RYDEX VARIABLE TRUST, 485BPOS, 2000-04-18

RYDEX VARIABLE TRUST
485BPOS, 2000-04-18

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON April 17, 2000

FILE NO. 333-57017
FILE NO. 811-08821

- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)

POST-EFFECTIVE AMENDMENT NO. 4

and

REGISTRATION STATEMENT UNDER THE INVESTMENT ACT OF 1940 (X)

AMENDMENT NO. 5 (X)

RYDEX VARIABLE TRUST
(Exact Name of Registrant as Specified in Charter)

c/o 6116 Executive Boulevard, Suite 400
Rockville, Maryland 20852
(Address of Principal Executive Offices, Zip Code)

Registrant's Telephone Number, including Area Code (301) 468-8520

Albert P. Viragh, Jr.
Rydex
6116 Executive Boulevard, Suite 400
Rockville, Maryland 20852
(Name and Address of Agent for Service)

Copies to:

W. John McGuire John H. Grady, Jr., Esq.
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
1800 M Street, N.W. 1701 Market Street
Washington, D.C. 20036 Philadelphia, PA 19103

It is proposed that this filing will become effective (check appropriate box):

___ Immediately upon filing pursuant to paragraph (b)

X On April 30, 2000 pursuant to paragraph (b)
---
___ 60 days after filing pursuant to paragraph (a)(1)

___ On (date) pursuant to paragraph (a)(1)

___ 75 days after filing pursuant to paragraph (a)(2)

___ On (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

___ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>
PROSPECTUS

<TABLE>
<C> <S>
1 INTRODUCTION
---

2 NOVA FUND
---

4 URSA FUND
---

6 OTC FUND
---

8 PRECIOUS METALS FUND
---

10 U.S. GOVERNMENT BOND FUND
---

12 U.S. GOVERNMENT MONEY MARKET FUND
---

14 MORE INFORMATION ABOUT FUND INVESTMENTS
--- AND RISK

18 PURCHASING AND REDEEMING SHARES
---

20 MANAGEMENT OF THE FUNDS
---

21 DIVIDENDS, DISTRIBUTIONS, AND TAXES
---

22 FINANCIAL HIGHLIGHTS
---

25 BENCHMARK INFORMATION
---

BC ADDITIONAL INFORMATION
---
</TABLE>

MAY 1, 2000

RYDEX VARIABLE TRUST

NOVA FUND
URSA FUND
OTC FUND
PRECIOUS METALS FUND
U.S. GOVERNMENT BOND FUND
U.S. GOVERNMENT MONEY MARKET FUND

6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852
800-820-0888 301-468-8520
WWW.RYDEXFUNDS.COM

Rydex Variable Trust (the "Trust") is a mutual fund complex with thirty separate
investment portfolios (the "Rydex Variable Funds"). This prospectus describes
six Funds which are grouped into three categories:

- BENCHMARK FUNDS -- Nova Fund, Ursa Fund, OTC Fund, and U.S. Government
Bond Fund
- SECTOR FUND -- Precious Metals Fund
- MONEY MARKET FUND -- U.S. Government Money Market Fund

Shares of the Funds are available exclusively for variable annuity and variable
life insurance products. Variable life and variable annuity account investors
should also review the separate account prospectus prepared by their insurance
company.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
TRUST'S SHARES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS 1
--------

RISK/RETURN INFORMATION COMMON TO THE FUNDS

THE FUNDS' INVESTMENT OBJECTIVES

Each Fund has a separate investment objective. A general description of the
Funds' investment objectives are set forth below:

- BENCHMARK FUNDS -- Each Benchmark Fund seeks to provide investment results
that match the performance of a specific benchmark.

- SECTOR FUND -- The Precious Metals Fund seeks capital appreciation by
investing in companies which operate in the precious metals sector. THE
INVESTMENT OBJECTIVE OF THE PRECIOUS METALS FUND IS NON-FUNDAMENTAL AND
MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.

- MONEY MARKET FUND -- The U.S. Government Money Market Fund seeks to
provide security of principal, high current income and liquidity.

RISKS OF INVESTING IN THE FUNDS

The value of the Funds may fluctuate. In addition, Fund shares:

- MAY DECLINE IN VALUE, AND YOU MAY LOSE MONEY

- ARE NOT FEDERALLY INSURED

- ARE NOT GUARANTEED BY ANY GOVERNMENT AGENCY

- ARE NOT BANK DEPOSITS

- ARE NOT GUARANTEED TO ACHIEVE THEIR OBJECTIVES
<PAGE>
- ------
2 PROSPECTUS

FUND INFORMATION -- NOVA FUND

FUND OBJECTIVE

The Nova Fund seeks to provide investment results that match the performance
of a specific benchmark on a daily basis. The Fund's current benchmark is 150%
of the performance of the S&P 500 Index-Registered Trademark- (the "S&P 500
Index").

If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by 150% of the value of any increase in the S&P 500
Index. When the value of the S&P 500 Index declines, the value of the Fund's
shares should also decrease on a daily basis by 150% of the value of any
decrease in the Index (e.g., if the S&P 500 Index goes down by 5%, the value of
the Fund's shares should go down by 7.5% on that day).

PORTFOLIO INVESTMENT STRATEGY

Unlike a traditional index fund, as its primary investment strategy, the
Fund invests to a significant extent in leveraged instruments, such as futures
contracts and options on securities, futures contracts, and stock indices, as
well as equity securities. Futures and options contracts enable the Fund to
pursue its objective without investing directly in the securities included in
the benchmark, or in the same proportion that those securities are represented
in that benchmark. On a day-to-day basis, the Fund holds U.S. Government
securities or cash equivalents to collateralize these futures and options
contracts. The Fund also may enter into repurchase agreements.

RISK CONSIDERATIONS

The Nova Fund is subject to a number of risks that will affect the value of
its shares, including:

- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
drastically from day to day. This volatility may cause the value of your
investment in the Fund to decrease.

- LEVERAGING RISK -- The more the Fund invests in leveraged instruments, the
more this leverage will magnify any losses on those investments.

- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
<PAGE>
PROSPECTUS 3
--------

FUND PERFORMANCE INFORMATION

NOVA FUND PERFORMANCE

The bar chart and table below show the performance of the Nova Fund both
year-by-year and as an average over different periods of time. For investment
activity prior to November 1998, the Fund's performance reflected insurance
related charges that had the effect of reducing returns. The variability of
performance over time provides an indication of the risks of investing in the
Fund. Of course, this past performance does not necessarily indicate how the
Fund will perform in the future.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
31.57% (QUARTER ENDED DEC. 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -17.17% (QUARTER ENDED SEPT. 30, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
NOVA FUND S&P 500 INDEX(2)
<S> <C> <C>
--------------------------------------
Past One Year 23.28% 19.53%
Since Inception (05/07/97) 28.83% 24.85%
</TABLE>

FUND INFORMATION -- URSA FUND

FUND OBJECTIVE
The Ursa Fund seeks to provide investment results that will inversely
correlate to the performance of the S&P 500 Index.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase during times when the value of the S&P 500 Index is decreasing. When
the value of the S&P 500 Index is increasing, however, the value of the Fund's
shares should decrease on a daily basis by an inversely proportionate amount
(e.g., if the S&P 500 Index goes up by 5%, the value of the Fund's shares should
go down by 5% on that day).

PORTFOLIO INVESTMENT STRATEGY
Unlike a traditional index fund, the Fund's benchmark is to perform exactly
opposite the S&P 500 Index, and the Fund will not own the securities included in
the Index. Instead, as its primary investment strategy, the Fund invests to a
significant extent in futures contracts and options on securities, futures
contracts, and stock indices. On a day-to-day basis, the Fund holds U.S.
Government securities or cash equivalents to collateralize these futures and
options contracts. The Fund also may enter into repurchase agreements and sell
securities short.

RISK CONSIDERATIONS
The Ursa Fund is subject to a number of risks that will affect the value of
its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
drastically from day to day. Equity market volatility may also negatively
affect the Fund's short sales of securities. This volatility may cause the
value of your investment in the Fund to decrease.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
<PAGE>
PROSPECTUS 5
--------

FUND PERFORMANCE INFORMATION

URSA FUND PERFORMANCE
The bar chart and table below show the performance of the Ursa Fund both
year-by-year and as an average over different periods of time. For investment
activity prior to November 1998, the Fund's performance reflected insurance
related charges that had the effect of reducing returns. The variability of
performance over time provides an indication of the risks of investing in the
Fund. Of course, this past performance does not necessarily indicate how the
Fund will perform in the future.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
9.11% (QUARTER ENDED SEPT. 30, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -16.91% (QUARTER ENDED DEC. 31, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
URSA FUND S&P 500 INDEX(2)
<S> <C> <C>
--------------------------------------
Past One Year -15.06 % 19.53%
Since Inception of Continuous Operations (06/10/97)(3) -19.51 % 22.99%
</TABLE>

(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.
(2) THE S&P 500 INDEX IS AN UNMANAGED INDEX THAT IS A WIDELY RECOGNIZED
INDICATOR OF GENERAL STOCK MARKET PERFORMANCE.
(3) THE FUND COMMENCED CONTINUOUS OPERATIONS ON JUNE 10, 1997. PRIOR TO THAT
TIME, DUE TO THE NATURE OF THE FUND'S INVESTMENT ACTIVITY, THE FUND
EXPERIENCED PERIODS WITH ZERO NET ASSETS. PERIODS OF OPERATION, INCLUDING
RETURNS FOR EACH DISCRETE PERIOD, WERE AS FOLLOWS: MAY 7, 1997 TO MAY 21,
1997 -3.70%; AND MAY 24, 1997 TO JUNE 3, 1997 0.10%.
<PAGE>
- ------
6 PROSPECTUS

FUND INFORMATION -- OTC FUND

FUND OBJECTIVE
The OTC Fund seeks to provide investment results that correspond to a
benchmark for over-the-counter securities. The Fund's current benchmark is the
NASDAQ 100 Index-Registered Trademark- (the "NASDAQ 100 Index").
If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by the amount of the increase in value of the NASDAQ
100 Index. However, when the value of the NASDAQ 100 Index declines, the value
of the Fund's shares should also decrease on a daily basis by the amount of the
decrease in value of the Index.

PORTFOLIO INVESTMENT STRATEGY
The Fund invests principally in securities of companies included in the
NASDAQ 100 Index. It also may invest in other instruments whose performance is
expected to correspond to that of the Index, and may engage in futures and
options transactions. The Fund may also purchase U.S. Government securities and
enter into repurchase agreements.

RISK CONSIDERATIONS
The OTC Fund is subject to a number of risks that will affect the value of
its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day to day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
<PAGE>
PROSPECTUS 7
--------

FUND PERFORMANCE INFORMATION

OTC FUND PERFORMANCE
The bar chart and table below show the performance of the OTC Fund both
year-by-year and as an average over different periods of time. For investment
activity prior to November 1998, the Fund's performance reflected insurance
related charges that had the effect of reducing returns. The variability of
performance over time provides an indication of the risks of investing in the
Fund. Of course, this past performance does not necessarily indicate how the
Fund will perform in the future.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
53.10% (QUARTER ENDED DEC. 31, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS
0.77% (QUARTER ENDED SEPT. 30, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
OTC FUND NASDAQ 100 INDEX-TM- (2)
<S> <C> <C>
--------------------------------------------
Past One Year 101.32% 101.95%
Since Inception (05/07/97) 67.70% 69.89%
</TABLE>

(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.
(2) THE NASDAQ 100 INDEX IS AN UNMANAGED INDEX THAT IS A WIDELY RECOGNIZED
INDICATOR OF OTC MARKET PERFORMANCE.
<PAGE>
- ------
8 PROSPECTUS

FUND INFORMATION -- PRECIOUS METALS FUND

FUND OBJECTIVE

The Precious Metals Fund seeks to provide capital appreciation by investing
in U.S. and foreign companies that are involved in the precious metals sector,
including exploration, mining, production and development, and other precious
metals-related services ("Precious Metals Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Precious Metals Companies that are traded in the United States and foreign
countries. Precious metals include gold, silver, platinum and other precious
metals. Precious Metals Companies include precious metal manufacturers;
distributors of precious metal products, such as jewelry, metal foil or bullion;
mining and geological exploration companies; and companies which provide
services to Precious Metals Companies. The Fund may also engage in futures and
options transactions, purchase ADRs and U.S. Government securities, and enter
into repurchase agreements.

RISK CONSIDERATIONS

The Precious Metals Fund is subject to a number of risks that will affect
the value of its shares, including:

- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's equity securities and any futures and options contracts may
fluctuate drastically from day to day. This volatility may cause the value
of your investment in the Fund to decrease.

- PRECIOUS METALS CONCENTRATION RISK -- The risk that the relatively few
securities of issuers in the precious metals sector that the Fund
purchases will underperform the market as a whole. To the extent that the
Fund's investments are concentrated in issuers conducting business in the
same industry, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/ or increased competition affecting that
industry, as well as to the volatility of global prices for precious
metals. The prices of precious metals may fluctuate widely due to changes
in inflation or inflation expectations, currency fluctuations,
speculation, worldwide demand and political developments in precious
metals producing countries.

- FOREIGN INVESTING RISK -- Investments in securities of foreign companies
can be more volatile than investments in U.S. companies. Diplomatic,
political, or economic developments could effect investment in foreign
countries. Foreign companies generally are not subject to uniform
accounting, auditing, and financial reporting standards comparable to
those applicable to U.S. domestic companies.
<PAGE>
PROSPECTUS 9
--------

FUND PERFORMANCE INFORMATION

PRECIOUS METALS FUND PERFORMANCE

The bar chart and table below show the performance of the Precious Metals
Fund both year-by-year and as an average over different periods of time. For
investment activity prior to November 1998, the Fund's performance reflected
insurance related charges that had the effect of reducing returns. The
variability of performance over time provides an indication of the risks of
investing in the Fund. Of course, this past performance does not necessarily
indicate how the Fund will perform in the future. Prior to October 1, 1999, the
Precious Metals Fund's objective was to provide investment results that
corresponded to a benchmark for precious metals-related securities.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PRECIOUS METALS FUND
<S> <C>
1999 -3.58%
1998 -17.24%
</TABLE>

DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
13.22% (QUARTER ENDED SEPT. 30, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS
- -13.80% (QUARTER ENDED DEC. 31, 1999).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
PRECIOUS METALS FUND S&P 500 INDEX(2) XAU INDEX(3)
<S> <C> <C> <C>
------------------------------------------------------
Past One Year -3.58% 19.53% 4.62%
Since Inception (05/29/97) -20.04% 23.84% -15.82%
</TABLE>

(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.
(2) THE S&P 500 INDEX IS AN UNMANAGED INDEX THAT IS A WIDELY RECOGNIZED
INDICATOR OF GENERAL STOCK MARKET PERFORMANCE.
(3) THE XAU INDEX IS AN UNMANAGED INDEX THAT IS A WIDELY RECOGNIZED INDICATOR OF
PRECIOUS METALS SECTOR PERFORMANCE.
<PAGE>
- ------
10 PROSPECTUS

FUND INFORMATION -- U.S. GOVERNMENT BOND FUND

FUND OBJECTIVE
The U.S. Government Bond Fund seeks to provide investment results that
correspond to a benchmark for U.S. Government securities. The Fund's current
benchmark is 120% of the price movement of the Long Treasury Bond.
If the Fund meets its objective, the value of the Fund's shares should
increase on a daily basis by 120% of any price increase by the Long Treasury
Bond. In contrast, when the price of the Long Treasury Bond declines, the value
of the Fund's shares should decline on a daily basis by 120% of any price
decline of the Long Treasury Bond.

PORTFOLIO INVESTMENT STRATEGY
The Fund invests principally in U.S. Government securities and in leveraged
instruments, such as certain futures and options contracts. Some of the Fund's
U.S. Government securities, or cash equivalents, will be used to collateralize
these futures and options. Futures and options contracts, if used properly, may
enable the Fund to meet its objective by increasing the Fund's exposure to the
securities included in its benchmark. In addition, the Fund may enter into
transactions involving zero coupon U.S. Treasury bonds and repurchase
agreements.

RISK CONSIDERATIONS
The U.S. Government Bond Fund is subject to a number of risks that will
affect the value of its shares, including:
- FIXED INCOME RISK -- The Fund's fixed income investments will change in
value in response to interest rate changes and other factors. In addition,
the value of securities with longer maturities will fluctuate more in
response to interest rate changes.
- LEVERAGING RISK -- The more the Fund invests in leveraged instruments, the
more this leverage will magnify any losses on those investments.

FUND PERFORMANCE INFORMATION

U.S. GOVERNMENT BOND FUND PERFORMANCE

The bar chart and table below show the performance of the U.S. Government
Bond Fund both year-by-year and as an average over different periods of time.
For investment activity prior to November 1998, the Fund's performance reflected
insurance related charges that had the effect of reducing returns. The
variability of performance over time provides an indication of the risks of
investing in the Fund. Of course, this past performance does not necessarily
indicate how the Fund will perform in the future.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
U.S. GOVERNMENT BOND FUND
<S> <C>
1999 -20.45%
1998 12.86%
</TABLE>

DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
10.08% (QUARTER ENDED SEPT. 30, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
- -9.62% (QUARTER ENDED MARCH 31, 1999).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
U.S. GOVERNMENT BOND FUND LEHMAN LONG TREASURY INDEX(2)
<S> <C> <C>
---------------------------------------------------------
Past One Year -20.45% -8.70%
Since Inception of Continuous Operations
(08/18/97)(3) -0.53% 5.14%
</TABLE>

(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.
(2) THE LEHMAN LONG TREASURY INDEX IS AN UNMANAGED INDEX THAT IS A WIDELY
RECOGNIZED INDICATOR OF U.S. GOVERNMENT BOND PERFORMANCE.
(3) THE FUND COMMENCED CONTINUOUS OPERATIONS ON AUGUST 18, 1997. PRIOR TO THAT
TIME, DUE TO THE NATURE OF THE FUND'S INVESTMENT ACTIVITY, THE FUND
EXPERIENCED PERIODS WITH ZERO NET ASSETS. PERIODS OF OPERATION, INCLUDING
RETURNS FOR EACH DISCRETE PERIOD, WERE AS FOLLOWS: MAY 29, 1997 TO JUNE 5,
1997 1.50%; JUNE 24, 1997 TO JULY 14, 1997 2.20%; AND JULY 29, 1997 TO
AUGUST 12, 1997 -3.30%.
<PAGE>
- ------
12 PROSPECTUS

FUND INFORMATION -- U.S. GOVERNMENT MONEY MARKET FUND

FUND OBJECTIVE

The U.S. Government Money Market Fund seeks to provide security of
principal, high current income, and liquidity.

PORTFOLIO INVESTMENT STRATEGY
The U.S. Government Money Market Fund invests primarily in money market
instruments issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, and enters into repurchase
agreements fully collateralized by U.S. Government securities. The Fund operates
under SEC rules, which impose certain liquidity, maturity and diversification
requirements. All securities purchased by the Fund must have remaining
maturities of 397 days or less, and must be found by the Advisor to represent
minimal credit risk and be of eligible quality.

RISK CONSIDERATIONS
The U.S. Government Money Market Fund is subject to the following risks that
will potentially affect the value of its shares:
- INTEREST RATE RISK -- Interest Rate Risk involves the potential for
decline in the rate of dividends the Fund pays in the event of declining
interest rates.
- STABLE PRICE PER SHARE RISK -- The Fund's assets are valued using the
amortized cost method, which enables the Fund to maintain a stable price
of $1.00 per share. ALTHOUGH THE FUND IS MANAGED TO MAINTAIN A STABLE
PRICE PER SHARE OF $1.00, THERE IS NO GUARANTEE THAT THE PRICE WILL BE
CONSTANTLY MAINTAINED, AND IT IS POSSIBLE TO LOSE MONEY.
<PAGE>
PROSPECTUS 13
--------

FUND PERFORMANCE INFORMATION

U.S. GOVERNMENT MONEY MARKET FUND PERFORMANCE
The bar chart and table below show the performance of the U.S. Government
Money Market Fund both year-by-year and as an average over different periods of
time. For investment activity prior to November 1998, the Fund's performance
reflected insurance related charges that had the effect of reducing returns. The
variability of performance over time provides an indication of the risks of
investing in the Fund. Of course, this past performance does not necessarily
indicate how the Fund will perform in the future.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND
<S> <C>
1999 3.92%
1998 2.22%
</TABLE>

DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
1.09% (QUARTER ENDED DEC. 31, 1999) AND THE LOWEST RETURN FOR A QUARTER WAS
0.64% (QUARTERS ENDED MARCH 31, 1998 AND JUNE 30, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
U.S. GOVERNMENT
MONEY MARKET FUND
<S> <C>
----
Past One Year 3.92%
Since Inception (05/07/97) 3.41%
</TABLE>

(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.

YIELD - As of December 31, 1999, the current yield of the Fund was 4.16%.
<PAGE>
- ------
14 PROSPECTUS

MORE INFORMATION ABOUT FUND INVESTMENTS AND RISK

THE BENCHMARK FUNDS' INVESTMENT OBJECTIVES

Each Benchmark Fund's objective is to provide investment results that match
the performance of a specific benchmark. The current benchmark used by each Fund
is set forth below:

<S> <C>
FUND BENCHMARK
NOVA FUND 150% OF THE PERFORMANCE OF THE S&P 500
INDEX-REGISTERED TRADEMARK- (SPX)
URSA FUND INVERSE (OPPOSITE) OF THE PERFORMANCE OF THE S&P 500
INDEX-REGISTERED TRADEMARK- (SPX)
OTC FUND 100% OF THE PERFORMANCE OF THE NASDAQ 100
INDEX-REGISTERED TRADEMARK- (NDX)
U.S. GOVERNMENT BOND FUND 120% OF THE PRICE MOVEMENT OF THE LONG TREASURY BOND
</TABLE>

A BRIEF GUIDE TO THE BENCHMARKS.

THE S&P 500 INDEX. The S&P 500 Index is a capitalization-weighted index composed
of 500 common stocks, which are chosen by the Standard & Poor's Corporation
("S&P") on a statistical basis.

THE NASDAQ 100 INDEX. The NASDAQ 100 Index is a modified capitalization-weighted
index composed of 100 of the largest non-financial companies listed on the
National Association of Securities Dealers Automated Quotations System.

THE LONG TREASURY BOND. The Long Treasury Bond is the current U.S. Treasury bond
with the longest maturity. Currently, the longest maturity of a U.S. Treasury
bond is 30 years.

ADVISOR'S INVESTMENT STRATEGY IN MANAGING THE FUNDS

BENCHMARK FUND. In managing the Benchmark Funds, the Advisor uses a "passive"
investment strategy to manage each Fund's portfolio, meaning that the Advisor
does not attempt to select securities based on their individual potential to
perform better than the market. The Advisor's primary objective is to match the
performance of each Fund's benchmark as closely as possible on a daily basis.
The Advisor uses quantitative analysis techniques to structure each Fund to
obtain the highest correlation to its particular benchmark. The Advisor does not
engage in temporary defensive investing, keeping each Fund's assets fully
invested in all market environments. The Advisor monitors each Fund on an
ongoing basis, and makes adjustments to its portfolio, as necessary, to minimize
tracking error and to maximize liquidity.

The Advisor may pursue the Funds' investment objectives by utilizing leveraged
instruments, such as futures contracts and options on securities, futures
contracts, and stock indices. In addition, the Advisor will regularly utilize
short selling techniques designed to help the Ursa Fund's performance to
inversely correlate to the performance of the S&P 500 Index.
<PAGE>
PROSPECTUS 15
--------

SECTOR FUND. In managing the Precious Metals Fund, the Advisor's investment team
employs a quantitative model that considers a number of factors. To develop a
liquid portfolio of stocks that adequately represents the precious metals market
sector, the Advisor applies filters to the broad universe of stocks of issuers
that are "principally engaged" in business activities in that industry sector.
Specifically, the Advisor's investment process screens stocks primarily based on
liquidity, market capitalization, and correlation relative to the entire
industry sector. The Advisor also may consider other factors.

The Advisor monitors the Precious Metals Fund's portfolio on an ongoing basis,
and adds or deletes stocks from the portfolio as needed.

After constructing a portfolio for the Precious Metals Fund, the Advisor may
utilize futures contracts and options to leverage the Fund's exposure to the
relevant business sector. The use of leverage will result in the Fund being
exposed to its relevant business sector with more than 100% of its total assets.

Each business sector typically consists of numerous industries. For purposes of
the Advisor's investment methodology and the policies for the Fund, a company is
considered to be "principally engaged" in a designated business activity in a
particular economic sector if at least 50% of its assets, gross income, or net
profits are committed to, or derived from, that activity. If a question exists
as to whether a company meets these standards, the Advisor will determine
whether the company's primary business is within the business sector designated
for investment by the Fund.

RISKS OF INVESTING IN THE FUNDS

As indicated below, the Funds are subject to a number of risks that may
affect the value of Fund shares.

EQUITY RISK (NOVA, URSA, OTC, AND PRECIOUS METALS FUNDS) -- The Funds may invest
in public and privately issued equity securities, including common and preferred
stocks, warrants, and rights, as well as instruments that attempt to track the
price movement of equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause their prices
to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which the Funds invest will
cause the net asset value of the Funds to fluctuate. Historically, the equity
markets have moved in cycles, and the value of the Fund's equity securities and
equity derivatives may fluctuate drastically from day to day. This price
volatility is the principal risk of investing in equity securities. Because of
their link to the equity markets, an investment in the Funds may be more
suitable for long-term investors who can bear the risk of short-term principal
fluctuations.
<PAGE>
- ------
16 PROSPECTUS

NON-DIVERSIFICATION RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) --
Since each Fund is non-diversified, each Fund may invest in the securities of a
limited number of issuers. To the extent that a Fund invests a significant
percentage of its assets in a limited number of issuers, the Fund is subject to
the risks of investing in those few issuers, and may be more susceptible to a
single adverse economic or regulatory occurrence.

FIXED INCOME RISK (U.S. GOVERNMENT BOND FUND) -- The market value of fixed
income investments will change in response to interest rate changes and other
factors. During periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the values of such securities generally decline. Moreover, while
securities with longer maturities tend to produce higher yields, the prices of
longer maturity securities are also subject to greater market fluctuations as a
result of changes in interest rates.

TRACKING ERROR RISK (BENCHMARK FUNDS) -- While the Funds do not expect returns
to deviate significantly from their respective benchmarks on a daily basis,
certain factors may affect their ability to achieve close correlation. These
factors may include Fund expenses, imperfect correlation between the Funds'
investments and those of their benchmarks, rounding of share prices, changes to
the benchmark, regulatory policies, and leverage. The cumulative effect of these
factors may over time cause the Funds' returns to deviate from their respective
benchmarks on an aggregate basis. The magnitude of any tracking error may be
affected by a higher portfolio turnover rate.

TRADING HALT RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET) -- The Funds
typically will hold short-term options and futures contracts. The major
exchanges on which these contracts are traded, such as the Chicago Mercantile
Exchange ("CME"), have established limits on how much an option or futures
contract may decline over various time periods within a day. If an option or
futures contract's price declines more than the established limits, trading on
the exchange is halted on that instrument. If a trading halt occurs, a Fund may
temporarily be unable to purchase or sell options or futures contracts. Such a
trading halt near the time the Fund prices its shares may limit the Fund's
ability to use leverage and may prevent the Fund from achieving its investment
objective. In such an event, a Fund also may be required to use a "fair-value"
method to price its outstanding contracts.

FUTURES AND OPTIONS RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) --
The Funds will invest a percentage of their assets in futures and options
contracts. The Funds may use futures contracts and related options for bona fide
hedging purposes to offset changes in the value of securities held or expected
to be acquired. They may also be used to gain exposure to a particular market or
instrument, to create a synthetic money market position, and for certain other
tax-related
<PAGE>
PROSPECTUS 17
--------

purposes. The Funds will only enter into futures contracts traded on a national
futures exchange or board of trade. Futures and options contracts are described
in more detail below:

FUTURES CONTRACTS -- Futures contracts and options on futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. An option on a futures contract gives the purchaser the
right, in exchange for a premium, to assume a position in a futures contract
at a specified exercise price during the term of the option. Index futures
are futures contracts for various indices that are traded on registered
securities exchanges.

OPTIONS -- The buyer of an option acquires the right to buy (a call option)
or sell (a put option) a certain quantity of a security (the underlying
security) or instrument at a certain price up to a specified point in time.
The seller or writer of an option is obligated to sell (a call option) or
buy (a put option) the underlying security. When writing (selling) call
options on securities, the Funds may cover its position by owning the
underlying security on which the option is written or by owning a call
option on the underlying security. Alternatively, the Funds may cover its
position by maintaining in a segregated account cash or liquid securities
equal in value to the exercise price of the call option written by the
Funds.

The risks associated with the Funds' use of futures and options contracts
include:

- A Fund may experience losses over certain ranges in the market that exceed
losses experienced by a fund that does not use futures contracts and
options.

- There may be an imperfect correlation between the changes in market value
of the securities held by a Fund and the prices of futures and options on
futures.

- Although the Funds will only purchase exchange-traded futures, due to
market conditions there may not always be a liquid secondary market for a
futures contract or option. As a result, the Funds may be unable to close
out their futures contracts at a time which is advantageous.

- Trading restrictions or limitations may be imposed by an exchange, and
government regulations may restrict trading in futures contracts and
options.

- Because option premiums paid or received by the Funds are small in
relation to the market value of the investments underlying the options,
buying and selling put and call options can be more speculative than
investing directly in securities.

SHORT SALES RISK (URSA FUND) -- Short sales are transactions in which a Fund
sells a security it does not own. To complete the transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund is then 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 higher or lower than the
price at which the security was sold by the Fund. If the underlying security
goes down in price
<PAGE>
- ------
18 PROSPECTUS

between the time the Fund sells the security and buys it back, the Fund will
realize a gain on the transaction. Conversely, if the underlying security goes
up in price during the period, the Fund will realize a loss on the transaction.
The risk of such price increases is the principal risk of engaging in short
sales.

PORTFOLIO TURNOVER RATE RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET
FUND) -- The Trust anticipates that investors that are part of a tactical
asset-allocation strategy will frequently redeem or exchange shares of a Fund,
which will cause that Fund to experience high portfolio turnover. A higher
portfolio turnover rate may result in a Fund paying higher levels of transaction
costs and generating greater tax liabilities for shareholders.

INDUSTRY CONCENTRATION RISK (PRECIOUS METALS FUND) -- None of the Benchmark
Funds will invest 25% or more of the value of the Fund's total assets in the
securities of one or more issuers conducting their principal business activities
in the same industry; EXCEPT THAT, to the extent the index underlying a Fund's
benchmark is concentrated in a particular industry, a Fund will necessarily be
concentrated in that industry. Currently, the index underlying the OTC Fund's
benchmark -- the NASDAQ 100 Index -- is concentrated in technology companies.
The Precious Metals Fund invests in the securities of a limited number of
issuers conducting business in the precious metals industry and therefore is
concentrated in that industry. The risk of concentrating Fund investments in a
limited number of issuers conducting business in the same industry is that a
Fund will be more susceptible to the risks that are associated with those
issuers (or that industry) than a fund that does not concentrate its
investments.

EARLY CLOSING RISK (OTC AND PRECIOUS METALS FUNDS) -- The normal close of
trading of securities listed on the National Association of Securities Dealers
Automated Quotations system ("NASDAQ") and the New York Stock Exchange ("NYSE")
is 4:00 P.M., Eastern Time. Unanticipated early closings may result in a Fund
being unable to sell or buy securities on that day. If an exchange closes early
on a day when one or more of the Funds needs to execute a high volume of
securities trades late in a trading day, a Fund might incur substantial trading
losses.

FOREIGN INVESTING RISK (PRECIOUS METALS FUND) -- Investments in securities of
foreign companies can be more volatile than investments in U.S. companies.
Diplomatic, political, or economic developments could affect investments in
foreign countries. Foreign companies generally are not subject to uniform
accounting, auditing, and financial reporting standards comparable to those
applicable to U.S. domestic companies.

PURCHASING AND REDEEMING SHARES

Shares are offered continuously, and may be purchased on any day that the
NYSE is open for business (a "Business Day"). On any day that the New York Fed
or the NYSE closes early, the principal government securities and corporate bond
markets close early (such as on days in advance
<PAGE>
PROSPECTUS 19
--------

of holidays generally observed by participants in these markets), or as
permitted by the Securities and Exchange Commission ("SEC"), the right is
reserved to advance the time on that day by which purchase and redemption orders
must be received.

