFund may
cover its sale of a put option on a futures contract by taking a short position
in the underlying futures contract at a price greater than or equal to the
strike price of the put option, or, if the short position in the underlying
futures contract is established at a price less than the strike price of the
written put, the VP ProFund will maintain in a segregated account cash or
high-grade liquid debt securities equal in value to the difference between the
strike price of the put and the price of the future. A VP ProFund may also cover
its sale of a put option by taking positions in instruments the prices of which
are expected to move relatively consistently with the put option.
Although the VP ProFunds intend to sell futures contracts only if there is
an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
day. Futures contract prices could move to the limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation of
futures positions and potentially subjecting a VP ProFund to substantial losses.
If trading is not possible, or if a VP ProFund determines not to close a futures
position in anticipation of adverse price movements, the VP ProFund will be
required to make daily cash payments of variation margin. The risk that the VP
ProFund will be unable to close out a futures position will be minimized by
entering into such transactions on a national exchange with an active and liquid
secondary market.
INDEX OPTIONS
The VP ProFunds (other than the Money Market ProFund VP) may purchase and
write options on stock indexes to create investment exposure consistent with
their investment objectives, to hedge or limit the exposure of their positions
and to create synthetic money market positions. See "Taxation" herein.
A stock index fluctuates with changes in the market values of the stocks
included in the index. Options on stock indexes give the holder the right to
receive an amount of cash upon exercise of the option. Receipt of this cash
amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received, if
any, will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple. The
writer (seller) of the option is obligated, in return for the premiums received
from the purchaser of the option, to make delivery of this amount to the
purchaser. All settlements of index options transactions are in cash.
Index options are subject to substantial risks, including the risk of
imperfect correlation between the option price and the value of the underlying
securities composing the stock index selected and the risk that there might not
be a liquid secondary market for the option. Because the value of an index
option depends upon movements in the level of the index rather than the price of
a particular stock, whether a VP ProFund will realize a gain or loss from the
purchase or writing (sale) of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of certain
indexes, in an industry or market segment, rather than upon movements in the
price of a particular stock. Whether a VP ProFund will realize a profit or loss
by the use of options on stock indexes will depend on movements in the direction
of the stock market generally or of a particular industry or market segment.
This requires different skills and techniques than are required for predicting
changes in the price of individual stocks. A VP ProFund will not enter into an
option position that exposes the VP ProFund to an obligation to another party,
unless the VP ProFund either (i) owns an offsetting position in securities or
other options and/or (ii) maintains with the VP ProFund's custodian bank liquid
instruments that, when added to the premiums deposited with respect to the
option, are equal to the market value of the underlying stock index not
otherwise covered.
<PAGE>
The Benchmark VP ProFunds may engage in transactions in stock index options
listed on national securities exchanges or traded in the over-the-counter market
as an investment vehicle for the purpose of realizing the VP ProFund's
investment objective. Options on indexes are settled in cash, not by delivery of
securities. The exercising holder of an index option receives, instead of a
security, cash equal to the difference between the closing price of the
securities index and the exercise price of the option.
Some stock index options are based on a broad market index such as the S&P
500 Index, the NYSE Composite Index, or the AMEX Major Market Index, or on a
narrower index such as the Philadelphia Stock Exchange Over-the-Counter Index.
Options currently are traded on the Chicago Board Options Exchange (the "CBOE"),
the AMEX, and other exchanges ("Exchanges"). Purchased over-the-counter options
and the cover for written over-the-counter options will be subject to the
respective VP ProFund's 15% limitation on investment in illiquid securities. See
"Illiquid Securities."
Each of the Exchanges has established limitations governing the maximum
number of call or put options on the same index which may be bought or written
(sold) by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
Exchanges or are held or written on one or more accounts or through one or more
brokers). Under these limitations, option positions of all investment companies
advised by the same investment adviser are combined for purposes of these
limits. Pursuant to these limitations, an Exchange may order the liquidation of
positions and may impose other sanctions or restrictions. These position limits
may restrict the number of listed options which a VP ProFund may buy or sell;
however, the Advisor intends to comply with all limitations.
OPTIONS ON SECURITIES
The Benchmark VP ProFunds may buy and write (sell) options on securities
for the purpose of realizing each respective VP ProFund's investment objectives.
By buying a call option, a VP ProFund has the right, in return for a premium
paid during the term of the option, to buy the securities underlying the option
at the exercise price. By writing a call option on securities, a VP ProFund
becomes obligated during the term of the option to sell the securities
underlying the option at the exercise price if the option is exercised. By
buying a put option, a VP ProFund has the right, in return for a premium paid
during the term of the option, to sell the securities underlying the option at
the exercise price. By writing a put option, a VP ProFund becomes obligated
during the term of the option to purchase the securities underlying the option
at the exercise price if the option is exercised. 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 such earlier time that the writer 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 one previously sold. Once an option has been exercised, the writer 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 a call 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. When writing
call options on securities, a VP ProFund may cover its position by owning the
underlying security on which the option is written. Alternatively, the VP
ProFund may cover its position by owning a call option on the underlying
security, on a share for share basis, which is deliverable under the option
contract at a price no higher than the exercise price of the call option written
by the VP ProFund or, if higher, by owning such call option and depositing and
maintaining in a segregated account cash or liquid instruments equal in value to
the difference between the two exercise prices. In addition, a VP ProFund may
cover its position by depositing and maintaining in a segregated account cash or
liquid instruments equal in value to the exercise price of the call option
written by the VP ProFund. When a VP ProFund writes a put option, the VP ProFund
will have and maintain on deposit with its custodian bank cash or liquid
instruments having a value equal to the exercise value of the option. The
principal reason for a VP ProFund to write call options on stocks held by the VP
ProFund is to attempt to realize, through the receipt of premiums, a greater
return than would be realized on the underlying securities alone.
<PAGE>
If a VP ProFund that writes an option wishes to terminate the VP ProFund's
obligation, the VP ProFund may effect a "closing purchase transaction." The VP
ProFund accomplishes this by buying an option of the same series as the option
previously written by the VP ProFund. The effect of the purchase is that the
writer's position will be canceled by the OCC. However, a writer may not effect
a closing purchase transaction after the writer has been notified of the
exercise of an option. Likewise, a VP ProFund which is the holder of an option
may liquidate its position by effecting a "closing sale transaction." The VP
ProFund accomplishes this by selling an option of the same series as the option
previously purchased by the VP ProFund. There is no guarantee that either a
closing purchase or a closing sale transaction can be effected. If any call or
put option is not exercised or sold, the option will become worthless on its
expiration date. A VP ProFund will realize a gain (or a loss) on a closing
purchase transaction with respect to a call or a put option previously written
by the VP ProFund if the premium, plus commission costs, paid by the VP ProFund
to purchase the call or put option to close the transaction is less (or greater)
than the premium, less commission costs, received by the VP ProFund on the sale
of the call or the put option. The VP ProFund also will realize a gain if a call
or put option which the VP ProFund has written lapses unexercised, because the
VP ProFund would retain the premium.
Although certain securities exchanges attempt to provide continuously
liquid markets in which holders and writers of options can close out their
positions at any time prior to the expiration of the option, no assurance can be
given that a market will exist at all times for all outstanding options
purchased or sold by a VP ProFund. If an options market were to become
unavailable, the VP ProFund would be unable to realize its profits or limit its
losses until the VP ProFund could exercise options it holds, and the VP ProFund
would remain obligated until options it wrote were exercised or expired. Reasons
for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the OCC may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
OCC as a result of trades on that exchange would continue to be exercisable in
accordance with their terms.
SHORT SALES
The Bear ProFund VP, the UltraBear ProFund VP, the UltraShort ProFund VP
and the UltraShort Europe ProFund VP may engage in short sales transactions
under which the VP ProFund sells a security it does not own. To complete such a
transaction, the VP ProFund must borrow the security to make delivery to the
buyer. The VP ProFund then is obligated to replace the security borrowed by
purchasing the security at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the VP ProFund. Until the security is replaced, the VP ProFund is
required to pay to the lender amounts equal to any dividends or interest which
accrue during the period of the loan. To borrow the security, the VP ProFund
also may be required to pay a premium, which would increase the cost of the
security sold. The proceeds of the short sale will be retained by the broker, to
the extent necessary to meet the margin requirements, until the short position
is closed out.
<PAGE>
Until the VP ProFund closes its short position or replaces the borrowed
security, the VP ProFund will cover its position with an offsetting position or
maintain a segregated account containing cash or liquid instruments at such a
level that the amount deposited in the account plus the amount deposited with
the broker as collateral will equal the current value of the security sold
short.
SWAP AGREEMENTS
The VP ProFunds (other than the Money Market ProFund VP) may enter into
equity index or interest rate swap agreements for purposes of attempting to gain
exposure to the stocks making up an index of securities in a market without
actually purchasing those stocks, or to hedge a position. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a day to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested in a "basket" of
securities representing a particular index. Forms of swap agreements include
interest rate caps, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates exceed a specified
rate, or "cap"; interest rate floors, under which, in return for a premium, one
party agrees to make payments to the other to the extent that interest rates
fall below a specified level, or "floor"; and interest rate collars, under which
a party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels.
Most swap agreements entered into by the VP ProFunds calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a VP
ProFund's current obligations (or rights) under a swap agreement will generally
be equal only to the net amount to be paid or received under the agreement based
on the relative values of the positions held by each party to the agreement (the
"net amount").
A VP ProFund's current obligations under a swap agreement will be accrued
daily (offset against any amounts owing to the VP ProFund) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by segregating
assets determined to be liquid. Obligations under swap agreements so covered
will not be construed to be "senior securities" for purposes of a VP ProFund's
investment restriction concerning senior securities. Because they are two party
contracts and because they may have terms of greater than seven days, swap
agreements may be considered to be illiquid for the VP ProFunds' illiquid
investment limitations. A VP ProFund will not enter into any swap agreement
unless the Advisor believes that the other party to the transaction is
creditworthy. A VP ProFund bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a
swap agreement counterparty.
Each Benchmark VP ProFund may enter into swap agreements to invest in a
market without owning or taking physical custody of securities in circumstances
in which direct investment is restricted for legal reasons or is otherwise
impracticable. The counterparty to any swap agreement will typically be a bank,
investment banking firm or broker/dealer. The counterparty will generally agree
to pay the VP ProFund the amount, if any, by which the notional amount of the
swap agreement would have increased in value had it been invested in the
particular stocks, plus the dividends that would have been received on those
stocks. The VP ProFund will agree to pay to the counterparty a floating rate of
interest on the notional amount of the swap agreement plus the amount, if any,
by which the notional amount would have decreased in value had it been invested
in such stocks. Therefore, the return to the VP ProFund on any swap agreement
should be the gain or loss on the notional amount plus dividends on the stocks
less the interest paid by the VP ProFund on the notional amount.
Swap agreements typically are settled on a net basis, which means that the
two payment streams are netted out, with the VP ProFund receiving or paying, as
the case may be, only the net amount of the two payments. Payments may be made
at the conclusion of a swap agreement or periodically during its term. Swap
agreements do not involve the delivery of securities or other underlying assets.
Accordingly, the risk of loss with respect to swap agreements is limited to the
net amount of payments that a VP ProFund is contractually obligated to make. If
the other party to a swap agreement defaults, a VP ProFund's risk of loss
consists of the net amount of payments that such Fund is contractually entitled
to receive, if any. The net amount of the excess, if any, of a VP ProFund's
obligations over its entitlements with respect to each equity swap will be
accrued on a daily basis and an amount of cash or liquid assets, having an
aggregate net asset value at least equal to such accrued excess will be
maintained in a segregated account by a VP ProFund's custodian. Inasmuch as
these transactions are entered into for hedging purposes or are offset by
segregated cash of liquid assets, as permitted by applicable law, the VP
ProFunds and their Advisor believe that transactions do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to a VP ProFund's borrowing restrictions.
<PAGE>
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid in comparison with the markets for other similar
instruments which are traded in the over-the-counter market. The Advisor, under
the supervision of the Board of Trustees, are responsible for determining and
monitoring the liquidity of the VP ProFunds' transactions in swap agreements.
The use of equity swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions.
U.S. GOVERNMENT SECURITIES
Each VP ProFund also may invest in U.S. government securities in pursuit of
its investment objectives, as "cover" for the investment techniques these VP
ProFunds employ, or for liquidity purposes.
Yields on U.S. government securities are dependent on a variety of factors,
including the general conditions of the money and bond markets, the size of a
particular offering, and the maturity of the obligation. Debt securities with
longer maturities tend to produce higher yields and are generally subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities and lower yields. The market value of U.S. government
securities generally varies inversely with changes in market interest rates. An
increase in interest rates, therefore, would generally reduce the market value
of a VP ProFund's portfolio investments in U.S. government securities, while a
decline in interest rates would generally increase the market value of a VP
ProFund's portfolio investments in these securities.
U.S. government securities include U.S. Treasury securities, which are
backed by the full faith and credit of the U.S. Treasury and which differ only
in their interest rates, maturities, and times of issuance. U.S. Treasury bills
have initial maturities of one year or less; U.S. Treasury notes have initial
maturities of one to ten years; and U.S. Treasury bonds generally have initial
maturities of greater than ten years. Certain U.S. government securities are
issued or guaranteed by agencies or instrumentalities of the U.S. government
including, but not limited to, obligations of U.S. government agencies or
instrumentalities, such as the Federal National Mortgage Association, the
Government National Mortgage Association, the Small Business Administration, the
Federal Farm Credit Administration, the Federal Home Loan Banks, Banks for
Cooperatives (including the Central Bank for Cooperatives),the Federal Land
Banks, the Federal Intermediate Credit Banks, the Tennessee Valley Authority,
the Export-Import Bank of the United States, the Commodity Credit Corporation,
the Federal Financing Bank, the Student Loan Marketing Association, and the
National Credit Union Administration. Some obligations issued or guaranteed by
U.S. government agencies and instrumentalities, including, for example,
Government National Mortgage Association pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury. Other obligations
issued by or guaranteed by Federal agencies, such as those securities issued by
the Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. government to purchase certain obligations of the federal
agency, while other obligations issued by or guaranteed by federal agencies,
such as those of the Federal Home Loan Banks, are supported by the right of the
issuer to borrow from the U.S. Treasury. While the U.S. government provides
financial support to such U.S. government-sponsored Federal agencies, no
assurance can be given that the U.S. government will always do so, since the
U.S. Government is not so obligated by law. U.S. Treasury notes and bonds
typically pay coupon interest semi-annually and repay the principal at maturity.
<PAGE>
REPURCHASE AGREEMENTS
Each of the VP ProFunds may enter into repurchase agreements with financial
institutions. Under a repurchase agreement, a VP ProFund purchases a debt
security and simultaneously agrees to sell the security back to the seller at a
mutually agreed-upon future price and date, normally one day or a few days
later. The resale price is greater than the purchase price, reflecting an
agreed-upon market interest rate during the purchaser's holding period. While
the maturities of the underlying securities in repurchase transactions may be
more than one year, the term of each repurchase agreement will always be less
than one year. The VP ProFunds follow certain procedures designed to minimize
the risks inherent in such agreements. These procedures include effecting
repurchase transactions only with large, well-capitalized and well-established
financial institutions whose condition will be continually monitored by the
Advisor. In addition, the value of the collateral underlying the repurchase
agreement will always be at least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement. In the event of a default
or bankruptcy by a selling financial institution, a VP ProFund will seek to
liquidate such collateral which could involve certain costs or delays and, to
the extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the VP ProFund could suffer a
loss. A VP ProFund also may experience difficulties and incur certain costs in
exercising its rights to the collateral and may lose the interest the VP ProFund
expected to receive under the repurchase agreement. Repurchase agreements
usually are for short periods, such as one week or less, but may be longer. It
is the current policy of the VP ProFunds not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with any
other liquid assets held by the VP ProFund, amounts to more than 15% (10% with
respect to the Money Market ProFund VP) of the VP ProFund's total net assets.
