OCTOBER 18, 1999
PROSPECTUS
THE PROFUNDS VP
PROFUND VPULTRAOTC
PROFUND VPEUROPE 30
PROFUND VPSMALL CAP
[ProFunds logo omitted]
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
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
1 PROFUNDS VP OVERVIEW
9 PROFUNDS VP STRATEGY
13 GENERAL INFORMATION
19 PROFUNDS VP MANAGEMENT
23 SIMILAR FUND PERFORMANCE
[logo omitted] PROFUND ADVISORS LLC
INVESTMENT ADVISOR
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THE PROFUNDS VP
OVERVIEW
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OBJECTIVES
The ProFunds included in this prospectus ("ProFunds VP") each
seek to achieve a daily return equal to the performance of a
particular stock market BENCHMARK.*
oPROFUND VP ULTRAOTC ("ULTRAOTC VP")--seeks daily investment
results that correspond to twice (200%) the performance of the
NASDAQ 100 Index(TM).
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If UltraOTC 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.
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oPROFUND VP EUROPE 30 ("EUROPE 30 VP")--seeks daily investment
results that correspond to the performance of the ProFunds
Europe 30 Index.
oPROFUND VP SMALL CAP ("SMALL CAP VP")--seeks daily investment
results that correspond to the performance of the Russell
2000(R) Index.
The securities indexes that the ProFunds VP use as their
benchmarks are described below under "Benchmark Indexes."
*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.
ProFunds VP Overview 1
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THE FOLLOWING CHART SUMMARIZES THE PROFUNDS VP:
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<TABLE>
<CAPTION>
PROFUNDS VP INDEX DAILY OBJECTIVE TYPES OF COMPANIES IN INDEX
<S> <C> <C> <C>
UltraOTC VP NASDAQ 100 Double Large capitalization, most with technology and/or growth orientation
Europe 30 VP ProFunds Europe 30 Match Large capitalization European stocks represented by American
Depository Receipts.
Small Cap VP Russell 2000 Match Diverse, small capitalization
</TABLE>
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STRATEGY
The investments made by a ProFund VP and the results achieved
by the ProFund VP at any given time are not expected to be the
same as those made by other mutual funds for which ProFund
Advisors LLC acts as investment advisor, including mutual
funds with names, investment objectives and policies similar
to the ProFund VP. Investors should carefully consider their
investment goals and willingness to tolerate investment risk
before allocating their investment to a ProFund VP.
ProFund Advisors uses quantitative and statistical analysis it
developed in seeking to achieve each ProFund VP's investment
objective. This analysis determines the type, quantity and mix
of investment positions that a ProFund VP should hold to
approximate the performance of its benchmark.
ULTRAOTC VP, EUROPE 30 VP, and SMALL CAP VP invest in stocks
that ProFund Advisors believe should simulate the movement of
the applicable underlying index. In addition all the ProFunds
VP may invest in the following instruments as a substitute for
investing directly in stocks, achieving leverage for UltraOTC
VP and for other purposes:
oFutures contracts on stock indexes, and options on futures
contracts; and
2 ProFunds VP Overview
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oFinancial instruments such as equity caps, collars and
floors, swaps, depository receipts, and options on securities
and stock indexes.
ULTRAOTC VP generally invests 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 UltraOTC VP's investments.
INVESTMENT RISKS
Like all investments, the ProFunds VP entail risk. ProFund
Advisors cannot guarantee that any of the ProFunds VP will
achieve its objective. As with any mutual fund, the ProFunds
VP could lose money, or their performance could trail that of
other investment alternatives.
In addition, the ProFunds VP may 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 VP.
The following chart summarizes certain risks associated with
the ProFunds VP:
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MARKET RISK LEVERAGE RISK FOREIGN RISK
UltraOTC VP X X
Europe 30 VP X X
Small Cap VP X
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These and other risks are described below.
ProFunds VP Overview 3
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CERTAIN RISKS ASSOCIATED WITH PARTICULAR PROFUNDS
oLEVERAGE RISK UltraOTC VP employs leveraged investment
techniques. Leverage is the ability to get a return on a
capital base that is larger than UltraOTC VP's investment. Use
of leverage can magnify the effects of changes in the value of
UltraOTC VP and makes it more volatile. The leveraged
investment techniques that UltraOTC VP employs should cause
investors in UltraOTC VP to lose more money in adverse
environments.
oFOREIGN INVESTMENT RISK Europe 30 VP entails the risk of
foreign investing, which may involve risks not typically
associated with investing in U.S. securities alone:
o Many foreign countries lack uniform accounting and
disclosure standards, or have standards that differ from
U.S. standards. Accordingly, Europe 30 VP may not have
access to adequate or reliable company information.
o Europe 30 VP will be subject to the market, economic and
political risks of the countries where they invest or where
the companies represented in their benchmarks are located.
o The value of ADRs 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.
o 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.