Shares of each Fund can be purchased only by insurance companies for their
separate accounts to fund variable life insurance and variable annuity
contracts. All orders for the purchase of shares are subject to acceptance or
rejection by the Trust. An insurance company purchases and redeems shares of
each Fund based on, among other things, the amount of net Contract premiums or
purchase payments allocated to a separate account investment division, transfers
to or from a separate account investment division, contract loans and
repayments, contract withdrawals and surrenders, and benefit payments, at the
Fund's net asset value per share calculated as of that same day.

All redemption requests will be processed and payment with respect thereto
will be made within seven days after tender. With respect to each Fund, and as
permitted by the SEC, the right of redemption may be suspended, or the date of
payment postponed: (1) for any period during which the NYSE is closed (other
than customary weekend or holiday closings) or trading on the NYSE is
restricted; (2) for any period during which an emergency exists so that disposal
of Fund investments or the determination of net asset value per share ("NAV") is
not reasonably practicable; or (3) for such other periods as the SEC, by order,
may permit for protection of fund investors. In cases where NASDAQ, the CME,
Chicago Board Options Exchange ("CBOE") or the CBOT, as appropriate, is closed
or trading is restricted, a Fund may ask the SEC to permit the right of
redemption to be suspended.

NET ASSET VALUE

The price per share (the offering price) will be the NAV next determined
after your purchase order is received by the Trust. You may also redeem all or
any portion of your Fund shares at the next determined NAV after the Trust
receives your redemption request. NAV is calculated by (1) taking the current
market value of a Fund's total assets, (2) subtracting the liabilities, and
(3) dividing that amount by the total number of shares owned by shareholders.
For most Funds, the NAV is calculated once each Business Day after the close of
the NYSE (currently, 4:00 p.m., Eastern Time). The NAV of the U.S. Government
Bond Fund is determined each Business Day as of the close of normal trading on
the CBOT (normally 3:00 P.M., Eastern Time). If the exchange or market where a
Fund's securities or other investments are primarily traded closes early, the
NAV may be calculated earlier in accordance with the policies set forth in the
Funds' SAI.

TO RECEIVE THE CURRENT BUSINESS DAY'S NAV, VARIABLE LIFE AND VARIABLE
ANNUITY ACCOUNT INVESTORS SHOULD CONSULT THEIR SEPARATE ACCOUNT PROSPECTUS.
<PAGE>
- ------
20 PROSPECTUS

MANAGEMENT OF THE FUNDS

THE INVESTMENT ADVISOR

Rydex Global Advisors (the "Advisor"), 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852, serves as investment advisor and manager of the
Funds. Albert P. Viragh, Jr., the Chairman of the Board and the President of the
Advisor, owns a controlling interest in the Advisor. From 1985 until the
incorporation of the Advisor, Mr. Viragh was a Vice President of Money
Management Associates ("MMA"), a Maryland-based registered investment advisor.
From 1992 to June 1993, Mr. Viragh was the portfolio manager of The Rushmore
Nova Portfolio, a series of The Rushmore Fund, Inc., an investment company
managed by MMA.

The Advisor makes investment decisions for the assets of the Funds and
continuously reviews, supervises, and administers each Fund's investment
program. The Trustees of the Trust supervise the Advisor and establish policies
that the Advisor must follow in its day-to-day management activities. Under an
investment advisory agreement between the Trust and the Advisor, the Funds paid
the Advisor a fee at an annualized rate for the fiscal year ended December 31,
1999, based on the average daily net assets for each Fund, as set forth below:

<TABLE>
<CAPTION>
FUND ADVISORY FEE
<S> <C>
- --------------------------------------------------------------------------
Nova .75%
Ursa .90%
OTC .75%
Precious Metals .75%
U.S. Government Bond .50%
U.S. Government Money Market .50%
</TABLE>

The Advisor bears all of its own costs associated with providing these
advisory services and the expenses of the Trustees who are affiliated with the
Advisor. The Advisor may make payments from its own resources to broker-dealers
and other financial institutions in connection with the sale of Fund shares.

PORTFOLIO MANAGEMENT

The portfolio manager of the Ursa Fund and the OTC Fund is Michael P. Byrum,
who is a Vice President and the Advisor's senior portfolio manager. Prior to
joining the Advisor as a portfolio manager in July 1993, Mr. Byrum worked as an
investor representative with MMA.

The portfolio manager of the Nova Fund is Thomas Michael, who joined the
Advisor as a portfolio manager in March 1994. From 1992 to February 1994, Mr.
Michael was a financial markets analyst at Cedar Street Investment Management
Co., of Chicago, Illinois, an institutional consulting
<PAGE>
PROSPECTUS 21
--------

firm specializing in developing hedging and speculative strategies in stock
index futures contracts and U.S. Treasury bond futures contracts.

The Precious Metals Fund is managed by a team and no one person is
responsible for making investment decisions for the Fund.

The portfolio manager of the U.S. Government Bond Fund is Anne H. Ruff, who
joined the Advisor as a portfolio manager in August 1996. From 1989 to 1995, Ms.
Ruff worked as a portfolio manager for United Services Life Insurance Company in
Arlington, Virginia, where she managed $2.5 billion in fixed-income portfolios.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

DIVIDENDS AND DISTRIBUTIONS

Income dividends and capital gain distributions are paid at least annually
by each of the Funds, except the U.S. Government Money Market and the U.S.
Government Bond Funds, which declare and pay dividends daily to the insurance
company. The Trust may declare a special capital gains distribution if the
Trustees believe that such a distribution would be in the best interest of the
shareholders of a Fund.

TAXES

Each Fund is treated as a separate entity for federal tax purposes, and
intends to qualify for the special tax treatment afforded regulated investment
companies. As long as a Fund qualifies as a regulated investment company, it
pays no federal income tax on the earnings it distributes to Shareholders. A
Fund is not liable for any income or franchise tax in Delaware as long as it
qualifies as a regulated investment company for federal income tax purposes.

In addition to qualifying for special tax treatment as a regulated
investment company, the Funds intend to meet special diversification
requirements of the Internal Revenue Code (the "Code") in order to assure
insurance companies that their variable annuity and variable life contracts
qualify as insurance under the Code.
<PAGE>
- ------
22 PROSPECTUS

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Funds'
financial performance for the period of each Fund's (and its predecessor's)
operations. Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). On November 2, 1998, the Trust acquired all of the
assets and liabilities (other than liabilities relating to insurance charges) of
Rydex Advisor Variable Annuity Account (the "Separate Account") and the
subaccounts of the Separate Account (the "Subaccounts"). The information
provided below for periods ending prior to and including December 31, 1997,
which relates to the Subaccounts, has been audited by PricewaterhouseCoopers
LLP. The information for subsequent periods has been audited by Deloitte &
Touche LLP. The Reports of Independent Accountants for each such period along
with the Funds' financial statements and related notes, are included in the
Annual Reports to Shareholders for such periods. Our 1999 Annual Report is
available upon request and without charge by calling 1-301-468-8520 collect. The
1999 Annual Report is incorporated by reference in the SAI.

FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NOVA URSA
-------------------------------------------- --------------------------------------------
YEAR YEAR PERIOD YEAR YEAR JUNE 10,
ENDED ENDED ENDED ENDED ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997* 1999 1998 1997+
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:++
Net Asset Value -- Beginning
of Period.................. $ 15.88 $ 12.21 $ 10.00 $ 6.30 $ 8.07 $ 9.36
------- ------- ------- ------- ------ ------
Net Investment Income
(Loss)................... .49 .04 .07 .20 .06 (.01)
Net Realized and
Unrealized Gains (Losses)
on Securities............ 3.10 3.63 2.14 (1.15) (1.83) (1.28)
Net Increase (Decrease) in
Net Asset Value Resulting
from Operations.......... 3.59 3.67 2.21 (.95) (1.77) (1.29)
Dividends to Shareholders
from Net Investment
Income................... (.01) .00 .00 .00 .00 .00
Distributions (from
capital gains)........... (.89) .00 .00 .00 .00 .00
------- ------- ------- ------- ------ ------
Net Increase (Decrease) in
Net Asset Value.......... 2.69 3.67 2.21 (.95) (1.77) (1.29)
------- ------- ------- ------- ------ ------
Net Asset Value -- End of
Period..................... $ 18.57 $ 15.88 $ 12.21 $ 5.35 $ 6.30 $ 8.07
======= ======= ======= ======= ====== ======
Total Investment Return..... 23.28% 30.06% (15.06)% (21.93)%
Ratios to Average Net Assets
Gross Expenses............ 1.55% 3.26% 9.09%** 1.73% 3.76% 9.21%**
Net Expenses.............. 1.55% 3.22% 2.80%** 1.73% 3.59% 2.90%**
Net Investment Income
(Loss)................... 2.90% 0.27% 0.91%** 3.34% 0.89% (0.27)%**
Supplementary Data:
Portfolio Turnover
Rate***.................... 0% 0% 178% 0% 0% 0%
Net Assets, End of Period
(000's omitted)............ $92,922 $29,258 $10,448 $32,310 $5,509 $2,879

<CAPTION>
URSA
--------------------------
MAY 24, MAY 7,
1997 TO 1997 TO
JUNE 3, MAY 21,
1997+ 1997+*
----------- -----------
<S> <C> <C>
Per Share Operating
Performance:++
Net Asset Value -- Beginning
of Period.................. $ 9.57 $ 10.00
------ -------
Net Investment Income
(Loss)................... .00 (.04)
Net Realized and
Unrealized Gains (Losses)
on Securities............ .01 (.33)
Net Increase (Decrease) in
Net Asset Value Resulting
from Operations.......... .01 (.37)
Dividends to Shareholders
from Net Investment
Income................... .00 .00
Distributions (from
capital gains)........... .00 .00
------ -------
Net Increase (Decrease) in
Net Asset Value.......... .01 (.37)
------ -------
Net Asset Value -- End of
Period..................... $ 9.58 $ 9.63
====== =======
Total Investment Return.....
Ratios to Average Net Assets
Gross Expenses............ 85.10%** 13.62%**
Net Expenses.............. 2.90%** 2.90%**
Net Investment Income
(Loss)................... 2.76%** (10.05)%**
Supplementary Data:
Portfolio Turnover
Rate***.................... 0% 0%
Net Assets, End of Period
(000's omitted)............ $ -- $ --
</TABLE>

- ------------

* COMMENCEMENT OF OPERATIONS: NOVA AND URSA -- MAY 7, 1997

** ANNUALIZED

*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SHORT-TERM
SECURITIES HAVING A MATURITY OF LESS THAN ONE YEAR.

+ DUE TO THE NATURE OF THE INVESTMENT ACTIVITY, THE FUND EXPERIENCED PERIODS
WITH ZERO NET ASSETS. FINANCIAL HIGHLIGHTS ARE PRESENTED ONLY FOR PERIODS
WITH NET ASSETS GREATER THAN ZERO.

++ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
<PAGE>
PROSPECTUS 23
--------

FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. GOVERNMENT
MONEY MARKET OTC
---------------------------------------- ----------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997* 1999 1998 1997*
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:++
Net Asset Value -- Beginning of
Period........................... $ 1.00 $ 10.32 $ 10.00 $ 19.57 $ 10.65 $ 10.00
------- ------- ------- -------- -------- -------
Net Investment Income (Loss)....... .04 .08 .31 (.33) (.40) (.09)
Net Realized and Unrealized Gains
(Losses) on Securities.......... .00 .00 .01 19.88 9.32 .74
------- ------- ------- -------- -------- -------
Net Increase (Decrease) in Net
Asset Value Resulting from
Operations...................... .04 .08 .32 19.55 8.92 .65
Dividends to Shareholders from
Net Investment Income........... (.04) (.01) .00 .00 .00 .00
Distributions (from capital
gains).......................... .00 .00 .00 (.60) .00 .00
Adjustment due to
Reorganization.................. .00 (9.39) .00 .00 .00 .00
------- ------- ------- -------- -------- -------
Net Increase (Decrease) in Net
Asset Value..................... -- (9.32) .32 18.95 8.92 .65
------- ------- ------- -------- -------- -------
Net Asset Value -- End of Period... $ 1.00 $ 1.00 $ 10.32 $ 38.52 $ 19.57 $ 10.65
======= ======= ======= ======== ======== =======
Total Investment Return............ 3.92% 2.22% 101.32% 83.76%
Ratios to Average Net Assets
Gross Expenses................... 1.39% 2.99% 6.82%** 1.55% 2.96% 9.07%**
Net Expenses..................... 1.39% 2.67% 2.20%** 1.55% 2.96% 2.80%**
Net Investment Income (Loss)..... 3.64% 2.61% 3.34%** (1.24) (2.67)% (1.22)%**
Supplementary Data:
Portfolio Turnover Rate***....... 0% 0% 0% 953% 1,077% 450%
Net Assets, End of Period
(000's omitted)................. $99,396 $40,971 $17,903 $373,458 $ 22,038 $ 2,367

PRECIOUS METALS
----------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997*
------------ ------------ ------------
<S> <C> <C> <C>
Per Share Operating Performance:++
Net Asset Value -- Beginning of
Period........................... $ 5.81 $ 7.02 $ 10.00
-------- -------- -------
Net Investment Income (Loss)....... (.07) (.16) (.11)
Net Realized and Unrealized Gains
(Losses) on Securities.......... (.14) (1.05) (2.87)
-------- -------- -------
Net Increase (Decrease) in Net
Asset Value Resulting from
Operations...................... (.21) (1.21) (2.98)
Dividends to Shareholders from
Net Investment Income........... (.17) .00 .00
Distributions (from capital
gains).......................... .00 .00 .00
Adjustment due to
Reorganization.................. .00 .00 .00
-------- -------- -------
Net Increase (Decrease) in Net
Asset Value..................... (.38) (1.21) (2.98)
-------- -------- -------
Net Asset Value -- End of Period... $ 5.43 $ 5.81 $ 7.02
======== ======== =======
Total Investment Return............ (3.58) (17.24)%
Ratios to Average Net Assets
Gross Expenses................... 2.17% 3.39% 9.76%**
Net Expenses..................... 2.17% 3.23% 2.80%**
Net Investment Income (Loss)..... (1.39)% (2.31)% (2.19)%**
Supplementary Data:
Portfolio Turnover Rate***....... 1,239% 1,739% 914%
Net Assets, End of Period
(000's omitted)................. $ 6,992 $ 2,695 $ 518
</TABLE>

- ------------

* COMMENCEMENT OF OPERATIONS: U.S. GOVERNMENT MONEY MARKET AND OTC --
MAY 7, 1997; PRECIOUS METALS -- MAY 29, 1997

** ANNUALIZED

*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SHORT-TERM
SECURITIES HAVING A MATURITY OF LESS THAN ONE YEAR.

++ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
<PAGE>
- ------
24 PROSPECTUS

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
U.S. GOVERNMENT BOND
---------------------------------------------------------------------------------
AUGUST 18, JULY 29, JUNE 24, MAY 29,
YEAR ENDED YEAR ENDED 1997 TO 1997 TO 1997 TO 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, AUGUST 12, JULY 14, JUNE 5,
1999 1998 1997+ 1997+ 1997+ 1997+*
------------ ------------ ------------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:++
Net Asset Value -- Beginning of Period...... $ 13.28 $ 11.82 $10.70 $10.92 $10.44 $10.00
------- ------- ------ ------ ------ ------
Net Investment Income..................... .41 .24 .15 .02 .10 .00
Net Realized and Unrealized Gains (Losses)
on Securities............................ (3.09) 1.28 .97 (.38) .13 .15
------- ------- ------ ------ ------ ------
Net Increase (Decrease) in Net Asset Value
Resulting from Operations................ (2.68) 1.52 1.12 (.36) .23 .15
Dividends to Shareholders from Net
Investment Income........................ (.43) (.06) .00 .00 .00 .00
Distributions (from capital gains)........ .00 .00 .00 .00 .00 .00
------- ------- ------ ------ ------ ------
Net Increase (Decrease) in Net Asset
Value.................................... (3.11) 1.46 1.12 (.36) .23 .15
------- ------- ------ ------ ------ ------
Net Asset Value -- End of Period............ $ 10.17 $ 13.28 $11.82 $10.56 $10.67 $10.15
======= ======= ====== ====== ====== ======
Total Investment Return..................... (20.45)% 12.86%
Ratios to Average Net Assets
Gross Expenses............................ 1.52% 2.71% 8.47%** 49.63%** 12.68%** 5.43%**
Net Expenses.............................. 1.52% 2.71% 2.40%** 2.40%** 2.40%** 2.40%**
Net Investment Income..................... 3.55% 1.92% 3.49%** 3.80%** 7.94%** 1.86%**
Supplementary Data:
Portfolio Turnover Rate***................ 1,611% 1,463% 761% 0% 0% 0%
Net Assets, End of Period
(000's omitted).......................... $ 1,136 $ 4,973 $ 892 $ -- $ -- $ --
</TABLE>

- ------------

* COMMENCEMENT OF OPERATIONS: U. S. GOVERNMENT BOND -- MAY 29, 1997

** ANNUALIZED

*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SHORT-TERM
SECURITIES HAVING A MATURITY OF LESS THAN ONE YEAR.

+ DUE TO THE NATURE OF THE INVESTMENT ACTIVITY, THE FUND EXPERIENCED PERIODS
WITH ZERO NET ASSETS. FINANCIAL HIGHLIGHTS ARE PRESENTED ONLY FOR PERIODS
WITH NET ASSETS GREATER THAN ZERO.

++ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
<PAGE>
PROSPECTUS 25
--------

BENCHMARK INFORMATION

NEITHER THE NOVA FUND NOR THE URSA FUND IS SPONSORED, ENDORSED, SOLD, OR
PROMOTED BY STANDARD & POOR'S CORP. (S&P); AND THE OTC FUND IS NOT SPONSORED,
ENDORSED, SOLD, OR PROMOTED BY NASDAQ OR ANY OF NASDAQ'S AFFILIATES (NASDAQ AND
ITS AFFILIATES HEREINAFTER COLLECTIVELY REFERRED TO AS "NASDAQ").

NEITHER THE S&P NOR THE NASDAQ MAKE ANY REPRESENTATION OR WARRANTY, IMPLIED OR
EXPRESS, TO THE INVESTORS IN THE FUNDS, OR ANY MEMBER OF THE PUBLIC, REGARDING
THE ADVISABILITY OF INVESTING IN INDEX FUNDS OR THE ABILITY OF THE S&P 500
INDEX-Registered Trademark- AND THE NASDAQ 100 INDEX-Registered Trademark-,
RESPECTIVELY, TO TRACK GENERAL STOCK MARKET PERFORMANCE.

NEITHER THE S&P NOR THE NASDAQ GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE S&P 500 INDEX-Registered Trademark- AND THE NASDAQ 100
INDEX-Registered Trademark-, RESPECTIVELY, OR ANY DATA INCLUDED THEREIN.

NEITHER THE S&P NOR THE NASDAQ MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY ANY OF THE FUNDS, THE INVESTORS IN THE FUNDS, OR ANY
PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX-Registered Trademark-, THE
NASDAQ 100 INDEX-Registered Trademark-, RESPECTIVELY, OR ANY DATA INCLUDED
THEREIN.

NEITHER THE S&P NOR THE NASDAQ MAKE ANY EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE FOR USE WITH RESPECT TO THE
S&P 500 INDEX-Registered Trademark-, THE NASDAQ 100 INDEX-Registered Trademark-,
RESPECTIVELY, OR ANY DATA INCLUDED THEREIN.
<PAGE>
Additional information about the Funds is included in a Statement of Additional
Information dated May 1, 2000 (the "SAI"), which contains more detailed
information about the Funds. The SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus and, therefore, legally forms a part of this Prospectus. The SEC
maintains a web site ("http://www.sec.gov") that contains the SAI, material
incorporated by reference, and other information regarding registrants that file
electronically with the SEC. You may also review and copy documents at the SEC
Public Reference Room in Washington, D.C. (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a duplication
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, D.C. 20549-0102. You may also obtain information, upon
payment of a duplicating fee, by e-mailing the SEC at the following address:
[email protected].

You may obtain a copy of the SAI or the annual or semi-annual reports of the
Trust without charge by calling 1-301-468-8520 collect or by writing to Rydex
Variable Trust, at 6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852. Additional information about the investments of the Funds is available in
the annual and semi-annual reports. Also, in the annual report of the Trust, you
will find a discussion of the market conditions and investment strategies that
significantly affected performance during the last fiscal year.

- --------------------------------------------------------------------------------

NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR RYDEX GLOBAL
ADVISORS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST IN ANY
JURISDICTION WHERE SUCH AN OFFERING IS NOT LAWFUL.

THE TRUST'S SEC REGISTRATION NUMBER IS 811-08821.
<PAGE>

PROSPECTUS

RYDEX VARIABLE TRUST

BENCHMARK FUNDS
SECTOR FUNDS

6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852
1-800-820-0888 301-468-8520

WWW.RYDEXFUNDS.COM

Rydex Variable Trust (the "Trust") is a no-load mutual fund complex with
thirty separate investment portfolios (the "Funds"). This prospectus describes
eighteen Funds, which are grouped into two categories:

- BENCHMARK FUNDS - Arktos Fund and Juno Fund.

- SECTOR FUNDS - Banking Fund, Basic Materials Fund, Biotechnology Fund,
Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services
Fund, Financial Services Fund, Health Care Fund, Internet Fund,
Leisure Fund, Retailing Fund, Technology Fund, Telecommunications
Fund, Transportation Fund and Utilities Fund.

May 1, 2000

<PAGE>

RISK/RETURN INFORMATION COMMON TO THE FUNDS

THE FUNDS' INVESTMENT OBJECTIVES

Each Fund has a separate investment objective. A general description of the
Benchmark Funds and Sector Funds investment objective is set forth below:

- BENCHMARK FUNDS - Each Benchmark Fund seeks to provide investment
results that match the performance of a specific benchmark.

- SECTOR FUNDS - Each Sector Fund seeks capital appreciation by
investing in companies which operate in a specific economic
sector. THE INVESTMENT OBJECTIVE OF EACH SECTOR FUND IS
NON-FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.

RISKS OF INVESTING IN THE FUNDS

The value of the Funds may fluctuate. In addition, Fund shares:

- MAY DECLINE IN VALUE, AND YOU MAY LOSE MONEY
- ARE NOT FEDERALLY INSURED
- ARE NOT GUARANTEED BY ANY GOVERNMENT AGENCY
- ARE NOT BANK DEPOSITS
- ARE NOT GUARANTEED TO ACHIEVE THEIR OBJECTIVES

<PAGE>

FUND INFORMATION - ARKTOS FUND

FUND OBJECTIVE

The Arktos Fund seeks to provide investment results that will match the
performance of a specific benchmark. The Fund's current benchmark is the
inverse of the performance of the NASDAQ 100 Index-Registered Trademark-
(the "NASDAQ 100 Index").

If the Fund meets its objective, the value of the Fund's shares will tend
to increase during times when the value of the NASDAQ 100 Index is
decreasing. When the value of the NASDAQ 100 Index is increasing, however,
the value of the Fund's shares should decrease on a daily basis by an
inversely proportionate amount (e.g., if the NASDAQ 100 Index goes up by
5%, the value of the Fund's shares should go down by 5% on that day).

PORTFOLIO INVESTMENT STRATEGY

Unlike a traditional index fund, the Fund's benchmark is to perform exactly
opposite the NASDAQ 100 Index, and the Fund will not own the securities
included in the Index. Instead, as its primary investment strategy, the
Fund engages to a significant extent in short sales of securities, futures
contracts and options on securities, futures contracts, and stock indexes.
On a day-to-day basis, the Fund holds U.S. Government securities or cash
equivalents to collateralize these futures and options contracts. The Fund
also may enter into repurchase agreements.

RISK CONSIDERATIONS

The Arktos Fund is subject to a number of risks that will affect the value
of its shares, including:

- - EQUITY RISK - The equity markets are volatile, and the value of the Fund's
futures and options contracts and other securities may fluctuate
drastically from day to day. Equity market volatility may also negatively
affect the Fund's short sales of securities. This volatility may cause the
value of your investment in the Fund to decrease.

- - TRACKING ERROR RISK - The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.

<PAGE>

FUND PERFORMANCE INFORMATION

ARKTOS FUND PERFORMANCE
The Arktos Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION - JUNO FUND

FUND OBJECTIVE

The Juno Fund seeks to provide total returns that will inversely correlate
to the price movements of a benchmark for U.S. Treasury debt instruments or
futures contract on a specified debt instrument. The Fund's current
benchmark is the inverse of the price movement of the Long Treasury Bond.

If the Fund meets its objective, the value of the Fund's shares will tend
to increase during periods when the price of the Long Treasury Bond
decreases. When the price of the Long Treasury Bond increases, however, the
value of the Fund's shares should decrease on a daily basis by an inversely
proportionate amount (e.g., if the price of the Long Treasury Bond
increases by 2%, the value of the Fund's shares should go down by 2% on
that day).

PORTFOLIO INVESTMENT STRATEGY

Unlike a traditional fund, the Fund's benchmark is to perform exactly
opposite the Long Treasury Bond. As its primary investment strategy, the
Fund enters into short sales and engages in futures and options
transactions. On a day-to-day basis, the Fund holds U.S. Government
securities or cash equivalents to collateralize these obligations. The Fund
also may enter into repurchase agreements.

RISK CONSIDERATIONS

The Fund is subject to a number of risks that will affect the value of its
shares, including:

- - FIXED INCOME RISK - The Fund's fixed income investments will change in
value in response to interest rate changes and other factors. In addition,
the value of securities with longer maturities will fluctuate more in
response to interest rate changes.

<PAGE>

FUND PERFORMANCE INFORMATION

JUNO FUND PERFORMANCE
The bar chart and table below show the performance of Juno Fund both year by
year and as an average over different periods of time. The variability of
performance over time provides an indication of the risks of investing in the
Fund. Of course, this past performance does not necessarily indicate how the
Fund will perform in the future.

[INSERT BAR CHART HERE FOR
FOR CALENDAR-YEAR PERFORMANCE FOR
1998 AND 1999]
During the period shown in the bar
chart, the highest return for a quarter
was 5.81% (quarter ended March 31, 1999) and the
lowest return for a quarter was -6.43%
(quarter ended Sept. 30, 1998).

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
<TABLE>
<CAPTION>

LEHMAN LONG TREASURY
JUNO FUND INDEX(2)
--------------------------------------------

<S> <C> <C>
Past One Year 19.66% -8.70%
Since Inception (05/07/97) 4.93% 2.05%
</TABLE>

(1)These figures assume the reinvestment of dividends and capital gains
distributions.
(2)The Lehman Long Treasury Index is an unmanaged index that is a widely
recognized indicator of U.S. Government bond performance.

<PAGE>

FUND INFORMATION - BANKING FUND

FUND OBJECTIVE

The Banking Fund seeks to provide capital appreciation by investing in
companies that are involved in the banking sector, including commercial
banks (and their holding companies) and savings and loan institutions
("Banking Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Banking Companies that are traded in the United States. Banking Companies
are engaged in accepting deposits and making commercial and principally
non-mortgage consumer loans and include state chartered banks, savings and
loan institutions, and banks that are members of the Federal Reserve
System. The Fund may also engage in futures and options transactions,
purchase ADRs and U.S. Government securities, and enter into repurchase
agreements.

RISK CONSIDERATIONS

The Banking Fund is subject to a number of risks that will affect the value
of its shares, including:

- - EQUITY RISK - The equity markets are volatile, and the value of the Fund's
securities and futures and options contracts may fluctuate drastically from
day to day. This volatility may cause the value of your investment in the
Fund to decrease.

- - BANKING SECTOR CONCENTRATION RISK - The risk that the securities of Banking
Companies that the Fund purchases will under perform the market as a whole.
To the extent that the Fund's investments are concentrated in Banking
Companies, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting Banking
Companies. The prices of the securities of Banking Companies may fluctuate
widely due to the broadening of regional and national interstate banking
powers, the reduction in the number of publicly-traded Banking Companies,
and general economic conditions which could create exposure to credit
losses.

<PAGE>

FUND PERFORMANCE INFORMATION

BANKING FUND PERFORMANCE
The Banking Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION - BASIC MATERIALS FUND

FUND OBJECTIVE

The Basic Materials Fund seeks capital appreciation by investing in
companies engaged in the mining, manufacture, or sale of basic materials,
such as lumber, steel, iron, aluminum, concrete, chemicals and other basic
building and manufacturing materials ("Basic Materials Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Basic Materials Companies that are traded in the United States. Basic
Materials Companies are engaged in the manufacture, mining, processing, or
distribution of raw materials and intermediate goods used in the industrial
sector, and may be involved in the production of metals, textiles, and wood
products, including equipment suppliers and railroads. The Fund may also
engage in futures and options transactions, purchase ADRs and U.S.
Government securities, and enter into repurchase agreements.

RISK CONSIDERATIONS

The Basic Materials Fund is subject to a number of risks that will affect
the value of its shares, including:

- - BASIC MATERIALS SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the basic materials sector that the Fund purchases will under
perform the market as a whole. To the extent that the Fund's investments
are concentrated in issuers conducting business in the same economic
sector, the Fund is subject to legislative or regulatory changes, adverse
market conditions and/or increased competition affecting that economic
sector. The prices of the securities of Basic Materials Companies may
fluctuate widely due to the level and volatility of commodity prices, the
exchange value of the dollar, import controls, worldwide competition,
liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control devices.

<PAGE>

FUND PERFORMANCE INFORMATION

BASIC MATERIALS FUND PERFORMANCE
The Basic Materials Fund has not commenced operations, and therefore does not
have a performance history for a full calendar year.

<PAGE>

FUND INFORMATION - BIOTECHNOLOGY FUND

FUND OBJECTIVE

The Biotechnology Fund seeks capital appreciation by investing in companies
that are involved in the biotechnology industry, including companies
involved in research and development, genetic or other biological
engineering, and in the design, manufacture, or sale of related
biotechnology products or services ("Biotechnology Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Biotechnology Companies that are traded in the United States. Biotechnology
Companies are engaged in the research, development, and manufacture of
various biotechnological products, services, and processes; manufacture
and/or distribute biotechnological and biomedical products, including
devices and instruments; provide or benefit significantly from scientific
and technological advances in biotechnology; or provide processes or
services instead of, or in addition to, products. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.

RISK CONSIDERATIONS

The Biotechnology Fund is subject to a number of risks that will affect the
value of its shares, including:

- - BIOTECHNOLOGY SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the biotechnology sector that the Fund purchases will under
perform the market as a whole. To the extent that the Fund's investments
are concentrated in issuers conducting business in the same economic
sector, the Fund is subject to legislative or regulatory changes, adverse
market conditions and/or increased competition affecting that economic
sector. The prices of the securities of Biotechnology Companies may
fluctuate widely due to patent considerations, intense competition, rapid
technological change and obsolescence, and regulatory requirements of the
Food and Drug Administration, the Environmental Protection Agency, state
and local governments, and foreign regulatory authorities.

- - SMALL ISSUER RISK - Many Biotechnology Companies are relatively small and
have thinly traded equity securities, may not yet offer products or offer a
single product, and may have persistent losses during a new product's
transition from development to production or erratic revenue patterns.

<PAGE>

FUND PERFORMANCE INFORMATION

BIOTECHNOLOGY FUND PERFORMANCE
The Biotechnology Fund has not commenced operations, and therefore does not have
a performance history for a full calendar year.

<PAGE>

FUND INFORMATION - CONSUMER PRODUCTS FUND

FUND OBJECTIVE

The Consumer Products Fund seeks capital appreciation by investing in
companies engaged in manufacturing finished goods and services both
domestically and internationally ("Consumer Products Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Consumer Products Companies that are traded in the United States. Consumer
Products Companies include companies that manufacture, wholesale or retail
durable goods such as major appliances and personal computers, or that
retail non-durable goods such as beverages, tobacco, health care products,
household and personal care products, apparel, and entertainment products
(E.G., books, magazines, TV, cable, movies, music, gaming, sports), as well
as companies that provide consumer products and services such as lodging,
child care, convenience stores, and car rentals. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.

RISK CONSIDERATIONS

The Consumer Products Fund is subject to a number of risks that will affect
the value of its shares, including:

- - CONSUMER PRODUCTS SECTOR CONCENTRATION RISK - The risk that the securities
of issuers in the consumer products sector that the Fund purchases will
under perform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The performance of Consumer Products Companies has
historically been closely tied to the performance of the overall economy,
and is also affected by interest rates, competition, consumer confidence
and relative levels of disposable household income and seasonal consumer
spending. Changes in demographics and consumer tastes can also affect the
demand for, and success of, consumer products in the marketplace.

<PAGE>

FUND PERFORMANCE INFORMATION

CONSUMER PRODUCTS FUND PERFORMANCE
The Consumer Products Fund has not commenced operations, and therefore does not
have a performance history for a full calendar year.