The investments of each of the VP ProFunds in repurchase agreements at times may
be substantial when, in the view of the Advisor, liquidity, investment,
regulatory, or other considerations so warrant.
CASH RESERVES
To seek its investment objective as a cash reserve, for liquidity purposes,
or as "cover" for positions it has taken, each VP ProFund may temporarily invest
all or part of the VP ProFund's 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.
REVERSE REPURCHASE AGREEMENTS
The VP ProFunds may use reverse repurchase agreements as part of that VP
ProFund's investment strategy. Reverse repurchase agreements involve sales by a
VP ProFund of portfolio assets concurrently with an agreement by the VP ProFund
to repurchase the same assets at a later date at a fixed price. Generally, the
effect of such a transaction is that the VP ProFund can recover all or most of
the cash invested in the portfolio securities involved during the term of the
reverse repurchase agreement, while the VP ProFund will be able to keep the
interest income associated with those portfolio securities. Such transactions
are advantageous only if the interest cost to the VP ProFund of the reverse
repurchase transaction is less than the cost of obtaining the cash otherwise.
Opportunities to achieve this advantage may not always be available, and the VP
ProFund intend to use the reverse repurchase technique only when it will be to
the VP ProFund's advantage to do so. The VP ProFund will establish a segregated
account with its custodian bank in which the VP ProFund will maintain cash or
liquid instruments equal in value to the VP ProFund's obligations in respect of
reverse repurchase agreements.
<PAGE>
BORROWING
The VP ProFunds may borrow money for cash management purposes or investment
purposes. Each of the VP ProFunds may also enter into reverse repurchase
agreements, which may be viewed as a form of borrowing, with financial
institutions. However, to the extent a VP ProFund "covers" its repurchase
obligations as described above in "Reverse Repurchase Agreements," such
agreement will not be considered to be a "senior security" and, therefore, will
not be subject to the 300% asset coverage requirement otherwise applicable to
borrowings by the VP ProFunds. Borrowing for investment is known as leveraging.
Leveraging investments, by purchasing securities with borrowed money, is a
speculative technique which increases investment risk, but also increases
investment opportunity. Since substantially all of a VP ProFund's assets will
fluctuate in value, whereas the interest obligations on borrowings may be fixed,
the net asset value per share of the VP ProFund will increase more when the VP
ProFund's portfolio assets increase in value and decrease more when the VP
ProFund's portfolio assets decrease in value than would otherwise be the case.
Moreover, interest costs on borrowings may fluctuate with changing market rates
of interest and may partially offset or exceed the returns on the borrowed
funds. Under adverse conditions, a VP ProFund might have to sell portfolio
securities to meet interest or principal payments at a time when investment
considerations would not favor such sales.
As required by the 1940 Act, a VP ProFund must maintain continuous asset
coverage (total assets, including assets acquired with borrowed funds, less
liabilities exclusive of borrowings) of 300% of all amounts borrowed. If at any
time the value of the VP ProFund's assets should fail to meet this 300% coverage
test, the VP ProFund, within three days (not including Sundays and holidays),
will reduce the amount of the VP ProFund's borrowings to the extent necessary to
meet this 300% coverage. Maintenance of this percentage limitation may result in
the sale of portfolio securities at a time when investment considerations
otherwise indicate that it would be disadvantageous to do so. In addition to the
foregoing, the VP ProFunds are authorized to borrow money from a bank as a
temporary measure for extraordinary or emergency purposes in amounts not in
excess of 5% of the value of the VP ProFund's total assets. This borrowing is
not subject to the foregoing 300% asset coverage requirement. The VP ProFunds
are authorized to pledge portfolio securities as the Advisor deems appropriate
in connection with any borrowings.
LENDING OF PORTFOLIO SECURITIES
Each of the VP ProFunds may lend its portfolio securities to brokers,
dealers, and financial institutions, provided that cash equal to at least 100%
of the market value of the securities loaned is deposited by the borrower with
the VP ProFund and is maintained each business day in a segregated account
pursuant to applicable regulations. While such securities are on loan, the
borrower will pay the lending VP ProFund any income accruing thereon, and the VP
ProFund may invest the cash collateral in portfolio securities, thereby earning
additional income. A VP ProFund will not lend more than 33 1/3% of the value of
the VP ProFund's total assets. Loans would be subject to termination by the
lending VP ProFund on four business days' notice, or by the borrower on one
day's notice. Borrowed securities must be returned when the loan is terminated.
Any gain or loss in the market price of the borrowed securities which occurs
during the term of the loan inures to the lending VP ProFund. There may be risks
of delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the securities lent should the borrower of
the securities fail financially. A lending VP ProFund may pay reasonable
finders, borrowers, administrative, and custodial fees in connection with a
loan.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each Benchmark VP ProFund, from time to time, in the ordinary course of
business, may purchase securities on a when-issued or delayed-delivery basis
(i.e., delivery and payment can take place between a month and 120 days after
the date of the transaction). These securities are subject to market fluctuation
and no interest accrues to the purchaser during this period. At the time a VP
ProFund makes the commitment to purchase securities on a when-issued or
delayed-delivery basis, the VP ProFund will record the transaction and
thereafter reflect the value of the securities, each day, in determining the VP
ProFund's net asset value. Each Benchmark VP ProFund will not purchase
securities on a when-issued or delayed-delivery basis if, as a result, more than
15% of the VP ProFund's net assets would be so invested. At the time of delivery
of the securities, the value of the securities may be more or less than the
purchase price.
The Trust will also establish a segregated account with the Trust's
custodian bank in which the VP ProFunds will maintain liquid instruments equal
to or greater in value than the VP ProFund's purchase commitments for such
when-issued or delayed-delivery securities, or the Trust does not believe that a
VP ProFund's net asset value or income will be adversely affected by the VP
ProFund's purchase of securities on a when-issued or delayed delivery basis.
<PAGE>
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The VP ProFunds may invest in the securities of other investment companies
to the extent that such an investment would be consistent with the requirements
of the 1940 Act. If a VP ProFund invests in, and, thus, is a shareholder of,
another investment company, the VP ProFund's shareholders will indirectly bear
the VP ProFund's proportionate share of the fees and expenses paid by such other
investment company, including advisory fees, in addition to both the management
fees payable directly by the VP ProFund to the VP ProFund's own investment
adviser and the other expenses that the VP ProFund bears directly in connection
with the VP ProFund's own operations.
ILLIQUID SECURITIES
While none of the VP ProFunds anticipates doing so, each of the VP ProFunds
may purchase illiquid securities, including securities that are not readily
marketable and securities that are not registered ("restricted securities")
under the Securities Act of 1933, as amended (the "1933 Act"), but which can be
sold to qualified institutional buyers under Rule 144A of the 1933 Act. A VP
ProFund will not invest more than 15% (10% with respect to the Money Market
ProFund VP) of the VP ProFund's net assets in illiquid securities. The term
"illiquid securities" for this purpose means securities that cannot be disposed
of within seven days in the ordinary course of business at approximately the
amount at which the VP ProFund has valued the securities. Under the current
guidelines of the staff of the Securities and Exchange Commission (the
"Commission"), illiquid securities also are considered to include, among other
securities, purchased over-the-counter options, certain cover for
over-the-counter options, repurchase agreements with maturities in excess of
seven days, and certain securities whose disposition is restricted under the
Federal securities laws. The VP ProFund may not be able to sell illiquid
securities when the Advisor considers it desirable to do so or may have to sell
such securities at a price that is lower than the price that could be obtained
if the securities were more liquid. In addition, the sale of illiquid securities
also may require more time and may result in higher dealer discounts and other
selling expenses than does the sale of securities that are not illiquid.
Illiquid securities also may be more difficult to value due to the
unavailability of reliable market quotations for such securities, and
investments in illiquid securities may have an adverse impact on net asset
value.
At the time of investment, the Money Market ProFund VP's aggregate holdings
of repurchase agreements having remaining maturities of more than seven calendar
days (or which may not be terminated within seven calendar days upon notice by
the Money Market ProFund VP), time deposits having remaining maturities of more
than seven calendar days, illiquid securities, restricted securities and
securities lacking readily available market quotations will not exceed 10% of
the Money Market ProFund VP's net assets. If changes in the liquidity of certain
securities cause the Money Market ProFund VP to exceed such 10% limit, the Money
Market ProFund VP will take steps to bring the aggregate amount of its illiquid
securities back below 10% of its net assets as soon as practicable, unless such
action would not be in the best interest of the Money Market ProFund VP.
Institutional markets for restricted securities have developed as a result
of the promulgation of Rule 144A under the 1933 Act, which provides a safe
harbor from 1933 Act registration requirements for qualifying sales to
institutional investors. When Rule 144A restricted securities present an
attractive investment opportunity and otherwise meet selection criteria, a VP
ProFund may make such investments. Whether or not such securities are illiquid
depends on the market that exists for the particular security. The Commission
staff has taken the position that the liquidity of Rule 144A restricted
securities is a question of fact for a board of trustees to determine, such
determination to be based on a consideration of the readily-available trading
markets and the review of any contractual restrictions. The staff also has
acknowledged that, while a board of trustees retains ultimate responsibility,
trustees may delegate this function to an investment adviser. Trustees of VP
ProFunds have delegated this responsibility for determining the liquidity of
Rule 144A restricted securities which may be invested in by a VP ProFund to the
Advisor. It is not possible to predict with assurance exactly how the market for
Rule 144A restricted securities or any other security will develop. A security
which when purchased enjoyed a fair degree of marketability may subsequently
become illiquid and, accordingly, a security which was deemed to be liquid at
the time of acquisition may subsequently become illiquid. In such event,
appropriate remedies will be considered to minimize the effect on the VP
ProFund's liquidity.
<PAGE>
PORTFOLIO QUALITY AND MATURITY (MONEY MARKET PROFUND VP)
The Money Market ProFund VP will maintain a dollar-weighted average
maturity of 90 days or less. All securities in which the Money Market ProFund VP
invests will have or be deemed to have remaining maturities of 397 days or less
on the date of their purchase, will be denominated in U.S. dollars and will have
been granted the required ratings established herein by two nationally
recognized statistical rating organizations ("NRSRO") (or one such NRSRO if that
NRSRO is the only such NRSRO which rates the security), or if unrated, are
believed by the Advisor, under the supervision of the Money Market ProFund VP's
Board of Trustees, to be of comparable quality. Currently, there are five rating
agencies which have been designated by the Commission as an NRSRO. These
organizations and their highest short-term rating category (which may also be
modified by a "+") are: Duff and Phelps Credit Rating Co., D-1; Fitch IBCA,
Inc., F1; Moody's Investors Service Inc. ("Moody's"), Prime-1; Standard &
Poor's, A-1; and Thomson BankWatch, Inc., T-1. A description of such ratings is
provided in the Appendix. The Advisor, acting under the supervision of and
procedures adopted by the Board of Trustees of the Money Market ProFund VP, will
also determine that all securities purchased by the Money Market ProFund VP
present minimal credit risks. The Advisor will cause the Money Market ProFund VP
to dispose of any security as soon as practicable if the security is no longer
of the requisite quality, unless such action would not be in the best interest
of the Money Market ProFund VP.
OBLIGATIONS OF BANKS AND OTHER FINANCIAL INSTITUTIONS (MONEY MARKET PROFUND VP)
The Money Market ProFund VP may invest in U.S. dollar-denominated fixed
rate or variable rate obligations of U.S. or foreign institutions, including
banks which are rated in the highest short-term rating category by any two
NRSROs (or one NRSRO if that NRSRO is the only such NRSRO which rates such
obligations) or, if not so rated, are believed by the Advisor, acting under the
supervision of the Board of Trustees, to be of comparable quality. Bank
obligations in which the Money Market ProFund VP invests include certificates of
deposit, bankers' acceptances, time deposits, commercial paper, and other U.S.
dollar-denominated instruments issued or supported by the credit of U.S. or
foreign institutions including banks. For purposes of the Money Market ProFund
VP's investment policies with respect to bank obligations, the assets of a bank
will be deemed to include the assets of its domestic and foreign branches.
Obligations of foreign branches of U.S. banks and foreign banks may be general
obligations of the parent bank in addition to the issuing bank or may be limited
by the terms of a specific obligation and by government regulation. If the
Advisor, acting under the supervision of the Board of Trustees, deems the
instruments to present minimal credit risk, the Money Market ProFund VP may
invest in obligations of foreign banks or foreign branches of U.S. banks which
include banks located in the United Kingdom, Grand Cayman Island, Nassau, Japan
and Canada. Investments in these obligations may entail risks that are different
from those of investments in obligations of U.S. domestic banks because of
differences in political, regulatory and economic systems and conditions. These
risks include, without limitation, future political and economic developments,
currency blockage, the possible imposition of withholding taxes on interest
payments, possible seizure or nationalization of foreign deposits, and
difficulty or inability of pursuing legal remedies and obtaining judgment in
foreign courts, possible establishment of exchange controls or the adoption of
other foreign governmental restrictions that might affect adversely the payment
of principal and interest on bank obligations. Foreign branches of U.S. banks
and foreign banks may also be subject to less stringent reserve requirements and
to different accounting, auditing, reporting and recordkeeping standards than
those applicable to branches of U.S. banks. Under normal market conditions, the
Money Market ProFund VP will invest more than 25% of its assets in the foreign
and domestic bank obligations described above. The Money Market ProFund VP's
concentration of its investments in bank obligations will cause the Money Market
ProFund VP to be subject to the risks peculiar to the domestic and foreign
banking industries to a greater extent than if its investments were not so
concentrated. A description of the ratings set forth above is provided in the
Appendix.
<PAGE>
COMMERCIAL PAPER, OTHER DEBT OBLIGATIONS AND CREDIT ENHANCEMENT (MONEY MARKET
PROFUND VP)
COMMERCIAL PAPER. The Money Market ProFund VP may invest in fixed rate or
variable rate commercial paper, including variable rate master demand notes,
issued by U.S. or foreign entities. Commercial paper when purchased by the Money
Market ProFund VP must be rated the highest short-term rating category by any
two NRSROs (or one NRSRO if that NRSRO is the only such NRSRO which rates
objections, or if not rated, must be believed by the Advisor, acting under the
supervision of the Board of Trustees of the Money Market ProFund VP, to be of
comparable quality. Any commercial paper issued by a foreign entity and
purchased by the Money Market ProFund VP must be U.S. dollar-denominated and
must not be subject to foreign withholding tax at the time of purchase.
Investing in foreign commercial paper generally involves risks similar to those
described above relating to obligations of foreign banks or foreign branches of
U.S. banks.
Variable rate master demand notes are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. Because variable rate master demand notes are direct lending
arrangements between the Money Market ProFund VP and the issuer, they are not
normally traded. Although no active secondary market may exist for these notes,
the Money Market ProFund VP will purchase only those notes under which it may
demand and receive payment on principal and accrued interest daily or may resell
the note to a third party. While the notes are not typically rated by credit
rating agencies, issuers of variable rate master demand notes must satisfy the
Advisor, acting under the supervision of the Board of Trustees, that the same
criterion set forth above for issuers of commercial paper are met. In the event
an issuer of a variable rate master demand note defaulted on its payment
obligation, the Money Market ProFund VP might be unable to dispose of the note
because of the absence of a secondary market and could, for this or other
reasons, suffer a loss to the full extent of the default. The face maturities of
variable rate notes subject to a demand feature may exceed 397 days in certain
circumstances.