4 ProFunds VP Overview
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RISKS IN COMMON
Each ProFunds VP faces certain risks in common:
oMARKET RISK The ProFunds VP 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 Small Cap 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 ProFunds
VP should lose money when the index underlying their benchmark
declines. These indexes are discussed in the next section.
oLIQUIDITY RISK In certain circumstances, such as a disruption
of the orderly markets for the financial instruments in which
they invest, the ProFunds VP 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 ProFunds VP from limiting losses or realizing
gains.
oCORRELATION RISK While ProFund Advisors expects that each of
the ProFunds VP will track its benchmark with an average
correlation of .90 or better over a year, there can be no
guarantee that the ProFunds VP will be able to achieve this
level of correlation. The ability of a ProFund VP to track its
benchmark may be affected by numerous factors. Actual
purchases and sales of the shares of the ProFunds VP by
insurance company separate accounts may differ from estimated
transactions reported to the ProFunds VP by the insurance
companies prior to the time the ProFunds VP share prices are
calculated. Any such difference could significantly and
adversely affect the performance and correlation of the
ProFunds VP. A failure to achieve a high degree of correlation
may prevent a ProFund VP from achieving its investment goal.
ProFunds VP Overview 5
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oNON-DIVERSIFICATION RISK The ProFunds VP 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, if ProFund Advisors determines that doing so is the
most efficient means of tracking the relevant benchmark. This
would make the performance of a ProFund VP more susceptible to
a single economic, political or regulatory event than a more
diversified mutual fund might be. Nevertheless, the ProFunds
VP intend to invest on a diversified basis.
oRISKS OF AGGRESSIVE INVESTMENT TECHNIQUES The ProFunds VP 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
oTHE 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.
oPROFUNDS EUROPE 30 INDEX, created by ProFund Advisors, is
composed of the 30 European companies whose securities are
traded on U.S. exchanges or on the NASDAQ Stock Market as
American Depository Receipts with the highest market
capitalization determined annually. The component companies of
the Index as of the date of this Prospectus are listed in an
appendix to the Statement of Additional Information.
6 ProFunds VP Overview
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oTHE 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.
The Board of Trustees may change a ProFund VP's investment
objective without shareholder approval including, for example,
it believes another benchmark might better suit shareholder
needs.
WHO MAY WANT TO CONSIDER AN INVESTMENT
EUROPE 30 VP and SMALL CAP VP may be appropriate for investors
who want to receive investment results approximating the
performance of the ProFunds Europe 30 Index and the Russell
2000(R) Index, respectively.
ULTRAOTC VP may be appropriate for investors who:
Obelieve that over the long term, the value of the NASDAQ 100
Index will increase, and that by investing with the objective
of doubling the Index's daily return they will achieve
superior results over time. Since UltraOTC VP seeks to double
the daily performance of its benchmark index, it should have
twice the volatility of a NASDAQ 100 Index fund and twice the
potential risk of loss.
Oare seeking to match the NASDAQ 100 Index's daily return with
half the investment required of conventional stock index
mutual funds.
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An investor might invest $100,000 in a NASDAQ 100 Index
Fund. Alternatively that same investor could invest half
that amount-$50,000-in UltraOTC VP and target the same daily
return.
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ProFunds VP Overview 7
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ALL OF THE PROFUNDS VP may be appropriate for investors who
are executing a strategy that relies on frequent buying,
selling or exchanging among stock mutual funds, since the
ProFunds VP do not limit how often an investor may exchange
among ProFunds VP.
FUND PERFORMANCE
Because the ProFunds VP 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.
8 ProFunds VP Overview
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PROFUNDS VP
STRATEGY
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WHAT THE PROFUNDS VP DO
Each ProFund VP:
oSeeks 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.
oUses a mathematical and quantitative approach.
oPursues its objective regardless of market conditions, trends
or direction.
oSeeks to provide correlation with its benchmark on a daily
basis.
WHAT THE PROFUNDS VP DO NOT DO
ProFund Advisors does not:
oConduct conventional stock research or analysis or forecast
stock market movement in managing the assets of the ProFunds
VP.
oInvest the assets of the ProFunds VP in stocks or instruments
based on ProFund Advisors' view of the fundamental prospects
of particular companies.
oAdopt defensive positions by investing in cash or other
instruments in anticipation of an adverse climate for their
benchmark indexes.
oSeek to invest to realize dividend income from their
investments.