<PAGE>

FUND INFORMATION - ELECTRONICS FUND

FUND OBJECTIVE

The Electronics Fund seeks capital appreciation by investing in companies
that are involved in the electronics sector, including semiconductor
manufacturers and distributors, and makers and vendors of other electronic
components and devices ("Electronics Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Electronics Companies that are traded in the United States. Electronics
Companies include companies involved in the manufacture and development of
semiconductors, connectors, printed circuit boards and other components;
equipment vendors to electronic component manufacturers; electronic
component distributors; electronic instruments and electronic systems
vendors; and also include companies involved in all aspects of the
electronics business and in new technologies or specialty areas such as
defense electronics, advanced design and manufacturing technologies, or
lasers. The Fund may also engage in futures and options transactions,
purchase ADRs and U.S. Government securities, and enter into repurchase
agreements.

RISK CONSIDERATIONS

The Electronics Fund is subject to a number of risks that will affect the
value of its shares, including:

- - ELECTRONICS SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the electronics sector that the Fund purchases will under
perform the market as a whole. To the extent that the Fund's investments
are concentrated in issuers conducting business in the same economic
sector, the Fund is subject to legislative or regulatory changes, adverse
market conditions and/or increased competition affecting that economic
sector. The prices of the securities of Electronics Companies may fluctuate
widely due to risks of rapid obsolescence of products, intense competition,
the economic performance of their customers, high technology and research
costs (especially in light of decreased defense spending by the U.S.
Government), and may face competition from subsidized foreign competitors
with lower production costs.

- - SMALL ISSUER RISK - Many Electronics Companies are relatively small and
have thinly traded securities, may offer only one or a limited number of
rapidly obsolescing

<PAGE>

products, and may have persistent losses during a new product's transition
from development to production.

FUND PERFORMANCE INFORMATION

ELECTRONICS FUND PERFORMANCE
The Electronics Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION - ENERGY FUND

FUND OBJECTIVE

The Energy Fund seeks capital appreciation by investing in companies
involved in the energy field, including the exploration, production, and
development of oil, gas, coal and alternative sources of energy ("Energy
Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Energy Companies that are traded in the United States. Energy Companies are
involved in all aspects of the energy industry, including the conventional
areas of oil, gas, electricity, and coal, and alternative sources of energy
such as nuclear, geothermal, oil shale, and solar power, and include
companies that produce, transmit, market, distribute or measure energy;
companies involved in providing products and services to companies in the
energy field; and companies involved in the exploration of new sources of
energy, conservation, and energy-related pollution control. The Fund may
also engage in futures and options transactions, purchase ADRs and U.S.
Government securities, and enter into repurchase agreements.

RISK CONSIDERATIONS

The Energy Fund is subject to a number of risks that will affect the value
of its shares, including:

- - ENERGY SECTOR CONCENTRATION RISK - The risk that the securities of issuers
in the energy sector that the Fund purchases will under perform the market
as a whole. To the extent that the Fund's investments are concentrated in
issuers conducting business in the same economic sector, the Fund is
subject to legislative or regulatory changes, adverse market conditions
and/or increased competition affecting that economic sector. The prices of
the securities of Energy Companies may fluctuate widely due to changes in
value and dividend yield, which depend largely on the price and supply of
energy fuels, international political events relating to oil producing
countries, energy conservation, the success of exploration projects, and
tax and other governmental regulatory policies.

<PAGE>

FUND PERFORMANCE INFORMATION

ENERGY FUND PERFORMANCE
The Energy Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION - ENERGY SERVICES FUND

FUND OBJECTIVE

The Energy Services Fund seeks capital appreciation by investing in
companies that are involved in the energy services field, including those
that provide services and equipment in the areas of oil, coal, and gas
exploration and production ("Energy Services Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Energy Services Companies that are traded in the United States. Energy
Services Companies are engaged in one or more businesses in the energy
service field, including those that provide services and equipment to
companies engaged in the production, refinement or distribution of oil,
gas, electricity, and coal; companies involved with the production and
development of newer sources of energy such as nuclear, geothermal, oil
shale, and solar power; companies involved with onshore or offshore
drilling; companies involved in production and well maintenance; companies
involved in exploration engineering, data and technology; companies
involved in energy transport; and companies involved in equipment and plant
design or construction. The Fund may also engage in futures and options
transactions, purchase ADRs and U.S. Government securities, and enter into
repurchase agreements.

RISK CONSIDERATIONS

The Energy Services Fund is subject to a number of risks that will affect
the value of its shares, including:

- - ENERGY SERVICES SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the energy services sector that the Fund purchases will under
perform the market as a whole. To the extent that the Fund's investments
are concentrated in issuers conducting business in the same economic
sector, the Fund is subject to legislative or regulatory changes, adverse
market conditions and/or increased competition affecting that economic
sector. The prices of the securities of Energy Services Companies may
fluctuate widely due to the supply and demand both for their specific
products or services and for energy products in general, the price of oil
and gas, exploration and production spending, governmental regulation and
environmental issues, and world events and economic conditions generally
affecting energy supply companies.

<PAGE>

FUND PERFORMANCE INFORMATION

ENERGY SERVICES FUND PERFORMANCE
The Energy Services Fund has not commenced operations, and therefore does not
have a performance history for a full calendar year.

<PAGE>

FUND INFORMATION - FINANCIAL SERVICES FUND

FUND OBJECTIVE

The Financial Services Fund seeks capital appreciation by investing in
companies that are involved in the financial services sector ("Financial
Services Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Financial Services Companies that are traded in the United States.
Financial Service Companies include commercial banks, savings and loan
associations, insurance companies and brokerage companies. The Fund may
also engage in futures and options transactions, purchase ADRs and U.S.
Government securities, and enter into repurchase agreements. Under SEC
regulations, the Fund may not invest more than 5% of its total assets in
the equity securities of any company that derives more than 15% of its
revenues from brokerage or investment management activities.

RISK CONSIDERATIONS

The Financial Services Fund is subject to a number of risks that will
affect the value of its shares, including:

- - FINANCIAL SERVICES SECTOR CONCENTRATION RISK - The risk that the securities
of issuers in the financial services sector that the Fund purchases will
under perform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. Financial Services Companies are subject to extensive
governmental regulation, which may limit both the amounts and types of
loans and other financial commitments they can make, and the rates and fees
they can charge. Profitability is largely dependent on the availability and
cost of capital, and can fluctuate significantly when interest rates
change. Credit losses resulting from financial difficulties of borrowers
also can negatively impact the sector.

<PAGE>

FUND PERFORMANCE INFORMATION

FINANCIAL SERVICES FUND PERFORMANCE
The Financial Services Fund has not commenced operations, and therefore does not
have a performance history for a full calendar year.

<PAGE>

FUND INFORMATION - HEALTH CARE FUND

FUND OBJECTIVE

The Health Care Fund seeks capital appreciation by investing in companies
that are involved in the health care industry ("Health Care Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Health Care Companies that are traded in the United States. Health Care
Companies include pharmaceutical companies, companies involved in research
and development of pharmaceutical products and services, companies involved
in the operation of health care facilities, and other companies involved in
the design, manufacture, or sale of health care-related products or
services. The Fund may also engage in futures and options transactions,
purchase ADRs and U.S. Government securities, and enter into repurchase
agreements.

RISK CONSIDERATIONS

The Health Care Fund is subject to a number of risks that will affect the
value of its shares, including:

- - HEALTH CARE SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the health care sector that the Fund purchases will under
perform the market as a whole. To the extent that the Fund's investments
are concentrated in issuers conducting business in the same economic
sector, the Fund is subject to legislative or regulatory changes, adverse
market conditions and/or increased competition affecting that economic
sector. The prices of the securities of Health Care Companies may fluctuate
widely due to government regulation and approval of their products and
services, which can have a significant effect on their price and
availability. Furthermore, the types of products or services produced or
provided by these companies may quickly become obsolete. Moreover,
liability for products that are later alleged to be harmful or unsafe may
be substantial, and may have a significant impact on a Health Care
Company's market value and/or share price.

<PAGE>

FUND PERFORMANCE INFORMATION

HEALTH CARE FUND PERFORMANCE
The Health Care Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION -- INTERNET FUND

FUND OBJECTIVE
The Internet Fund seeks capital appreciation by investing in companies that
provide products or services designed for or related to the Internet
("Internet Companies").

PORTFOLIO INVESTMENT STRATEGY
The Fund invests substantially all of its assets in equity securities of
Internet Companies that are traded in the United States. Internet Companies
are involved in all aspects of research, design development, manufacturing
or distribution of products or services for use with the Internet or
Internet-related businesses. Such companies may provide information or
entertainment services over the Internet; sell or distribute goods and
services over the Internet; provide infrastructure systems or otherwise
provide hardware, software or support which impacts Internet commerce; or
provide Internet access to consumers and businesses. Internet companies may
also include companies that provide Intranet and Extranet services. The
Fund will maintain an adequate representation of the various industries in
the Internet sector. The Fund may also engage in futures and options
transactions, purchase ADRs and U.S. Government securities, and enter into
repurchase agreements.

RISK CONSIDERATIONS
The Internet Fund is subject to a number of risks that will affect the
value of its shares, including:

- - EQUITY RISK - The equity markets are volatile, and the value of the Fund's
futures and options contracts and other securities may fluctuate
significantly from day to day. This volatility may cause the value of your
investment in the Fund to decrease.

- - INTERNET SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the Internet sector that the Fund purchases will under perform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector. The
prices of the securities of Internet Companies may fluctuate widely due to
competitive pressures, increased sensitivity to short product cycles and
aggressive pricing, problems relating to bringing their products to market
and rapid obsolescence of products.

- - SMALLER COMPANY RISK - Although securities of large and well-established
companies in the Internet sector will be held in the Fund's portfolio, the
Fund also will invest in medium, small and/or newly-public companies which
may be subject to greater share price fluctuations and declining growth,
particularly in the event of rapid changes in technology and/or increased
competition. Securities of those smaller and /or less seasoned companies
may therefore expose shareholders of the Fund to above-average risk.

<PAGE>

FUND PERFORMANCE INFORMATION

INTERNET FUND PERFORMANCE
The Internet Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION - LEISURE FUND

FUND OBJECTIVE

The Leisure Fund seeks capital appreciation by investing in companies
engaged in leisure and entertainment businesses ("Leisure Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Leisure Companies that are traded in the United States. Leisure Companies
are engaged in the design, production, or distribution of goods or services
in the leisure industries. Leisure Companies include hotels and resorts,
casinos, radio and television broadcasting and advertising, motion picture
production, toys and sporting goods manufacture, musical recordings and
instruments, alcohol and tobacco, and publishing. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.

RISK CONSIDERATIONS

The Leisure Fund is subject to a number of risks that will affect the value
of its shares, including:

- - LEISURE SECTOR CONCENTRATION RISK - The risk that the securities of issuers
in the leisure sector that the Fund purchases will under perform the market
as a whole. To the extent that the Fund's investments are concentrated in
issuers conducting business in the same economic sector, the Fund is
subject to legislative or regulatory changes, adverse market conditions
and/or increased competition affecting that economic sector. Securities of
Leisure Companies may be considered speculative, and generally exhibit
greater volatility than the overall market. The prices of the securities of
Leisure Companies may fluctuate widely due to unpredictable earnings, due
in part to changing consumer tastes and intense competition, strong
reaction to technological developments and to the threat of increased
government regulation, particularly in the gaming arena.

<PAGE>

FUND PERFORMANCE INFORMATION

LEISURE FUND PERFORMANCE
The Leisure Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION - RETAILING FUND

FUND OBJECTIVE

The Retailing Fund seeks capital appreciation by investing in companies
engaged in merchandising finished goods and services, including department
stores, restaurant franchises, mail order operations and other companies
involved in selling products to consumers ("Retailing Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Retailing Companies that are traded in the United States. Retailing
Companies include drug and department stores; suppliers of goods and
services for homes, home improvements and yards; clothing, jewelry,
electronics and computer retailers; franchise restaurants; motor vehicle
and marine dealers; warehouse membership clubs; mail order operations; and
companies involved in alternative selling methods. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.

RISK CONSIDERATIONS

The Retailing Fund is subject to a number of risks that will affect the
value of its shares, including:

- - RETAILING SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the retailing sector that the Fund purchases will under perform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector. The
prices of the securities of Retailing Companies may fluctuate widely due to
consumer spending, which is affected by general economic conditions and
consumer confidence levels. The retailing industry is highly competitive,
and a Retailing Company's success is often tied to its ability to
anticipate and react to changing consumer tastes. Many Retailing Companies
are thinly capitalized, and are dependent upon a relatively few number of
business days to achieve their overall results.

<PAGE>

FUND PERFORMANCE INFORMATION

RETAILING FUND PERFORMANCE
The Retailing Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION - TECHNOLOGY FUND

FUND OBJECTIVE

The Technology Fund seeks capital appreciation by investing in companies
that are involved in the technology sector, including computer software and
service companies, semiconductor manufacturers, networking and
telecommunications equipment manufacturers, PC hardware and peripherals
companies ("Technology Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Technology Companies that are traded in the United States. Technology
Companies are companies which the Advisor believes have, or will develop,
products, processes, or services that will provide technological advances
and improvements. These companies may include, for example, companies that
develop, produce or distribute products or services in the computer,
semiconductor, electronics, communications, health care, and biotechnology
sectors. The Fund may also engage in futures and options transactions,
purchase ADRs and U.S. Government securities, and enter into repurchase
agreements.

RISK CONSIDERATIONS

The Technology Fund is subject to a number of risks that will affect the
value of its shares, including:

- - TECHNOLOGY SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the technology sector that the Fund purchases will under perform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector. The
prices of the securities of Technology Companies may fluctuate widely due
to competitive pressures, increased sensitivity to short product cycles and
aggressive pricing, problems relating to bringing their products to market,
very high price/earnings ratios, and high personnel turnover due to severe
labor shortages for skilled technology professionals.

<PAGE>

FUND PERFORMANCE INFORMATION

TECHNOLOGY FUND PERFORMANCE
The Technology Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

FUND INFORMATION - TELECOMMUNICATIONS FUND

FUND OBJECTIVE

The Telecommunications Fund seeks capital appreciation by investing in
companies engaged in the development, manufacture, or sale of
communications services or communications equipment ("Telecommunications
Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Telecommunications Companies that are traded in the United States.
Telecommunications Companies range from traditional local and long-distance
telephone services or equipment providers, to companies involved in
developing technologies such as cellular telephone or paging services,
Internet equipment and service providers, and fiber-optics. The Fund may
also engage in futures and options transactions, purchase ADRs and U.S.
Government securities, and enter into repurchase agreements. Although many
established Telecommunications Companies pay an above-average dividend, the
Fund's investment decisions are primarily based on growth potential and not
on income.

RISK CONSIDERATIONS

The Telecommunications Fund is subject to a number of risks that will
affect the value of its shares, including:

- - TELECOMMUNICATIONS SECTOR CONCENTRATION RISK - The risk that the securities
of issuers in the telecommunications sector that the Fund purchases will
under perform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Telecommunications
Companies may fluctuate widely due to both federal and state regulations
governing rates of return and services that may be offered, fierce
competition for market share, and competitive challenges in the U.S. from
foreign competitors engaged in strategic joint ventures with U.S.
companies, and in foreign markets from both U.S. and foreign competitors.
In addition, recent industry consolidation trends may lead to increased
regulation of Telecommunications Companies in their primary markets.

<PAGE>

FUND PERFORMANCE INFORMATION

TELECOMMUNICATIONS FUND PERFORMANCE
The Telecommunications Fund has not commenced operations, and therefore does not
have a performance history for a full calendar year.

<PAGE>

FUND INFORMATION - TRANSPORTATION FUND

FUND OBJECTIVE

The Transportation Fund seeks capital appreciation by investing in
companies engaged in providing transportation services or companies engaged
in the design, manufacture, distribution, or sale of transportation
equipment ("Transportation Companies").

PORTFOLIO INVESTMENT STRATEGY

The Fund invests substantially all of its assets in equity securities of
Transportation Companies that are traded in the United States.
Transportation Companies may include, for example, companies involved in
the movement of freight or people, such as airline, railroad, ship, truck
and bus companies; equipment manufacturers (including makers of trucks,
automobiles, planes, containers, railcars or other modes of transportation
and related products); parts suppliers; and companies involved in leasing,
maintenance, and transportation-related services. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.

RISK CONSIDERATIONS

The Transportation Fund is subject to a number of risks that will affect
the value of its shares, including:

- - TRANSPORTATION SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the transportation sector that the Fund purchases will under
perform the market as a whole. To the extent that the Fund's investments
are concentrated in issuers conducting business in the same economic
sector, the Fund is subject to legislative or regulatory changes, adverse
market conditions and/or increased competition affecting that economic
sector. The prices of the securities of Transportation Companies may
fluctuate widely due to their cyclical nature, occasional sharp price
movements which may result from changes in the economy, fuel prices, labor
agreements, and insurance costs, the recent trend of government
deregulation, and increased competition from foreign companies, many of
which are partially funded by foreign governments and which may be less
sensitive to short-term economic pressures.

<PAGE>

FUND PERFORMANCE INFORMATION

TRANSPORTATION FUND PERFORMANCE
The Transportation Fund has not commenced operations, and therefore does not
have a performance history for a full calendar year.

<PAGE>

FUND INFORMATION - UTILITIES FUND

FUND OBJECTIVE
The Utilities Fund seeks capital appreciation by investing in companies
that operate public utilities ("Utilities Companies").

PORTFOLIO INVESTMENT STRATEGY
The Fund invests substantially all of its assets in equity securities of
Utilities Companies that are traded in the United States. Utilities
Companies may include companies involved in the manufacturing, production,
generation, transmission, distribution or sales of gas or electric energy;
water supply, waste and sewage disposal; and companies that receive a
majority of their revenues from their public utility operations. The Fund
may also engage in futures and options transactions, purchase ADRs and U.S.
Government securities, and enter into repurchase agreements.

RISK CONSIDERATIONS
The Utilities Fund is subject to a number of risks that will affect the
value of its shares, including:

- - UTILITIES SECTOR CONCENTRATION RISK - The risk that the securities of
issuers in the Utilities sector that the Fund purchases will under perform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector. The
prices of the securities of Utilities Companies may fluctuate widely due to
government regulation; the effect of interest rates on capital financing;
competitive pressures due to deregulation in the utilities industry; supply
and demand for services; increased sensitivity to the cost of natural
resources required for energy production; and environmental factors such as
conservation of natural resources.

<PAGE>

FUND PERFORMANCE INFORMATION

UTILITIES FUND PERFORMANCE
The Utilities Fund has not commenced operations, and therefore does not have a
performance history for a full calendar year.

<PAGE>

MORE INFORMATION ABOUT FUND INVESTMENTS AND RISK

THE BENCHMARK FUNDS' INVESTMENT OBJECTIVES
Each Benchmark Fund's objective is to provide investment results that match
the performance of a specific benchmark. The current benchmark used by each Fund
is set forth below:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND BENCHMARK
- -------------------------------------------------------------------------------
<S> <C>
Arktos Fund Inverse (opposite) of the performance of the NASDAQ 100 Index
(Registered Trademark)(NDX)
- -------------------------------------------------------------------------------
Juno Fund Inverse (opposite) of the price movement of the Long Treasury
Bond
- -------------------------------------------------------------------------------
</TABLE>

A BRIEF GUIDE TO THE BENCHMARKS.

THE NASDAQ 100 INDEX-Registered Trademark-. The NASDAQ 100
Index-Registered Trademark- is a modified capitalization-weighted index composed
of 100 of the largest non-financial companies listed on the National Association
of Securities Dealers Automated Quotations System.

THE LONG TREASURY BOND. The Long Treasury Bond is the current U.S. Treasury bond
with the longest maturity. Currently, the longest maturity of a U.S. Treasury
Bond is 30 years.

ADVISOR'S INVESTMENT STRATEGY IN MANAGING THE FUNDS
BENCHMARK FUNDS. In managing the Benchmark Funds, the Advisor uses a "passive"
investment strategy to manage each Fund's portfolio, meaning that the Advisor
does not attempt to select securities based on their individual potential to
perform better than the market. The Advisor's primary objective is to match the
performance of each Fund's benchmark as closely as possible on a daily basis.
The Advisor uses quantitative analysis techniques to structure each Fund to
obtain the highest correlation to its particular benchmark. The Advisor does not
engage in temporary defensive investing, keeping each Fund's assets fully
invested in all market environments. The Advisor monitors each Fund on an
ongoing basis, and makes adjustments to its portfolio, as necessary, to minimize
tracking error and to maximize liquidity.

The Advisor may pursue the Funds' investment objectives by utilizing
leveraged instruments, such as futures contracts and options on securities,
futures contracts, and stock indices. In addition, the Advisor will regularly
utilize short selling techniques designed to help the Arktos Fund's and Juno
Fund's performance to inversely correlate to the performance of the NASDAQ 100
Index and the Long Treasury Bond, respectively.

SECTOR FUNDS. In managing the Sector Funds, the Advisor's investment team
employs a quantitative model that considers a number of factors. To develop a
liquid portfolio of stocks that adequately represents a particular market
sector, the Advisor applies filters to the broad universe of stocks of issuers
that are "principally engaged" in business activities in each

<PAGE>

industry sector. Specifically, the Advisor's investment process screens stocks
primarily based on liquidity, market capitalization, and correlation relative to
the entire industry sector. The Advisor also may consider other factors.

The Advisor monitors the Sector Funds' portfolios on an ongoing basis, and
adds or deletes stocks from the portfolios as needed.

After constructing a portfolio for each Sector Fund, the Advisor may
utilize futures contracts and options to leverage a Fund's exposure to the
relevant business sector. The use of leverage will result in each Fund being
exposed to its relevant business sector with more than 100% of its total assets.

Each business sector typically consists of numerous industries. For
purposes of the Advisor's investment methodology and the policies for each Fund,
a company is considered to be "principally engaged" in a designated business
activity in a particular economic sector if at least 50% of its assets, gross
income, or net profits are committed to, or derived from, that activity. If a
question exists as to whether a company meets these standards, the Advisor will
determine whether the company's primary business is within the business sector
designated for investment by that Fund.

RISKS OF INVESTING IN THE FUNDS
As indicated below, the Funds are subject to a number of risks that may
affect the value of Fund shares.

EQUITY RISK (ALL FUNDS EXCEPT JUNO FUND) -- The Funds may invest in public and
privately issued equity securities, including common and preferred stocks,
warrants, and rights, as well as instruments that attempt to track the price
movement of equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause their prices
to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which the Funds invest will
cause the net asset value of the Funds to fluctuate. Historically, the equity
markets have moved in cycles, and the value of the Fund's equity securities and
equity derivatives may fluctuate drastically from day to day. Because of their
link to the equity markets, an investment in the Funds may be more suitable for
long-term investors who can bear the risk of short-term principal fluctuations.

NON-DIVERSIFICATION RISK (ALL FUNDS) -- Since each Fund is non-diversified, each
Fund may invest in the securities of a limited number of issuers. To the extent
that a Fund invests a significant percentage of its assets in a limited number
of issuers, the Fund is subject to the risks of investing in those few issuers,
and may be more susceptible to a single adverse economic or regulatory
occurrence.

INDUSTRY CONCENTRATION RISK (SECTOR FUNDS) -- Neither of the Benchmark Funds
will invest 25% or more of the value of the Fund's total assets in the
securities of one or more issuers conducting their principal business activities
in the same industry; EXCEPT THAT, to the

<PAGE>

extent the index underlying a Fund's benchmark is concentrated in a particular
industry, a Fund will necessarily be concentrated in that industry. The Sector
Funds invest in the securities of a limited number of issuers conducting
business in a specific industry and therefore are concentrated in that industry.
The risk of concentrating Fund investments in a limited number of issuers
conducting business in the same industry is that a Fund will be more susceptible
to the risks that are associated with those issuers (or that industry) than a
fund that does not concentrate its investments.

FIXED INCOME RISK (JUNO FUND) -- The market value of fixed income investments
will change in response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Moreover, while securities with
longer maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates.

TRACKING ERROR RISK (BENCHMARK FUNDS) -- While the Funds do not expect returns
to deviate significantly from their respective benchmarks on a daily basis,
factors such as Fund expenses, imperfect correlation between the Funds'
investments and those of their benchmarks, rounding of share prices, changes to
the benchmark, regulatory policies, and leverage, may affect their ability to
achieve close correlation. The cumulative effect of these factors may over time
cause the Funds' returns to deviate from their respective benchmarks on an
aggregate basis. The magnitude of any tracking error may be affected by a higher
portfolio turnover rate.

TRADING HALT RISK (ALL FUNDS) -- The Funds typically will hold short-term
options and futures contracts. The major exchanges on which these contracts are
traded, such as the Chicago Mercantile Exchange ("CME"), have established limits
on how much an option or futures contract may decline over various time periods
within a day. If an option or futures contract's price declines more than the
established limits, trading on the exchange is halted on that instrument. If a
trading halt occurs, at the close of a trading day, a Fund may not be able to
purchase or sell options or futures contracts. In such an event, a Fund also may
be required to use a "fair-value" method to price its outstanding contracts.

FUTURES AND OPTIONS RISK (ALL FUNDS)-- The Funds may invest a percentage of
their assets in leveraged instruments such as futures and options contracts. The
Funds may use futures contracts and related options for bona fide hedging
purposes to offset changes in the value of securities held or expected to be
acquired. They may also be used to gain exposure to a particular market or
instrument, to create a synthetic money market position, and for certain other
tax-related purposes. The Funds will only enter into futures contracts traded on
a national futures exchange or board of trade. Futures and options contracts are
described in more detail below:

<PAGE>

on a futures contract gives the purchaser the right, in exchange for a
premium, to assume a position in a futures contract at a specified exercise
price during the term of the option. Index futures are futures contracts
for various indices that are traded on registered securities exchanges.

The risks associated with the Funds' use of futures and options contracts
include:

- A Fund may experience losses over certain ranges in the market that
exceed losses experienced by a fund that does not use futures
contracts and options.

- There may be an imperfect correlation between the changes in market
value of the securities held by a Fund and the prices of futures and
options on futures.

- Although the Funds will only purchase exchange-traded futures, due to
market conditions there may not always be a liquid secondary market
for a futures contract or option. As a result, the Funds may be unable
to close out their futures contracts at a time which is advantageous.

- Trading restrictions or limitations may be imposed by an exchange, and
government regulations may restrict trading in futures contracts and
options.

PORTFOLIO TURNOVER RATE RISK (ALL FUNDS) -- The Trust anticipates that investors
that are part of a tactical asset-allocation strategy will frequently redeem or
exchange shares of a Fund, which will cause that Fund to experience high
portfolio turnover. A higher portfolio turnover rate may result in a Fund paying
higher levels of transaction costs and generating greater tax liabilities for
shareholders.

EARLY CLOSING RISK (SECTOR FUNDS) -- The normal close of trading of securities
listed on the National Association of Securities Dealers Automated Quotations
system ("NASDAQ") and the New York Stock Exchange ("NYSE") is 4:00 P.M., Eastern
Time. Unanticipated early closings may result in a Fund being unable to sell or
buy securities on that day. If an exchange closes early on a day when one or
more of the Funds needs to execute a high

<PAGE>

volume of securities trades late in a trading day, a Fund might incur
substantial trading losses.

SHORT SALES RISK (BENCHMARK FUNDS) -- Short sales are transactions in which a
Fund sells a security it does not own. To complete the transaction, the Fund
must borrow the security to make delivery to the buyer. The Fund is then
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 higher or
lower than the price at which the security was sold by the Fund. If the
underlying security goes down in price between the time the Fund sells the
security and buys it back, the Fund will realize a gain on the transaction.
Conversely, if the underlying security goes up in price during the period, the
Fund will realize a loss on the transaction. The risk of such price increases is
the principal risk of engaging in short sales.

FOREIGN COMPANY RISKS (SECTOR FUNDS) -- Investments in securities of foreign
companies can be more volatile than investments in U.S. companies. Diplomatic,
political, or economic developments could affect investments in foreign
countries. Foreign companies generally are not subject to uniform accounting,
auditing, and financial reporting standards comparable to those applicable to
U.S. domestic companies.

SMALL ISSUER RISK (BIOTECHNOLOGY, ELECTRONICS, AND INTERNET FUNDS) -- Small and
medium capitalization companies may be more vulnerable than larger, more
established organizations to adverse business or economic developments. In
particular, small capitalization companies may have limited product lines,
markets, and financial resources and may be dependent upon a relatively small
management group. These securities may trade over-the-counter or listed on an
exchange and may or may not pay dividends.

PURCHASING AND REDEEMING SHARES

Shares are offered continuously, and may be purchased on any day that both
the NYSE is open for business and the index underlying the Funds' benchmark is
published (a "Business Day"). On any day that the New York Fed or the NYSE
closes early, the principal government securities and corporate bond markets
close early (such as on days in advance of holidays generally observed by
participants in these markets), or as permitted by the Securities and Exchange
Commission ("SEC"), the right is reserved to advance the time on that day by
which purchase and redemption orders must be received.

Shares of each Fund can be purchased only by insurance companies for their
separate accounts to fund variable life insurance and variable annuity
contracts. All orders for the purchase of shares are subject to acceptance or
rejection by the Trust. An insurance company purchases and redeems Shares of
each Fund based on, among other things, the amount of net Contract premiums or
purchase payments allocated to a separate account investment division, transfers
to or from a separate account investment division, contract loans and

<PAGE>

repayments, contract withdrawals and surrenders, and benefit payments, at the
Fund's net asset value per share calculated as of that same day.

NET ASSET VALUE
The price per share (the offering price) will be the NAV next determined
after your purchase order is received by the Trust. You may also redeem all or
any portion of your Fund shares at the next determined NAV after receipt of the
redemption request. NAV is calculated by (1) taking the current market value of
a Fund's total assets, (2) subtracting the liabilities, and (3) dividing that
amount by the total number of shares owned by shareholders. For each Fund, the
NAV is calculated once each Business Day after the close of the NYSE (currently,
4:00 p.m., Eastern Standard Time). If the exchange or market where a Fund's
securities or other investments are primarily traded closes early, the NAV may
be calculated earlier in accordance with the policies set forth in the Funds'
SAI

TO RECEIVE THE CURRENT BUSINESS DAY'S NAV, THE TRUST MUST RECEIVE PURCHASE
OR REDEMPTION ORDERS BEFORE 4:00 P.M., EASTERN TIME. HOWEVER, YOUR INSURANCE
COMPANY OR RETIREMENT PLAN SPONSOR MAY HAVE EARLIER CUTOFF TIMES. VARIABLE LIFE
AND VARIABLE ANNUITY ACCOUNT INVESTORS SHOULD CONSULT THEIR SEPARATE ACCOUNT
PROSPECTUS.

MANAGEMENT OF THE FUNDS

THE INVESTMENT ADVISOR
Rydex Global Advisors (the "Advisor"), 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852, serves as investment advisor and manager of the
Funds. Albert P. Viragh, Jr., the Chairman of the Board and the President of the
Advisor, owns a controlling interest in the Advisor. From 1985 until the
incorporation of the Advisor, Mr. Viragh was a Vice President of Money
Management Associates ("MMA"), a Maryland-based registered investment advisor.
From 1992 to June 1993, Mr. Viragh was the portfolio manager of The Rushmore
Nova Portfolio, a series of The Rushmore Fund, Inc., an investment company
managed by MMA.

<PAGE>

day management activities. Under an investment advisory agreement between the
Trust and the Advisor, the Funds pay the Advisor a fee at an annualized rate,
based on the average daily net assets for each Fund, as set forth below:

- -------------------------------------------------------------------------------
FUND ADVISORY FEE
- -------------------------------------------------------------------------------
<S> <C>
Benchmark Funds 0.90%
- -------------------------------------------------------------------------------
Sector Funds 0.85%
- -------------------------------------------------------------------------------
</TABLE>

PORTFOLIO MANAGEMENT
The portfolio manager of the Arktos Fund is Michael P. Byrum, who is the
Advisor's senior portfolio manager. Prior to joining the Advisor as a portfolio
manager in July 1993, Mr. Byrum worked as an investor representative with MMA.

The portfolio manager of the Juno Fund is Adam V. Croll, who joined the
Advisor as an assistant portfolio manager in 1996. Mr. Croll was promoted to
portfolio manager in 1998. Prior to joining the Advisor, Mr. Croll attended the
University of Maryland.

Each Sector Fund is managed by a team and no one person is responsible for
making investment decisions.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gain distributions are paid at least annually
to the insurance company by each of the Funds. The Trust may declare a special
capital gains distribution if the Trustees believe that such a distribution
would be in the best interest of the shareholders of a Fund.

TAXES
Each Fund is treated as a separate entity for federal tax purposes, and
intends to qualify for the special tax treatment afforded regulated investment
companies. As long as a Fund qualifies as a regulated investment company, it
pays no federal income tax on the earnings it distributes to Shareholders. A
Fund is not liable for any income or franchise tax in Delaware as long as it
qualifies as a regulated investment company for Federal income tax purposes.