OTHER DEBT OBLIGATIONS. The Money Market ProFund VP may invest in deposits,
bonds, notes and debentures and other debt obligations that at the time of
purchase have, or are comparable in priority and security to other securities of
such issuer which have, outstanding short-term obligations meeting the above
short-term rating requirements, or if there are no such short-term ratings, are
determined by the Advisor, acting under the supervision of the Board of
Trustees, to be of comparable quality and are rated in the top three highest
long-term categories by the NRSROs rating such security.
CREDIT ENHANCEMENT. Certain of the Money Market ProFund VP's acceptable
investments may be credit-enhanced by a guaranty, letter of credit, or
insurance. Any bankruptcy, receivership, default, or change in the credit
quality of the party providing the credit enhancement will adversely affect the
quality and marketability of the underlying security and could cause losses to
the Money Market ProFund VP and affect the Money Market ProFund VP's share
price. The Money Market ProFund VP may have more than 25% of its total assets
invested in securities credit-enhanced by banks.
ASSET-BACKED SECURITIES. The Money Market ProFund VP may also invest in
securities generally referred to as asset-backed securities, which directly or
indirectly represent a participation interest in, or are secured by and payable
from, a stream of payments generated by particular assets, such as motor vehicle
or credit card receivables. Asset-backed securities may provide periodic
payments that consist of interest and/or principal payments. Consequently, the
life of an asset-backed security varies with the prepayment and loss experience
of the underlying assets.
<PAGE>
PORTFOLIO TURNOVER
The nature of the VP ProFunds will cause the VP ProFunds to experience
substantial portfolio turnover. A higher portfolio turnover rate would likely
involve correspondingly greater brokerage commissions and transaction and other
expenses which would be borne by the VP ProFunds. In addition, a VP ProFund's
portfolio turnover level may adversely affect the ability of the VP ProFund to
achieve its investment objective. Because each VP ProFund's portfolio turnover
rate to a great extent will depend on the purchase, redemption, and exchange
activity of the VP ProFund's investors, it is difficult to estimate what the VP
ProFund's actual turnover rate will be in the future. "Portfolio Turnover Rate"
is defined under the rules of the Commission as the value of the securities
purchased or securities sold, excluding all securities whose maturities at time
of acquisition were one year or less, divided by the average monthly value of
such securities owned during the year. Based on this definition, instruments
with remaining maturities of less than one year are excluded from the
calculation of portfolio turnover rate. Instruments excluded from the
calculation of portfolio turnover generally would include the futures contracts
and option contracts in which the Benchmark VP ProFunds invest since such
contracts generally have a remaining maturity of less than one year. Pursuant to
the formula prescribed by the Commission, the portfolio turnover rate for each
VP ProFund is calculated without regard to instruments, including options and
futures contracts, having a maturity of less than one year. The Bull ProFund VP,
the UltraBull ProFund VP, the Bear ProFund VP, the UltraBear ProFund VP, and the
SmallCap ProFund VP typically hold most of their investments in short-term
options and futures contracts, which, therefore, are excluded for purposes of
computing portfolio turnover. Therefore, based on the Commission's portfolio
turnover formula, each of these VP ProFunds expects a portfolio turnover rate of
approximately 0%.
SPECIAL CONSIDERATIONS
To the extent discussed above and in the prospectus, the VP ProFunds
present certain risks, some of which are further described below.
TRACKING ERROR. While the Benchmark VP ProFunds do not expect that their
returns over a year will deviate adversely from their respective benchmarks by
more than ten percent, several factors may affect their ability to achieve this
correlation. Among these factors are: (1) VP ProFund expenses, including
brokerage (which may be increased by high portfolio turnover) and the cost of
the investment techniques employed by the VP ProFunds; (2) less than all of the
securities in the benchmark being held by a VP ProFund and securities not
included in the benchmark being held by a VP ProFund; (3) an imperfect
correlation between the performance of instruments held by a VP ProFund, such as
futures contracts and options, and the performance of the underlying securities
in the cash market; (4) bid-ask spreads (the effect of which may be increased by
portfolio turnover); (5) holding instruments traded in a market that has become
illiquid or disrupted; (6) VP ProFund share prices being rounded to the nearest
cent; (7) changes to the benchmark index that are not disseminated in advance;
(8) the need to conform a VP ProFund's portfolio holdings to comply with
investment restrictions or policies or regulatory or tax law requirements, and
(9) early and unanticipated closings of the markets on which the holdings of a
VP ProFund trade, resulting in the inability of the VP ProFund to execute
intended portfolio transactions. While a close correlation of any VP ProFund to
its benchmark may be achieved on any single trading day, over time the
cumulative percentage increase or decrease in the net asset value of the shares
of a VP ProFund may diverge significantly from the cumulative percentage
decrease or increase in the benchmark due to a compounding effect.
LEVERAGE. The UltraBull ProFund VP, the UltraBear ProFund VP, UltraOTC
ProFund VP, UltraEurope VP ProFund, UltraShort OTC ProFund VP and UltraShort
Europe VP ProFund intend to regularly use leveraged investment techniques in
pursuing their investment objectives. Utilization of leveraging involves special
risks and should be considered to be speculative. Leverage exists when a VP
ProFund achieves the right to a return on a capital base that exceeds the amount
the VP ProFund has invested. Leverage creates the potential for greater gains to
shareholders of these VP ProFunds during favorable market conditions and the
risk of magnified losses during adverse market conditions. Leverage should cause
higher volatility of the net asset values of these VP ProFunds' shares. Leverage
may involve the creation of a liability that does not entail any interest costs
or the creation of a liability that requires the VP ProFund to pay interest
which would decrease the VP ProFund's total return to shareholders. If these VP
ProFunds achieve their investment objectives, during adverse market conditions,
shareholders should experience a loss of approximately twice the amount they
would have incurred had these VP ProFunds not been leveraged.
<PAGE>
NON-DIVERSIFIED STATUS. Each Benchmark VP ProFund is a "non-diversified"
series. Each Benchmark VP ProFund is considered "non-diversified" because a
relatively high percentage of the VP ProFund's assets may be invested in the
securities of a limited number of issuers, primarily within the same economic
sector. That VP ProFund's portfolio securities, therefore, may be more
susceptible to any single economic, political, or regulatory occurrence than the
portfolio securities of a more diversified investment company. A VP ProFund's
classification as a "non-diversified" investment company means that the
proportion of the VP ProFund's assets that may be invested in the securities of
a single issuer is not limited by the 1940 Act. Each VP ProFund, however,
intends to seek to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code, which imposes diversification requirements on these
VP ProFunds that are less restrictive than the requirements applicable to the
"diversified" investment companies under the 1940 Act.
INVESTMENT RESTRICTIONS
The VP ProFunds have adopted certain investment restrictions as fundamental
policies which cannot be changed without the approval of the holders of a
"majority" of the outstanding shares of a VP ProFund, as that term is defined in
the 1940 Act. The term "majority" is defined in the 1940 Act as the lesser of:
(i) 67% or more of the shares of the series present at a meeting of
shareholders, if the holders of more than 50% of the outstanding shares of the
VP ProFund are present or represented by proxy; or (ii) more than 50% of the
outstanding shares of the series. (All policies of a VP ProFund not specifically
identified in this Statement of Additional Information or the Prospectus as
fundamental may be changed without a vote of the shareholders of the VP
ProFund.) For purposes of the following limitations, all percentage limitations
apply immediately after a purchase or initial investment.
A VP ProFund may not:
1. Invest more than 25% of its total assets, taken at market value at the time
of each investment, in the securities of issuers in any particular industry
(excluding the U.S. government and its agencies and instrumentalities or
repurchase agreements with respect thereto). With respect to the Money Market
ProFund VP, this restriction does not apply to securities or obligations issued
by U.S. banks.
2. Make investments for the purpose of exercising control or management.
3. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the VP ProFund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies that invest
in real estate or interests therein.
4. Make loans to other persons, except that the acquisition of bonds, debentures
or other corporate debt securities and investment in government obligations,
commercial paper, pass-through instruments, certificates of deposit, bankers'
acceptances and repurchase agreements and purchase and sale contracts and any
similar instruments shall not be deemed to be the making of a loan, and except
further that the VP ProFund may lend its portfolio securities, provided that the
lending of portfolio securities may be made only in accordance with applicable
law and the guidelines set forth in the Prospectus and this Statement of
Additional Information, as they may be amended from time to time.
5. Issue senior securities to the extent such issuance would violate applicable
law.
6. Borrow money, except that the VP ProFund (i) may borrow from banks (as
defined in the Investment Company Act of 1940) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) may, to the extent permitted
by applicable law, borrow up to an additional 5% of its total assets for
temporary purposes, (iii) may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities, (iv) may
purchase securities on margin to the extent permitted by applicable law and (v)
may enter into reverse repurchase agreements. The VP ProFund may not pledge its
assets other than to secure such borrowings or, to the extent permitted by the
VP ProFund's investment policies as set forth in the Prospectus and this
Statement of Additional Information, as they may be amended from time to time,
in connection with hedging transactions, short sales, when-issued and forward
commitment transactions and similar investment strategies.
<PAGE>
7. Underwrite securities of other issuers, except insofar as the VP ProFund
technically may be deemed an underwriter under the Securities Act of 1933, as
amended, in selling portfolio securities.
8. Purchase or sell commodities or contracts on commodities, except to the
extent the VP ProFund may do so in accordance with applicable law and the VP
ProFund's Prospectus and Statement of Additional Information, as they may be
amended from time to time.
DETERMINATION OF NET ASSET VALUE
The net asset values of the shares of the VP ProFunds (except the Europe
ProFund VP, the UltraEurope ProFund VP, and the UltraShort Europe ProFund VP)
are determined as of the close of business of the NYSE (ordinarily, 4:00 p.m.
Eastern Time) on each day the NYSE and the Chicago Mercantile Exchange ("CME")
are open for business (in the case of the Money Market VP ProFund, net asset
value is determined as of the close of business on each day the NYSE is open for
business.)
The net asset values of the shares of the Europe ProFund VP, the
UltraEurope ProFund VP, and the UltraShort Europe ProFund VP are determined as
of one-half hour following the opening of the last of the three exchanges to
open (ordinarily 4:30 AM Eastern Time) on each day the NYSE, London Stock
Exchange, Frankfurt Stock Exchange and Paris Stock Exchange are open for
business (see prospectus for applicable holiday closings). To the extent that
portfolio securities of a VP ProFund are traded in other markets on days when
the VP ProFund's principal trading market(s) is closed, the VP ProFund's net
asset value may be affected on days when investors do not have access to the VP
ProFund to purchase or redeem shares. Although the VP ProFunds expect the same
holiday schedules to be observed in the future, the exchanges may modify their
holiday schedules at any time.
The net asset value of shares of a VP ProFund serves as the basis for the
purchase and redemption price of that class of shares. The net asset value per
share of a VP ProFund is calculated by dividing the market value of the VP
ProFund's assets, less all liabilities attributed to the VP ProFund, by the
number of outstanding shares of the VP ProFund. If market quotations are not
readily available, a security will be valued at fair value by the Trustees of
ProFunds or by the Advisor using methods established or ratified by the Trustees
of ProFunds. The Money Market ProFund VP's net asset value per share will
normally be $1.00. There is no assurance that the $1.00 net asset value will be
maintained.
The securities in the portfolio of a Benchmark VP ProFund, except as
otherwise noted, that are listed or traded on a stock exchange, are valued on
the basis of the last sale on that day or, lacking any sales, at a price that is
the mean between the closing bid and asked prices. Other securities that are
traded on the OTC markets are priced using NASDAQ, which provides information on
bid and asked prices quoted by major dealers in such stocks. Bonds, other than
convertible bonds, are valued using a third-party pricing system. Convertible
bonds are valued using this pricing system only on days when there is no sale
reported. Short-term debt securities are valued using this pricing system only
on days when there is no sale reported. Short-term debt securities are valued at
amortized cost, which approximates market value. When market quotations are not
readily available, securities and other assets are valued at fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the ProFunds' Board of Trustees.
Except for futures contracts held by the Europe ProFund VP, the UltraEurope
ProFund VP, and the UltraShort Europe ProFund VP, futures contracts maintained
by VP ProFunds are valued at their last sale price prior to the valuation time.
Options on futures contracts generally are valued at fair value as determined
with reference to established futures exchanges. Options on securities and
indices purchased by a VP ProFund are valued at their last sale price prior to
the valuation time or at fair value. In the event of a trading halt that closes
the NYSE early, futures contracts will be valued on the basis of settlement
prices on futures exchanges, options on futures will be valued at fair value as
determined with reference to such settlement prices, and options on securities
and indices will be valued at their last sale price prior to the trading halt or
at fair value.
<PAGE>
In the event a trading halt closes a futures exchange for a given day and
that closure occurs prior to the close of the NYSE on that day, futures
positions traded on such exchange and held by a VP ProFund will be valued on the
basis of the day's settlement prices on the futures exchange or fair value.
For the Europe ProFund VP, the UltraEurope ProFund VP, and the UltraShort
Europe ProFund VP, futures contracts are valued at their last sale price as of
one-half hour after the opening of the exchange on which the underlying
securities are traded. Options on futures contracts generally are valued at fair
value as determined with reference to established futures exchanges. Options on
securities and indices purchased by a VP ProFund are valued at their last sale
price as of one-half hour after the opening of the exchange on which the
underlying securities are traded.
AMORTIZED COST VALUATION
The Money Market ProFund VP will utilize the amortized cost method in
valuing its portfolio securities, which does not take into account unrealized
capital gains or losses. This method involves valuing each security held by the
Money Market ProFund VP at its cost at the time of its purchase and thereafter
assuming a constant amortization to maturity of any discount or premium.
Accordingly, immaterial fluctuations in the market value of the securities held
by the Money Market ProFund VP will not be reflected in the Money Market ProFund
VP's net asset value. The Board of Trustees will monitor the valuation of assets
of this method and will make such changes as it deems necessary to assure that
the assets of the Money Market ProFund VP are valued fairly in good faith.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Money Market ProFund VP's use of the amortized cost method of valuing
its securities is permitted by a rule adopted by the Commission. Under this
rule, the Money Market ProFund VP must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 397 days or and invest only in securities determined by
or under the supervision of the Board of Trustees to be of high quality with
minimal credit risks.
Pursuant to the rule, the Board of Trustees also has established procedures
designed to stabilize, to the extent reasonably possible, the investors' price
per share as computed for the purpose of sales and redemptions at $1.00. These
procedures include review of the Money Market ProFund VP's holdings by the Board
of Trustees, at such intervals as it deems appropriate, to determine whether the
value of the Money Market ProFund VP's assets calculated by using available
market quotations or market equivalents deviates from such valuation based on
amortized cost.
The rule also provides that the extent of any deviation between the value
of the Money Market ProFund VP's assets based on available market quotations or
market equivalents and such valuation based on amortized cost must be examined
by the Board of Trustees. In the event the Board of Trustees determines that a
deviation exists that may result in material dilution or other unfair results to
investors or existing shareholders, pursuant to the rule, the Board of Trustees
must cause the Money Market ProFund VP to take such corrective action as the
Board of Trustees regards as necessary and appropriate, including: selling
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends or paying
distributions from capital or capital gains; redeeming shares in kind; or
valuing the Money Market ProFund VP's assets by using available market
quotations.