ProFunds VP Strategy 9
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In addition, UltraOTC VP does not seek to provide correlation
with its benchmark over a period of time other than daily,
such as monthly or annually, since mathematical compounding
prevents UltraOTC VP from achieving such results.
IMPORTANT CONCEPTS
oLEVERAGE offers a means of magnifying small market movements,
up or down, into large changes in an investment's value.
oFUTURES, 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.
oOPTION 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.
oAMERICAN DEPOSITORY RECEIPTS represent the right to receive
securities of foreign issuers deposited in a bank or trust
company. ADRs are an alternative to purchasing the underlying
securities in their national markets and currencies.
Investment in ADRs has certain advantages over direct
investment in the underlying foreign securities since: (i)
ADRs are U.S. dollar-denominated investments that are easily
transferable and for which market quotations are readily
available, and (ii) issuers whose securities are represented
by ADRs are generally subject to auditing, accounting and
financial reporting standards similar to those applied to
domestic issuers.
PORTFOLIO TURNOVER
ProFund Advisors expects a significant portion of the assets
of the ProFunds VP to come from professional money managers
and investors who use the ProFunds VP as part of "market
timing" investment strategies. These strategies often call for
frequent trading of ProFund VP shares to take advantage of
anticipated changes in market conditions. Although ProFund
Advisors
10 ProFunds VP Strategy
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believes its accounting methodology should minimize the effect
on the ProFunds VP of such trading, market timing trading
could increase the rate of ProFund VP portfolio turnover,
increasing transaction expenses. In addition, while the
ProFunds VP do not expect it, large movements of assets into
and out of the ProFunds VP may negatively impact their
abilities to achieve their investment objectives or their
levels of operating expenses.
ProFunds VP Strategy 11
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GENERAL
INFORMATION
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CALCULATING THE FUNDS' SHARE PRICES
Each 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 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.
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 ProFund
VP are traded in markets on days when the ProFund VP's
principal trading market(s) is closed, the ProFund VP's net
asset value may vary on days when investors cannot purchase or
redeem shares.
The ProFunds VP value shares by dividing the market value of
the assets attributable to a ProFund VP, less the liabilities
attributable to the ProFund VP, by the number of its
outstanding shares. The ProFunds VP use the following methods
for arriving at the current market price of investments held
by them:
osecurities 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.
osecurities traded over-the-counter--NASDAQ-supplied
information on the prevailing bid and asked prices.
General Information 13
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ofutures contracts and options on indexes and securities--the
last sale price prior to the close of regular trading on the
NYSE.
ooptions on futures contracts--priced at fair value determined
with reference to established future exchanges.
obonds and convertible bonds generally are valued using a
third-party pricing system.
oshort-term debt securities are valued at amortized cost,
which approximates market value.
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
ProFunds VP 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.
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.
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PURCHASING AND REDEEMING SHARES
Shares of the ProFunds VP 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 ProFunds VP 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 ProFunds VP 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 ProFunds VP 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
ProFunds VP.
The ProFunds VP currently do not foresee any disadvantages to
investors if the ProFunds VP 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 ProFund VP 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
General Information 15
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such a conflict occurred, an insurance company participating
in the ProFund VP might be required to redeem the investment
of one or more of its separate accounts from the ProFund VP,
which might force the ProFund VP to sell securities at
disadvantageous prices.
The ProFunds VP reserve the right to discontinue offering
shares at any time. In the event that a ProFund VP ceases
offering its shares, any investments allocated to the Fund
may, subject to any necessary regulatory approvals, be
invested in another ProFund VP deemed appropriate by the Board
of Trustees.
DISTRIBUTION OF SHARES
Under a distribution plan adopted by the Board of Trustees,
each ProFund VP may pay financial intermediaries an annual fee
of up to 0.25% of its average daily net assets as
reimbursement or compensation for providing or procurring a
variety of services relating to the promotion, sale and
servicing of shares of the ProFund VP. Over time, fees paid
under the plan will increase the cost of your investment and
may cost you more than other types of sales charges.
If a ProFund VP fails to meet this diversification
requirement, income with respect to variable insurance
contracts invested in that ProFund VP 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.
TAX INFORMATION
To comply with regulations under the Internal Revenue Code,
each ProFund VP is required to diversify its investments.
Generally, a ProFund VP will be required to diversify its
16 General Information
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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.
Because you do not own shares in the ProFunds VP directly,
generally you are not taxed directly on distributions from the
ProFunds VP. 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.
General Information 17
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PROFUNDS VP
MANAGEMENT
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BOARD OF TRUSTEES AND OFFICERS
The ProFunds VP 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 ProFunds VP. The Trust's officers are
responsible for day-to-day operations of the ProFunds VP.