In addition to qualifying for special tax treatment as a regulated
investment company, the Funds intend to meet special diversification
requirements of the Internal Revenue Code

<PAGE>

(the "Code") in order to assure insurance companies that their variable annuity
and variable life contracts qualify as insurance under the Code.

<PAGE>

RYDEX VARIABLE TRUST

FINANCIAL HIGHLIGHTS

The Financial highlights table is intended to help you understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single share of the Fund. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
whose report, along with the financial statements and related notes, appears in
the Trust's 1999 Annual Report. Our 1999 Annual Report is available by
telephoning us at 800-820-0888 or (301)468-8520. The Annual Report is
incorporated by reference in the SAI.

<TABLE>
<CAPTION>
JUNO FUND
---------------------------------------------------------------------------------------
MARCH 3, MARCH 1, FEBRUARY 22, FEBRUARY 1, JANUARY 19,
YEAR ENDED 1998 TO 1998 TO 1998 TO 1998 TO 1998 TO
DECEMBER 31, DECEMBER 31, MARCH 2, FEBRUARY 24, FEBRUARY 2, JANUARY 25,
1999 1998+ 1998+ 1998+ 1998+ 1998+
------------- ------------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:++
NET ASSET VALUE--BEGINNING OF
PERIOD............................. $ 8.40 $ 9.20 $ 9.09 $ 9.03 $8.98 $8.88
------ ------- ------- ------- ----- -----
Net Investment Income (Loss)....... .17 (.05) -- -- -- --
Net Realized and Unrealized Gains
(Losses) on Securities........... 1.47 (.75) .08 .11 .04 .26
------ ------- ------- ------- ----- -----
Net Increase (Decrease) in Net
Asset Value Resulting from
Operations....................... 1.64 (.80) .08 .11 .04 .26
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income.............. (.04) -- -- -- -- --
Net Realized Capital Gains......... (.09) -- -- -- -- --
------ ------- ------- ------- ----- -----
Net Increase (Decrease) in Net Asset
Value.............................. 1.51 (.80) .08 .11 .04 .26
------ ------- ------- ------- ----- -----
NET ASSET VALUE--END OF PERIOD....... $ 9.91 $ 8.40 $ 9.17 $ 9.14 $9.02 $9.14
====== ======= ======= ======= ===== =====
TOTAL INVESTMENT RETURN.............. 19.66% (8.70)% 0.88% 1.22% 0.45% 2.93%
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses..................... 2.26% 5.72%** 13.10%** 4.39%** 4.42%** 4.42%**
Net Expenses....................... 2.26% 3.52%** 11.01%** 3.68%** 3.68%** 3.67%**
Net Investment Income (Loss)....... 1.95% (1.10)%** (5.32)%** 1.60%** 1.92%** 1.73%**
SUPPLEMENTARY DATA:
Portfolio Turnover Rate***........... 0% 0% 0% 0% 0% 0%
Net Assets, End of Period (000's
omitted)........................... $ 388 $ 69 $ -- $ -- $ -- $ --
</TABLE>

<TABLE>
<C> <S>
** ANNUALIZED
*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO
SHORT-TERM SECURITIES HAVING A MATURITY OF LESS THAN ONE
YEAR.
+ DUE TO THE NATURE OF THE INVESTMENT ACTIVITY, THE FUND
EXPERIENCED PERIODS WITH ZERO NET ASSETS. FINANCIAL
HIGHLIGHTS ARE PRESENTED ONLY FOR PERIODS WITH NET ASSETS
GREATER THAN ZERO.
++ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR
THE PERIOD.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
JUNO FUND
------------------------------------------------------------------------------
OCTOBER 22, AUGUST 26, JULY 24, JUNE 16, MAY 7,
1997 TO 1997 TO 1997 TO 1997 TO 1997 TO
DECEMBER 11, OCTOBER 19, AUGUST 11, JULY 7, JULY 2, JUNE 3,
1997+ 1997+ 1997+ 1997+ 1997+ 1997+*
------------- ------------ ----------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:++
NET ASSET VALUE--BEGINNING OF PERIOD..... $ 9.50 $ 9.72 $ 9.41 $ 9.59 $ 9.71 $ 10.00
------ ------ ------ ------- ------ ---------
Net Investment Income.................. .11 .01 .01 -- -- --
Net Realized and Unrealized Gains
(Losses) on Securities............... (.60) (.21) .26 (.05) (.03) (.14)
------ ------ ------ ------- ------ ---------
Net Increase (Decrease) in Net Asset
Value.................................. (.49) (.20) .27 (.05) (.03) (.14)
------ ------ ------ ------- ------ ---------
NET ASSET VALUE--END OF PERIOD........... $ 9.01 $ 9.52 $ 9.68 $ 9.54 $ 9.68 $ 9.86
====== ====== ====== ======= ====== =========
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses......................... 19.73%** 7.88%** 3.23%** 111.10%** 5.71%** 6.13%**
Net Expenses........................... 2.90%** 2.90%** 2.90%** 2.90%** 2.90%** 2.90%**
Net Investment Income (Loss)........... 8.68%** 0.80%** 1.50%** 0.74%** 1.29%** (0.37)%**
SUPPLEMENTARY DATA:
Portfolio Turnover Rate***............... 0% 0% 0% 0% 0% 0%
Net Assets, End of Period (000's
omitted)............................... $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>

<TABLE>
<C> <S>
* COMMENCEMENT OF OPERATIONS: MAY 7, 1997
** ANNUALIZED
*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO
SHORT-TERM SECURITIES HAVING A MATURITY OF LESS THAN ONE
YEAR.
+ DUE TO THE NATURE OF THE INVESTMENT ACTIVITY, THE FUND
EXPERIENCED PERIODS WITH ZERO NET ASSETS. FINANCIAL
HIGHLIGHTS ARE PRESENTED ONLY FOR PERIODS WITH NET ASSETS
GREATER THAN ZERO.
++ THE PER SHARE DATA OF THE FINANCIAL HIGHLIGHTS TABLE IS
CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR
THE YEAR.
</TABLE>

See Notes to Financial Statements.

<PAGE>

BENCHMARK INFORMATION

The Arktos Fund is not sponsored, endorsed, sold, or promoted by NASDAQ or any
of NASDAQ's affiliates (NASDAQ and its affiliates hereinafter collectively
referred to as "NASDAQ").

NASDAQ does not make any representation or warranty, implied or express, to the
investor in the Funds, or any member of the public, regarding the advisability
of investing in index funds or the ability of the NASDAQ 100 Index,
respectively, to track general stock market performance.

NASDAQ does not guarantee the accuracy and/or the completeness of the NASDAQ 100
Index, respectively, or any data included therein.

NASDAQ does not make any warranty, express or implied, as to results to be
obtained by any of the Funds, the investors in the Funds, or any person or
entity from the use of the NASDAQ 100 Index, respectively, or any data included
therein.

NASDAQ does not make any express or implied warranties of merchantability or
fitness for a particular purpose for use with respect to the NASDAQ 100 Index,
respectively, or any data included therein.

<PAGE>

Additional information about the Funds is included in a Statement of
Additional Information dated May 1, 2000 (the "SAI"), which contains more
detailed information about the Funds. The SAI has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus and, therefore, legally forms a part of this
Prospectus. The SEC maintains a web site ("http://www.sec.gov") that
contains the SAI, material incorporated by reference, and other information
regarding registrants that file electronically with the SEC. You may also
review and copy documents at the SEC Public Reference Room in Washington,
D.C. (for information call 1-800-SEC-0330). You may request documents by
mail from the SEC, upon payment of a duplication fee, by writing to:
Securities and Exchange Commission, Public Reference Section, Washington,
D.C. 20549-0102. You may also obtain information, upon payment of a
duplicating fee, by e-mailing the SEC at the following address:
[email protected].

You may obtain a copy of the SAI or the annual or semi-annual reports of the
Trust without charge by calling 1-301-468-8520 collect or by writing to
Rydex Variable Trust, at 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852. Additional information about the investments of
the Trust is available in the annual and semi-annual reports. Also, in the
annual report of the Trust, you will find a discussion of the market
conditions and investment strategies that significantly affected performance
during its last fiscal year.

NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH
INFORMATION OR REPRESENTATIONS
AS HAVING BEEN AUTHORIZED BY THE TRUST OR RYDEX GLOBAL ADVISORS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE TRUST IN ANY JURISDICTION WHERE SUCH AN OFFERING IS
NOT LAWFUL.

The Trust's SEC registration number is 811-08821.

50
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

RYDEX VARIABLE TRUST

6116 EXECUTIVE BOULEVARD, SUITE 400
ROCKVILLE, MARYLAND 20852
800-820-0888
301-468-8520

WWW.RYDEXFUNDS.COM

Rydex Variable Trust (the "Trust") is a no-load mutual fund complex with thirty
separate investment portfolios (the "Funds"). This Statement of Additional
Information ("SAI") relates to shares of the following portfolios:

NOVA FUND
URSA FUND
OTC FUND
ARKTOS FUND*
JUNO FUND*
U.S. GOVERNMENT BOND FUND
BANKING FUND*
BASIC MATERIALS FUND*
BIOTECHNOLOGY FUND*
CONSUMER PRODUCTS FUND*
ELECTRONICS FUND*
ENERGY FUND*
ENERGY SERVICES FUND*
FINANCIAL SERVICES FUND*
HEALTH CARE FUND*
INTERNET FUND*
LEISURE FUND*
PRECIOUS METALS FUND
RETAILING FUND*
TECHNOLOGY FUND*
TELECOMMUNICATIONS FUND*
TRANSPORTATION FUND*
UTILITIES FUND*
U.S. GOVERNMENT MONEY MARKET FUND

This SAI is not a prospectus. It should be read in conjunction with the Trust's
Prospectus, dated May 1, 2000. A copy of the Trust's Prospectus is available,
without charge, upon request to the Trust at the address above or by telephoning
the Trust at the telephone numbers above.

*CURRENTLY, SHARES OF THESE FUNDS ARE NOT BEING OFFERED OR SOLD.

The date of this SAI is May 1, 2000
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION ABOUT THE TRUST...........................................3

ADDITIONAL INFORMATION ABOUT THE SECTOR FUNDS.................................3

DESCRIPTION OF THE MONEY MARKET FUND..........................................7

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS..............................8

INVESTMENT RESTRICTIONS......................................................19

PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................23

MANAGEMENT OF THE TRUST......................................................25

PRINCIPAL HOLDERS OF SECURITIES..............................................32

DETERMINATION OF NET ASSET VALUE.............................................33

PERFORMANCE INFORMATION......................................................35

CALCULATION OF RETURN QUOTATIONS.............................................36

INFORMATION ON COMPUTATION OF YIELD..........................................38

PURCHASE AND REDEMPTION OF SHARES............................................39

DIVIDENDS, DISTRIBUTIONS, AND TAXES..........................................40

OTHER INFORMATION............................................................44

COUNSEL......................................................................44

AUDITORS AND CUSTODIAN.......................................................45

FINANCIAL STATEMENTS.........................................................45

APPENDIX....................................................................A-1
</TABLE>

<PAGE>

GENERAL INFORMATION ABOUT THE TRUST

The Trust, an open-end management investment company, was organized as a
Delaware business trust on June 11, 1998. The Trust is permitted to offer
separate portfolios of shares (the "Funds"). Shares of the Funds are available
through certain deferred variable annuity and variable insurance contracts
("Contracts") offered through insurance companies, as well as to certain
retirement plan investors. Additional Funds and/or classes may be created from
time to time.

Currently, the Trust has thirty separate Funds. All payments received by the
Trust for shares of any Fund belong to that Fund. Each Fund has its own assets
and liabilities. This SAI relates to shares of: Nova Fund, Ursa Fund, OTC Fund,
Arktos Fund, U.S. Government Bond Fund (the "Bond Fund"), and Juno Fund
(collectively, the "Benchmark Funds"); the U.S. Government Money Market Fund
(the "Money Market Fund"); and Banking Fund, Basic Materials Fund, Biotechnology
Fund, Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services
Fund, Financial Services Fund, Health Care Fund, Internet Fund, Leisure Fund,
Precious Metals Fund, Retailing Fund, Technology Fund, Telecommunications Fund,
Transportation Fund, and Utilities Fund (collectively, the "Sector Funds")
(collectively, the "Funds").

The Trust is a successor to The Rydex Advisor Variable Annuity Account (the
"Separate Account"), and the subaccounts of the Separate Account (the "Rydex
Subaccounts"). The Rydex Subaccounts were divided into the Nova, Ursa, Juno,
OTC, Precious Metals, U.S. Government Bond, and Money Market Subaccounts. A
substantial portion of the assets of each of the Rydex Subaccounts were
transferred to the respective Funds of the Trust in connection with the
commencement of operations of the Trust. To obtain historical financial
information about the Rydex Subaccounts, please call 1-800-820-0888.

ADDITIONAL INFORMATION ABOUT THE SECTOR FUNDS

BANKING FUND
The Fund may invest in companies engaged in accepting deposits and making
commercial and principally non-mortgage consumer loans. In addition, these
companies may offer services such as merchant banking, consumer and commercial
finance, discount brokerage, leasing and insurance. These companies may
concentrate their operations within a specific part of the country rather than
operating predominantly on a national or international scale.

BASIC MATERIALS FUND
The Fund may invest in companies engaged in the manufacture, mining, processing,
or distribution of raw materials and intermediate goods used in the industrial
sector. The Fund may invest in companies handling products such as chemicals,
lumber, paper, copper, iron ore, nickel, steel, aluminum, textiles, cement, and
gypsum. The Fund may also invest in the securities of mining, processing,
transportation, and distribution companies, including equipment suppliers and
railroads.

BIOTECHNOLOGY FUND
The Fund may invest in companies engaged in the research, development, sale, and
manufacture of various biotechnological products, services and processes. These
include companies involved with developing or experimental technologies such as
generic engineering, hybridoma and recombinant DNA techniques and monoclonal
antibodies. The Fund may also invest in companies that manufacture and/or
distribute

<PAGE>

biotechnological and biomedical products, including devices and instruments, and
that provide or benefit significantly from scientific and technological advances
in biotechnology. Some biotechnology companies may provide processes or services
instead of, or in addition to, products.

The description of the biotechnology sector may be interpreted broadly to
include applications and developments in such areas as human health care
(cancer, infectious disease, diagnostics and therapeutics); pharmaceuticals (new
drug development and production); agricultural and veterinary applications
(improved seed varieties, animal growth hormones); chemicals (enzymes, toxic
waste treatment); medical/surgical (epidermal growth factor, in vivo
imaging/therapeutics); and industry (biochips, fermentation, enhanced mineral
recovery).

CONSUMER PRODUCTS FUND
The Fund may invest in companies engaged in the manufacture of goods to
consumers, both domestically and internationally. The Fund may invest in
companies that manufacture durable products such as furniture, major appliances,
and personal computers. The Fund also may invest in companies that manufacture,
wholesale or retail non-durable goods such as beverages, tobacco, health care
products, household and personal care products, apparel, and entertainment
products (E.G., books, magazines, TV, cable, movies, music, gaming, and sports).
In addition, the Fund may invest in consumer products and services such as
lodging, child care, convenience stores, and car rentals.

ELECTRONICS FUND
The Fund may invest in companies engaged in the design, manufacture, or sale of
electronic components (semiconductors, connectors, printed circuit boards and
other components); equipment vendors to electronic component manufactures;
electronic component distributors; and electronic instruments and electronic
systems vendors. In addition, the Fund may invest in companies in the fields of
defense electronics, medical electronics, consumer electronics, advanced
manufacturing technologies (computer-aided design and computer-aided
manufacturing electro-optics, and other developing electronics technologies.

ENERGY FUND
The Fund may invest in companies in the energy field, including the conventional
areas of oil, gas, electricity and coal, and alternative sources of energy such
as nuclear, geothermal, oil shale and solar power. The business activities of
companies in which the Fund may invest include production, generation,
transmission, refining, marketing, control, distribution or measurement of
energy or energy fuels such as petrochemicals; providing component parts or
services to companies engaged in the above activities; energy research or
experimentation; and environmental activities related to pollution control.
Companies participating in new activities resulting from technological advances
or research discoveries in the energy field may also be considered for this
Fund.

ENERGY SERVICES FUND
The Fund may invest in companies in the energy service field, including those
that provide services and equipment to the conventional areas of oil, gas,
electricity and coal, and alternative sources of energy such as nuclear,
geothermal, oil shale and solar power. The Fund may invest in companies involved
in providing services and equipment for drilling processes such as offshore and
onshore drilling, drill bits, drilling rig equipment, drilling string equipment,
drilling fluids, tool joints and wireline logging. Many energy service

<PAGE>

companies are engaged in production and well maintenance, providing such
products and services as packers, perforating equipment, pressure pumping,
downhole equipment, valves, pumps, compression equipment, and well completion
equipment and service. Certain companies supply energy providers with
exploration technology such as seismic data, geological and geophysical
services, and interpretation of this data. The Fund may also invest in companies
with a variety of underwater well services, helicopter services, geothermal
plant design or construction, electric and nuclear plant design or construction,
energy related capital equipment, mining related equipment or services, and high
technology companies serving these industries.

FINANCIAL SERVICES FUND
The Fund may invest in companies that are involved in the financial sector,
including commercial and investment banks, savings and loan associations,
consumer and industrial finance companies, securities brokerage companies, real
estate-related companies, leasing companies, and a variety of firms in all
segments of the insurance industry such as multi-line, property and casualty,
and life insurance.

The financial services sector is currently undergoing relatively rapid change as
existing distinctions between financial service segments become less clear. For
instance, recent business combinations have included insurance, finance, and
securities brokerage under single ownership. Some primarily retail corporations
have expanded into securities and insurance industries. Moreover, the federal
laws generally separating commercial and investment banking are currently being
studied by Congress.

Securities and Exchange Commission ("SEC") regulations provide that the Fund may
not invest more than 5% of its total assets in the securities of any one company
that derives more than 15% of its revenues from brokerage or investment
management activities. These companies, as well as those deriving more than 15%
of profits from brokerage and investment management activities, will be
considered to be "principally engaged" in this Fund's business activity. Rule
12d3-1 under the Investment Company Act of 1940 (the "1940 Act"), allows
investment portfolios such as this Fund, to invest in companies engaged in
securities-related activities subject to certain conditions. Purchases of
securities of a company that derived 15% or less of gross revenues during its
most recent fiscal year from securities-related activities (I.E., broker/dealer,
underwriting, or investment advisory activities) are subject only to the same
percentage limitations as would apply to any other security the Fund may
purchase. The Fund may purchase securities of an issuer that derived more than
15% of it gross revenues in its most recent fiscal year from securities-related
activities, subject to the following conditions:

a. the purchase cannot cause more than 5% of the Fund's total assets to be
invested in securities of that issuer;

b. for any equity security, the purchase cannot result in the Fund owing
more than 5% of the issuer's outstanding securities in that class;

c. for a debt security, the purchase cannot result in the fund owing more
than 10% of the outstanding principal amount of the issuer's debt
securities.

In applying the gross revenue test, an issuer's own securities-related
activities must be combined with its ratable share of securities-related
revenues from enterprises in which it owns a 20% or greater voting or

<PAGE>

equity interest. All of the above percentage limitations, as well as the
issuer's gross revenue test, are applicable at the time of purchase. With
respect to warrants, rights, and convertible securities, a determination of
compliance with the above limitations shall be made as though such warrant,
right, or conversion privilege had been exercised. The Fund will not be required
to divest its holding of a particular issuer when circumstances subsequent to
the purchase cause one of the above conditions to not be met. The purchase of a
general partnership interest in a securities-related business is prohibited.

HEALTH CARE FUND
The Fund may invest in companies that are involved in the health care industry
including companies engaged in the design, manufacture, or sale of products or
services used for or in connection with health care or medicine. Companies in
the health care sector may include pharmaceutical companies; firms that design,
manufacture, sell, or supply medical, dental, and optical products, hardware or
services; companies involved in biotechnology, medical diagnostic, and
biochemical research and development, as well as companies involved in the
operation of health care facilities.

INTERNET FUND
The Fund may invest in companies that are involved in the Internet sector
including companies which the Advisor believes should benefit from the
commercialization of technological advances, although they may not be directly
involved in research and development. Such companies may provide information or
entertainment services over the Internet; sell or distribute goods and services
over the Internet; provide infrastructure systems or otherwise provide hardware
or software which impacts Internet commerce; or provide Internet access to
consumers and businesses.

LEISURE FUND
The Fund may invest in companies engaged in the design, production, or
distribution of goods or services in the leisure industries including television
and radio broadcasting or manufacturing (including cable television); motion
pictures and photography; recordings and musical instruments; publishing,
including newspapers and magazines; sporting goods and camping and recreational
equipment; and sports arenas. Other goods and services may include toys and
games (including video and other electronic games), amusement and theme parks,
travel and travel-related services, hotels and motels, leisure apparel or
footwear, tobacco products, and gaming casinos.

PRECIOUS METALS FUND
The Fund may invest in the equity securities of U.S. and foreign companies that
are involved in the precious metals sector ("Precious Metals Companies").
Precious Metals Companies include precious metals manufacturers; distributors of
precious metals products, such as jewelry, metal foil or bullion; mining and
geological exploration companies; and companies which provide services to
Precious Metals Companies.

RETAILING FUND
The Fund may invest in companies that are involved in the retailing sector
including companies engaged in merchandising finished goods and services
primarily to individual consumers. Companies in which the Fund may invest
include general merchandise retailers, department stores, restaurant franchises,
drug stores, motor vehicle and marine dealers, and any specialty retailers
selling a single category of merchandise such as apparel, toys, jewelry,
consumer electronics, or home improvement products. The Fund may also invest in

<PAGE>

companies engaged in selling goods and services through alternative means such
as direct telephone marketing, mail order, membership warehouse clubs, computer,
or video based electronic systems.

TECHNOLOGY FUND
The Fund may invest in companies that are involved in the technology sector
including companies which the Advisor believes have, or will develop, products,
processes or services that will provide or will benefit significantly from
technological advances and improvements. These may include, for example,
companies that develop, produce, or distribute products or services in the
computer, semiconductor, electronics, communications, health care, and
biotechnology sectors.

TELECOMMUNICATIONS FUND
The Fund may invest in companies that are involved in the telecommunications
sector including companies engaged in the development, manufacture, or sale of
communications services and/or equipment. Companies in the telecommunications
field offer a variety of services and products, including local and
long-distance telephone service; cellular, paging, local and wide-area product
networks; satellite, microwave and cable television; Internet access; and
equipment used to provide these products and services. Long-distance telephone
companies may also have interests in developing technologies, such as fiber
optics and data transmission. Certain types of companies in which the Fund may
invest are engaged in fierce competition for a share of the market for goods or
services such as private and local area networks, or are engaged in the sale of
telephone set equipment.

TRANSPORTATION FUND
The Fund may invest in companies that are involved in the transportation sector,
including companies engaged in providing transportation services or companies
engaged in the design, manufacture, distribution, or sale of transportation
equipment. Transportation services may include companies involved in the
movement of freight and/or people such as airline, railroad, ship, truck, and
bus companies. Other service companies include those that provide leasing and
maintenance for automobiles, trucks, containers, rail cars, and planes.
Equipment manufacturers include makers of trucks, automobiles, planes,
containers, rail cars, or any other mode of transportation and their related
products. In addition, the Fund may invest in companies that sell fuel-saving
devices to the transportation industries and those that sell insurance and
software developed primarily for transportation companies.

UTILITIES FUND
The Fund will invest primarily in companies in the public utilities industry and
companies deriving a majority of their revenues from their public utility
operations as described in the Fund's prospectus. Such companies may include
companies involved in the manufacturing, production, generation, transmission,
distribution or sales of gas or electric energy; water supply, waste and sewage
disposal; and companies involved in the public communication field, including
telephone, telegraph, satellite, microwave and other public communication
facilities.

DESCRIPTION OF THE MONEY MARKET FUND

The Money Market Fund seeks to provide security of principal, high current
income, and liquidity. The Money Market Fund invests primarily in money market
instruments issued or guaranteed as to principal and

<PAGE>

interest by the U.S. Government, its agencies or instrumentalities, and may
invest any remaining assets in receipts and enter into repurchase agreements
fully collateralized by U.S. Government Securities.

The Money Market Fund is governed by SEC rules which impose certain liquidity,
maturity and diversification requirements. The Money Market Fund's assets are
valued using the amortized cost method, which enables the Money Market Fund to
maintain a stable NAV. All securities purchased by the Money Market Fund must
have remaining maturities of 397 days or less. Although the Money Market Fund is
managed to maintain a stable price per share of $1.00, there is no guarantee
that the price will be constantly maintained.

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS

GENERAL
Each Fund's investment objective and permitted investments are described in the
Prospectuses. The following information supplements, and should be read in
conjunction with, those sections of the Prospectuses.

Portfolio management is provided to each Fund by the Trust's investment adviser,
PADCO Advisors II, Inc., a Maryland corporation with offices at 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852. PADCO Advisors II, Inc.
operates under the name Rydex Global Advisors (the "Advisor"). The investment
strategies of the Funds discussed below and in the Prospectuses may be used by a
Fund if, in the opinion of the Advisor, these strategies will be advantageous to
that Fund. A Fund is free to reduce or eliminate its activity in any of those
areas without changing the Fund's fundamental investment policies. There is no
assurance that any of these strategies or any other strategies and methods of
investment available to a Fund will result in the achievement of that Fund's
objectives.

BORROWING
The Nova Fund, Bond Fund and Sector Funds may borrow money, including borrowing
for investment purposes. 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 Fund's assets will
fluctuate in value, whereas the interest obligations on borrowings may be fixed,
the net asset value per share of the Fund will increase more when the Fund's
portfolio assets increase in value and decrease more when the Fund'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, the Nova Fund, the Bond Fund, or the Sector Funds might have to sell
portfolio securities to meet interest or principal payments at a time when
investment considerations would not favor such sales. The Nova Fund, Bond Fund
and Sector Funds intend to use leverage during periods when the Advisor believes
that the respective Fund's investment objective would be furthered.

Each Fund may also borrow money to facilitate management of the Fund's portfolio
by enabling the Fund to meet redemption requests when the liquidation of
portfolio instruments would be inconvenient or disadvantageous. Such borrowing
is not for investment purposes and will be repaid by the borrowing Fund
promptly.

<PAGE>

As required by the 1940 Act, a Fund 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 Fund's assets should fail to meet this 300% coverage test, the
Fund, within three days (not including Sundays and holidays), will reduce the
amount of the Fund'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 Funds are authorized to borrow money as a
temporary measure for extraordinary or emergency purposes in amounts not in
excess of 5% of the value of the Fund's total assets. This borrowing is not
subject to the foregoing 300% asset coverage requirement The Funds are
authorized to pledge portfolio securities as the Advisor deems appropriate in
connection with any borrowings.

FOREIGN ISSUERS
The Sector Funds may invest in issuers located outside the United States. The
Sector Funds may purchase American Depository Receipts ("ADRs"), "ordinary
shares," or "New York shares" in the United States. ADRs are dollar-denominated
receipts representing interests in the securities of a foreign issuer, which
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by United States banks and trust companies which evidence ownership of
underlying securities issued by a foreign corporation. Generally, ADRs in
registered form are designed for use in domestic securities markets and are
traded on exchanges or over-the-counter in the United States. Ordinary shares
are shares of foreign issuers that are traded abroad and on a United States
exchange. New York shares are shares that a foreign issuer has allocated for
trading in the United States. ADRs, ordinary shares, and New York shares all may
be purchased with and sold for U.S. dollars, which protect the Funds from the
foreign settlement risks described below.

Investing in foreign companies may involve risks not typically associated with
investing in United States 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 United States markets, and prices in some foreign markets can be
very volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those that apply to United States companies, and it may
be more difficult to obtain reliable information regarding a foreign issuer's
financial condition and operations. In addition, the costs of foreign investing,
including withholding taxes, brokerage commissions, and custodial fees,
generally are higher than for United States investments.

Investing in companies located abroad carries political and economic risks
distinct from those associated with investing in the United States. Foreign
investment may be affected by actions of foreign governments adverse to the
interests of United States investors, including the possibility of expropriation
or nationalization of assets, confiscatory taxation, restrictions on United
States investment, or on the ability to repatriate assets or to convert currency
into U.S. dollars. There may be a greater possibility of default by foreign
governments or foreign-government sponsored enterprises. Investments in foreign
countries also involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments.

<PAGE>

ILLIQUID SECURITIES
While none of the Funds anticipates doing so, each Fund 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 offered and sold to
"qualified institutional buyers" under Rule 144A under the 1933 Act. A Fund will
not invest more than 15% (10% with respect to the Money Market Fund) of the
Fund's net assets in illiquid securities. If the percentage of a Fund's net
assets invested in illiquid securities exceeds 15% (10% for the Money Market
Fund) due to market activity, the Fund will take appropriate measures to reduce
its holdings of illiquid securities. Each Fund will adhere to a more restrictive
limitation on the Fund's investment in illiquid securities as required by the
securities laws of those jurisdictions where shares of the Fund are registered
for sale. 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 Fund 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 Fund 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 investment
in illiquid securities may have an adverse impact on net asset value.

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 meet other selection criteria, a Fund may make such investments
whether or not such securities are "illiquid" depending on the market that
exists for the particular security. The trustees of the Trust (the "Trustees")
have delegated the responsibility for determining the liquidity of Rule 144A
restricted securities, which may be invested in by a Fund, to the Advisor.

INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Funds (other than the Bond Fund and Money Market Fund) presently may invest
in the securities of other investment companies to the extent that such an
investment would be consistent with the requirements of Section 12(d)(1) of the
1940 Act. A Fund, therefore, may invest in the securities of another investment
company (the "acquired company") provided that the Fund, immediately after such
purchase or acquisition, does not own in the aggregate: (i) more than 3% of the
total outstanding voting stock of the acquired company; (ii) securities issued
by the acquired company having an aggregate value in excess of 5% of the value
of the total assets of the Fund; or (iii) securities issued by the acquired
company and all other investment companies (other than Treasury stock of the
Fund) having an aggregate value in excess of 10% of the value of the total
assets of the Fund. A Fund may also invest in the securities of other investment
companies if such securities are the only investment securities held by the
Fund, such as through a master-feeder arrangement. The Bond Fund and Money
Market Fund may invest in the securities of other investment companies only as
part of a merger, reorganization, or acquisition, subject to the requirements of
the 1940 Act.

<PAGE>

If a Fund invests in, and, thus, is a shareholder of, another investment
company, the Fund's shareholders will indirectly bear the Fund'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
Fund to the Fund's own investment adviser and the other expenses that the Fund
bears directly in connection with the Fund's own operations.

LENDING OF PORTFOLIO SECURITIES
Subject to the investment restrictions set forth below, each of the Funds may
lend 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 Fund 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 Fund any income
accruing thereon, and the Fund may invest the cash collateral in portfolio
securities, thereby earning additional income. A Fund will not lend its
portfolio securities if such loans are not permitted by the laws or regulations
of any state in which the Fund's shares are qualified for sale, and the Funds
will not lend more than 33 1/3% of the value of the Fund's total assets, except
that the Money Market Fund will not lend more than 10% of the value of the Money
Market Fund's total assets. Loans would be subject to termination by the lending
Fund 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 Fund and that Fund's shareholders. A lending
Fund may pay reasonable finders, borrowers, administrative, and custodial fees
in connection with a loan.

OPTIONS TRANSACTIONS

OPTIONS ON SECURITIES. The Nova Fund, OTC Fund, and Sector Funds may buy call
options and write (sell) put options on securities, and the Ursa Fund and Arktos
Fund may buy put options and write call options on securities for the purpose of
realizing the Fund's investment objective. By wiring a call option on
securities, a Fund 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 writing a put option, a Fund becomes obligated during the term of
the option to purchase the securities underlying the option at the exercise
price 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 Option
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.

<PAGE>

dealers and not with a clearing corporation, and therefore entail the risk of
non-performance by the dealer. OTC options are available for a greater variety
of securities and for a wider range of expiration dates and exercise prices than
are available for exchange-traded options. Because OTC options are not traded on
an exchange, pricing is done normally by reference to information from a market
maker. It is the position of the SEC that OTC options are illiquid.

OPTIONS ON SECURITY INDICES. The Nova Fund, OTC Fund, and Sector Funds may
purchase call options and write put options, and the Ursa Fund and Arktos Fund
may purchase put options and write call options, on stock indices listed on
national securities exchanges or traded in the over-the-counter market as an
investment vehicle for the purpose of realizing the Fund's investment objective.

Options on indices are settled in cash, not in 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. When a Fund writes a covered option on an index,
the Fund will be required to deposit and maintain with a custodian cash or
liquid securities equal in value to the aggregate exercise price of a put or
call option pursuant to the requirements and the rules of the applicable
exchange. If, at the close of business on any day, the market value of the
deposited securities falls below the contract price, the Fund will deposit with
the custodian cash or liquid securities equal in value to the deficiency.