<PAGE>
Subject to the general supervision by the Trustees, the Advisor is
responsible for decisions to buy and sell securities for each of the VP
ProFunds, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. The Advisor expects that the
VP ProFunds may execute brokerage or other agency transactions through
registered broker-dealers, for a commission, in conformity with the 1940 Act,
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. The Advisor may serve as an investment manager to a number of
clients, including other investment companies. It is the practice of the Advisor
to cause purchase and sale transactions to be allocated among the VP ProFunds
and others whose assets the Advisor manages in such manner as the Advisor deems
equitable. The main factors considered by the Advisor in making such allocations
among the VP ProFunds and other client accounts of the Advisor are the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held, and the opinions of the person(s)
responsible, if any, for managing the portfolios of the VP ProFunds and the
other client accounts.
The policy of each VP ProFund regarding purchases and sales of securities
for a VP ProFund's portfolio is that primary consideration will be given to
obtaining the most favorable prices and efficient executions of transactions.
Consistent with this policy, when securities transactions are effected on a
stock exchange, each VP ProFund's policy is to pay commissions which are
considered fair and reasonable without necessarily determining that the lowest
possible commissions are paid in all circumstances. Each VP ProFund believes
that a requirement always to seek the lowest possible commission cost could
impede effective portfolio management and preclude the VP ProFund and the
Advisor from obtaining a high quality of brokerage and research services. In
seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Advisor relies upon its experience and knowledge regarding
commissions generally charged by various brokers and on its judgment in
evaluating the brokerage and research services received from the broker
effecting the transaction. Such determinations are necessarily subjective and
imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
Purchases and sales of U.S. government securities are normally transacted
through issuers, underwriters or major dealers in U.S. government securities
acting as principals. Similarly, purchases and sales of securities on behalf of
the Money Market ProFund VP usually are principal transactions. Such
transactions are made on a net basis and do not involve payment of brokerage
commissions. The cost of securities purchased from an underwriter usually
includes a commission paid by the issuer to the underwriters; transactions with
dealers normally reflect the spread between bid and asked prices.
In seeking to implement a VP ProFund's policies, the Advisor effects
transactions with those brokers and dealers who the Advisor believes provide the
most favorable prices and are capable of providing efficient executions. If the
Advisor believes such prices and executions are obtainable from more than one
broker or dealer, the Advisor may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the VP ProFund or the Advisor. Such services may include, but are
not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities. If the broker-dealer providing these
additional services is acting as a principal for its own account, no commissions
would be payable. If the broker-dealer is not a principal, a higher commission
may be justified, at the determination of the Advisor, for the additional
services.
The information and services received by the Advisor from brokers and
dealers may be of benefit to the Advisor in the management of accounts of some
of the Advisor's other clients and may not in all cases benefit a VP ProFund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Advisor and thereby reduce the Advisor's expenses,
this information and these services are of indeterminable value and the
management fee paid to the Advisor is not reduced by any amount that may be
attributable to the value of such information and services.
MANAGEMENT OF PROFUNDS
The Board of Trustees is responsible for the general supervision of the
Trust's business. The day-to-day operations of the ProFunds are the
responsibilities of ProFunds' officers. The names and addresses (and ages) of
the Trustees of the Trust, the officers of the Trust, and the officers of the
Advisor, together with information as to their principal business occupations
during the past five years, are set forth below. Fees and expenses for
non-interested Trustees will be paid by the Trust; Trustee expenses for
interested Trustees will be paid by ProFund Advisors LLC.
<PAGE>
TRUSTEES AND OFFICERS OF PROFUNDS
MICHAEL L. SAPIR* (birthdate: May 19, 1958): Trustee, Chairman and Chief
Executive Officer; Chairman and Chief Executive Officer, ProFund Advisors LLC;
Principal, Law Offices of Michael L. Sapir; Rydex Distributors, Inc., President;
Padco Advisors, Inc., Senior Vice President, General Counsel; Jorden Burt
Berenson & Klingensmith, Partner. His address is 7900 Wisconsin Avenue, Suite
300, Bethesda, Maryland 20814.
LOUIS M. MAYBERG* (birthdate: August 9, 1962): Trustee, Secretary; ProFund
Advisors LLC, President; Potomac Securities, Inc., President; National Capital
Companies, LLC, Managing Director. His address is 7900 Wisconsin Avenue, Suite
300, Bethesda, Maryland 20814.
NIMISH BHATT (birthdate: June 6, 1963): Treasurer; BISYS Fund Services,
Vice President, Tax and Financial Services; Evergreen Funds/First Union Bank,
Assistant Vice President; Price Waterhouse LLP, Senior Tax Consultant. His
address is 3435 Stelzer Road, Columbus, Ohio 43219.
MICHAEL C. WACHS (birthdate: October 21, 1961): Trustee; Delancy Investment
Group, Inc., Vice President; First Union National Bank, Vice President/Senior
Underwriter; First Union Capital Markets Corp., Vice President; Vice
President/Senior Credit Officer; Vice President/Team Leader. His address is 1528
Powder Mill Lane, Wynnewood, Pennsylvania 19096.
RUSSELL S. REYNOLDS, III (birthdate: July 21, 1957): Trustee; Directorship,
Inc., Managing Director, Chief Financial Officer and Secretary; Quadcom
Services, Inc., President. His address is 7 Stag Lane, Greenwich, Connecticut
06831.
*This Trustee is deemed to be an "interested person" within the meaning of
Section 2(a)(19) of the 1940 Act, inasmuch as this person is affiliated with the
Advisor, as described herein.
PROFUNDS TRUSTEE COMPENSATION TABLE
The following table reflect fees paid to the Trustees for the year ended
December 31, 1998.
NAME OF
PERSON: POSITION COMPENSATION
Michael L. Sapir, Chairman and Chief Executive Officer None
Louis M. Mayberg, Trustee, President, Secretary None
Russell S. Reynolds, III, Trustee $5,000
Michael C. Wachs, Trustee $3,750
<PAGE>
PROFUND ADVISORS LLC
Under an investment advisory agreement between the VP ProFunds and the
Advisor, dated _____, 1999, each of the Bull, UltraBull, Bear, UltraBear,
UltraOTC, UltraShort OTC, and SmallCap VP ProFunds pays the Advisor a fee at an
annualized rate, based on its average daily net assets, of 0.75%, each of the
Europe ProFund VP, the UltraEurope ProFund VP, and UltraShort Europe ProFund VP
pays the Advisor a fee at an annualized rate, based on its average daily net
assets, of 0.90%, and the Money Market ProFund VP pays the Advisor a fee at an
annualized rate, based on its average daily net assets, of __%. The Advisor
manages the investment and the reinvestment of the assets of each of the VP
ProFunds, in accordance with the investment objectives, policies, and
limitations of each VP ProFund, subject to the general supervision and control
of Trustees and the officers of VP ProFunds. The Advisor bears all costs
associated with providing these advisory services. The Advisor, from its own
resources, including profits from advisory fees received from the VP ProFunds,
provided such fees are legitimate and not excessive, also may make payments to
broker-dealers and other financial institutions for their expenses in connection
with the distribution of VP ProFunds' shares, and otherwise currently pays all
distribution costs for VP ProFunds shares. The Advisor's address is 7900
Wisconsin Avenue, Suite 300, Bethesda, Maryland 20814.
ADMINISTRATION, TRANSFER AGENT, FUND ACCOUNTING AGENT AND CUSTODIAN
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
acts as Administrator to the VP ProFunds. The Administrator provides the VP
ProFunds with all required general administrative services, including, without
limitation, office space, equipment, and personnel; clerical and general back
office services; bookkeeping, internal accounting, and secretarial services; the
determination of net asset values; and the preparation and filing of all
reports, registration statements, proxy statements, and all other materials
required to be filed or furnished by the VP ProFunds under Federal and state
securities laws. The Administrator also maintains the shareholder account
records for the VP ProFunds, distributes dividends and distributions payable by
the VP ProFunds, and produces statements with respect to account activity for
the VP ProFunds and their shareholders. The Administrator pays all fees and
expenses that are directly related to the services provided by the Administrator
to the VP ProFunds; each VP ProFund reimburses the Administrator for all fees
and expenses incurred by the Administrator which are not directly related to the
services the Administrator provides to the VP ProFunds under the service
agreement.
For its services as Administrator, each VP ProFund pays BISYS an annual fee
ranging from 0.15% of average daily net assets of $0 to $300 million to .05% of
average daily net assets of $1 billion and over. BISYS Funds Services, Inc.
("BFSI"), an affiliate of BISYS, acts as transfer agent and fund accounting
agent for the VP ProFunds, for which it receives additional fees. Additionally,
VP ProFunds and BISYS and BFSI have entered into an Omnibus Fee Agreement in
which the amount of compensation due and payable to BISYS shall be the greater
of (i) the aggregate fee amount due and payable for services pursuant to the
Administration, Fund Accounting and Transfer Agency Agreements and (ii) the
minimum relationship fee described as specific dollar amounts payable over a
period of ten calendar quarters ($________). The address for BISYS and BFSI is
3435 Stelzer Road, Suite 1000, Columbus, Ohio 43219.
ProFunds Advisors LLC, pursuant to a separate Management Services
Agreement, performs certain client support and other administrative services on
behalf of the VP ProFunds. These services include, in general, assisting the
Board of Trustees of the Trust in all aspects of the administration and
operation of the Money Market ProFund VP. For these services, each VP ProFund
will pay to ProFunds Advisors LLC a fee at the annual rate of .15% of its
average daily net assets for all Benchmark VP ProFunds and ____% of its average
daily net assets for the Money Market ProFund VP.
UMB Bank, N.A. acts as custodian to the Benchmark VP ProFunds. UMB Bank,
N.A.'s address is 928 Grand Avenue, Kansas City, Missouri.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP serves as independent auditors to the VP
ProFunds. PricewaterhouseCoopers LLP provides audit services, tax return
preparation and assistance and consultation in connection with certain SEC
filings. PricewaterhouseCoopers LLP is located at 100 East Broad Street,
Columbus, Ohio 43215.
LEGAL COUNSEL
Dechert Price & Rhoads serves as counsel to the VP ProFunds. The firm's
address is 1775 Eye Street, N.W., Washington, DC 20006-2401.
<PAGE>
DISTRIBUTOR
Concord Financial Group, Inc. will serve as the distributor and principal
underwriter in all fifty states and the District of Columbia. Concord Financial
Group, Inc. receives no compensation from the VP ProFunds for serving as
distributor. Concord Financial Group, Inc.'s address is 3435 Stelzer Road,
Columbus, Ohio 43219.
INVESTOR SERVICES PLAN
Pursuant to an Investor Services Plan, service providers determined by
Concord Financial Group, Inc. ("Service Providers") provide investor services to
owners of insurance contracts who, indirectly through insurance company separate
accounts, invest in shares of the VP ProFunds ("Investors"). Investor services
include some or all of the following: printing prospectuses and statements of
additional information and mailing them to Investors or to financial advisors
who allocate funds for investment in shares of the VP ProFunds on behalf of
Investors ("Financial Advisors"); forwarding communications from the VP ProFunds
to Investors or Financial Advisors, including proxy solicitation material and
annual and semiannual reports; assistance in facilitating and processing
transactions in shares of the VP ProFunds in connection with strategic or
tactical asset allocation investing; assistance in providing the VP ProFunds
with advance information on strategic and tactical asset allocation trends and
anticipated investment activity in and among the VP ProFunds; assisting
Investors who wish or need to change Financial Advisors; and providing support
services to Financial Advisors, including, but not limited to: (a) providing
Financial Advisors with updates on policies and procedures; (b) answering
questions of Financial Advisors regarding the VP ProFunds' portfolio
investments; (c) providing performance information to Financial Advisors
regarding the VP ProFunds; (d) providing information to Financial Advisors
regarding the VP ProFunds investment objectives; (e) providing investor account
information to Financial Advisors; (f) redeeming VP ProFund shares, if
necessary, for the payment of Financial Advisor fees.
For these services, the Trust compensates Concord Financial Group, Inc. at
an annual rate not exceeding .25% of the VP ProFunds' average daily net assets.
Concord Financial Group, Inc. is authorized to use its fee to compensate
Services Providers for providing Investor services. The fee will be paid from
the assets of the VP ProFunds and will be calculated and accrued daily and paid
within fifteen (15) days of the end of each month.
The Investor Services Plan and related agreements will remain in effect for
a period of one year and will continue in effect thereafter only if such
continuance is specifically approved annually by a vote of the Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Investor Services Plan or the related agreements. All material amendments of the
Plan must also be approved by the Trustees in the manner described above. The
Plan may be terminated at any time by a majority of the Trustees as described
above or by vote of a majority of the outstanding shares of the affected VP
ProFund. The agreements may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees as described above or by a vote
of a majority of the outstanding shares of the affected VP ProFund on not more
than 60 days' written notice to any other party to the agreements. The
agreements shall terminate automatically if assigned. The Trustees have
determined that, in their judgment, there is a reasonable likelihood that the
Plan will benefit the VP ProFunds and Investors. In the Trustees' quarterly
review of the Plan and agreements, they will consider their continued
appropriateness and the level of compensation provided therein.
The intent of the Plan and agreements is to procure quality shareholder
services on behalf of Investors; in adopting the Plan and agreements, the
Trustees considered the fact that such services may have the effect of enhancing
distribution of VP ProFund shares and growth of the VP ProFunds. In light of
this, the VP ProFunds intend to observe the procedural requirements of Rule
12b-1 under the 1940 Act on considering the continued appropriateness of the
Plan and agreements.
<PAGE>
COSTS AND EXPENSES
Each VP ProFund bears all expenses of its operations other than those
assumed by the Advisor or the Administrator. VP ProFund expenses include: the
management fee; the servicing fee (including administrative, transfer agent, and
shareholder servicing fees); custodian and accounting fees and expenses, legal
and auditing fees; securities valuation expenses; fidelity bonds and other
insurance premiums; expenses of preparing and printing prospectuses,
confirmations, proxy statements, and shareholder reports and notices;
registration fees and expenses; proxy and annual meeting expenses, if any; all
Federal, state, and local taxes (including, without limitation, stamp, excise,
income, and franchise taxes); organizational costs; and non-interested Trustees'
fees and expenses.
ORGANIZATION AND DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
ProFunds is a registered open-end investment company under the 1940 Act.
The Trust was organized as a Delaware business trust on April 17, 1997, and has
authorized capital of unlimited shares of beneficial interest of no par value
which may be issued in more than one class or series. Currently, the Trust
consists of twenty separately managed series, eleven of which are described
herein. Other separate series may be added in the future.
All shares of the VP ProFunds are freely transferable. The Trust shares do
not have preemptive rights or cumulative voting rights, and none of the shares
have any preference to conversion, exchange, dividends, retirements,
liquidation, redemption, or any other feature. Trust shares have equal voting
rights, except that, in a matter affecting only a particular series or class of
shares, only shares of that series or class may be entitled to vote on the
matter.
Under Delaware law, the Trust is not required to hold an annual
shareholders meeting if the 1940 Act does not require such a meeting. Generally,
there will not be annual meetings of Trust shareholders. Trust shareholders may
remove Trustees from office by votes cast at a meeting of Trust shareholders or
by written consent of such Trustees. If requested by shareholders of at least
10% of the outstanding shares of the Trust, the Trust will call a meeting of
shareholders for the purpose of voting upon the question of removal of a Trustee
of the Trust and will assist in communications with other Trust shareholders.