INVESTMENT ADVISOR
PROFUND ADVISORS LLC, located at 7900 Wisconsin Avenue, Suite
300, Bethesda, Maryland 20814, serves as the investment
advisor to the ProFunds VP, providing investment advice and
management services. ProFund Advisors oversees the investment
and reinvestment of the assets in each ProFund VP. It receives
fees equal to 0.75% of the average daily net assets of each
ProFund VP.
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.).
ProFunds VP Management 19
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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.
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 ProFund VP 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 ProFunds VP, providing operations, compliance and
administrative services. Each ProFund VP pays BISYS a fee for
its administrative services. Before any waiver that may be in
effect, the fee is 0.05% of average daily net assets.
ProFund Advisors also performs client support and
administrative services for the ProFunds VP. The ProFunds VP
each pay a fee equal, on an annual basis, to 0.15% of average
daily net assets for these services.
20 ProFunds VP Management
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YEAR 2000
Like other funds and business organizations around the world,
the ProFunds VP 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
ProFunds VP invest, which could impact the share prices of the
ProFunds VP. Europe 30 VP may be particularly susceptible to
this risk, as it primarily invests, directly or indirectly, in
issuers located outside the U.S., and the governments and
companies in many foreign countries have not prepared as
extensively as have most U.S. issuers for the arrival of the
Year 2000.
The ProFunds VP 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 operations of the ProFunds VP 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.
In the event that any systems upon which the ProFunds VP
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
service providers of the ProFunds VP cannot be accurately
assessed at this time, the ProFunds VP 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 ProFunds VP will continue to closely
monitor developments relating to this issue.
ProFunds VP Management 21
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OTHER INFORMATION
"NASDAQ 100 Index" and the "Russell 2000 Index" are trademarks
of the NASDAQ Stock Markets, Inc. and of the Frank Russell
Company, respectively. The ProFunds VP are not sponsored,
endorsed, sold or promoted by NASDAQ or by the Frank Russell
Company. Also, NASDAQ and the Frank Russell Company do not
make any representation regarding the advisability of
investing in the ProFunds VP.
22 ProFunds VP Management
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SIMILAR FUND
PERFORMANCE
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The following table provides information concerning the
historical total return performance of the Investor Class
shares of the UltraOTC ProFund (the "Similar Fund"), a series
of the Trust, which is similar to UltraOTC VP. The Similar
Fund's investment objective, policies and strategies are
substantially similar to those of UltraOTC VP, and it is
currently managed by the same investment team. While the
investment objective, policies and risks of the Similar Fund
and UltraOTC VP are similar, the performance of the Similar
Fund and UltraOTC VP 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 UltraOTC VP or the
future performance of UltraOTC VP or its investment team.
Consequently, potential investors should not consider this
performance data as an indication of the future performance of
UltraOTC VP or of its investment team.
The performance data shown below reflects the net operating
expenses of the Similar Fund, which are lower than the
estimated operating expenses of UltraOTC VP. Performance would
have been lower for the Similar Fund if the expenses of
UltraOTC VP were used. In addition, the Similar Fund, unlike
UltraOTC VP, is 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
Similar Fund Performance 23
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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 UltraOTC VP serves as an
underlying investment vehicle. By contrast, investors with
contract value allocated to UltraOTC VP will be subject to
charges and expenses relating to variable insurance contracts
and separate accounts.
The Similar Fund's 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 Fund presented below are unaudited and are not
intended to predict or suggest results that might be
experienced by the Similar Fund or UltraOTC VP. 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 Fund or UltraOTC VP.
AVERAGE ANNUAL TOTAL RETURN FOR THE SIMILAR FUND AND FOR ITS BENCHMARK INDEX FOR
PERIODS ENDED DECEMBER 31, 1998
SIMILAR FUND/BENCHMARK INDEX ONE YEAR SINCE INCEPTION INCEPTION DATE
- --------------------------------------------------------------------------------
UltraOTC ProFund# 185.34% 123.30% 12/02/97
NASDAQ 100 Index(TM)* 85.31% 70.12%
- --------------------------------------------------------------------------------
# The Similar Fund performance information set forth above reflects fee waivers
and/or expense reimbursements. Absent such waivers and/or reimbursements,
Similar Fund performance would have been lower.
* Excludes dividends.
24 Similar Fund Performance
<PAGE>
You can find more detailed information about each of the Funds
in their current Statement of Additional Information, dated
October 18, 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 dated October 18, 1999. To receive your free copy
of a Statement of Additional Information, or if you have
questions about the Funds, 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 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 Funds, 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
[ProFunds logo omitted]
811-08239