OPTIONS ON FUTURES CONTRACTS. Under Commodities Futures Trading Commission
("CFTC") Regulations, a Fund (other than the Money Market Fund) may engage in
futures transactions, either for "bona fide hedging" purposes, as this term is
defined in the CFTC Regulations, or for non-hedging purposes to the extent that
the aggregate initial margins and option premiums required to establish such
non-hedging positions do not exceed 5% of the liquidation value of the Fund'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.

When a Fund purchases or sells a stock index futures contract, or sells an
option thereon, the Fund "covers" its position. To cover its position, a Fund
may maintain with its custodian bank (and marked-to-market on a daily basis), a
segregated account consisting of cash or liquid securities 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. If
the Fund continues to engage in the described securities trading practices and
properly segregates assets, the segregated account will function as a practical
limit on the amount of leverage which the Fund may undertake and on the
potential increase in the speculative character of the Fund's outstanding
portfolio securities. Additionally, such segregated accounts will generally
assure the availability of adequate funds to meet the obligations of the Fund
arising from such investment activities.

<PAGE>

in instruments with prices which are expected to move relatively consistently
with the futures contract. A Fund may cover its short position in a futures
contract by taking a long position in the instruments underlying the futures
contracts, or by taking positions in instruments with prices which are expected
to move relatively consistently with the futures contract.

A Fund 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. In the alternative, if the long position
in the underling futures contracts is established at a price greater than the
strike price of the written (sold) call, the Fund will maintain in a segregated
account cash or liquid securities equal in value to the difference between the
strike price of the call and the price of the futures contract. A Fund may also
cover its sale of a call option by taking positions in instruments with prices
which are expected to move relatively consistently with the call option. A Fund
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 Fund will maintain in a segregated account cash or liquid
securities equal in value to the difference between the strike price of the put
and the price of the futures contract. A Fund may also cover its sale of a put
option by taking positions in instruments with prices which are expected to move
relatively consistently with the put option.

SWAP AGREEMENTS
The Funds 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
dollars, 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 Funds calculate the obligations of the
parties to the agreement on a "net basis." Consequently, a Fund'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").

<PAGE>

swap agreements may be considered to be illiquid for the Fund illiquid
investment limitations. A Fund will not enter into any swap agreement unless the
Advisor believes that the other party to the transaction is creditworthy. A Fund
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 Fund 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 Fund 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 Fund 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 Fund 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 Fund
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 Fund 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 Fund is contractually obligated to make. If the
other party to a swap agreement defaults, a Fund'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 Fund'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 Fund'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 Funds and their Advisor believe that these transactions do
not constitute senior securities under the 1940 Act and, accordingly, will not
treat them as being subject to a Fund's borrowing restrictions.

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, is responsible for determining and
monitoring the liquidity of Fund 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.

<PAGE>

Trust's Prospectus). Because each Fund's portfolio turnover rate, to a great
extent, will depend on the purchase, redemption, and exchange activity of the
Fund's investors, it is very difficult to estimate what the Fund's actual
turnover rate will be in the future.

"Portfolio Turnover Rate" is defined under the rules of the SEC as the value of
the securities purchased or securities sold, excluding all securities whose
maturities at the 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 the portfolio turnover rate. Instruments
excluded from the calculation of portfolio turnover generally would include the
futures contracts and option contracts in which the Funds invest since such
contracts generally have remaining maturity of less than one year.

REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements with financial
institutions. The Funds each 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 Fund will seek to liquidate such collateral.
However, the exercising of each Fund's right to liquidate such collateral 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 Fund could suffer a loss. It is the current policy of each of the
Funds, other than the Money Market Fund, not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with any
other illiquid assets held by the Fund, amounts to more than 15% (10% with
respect to the Money Market Fund) of the Fund's total assets. The investments of
each of the Funds in repurchase agreements, at times, may be substantial when,
in the view of the Advisor, liquidity or other considerations so warrant.

REVERSE REPURCHASE AGREEMENTS
The Ursa Fund, Juno Fund, and Money Market Fund may use reverse repurchase
agreements as part of that Fund's investment strategy. Reverse repurchase
agreements involve sales by a Fund of portfolio assets concurrently with an
agreement by the Fund to repurchase the same assets at a later date at a fixed
price. Generally, the effect of such a transaction is that the Fund can recover
all or most of the cash invested in the portfolio securities involved during the
term of the reverse repurchase agreement, while the Fund will be able to keep
the interest income associated with those portfolio securities. Such
transactions are advantageous only if the interest cost to the Fund 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 Funds intend to use the reverse repurchase technique only when this will
be advantageous to the Funds. Each Fund will establish a segregated account with
the Trust's custodian bank in which the Fund will maintain cash or cash
equivalents or other portfolio securities equal in value to the Fund's
obligations in respect of reverse repurchase agreements.

<PAGE>

SHORT SALES
The Ursa Fund, Arktos Fund, and Juno Fund may engage in short sales
transactions under which the Fund sells a security it does not own. To
complete such a transaction, the Fund must borrow the security to make
delivery to the buyer. The Fund 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 Fund. Until the security is replaced, the
Fund 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 Fund 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.

Until the Ursa Fund, Arktos Fund, or Juno Fund closes its short position or
replaces the borrowed security, the Fund will: (a) maintain a segregated account
containing cash or liquid securities at such a level that (i) 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 and (ii) the amount
deposited in the segregated account plus the amount deposited with the broker as
collateral will not be less than the market value of the security at the time
the security was sold short; or (b) otherwise cover the Fund's short position.
Each of the Funds may use up to 100% of its portfolio to engage in short sales
transactions and collateralize its open short positions.

The Nova Fund, OTC Fund, and Sector Funds each may engage in short sales if, at
the time of the short sale, the Fund owns or has the right to acquire an equal
amount of the security being sold at no additional cost. These Funds may make a
short sale when the Fund wants to sell the security the Fund owns at a current
attractive price, in order to hedge or limit the exposure of the Fund's
position.

STOCK INDEX FUTURES CONTRACTS
A Fund may buy and sell stock index futures contracts with respect to any stock
index traded on a recognized stock exchange or board of trade. A stock index
futures contract is a contract to buy or sell units of an index at a specified
future date at a price agreed upon when the contract is made. The stock index
futures contract specifies that no delivery of the actual stocks making up the
index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract.

At the time a Fund purchases a futures contract, an amount of cash, U.S.
Government securities or other liquid securities equal to the market value of
the futures contract will be deposited in a segregated account with the Fund's
custodian. When writing a futures contract, the Fund will maintain with its
custodian liquid assets that, when added to the amounts deposited with a futures
commission merchant or broker as margin, are equal to the market value of the
instruments underlying the contract. Alternatively, a Fund may "cover" its
position by owning the instruments underlying the contract (or, in the case of
an index futures contract, a portfolio with a volatility substantially similar
to that of the index on which the futures contract is based), or holding a call
option permitting the Fund to purchase the same futures contract at a price no
higher than the price of the contract written by the Fund (or at a higher price
if the difference is maintained in liquid assets with the Fund's custodian).

<PAGE>

TRACKING ERROR
While the Benchmark Funds seek to duplicate the performance of their respective
benchmarks on a daily basis, as discussed in the Prospectus, they do not expect
that the aggregate returns over a year will deviate significantly from their
respective benchmarks. However, several factors may affect their ability to
achieve this correlation. Among these are: (1) Fund expenses, including
brokerage (which may be increased by high portfolio turnover); (2) less than all
of the securities in the benchmark being held by a Fund and securities not
included in the benchmark being held by a Fund; (3) an imperfect correlation
between the performance of instruments held by a Fund, such as futures contracts
and options, and the performance of the underlying securities in the market; (4)
bid-ask spreads (the effect of which may be increased by portfolio turnover);
(5) a Fund holds instruments traded in a market that has become illiquid or
disrupted; (6) Fund 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 Fund's portfolio holdings to comply with investment restrictions or
policies or regulatory or tax law requirements; or (9) market movements that run
counter to a leveraged Fund's investments. Market movements that run counter to
a leveraged Fund's investments will cause some divergence between the Fund and
its benchmark over time due to the mathematical effects of leveraging. The
magnitude of the divergence is dependent upon the magnitude of the market
movement, its duration, and the degree to which the Fund is leveraged. The
tracking error of a leveraged Fund is generally small during a well-defined up
trend or downtrend in the market when measured from price peak to price peak,
absent a market decline and subsequent recovery, however, the deviation of the
Fund from its benchmark may be significant.

U.S. GOVERNMENT SECURITIES
The Bond Fund invests primarily in U.S. Government Securities, and each of the
other Funds may invest in U.S. Government Securities. The Juno Fund may enter
into short transactions on U.S. Government Securities. Securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities 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 Fannie Mae,
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 Fannie Mae, 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

<PAGE>

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. The Bond Fund will invest in such U.S. Government
Securities only when the Advisor is satisfied that the credit risk with respect
to the issuer is minimal.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each Fund, 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
Fund makes the commitment to purchase securities on a when-issued or
delayed-delivery basis, the Fund will record the transaction and thereafter
reflect the value of the securities, each day, in determining the Fund's net
asset value. A Fund will not purchase securities on a when-issued or
delayed-delivery basis if, as a result, more than 15% (10% with respect to
the Money Market Fund) of the Fund'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 Fund will also establish a segregated
account with the Fund's custodian bank in which the Fund will maintain cash
or liquid securities equal to or greater in value than the Fund's purchase
commitments for such when-issued or delayed-delivery securities. The Trust
does not believe that a Fund's net asset value or income will be adversely
affected by the Fund's purchase of securities on a when-issued or
delayed-delivery basis.

ZERO COUPON BONDS
The Bond Fund and Juno Fund may invest in U.S. Treasury zero-coupon bonds. These
securities are U.S. Treasury bonds which have been stripped of their unmatured
interest coupons, the coupons themselves, and receipts or certificates
representing interests in such stripped debt obligations and coupons. Interest
is not paid in cash during the term of these securities, but is accrued and paid
at maturity. Such obligations have greater price volatility than coupon
obligations and other normal interest-paying securities, and the value of zero
coupon securities reacts more quickly to changes in interest rates than do
coupon bonds. Since dividend income is accrued throughout the term of the zero
coupon obligation, but is not actually received until maturity, the Fund may
have to sell other securities to pay said accrued dividends prior to maturity of
the zero coupon obligation. Unlike regular U.S. Treasury bonds which pay
semi-annual interest, U.S. Treasury zero coupon bonds do not generate
semi-annual coupon payments. Instead, zero coupon bonds are purchased at a
substantial discount from the maturity value of such securities, the discount
reflecting the current value of the deferred interest; this discount is
amortized as interest income over the life of the security, and is taxable even
though there is no cash return until maturity. Zero coupon U.S. Treasury issues
originally were created by government bond dealers who bought U.S. Treasury
bonds and issued receipts representing an ownership interest in the interest
coupons or in the principal portion of the bonds. Subsequently, the U.S.
Treasury began directly issuing zero coupon bonds with the introduction of
"Separate Trading of Registered Interest and Principal of Securities" (or
"STRIPS"). While zero coupon bonds eliminate the reinvestment risk of regular
coupon issues, that is, the risk of subsequently investing the periodic interest
payments at a lower rate than that of the security held, zero coupon bonds
fluctuate much more sharply than regular coupon-bearing bonds. Thus, when
interest rates rise, the value of zero coupon bonds will decrease to a greater
extent than will the value of regular bonds having the same interest rate.

<PAGE>

INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES
The following investment limitations (and those set forth in the Prospectuses)
are fundamental policies of the Funds which cannot be changed with respect to a
Fund without the consent of the holders of a majority of that Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of a Fund's shares present at a meeting, if more than 50% of the
outstanding shares of that Fund are present or represented by proxy, or (ii)
more than 50% of that Fund's outstanding shares, whichever is less.

FUNDAMENTAL POLICIES OF THE BENCHMARK FUNDS AND THE PRECIOUS METALS FUND

A Benchmark Fund and the Precious Metals Fund shall not:

1. Lend any security or make any other loan if, as a result, more than
33 1/3% of the value of the Fund's total assets would be lent to other
parties, except (i) through the purchase of a portion of an issue of
debt securities in accordance with the Fund's investment objective,
policies, and limitations, or (ii) by engaging in repurchase
agreements with respect to portfolio securities, or (iii) through the
loans of portfolio securities provided the borrower maintains
collateral equal to at least 100% of the value of the borrowed
security and marked-to-market daily.

2. Underwrite securities of any other issuer.

3. Purchase, hold, or deal in real estate or oil and gas interests,
although the Fund may purchase and sell securities that are secured by
real estate or interests therein and may purchase mortgage-related
securities and may hold and sell real estate acquired for the Fund as
a result of the ownership of securities.

4. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act) (including the amount of senior securities issued but
excluding liabilities and indebtedness not constituting senior
securities), except that the Fund may issue senior securities in
connection with transactions in options, futures, options on futures,
and other similar investments, and except as otherwise permitted
herein and in Investment Restriction Nos. 5, 7, 8, and 9, as
applicable to the Fund.

5. Pledge, mortgage, or hypothecate the Fund's assets, except to the
extent necessary to secure permitted borrowings and to the extent
related to the deposit of assets in escrow in connection with (i) the
writing of covered put and call options, (ii) the purchase of
securities on a forward-commitment or delayed-delivery basis, and
(iii) collateral and initial or variation margin arrangements with
respect to currency transactions, options, futures contracts,
including those relating to indices, and options on futures contracts
or indices.

6. Invest in commodities except that the Fund may purchase and sell
futures contracts, including those relating to securities, currencies,
indices, and options on futures contracts or indices and currencies
underlying or related to any such futures contracts, and purchase

<PAGE>

and sell currencies (and options thereon) or securities on a
forward-commitment or delayed-delivery basis.

6.1 THE PRECIOUS METALS FUND MAY (A) TRADE IN FUTURES CONTRACTS AND
OPTIONS ON FUTURES CONTRACTS; OR (B) INVEST IN PRECIOUS METALS
AND PRECIOUS MINERALS.

7. Invest 25% or more of the value of the Fund's total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry (except that, to the extent the
benchmark selected for a particular Benchmark Fund is concentrated in
a particular industry, the Fund will necessarily be concentrated in
that industry). This limitation does not apply to investments or
obligations of the U.S. Government or any of its agencies or
instrumentalities.

7.1 THE PRECIOUS METALS FUND WILL INVEST 25% OR MORE OF THE VALUE OF
THE ITS TOTAL ASSETS IN THE SECURITIES IN THE METALS-RELATED AND
MINERALS-RELATED INDUSTRIES.

8. Borrow money, except (i) as a temporary measure for extraordinary or
emergency purposes and then only in amounts not in excess of 5% of the
value of the Fund's total assets from a bank or (ii) in an amount up
to one-third of the value of the Fund's total assets, including the
amount borrowed, in order to meet redemption requests without
immediately selling portfolio instruments. This provision is not for
investment leverage but solely to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments would be inconvenient or
disadvantageous.

8.1 THE NOVA FUND AND THE BOND FUND MAY BORROW MONEY, SUBJECT TO THE
CONDITIONS OF PARAGRAPH 8, FOR THE PURPOSE OF INVESTMENT
LEVERAGE.

8.2 THE JUNO FUND MAY BORROW MONEY, SUBJECT TO THE CONDITIONS OF
PARAGRAPH 8, BUT SHALL NOT MAKE PURCHASES WHILE BORROWING IN
EXCESS OF 5% OF THE VALUE OF ITS ASSETS. FOR PURPOSES OF THIS
SUBPARAGRAPH, FUND ASSETS INVESTED IN REVERSE REPURCHASE
AGREEMENTS ARE INCLUDED IN THE AMOUNTS BORROWED.

9. Make short sales of portfolio securities or purchase any portfolio
securities on margin, except for such short-term credits as are
necessary for the clearance of transactions. The deposit or payment by
the Fund of initial or variation margin in connection with futures or
options transactions is not considered to be a securities purchase on
margin. The Fund may engage in short sales if, at the time of the
short sale, the Fund owns or has the right to acquire an equal amount
of the security being sold at no additional cost ("selling against the
box").

9.1 THE URSA FUND, THE ARKTOS FUND, AND THE JUNO FUND MAY ENGAGE IN
SHORT SALES OF PORTFOLIO SECURITIES OR MAINTAIN A SHORT POSITION
IF AT ALL TIMES WHEN A SHORT POSITION IS OPEN (i) THE FUND
MAINTAINS A SEGREGATED ACCOUNT WITH THE FUND'S CUSTODIAN TO COVER
THE SHORT POSITION IN ACCORDANCE WITH THE POSITION OF THE
SECURITIES AND EXCHANGE COMMISSION OR (ii) THE FUND OWNS AN EQUAL
AMOUNT

<PAGE>

OF SUCH SECURITIES OR SECURITIES CONVERTIBLE INTO OR
EXCHANGEABLE, WITHOUT PAYMENT OF ANY FURTHER CONSIDERATION, FOR
SECURITIES OF THE SAME ISSUE AS, AND EQUAL IN AMOUNT TO, THE
SECURITIES SOLD SHORT.

FUNDAMENTAL POLICIES APPLICABLE TO THE MONEY MARKET FUND

The Money Market Fund shall not:

10. Make loans to others except through the purchase of qualified debt
obligations, loans of portfolio securities and entry into repurchase
agreements.

11. Lend the Money Market Fund's portfolio securities in excess of 15% of
the Money Market Fund's total assets. Any loans of the Money Market
Fund's portfolio securities will be made according to guidelines
established by the Board of Trustees of the Trust, including
maintenance of cash collateral of the borrower equal at all times to
the current market value of the securities loaned.

12. Issue senior securities, except as permitted by the Money Market
Fund's investment objectives and policies.

13. Write or purchase put or call options.

14. Invest in securities of other investment companies, except as these
securities may be acquired as part of a merger, consolidation,
acquisition of assets, or plan of reorganization.

15. Mortgage, pledge, or hypothecate the Money Market Fund's assets except
to secure permitted borrowings. In those cases, the Money Market Fund
may mortgage, pledge, or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of total assets of the Money Market Fund at the time of the
borrowing.

16. Make short sales of portfolio securities or purchase any portfolio
securities on margin, except for such short-term credits as are
necessary for the clearance of transactions.

FUNDAMENTAL POLICIES OF THE SECTOR FUNDS (OTHER THAN THE PRECIOUS METALS FUND)

A Sector Fund (other than the Precious Metals Fund) may not:

17. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate the Fund to purchase securities or
require that Fund to segregate assets are not considered to be
borrowing. Asset coverage of a least 300% is required for all
borrowing, except where the Fund has borrowed money for temporary
purposes in amounts not exceeding 5% of its total

<PAGE>

assets. The Fund will not purchase securities while its borrowing
exceed 5% of its total assets.

18. Make loans if, as a result, more than 33 1/3% of its total assets
would be lent to other parties, except that the Fund may (i) purchase
or hold debt instruments in accordance with its investment objective
and policies; (ii) enter into repurchase agreements; and (iii) lend
its securities.

19. Purchase or sell real estate, physical commodities, or commodities
contracts, except that the Fund may purchase (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts; and
(ii) commodities contracts relating to financial instruments, such as
financial futures contracts and options on such contracts.

20. Issue senior securities (as defined in the 1940 Act) except as
permitted by rule, regulation or order of the SEC.

21. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.

22. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.

NON-FUNDAMENTAL POLICIES

The following investment limitations are non-fundamental policies of the Funds
and may be changed with respect to any Fund by the Board of Trustees.

Each Fund may not:

1. Invest in warrants.

2. Invest in real estate limited partnerships.

3. Invest in mineral leases.

Each Sector Fund may not:

4. Pledge, mortgage or hypothecate assets except to secure borrowing
permitted by the Fund's fundamental limitation on borrowing.

5. Invest in companies for the purpose of exercising control.

6. Purchase securities on margin or effect short sales, except that a
Fund may (i) obtain short-term credits as necessary for the clearance
of security transactions; (ii) provide initial and

<PAGE>

variation margin payments in connection with transactions involving
futures contracts and options on such contracts; and (iii) make short
sales "against the box" or in compliance with the SEC's position
regarding the asset segregation requirements imposed by Section 18 of
the 1940 Act.

7. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act or any rule, regulation or order of the SEC.

8. Purchase or hold illiquid securities, I.E., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing
in more than seven days) if, in the aggregate, more than 15% of its
net assets would be invested in illiquid securities.

The foregoing percentages are: (i) based on total assets (except for the
limitation on illiquid securities, which is based on net assets); (ii) will
apply at the time of the purchase of a security; and (iii) shall not be
considered violated unless an excess or deficiency occurs or exists immediately
after and as a result of a purchase of such security.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to the general supervision by the Trustees, the Advisor is responsible
for decisions to buy and sell securities for each of the Funds, the selection of
brokers and dealers to effect the transactions, and the negotiation of brokerage
commissions, if any. The Advisor expects that the Funds 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 Funds 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 Funds 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 Funds and the other client accounts.

The policy of each Fund regarding purchases and sales of securities for the
Fund'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
Fund'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 Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund 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

<PAGE>

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. 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 managing the investment portfolios of the Funds, 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 Fund or the Advisor. In addition, Section 28(e) of the
Securities Exchange Act of 1934 permits the Advisor to cause a Fund to pay
commission rates in excess of those another dealer or broker would have charged
for effecting the same transaction, if the Advisor determines, in good faith,
that the commission paid is reasonable in relation to the value of brokerage and
research services provided. While the Advisor currently does not intend to pay
higher commissions to dealers and brokers who supply it with brokerage and
research services, in the event such higher payments would be made or are deemed
to have been made, such higher payments would be in accordance with Section
28(e).

Such research services may include information on the economy, industries,
groups of securities, individual companies, statistical information, accounting
and tax law interpretations, political developments, legal developments
affecting portfolio securities, technical market action, pricing and appraisal
services, credit analysis, risk measurement analysis, performance analysis,
analysis of corporate responsibility issues or in the form of access to various
computer-generated data, computer hardware and software. Such research may be
provided by brokers and dealers in the form of written reports, telephone
contacts and personal meetings with security analysts, corporate and industry
spokespersons, economists, academicians, and government representatives.
Brokerage services and equipment may facilitate the execution and monitoring of
securities transactions, for example, by providing rapid communications with
financial markets and brokers or dealers, or by providing real-time tracking of
orders, settlements, investment positions and relevant investment criteria and
restrictions applicable to the execution of securities transactions. In some
cases, brokerage and research services are generated by third parties but are
provided to the Advisor by or through brokers and dealers. The Advisor may
allocate brokerage for research services that are also available for cash, where
appropriate and permitted by law. The Advisor may also pay cash for certain
research services received from external sources.

In addition, the information and services received by the Advisor from brokers
and dealers may not in all cases benefit a Fund directly. For example, such
information and services received by the Advisor as a result of the brokerage
allocation of one of the Funds may be of benefit to the Advisor in the
management of other accounts of the Advisor, including other Funds of the Trust
and other investment companies advised by the Advisor. 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

<PAGE>

paid to the Advisor is not reduced by any amount that may be attributable to the
value of such information and services.

For the fiscal periods ended December 31, 1997, December 31, 1998 and
December 31, 1999 the Funds paid the following brokerage commissions:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AGGREGATE BROKERAGE COMMISSIONS
-----------------------------------------
FUND 1997* 1998** 1999***
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Nova Fund $ 5,912 $13,363 $84,035
- -------------------------------------------------------------------------------
Ursa Fund $ 5,924 $30,809 $55,225
- -------------------------------------------------------------------------------
OTC Fund $ 220 $ 401 $ 1,449
- -------------------------------------------------------------------------------
Juno Fund $ 2,018 $ 1,074 $ 4,067
- -------------------------------------------------------------------------------
U.S. Government Bond Fund $ 0 $ 2,169 $ 4,228
- -------------------------------------------------------------------------------
Precious Metals Fund $19,754 $32,985 $24,305
- -------------------------------------------------------------------------------
U.S. Government Money Market Fund n/a n/a n/a
- -------------------------------------------------------------------------------
</TABLE>

*Fees paid by the Rydex Subaccounts.
**Includes fees paid by both the Rydex Subaccounts and each successor fund.
***The Arktos Fund and Sector Funds, other than the Precious Metals Fund, had
not commenced operations as of December 31, 1999.

MANAGEMENT OF THE TRUST

The Trustees are responsible for the general supervision of the Trust's
business. The day-to-day operations of the Trust are the responsibilities of the
Trust's officers. The names and addresses (and ages) of the Trustees and 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.

TRUSTEES

*/ALBERT P. VIRAGH, JR. (58)

- --------

*/ This trustee is deemed to be an "interested person" of the Trust, within
the meaning of Section 2(a)(19) of the 1940 Act, inasmuch as this person is
affiliated with the Advisor, as described herein.

<PAGE>

and transfer agent servicer, 1993 to present; Chairman of the Board of
Directors, President, and Treasurer of PADCO Advisors II, Inc., investment
adviser, 1998 to present; Chairman of the Board of Directors, President,
and Treasurer of Rydex Distributors, Inc., a registered broker-dealer firm,
1996 to present; Vice President of Rushmore Investment Advisors Ltd., a
registered investment adviser, 1985 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

COREY A. COLEHOUR (53)

Trustee of Rydex Series Funds, 1993 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Senior Vice President of Marketing of Schield Management Company, a
registered investment adviser, 1985 to present. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

J. KENNETH DALTON (58)

Trustee of Rydex Series Funds, 1995 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Mortgage Banking Consultant and Investor, The Dalton Group, a real estate
company, 1995 to present; President, CRAM Mortgage Group, Inc., 1966 to
1995. Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852.

JOHN O. DEMARET (59)

Trustee of Rydex Series Funds, 1997 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Founder and Chief Executive Officer, Health Cost Controls America, Chicago,
Illinois, 1987 to 1996; Sole Practitioner, Chicago, Illinois, 1984 to 1987;
General Counsel for the Chicago Transit Authority, 1981 to 1984; Senior
Partner, O'Halloran, LaVarre & Demaret, Northbrook, Illinois, 1978 to 1981.
Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

PATRICK T. MCCARVILLE (57)

Trustee of Rydex Series Funds, 1997 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Founder and Chief Executive Officer, Par Industries, Inc., Northbrook,
Illinois, 1977 to present; President and Chief Executive Officer, American
Health Resources, Northbrook, Illinois, 1984 to 1986. Address: 6116
Executive Boulevard, Suite 400, Rockville, Maryland 20852.

ROGER SOMERS (54)

Trustee of Rydex Series Funds, 1993 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
President, Arrow Limousine, 1963 to present. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

<PAGE>

OFFICERS

ROBERT M. STEELE (41)

Secretary and Vice President of Rydex Series Funds, 1994 to present;
Secretary and Vice President of Rydex Variable Trust, 1998 to present;
Secretary and Vice President of Rydex Dynamic Funds, 1999 to present; Vice
President of Rydex Distributors, Inc., 1996 to present; Vice President of
The Boston Company, Inc., an institutional money management firm, 1987 to
1994. Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852.

CARL G. VERBONCOEUR (47)

Vice President and Treasurer of Rydex Series Funds, 1997 to present; Vice
President and Treasurer of the Rydex Variable Trust, 1998 to present; Vice
President and Treasurer of Rydex Dynamic Funds, 1999 to present; Vice
President of Rydex Distributors, Inc., 1997 to present; Senior Vice
President, Crestar Bank, 1995 to 1997; Senior Vice President, Crestar Asset
Management Company, a registered investment adviser, 1993 to 1995; Vice
President of Perpetual Savings Bank, 1987 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

MICHAEL P. BYRUM (29)

Vice President and Assistant Secretary of Rydex Series Funds, 1997 to
present; Vice President and Assistant Secretary of the Rydex Variable
Trust, 1998 to present; Vice President and Assistant Secretary of the Rydex
Dynamic Funds, 1999 to present; Vice President and Senior Portfolio Manager
of PADCO Advisors, Inc., investment adviser, 1993 to present; Vice
President and Senior Portfolio Manager of PADCO Advisors II Inc.,
investment adviser, 1996 to present; Secretary of Rydex Distributors, Inc.,
1996 to present; Investment Representative, Money Management Associates, a
registered investment adviser, 1992 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

JOHN FRANGOS (42)

Vice President of Rydex Series Funds, Rydex Variable Trust, and Rydex
Dynamic Funds from 1999 to present; Vice President of Operations of PADCO
Service Company, Inc., 1998 to present; Vice President of Rydex
Distributors, Inc., 1999 to present; Manager and Assistant Vice President,
PFPC, Inc., a mutual fund service company, 1994 to 1998. Address: 6116
Executive Boulevard, Suite 400, Rockville, Maryland 20852.

The aggregate compensation paid by the Trust to each of its Trustees serving
during the fiscal year ended December 31, 1999, is set forth in the table below:

<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AGGREGATE PENSION OR ESTIMATED TOTAL
NAME OF PERSON, COMPENSATION RETIREMENT ANNUAL COMPENSATION
POSITION FROM TRUST BENEFITS ACCRUED BENEFITS UPON FROM FUND
AS PART OF RETIREMENT COMPLEX FOR
TRUST'S EXPENSES SERVICE ON
THREE
BOARDS**
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert P. Viragh, Jr.*, $0 $0 $0 $0
CHAIRMAN AND
PRESIDENT
- -----------------------------------------------------------------------------------------------
Corey A. Colehour, $6,500 $0 $0 $29,000
TRUSTEE
- -----------------------------------------------------------------------------------------------
J. Kenneth Dalton, $6,500 $0 $0 $29,000
TRUSTEE
- -----------------------------------------------------------------------------------------------
Roger Somers, $6,500 $0 $0 $29,000
TRUSTEE
- -----------------------------------------------------------------------------------------------
John O. Demaret, $6,500 $0 $0 $29,000
TRUSTEE
- -----------------------------------------------------------------------------------------------
Patrick T. McCarville, $6,500 $0 $0 $29,000
TRUSTEE
- -----------------------------------------------------------------------------------------------
</TABLE>

* Denotes an "interested person" of the Trust, within the meaning of Section
2(a)(19) of the 1940 Act, in as much as this person is affiliatd with the
Advisor, as described herein..
** Each member of the Board of Trustees also serves as a Trustee to Rydex
Series Funds and to Rydex Dynamic Funds.

As of the date of this Statement of Additional Information, the Trustees and the
officers of the Trust, as a group, owned, of record and beneficially, less than
1% of the outstanding shares of each Fund.

THE ADVISORY AGREEMENT
Under an investment advisory agreement with the Advisor, dated August 11, 1998,
the Advisor serves as the investment adviser for each series of the Trust and
provides investment advice to the Funds and oversees the day-to-day operations
of the Funds, subject to direction and control by the Trustees and the officers
of the Trust. Prior to November 2, 1998, the Advisor provided similar services
to the Rydex Subaccounts. As of March 31, 2000, net assets under management of
the Advisor and its affiliates were approximately $8.5 billion. Pursuant to the
advisory agreement with the Advisor, the Funds pay the Advisor the following
fees at an annual rate based on the average daily net assets for each respective
Fund, as set forth below. For the fiscal periods ended December 31, 1997,
December 31, 1998, and December 31, 1999 the Advisor received the following
investment advisory fees:

<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
FUND ADVISORY FEES PAID
----------------------------------------------------------
ANNUAL ADVISORY 1997* 1998** 1999***
FEE CONTRACTUAL
RATE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nova Fund 0.75% $0 $115,892 $454,768
- --------------------------------------------------------------------------------------
Ursa Fund 0.90% $0 $ 41,668 $286,828
- --------------------------------------------------------------------------------------
OTC Fund 0.75% $0 $ 96,378 $928,141
- --------------------------------------------------------------------------------------
Juno Fund 0.90% $0 $ 906 $ 2,898
- --------------------------------------------------------------------------------------
U.S. Government Bond 0.50% $0 $ 9,985 $ 14,155
Fund
- --------------------------------------------------------------------------------------
Precious Metals Fund 0.75% $0 $ 5,891 $ 15,807
- --------------------------------------------------------------------------------------
U.S. Government Money 0.50% $0 $ 79,870 $337,723
Market Fund
- --------------------------------------------------------------------------------------
</TABLE>

The Advisor manages the investment and the reinvestment of the assets of each of
the Funds, in accordance with the investment objectives, policies, and
limitations of the Fund, subject to the general supervision and control of the
Trustees and the officers of the Trust. The Advisor bears all costs associated
with providing these advisory services and the expenses of the Trustees of the
Trust who are affiliated with or interested persons of the Advisor. The Advisor,
from its own resources, including profits from advisory fees received from the
Funds, provided such fees are legitimate and not excessive, may make payments to
broker-dealers and other financial institutions for their expenses in connection
with the distribution of Fund shares, and otherwise currently pay all
distribution costs for Fund shares.