The Declaration of Trust of the Trust disclaims liability of the
shareholders or the officers of the Trust for acts or obligations of the Trust
which are binding only on the assets and property of the Trust. The Declaration
of Trust provides for indemnification of the Trust's property for all loss and
expense of any shareholder held personally liable for the obligations of the
Trust. The risk of a Trust shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would not be able to meet the Trust's obligations. This risk should be
considered remote.
TAXATION
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the VP ProFunds and the purchase, ownership, and disposition of VP
ProFund shares. This discussion does not purport to be complete or to deal with
all aspects of federal income taxation that may be relevant to shareholders in
light of their particular circumstances, nor to certain types of shareholders
subject to special treatment under the federal income tax laws (for example,
banks and life insurance companies). This discussion is based upon present
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder, and judicial and administrative ruling
authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of VP ProFund shares, as well as the tax consequences arising under
the laws of any state, foreign country, or other taxing jurisdiction.
<PAGE>
Each of the VP ProFunds intends to qualify and elect to be treated each
year as a regulated investment company (a "RIC") under Subchapter M of the Code.
A RIC generally is not subject to federal income tax on income and gains
distributed in a timely manner to its shareholders. Accordingly, each VP ProFund
generally must, among other things, (a) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with respect to certain
securities loans, and gains from the sale or other disposition of stock,
securities or foreign currencies, or other income derived with respect to its
business of investing in such stock, securities or currencies; and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the VP ProFund's assets is represented by cash, U.S. government
securities, the securities of other regulated investment companies and other
securities, with such other securities limited, in respect of any one issuer, to
an amount not greater than 5% of the value of the VP ProFund's total assets and
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. government securities and the securities of other
regulated investment companies).
As a RIC, a VP ProFund generally will not be subject to U.S. federal income
tax on income and gains that it distributes to shareholders, if at least 90% of
the VP ProFund's investment company taxable income (which includes, among other
items, dividends, interest and the excess of any net short-term capital gains
over net long-term capital losses) for the taxable year is distributed. Each VP
ProFund intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the VP ProFund level. To avoid the tax, each VP ProFund must distribute during
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for a one-year period generally
ending on October 31 of the calendar year, and (3) all ordinary income and
capital gains for previous years that were not distributed during such years. To
avoid application of the excise tax, the VP ProFunds intend to make
distributions in accordance with the calendar year distribution requirement. A
distribution will be treated as paid on December 31 of a calendar year if it is
declared by the VP ProFund in October, November or December of that year with a
record date in such a month and paid by the VP ProFund during January of the
following year. Such distributions will be taxable to shareholders in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received.
MARKET DISCOUNT
If VP ProFund purchases a debt security at a price lower than the stated
redemption price of such debt security, the excess of the stated redemption
price over the purchase price is "market discount". If the amount of market
discount is more than a de minimis amount, a portion of such market discount
must be included as ordinary income (not capital gain) by the VP ProFund in each
taxable year in which the VP ProFund owns an interest in such debt security and
receives a principal payment on it. In particular, the VP ProFund will be
required to allocate that principal payment first to the portion of the market
discount on the debt security that has accrued but has not previously been
includable in income. In general, the amount of market discount that must be
included for each period is equal to the lesser of (i) the amount of market
discount accruing during such period (plus any accrued market discount for prior
periods not previously taken into account) or (ii) the amount of the principal
payment with respect to such period. Generally, market discount accrues on a
daily basis for each day the debt security is held by a VP ProFund at a constant
rate over the time remaining to the debt security's maturity or, at the election
of the VP ProFund, at a constant yield to maturity which takes into account the
semi-annual compounding of interest. Gain realized on the disposition of a
market discount obligation must be recognized as ordinary interest income (not
capital gain) to the extent of the "accrued market discount."
ORIGINAL ISSUE DISCOUNT
Certain debt securities acquired by the VP ProFunds may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by a VP ProFund, original issue discount that accrues on a
debt security in a given year generally is treated for federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements applicable to regulated investment companies.
<PAGE>
Some debt securities may be purchased by the VP ProFunds at a discount that
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes
(see above).
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
Any regulated futures contracts and certain options (namely, nonequity
options and dealer equity options) in which a VP ProFund may invest may be
"section 1256 contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains or losses;
however foreign currency gains or losses arising from certain section 1256
contracts are ordinary in character. Also, section 1256 contracts held by a VP
ProFund at the end of each taxable year (and on certain other dates prescribed
in the Code) are "marked to market" with the result that unrealized gains or
losses are treated as though they were realized.
Transactions in options, futures and forward contracts undertaken by the VP
ProFunds may result in "straddles" for federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by a VP ProFund,
and losses realized by the VP ProFund on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the taxable income for the taxable year in which the losses are
realized. In addition, certain carrying charges (including interest expense)
associated with positions in a straddle may be required to be capitalized rather
than deducted currently. Certain elections that a VP ProFund may make with
respect to its straddle positions may also affect the amount, character and
timing of the recognition of gains or losses from the affected positions.
Because only a few regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the VP ProFunds are not
entirely clear. The straddle rules may increase the amount of short-term capital
gain realized by a VP ProFund, which is taxed as ordinary income when
distributed to shareholders. Because application of the straddles rules may
affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle positions, the amount
which must be distributed to shareholders as ordinary income or long-term
capital gain may be increased or decreased substantially as compared to a fund
that did not engage in such transactions.
CONSTRUCTIVE SALES
Recently enacted rules may affect the timing and character of gain if a VP
ProFund engages in transactions that reduce or eliminate its risk of loss with
respect to appreciated financial positions. If the VP ProFund enters into
certain transactions in property while holding substantially identical property,
the VP ProFund would be treated as if it had sold and immediately repurchased
the property and would be taxed on any gain (but not loss) from the constructive
sale. The character of gain from a constructive sale would depend upon the VP
ProFund's holding period in the property. Loss from a constructive sale would be
recognized when the property was subsequently disposed of, and its character
would depend on the VP ProFund's holding period and the application of various
loss deferral provisions of the Code.
PASSIVE FOREIGN INVESTMENT COMPANIES
The VP ProFunds may invest in shares of foreign corporations that may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half of
its assets constitute investment-type assets, or 75% or more of its gross income
is investment-type income. If a VP ProFund receives a so-called "excess
distribution" with respect to PFIC stock, the VP ProFund itself may be subject
to a tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by the VP ProFund to shareholders. In
general, under the PFIC rules, an excess distribution is treated as having been
realized ratably over the period during which the VP ProFund held the PFIC
shares. Each VP ProFund will itself be subject to tax on the portion, if any, of
an excess distribution that is so allocated to prior VP ProFund taxable years
and an interest factor will be added to the tax, as if the tax had been payable
in such prior taxable years. Certain distributions from a PFIC as well as gain
from the sale of PFIC shares are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might have been
classified as capital gains.
<PAGE>
The VP ProFunds may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, a VP ProFund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions were received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, another election would
involve marking to market the VP ProFund's PFIC shares at the end of each
taxable year, with the result that unrealized gains would be treated as though
they were realized and reported as ordinary income. Any mark-to-market losses
and any loss from an actual disposition of VP ProFund shares would be deductible
as ordinary losses to the extent of any net mark-to-market gains included in
income in prior years.
BACKUP WITHHOLDING
Each VP ProFund generally will be required to withhold federal income tax
at a rate of 31% ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to shareholders if (1) the shareholder
fails to furnish the VP ProFund with the shareholder's correct taxpayer
identification number or social security number, (2) the IRS notifies the
shareholder or the VP ProFund that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he or she is not subject to backup withholding. Any amounts withheld may be
credited against the shareholder's federal income tax liability.
OTHER TAXATION
Distributions may be subject to additional state, local and foreign taxes,
depending on each shareholder's particular situation. Non-U.S. shareholders and
certain types of U.S. shareholders subject to special treatment under the U.S.
federal income tax laws (e.g. banks and life insurance companies) may be subject
to U.S. tax rules that differ significantly from those summarized above.
EQUALIZATION ACCOUNTING
Each VP ProFund distributes its net investment income and capital gains to
shareholders as dividends annually to the extent required to qualify as a
regulated investment company under the Code and generally to avoid federal
income or excise tax. Under current law, each VP ProFund may on its tax return
treat as a distribution of investment company taxable income and net capital
gain the portion of redemption proceeds paid to redeeming shareholders that
represents the redeeming shareholders' portion of the VP ProFund's undistributed
investment company taxable income and net capital gain. This practice, which
involves the use of equalization accounting, will have the effect of reducing
the amount of income and gains that the VP ProFund is required to distribute as
dividends to shareholders in order for the VP ProFund to avoid federal income
tax and excise tax. This practice may also reduce the amount of distributions
required to be made to nonredeeming shareholders and the amount of any
undistributed income will be reflected in the value of the VP ProFund's shares;
the total return on a shareholder's investment will not be reduced as a result
of the VP ProFund's distribution policy. Investors who purchase shares shortly
before the record date of a distribution will pay the full price for the shares
and then receive some portion of the price back as a taxable distribution.
<PAGE>
PERFORMANCE INFORMATION
TOTAL RETURN CALCULATIONS
From time to time, each of the VP ProFunds may advertise the total return
of the VP ProFund for prior periods. Any such advertisement would include at
least average annual total return quotations for one, five, and ten-year
periods, or for the life of the VP ProFund. Other total return quotations,
aggregate or average, over other time periods for the VP ProFund also may be
included.
The total return of a VP ProFund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the VP
ProFund from the beginning to the end of the period. Total return is calculated
by subtracting the value of the initial investment from the ending value and
showing the difference as a percentage of the initial investment; this
calculation assumes that the initial investment is made at the current net asset
value and that all income dividends or capital gains distributions during the
period are reinvested in shares of the VP ProFund at net asset value. Total
return is based on historical earnings and asset value fluctuations and is not
intended to indicate future performance. No adjustments are made to reflect any
income taxes payable by shareholders on dividends and distributions paid by the
VP ProFund.
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equal the initial amount invested to the ending redeemable value.
YIELD CALCULATIONS
From time to time, the Money Market ProFund VP advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "yield" of the Money Market
ProFund VP refers to the income generated by an investment in the Money Market
ProFund VP over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly, but, when annualized, the income
earned by an investment in the Money Market ProFund VP is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.
Since yield fluctuates, yield data cannot necessarily be used to compare an
investment in the Money Market ProFund VP's shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders of the Money
Market ProFund VP should remember that yield generally is a function of the kind
and quality of the instrument held in portfolio, portfolio maturity, operating
expenses, and market conditions.
<PAGE>
COMPARISONS OF INVESTMENT PERFORMANCE
In conjunction with performance reports, promotional literature, and/or
analyses of shareholder service for a VP ProFund, comparisons of the performance
information of the VP ProFund for a given period to the performance of
recognized, unmanaged indexes for the same period may be made. Such indexes
include, but are not limited to, ones provided by Dow Jones & Company, Standard
& Poor's Corporation, Lipper Analytical Services, Inc., Shearson Lehman
Brothers, the National Association of Securities Dealers, Inc., The Frank
Russell Company, Value Line Investment Survey, the American Stock Exchange, the
Philadelphia Stock Exchange, Morgan Stanley Capital International, Wilshire
Associates, the Financial Times-Stock Exchange, and the Nikkei Stock Average and
Deutcher Aktienindex, all of which are unmanaged market indicators. Such
comparisons can be a useful measure of the quality of a VP ProFund's investment
performance. In particular, performance information for the Bull ProFund VP, the
UltraBull ProFund VP, the Bear ProFund VP and the UltraBear ProFund VP may be
compared to various unmanaged indexes, including, but not limited to, the S&P
500 Index or the Dow Jones Industrial Average; performance information for the
UltraOTC ProFund VP and the UltraShort OTC ProFund VP may be compared to various
unmanaged indexes, including, but not limited to its current benchmark, the
NASDAQ 100 Index; and Performance information for the SmallCap ProFund VP may be
compared to various unmanaged indexes, including, but not limited to, its
current benchmark, the Russell 2000(R) Index.
In addition, rankings, ratings, and comparisons of investment performance
and/or assessments of the quality of shareholder service appearing in
publications such as Money, Forbes, Kiplinger's Magazine, Personal Investor,
Morningstar, Inc., and similar sources which utilize information compiled (i)
internally, (ii) by Lipper Analytical Services, Inc. ("Lipper"), or (iii) by
other recognized analytical services, may be used in sales literature. The total
return of each VP ProFund also may be compared to the performances of broad
groups of comparable mutual funds with similar investment goals, as such
performance is tracked and published by such independent organizations as Lipper
and CDA Investment Technologies, Inc., among others. The Lipper ranking and
comparison, which may be used by the VP ProFunds in performance reports, will be
drawn from the "Capital Appreciation VP ProFunds" grouping for the Bull ProFund
VP, the UltraBull ProFund VP, the Bear ProFund VP and the UltraBear ProFund VP
and from the "Small Company Growth VP ProFunds" grouping for the UltraOTC
ProFund VP and the SmallCap ProFund VP. In addition, the broad-based Lipper
groupings may be used for comparison to any of the VP ProFunds. Further
information about the performance of the VP ProFunds will be contained in the VP
ProFunds' annual reports to shareholders, which may be obtained without charge
by writing to the VP ProFunds at the address or telephoning the VP ProFunds at
the telephone number set forth on the cover page of this SAI. However, because
the VP ProFunds have no history of investment operations, they have not yet
prepared any shareholder reports.
RATING SERVICES
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group represent their opinions as to the quality of the securities that
they undertake to rate. It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of quality. Although
these ratings are an initial criterion for selection of portfolio investments,
the Advisor also makes its own evaluation of these securities, subject to review
by the Board of Trustees. After purchase by the Money Market ProFund VP, an
obligation may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Money Market ProFund VP. Neither event would
require the Money Market ProFund VP to eliminate the obligation from its
portfolio, but the Advisor will consider such an event in its determination of
whether the Money Market ProFund VP should continue to hold the obligation. A
description of the ratings used herein and in the Prospectus is set forth in the
Appendix to this SAI.
Other Information
The ProFunds are not sponsored, endorsed, sold or promoted by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no
representation or warranty, express or implied, to the owners of shares of the
VP ProFunds or any member of the public regarding the advisability of investing
in securities generally or in the VP ProFunds particularly or the ability of the
S&P 500 Index to track general stock market performance. S&P's only relationship
to the Licensee is the licensing of certain trademarks and trade names of S&P
and of the S&P 500 Index which is determined, composed and calculated by S&P
without regard to the Licensee or the VP ProFunds. S&P has no obligation to take
the needs of the Licensee or the owners of shares of the VP ProFunds into
consideration in determining, composing or calculating the S&P 500 Index. S&P is
not responsible for and has not participated in the determination or calculation
of the equation by which the shares of the VP ProFunds are to be converted into
cash. S&P has no obligation or liability in connection with the administration,
marketing or trading of the VP ProFunds.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF SHARES OF THE VP
PROFUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY
DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
<PAGE>
FINANCIAL STATEMENTS
Since the VP ProFunds had not commenced operation as of the date of this
Statement of Additional Information, there are no financial statements to
include in the Statement of Additional Information.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS, OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR PRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY PROFUNDS. THIS STATEMENT OF ADDITIONAL INFORMATION
DOES NOT CONSTITUTE AN OFFERING BY PROFUNDS IN ANY JURISDICTION IN WHICH SUCH AN
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
DESCRIPTION OF S&P'S CORPORATE RATINGS:
AAA-Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issuers only in small degree.
S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major categories,
except in the AAA rating category.
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
Aaa-Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection 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 risks appear somewhat larger than in Aaa securities.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF FITCH INVESTORS SERVICE'S CORPORATE BOND RATINGS:
AAA-Securities of this rating are regarded as strictly high-grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions, and
liable to slight market fluctuation other than through changes in the money
rate. The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong companies, and are
most numerous in the railway and public utility fields, though some industrial
obligations have this rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Other features may enter in, such as a wide margin
of protection through collateral security or direct lien on specific property as
in the case of high class equipment certificates or bonds that are first
mortgages on valuable real estate. Sinking funds or voluntary reduction of the
debt by call or purchase are often factors, while guarantee or assumption by
parties other than the original debtor may also influence the rating.
AA-Securities in this group are of safety virtually beyond question, and as
a class are readily salable while many are highly active. Their merits are not
greatly unlike those of the AAA class, but a security so rated may be of junior
though strong lien in many cases directly following an AAA security or the
margin of safety is less strikingly broad. The issue may be the obligation of a
small company, strongly secure but influenced as the ratings by the lesser
financial power of the enterprise and more local type of market.
<PAGE>
DESCRIPTION OF DUFF & PHELPS' CORPORATE BOND RATINGS:
AAA-Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury Funds.
AA+, AA-High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
DESCRIPTION OF S&P'S MUNICIPAL BOND RATINGS:
AAA-Prime-These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.
General Obligation Bonds-In a period of economic stress, the issuers will
suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.
Revenue Bonds-Debt service coverage has been, and is expected to remain,
substantial; stability of the pledged revenues is also exceptionally strong due
to the competitive position of the municipal enterprise or to the nature of the
revenues. Basic security provisions (including rate covenant, earnings test for
issuance of additional bonds and debt service reserve requirements) are
rigorous. There is evidence of superior management.
AA-High Grade-The investment characteristics of bonds in this group are
only slightly less marked than those of the prime quality issues. Bonds rated AA
have the second strongest capacity for payment of debt service.
S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major rating
categories, except in the AAA rating category.
DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." 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, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa-Bonds which are rated Aa judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
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 risks appear somewhat larger than in Aaa securities.
Moody's may apply the numerical modifier in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
within its generic rating classification possesses the strongest investment
attributes.
DESCRIPTION OF S&P'S MUNICIPAL NOTE RATINGS:
Municipal notes with maturities of three years or less are usually given
note ratings (designated SP-1 or SP-2) to distinguish more clearly the credit
quality of notes as compared to bonds. Notes rated SP-1 have a very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given the designation of SP-1+.
Notes rated SP-2 have a satisfactory capacity to pay principal and interest.
<PAGE>
DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS:
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG-1/VMIG-1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both. Loans the designation MIG-2/VMIG-2 are of high quality,
with ample margins of protection, although not as large as the preceding group.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to posses overwhelming safety characteristics are denoted A-1+.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations.
DESCRIPTION OF FITCH INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS:
F-1+-Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1-Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issue.
DESCRIPTION OF DUFF & PHELPS' COMMERCIAL PAPER RATINGS:
Duff 1+-Highest certainly of timely payment. Short term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk free U.S. Treasury short
term obligations.
Duff 1-Very high certainty of timely +.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or relating supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations.
DESCRIPTION OF FITCH INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS:
F-1+-Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business economic or financial conditions may increase investment
risk albeit not very significantly.
<PAGE>
A-Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
BBB-Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.
BB-Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest exists, but
is susceptible over time to adverse changes in business, economic or financial
conditions.
B-Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse changes in
business, economic or financial conditions.
CCC-Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on favorable
business, economic or financial conditions.
CC-Obligations which are highly speculative or which have a high risk of
default.
C-Obligations which are currently in default.
Notes: "+" or "-".
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations.
DESCRIPTION OF FITCH INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS:
F-1+-Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely business,
economic or financial conditions.
A3-Obligations supported by an adequate capacity for timely repayment. Such
capacity is more susceptible to adverse changes in business, economic or
financial conditions than for obligations in higher categories.
B-Obligations for which the capacity for timely repayment is susceptible to
adverse changes in business, economic or financial conditions.
C-Obligations for which there is an inadequate capacity to ensure timely
repayment.
D-Obligations which have a high risk of default or which are currently in
default
DESCRIPTION OF THOMSON BANK WATCH SHORT-TERM RATINGS:
TBW-1-The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis.
TBW-2-The second-highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as of issues rated 'TBW-1'.
<PAGE>
TWB-3-The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.
TWB-4-The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.
DESCRIPTION OF THOMSON BANKWATCH LONG-TERM RATINGS:
AAA-The highest category; indicates that the ability to repay principal and
interest on a timely basis is extremely high.
AA-The second -highest category; indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highs category.
A-The third-highest category; indicates the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
BBB-The lowest investment-grade category; indicates an acceptable capacity
to repay principal and interest. Issues rated "BBB" are, however, more
vulnerable to adverse developments (both internal and external) than obligations
with higher ratings.
NON-INVESTMENT GRADE (ISSUES REGARDED AS HAVING SPECULATIVE CHARACTERISTICS IN
THE LIKELIHOOD OF TIMELY REPAYMENT OF PRINCIPAL AND INTEREST.)
BB-While not investment grade, the "BB" rating suggests that the likelihood
of default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations.
B-Issues rated "B" show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse development
could well negatively affect the payment of interest and principal on a timely
basis.
CCC-Issues rate "CCC" clearly have a high likelihood of default, with
little capacity to address further adverse changes in financial circumstances.
CC-"CC" is applied to issues that are subordinate to other obligations
rated "CCC" and are afforded less protection in the event of bankruptcy or
reorganization.
D-Default
These long-term debt ratings can also be applied to local currency debt. In
such cases the ratings defined above will be preceded by the designation "local
currency".
RATINGS IN THE LONG-TERM DEBT CATEGORIES MAY INCLUDE A PLUS (+) OR MINUS (-)
DESIGNATION, WHICH INDICATES WHERE WITHIN THE RESPECTIVE CATEGORY THE ISSUE IS
PLACED.
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a)(1) Certificate of Trust of ProFunds (the "Registrant")(1)
(a)(2) First Amended Declaration of Trust of the Registrant
(2)
(a)(3) Form of Establishment and Designation of Series dated
February 18, 1998
(a)(4) Form of Establishment and Designation of Series dated
February 23, 1999
(a)(5) Form of Establishment and Designation of Series for
VP ProFunds*
(b) By-laws of Registrant (2)
(c) Not Applicable
(d)(1) Form of Investment Advisory Agreement (2)
(d)(2) Investment Advisory Agreement for Cash Management
Portfolio incorporated by reference to Bankers Trust
Company's Registration Statement on Form N-1A ('40 Act
file no. 811-06073) filed with the Commission on April
24, 1996.
(d)(3) Amendment to Investment Advisory Agreement between
ProFunds and ProFund Advisors LLC (3)
(d)(4) Investment Advisory Agreement for UltraEurope and
UltraShort Europe ProFunds (4)
(d)(5) Form of Investment Advisory Agreement for the VP
ProFunds*
(e) Form of Distribution Agreement and Dealer Agreement
(2)
(f) Not Applicable
(g)(1) Form of Custody Agreement with UMB Bank, N.A. (2)
(g)(2) Amendment to Custody Agreement with UMB Bank, N.A. (3)
(g)(3) Amendment to Custody Agreement with UMB Bank, N.A.
with respect to UltraEurope and UltraShort Europe
ProFunds*
(g)(4) Amendment to Custody Agreement with UMB Bank, N.A.
with respect to the VP ProFunds*
(h)(1) Form of Transfer Agency Agreement (2)
(h)(2) Form of Administration Agreement (2)
(h)(3) Form of Administration and Services Agreement
incorporated by reference to Bankers Trust Company's
Registration Statement on Form N-1A ('40 Act file no.
811-06073)filed with the Commission on April 24, 1996.
(h)(4) Form of Fund Accounting Agreement (2)
(h)(5)(i) Form of Management Services Agreement (2)
(h)(5)(ii) Amendment to Management Services Agreement with
respect to the UltraShort OTC ProFund (3)
(h)(5)(iii) Form of Amended and Restated Management Services
Agreement (4)
(h)(6) Form of Shareholder Services Agreement related to
Adviser Shares (2)
(h)(7) Form of Investor Services Plan related to VP ProFunds*
(h)(8) Form of Omnibus Fee Agreement with BISYS Fund Services
LP (2)
(h)(9) Form of Participation Agreement*
(i) Opinion and Consent of Counsel to the Registrant (2)
(j) Consent of Independent Auditors
(k) None
(l) Purchase Agreement dated October 10, 1997 between the
Registrant and National Capital Group, Inc. (2)
(m) Not Applicable
(n) Financial Data Schedules
(o)(1) Multiple Class Plan (2)
(o)(2) Amended and Restated Multi-Class Plan (4)
(p)(1) Power of Attorney of Cash Management Portfolio
incorporated by reference to Bankers Trust Company's
Registration Statement on Form N-1A filed with the
Commission on March 19, 1997.
(p)(2) Power of Attorney of Charles A. Rizzo
(p)(3) Power of Attorney of ProFunds (4)
(1) Filed with initial registration statement.
(2) Previously filed on October 29, 1997 as part of Pre-Effective Amendment No.
3 and incorporated by reference herein.
(3) Previously filed on February 24, 1998 as part of Post-Effective Amendment
No. 1 and incorporated by reference herein.
(4) Previously filed on March 2, 1999 as part of Post-Effective Amendment No.4
and incorporated by reference herein.
* To be filed by Post-Effective Amendment.
ITEM 24. Persons Controlled By or Under Common Control With Registrant.
None.
ITEM 25. Indemnification
The Registrant is organized as a Delaware business trust and is
operated pursuant to a Declaration of Trust, dated as of April 17, 1997
(the "Declaration of Trust"), that permits the Registrant to indemnify
its trustees and officers under certain circumstances. Such
indemnification, however, is subject to the limitations imposed by the
Securities Act of 1933, as amended, and the Investment Company Act of
1940, as amended. The Declaration of Trust of the Registrant provides
that officers and trustees of the Trust shall be indemnified by the
Trust against liabilities and expenses of defense in proceedings
against them by reason of the fact that they each serve as an officer
or trustee of the Trust or as an officer or trustee of another entity
at the request of the entity. This indemnification is subject to the
following conditions:
(a) no trustee or officer of the Trust is indemnified against any
liability to the Trust or its security holders which was the
result of any willful misconduct, bad faith, gross negligence,
or reckless disregard of his duties;
(b) officers and trustees of the Trust are indemnified only for
actions taken in good faith which the officers and trustees
believed were in or not opposed to the best interests of the
Trust; and
(c) expenses of any suit or proceeding will be paid in advance
only if the persons who will benefit by such advance undertake
to repay the expenses unless it subsequently is determined
that such persons are entitled to indemnification.
The Declaration of Trust of the Registrant provides that if
indemnification is not ordered by a court, indemnification may be
authorized upon determination by shareholders, or by a majority vote of
a quorum of the trustees who were not parties to the proceedings or, if
this quorum is not obtainable, if directed by a quorum of disinterested
trustees, or by independent legal counsel in a written opinion, that
the persons to be indemnified have met the applicable standard.
ITEM 26. Business and Other Connections of Investment Advisor
ProFund Advisors LLC (the "Advisor"), a limited liability company
formed under the laws of the State of Maryland on May 8, 1997.
Information relating to the business and other connections of Bankers
Trust which serves as investment adviser to the Cash Management
Portfolio and each director, officer or partner of Bankers Trust are
hereby incorporated by reference to disclosures in Item 28 of BT
Institutional funds (accession # 0000862157-97-00007) is filed on March
17, 1997 with the Securities and Exchange Commission.
<PAGE>
ITEM 27. Principal Underwriter
Concord Financial Group, Inc., 3435 Stelzer Road, Columbus, Ohio 43219 acts
solely as interim distributor for the Registrant. The officers of Concord
Financial Group, Inc., all of whose principal business address is set forth
above, are:
<TABLE>
<S> <C> <C>
Name Principal Position and Offices Position and Offices
with CFG with Registrant
Lynn J. Magnum Chairman none
Dennis Sheehan Sr. Vice President none
Michael D. Burns Vice President/ none
Chief Compliance Officer
Steven Mintos Executive Vice none
President/Chief Operating Officer
Dale Smith Vice President/ none
Chief Financial Officer
Kevin Dell Vice President none
General Counsel/Secretary
</TABLE>
ITEM 28. Location of Accounts and Records
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, will be kept by the
Registrant at:
(1) ProFund Advisors LLC, 7900 Wisconsin Avenue, Suite 300,
Bethesda, Maryland (records relating to its functions as
investment adviser and manager to the portfolios other than
the Money Market ProFund);
(2) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio
(records relating to the administrator, fund accountant and
transfer agent).
(3) UMB Bank, N.A., 928 Grand Avenue, Kansas City, Missouri for
each ProFund (records relating to its function as Custodian)
ITEM 29. Management Services
None.
ITEM 30. Undertakings
(a) Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a
Trustee or Trustees when requested to do so by the holders of
at least 10% of the Registrant's outstanding shares and, in
connection with such meeting, to comply with the shareholder
communications provisions of Section 16(c) of the Investment
Company Act of 1940.
(b) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
Annual Report to shareholders, upon request and without
charge.
<PAGE>
SIGNATURES
PROFUNDS
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in Washington, D.C. on August 4, 1999.
PROFUNDS
/S/ MICHAEL L. SAPIR*
Michael L. Sapir, Chairman
and Chief Executive Officer
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 date indicated.
Signatures Title Date
/s/ MICHAEL L. SAPIR* Trustee, President August 4, 1999
Michael L. Sapir
/s/ LOUIS MAYBERG* Trustee, Secretary August 4, 1999
Louis Mayberg
/s/ RUSSELL S. REYNOLDS* Trustee August 4, 1999
Russell S. Reynolds
/s/ MICHAEL WACHS* Trustee August 4, 1999
Michael Wachs
/s/ NIMISH BHATT* Treasurer August 4, 1999
Nimish Bhatt
*By: /s/ KEITH T. ROBINSON
Keith T. Robinson
as Attorney-in-Fact
Date: August 4, 1999
<PAGE>
SIGNATURES
CASH MANAGEMENT PORTFOLIO
CASH MANAGEMENT PORTFOLIO has duly caused this Post-Effective Amendment No.
6 to its Registration Statement on Form N-1A of ProFunds to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Baltimore
and the State of Maryland on the 3rd day of August, 1999.
CASH MANAGEMENT PORTFOLIO
/s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
This Post-Effective Amendment No. 6 to the Registration Statement on Form
N-1A of ProFunds has been signed below by the following persons in the
capacities indicated with respect to Cash Management Portfolio on August 3,
1999.
Signatures Title
/s/ John Y. Keffer* President and Chief Executive Officer
- ---------------------------------------
John Y. Keffer
/s/ Charles A. Rizzo* Treasurer and Principal
- --------------------------------------- Financial and Accounting Officer
Charles A. Rizzo
/s/ Charles P. Biggar* Trustee
- --------------------------------------
Charles P. Biggar
/s/ S. Leland Dill* Trustee
- --------------------------------------
S. Leland Dill
/s/ Philip Saunders, Jr.* Trustee
- --------------------------------------
Philip Saunders, Jr.