The Advisor is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of 0.90% of the average daily net assets of each Fund. The
Advisor may from time to time reimburse certain expenses of the Funds in order
to limit the Funds' operating expenses as described in the prospectuses. The
Advisor's office is located at 6116 Executive Boulevard, Suite 400, Rockville,
Maryland 20852. PADCO Advisers II, Inc. was incorporated in the State of
Maryland on July 5, 1994. Albert P. Viragh, Jr., the Chairman of the Board of
Trustees and the President of the Advisor, owns a controlling interest in the
Advisor.

THE SERVICE AGREEMENT
General administrative, shareholder, dividend disbursement, transfer agent, and
registrar services are provided to the Trust and the Funds by PADCO Service
Company, Inc. (the "Servicer"), 6116 Executive Boulevard, Suite 400, Rockville,
Maryland 20852, subject to the general supervision and control of the Trustees
and the officers of the Trust, pursuant to a service agreement between the Trust
and the

<PAGE>

Servicer. The Servicer is wholly-owned by Albert P. Viragh, Jr., who is the
Chairman of the Board and the President of the Trust and the sole controlling
person and majority owner of the Advisor.

In consideration for its services, the Servicer is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of 0.25% of the daily net
assets of each Fund. The service fee contractual rate paid to the Servicer by
the Funds/Rydex Subaccounts is set forth in the table below. The aggregate
service fees paid to the Servicer for the fiscal years ended December 31, 1997,
December 31, 1998, and December 31, 1999 are also set forth in the table below.

<TABLE>
<CAPTION>
SERVICE FEES PAID
--------------------------------------
ANNUAL SERVICE 1997* 1998** 1999***
FEE RATE
FUND/SUBACCOUNT
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nova Fund 0.25% $0 $40,528 $151,589
- -----------------------------------------------------------------------------------------
Ursa Fund 0.25% $0 $14,234 $ 79,674
- -----------------------------------------------------------------------------------------
OTC Fund 0.20% $0 $25,701 $247,504
- -----------------------------------------------------------------------------------------
Juno Fund 0.25% $0 $ 445 $ 805
- -----------------------------------------------------------------------------------------
U.S. Government Bond
Fund 0.20% $0 $ 3,994 $ 5,662
- -----------------------------------------------------------------------------------------
Precious Metals Fund 0.20% $0 $ 2,001 $ 4,215
- -----------------------------------------------------------------------------------------
U.S. Government Money 0.20% $0 $56,756 $135,089
Market Fund
- -----------------------------------------------------------------------------------------
</TABLE>

*Fees paid by the Rydex Subaccounts.
**Includes fees paid by both the Rydex Subaccounts and each successor Fund.
***The Arktos Fund and Sector Funds, other than the Precious Metals Fund, had
not commenced operations as of December 31, 1999.

Under the service agreement, the Servicer provides the Trust and each Fund 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 Trust and each Fund under federal and
state securities laws. The Servicer also maintains the shareholder account
records for each Fund, disburses dividends and distributions payable by each
Fund, and produces statements with respect to account activity for each Fund and
each Fund's shareholders. The Servicer pays all fees and expenses that are
directly related to the services provided by the Servicer to each Fund; each
Fund reimburses the Servicer for all fees and expenses incurred by the Servicer
which are not directly related to the services the Servicer provides to the Fund
under the service agreement. Prior to November 2, 1998 the Servicer provided
similar services to the Rydex Subaccounts.

<PAGE>

Pursuant to an Accounting Services Agreement, the Servicer serves as Accounting
Services Agent and performs certain record keeping and accounting functions. The
Servicer received the following fees for the fiscal period ended December 31,
1999:

<TABLE>
<CAPTION>
FUND* FEES PAID
----- ---------
<S> <C>
Nova Fund $ 98,587
Ursa Fund $ 59,059
OTC Fund $235,009
Juno Fund $ 386
U.S. Government Bond Fund $ 3,499
Precious Metals Fund $ 3,312
U.S. Government Money Market Fund $100,201
</TABLE>

* The Arktos Fund and Sector Funds, other than the Precious Metals Fund, had
not commenced operations as of December 31, 1999.

DISTRIBUTION
Pursuant to the Distribution Agreement adopted by the Trust, Rydex Distributors,
Inc. (the "Distributor"), 6116 Executive Boulevard, Suite 400, Rockville,
Maryland 20852, acts as the distributor for the shares of the Trust under the
general supervision and control of the Trustees and the officers of the Trust.

INVESTOR SERVICES PLAN
Pursuant to an Investor Services Plan dated January 1, 1999, the Distributor
directly, or indirectly through other service providers determined by the
Distributor ("Service Providers"), provides investor services to owners of
Contacts who, indirectly through insurance company separate accounts, invest in
shares of the Funds ("Investors"). Investor services include some or all of the
following: printing Fund prospectuses and statements of additional information
and mailing them to Investors or to financial advisers who allocate funds for
investments in shares of the Funds on behalf of Investors ("Financial
Advisors"); forwarding communications from the Funds to Investors or Financial
Advisors, including proxy solicitation material and annual and semiannual
reports; assistance in facilitating and processing transactions in shares of the
Funds in connection with strategic or tactical asset allocation investing;
assistance in providing the Fund with advance information on strategic and
tactical asset allocation trends and anticipated investment activity in and
among the Funds; 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 Funds'
portfolio investments; (c) providing performance information to Financial
Advisors regarding the Funds; (d) providing information to Financial Advisors
regarding the Funds' investment objectives; (e) providing investor account
information to Financial Advisors; and (f) redeeming Fund shares, if necessary,
for the payment of Financial Advisor fees.

For these services, the Trust compensates the Distributor at an annual rate
not exceeding .25% of the Funds' average daily net assets. The Distributor is
authorized to use its fee to compensate Services Providers for providing
Investor services. The fee will be paid from the assets of the Funds and will
be calculated and accrued daily and paid within fifteen (15) days of the end
of each month. Following are the fees paid under this plan for the fiscal
year ended December 31, 1999:

<PAGE>

<TABLE>
<CAPTION>
FUND* FEES PAID
---- ---------
<S> <C>
Nova Fund $ 98,587
Ursa Fund $ 59,059
OTC Fund $235,009
Juno Fund $ 386
U.S. Government Bond Fund $ 3,499
Precious Metals Fund $ 3,312
U.S. Government Money Market $100,201
</TABLE>

* The Arktos Fund and Sector Funds, other than the Precious Metals Fund, had
not commenced operations as of December 31, 1999.

COSTS AND EXPENSES
Each Fund bears all expenses of its operations other than those assumed by the
Advisor or the Servicer. Fund 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; non-interested Trustees' fees and expenses; the costs and
expenses of redeeming shares of the Fund; fees and expenses paid to any
securities pricing organization; dues and expenses associated with membership in
any mutual fund organization; and costs for incoming telephone WATTS lines. In
addition, each of the Funds pays an equal portion of the Trustee fees and
expenses for attendance at Trustee meetings for the Trustees of the Trust who
are not affiliated with or interested persons of the Advisor.

Conseco Variable and PADCO have advanced the organizational expenses of the
Funds' predecessor Separate Account. These expenses (a total of approximately
$821,573) will be reimbursed by the Funds and amortized over a five year period.
These amortized reimbursements will be allocated among the Funds daily and
reconciled and settled monthly on the basis of relative Fund net assets.

PRINCIPAL HOLDERS OF SECURITIES

As of April 4, 2000, the following persons were the only persons who were record
owners or, to the knowledge of the Trust, beneficial owners of 5% or more of the
shares of the Funds.

<TABLE>
<CAPTION>
NAME AND ADDRESS # OF SHARES PERCENT
- -------------------------------------------------------------------------
<S> <C> <C>
Nova Fund
- -------------------------------------------------------------------------
American Skandia Life 7,188,895.642 71.67%
Assurance Co.
- -------------------------------------------------------------------------
Conseco Variable Insurance 2,517,624.522 25.10%
Company
- -------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
NAME AND ADDRESS # OF SHARES PERCENT
- -----------------------------------------------------------------------------------
<S> <C> <C>
Ursa Fund
- -----------------------------------------------------------------------------------
Conseco Variable Insurance 3,420,706.497 51.23
Company
- -----------------------------------------------------------------------------------
American Skandia Life 2,917,033.060 43.69
Assurance Co.
- -----------------------------------------------------------------------------------
OTC Fund
- -----------------------------------------------------------------------------------
American Skandia Life 12,475,343.921 88.29
Assurance Co.
- -----------------------------------------------------------------------------------
Conseco Variable Insurance 1,268,369.984 8.98
Company
- -----------------------------------------------------------------------------------
Juno Fund
- -----------------------------------------------------------------------------------
Conseco Variable Insurance 17,902.659 95.15%
Company
- -----------------------------------------------------------------------------------
U.S. Government Bond Fund
- -----------------------------------------------------------------------------------
Conseco Variable Insurance 238,841.606 92.76%
Company
- -----------------------------------------------------------------------------------
Precious Metals Fund
- -----------------------------------------------------------------------------------
Ameritas Life Insurance 465,809.336 76.59%
Company
- -----------------------------------------------------------------------------------
Conseco Variable Life 139,095.901 22.87%
Assurance Co.
- -----------------------------------------------------------------------------------
Money Market Fund
- -----------------------------------------------------------------------------------
Conseco Variable Insurance 89,301,835.360 100.00%
Company
- -----------------------------------------------------------------------------------
</TABLE>

DETERMINATION OF NET ASSET VALUE

The net asset value of a Fund serves as the basis for the purchase and
redemption price of that Fund's shares. The net asset value per share of a Fund
is calculated by dividing the market value of the Fund's securities plus the
values of its other assets, less all liabilities, by the number of outstanding
shares of the Fund. If market quotations are not readily available, a security
will be valued at fair value by the Advisor using methods established or
ratified by the Board of Trustees.

<PAGE>

Options on securities and indices purchased by a Fund generally are valued at
their last bid price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter ("OTC") market, the average of the last
bid price as obtained from two or more dealers unless there is only one dealer,
in which case that dealer's price is used. Futures contracts generally are
valued based upon the unrealized gain or loss on the contract determined with
reference to the first price reported by established futures exchanges after the
close of a Fund pricing cycle, or alternatively, with reference to the average
price at which futures are bought and sold by a Fund. Options on futures
contracts generally are valued with reference to the underlying futures
contract. If the market makes a limit move with respect to a particular
commodity, the commodity will be valued at fair value by the Advisor using
methods established or ratified by the Board of Trustees.

On days when the CBOT is closed during its usual business hours, but the
shares of the Bond Fund, Juno Fund or Juno Master Fund have been purchased,
redeemed, and/or exchanged, the portfolio securities held by the Bond Fund
and Juno Fund which are traded on the CBOT are valued at the earlier of (i)
the time of the execution of the last trade of the day for the Bond Fund and
Juno Fund in those CBOT-traded portfolio securities and (ii) the time of the
close of the CBOT Evening Session. On days when the CBOT is closed during its
usual business hours and there is no need for the Bond Fund and Juno Fund to
execute trades on the CBOT, the value of the CBOT-traded portfolio securities
held by the Bond Fund and Juno Fund will be the mean of the bid and asked
prices for those CBOT-traded portfolio securities at the open of the CBOT
Evening Session.

OTC securities held by a Fund shall be valued at the last sales price or, if no
sales price is reported, the mean of the last bid and asked price is used. The
portfolio securities of a Fund that are listed on national exchanges are taken
at the last sales price of such securities on such exchange; if no sales price
is reported, the mean of the last bid and asked price is used. For valuation
purposes, all assets and liabilities initially expressed in foreign currency
values will be converted into U.S. dollar values at the mean between the bid and
the offered quotations of such currencies against U.S. dollars as last quoted by
any recognized dealer. If such quotations are not available, the rate of
exchange will be determined in good faith by the Advisor based on guidelines
adopted by the Trustees. Dividend income and other distributions are recorded on
the ex-dividend date, except for certain dividends from foreign securities which
are recorded as soon as the Trust is informed after the ex-dividend date.

Illiquid securities, securities for which reliable quotations or pricing
services are not readily available, and all other assets will be valued at their
respective fair value as determined in good faith by, or under procedures
established by, the Trustees, which procedures may include the delegation of
certain responsibilities regarding valuation to the Advisor or the officers of
the Trust. The officers of the Trust report, as necessary, to the Trustees
regarding portfolio valuation determination. The Trustees, from time to time,
will review these methods of valuation and will recommend changes which may be
necessary to assure that the investments of the Funds are valued at fair value.

The Money Market Fund will utilize the amortized cost method in valuing its
portfolio securities for purposes of determining the net asset value of its
shares even though the portfolio securities may increase or decrease in market
value, generally, in connection with changes in interest rates. The amortized
cost method of valuation involves valuing a security at its cost adjusted by a
constant

<PAGE>

amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument while this
method provides certainty in valuation, this method may result in periods during
which value, as determined by amortized cost, is higher or lower than the price
the Money Market Fund would receive if this Fund sold the instrument. During
such periods, the yield to investors in the Money Market Fund may differ
somewhat from that obtained in a similar company which uses mark-to-market
values for all its portfolio securities. For example, if the use of amortized
cost resulted in a lower (higher) aggregate portfolio value on a particular day,
a prospective investor in the Money Market Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such a
similar company and existing investors would receive less (more) investment
income. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00.

The Money Market Fund's use of the amortized cost method is permitted pursuant
to Rule 2a-7 under the 1940 Act (the "Rule"). The Rule requires that the Money
Market Fund limit its investments to U.S. dollar-denominated instruments that
meet the Rule's quality, maturity and diversification requirements. The Rule
also requires the Money Market Fund to maintain a dollar-weighted average
portfolio maturity of not more than ninety days and precludes the purchase of
any instrument with a remaining maturity of more than thirteen months.

The Money Market Fund may only purchase "Eligible Securities." Eligible
Securities are securities which: (a) have remaining maturities of thirteen
months or less; (b) either (i) are rated in the two highest short-term rating
categories by any two nationally-recognized statistical rating organizations
("NRSROs") that have issued a short-term rating with respect to the security or
class of debt obligations of the issuer, or (ii) if only one NRSRO has issued a
short-term rating with respect to the security, then by that NRSRO; (c) were
long-term securities at the time of issuance whose issuers have outstanding
short-term debt obligations which are comparable in priority and security and
has a ratings as specified in (b) above; or (d) if no rating is assigned by any
NRSRO as provided in (b) and (c) above, the unrated securities are determined by
the Trustees to be of comparable quality to any rated securities.

As permitted by the Rule, the Trustees have delegated to the Advisor, subject to
the Trustees' oversight pursuant to guidelines and procedures adopted by the
Trustees, the authority to determine which securities present minimal credit
risks and which unrated securities are comparable in quality to rated
securities.

If the Trustees determine that it is no longer in the best interests of the
Money Market Fund and its shareholders to maintain a stable price of $1.00 per
share, or if the Trustees believe that maintaining such price no longer reflects
a market-based net asset value per share, the Trustees have the right to change
from an amortized cost basis of valuation to valuation based on market
quotations. The Money Market Fund will notify shareholders of any such change.

PERFORMANCE INFORMATION

From time to time, each of the Funds (other than the Money Market Fund) may
include the Fund's total return in advertisements or reports to shareholders or
prospective shareholders. Quotations of average annual total return for a Fund
will be expressed in terms of the average annual compounded rate of return

<PAGE>

on a hypothetical investment in the Fund over a period of at least one, five,
and ten years (up to the life of the Fund) (the ending date of the period will
be stated). Total return of a Fund is calculated from two factors: the amount of
dividends earned by each Fund share and by the increase or decrease in value of
the Fund's share price. See "Calculation of Return Quotations."

Performance information for each of the Funds contained in reports to
shareholders or prospective shareholders, advertisements, and other
promotional literature may be compared to the record of various unmanaged
indices. Performance information for the Nova Fund, Ursa Fund, and Precious
Metals Fund may be compared to various unmanaged indices, including, but not
limited to, the S&P 500 Index-Registered Trademark- (the "S&P 500 Index") or
the Dow Jones Industrial Average. Performance information for the Precious
Metals Fund also may be compared to its current benchmark, the XAU Index.
Performance information for the OTC Fund and Arktos Fund may be compared to
various unmanaged indices, including, but not limited to, its current
benchmark, the NASDAQ 100 Index-Registered Trademark- (the "NASDAQ 100
Index"), and the NASDAQ Composite Index-Registered Trademark- (the "NASDAQ
Composite Index"). The OTC Fund has the ability to invest in securities not
included in the NASDAQ 100 Index or the NASDAQ Composite Index, and the OTC
Fund's investment portfolio may or may not be similar in composition to
NASDAQ 100 Index or the NASDAQ Composite Index. Performance information for
the Bond Fund and Juno Fund may be compared to various unmanaged indices,
including, but not limited to, the Shearson Lehman Government (LT) Index.

Such unmanaged indices may assume the reinvestment of dividends, but generally
do not reflect deductions for operating costs and expenses. In addition, a
Fund's total return may be compared to the performance of broad groups of
comparable mutual funds with similar investment goals, as such performance is
tracked and published by such independent organizations as Lipper Analytical
Services, Inc. ("Lipper"), and CDA Investment Technologies, Inc., among others.
When Lipper's tracking results are used, the Fund will be compared to Lipper's
appropriate fund category, that is, by fund objective and portfolio holdings.
Performance figures are based on historical results and are not intended to
indicate future performance.

In addition, rankings, ratings, and comparisons of investment performance and/or
assessments of the quality of shareholder service appear in numerous financial
publications such as MONEY, FORBES, KIPLINGER'S MAGAZINE, PERSONAL INVESTOR,
MORNINGSTAR, INC., and similar sources.

CALCULATION OF RETURN QUOTATIONS

For purposes of quoting and comparing the performance of a Fund to that of other
mutual funds and to other relevant market indices in advertisements or in
reports to shareholders, performance for the Fund may be stated in terms of
total return. Under the rules of the SEC ("SEC Rules"), Funds advertising
performance must include total return quotes calculated according to the
following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1,000;

T = average annual total return;

<PAGE>

n = number of years (1, 5, or 10); and

ERV = ending redeemable value of a hypothetical
$1,000 payment, made at the beginning of the
1, 5, or 10 year periods, at the end of the
1, 5, or 10 year periods (or fractional
portion thereof).

Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication, and will cover 1, 5, and
10 year periods or a shorter period dating from the effectiveness of the
Registration Statement of the Trust. In calculating the ending redeemable value,
all dividends and distributions by a Fund are assumed to have been reinvested at
net asset value as described in the Trust's Prospectus on the reinvestment dates
during the period. Total return, or 'T' in the formula above, is computed by
finding the average annual compounded rates of return over the 1, 5, and 10 year
periods (or fractional portion thereof) that would equate the initial amount
invested to the ending redeemable value.

For the one-year period, five-year period and period from the respective
commencement of continuous operations of the Funds/Rydex Subaccounts ended
December 31, 1999, the average annual compounded rate of return of the
respective Funds, assuming the reinvestment of all dividends and
distributions, was as follows:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN FISCAL YEAR END
- -------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS INCEPTION SINCE
FUND DATE INCEPTION
(MM/DD/YY)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nova Fund 23.28% n/a 05/07/97 28.83%
- -------------------------------------------------------------------------------------------------------
Ursa Fund -15.06% n/a 06/10/97 -19.51%
- -------------------------------------------------------------------------------------------------------
OTC Fund 101.32% n/a 05/07/97 67.70%
- -------------------------------------------------------------------------------------------------------
Juno Fund 19.66% n/a 03/03/98 4.93%
- -------------------------------------------------------------------------------------------------------
U.S. Government Bond Fund -20.45% n/a 08/18/98 -0.53%
- -------------------------------------------------------------------------------------------------------
Precious Metals Fund -3.58% n/a 05/29/97 -20.04%
- -------------------------------------------------------------------------------------------------------
U.S. Government Money Market Fund 3.92% n/a 05/07/97 1.84%
- -------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

INFORMATION ON COMPUTATION OF YIELD

THE U.S. GOVERNMENT BOND FUND
In addition to the total return quotations discussed above, the Bond Fund also
may advertise its yield based on a thirty-day (or one month) period ended on the
date of the most recent balance sheet included in the Trust's Registration
Statement, computed by dividing the net investment income per share of the

Fund earned during the period by the maximum offering price per Fund share on
the last day of the period, according to the following formula:

YIELD = 2(a-b 6
--- +1) -1
cd

Where: a = dividends and interest earned during the period;

b = expenses accrued for the period (net of
reimbursements);

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends;
and

d = the maximum offering price per share on the last day
of the period.

Under this formula, interest earned on debt obligations for purposes of "a"
above, is calculated by (i) computing the yield to maturity of each obligation
held by the Bond Fund based on the market value of the obligation (including
actual accrued interest) at the close of business on the last day of each month,
or, with respect to obligations purchased during the month, the purchase price
(plus actual accrued interest), (ii) dividing that figure by 360 and multiplying
the quotient by the market value of the obligation (including actual accrued
interest as referred to above) to determine the interest income on the
obligation that is in the Bond Fund's portfolio (assuming a month of thirty
days), and (iii) computing the total of the interest earned on all debt
obligations and all dividends accrued on all equity securities during the
thirty-day or one month period. In computing dividends accrued, dividend income
is recognized by accruing 1/360 of the stated dividend rate of a security each
day that the security is in the Fund's portfolio. Undeclared earned income,
computed in accordance with generally accepted accounting principles, may be
subtracted from the maximum offering price calculation required pursuant to "d"
above.

The Bond Fund from time to time may also advertise its yield based on a
thirty-day period ending on a date other than the most recent balance sheet
included in the Trust's Registration Statement, computed in accordance with the
yield formula described above, as adjusted to conform with the differing period
for which the yield computation is based.

Any quotation of performance stated in terms of yield (whether based on a
thirty-day or one month period) will be given no greater prominence than the
information prescribed under SEC Rules. In addition, all advertisements
containing performance data of any kind will include a legend disclosing that
such performance data represents past performance and that the investment return
and principal value of

<PAGE>

an investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than the original cost of such shares.

The Bond Fund's yield, as of December 31, 1999, based on a thirty-day base
period, was approximately 4.23%.

THE MONEY MARKET FUND
The Money Market Fund's annualized current yield, as may be quoted from time to
time in advertisements and other communications to shareholders and potential
investors, is computed by determining, for a stated seven-day period, the net
change, exclusive of capital changes and income other than investment income, in
the value of a hypothetical pre-existing account having a balance of one share
at the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by 365 divided by 7.

The Money Market Fund's annualized effective yield, as may be quoted from time
to time in advertisements and other communications to shareholders and potential
investors, is computed by determining (for the same stated seven-day period as
the current yield) the net change, exclusive of capital changes and including
the value of additional shares purchased with dividends and any dividends
declared therefrom (which reflect deductions of all expenses of the Money Market
Fund such as management fees), in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return, and then compounding the base period
return by adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.

The Money Market Fund's annualized effective yield and annualized current yield,
for the seven-day period ended December 31, 1999, were 3.81% and 4.16%,
respectively.

The yields quoted in any advertisement or other communication should not be
considered a representation of the yields of the Money Market Fund in the future
since the yield is not fixed. Actual yields will depend not only on the type,
quality, and maturities of the investments held by the Money Market Fund and
changes in interest rates on such investments, but also on changes in the Money
Market Fund's expenses during the period.

Yield information may be useful in reviewing the performance of the Money Market
Fund and for providing a basis for comparison with other investment
alternatives. However, unlike bank deposits or other investments which typically
pay a fixed yield for a stated period of time, the Money Market Fund's yield
fluctuates.

PURCHASE AND REDEMPTION OF SHARES

SUSPENSION OF THE RIGHT OF REDEMPTION
The Funds may suspend the right of redemption or the date of payment: (i) for
any period during which the NYSE is closed (other than customary weekend or

<PAGE>

holiday closings), or trading on the NYSE is restricted; (ii) for any period
during which an emergency exists so that disposal of Fund investments or the
determination of NAV is not reasonably practicable; or (iii) for such other
periods as the SEC, by order, may permit for the protection of fund
investors. In cases where NASDAQ, the CME, Chicago Board Options Exchange
("CBOE") or the CBOT, as appropriate, is closed or trading is restricted, a
Fund may ask the SEC to permit the right to redemption to be suspended.

HOLIDAYS
The NYSE, the Federal Reserve Bank of New York, the NASDAQ, the CME, the CBOT,
and other U.S. exchanges are closed on weekends and on the following holidays:
(i) New Year's Day, Martin Luther King Jr.'s Birthday, President's Day, Good
Friday, Memorial Day, July Fourth, Labor Day, Columbus Day, Thanksgiving Day,
and Christmas Day; and (ii) the preceding Friday if any of these holidays falls
on a Saturday, or the subsequent Monday if any of these holidays falls on a
Sunday. Although the Trust expects the same holiday schedules to be observed in
the future, each of the aforementioned exchanges may modify its holiday schedule
at any time.

REDEMPTIONS IN-KIND
The Trust intends to pay your redemption proceeds in cash. However, under
unusual conditions that make the payment in cash unwise (and for the protection
of the remaining shareholders of the Fund) the Trust reserves the right to pay
all, or part, of your redemption proceeds in liquid securities with a market
value equal to the redemption price (redemption in-kind). Although it is highly
unlikely that your shares would ever actually be redeemed in kind, you would
probably have to pay brokerage costs to sell the securities distributed to you.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income and any distributions of net realized
capital gains from each of the Funds will be distributed as described in the
Trust's Prospectus under "Dividends and Distributions." In general, all such
distributions of a Fund automatically will be reinvested without charge in
additional shares of the same Fund.

The Money Market Fund intends to declare dividends daily from net investment
income (and net short-term capital gains, if any) and distribute such dividends
monthly. Net income, for dividend purposes, includes accrued interest and
accretion of original issue and market discount, plus or minus any short-term
gains or losses realized on sales of portfolio securities, less the amortization
of market premium and the estimated expenses of the Money Market Fund. Net
income will be calculated immediately prior to the determination of net asset
value per share of the Money Market Fund.

The Trustees may revise the dividend policy, or postpone the payment of
dividends, if the Money Market Fund should have or anticipate any large
unexpected expense, loss, or fluctuation in net assets which, in the opinion of
the Trustees, might have a significant adverse effect on shareholders of the
Money Market Fund. On occasion, in order to maintain a constant $1.00 per share
net asset value for the Money Market Fund, the Trustees may direct that the
number of outstanding shares of the Money Market Fund be reduced in each
shareholder's account.

<PAGE>

With respect to the investment by the Bond Fund in U.S. Treasury zero coupon
bonds, a portion of the difference between the issue price of zero coupon
securities and the face value of such securities (the "original issue discount")
is considered to be income to the Bond Fund each year, even though the Bond Fund
will not receive cash interest payments from these securities. This original
issue discount (imputed income) will comprise a part of the investment company
taxable income of the Bond Fund which must be distributed to shareholders of the
Bond Fund in order to maintain the qualification of the Bond Fund as a regulated
investment company (a "RIC") under Subchapter M of the U.S. Internal Revenue
Code of 1986, as amended (the "Code"), as described immediately below under
"Regulated Investment Company Status," and to avoid federal income tax at the
level of the Bond Fund.

REGULATED INVESTMENT COMPANY STATUS
As a RIC, a Fund would not be subject to federal income taxes on the net
investment income and capital gains that the Fund distributes to the Fund's
shareholders.

Each of the Funds will seek to qualify for treatment as a RIC under the Code.
Provided that a Fund (i) is a RIC and (ii) distributes at least 90% of the
Fund's net investment income (including, for this purpose, net realized
short-term capital gains), the Fund itself will not be subject to federal income
taxes to the extent the Fund's net investment income and the Fund's net realized
long- and short-term capital gains, if any, are distributed to the Fund's
shareholders. To avoid an excise tax on its undistributed income, each Fund
generally must distribute at least 98% of its income, including its net
long-term capital gains. One of several requirements for RIC qualification is
that the Fund must receive at least 90% of the Fund's gross income each year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of securities or foreign currencies, or other
income derived with respect to the Fund's investments in stock, securities, and
foreign currencies (the "90% Test"). Income from investments in precious metals
and in precious minerals will not qualify as gross income from "securities" for
purposes of the 90% Test. The Precious Metals Fund, therefore, intends to
restrict its investment in precious metals and in precious minerals to avoid a
violation of the 90% Test.

If a Fund were to fail to qualify as a RIC for one or more taxable years, the
Fund could then qualify (or re-qualify) as a RIC for a subsequent taxable year
only if the Fund had distributed to the Fund's shareholders a taxable dividend
equal to the full amount of any earnings or profits (less the interest charge
mentioned below, if applicable) attributable to such period. The fund might also
be required to pay to the U.S. Internal Revenue Service (the "IRS") interest on
50% of such accumulated earnings and profits. In addition, pursuant to the Code
and an interpretative notice issued by the IRS, if the Fund should fail to
qualify as an RIC and should thereafter seek to re-qualify as a RIC, the Fund
may be subject to tax on the excess (if any) of the fair market of the Fund's
assets over the Fund's basis in such assets, as of the day immediately before
the first taxable year for which the Fund seeks to re-qualify as a RIC.

If a Fund determines that it will not qualify as a RIC under Subchapter M of
the Code, the Fund will establish procedures to reflect the anticipated tax
liability in the Fund's net asset value.

SECTION 817(h) DIVERSIFICATION
Section 817(h) of the Code requires that the assets of each Fund be adequately
diversified so that insurance companies that invest in their shares, and not
variable annuity contract owners, are considered

<PAGE>

the owners of the shares for federal income tax purposes. Each Fund ordinarily
must satisfy the diversification requirements within one year after contract
owner funds are first allocated to the particular Fund. In order to meet the
diversification requirements of regulations issued under Section 817(h), each
Fund will meet the following test: no more than 55% of the assets will be
invested in any one investment; no more than 70% of the assets will be invested
in any two investments; no more than 80% of the assets will be invested in any
three investments; and no more than 90% will be invested in any four
investments. Each Fund must meet the above diversification requirements within
30 days of the end of each calendar quarter.

SPECIAL CONSIDERATIONS APPLICABLE TO THE SECTOR FUNDS
In general, with respect to the Sector Funds, gains from "foreign currencies"
and from foreign currency options, foreign currency futures, and forward foreign
exchange contracts ("forward contracts") relating to investments in stock,
securities, or foreign currencies will be qualifying income for purposes of
determining whether the Fund qualifies as a RIC. It is currently unclear,
however, who will be treated as the issuer of a foreign currency instrument or
how foreign currency options, futures, or forward contracts will be valued for
purposes of the RIC diversification requirements applicable to the Fund.

Under the Code, special rules are provided for certain transactions in a foreign
currency other than the taxpayer's functional currency (I.E., unless certain
special rules apply, currencies other than the U.S. dollar). In general, foreign
currency gains or losses from forward contracts, from futures contracts that are
not "regulated futures contracts," and from unlisted options will be treated as
ordinary income or loss under the Code. Also, certain foreign exchange gains
derived with respect to foreign fixed-income securities are also subject to
special treatment. In general, any such gains or losses will increase or
decrease the amount of the Fund's investment company taxable income available to
be distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. Additionally, if such
losses exceed other investment company taxable income during a taxable year, the
Fund would not be able to make any ordinary dividend distributions.

The Sector Funds may incur a liability for dividend withholding tax as a result
of investment in stock or securities of foreign corporations. If, at any year
end, more than 50% of the assets of a Fund are comprised of stock or securities
of foreign corporations, a Fund may elect to "pass through" to shareholders the
amount of foreign taxes paid by that Fund. A Fund will make such an election
only if that Fund deems this to be in the best interests of its shareholders. If
a Fund does not qualify to make this election or does qualify, but does not
choose to do so, the imposition of such taxes would directly reduce the return
to an investor from an investment in that Fund.

OPTIONS TRANSACTIONS BY THE FUNDS
If a call option written by a Fund expires, the amount of the premium received
by the Fund for the option will be short-term or long-term capital gain to the
Fund depending on the Fund's holding period for the underlying security or
underlying futures contract. If such an option is closed by a Fund, any gain or
loss realized by the Fund as a result of the closing purchase transaction will
be short-term or long-term capital gain or loss depending on the Fund's holding
period for the underlying security or underlying futures contract. If the holder
of a call option exercises the holder's right under the option, any gain or loss
realized by the Fund upon the sale of the underlying security or underlying
futures contract pursuant to

<PAGE>

such exercise will be short-term or long-term capital gain or loss to the Fund
depending on the Fund's holding period for the underlying security or underlying
futures contract.