*By: /s/ DANIEL O. HIRSCH
Daniel O. Hirsch, Secretary of Cash Management Portfolio
as Attorney-in-Fact
Date: August 3, 1999
<PAGE>
Exhibit Index
Exhibit Description
(a)(3) Form of Establishment and Designation of Series dated
February 18, 1998
(a)(4) Form of Establishment and Designation of Series dated
February 23, 1999
(j) Consent of Independent Auditors
(n) Financial Data Schedules
(p)(2) Power of Attorney of Charles A. Rizzo
PROFUNDS
Establishment and Designation of One Additional Series
The undersigned, being all of the Trustees of ProFunds (the "Trust"), a Delaware
business trust, acting pursuant to Section 4.9.2 of the Amended and Restated
Declaration of Trust dated October 28, 1997 (the "Declaration of Trust"), hereby
divide the shares of beneficial interest ("Shares") of the Trust into additional
separate series (the "Fund"), of two classes known as the "Investor" and
"Advisor" class (each of which bears the expenses attributable to it and
otherwise has the relative rights and preferences set forth in the Declaration
of Trust), the Fund hereby created having the following special and relative
rights:
1. The Fund shall be designated as follows:
UltraShort OTC ProFund
2. The Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the then
current prospectus and registration statement materials for the Fund under the
Securities Act of 1933. Each Share of the Fund shall be redeemable, shall
represent a pro rata beneficial interest in the assets of the Fund, and shall be
entitled to receive its pro rata share of net assets allocable to such Shares of
the Fund upon liquidation of the Fund, as provided in the Declaration of Trust.
The proceeds of sales of Shares of the Fund, together with any income and gain
thereon, less any diminution or expenses thereof, shall irrevocably belong to
the Fund, unless otherwise required by law.
3. Each Share of the Fund shall be entitled to one vote for each dollar
of value invested (or fraction thereof in respect of a fractional Share) on
matters on which such Shares shall be entitled to vote, except to the extent
otherwise required by the Investment Company Act of 1940 or when the Trustees
have determined that the matter affects only the interest of Shareholders of
certain series or classes, in which case only the Shareholders of such series or
classes shall be entitled to vote thereon. Any matter shall be deemed to have
been effectively acted upon with respect to the Fund if acted upon as provided
in Rule 18f-2 under such Act, or any successor rule, and in the Declaration of
Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Fund and all other series of the Trust (collectively, the "Funds") as set forth
in the Declaration of Trust, except as described below.
(a) Costs incurred by the Trust on behalf of the Fund in
connection with the organization and registration and public
offering of Shares of the Fund shall be amortized for the Fund
over the lesser of the life of a Fund or such other period as
required by applicable law; costs incurred by the Trust on
behalf of pre-existing Funds in connection with the
organization and initial registration and public offering of
Shares of those Funds shall be amortized for the Funds over
the lesser of the life of each such Fund or such other period
as required by applicable law.
<PAGE>
(b) Liabilities, expenses, costs, charges or reserves relating to
the distribution of, and other identified expenses that should
properly be allocated to, the Shares of a particular class may
be charged to and borne solely by such class and the bearing
of expenses solely by a class of Shares may be appropriately
reflected and cause differences in the net asset value
attributable to and the dividend, redemption and liquidation
rights of, the Shares of different classes.
(c) The Trustees may from time to time in particular cases make
specific allocations of assets or liabilities among the Funds
or classes, and each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Funds and
classes for all purposes.
5. Shares of each class of the Fund may vary between themselves as to
rights of redemption and conversion rights, as may be approved by the Trustees
and set out in the Fund's then-current prospectus.
6. The Trustees (including any successor Trustee) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created or to otherwise change the
special and relative rights of any such Fund, provided that such change shall
not adversely affect the rights of the Shareholders of such Fund.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the date set forth below.
Date: February 18, 1998 -------------------------------
Michael Sapir, as Trustee
------------------------------
Louis Mayberg, as Trustee
------------------------------
Russel S. Reynolds, as Trustee
------------------------------
Michael Wachs, as Trustee
PROFUNDS
Establishment and Designation of Two Additional Series
The undersigned, being all of the Trustees of ProFunds (the "Trust"), a Delaware
business trust, acting pursuant to Section 4.9.2 of the Amended and Restated
Declaration of Trust dated October 28, 1997 (the "Declaration of Trust"), hereby
divide the shares of beneficial interest ("Shares") of the Trust into two
additional separate series (the "Funds"), of two classes known as the "Investor"
and "Advisor" class (each of which bears the expenses attributable to it and
otherwise has the relative rights and preferences set forth in the Declaration
of Trust), the Funds hereby created having the following special and relative
rights:
1. The Funds shall be designated as follows:
UltraEurope ProFund
UltraShort Europe ProFund
2. The Funds shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the then
current prospectus and registration statement materials for the Funds under the
Securities Act of 1933. Each Share of a Fund shall be redeemable, shall
represent a pro rata beneficial interest in the assets of the Fund, and shall be
entitled to receive its pro rata share of net assets allocable to such Shares of
the Fund upon liquidation of the Fund, as provided in the Declaration of Trust.
The proceeds of sales of Shares of a Fund, together with any income and gain
thereon, less any diminution or expenses thereof, shall irrevocably belong to
the Fund, unless otherwise required by law.
3. Each Share of the Funds shall be entitled to one vote for each
dollar of value invested (or fraction thereof in respect of a fractional Share)
on matters on which such Shares shall be entitled to vote, except to the extent
otherwise required by the Investment Company Act of 1940 or when the Trustees
have determined that the matter affects only the interest of Shareholders of
certain series or classes, in which case only the Shareholders of such series or
classes shall be entitled to vote thereon. Any matter shall be deemed to have
been effectively acted upon with respect to the Funds if acted upon as provided
in Rule 18f-2 under such Act, or any successor rule, and in the Declaration of
Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds and all other series of the Trust (collectively, the "Funds") as set forth
in the Declaration of Trust, except as described below.
(a) Costs incurred by the Trust on behalf of a Fund in connection
with the organization and registration and public offering of
Shares of the Fund shall be amortized for the Fund over the
lesser of the life of the Fund or such other period as
required by applicable law; costs incurred by the Trust on
behalf of pre-existing Funds in connection with the
organization and initial registration and public offering of
Shares of those Funds shall be amortized for the Funds over
the lesser of the life of each such Fund or such other period
as required by applicable law.
<PAGE>
(b) Liabilities, expenses, costs, charges or reserves relating to
the distribution of, and other identified expenses that should
properly be allocated to, the Shares of a particular class may
be charged to and borne solely by such class and the bearing
of expenses solely by a class of Shares may be appropriately
reflected and cause differences in the net asset value
attributable to and the dividend, redemption and liquidation
rights of, the Shares of different classes.
(c) The Trustees may from time to time in particular cases make
specific allocations of assets or liabilities among the Funds
or classes, and each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Funds and
classes for all purposes.
5. Shares of each class of each Fund may vary between themselves as to
rights of redemption and conversion rights, as may be approved by the Trustees
and set out in each Fund's then-current prospectus.
6. The Trustees (including any successor Trustee) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Funds now or hereafter created or to otherwise change the
special and relative rights of any such Funds, provided that such change shall
not adversely affect the rights of the Shareholders of such Funds.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the date set forth below.
Date: February 23, 1999 ------------------------------
Michael Sapir, as Trustee
------------------------------
Louis Mayberg, as Trustee
------------------------------
Russel S. Reynolds, as Trustee
------------------------------
Michael Wachs, as Trustee
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A (File No. 333-28339)
of our report dated February 8, 1999 on our audits of the financial statements
and financial highlights of ProFunds (comprising, respectively, the Bull
ProFund, UltraBull ProFund, Ultra OTC ProFund, Bear ProFund, UltraBear ProFund,
UltraShort OTC ProFund and Money Market Profund), which report is included in
the Annual Report to Shareholders for the year ended December 31, 1998, which is
incorporated by reference in the Statement of Additional Information in this
Post-Effective Amendment to the Registration Statement. We also consent to the
references to our Firm under the caption "Financial Highlights" in the
Prospectus and under the captions "Independent Accountants" and "Financial
Statements" in the Statements of Additional Information in this Post-Effective
Amendment No. 6 to the Registration Statement of ProFunds on Form N-1A (File No.
333-28339).
PricewaterhouseCoopers LLP
Columbus, Ohio
August 4, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 011
<NAME> BULL PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 7951029
<INVESTMENTS-AT-VALUE> 8125998
<RECEIVABLES> 1027
<ASSETS-OTHER> 34734
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8161759
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28290
<TOTAL-LIABILITIES> 28290
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8112397
<SHARES-COMMON-STOCK> 120736<F1>
<SHARES-COMMON-PRIOR> 936<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 249167
<ACCUM-APPREC-OR-DEPREC> 270239
<NET-ASSETS> 8133469
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 129335
<OTHER-INCOME> 0
<EXPENSES-NET> 50293
<NET-INVESTMENT-INCOME> 79042
<REALIZED-GAINS-CURRENT> 456309
<APPREC-INCREASE-CURRENT> 269984
<NET-CHANGE-FROM-OPS> 805355
<EQUALIZATION> 772048
<DISTRIBUTIONS-OF-INCOME> 5082<F1>
<DISTRIBUTIONS-OF-GAINS> 6056<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2037211
<NUMBER-OF-SHARES-REDEEMED> 1908101
<SHARES-REINVESTED> 180
<NET-CHANGE-IN-ASSETS> 8087178
<ACCUMULATED-NII-PRIOR> 85
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 846
<GROSS-ADVISORY-FEES> 21581
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75932
<AVERAGE-NET-ASSETS> 2571192<F1>
<PER-SHARE-NAV-BEGIN> 49.45<F1>
<PER-SHARE-NII> 1.63<F1>
<PER-SHARE-GAIN-APPREC> 11.49<F1>
<PER-SHARE-DIVIDEND> .04<F1>
<PER-SHARE-DISTRIBUTIONS> .05<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 62.48<F1>
<EXPENSE-RATIO> 1.63<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investor Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 012
<NAME> BULL PROFUND INVESTOR CLASS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 7951029
<INVESTMENTS-AT-VALUE> 8125998
<RECEIVABLES> 1027
<ASSETS-OTHER> 34734
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8161759
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28290
<TOTAL-LIABILITIES> 28290
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8112397
<SHARES-COMMON-STOCK> 9490<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 249167
<ACCUM-APPREC-OR-DEPREC> 270239
<NET-ASSETS> 8133469
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 129335
<OTHER-INCOME> 0
<EXPENSES-NET> 50293
<NET-INVESTMENT-INCOME> 79042
<REALIZED-GAINS-CURRENT> 456309
<APPREC-INCREASE-CURRENT> 269984
<NET-CHANGE-FROM-OPS> 805355
<EQUALIZATION> 772048
<DISTRIBUTIONS-OF-INCOME> 4<F1>
<DISTRIBUTIONS-OF-GAINS> 568<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2037211
<NUMBER-OF-SHARES-REDEEMED> 1908101
<SHARES-REINVESTED> 180
<NET-CHANGE-IN-ASSETS> 8087178
<ACCUMULATED-NII-PRIOR> 85
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 846
<GROSS-ADVISORY-FEES> 21581
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75932
<AVERAGE-NET-ASSETS> 27220<F1>
<PER-SHARE-NAV-BEGIN> 49.45<F1>
<PER-SHARE-NII> 1.08<F1>
<PER-SHARE-GAIN-APPREC> 11.64<F1>
<PER-SHARE-DIVIDEND> .00<F1>
<PER-SHARE-DISTRIBUTIONS> .05<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 62.12<F1>
<EXPENSE-RATIO> 2.67<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Service Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 021
<NAME> ULTRABULL PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 100276985
<INVESTMENTS-AT-VALUE> 102623765
<RECEIVABLES> 12801
<ASSETS-OTHER> 82003
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 102718569
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 872688
<TOTAL-LIABILITIES> 872688
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100894237
<SHARES-COMMON-STOCK> 1237135<F1>
<SHARES-COMMON-PRIOR> 117495<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7371016
<ACCUM-APPREC-OR-DEPREC> 8322660
<NET-ASSETS> 101845881
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1302212
<OTHER-INCOME> 0
<EXPENSES-NET> 536105
<NET-INVESTMENT-INCOME> 766107
<REALIZED-GAINS-CURRENT> 3734412
<APPREC-INCREASE-CURRENT> 8276070
<NET-CHANGE-FROM-OPS> 12776589
<EQUALIZATION> 11752921
<DISTRIBUTIONS-OF-INCOME> 73735<F1>
<DISTRIBUTIONS-OF-GAINS> 18759<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10118026
<NUMBER-OF-SHARES-REDEEMED> 8894824
<SHARES-REINVESTED> 1011
<NET-CHANGE-IN-ASSETS> 93407844
<ACCUMULATED-NII-PRIOR> 1899
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 25731
<GROSS-ADVISORY-FEES> 247992
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 612932
<AVERAGE-NET-ASSETS> 28652843<F1>
<PER-SHARE-NAV-BEGIN> 51.45<F1>
<PER-SHARE-NII> 1.55<F1>
<PER-SHARE-GAIN-APPREC> 20.53<F1>
<PER-SHARE-DIVIDEND> .06<F1>
<PER-SHARE-DISTRIBUTIONS> .03<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 73.44<F1>
<EXPENSE-RATIO> 1.50<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investor Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 022
<NAME> ULTRABULL PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 100276985
<INVESTMENTS-AT-VALUE> 102623765
<RECEIVABLES> 12801
<ASSETS-OTHER> 82003
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 102718569
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 872688
<TOTAL-LIABILITIES> 872688
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100894237
<SHARES-COMMON-STOCK> 151058<F1>
<SHARES-COMMON-PRIOR> 46521<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7371016
<ACCUM-APPREC-OR-DEPREC> 8322660
<NET-ASSETS> 101845881
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1302212
<OTHER-INCOME> 0
<EXPENSES-NET> 536105
<NET-INVESTMENT-INCOME> 766107
<REALIZED-GAINS-CURRENT> 3734412
<APPREC-INCREASE-CURRENT> 8276070
<NET-CHANGE-FROM-OPS> 12776589
<EQUALIZATION> 11752921
<DISTRIBUTIONS-OF-INCOME> 191<F1>
<DISTRIBUTIONS-OF-GAINS> 2097<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10118026
<NUMBER-OF-SHARES-REDEEMED> 8894824
<SHARES-REINVESTED> 1011
<NET-CHANGE-IN-ASSETS> 93407844
<ACCUMULATED-NII-PRIOR> 1899
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 25731
<GROSS-ADVISORY-FEES> 247992
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 612932
<AVERAGE-NET-ASSETS> 4468581<F1>
<PER-SHARE-NAV-BEGIN> 51.45<F1>
<PER-SHARE-NII> .95<F1>
<PER-SHARE-GAIN-APPREC> 20.39<F1>
<PER-SHARE-DIVIDEND> .00<F1>
<PER-SHARE-DISTRIBUTIONS> .03<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 72.76<F1>
<EXPENSE-RATIO> 2.39<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Service Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 031
<NAME> BEAR PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 4009230