With respect to call options purchased by a Fund, the Fund will realize
short-term or long-term capital gain or loss if such option is sold and will
realize short-term or long-term capital loss if the option is allowed to expire
depending on the Fund's holding period for the call option. If such a call
option is exercised, the amount paid by the Fund for the option will be added to
the basis of the stock or futures contract so acquired.

A Fund has available to it a number of elections under the Code concerning the
treatment of option transactions for tax purposes. A Fund will utilize the tax
treatment that, in the Fund's judgment, will be most favorable to a majority of
investors in the Fund. Taxation of these transactions will vary according to the
elections made by the Fund. These tax considerations may have an impact on
investment decisions made by the Fund.

Each of the Nova Fund, Ursa Fund, OTC Fund, Arktos Fund, and Sector Funds in its
operations also will utilize options on stock indices. Options on "broad based"
stock indices are classified as "nonequity options" under the Code. Gains and
losses resulting from the expiration, exercise, or closing of such nonequity
options, as well as gains and losses resulting from futures contract
transactions, will be treated as long-term capital gain or loss to the extent of
60% thereof and short-term capital gain or loss to the extent of 40% thereof
(hereinafter, "blended gain or loss"). In addition, any nonequity option and
futures contract held by a Fund on the last day of a fiscal year will be treated
as sold for market value on that date, and gain or loss recognized as a result
of such deemed sale will be blended gain or loss.

The trading strategies of each of the Nova Fund, Ursa Fund, OTC Fund, Arktos
Fund, and Sector Funds involving nonequity options on stock indices may
constitute "straddle" transactions. "Straddles" may affect the taxation of such
instruments and may cause the postponement of recognition of losses incurred in
certain closing transactions. Each of these four Funds will also have available
to the Fund a number of elections under the Code concerning the treatment of
option transactions for tax purposes. Each such Fund will utilize the tax
treatment that, in the Fund's judgment, will be most favorable to a majority of
investors in the Fund. Taxation of these transactions will vary according to the
elections made by the Fund. These tax considerations may have an impact on
investment decisions made by the Fund.

A Fund's transactions in options, under some circumstances, could preclude the
Fund's qualifying for the special tax treatment available to investment
companies meeting the requirements of Subchapter M of the Code. However, it is
the intention of each Fund's portfolio management to limit gains from such
investments to less than 10% of the gross income of the Fund during any fiscal
year in order to maintain this qualification.

OTHER ISSUES
Each Fund may be subject to tax or taxes in certain states where the Fund does
business. Furthermore, in those states which have income tax laws, the tax
treatment of a Fund and of Fund shareholders with respect to distributions by
the Fund may differ from federal tax treatment.

<PAGE>

Shareholders are urged to consult their own tax advisors regarding the
application of the provisions of tax law described in this Statement of
Additional Information in light of the particular tax situations of the
shareholders and regarding specific questions as to federal, state, or local
taxes.

OTHER INFORMATION

VOTING RIGHTS
You receive one vote for every full Fund share owned. Each Fund or class of a
Fund will vote separately on matters relating solely to that Fund or class. All
shares of the Funds are freely transferable.

As a Delaware business trust, the Trust is not required to hold annual
Shareholder meetings unless otherwise required by the 1940 Act. However, a
meeting may be called by Shareholders owning at least 10% of the outstanding
shares of the Trust. If a meeting is requested by Shareholders, the Trust will
provide appropriate assistance and information to the Shareholders who requested
the meeting. Shareholder inquiries can be made by calling 1-800-820-0888 or
301-468-8520, or by writing to the Trust at 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852.

CODE OF ETHICS
The Board of Trustees of the Trust has adopted a Combined Code of Ethics (the
"Code") pursuant to Rule 17j-1 under the 1940 Act. The Advisor, Servicer and
Distributor are also covered by the Code. The Code applies to the personal
investing activities of trustees, directors, officers and certain employees
("access persons"). Rule 17j-1 and the Code is designed to prevent unlawful
practices in connection with the purchase or sale of securities by access
persons. Under the Code, access persons are permitted to engage in personal
securities transactions, but are required to report their personal securities
transactions for monitoring purposes. In addition, certain access persons are
required to obtain approval before investing in initial public offerings or
private placements. The Code is on file with the Securities and Exchange
Commission, and is available to the public.

REPORTING
You will receive the Trust's unaudited financial information and audited
financial statements. In addition, the Trust will send you proxy statements and
other reports. If you are a customer of a financial institution that has
purchased shares of a Fund for your account, you may, depending upon the nature
of your account, receive all or a portion of this information directly from your
financial institution.

SHAREHOLDER INQUIRIES
You may visit the Trust's web site at www.rydexfunds.com or call 800-820-0888 or
301-468-8520 to obtain information on account statements, procedures, and other
related information.

COUNSEL

Morgan, Lewis & Bockius LLP, serves as counsel to the Trust.

<PAGE>

AUDITORS AND CUSTODIAN

Deloitte & Touche LLP, are the auditors and the independent certified public
accountants of the Trust and each of the Funds. Firstar Bank, N.A. (the
"Custodian"), Star Bank Center, 425 Walnut Street, Cincinnati, Ohio 45202,
serves as custodian for the Trust and the Funds under a custody agreement
between the Trust and the Custodian. Under the custody agreement, the
Custodian holds the portfolio securities of each Fund and keeps all necessary
related accounts and records.

FINANCIAL STATEMENTS

The Trust's financial statements for the fiscal year ended December 31, 1999,
including notes thereto and the report of Deloitte & Touche LLP are incorporated
by reference into this SAI. A copy of the Trust's Annual Report to Shareholders
(the "Annual Report") must accompany the delivery of this Statement of
Additional Information.

<PAGE>

APPENDIX A

BOND RATINGS

Below is a description of Standard & Poor's Ratings Group ("Standard & Poor's")
and Moody's Investors Service, Inc. ("Moody's") bond rating categories.

STANDARD & POOR'S RATINGS
GROUP CORPORATE BOND RATINGS

AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA -- Bonds rated "AA" also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from "AAA" issues only in small degree.

A -- Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

BBB -- Bonds rated "BBB" are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.

BB -- Bonds rated "BB" have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B -- Bonds rated "B" have a greater vulnerability to default but currently have
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.

CCC -- Bonds rated "CCC" have a currently identifiable vulnerability to default
and are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.

MOODY'S INVESTORS SERVICE, INC.
CORPORATE BOND RATINGS
Aaa -- Bonds rate "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to a
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong

A-1

<PAGE>

position of such issues.

Aa -- Bonds rate "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
protections may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risk appear somewhat larger than in "Aaa"
securities.

A -- Bonds rated "A" possess many favorable investment attributes, and are to be
considered as upper medium grade obligations. Factors giving security principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.

Baa -- Bonds rated "Baa" are considered as medium grade obligations (I.E., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba -- Bonds rated "Ba" are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B -- Bonds rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any longer period of time may be small.

Caa -- Bonds rated "Caa" are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

A-2

<PAGE>

PROSPECTUS

RYDEX VARIABLE TRUST

TITAN 500 FUND
TEMPEST 500 FUND
VELOCITY 100 FUND
VENTURE 100 FUND

6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852
800-820-0888 301-468-8520
www.rydexfunds.com

Rydex Variable Trust (the "Trust") is a no-load mutual fund complex with thirty
separate investment portfolios (the "Rydex Funds"), four of which are described
in this Prospectus. The Funds are the Titan 500, Tempest 500, Velocity 100, and
Venture 100 Funds (the "Funds" or the "Dynamic Funds"). Shares of the Funds are
available exclusively for variable annuity and variable life insurance products.
Variable life and variable annuity account investors should also review the
separate account prospectus prepared by their insurance company.

May 1, 2000

<PAGE>

RISK/RETURN INFORMATION COMMON TO THE FUNDS

THE FUNDS' INVESTMENT OBJECTIVES

Each Fund has a separate investment objective. THE INVESTMENT OBJECTIVE OF
EACH FUND IS NON-FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER
APPROVAL.

RISKS OF INVESTING IN THE FUNDS

The value of the Funds may fluctuate. In addition, Fund shares:

- MAY DECLINE IN VALUE, AND YOU MAY LOSE MONEY
- ARE NOT FEDERALLY INSURED
- ARE NOT GUARANTEED BY ANY GOVERNMENT AGENCY
- ARE NOT BANK DEPOSITS
- ARE NOT GUARANTEED TO ACHIEVE THEIR OBJECTIVES

<PAGE>

FUND INFORMATION -- TITAN 500 FUND

FUND OBJECTIVE
The Titan 500 Fund seeks to provide investment results that will match the
performance of a specific benchmark on a daily basis. The Fund's current
benchmark is 200% of the performance of the S&P 500 Index(R) (the "S&P 500
Index").

If the Fund meets its objective, the value of the Fund's shares will tend
to increase on a daily basis by 200% of the value of any increase in the
S&P 500 Index. When the value of the S&P 500 Index declines, the value of
the Fund's shares should also decrease on a daily basis by 200% of the
value of any decrease in the Index (e.g., if the S&P 500 Index goes down
by 5%, the value of the Fund's shares should go down by 10% on that day).

PORTFOLIO INVESTMENT STRATEGY
The Fund employs as its investment strategy a program of investing in
leveraged instruments, such as futures contracts and options on
securities, futures contracts, and stock indices. Futures and options
contracts enable the Fund to pursue its objective without investing
directly in the securities included in the benchmark, or in the same
proportion that those securities are represented in that benchmark. On a
day-to-day basis, the Fund holds U.S. Government securities or cash
equivalents to collateralize these futures and options contracts. The Fund
also may purchase equity securities, engage in equity index swaps, and
enter into repurchase agreements.

RISK CONSIDERATIONS
The Fund is subject to a number of risks that will affect the value of its
shares, including:

- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
significantly from day to day. This volatility may cause the value of
your investment in the Fund to decrease.

- LEVERAGING RISK -- The more the Fund invests in leveraged instruments,
the more this leverage will magnify any losses on those investments.

- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match that of the Fund's benchmark, either on a daily or
aggregate basis. Tracking Error may cause the Fund's performance to be
less than you expect.

- TRADING HALT RISK -- If a trading halt occurs, the Fund may temporarily
be unable to purchase or sell options or futures contracts. Such a
trading halt near the time the Fund prices its shares may limit the
Fund's ability to use leverage and may prevent the Fund from achieving
its investment objective.

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

TITAN 500 FUND PERFORMANCE
The Titan 500 Fund is new and therefore does not have a performance
history for a full calendar year.

<PAGE>

FUND INFORMATION -- TEMPEST 500 FUND

FUND OBJECTIVE
The Tempest 500 Fund seeks to provide investment results that will match
the performance of a specific benchmark on a daily basis. The Fund's
current benchmark is 200% of the inverse (opposite) performance of the S&P
500 Index.

If the Fund meets its objective, the value of the Fund's shares will tend
to increase on a daily basis by 200% of the value of any decrease in the
S&P 500 Index (e.g., if the S&P 500 Index goes down by 5%, the value of
the Fund's shares should go up by 10% on that day). When the value of the
S&P 500 Index increases, the value of the Fund's shares should decrease on
a daily basis by 200% of the value of any increase in the Index (e.g., if
the S&P 500 Index goes up by 5%, the value of the Fund's shares should go
down by 10% on that day).

PORTFOLIO INVESTMENT STRATEGY
The Fund employs as its investment strategy a program of engaging in short
sales of securities and investing in leveraged instruments, such as
futures contracts and options on securities, futures contracts, and stock
indices. Short sales and futures and options contracts enable the Fund to
pursue its objective without investing directly in the securities included
in the benchmark. On a day-to-day basis, the Fund holds U.S. Government
securities or cash equivalents to collateralize these futures and options
contracts. The Fund also may engage in equity index swaps and enter into
repurchase agreements.

RISK CONSIDERATIONS
The Fund is subject to a number of risks that will affect the value of its
shares, including:

- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
significantly from day to day. Equity market volatility may also
negatively affect the Fund's short sales of securities. This volatility
may cause the value of your investment in the Fund to decrease.

- LEVERAGING RISK -- The more the Fund invests in leveraged instruments,
the more this leverage will magnify any losses on those investments.

- TRADING HALT RISK -- If a trading halt occurs, the Fund may temporarily
be unable to purchase or sell options or futures contracts. Such a trading
halt near the time the Fund prices its shares may limit the Fund's ability
to use leverage and may prevent the Fund from achieving its investment
objective.

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

TEMPEST 500 FUND PERFORMANCE
The Tempest 500 Fund is new and therefore does not have a performance
history for a full calendar year.

<PAGE>

FUND INFORMATION -- VELOCITY 100 FUND

FUND OBJECTIVE
The Velocity 100 Fund seeks to provide investment results that will match
the performance of a specific benchmark on a daily basis. The Fund's
current benchmark is 200% of the performance of the NASDAQ 100 Index(R)
(the "NASDAQ 100 Index").

If the Fund meets its objective, the value of the Fund's shares will tend
to increase on a daily basis by 200% of the value of any increase in the
NASDAQ 100 Index. When the value of the NASDAQ 100 Index declines, the
value of the Fund's shares should also decrease on a daily basis by 200%
of the value of any decrease in the Index (e.g., if the NASDAQ 100 Index
goes down by 5%, the value of the Fund's shares should go down by 10% on
that day).

RISK CONSIDERATIONS
The Fund is subject to a number of risks that will affect the value of its
shares, including:

- EQUITY RISK --The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
significantly from day to day. This volatility may cause the value of your
investment in the Fund to decrease.

- LEVERAGING RISK -- The more the Fund invests in leveraged instruments,
the more this leverage will magnify any losses on those investments.

- TRADING HALT RISK -- If a trading halt occurs, the Fund may temporarily
be unable to purchase or sell options or futures contracts. Such a trading
halt near the time the Fund prices its shares may limit the Fund's ability
to use leverage and may prevent the Fund from achieving its investment
objective.

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

VELOCITY 100 FUND PERFORMANCE
The Velocity 100 Fund is new and therefore does not have a performance
history for a full calendar year.

<PAGE>

FUND INFORMATION -- VENTURE 100 FUND

FUND OBJECTIVE
The Venture 100 Fund seeks to provide investment results that will match
the performance of a specific benchmark on a daily basis. The Fund's
current benchmark is 200% of the inverse (opposite) performance of the
NASDAQ 100 Index.

If the Fund meets its objective, the value of the Fund's shares will tend
to increase on a daily basis by 200% of the value of any decrease in the
NASDAQ 100 Index (e.g., if the NASDAQ 100 Index goes down by 5%, the value
of the Fund's shares should go up by 10% on that day). When the value of
the NASDAQ 100 Index increases, the value of the Fund's shares should
decrease on a daily basis by 200% of the value of any increase in the
Index (e.g., if the NASDAQ 100 Index goes up by 5%, the value of the
Fund's shares should go down by 10% on that day).

RISK CONSIDERATIONS
The Fund is subject to a number of risks that will affect the value of its
shares, including:

- LEVERAGING RISK -- The more the Fund invests in leveraged instruments,
the more this leverage will magnify any losses on those investments.

- TRADING HALT RISK -- If a trading halt occurs, the Fund may temporarily
be unable to purchase or sell options or futures contracts. Such a trading
halt near the time the Fund prices its shares may limit the Fund's ability
to use leverage and may prevent the Fund from achieving its investment
objective.

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

VENTURE 100 FUND PERFORMANCE
The Venture 100 Fund is new and therefore does not have a performance
history for a full calendar year.

<PAGE>

MORE INFORMATION ABOUT FUND INVESTMENTS AND RISK

THE DYNAMIC FUNDS' INVESTMENT OBJECTIVES
Each Fund's objective is to provide investment results that match the
performance of a specific benchmark. The current benchmark used by each Fund is
set forth below:

- ---------------------------------------- -----------------------------------------------------------------------------------------
FUND BENCHMARK
- ---------------------------------------- -----------------------------------------------------------------------------------------
<S> <C>
Titan 500 Fund 200% of the performance, measured on a daily basis, of the S&P 500 Index-Registered
Trademark-
- ---------------------------------------- -----------------------------------------------------------------------------------------
Tempest 500 Fund 200% of the inverse (opposite) performance, measured on a daily basis, of the S&P 500
Index-Registered Trademark-
- ---------------------------------------- -----------------------------------------------------------------------------------------
Velocity 100 Fund 200% of the performance, measured on a daily basis, of the NASDAQ 100 Index-Registered
Trademark-
- ---------------------------------------- -----------------------------------------------------------------------------------------
Venture 100 Fund 200% of the inverse (opposite) performance, measured on a daily basis, of the NASDAQ
100 Index-Registered Trademark-
- ---------------------------------------- -----------------------------------------------------------------------------------------
</TABLE>

A BRIEF GUIDE TO THE BENCHMARKS.

THE S&P 500 INDEX. The S&P 500 Index is a capitalization-weighted index composed
of 500 common stocks, which are chosen by the Standard & Poor's Corporation
("S&P") on a statistical basis.

ADVISOR'S INVESTMENT METHODOLOGY

In managing the Dynamic Funds, the Advisor uses a "passive" investment
strategy to manage each Fund's portfolio, meaning that the Advisor does not
attempt to select securities based on their individual potential to perform
better than the market. The Advisor's primary objective is to match the
performance of each Fund's benchmark as closely as possible on a daily basis.
The Advisor uses quantitative analysis techniques to structure each Fund to
obtain the highest correlation to its particular benchmark. The Advisor does not
engage in temporary defensive investing, keeping each Fund's assets fully
invested in all market environments. The Advisor monitors each Fund on an
ongoing basis, and makes adjustments to its portfolio, as necessary, to minimize
tracking error and to maximize liquidity.

The Advisor pursues the Funds' investment objectives by regularly
utilizing leveraged instruments, such as futures contracts and options on
securities, futures contracts, and stock indices. In addition, the Advisor will
regularly utilize short selling techniques designed to help the Tempest 500
Fund's and the Venture 100 Fund's performance to inversely correlate to the
performance of the S&P 500 Index and the NASDAQ 100 Index, respectively.

RISKS OF INVESTING IN THE FUNDS

<PAGE>

As indicated below, the Funds are subject to a number of risks that may
affect the value of Fund shares.

EQUITY RISK -- The Funds invest primarily in equity securities as well as
instruments that attempt to track the price movement of equity indices as well
as equity securities, including common stocks. Investments in equity securities
and equity derivatives in general are subject to market risks that cause their
prices to fluctuate over time. Fluctuations in the value of equity securities in
which the Funds invest will cause the net asset value of the Funds to fluctuate.
Historically, the equity markets have moved in cycles, and the value of the
Funds' equity securities and equity derivatives may fluctuate drastically from
day to day. This price volatility is the principal risk of investing in equity
securities. Because of their link to the equity markets, an investment in the
Funds may be more suitable for long-term investors who can bear the risk of
short-term principal fluctuations.

FUTURES AND OPTIONS RISK -- The Funds will invest a percentage of their assets
in futures and options contracts. The Funds may use futures contracts and
related options for bona fide hedging purposes to offset changes in the value of
securities held or expected to be acquired. They may also be used to gain
exposure to a particular market or instrument, to create a synthetic money
market position and for certain other tax-related purposes. The Funds will only
enter into futures contracts traded on a national futures exchange or board of
trade. Futures and options contracts are described in more detail below:

FUTURES CONTRACTS -- Futures contracts and options on futures contracts
provide for the future sale by one party and purchase by another party of
a specified amount of a security at a specified future time and at a
specified price. An option on a futures contract gives the purchaser the
right, in exchange for a premium, to assume a position in a futures
contract at a specified exercise price during the term of the option.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges.

OPTIONS -- The buyer of an option acquires the right to buy (a call
option) or sell (a put option) a certain quantity of a security (the
underlying security) or instrument at a certain price up to a specified
point in time. The seller or writer of an option is obligated to sell (a
call option) or buy (a put option) the underlying security. When selling
call options on securities, a Fund may cover its position by owning the
underlying security or by owning a call option on the underlying security.
Alternatively, a Fund may cover its position by maintaining in a
segregated account cash or liquid securities equal in value to the
exercise price of the call option sold.

The risks associated with the Funds' use of futures and options contracts
include:

- There may be an imperfect correlation between the changes in market
value of the securities held by a Fund and the prices of futures and
options on futures.

- A Fund experiencing losses over certain ranges in the market that
exceed losses experienced by a Fund that does not use futures contracts
and options.

<PAGE>

- Although the Funds will only purchase exchange-traded futures, due to
market conditions there may not always be a liquid secondary market for
a futures contract. As a result, the Funds may be unable to close out
their futures contracts at a time which is advantageous.

- Trading restrictions or limitations may be imposed by an exchange, and
government regulations may restrict trading in futures contracts and
options.

INDUSTRY CONCENTRATION RISK-- None of the Funds will invest 25% or more of the
value of the Fund's total assets in the securities of one or more issuers
conducting their principal business activities in the same industry; EXCEPT
THAT, to the extent a Fund's benchmark is concentrated in a particular industry,
a Fund will necessarily be concentrated in that industry. Currently, the index
underlying the Velocity 100 Fund's and the Venture 100 Fund's benchmark - the
NASDAQ 100 Index- is concentrated in technology companies. The risk of
concentrating Fund investments in a limited number of issuers conducting
business in the same industry is that the Fund will be more susceptible to the
risks associated with those issuers (or that industry) than a fund that does not
concentrate its investments.

NON-DIVERSIFICATION RISK -- Each Fund is non-diversified and may invest in the
securities of a limited number of issuers. To the extent that a Fund invests a
significant percentage of its assets in a limited number of issuers, the Fund is
subject to the risks of investing in those few issuers, and may be more
susceptible to a single adverse economic or regulatory occurrence.

TRACKING ERROR RISK -- While the Funds do not expect returns to deviate
significantly from their respective benchmarks on a daily basis, certain factors
may affect their ability to achieve close correlation. These factors may include
Fund expenses, imperfect correlation between the Funds' investments and those of
their benchmarks, rounding of share prices, changes to the benchmark, regulatory
policies, and leverage. The cumulative effect of these factors may over time
cause the Funds' returns to deviate from their respective benchmarks on an
aggregate basis. The magnitude of any tracking error may be affected by a higher
portfolio turnover rate.

TRADING HALT RISK -- The Funds typically will hold short-term options and
futures contracts. The major exchanges on which these contracts are traded, such
as the Chicago Mercantile Exchange ("CME"), have established limits on how much
an option or futures contract may decline over various time periods within a
day. If an option or futures contract's price declines more than the established
limits, trading on the exchange is halted on that instrument. If a trading halt
occurs, the Fund may temporarily be unable to purchase or sell options or
futures contracts. Such a trading halt near the time the Fund prices its shares
may limit the Fund's ability to use leverage and may prevent the Fund from
achieving its investment objective. In such an event, a Fund also may be
required to use a "fair-value" method to price its outstanding contracts.

<PAGE>

EARLY CLOSING RISK -- The normal close of trading of securities listed on NASDAQ
and the New York Stock Exchange ("NYSE") is 4:00 p.m., Eastern Standard Time.
Unanticipated early closings of the equity markets may result in a Fund being
unable to sell or buy securities on that day. If an exchange closes early on a
day when one or more of the Funds needs to execute a high volume of securities
trades late in a trading day, a Fund might incur substantial trading losses.

SHORT SALES RISK (TEMPEST 500 FUND AND VENTURE 100 FUND) -- Short sales are
transactions in which a Fund sells a security it does not own. To complete the
transaction, the Fund must borrow the security to make delivery to the buyer.
The Fund is then 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 higher or lower than the price at which the security was sold by the
Fund. If the underlying security goes down in price between the time the Fund
sells the security and buys it back, the Fund will realize a gain on the
transaction. Conversely, if the underlying security goes up in price during the
period, the Fund will realize a loss on the transaction. The risk of such price
increases is the principal risk of engaging in short sales.

SWAPS RISKS -- The Funds may enter into equity index or interest rate swap
agreements for purposes of attempting to gain exposure to a particular group of
stocks or to an index of stocks without actually purchasing those stocks, or to
hedge a position. The Funds will use short-term swap agreements to exchange the
returns (or differentials in rates of return) earned or realized in particular
predetermined investments or instruments. A Fund will not enter into any swap
agreement unless the Advisor believes that the other party to the transaction is
creditworthy. The use of equity swaps involves risks that are different from
those associated with ordinary portfolio securities transactions. Swap
agreements may be considered to be illiquid. A Fund 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.

PURCHASING AND REDEEMING SHARES

Shares are offered continuously, and may be purchased on any day that
both the NYSE is open for business and the index underlying the Funds' benchmark
is published (a "Business Day"). On any day that the New York Fed or the NYSE
closes early, the principal government securities and corporate bond markets
close early (such as on days in advance of holidays generally observed by
participants in these markets), or as permitted by the Securities and Exchange
Commission ("SEC"), the right is reserved to advance the time on that day by
which purchase and redemption orders must be received.

Shares of each Fund can be purchased only by insurance companies for
their separate accounts to fund variable life insurance and variable annuity
contracts and by certain pension, profit sharing and other retirement plans. All
orders for the purchase of shares are subject to acceptance or rejection by the
Trust. An insurance company purchases and redeems Shares of each Fund based on,
among other things, the amount of net Contract premiums or purchase payments
allocated to a separate account investment division, transfers to or from a
separate account investment division, contract loans and repayments, contract
withdrawals and surrenders, and benefit payments, at the Fund's net asset value
per share calculated as of that same day.

<PAGE>

All redemption requests will be processed and payment with respect
thereto will be made within seven days after tender. With respect to each Fund,
and as permitted by the SEC, the right of redemption may be suspended, or the
date of payment postponed: (1) for any period during which the NYSE is closed
(other than customary weekend or holiday closings) or trading on the NYSE is
restricted; (2) for any period during which an emergency exists so that disposal
of Fund investments or the determination of net asset value per share ("NAV") is
not reasonably practicable; or (3) for such other periods as the SEC, by order,
may permit for protection of fund investors. In cases where NASDAQ, the CME,
Chicago Board Options Exchange ("CBOE") or the CBOT, as appropriate, is closed
or trading is restricted, a Fund may ask the SEC to permit the right of
redemption to be suspended.

NET ASSET VALUE
The price per share (the offering price) will be the NAV next
determined after your purchase order is received by the Trust. You may also
redeem all or any portion of your Fund shares at the next determined NAV after
receipt of the redemption request. NAV is calculated by (1) taking the current
market value of a Fund's total assets, (2) subtracting the liabilities, and (3)
dividing that amount by the total number of shares owned by shareholders. For
each Fund, the NAV is calculated once each Business Day after the close of the
NYSE (currently, 4:00 p.m., Eastern Standard Time). If the exchange or market
where a Fund's securities or other investments are primarily traded closes
early, the NAV may be calculated earlier in accordance with the policies set
forth in the Fund's SAI.

TO RECEIVE THE CURRENT BUSINESS DAY'S NAV, VARIABLE LIFE AND VARIABLE
ANNUITY ACCOUNT INVESTORS SHOULD CONSULT THEIR SEPARATE ACCOUNT PROSPECTUS.

MANAGEMENT OF THE FUNDS

THE INVESTMENT ADVISOR
Rydex Global Advisors (the "Advisor"), 6116 Executive Boulevard, Suite
400, Rockville, Maryland 20852, serves as investment advisor and manager of the
Funds. Albert P. Viragh, Jr., the Chairman of the Board and the President of the
Advisor, owns a controlling interest in the Advisor. From 1985 until the
incorporation of the PADCO Advisors II, Inc., Mr. Viragh was a Vice President of
Money Management Associates ("MMA"), a Maryland-based registered investment
advisor. From 1992 to June 1993, Mr. Viragh was the portfolio manager of The
Rushmore Nova Portfolio, a series of The Rushmore Fund, Inc., an investment
company managed by MMA.

The Advisor makes investment decisions for the assets of the Funds and
continuously reviews, supervises, and administers each Fund's investment
program. The Trustees of the Trust supervise the Advisor and establish policies
that the Advisor must follow in its day-to-day management activities. Under an
investment advisory agreement between the Trust and the Advisor, the Funds pay
the Advisor a fee at an annualized rate, based on the average daily net assets
for each Fund, as set forth below:

<PAGE>

- ----------------------------------------------------------- --------------------------------------------------------
FUND ADVISORY FEE
- ----------------------------------------------------------- --------------------------------------------------------
<S> <C>
Titan 500 Fund 0.90%
- ----------------------------------------------------------- --------------------------------------------------------
Tempest 500 Fund 0.90%
- ----------------------------------------------------------- --------------------------------------------------------
Velocity 100 Fund 0.90%
- ----------------------------------------------------------- --------------------------------------------------------
Venture 100 Fund 0.90%
- ----------------------------------------------------------- --------------------------------------------------------
</TABLE>

Each Dynamic Fund is managed by a team and no one person is responsible
for making investment decisions.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gain distributions are paid at least
annually to the insurance company by each of the Funds. The Trust may declare a
special capital gains distribution if the Trustees believe that such a
distribution would be in the best interest of the shareholders of a Fund.

<PAGE>

BENCHMARK INFORMATION

Neither the Titan 500 Fund nor the Tempest 500 Fund is sponsored, endorsed,
sold, or promoted by Standard & Poor's Corp. (S&P); and neither the Velocity 100
Fund nor the Venture 100 Fund is sponsored, endorsed, sold, or promoted by
NASDAQ or any of NASDAQ's affiliates (NASDAQ and its affiliates hereinafter
collectively referred to as "NASDAQ").

Neither S&P nor NASDAQ make any representation or warranty, implied or
express, to the investor in the Funds, or any member of the public, regarding
the advisability of investing in index funds or the ability of the S&P 500
Index-Registered Trademark-or the NASDAQ 100 Index-Registered Trademark-,
respectively, to track general stock market performance.

Neither S&P nor NASDAQ guarantees the accuracy and/or the completeness of the
S&P 500 Index-Registered Trademark- and the NASDAQ 100 Index-Registered
Trademark-, respectively, or any data included therein.

Neither S&P nor NASDAQ makes any warranty, express or implied, as to results
to be obtained by any of the Funds, the investors in the Funds, or any person
or entity from the use of the S&P 500 Index-Registered Trademark- or the
NASDAQ 100 Index-Registered Trademark-, respectively, or any data included
therein.

Neither S&P nor NASDAQ makes any express or implied warranties of
merchantability or fitness for a particular purpose for use with respect to
the S&P 500 Index-Registered Trademark- or the NASDAQ 100 Index-Registered
Trademark-, respectively, or any data included therein.

<PAGE>

Additional information about the Funds is included in a Statement of Additional
Information dated May 1, 2000 (the "SAI"), which contains more detailed
information about the Funds. The SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus and, therefore, legally forms a part of this Prospectus. The SEC
maintains a web site ("http://www.sec.gov") that contains the SAI, material
incorporated by reference, and other information regarding registrants that file
electronically with the SEC. You may also review and copy documents at the SEC
Public Reference Room in Washington, D.C. (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a duplication
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, D.C. 20549-0102. You may also obtain information, upon
payment of a duplicating fee, by e-mailing the SEC at the following address:
[email protected].

You may obtain a copy of the SAI or the annual or semi-annual reports of the
Trust without charge by calling 1-301-468-8520 collect or by writing to Rydex
Variable Trust, at 6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852. Additional information about the investments of the Trust is available in
the annual and semi-annual reports. Also, in the annual report of the Trust, you
will find a discussion of the market conditions and investment strategies that
significantly affected performance during its last fiscal year.

NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH
INFORMATION OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR
RYDEX GLOBAL ADVISORS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE TRUST IN ANY JURISDICTION WHERE SUCH AN OFFERING IS NOT LAWFUL.

The Trust's SEC registration number is 811-08821.
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

RYDEX VARIABLE TRUST

DYNAMIC FUNDS

6116 EXECUTIVE BOULEVARD, SUITE 400
ROCKVILLE, MARYLAND 20852

1-800-820-0888
301-468-8520

WWW.RYDEXFUNDS.COM

TITAN 500 FUND
TEMPEST 500 FUND
VELOCITY 100 FUND
VENTURE 100 FUND

This SAI is not a prospectus. It should be read in conjunction with the Trust's
Dynamic Funds Prospectus, dated May 1, 2000. A copy of the Trust's Prospectus is
available, without charge, upon request to the Trust at the address above or by
telephoning the Trust at the telephone number above.