<INVESTMENTS-AT-VALUE> 4011987
<RECEIVABLES> 511985
<ASSETS-OTHER> 28267
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4552239
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5782
<TOTAL-LIABILITIES> 5782
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5312124
<SHARES-COMMON-STOCK> 104474<F1>
<SHARES-COMMON-PRIOR> 50317<F1>
<ACCUMULATED-NII-CURRENT> 1290
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 769714
<ACCUM-APPREC-OR-DEPREC> 2757
<NET-ASSETS> 4546457
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 68015
<OTHER-INCOME> 0
<EXPENSES-NET> 26023
<NET-INVESTMENT-INCOME> 41992
<REALIZED-GAINS-CURRENT> (769283)
<APPREC-INCREASE-CURRENT> 2324
<NET-CHANGE-FROM-OPS> (724967)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 38388<F1>
<DISTRIBUTIONS-OF-GAINS> 481<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1170237
<NUMBER-OF-SHARES-REDEEMED> 1107531
<SHARES-REINVESTED> 1000
<NET-CHANGE-IN-ASSETS> 2030035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 137
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11045
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 51024
<AVERAGE-NET-ASSETS> 1118167<F1>
<PER-SHARE-NAV-BEGIN> 50.00<F1>
<PER-SHARE-NII> 1.47<F1>
<PER-SHARE-GAIN-APPREC> (11.22)<F1>
<PER-SHARE-DIVIDEND> .37<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 39.88<F1>
<EXPENSE-RATIO> 1.54<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investor Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 032
<NAME> BEAR PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 4009230
<INVESTMENTS-AT-VALUE> 4011987
<RECEIVABLES> 511985
<ASSETS-OTHER> 28267
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4552239
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5782
<TOTAL-LIABILITIES> 5782
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5312124
<SHARES-COMMON-STOCK> 9549<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 1290
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 769714
<ACCUM-APPREC-OR-DEPREC> 2757
<NET-ASSETS> 4546457
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 68015
<OTHER-INCOME> 0
<EXPENSES-NET> 26023
<NET-INVESTMENT-INCOME> 41992
<REALIZED-GAINS-CURRENT> (769283)
<APPREC-INCREASE-CURRENT> 2324
<NET-CHANGE-FROM-OPS> (724967)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2314<F1>
<DISTRIBUTIONS-OF-GAINS> 87<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1170237
<NUMBER-OF-SHARES-REDEEMED> 1107531
<SHARES-REINVESTED> 1000
<NET-CHANGE-IN-ASSETS> 2030035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 137
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11045
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 51024
<AVERAGE-NET-ASSETS> 355369<F1>
<PER-SHARE-NAV-BEGIN> 50.00<F1>
<PER-SHARE-NII> .87<F1>
<PER-SHARE-GAIN-APPREC> (10.88)<F1>
<PER-SHARE-DIVIDEND> .23<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 39.76<F1>
<EXPENSE-RATIO> 2.49<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Service Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 041
<NAME> ULTRABEAR PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 31829703
<INVESTMENTS-AT-VALUE> 30812987
<RECEIVABLES> 175467
<ASSETS-OTHER> 38295
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31026749
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74545
<TOTAL-LIABILITIES> 74545
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39760569
<SHARES-COMMON-STOCK> 876542<F1>
<SHARES-COMMON-PRIOR> 1<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7159379
<ACCUM-APPREC-OR-DEPREC> (1648986)
<NET-ASSETS> 30952204
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 720009
<OTHER-INCOME> 0
<EXPENSES-NET> 287880
<NET-INVESTMENT-INCOME> 432129
<REALIZED-GAINS-CURRENT> (7159379)
<APPREC-INCREASE-CURRENT> (1648986)
<NET-CHANGE-FROM-OPS> (8808365)
<EQUALIZATION> 410387
<DISTRIBUTIONS-OF-INCOME> 21742<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10758748
<NUMBER-OF-SHARES-REDEEMED> 9787938
<SHARES-REINVESTED> 370
<NET-CHANGE-IN-ASSETS> 30952173
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 126301
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 324846
<AVERAGE-NET-ASSETS> 14089859<F1>
<PER-SHARE-NAV-BEGIN> 51.80<F1>
<PER-SHARE-NII> 1.16<F1>
<PER-SHARE-GAIN-APPREC> (21.04)<F1>
<PER-SHARE-DIVIDEND> .04<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.88<F1>
<EXPENSE-RATIO> 1.57<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investor Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 042
<NAME> ULTRABEAR PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 31829703
<INVESTMENTS-AT-VALUE> 30812987
<RECEIVABLES> 175467
<ASSETS-OTHER> 38295
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31026749
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74545
<TOTAL-LIABILITIES> 74545
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39760569
<SHARES-COMMON-STOCK> 94639<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7159379
<ACCUM-APPREC-OR-DEPREC> (1648986)
<NET-ASSETS> 30952204
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 720009
<OTHER-INCOME> 0
<EXPENSES-NET> 287880
<NET-INVESTMENT-INCOME> 432129
<REALIZED-GAINS-CURRENT> (7159379)
<APPREC-INCREASE-CURRENT> (1648986)
<NET-CHANGE-FROM-OPS> (8808365)
<EQUALIZATION> 410387
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10758748
<NUMBER-OF-SHARES-REDEEMED> 9787938
<SHARES-REINVESTED> 370
<NET-CHANGE-IN-ASSETS> 30952173
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 126301
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 324846
<AVERAGE-NET-ASSETS> 2719751<F1>
<PER-SHARE-NAV-BEGIN> 51.75<F1>
<PER-SHARE-NII> .75<F1>
<PER-SHARE-GAIN-APPREC> (20.67)<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.83<F1>
<EXPENSE-RATIO> 2.45<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Service Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 051
<NAME> ULTRAOTC PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 256779453
<INVESTMENTS-AT-VALUE> 266356068
<RECEIVABLES> 39664904
<ASSETS-OTHER> 173243
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 306194215
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34785075
<TOTAL-LIABILITIES> 34785075
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 264570905
<SHARES-COMMON-STOCK> 2004023<F1>
<SHARES-COMMON-PRIOR> 6130<F1>
<ACCUMULATED-NII-CURRENT> 1513
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 61887183
<ACCUM-APPREC-OR-DEPREC> 68723905
<NET-ASSETS> 271409140
<DIVIDEND-INCOME> 6987
<INTEREST-INCOME> 1409196
<OTHER-INCOME> 0
<EXPENSES-NET> 896058
<NET-INVESTMENT-INCOME> 520125
<REALIZED-GAINS-CURRENT> 14500678
<APPREC-INCREASE-CURRENT> 68743665
<NET-CHANGE-FROM-OPS> 83764468
<EQUALIZATION> 76002019
<DISTRIBUTIONS-OF-INCOME> 37904<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16176927
<NUMBER-OF-SHARES-REDEEMED> 13922270
<SHARES-REINVESTED> 230
<NET-CHANGE-IN-ASSETS> 186762566
<ACCUMULATED-NII-PRIOR> 654
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 867046
<GROSS-ADVISORY-FEES> 419023
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1010220
<AVERAGE-NET-ASSETS> 48360336
<PER-SHARE-NAV-BEGIN> 41.80<F1>
<PER-SHARE-NII> .81<F1>
<PER-SHARE-GAIN-APPREC> 76.66<F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 119.27<F1>
<EXPENSE-RATIO> 1.47<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investor Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 052
<NAME> ULTRAOTC PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 256779453
<INVESTMENTS-AT-VALUE> 266356068
<RECEIVABLES> 39664904
<ASSETS-OTHER> 173243
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 306194215
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34785075
<TOTAL-LIABILITIES> 34785075
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 264570905
<SHARES-COMMON-STOCK> 272879<F1>
<SHARES-COMMON-PRIOR> 15885<F1>
<ACCUMULATED-NII-CURRENT> 1513
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 61887183
<ACCUM-APPREC-OR-DEPREC> 68723905
<NET-ASSETS> 271409140
<DIVIDEND-INCOME> 6987
<INTEREST-INCOME> 1409196
<OTHER-INCOME> 0
<EXPENSES-NET> 896058
<NET-INVESTMENT-INCOME> 520125
<REALIZED-GAINS-CURRENT> 14500678
<APPREC-INCREASE-CURRENT> 68743665
<NET-CHANGE-FROM-OPS> 83764468
<EQUALIZATION> 76002019
<DISTRIBUTIONS-OF-INCOME> 158<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16176927
<NUMBER-OF-SHARES-REDEEMED> 13922270
<SHARES-REINVESTED> 230
<NET-CHANGE-IN-ASSETS> 186762566
<ACCUMULATED-NII-PRIOR> 654
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 867046
<GROSS-ADVISORY-FEES> 419023
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1010220
<AVERAGE-NET-ASSETS> 7755665<F1>
<PER-SHARE-NAV-BEGIN> 41.80<F1>
<PER-SHARE-NII> .40<F1>
<PER-SHARE-GAIN-APPREC> 76.50<F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 118.70<F1>
<EXPENSE-RATIO> 2.38<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Service Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 061
<NAME> MONEY MARKET PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 77623310
<INVESTMENTS-AT-VALUE> 77623310
<RECEIVABLES> 0
<ASSETS-OTHER> 49358
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 77672668
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 240253
<TOTAL-LIABILITIES> 240253
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77430020
<SHARES-COMMON-STOCK> 62024251<F1>
<SHARES-COMMON-PRIOR> 286964<F1>
<ACCUMULATED-NII-CURRENT> 2395
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 77432415
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1787879
<EXPENSES-NET> 321946
<NET-INVESTMENT-INCOME> 1465933
<REALIZED-GAINS-CURRENT> 2398
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1468331
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1251407<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1182465274
<NUMBER-OF-SHARES-REDEEMED> 1106567419
<SHARES-REINVESTED> 1242690
<NET-CHANGE-IN-ASSETS> 77140545
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 3
<GROSS-ADVISORY-FEES> 49214
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 428695
<AVERAGE-NET-ASSETS> 26341797<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .05<F1>
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .85<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investor Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 062
<NAME> MONEY MARKET PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 77623310
<INVESTMENTS-AT-VALUE> 77623310
<RECEIVABLES> 0
<ASSETS-OTHER> 49358
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 77672668
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 240253
<TOTAL-LIABILITIES> 240253
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77430020
<SHARES-COMMON-STOCK> 15405769<F1>
<SHARES-COMMON-PRIOR> 2511<F1>
<ACCUMULATED-NII-CURRENT> 2395
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 77432415
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1787879
<EXPENSES-NET> 321946
<NET-INVESTMENT-INCOME> 1465933
<REALIZED-GAINS-CURRENT> 2398
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1468331
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 214526<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1182465274
<NUMBER-OF-SHARES-REDEEMED> 1106567419
<SHARES-REINVESTED> 1242690
<NET-CHANGE-IN-ASSETS> 77140545
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 3
<GROSS-ADVISORY-FEES> 49214
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 428695
<AVERAGE-NET-ASSETS> 5825419<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .04<F1>
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .04<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> 1.87<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Service Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 071
<NAME> ULTRASHORT OTC PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 21019191
<INVESTMENTS-AT-VALUE> 20757990
<RECEIVABLES> 5583
<ASSETS-OTHER> 17586
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20781159
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 460395
<TOTAL-LIABILITIES> 460395
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34668912
<SHARES-COMMON-STOCK> 1198485<F1>
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 13650687
<ACCUM-APPREC-OR-DEPREC> (697461)
<NET-ASSETS> 20320764
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 170766
<OTHER-INCOME> 0
<EXPENSES-NET> 98688
<NET-INVESTMENT-INCOME> 72078
<REALIZED-GAINS-CURRENT> (13650687)
<APPREC-INCREASE-CURRENT> (697461)
<NET-CHANGE-FROM-OPS> (14276070)
<EQUALIZATION> 67602
<DISTRIBUTIONS-OF-INCOME> 4476<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7679964
<NUMBER-OF-SHARES-REDEEMED> 6428987
<SHARES-REINVESTED> 165
<NET-CHANGE-IN-ASSETS> 34601310
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38021
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 107561
<AVERAGE-NET-ASSETS> 7645997<F1>
<PER-SHARE-NAV-BEGIN> 50.00<F1>
<PER-SHARE-NII> .26<F1>
<PER-SHARE-GAIN-APPREC> (34.02)<F1>
<PER-SHARE-DIVIDEND> 0.0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.24<F1>
<EXPENSE-RATIO> 1.83<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investor Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001039803
<NAME> PROFUNDS
<SERIES>
<NUMBER> 072
<NAME> ULTRASHORT OTC PROFUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 21019191
<INVESTMENTS-AT-VALUE> 20757990
<RECEIVABLES> 5583
<ASSETS-OTHER> 17586
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20781159
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 460395
<TOTAL-LIABILITIES> 460395
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34668912
<SHARES-COMMON-STOCK> 52657<F1>
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 13650687
<ACCUM-APPREC-OR-DEPREC> (697461)
<NET-ASSETS> 20320764
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 170766
<OTHER-INCOME> 0
<EXPENSES-NET> 98688
<NET-INVESTMENT-INCOME> 72078
<REALIZED-GAINS-CURRENT> (13650687)
<APPREC-INCREASE-CURRENT> (697461)
<NET-CHANGE-FROM-OPS> (14276070)
<EQUALIZATION> 67602
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7679964
<NUMBER-OF-SHARES-REDEEMED> 6428987
<SHARES-REINVESTED> 165
<NET-CHANGE-IN-ASSETS> 34601310
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38021
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 107561
<AVERAGE-NET-ASSETS> 989476<F1>
<PER-SHARE-NAV-BEGIN> 50.00<F1>
<PER-SHARE-NII> .10<F1>
<PER-SHARE-GAIN-APPREC> (33.86)<F1>
<PER-SHARE-DIVIDEND> 0.0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.24<F1>
<EXPENSE-RATIO> 2.92<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Service Shares
</FN>
</TABLE>
POWER OF ATTORNEY
Charles A. Rizzo, the Treasurer of BT Investment Funds, BT Institutional
Funds, BT Pyramid Mutual Funds, and BT Advisor Funds (each, a "Trust") and, Cash
Management Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio, NY Tax
Free Money Portfolio, International Equity Portfolio, Equity 500 Index
Portfolio, Asset Management Portfolio, Capital Appreciation Portfolio,
Intermediate Tax Free Portfolio, and BT Investment Portfolios (each, a
"Portfolio Trust") each hereby constitutes and appoints the Secretary, each
Assistant Secretary and each authorized signatory of each Trust and each
Portfolio Trust, each of them with full powers of substitution, as his true and
lawful attorney-in-fact and agent to execute in his name and on his behalf in
any and all capacities the Registration Statements on Form N-1A, and any and all
amendments thereto, and all other documents, filed by a Trust or a Portfolio
Trust with the Securities and Exchange Commission ("SEC") under the Investment
Company Act of 1940, as amended, and (as applicable) the Securities Act of 1933,
as amended, and any and all instruments which such attorneys and agents, or any
of them, deem necessary or advisable to enable the Trust or Portfolio Trust to
comply with such Acts, the rules, regulations and requirements of the SEC, and
the securities or Blue Sky laws of any state or other jurisdiction and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the SEC and such other jurisdictions, and the undersigned hereby ratifies
and confirms as his own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any one
of such attorneys and agents has, and may exercise, all of the powers hereby
conferred. The undersigned hereby revokes any Powers of Attorney previously
granted with respect to any Trust or Portfolio Trust concerning the filings and
actions described herein.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
as of the 27th day of July, 1999.
SIGNATURES TITLE
/s/ Charles A. Rizzo
- ----------------------- Treasurer (Principal Financial and
Charles A. Rizzo Accounting Officer) of each Trust and
Portfolio Trust