The date of this SAI is May 1, 2000.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GENERAL INFORMATION ABOUT THE TRUST ............................................. 3

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS ................................ 3

INVESTMENT RESTRICTIONS ........................................................ 12

PORTFOLIO TRANSACTIONS AND BROKERAGE ........................................... 14

MANAGEMENT OF THE TRUST ........................................................ 16

DETERMINATION OF NET ASSET VALUE ............................................... 21

PERFORMANCE INFORMATION ........................................................ 22

CALCULATION OF RETURN QUOTATIONS ............................................... 23

PURCHASE AND REDEMPTION OF SHARES .............................................. 23

DIVIDENDS, DISTRIBUTIONS, AND TAXES ............................................ 24

OTHER INFORMATION .............................................................. 26

COUNSEL ........................................................................ 27

AUDITORS AND CUSTODIAN ......................................................... 27

APPENDIX ...................................................................... A-1
</TABLE>

<PAGE>

GENERAL INFORMATION ABOUT THE TRUST

The Trust, an open-end management investment company, was organized as a
Delaware business trust on June 11, 1998. The Trust is permitted to offer
separate portfolios of shares. Shares of the Funds are available through certain
deferred variable annuity and variable insurance contracts ("Contracts") offered
through insurance companies, as well as to certain retirement plan investors.
Additional Funds and/or classes may be created from time to time.

Currently, the Trust has thirty separate series. All payments received by the
Trust for shares of any Fund belong to that Fund. Each Fund has its own assets
and liabilities. This SAI relates to shares of the Titan 500, Tempest 500,
Velocity 100, and Venture 100 Funds (the "Funds").

The Trust is a successor to The Rydex Advisor Variable Annuity Account (the
"Separate Account"), and the subaccounts of the Separate Account (the "Rydex
Subaccounts"). The Rydex Subaccounts were divided into the Nova, Ursa, Juno,
OTC, Precious Metals, U.S. Government Bond, and Money Market Subaccounts. A
substantial portion of the assets of each of the Rydex Subaccounts was
transferred to the respective Funds of the Trust in connection with the
commencement of operations of the Trust. To obtain historical financial
information about the Rydex Subaccounts, please call, collect, 1-800-820-0888.

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS

GENERAL
Each Fund's investment objective and principal investments are described in the
Prospectus. The following information supplements, and should be read in
conjunction with, those sections of the Prospectus.

Portfolio management is provided to each Fund by the Trust's investment adviser,
PADCO Advisors II, Inc., a Maryland corporation with offices at 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852. PADCO Advisors II, Inc.
operates under the name Rydex Global Advisors (the "Advisor"). The investment
strategies of the Funds discussed below and in the Prospectus may be used by a
Fund if, in the opinion of the Advisor, these strategies will be advantageous to
that Fund. A Fund is free to reduce or eliminate its activity in any of those
areas without changing the Fund's fundamental investment policies. There is no
assurance that any of these strategies or any other strategies and methods of
investment available to a Fund will result in the achievement of that Fund's
objectives.

BORROWING
The Funds may borrow money, including borrowing for investment purposes.
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 Fund's assets will fluctuate in value, whereas the
interest obligations on borrowings may be fixed, the net asset value per share
("NAV") of the Fund will increase more when the Fund's portfolio assets increase
in value and decrease more when the Fund'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, the Funds
might have to sell portfolio securities to meet interest or principal payments
at a time when investment

<PAGE>

considerations would not favor such sales. The Funds intend to use leverage
during periods when the Advisor believes that the respective Fund's investment
objective would be furthered.

In addition to the foregoing, the Funds are authorized to borrow money as a
temporary measure for extraordinary or emergency purposes in amounts not in
excess of 5% of the value of the Fund's total assets. This borrowing is not
subject to the foregoing 300% asset coverage requirement. The Funds are
authorized to pledge portfolio securities as the Advisor deems appropriate in
connection with any borrowings.

ILLIQUID SECURITIES
Each Fund 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 offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. A Fund will not invest more than 15% of the Fund's net
assets in illiquid securities. If the percentage of a Fund's net assets invested
in illiquid securities exceeds 15% due to market activity, the Fund will take
appropriate measures to reduce its holdings of illiquid securities. Each Fund
will adhere to a more restrictive limitation on the Fund's investment in
illiquid securities as required by the securities laws of those jurisdictions
where shares of the Fund are registered for sale. 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 Fund
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 Fund 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 investment
in illiquid securities may have an adverse impact on net asset value.

4
<PAGE>

sales to institutional investors. When Rule 144A restricted securities
present an attractive investment opportunity and meet other selection
criteria, a Fund may make such investments whether or not such securities are
"illiquid" depending on the market that exists for the particular security.
The trustees of the Trust (the "Trustees") have delegated the responsibility
for determining the liquidity of Rule 144A restricted securities, which may
be invested in by a Fund, to the Advisor.

INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Funds presently may invest in the securities of other investment companies
to the extent that such an investment would be consistent with the requirements
of Section 12(d)(1) of the 1940 Act. A Fund, therefore, may invest in the
securities of another investment company (the "acquired company") provided that
the Fund, immediately after such purchase or acquisition, does not own in the
aggregate: (i) more than 3% of the total outstanding voting stock of the
acquired company; (ii) securities issued by the acquired company having an
aggregate value in excess of 5% of the value of the total assets of the Fund; or
(iii) securities issued by the acquired company and all other investment
companies (other than Treasury stock of the Fund) having an aggregate value in
excess of 10% of the value of the total assets of the Fund. A Fund may also
invest in the securities of other investment companies if such securities are
the only investment securities held by the Fund, such as through a master-feeder
arrangement.

If a Fund invests in, and thus, is a shareholder of, another investment
company, the Fund's shareholders will indirectly bear the Fund'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
Fund to the Fund's own investment advisor and the other expenses that the Fund
bears directly in connection with the Fund's own operations.

LENDING OF PORTFOLIO SECURITIES
Subject to the investment restrictions set forth below, each of the Funds may
lend 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 Fund 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 Fund any income
accruing thereon, and the Fund may invest the cash collateral in portfolio
securities, thereby earning additional income. A Fund will not lend its
portfolio securities if such loans are not permitted by the laws or regulations
of any state in which the Fund's shares are qualified for sale, and the Funds
will not lend more than 33a% of the value of the Fund's total assets. Loans
would be subject to termination by the lending Fund 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 Fund and that Fund's shareholders. A lending Fund may pay reasonable
finders, borrowers, administrative, and custodial fees in connection with a
loan.

OPTIONS TRANSACTIONS

OPTIONS ON SECURITIES. The Titan 500 Fund and the Velocity 100 Fund may buy call
options and write (sell) put options on securities, and the Tempest 500 Fund and
the Venture 100 Fund may buy put options and write call options on securities
for the purpose of realizing the Funds' investment objective. By writing a call
option on securities, a Fund becomes obligated during the term of the option to
sell the securities

5
<PAGE>

underlying the option at the exercise price if the option is exercised. By
writing a put option, a Fund becomes obligated during the term of the option to
purchase the securities underlying the option at the exercise price if the
option is exercised.

A Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are illiquid.

OPTIONS ON SECURITY INDICES. The Titan 500 Fund and the Velocity 100 Fund may
purchase call options and write put options, and the Tempest 500 Fund and
Venture 100 Fund may purchase put options and write call options, on stock
indices listed on national securities exchanges or traded in the
over-the-counter market as an investment vehicle for the purpose of realizing
the Fund's investment objective.

OPTIONS ON FUTURES CONTRACTS. Under Commodities Futures Trading Commission
("CFTC") Regulations, a Fund may engage in futures transactions, either for
"bona fide hedging" purposes, as this term is defined in the CFTC Regulations,
or for non-hedging purposes to the extent that the aggregate initial margins and
option premiums required to establish such non-hedging positions do not exceed
5% of the liquidation value of the Fund'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

<PAGE>

the exercise price of the call option), the in-the-money amount may be excluded
in calculating this 5% limitation.

A Fund 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. In the
alternative, if the strike price of the put is less than the price of the
futures contract, the Fund will maintain in a segregated account cash or liquid
securities equal in value to the difference between the strike price of the put
and the price of the futures contract. A Fund 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 with prices which
are expected to move relatively consistently with the futures contract. A Fund
may cover its short position in a futures contract by taking a long position in
the instruments underlying the futures contracts, or by taking positions in
instruments with prices which are expected to move relatively consistently with
the futures contract.

A Fund 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. In the alternative, 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 Fund will maintain in a segregated
account cash or liquid securities equal in value to the difference between the
strike price of the call and the price of the futures contract. A Fund may also
cover its sale of a call option by taking positions in instruments with prices
which are expected to move relatively consistently with the call option. A Fund
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 Fund will maintain in a segregated account cash or liquid
securities equal in value to the difference between the strike price of the put
and the price of the futures contract. A Fund may also cover its sale of a put
option by taking positions in instruments with prices which are expected to move
relatively consistently with the put option.

7
<PAGE>

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 dollars, 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.

A Fund's current obligations under a swap agreement will be accrued daily
(offset against any amounts owing to the Fund) 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 Fund'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 Fund illiquid investment limitations. A
Fund will not enter into any swap agreement unless the Advisor believes that the
other party to the transaction is creditworthy. A Fund 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.

<PAGE>

transactions are entered into for hedging purposes or are offset by segregated
cash of liquid assets, as permitted by applicable law, the Funds and their
Advisor believe that these transactions do not constitute senior securities
under the 1940 Act and, accordingly, will not treat them as being subject to a
Fund's borrowing restrictions.

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.

PORTFOLIO TURNOVER
The Trust anticipates that investors in the Funds, as part of an asset
allocation investment strategy, will frequently purchase and/or redeem shares of
the Funds . The nature of the Funds as asset allocation tools will cause the
Funds to experience substantial portfolio turnover. (See "More Information
About Fund Investments and Risk" in the Trust's Prospectus). Because each Fund's
portfolio turnover rate, to a great extent, will depend on the purchase,
redemption, and exchange activity of the Fund's investors, it is very difficult
to estimate what the Fund's actual turnover rate will be in the future.

REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements with financial
institutions. The Funds each 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 Fund will seek to liquidate such collateral.
However, the exercising of each Fund's right to liquidate such collateral 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 Fund could suffer a loss. It is the current policy of each of the
Funds not to invest in repurchase agreements that do not mature within seven
days if any such investment, together with any other illiquid assets held by the
Fund, amounts to more than 15% of the Fund's total assets. The investments of
each of the Funds in repurchase

<PAGE>

agreements, at times, may be substantial when, in the view of the Advisor,
liquidity or other considerations so warrant.

REVERSE REPURCHASE AGREEMENTS
The Tempest 500 Fund and the Venture 100 Fund may use reverse repurchase
agreements as part of that Fund's investment strategy. Reverse repurchase
agreements involve sales by a Fund of portfolio assets concurrently with an
agreement by the Fund to repurchase the same assets at a later date at a fixed
price. Generally, the effect of such a transaction is that the Fund can recover
all or most of the cash invested in the portfolio securities involved during the
term of the reverse repurchase agreement, while the Fund will be able to keep
the interest income associated with those portfolio securities. Such
transactions are advantageous only if the interest cost to the Fund 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 Funds intend to use the reverse repurchase technique only when this will
be to the Fund's advantage to do so. Each Fund will establish a segregated
account with the Trust's custodian bank in which the Fund will maintain cash or
cash equivalents or other portfolio securities equal in value to the Fund's
obligations in respect of reverse repurchase agreements.

SHORT SALES
The Tempest 500 Fund and the Venture 100 Fund may engage in short sales
transactions under which the Fund sells a security it does not own. To complete
such a transaction, the Fund must borrow the security to make delivery to the
buyer. The Fund 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
Fund. Until the security is replaced, the Fund 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 Fund 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.

Until the Tempest 500 Fund or the Venture 100 Fund closes its short position or
replaces the borrowed security, the Fund will: (a) maintain a segregated account
containing cash or liquid securities at such a level that (i) 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 and (ii) the amount
deposited in the segregated account plus the amount deposited with the broker as
collateral will not be less than the market value of the security at the time
the security was sold short; or (b) otherwise cover the Fund's short position.
Each of the Funds may use up to 100% of its portfolio to engage in short sales
transactions and collateralize its open short positions. The Titan 500 Fund and
the Velocity 100 Fund each may engage in short sales if, at the time of the
short sale, the Fund owns or has the right to acquire an equal amount of the
security being sold at no additional cost. These Funds may make a short sale
when the Fund wants to sell the security the Fund owns at a current attractive
price, in order to hedge or limit the exposure of the Fund's position.

10
<PAGE>

specifies that no delivery of the actual stocks making up the index will take
place. Instead, settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the contract price
and the actual level of the stock index at the expiration of the contract.

TRACKING ERROR
The Funds do not expect that the returns over a year will deviate adversely from
their respective benchmarks by more than ten percent. But several factors may
affect their ability to achieve this correlation. Among these are: (1) Fund
expenses, including brokerage (which may be increased by high portfolio
turnover); (2) less than all of the securities in the benchmark being held by a
Fund and securities not included in the benchmark being held by a Fund; (3) an
imperfect correlation between the performance of instruments held by a Fund,
such as futures contracts and options, and the performance of the underlying
securities in the market; (4) bid-ask spreads (the effect of which may be
increased by portfolio turnover); (5) a Fund holds instruments traded in a
market that has become illiquid or disrupted; (6) Fund 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 Fund's portfolio holdings to
comply with investment restrictions or policies or regulatory or tax law
requirements; or (9) market movements that run counter to a leveraged Fund's
investments. Market movements that run counter to a leveraged Fund's investments
will cause some divergence between the Fund and its benchmark over time due to
the mathematical effects of leveraging. The magnitude of the divergence is
dependent upon the magnitude of the market movement, its duration, and the
degree to which the Fund is leveraged. The tracking error of a leveraged Fund is
generally small during a well-defined up trend or downtrend in the market when
measured from price peak to price peak, absent a market decline and subsequent
recovery, however, the deviation of the Fund from its benchmark may be
significant.

U.S. GOVERNMENT SECURITIES
The Funds may invest in U.S. Government Securities. Securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities 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 Fannie Mae,
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

11
<PAGE>

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.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each Fund, 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 Fund makes the
commitment to purchase securities on a when-issued or delayed-delivery basis,
the Fund will record the transaction and thereafter reflect the value of the
securities, each day, in determining the Fund's net asset value. A Fund will not
purchase securities on a when-issued or delayed-delivery basis if, as a result,
more than 15% of the Fund'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 Fund will also establish a segregated account with the
Fund's custodian bank in which the Fund will maintain cash or liquid securities
equal to or greater in value than the Fund's purchase commitments for such
when-issued or delayed-delivery securities. The Trust does not believe that a
Fund's net asset value or income will be adversely affected by the Fund's
purchase of securities on a when-issued or delayed-delivery basis.

INVESTMENT RESTRICTIONS

A Fund shall not:

1. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate the Fund to purchase securities or
require the Fund to segregate assets are not considered to be
borrowing. Asset coverage of a least 300% is required for all
borrowing, except where the

<PAGE>

Fund has borrowed money for temporary purposes in amounts not
exceeding 5% of its total assets. The Fund will not purchase
securities while its borrowing exceeds 5% of its total assets.

2. Make loans if, as a result, more than 33 1/3% of its total assets
would be lent to other parties, except that the Fund may (i) purchase
or hold debt instruments in accordance with its investment objective
and policies; (ii) enter into repurchase agreements; and (iii) lend
its securities.

3. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.

4. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.

5. Issue senior securities (as defined in the 1940 Act) except as
permitted by rule, regulation or order of the SEC.

6. Purchase or sell real estate, physical commodities, or commodities
contracts, except that the Fund may purchase (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts; and
(ii) commodities contracts relating to financial instruments, such as
financial futures contracts and options on such contracts.

7. Invest 25% or more of the value of the Fund's total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry; except that, to the extent the
benchmark selected for a particular Fund is concentrated in a
particular industry, the Fund will necessarily be concentrated in that
industry. This limitation does not apply to investments or obligations
of the U.S. Government or any of its agencies or instrumentalities.

NON-FUNDAMENTAL POLICIES
The following investment limitations are non-fundamental policies of the Funds
and may be changed with respect to any Fund by the Board of Trustees.

Each Fund may not:

1. Invest in warrants.

2. Invest in real estate limited partnerships.

3. Invest in mineral leases.

4. Pledge, mortgage or hypothecate assets except to secure borrowing
permitted by the Fund's fundamental limitation on borrowing.

<PAGE>

5. Invest in companies for the purpose of exercising control.

6. Purchase securities on margin or effect short sales, except that a
Fund may (i) obtain short-term credits as necessary for the clearance
of security transactions; (ii) provide initial and variation margin
payments in connection with transactions involving futures contracts
and options on such contracts; and (iii) make short sales "against the
box" or in compliance with the SEC's position regarding the asset
segregation requirements imposed by Section 18 of the 1940 Act.

7. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act or any rule, regulation or order of the SEC.

The foregoing percentages: (i) are based on total assets (except for the
limitation on illiquid securities, which is based on net assets); (ii) will
apply at the time of the purchase of a security; and (iii) shall not be
considered violated unless an excess or deficiency occurs or exists immediately
after and as a result of a purchase of such security.

PORTFOLIO TRANSACTIONS AND BROKERAGE

14
<PAGE>

Fund 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. 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.

15
<PAGE>

accounts of the Advisor, including other Funds of the Trust and other investment
companies advised by the Advisor. 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 THE TRUST

TRUSTEES

*ALBERT P. VIRAGH, JR. (58)

Chairman of the Board of Trustees and President of Rydex Series Funds, a
registered mutual fund, 1993 to present; Chairman of the Board of Trustees
and President of Rydex Variable Trust, a registered mutual fund, 1998 to
present; Chairman of the Board of Trustees and President of Rydex Dynamic
Funds, a registered mutual fund, 1999 to present; Chairman of the Board of
Directors, President, and Treasurer of PADCO Advisors, Inc., investment
adviser, 1993 to present; Chairman of the Board of Directors, President,
and Treasurer of PADCO Service Company, Inc., shareholder servicer and
transfer agent, 1993 to present; Chairman of the Board of Directors,
President, and Treasurer of PADCO Advisors II, Inc., investment adviser,
1998 to present; Chairman of the Board of Directors, President, and
Treasurer of Rydex Distributors, Inc., a registered broker-dealer firm,
1996 to present; Vice President of Rushmore Investment Advisors Ltd., a
registered investment adviser, 1985 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

COREY A. COLEHOUR (53)

- --------------------------

16
<PAGE>

J. KENNETH DALTON (58)

JOHN O. DEMARET (59)

PATRICK T. MCCARVILLE (57)

Trustee of Rydex Series Funds, 1997 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Founder and Chief Executive Officer, Par Industries, Inc., Northbrook,
Illinois, 1977 to present; President and Chief Executive Officer, American
Health Resources, Northbrook, Illinois, 1984 to 1986. Address: 6116
Executive Boulevard, Suite 400, Rockville, Maryland 20852.

ROGER SOMERS (54)

OFFICERS

ROBERT M. STEELE (41)

Secretary and Vice President of Rydex Series Funds, 1994 to present;
Secretary and Vice President of Rydex Variable Trust, 1998 to present;
Secretary and Vice President of Rydex Dynamic Funds, 1999 to present;
Vice President of Rydex Distributors, Inc., 1996 to present; Vice
President of The Boston Company, Inc., an institutional money
management firm, 1987 to 1994. Address: 6116 Executive Boulevard, Suite
400, Rockville, Maryland 20852.

CARL G. VERBONCOEUR (47)

Vice President and Treasurer of Rydex Series Funds, 1997 to present;
Vice President and Treasurer of the Rydex Variable Trust, 1998 to
present; Vice President and Treasurer of Rydex Dynamic

17
<PAGE>

Funds, 1999 to present; Vice President of Rydex Distributors, Inc., 1997 to
present; Senior Vice President, Crestar Bank, 1995 to 1997; Senior Vice
President, Crestar Asset Management Company, a registered investment
adviser, 1993 to 1995; Vice President of Perpetual Savings Bank, 1987 to
1993. Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852.

MICHAEL P. BYRUM (29)

JOHN FRANGOS (42)

The aggregate compensation paid by the Trust to each of its Trustees serving
during the fiscal year ended December 31, 1999, is set forth in the table below:

<TABLE>
<CAPTION>
====================================================================================================================
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
NAME OF PERSON, POSITION COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON FROM FUND COMPLEX
TRUST PART OF TRUST'S RETIREMENT FOR SERVICE ON
EXPENSES THREE BOARDS**
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert P. Viragh, Jr.*, $0 $0 $0 $0
CHAIRMAN AND PRESIDENT
- --------------------------------------------------------------------------------------------------------------------
Corey A. Colehour, TRUSTEE $6,500 $0 $0 $29,000
- --------------------------------------------------------------------------------------------------------------------
J. Kenneth Dalton, $6,500 $0 $0 $29,000
TRUSTEE
- --------------------------------------------------------------------------------------------------------------------

18
<PAGE>

====================================================================================================================
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
NAME OF PERSON, POSITION COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON FROM FUND COMPLEX
TRUST PART OF TRUST'S RETIREMENT FOR SERVICE ON
EXPENSES THREE BOARDS**
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Roger Somers, $6,500 $0 $0 $29,000
TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
John O. Demaret, $6,500 $0 $0 $29,000
TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
Patrick T. McCarville, $6,500 $0 $0 $29,000
TRUSTEE
====================================================================================================================
</TABLE>
* Denotes an "interested person" of the Trust.
** Each member of the Board of Trustees also serves as a Trustee to Rydex
Series Funds and to Rydex Dynamic Funds.

THE ADVISORY AGREEMENT
Under an investment advisory agreement with the Advisor, dated August 11, 1998,
the Advisor serves as the investment advisor for each series of the Trust and
provides investment advice to the Funds and oversees the day-to-day operations
of the Funds, subject to direction and control by the Trustees and the officers
of the Trust. As of March 31, 2000, net assets under management of the Advisor
and its affiliates were approximately $8.5 billion. Pursuant to the advisory
agreement with the Advisor, the Funds pay the Advisor according to the fees set
forth in the prospectus.

The Advisor is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of 0.90% of the average daily net assets of each Fund. The
Advisor may, from time to time reimburse certain expenses of the Funds in
order to limit the Funds' operating expenses as described in the prospectus.
The Advisor's office is located at 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852. PADCO Advisors II, Inc. was incorporated in the
State of Maryland on July 5, 1994. Albert P. Viragh, Jr., the Chairman of the
Board of Trustees and the President of the Advisor, owns a controlling
interest in the Advisor.

19
<PAGE>

Suite 400, Rockville, Maryland 20852, subject to the general supervision and
control of the Trustees and the officers of the Trust, pursuant to a service
agreement between the Trust and the Servicer. The Servicer is wholly-owned by
Albert P. Viragh, Jr., who is the Chairman of the Board and the President of
the Trust and the sole controlling person and majority owner of the Advisor.

In consideration for its services, the Servicer is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of 0.25% of the daily net
assets of each Fund. Pursuant to an Accounting Services Agreement, the Servicer
serves as Accounting Services Agent and performs certain record keeping and
accounting functions.

DISTRIBUTION
Pursuant to the Distribution Agreement adopted by the Trust, Rydex Distributors,
Inc. (the "Distributor"), 6116 Executive Boulevard, Suite 400, Rockville,
Maryland 20852, acts as distributor for the shares of the Trust under the
general supervision and control of the Trustees and the officers of the Trust.

INVESTOR SERVICES PLAN
Pursuant to an Investor Services Plan dated January 1, 1999, the Distributor
directly, or indirectly through other service providers determined by the
Distributor ("Service Providers"), provides investor services to owners of
Contracts who, indirectly through insurance company separate accounts, invest
in shares of the Funds ("Investors"). Investor services include some or all
of the following: printing Fund prospectuses and statements of additional
information and mailing them to Investors or to financial advisors who
allocate funds for investments in shares of the Funds on behalf of Investors
("Financial Advisors"); forwarding communications from the Funds to Investors
or Financial Advisors, including proxy solicitation material and annual and
semiannual reports; assistance in facilitating and processing transactions in
shares of the Funds in connection with strategic or tactical asset allocation
investing; assistance in providing the Fund with advance information on
strategic and tactical asset allocation trends and anticipated investment
activity in and among the Funds; 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 Funds' portfolio investments; (c) providing
performance information to Financial Advisors regarding the Funds; (d)
providing information to Financial Advisors regarding the Funds' investment
objectives; (e) providing investor account information to Financial Advisors;
and (f) redeeming Fund shares, if necessary, for the payment of Financial
Advisor fees.

<PAGE>

For these services, the Trust compensates the Distributor at an annual rate not
exceeding .25% of the Funds' average daily net assets. The Distributor is
authorized to use its fee to compensate Services Providers for providing
Investor services. The fee will be paid from the assets of the Funds and will be
calculated and accrued daily and paid within fifteen (15) days of the end of
each month.

DETERMINATION OF NET ASSET VALUE

On days when the CBOT is closed during its usual business hours, but the shares
of a Fund have been purchased, redeemed, and/or exchanged, the portfolio
securities held by a Fund which are traded on the CBOT are valued at the earlier
of (i) the time of the execution of the last trade of the day for a Fund in
those CBOT-traded portfolio securities and (ii) the time of the close of the
CBOT Evening Session. On days when the CBOT is closed during its usual business
hours and there is no need for a Fund to execute trades on the CBOT, the value
of the CBOT-traded portfolio securities held by a Fund will be the mean of the
bid and asked prices for those CBOT-traded portfolio securities at the open of
the CBOT Evening Session.

21
<PAGE>

PERFORMANCE INFORMATION

From time to time, each of the Funds may include the Fund's total return in
advertisements or reports to shareholders or prospective shareholders.
Quotations of average annual total return for a Fund will be expressed in terms
of the average annual compounded rate of return on a hypothetical investment in
the Fund over a period of at least one, five, and ten years (up to the life of
the Fund) (the ending date of the period will be stated). Total return of a Fund
is calculated from two factors: the amount of dividends earned by each Fund
share and by the increase or decrease in value of the Fund's share price. See
"Calculation of Return Quotations."

<PAGE>

CALCULATION OF RETURN QUOTATIONS

For purposes of quoting and comparing the performance of a Fund to that of other
mutual funds and to other relevant market indices in advertisements or in
reports to shareholders, performance for the Fund may be stated in terms of
total return. Under the rules of the Securities and Exchange Commission ("SEC
Rules"), Funds advertising performance must include total return quotes
calculated according to the following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1,000;

T = average annual total return;

n = number of years (1, 5, or 10); and

ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of the 1, 5, or 10
year periods, at the end of the 1, 5, or 10 year
periods (or fractional portion thereof).

Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication, and will cover 1, 5, and
10 year periods or a shorter period dating from the effectiveness of the
Registration Statement of the Trust In calculating the ending redeemable value,
all dividends and distributions by a Fund are assumed to have been reinvested at
net asset value as described in the Trust's Prospectus on the reinvestment dates
during the period. Total return, or `T' in the formula above, is computed by
finding the average annual compounded rates of return over the 1, 5, and 10 year
periods (or fractional portion thereof) that would equate the initial amount
invested to the ending redeemable value.

PURCHASE AND REDEMPTION OF SHARES

SUSPENSION OF THE RIGHT OF REDEMPTION
The Funds may suspend the right of redemption or the date of payment: (i) for
any period during which the NYSE is closed (other than customary weekend or
holiday closings) or trading on the NYSE is restricted; (ii) for any period
during which an emergency exists so that disposal of Fund investments or the
determination of NAV is not reasonably practicable; or (iii) for such other
periods as the SEC, by order, may permit for protection of fund investors. In
cases where NASDAQ, the CME, Chicago Board Options Exchange ("CBOE") or the
CBOT, as appropriate, is closed or trading is restricted, a Fund may ask the SEC
to permit the right to redemption to be suspended.

23
<PAGE>

Jr.'s Birthday, President's Day, Good Friday, Memorial Day, July Fourth, Labor
Day, Columbus Day, Thanksgiving Day, and Christmas Day; and (ii) the preceding
Friday if any of these holidays falls on a Saturday, or the subsequent Monday if
any of these holidays falls on a Sunday. Although the Trust expects the same
holiday schedules to be observed in the future, each of the aforementioned
exchanges may modify its holiday schedule at any time.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

REGULATED INVESTMENT COMPANY ("RIC") STATUS
As a RIC, a Fund would not be subject to federal income taxes on the net
investment income and capital gains that the Fund distributes to the Fund's
shareholders.

If a Fund were to fail to qualify as a RIC for one or more taxable years, the
Fund could then qualify (or re-qualify) as a RIC for a subsequent taxable year
only if the Fund had distributed to the Fund's shareholders a taxable dividend
equal to the full amount of any earnings or profits (less the interest charge
mentioned below, if applicable) attributable to such period. The Fund might also
be required to pay to the U.S. Internal Revenue Service (the "IRS") interest on
50% of such accumulated earnings and profits. In addition, pursuant to the Code
and an interpretative notice issued by the IRS, if the Fund should fail to
qualify as a RIC and should thereafter seek to re-qualify as a RIC, the Fund may
be subject to tax on the excess (if any) of the fair

24
<PAGE>

market of the Fund's assets over the Fund's basis in such assets, as of the day
immediately before the first taxable year for which the Fund seeks to re-qualify
as a RIC.

If a Fund determines that it will not qualify as a RIC under Subchapter M of the
Code, the Fund will establish procedures to reflect the anticipated tax
liability in it's net asset value.

SECTION 817(H) DIVERSIFICATION
Section 817(h) of the Code requires that the assets of each Fund be adequately
diversified so that insurance companies that invest in their shares, and not
variable annuity contract owners, are considered the owners of the shares for
federal income tax purposes. Each Fund ordinarily must satisfy the
diversification requirements within one year after contract owner funds are
first allocated to the particular Fund. In order to meet the diversification
requirements of regulations issued under Section 817(h), each Fund will meet the
following test: no more than 55% of the assets will be invested in any one
investment; no more than 70% of the assets will be invested in any two
investments; no more than 80% of the assets will be invested in any three
investments; and no more than 90% will be invested in any four investments. Each
Fund must meet the above diversification requirements within 30 days of the end
of each calendar quarter.

Each of the Funds will utilize options on stock indices in its operations.
Options on "broad based" stock indices are classified as "nonequity options"
under the Code. Gains and losses resulting from the expiration, exercise, or
closing of such nonequity options, as well as gains and losses resulting from
futures contract transactions, will be treated as long-term capital gain or loss
to the extent of 60% thereof

25
<PAGE>

and short-term capital gain or loss to the extent of 40% thereof (hereinafter,
"blended gain or loss"). In addition, any nonequity option and futures contract
held by a Fund on the last day of a fiscal year will be treated as sold for
market value on that date, and gain or loss recognized as a result of such
deemed sale will be blended gain or loss.

The trading strategies of each of the Funds involving nonequity options on stock
indices may constitute "straddle" transactions. "Straddles" may affect the
taxation of such instruments and may cause the postponement of recognition of
losses incurred in certain closing transactions. Each of these Funds will also
have available to the Fund a number of elections under the Code concerning the
treatment of option transactions for tax purposes. Each such Fund will utilize
the tax treatment that, in the Fund's judgment, will be most favorable to a
majority of investors in the Fund. Taxation of these transactions will vary
according to the elections made by the Fund. These tax considerations may have
an impact on investment decisions made by the Fund.

A Fund's transactions in options, under some circumstances, could preclude
the Fund's qualifying for the special tax treatment available to investment
companies meeting the requirements of Subchapter M of the Code. However, it
is the intention of each Fund's portfolio management to limit gains from such
investments to less than 10% of the gross income of the Fund during any
fiscal year in order to maintain this qualification.

OTHER INFORMATION

VOTING RIGHTS
You receive one vote for every full Fund share owned. Each Fund will vote
separately on matters relating solely to that Fund. All shares of the Funds are
freely transferable.

26
<PAGE>

Code applies to the personal investing activities of trustees, directors,
officers and certain employees ("access persons"). Rule 17j-1 and the Code is
designed to prevent unlawful practices in connection with the purchase or sale
of securities by access persons. Under the Code, access persons are permitted to
engage in personal securities transactions, but are required to report their
personal securities transactions for monitoring purposes. In addition, certain
access persons are required to obtain approval before investing in initial
public offerings or private placements. The Code is on file with the Securities
and Exchange Commission, and is available to the public.

SHAREHOLDER INQUIRIES
You may visit the Trust's web site at www.rydexfunds.com or call 1-800-820-0888
or 301-468-8520 to obtain information on account statements, procedures, and
other related information.

COUNSEL

Morgan, Lewis & Bockius LLP serves as counsel to the Trust.

AUDITORS AND CUSTODIAN

Deloitte & Touche LLP are the auditors and the independent certified public
accountants of the Trust and each of the Funds. Firstar Bank, N.A. (the
"Custodian"), Star Bank Center, 425 Walnut Street, Cincinnati, Ohio 45202,
serves as custodian for the Trust and the Funds under a custody agreement
between the Trust and the Custodian. Under the custody agreement, the Custodian
holds the portfolio securities of each Fund and keeps all necessary related
accounts and records.

<PAGE>

APPENDIX A

BOND RATINGS

Below is a description of Standard & Poor's Ratings Group ("Standard & Poor's")
and Moody's Investors Service, Inc. ("Moody's") bond rating categories.

STANDARD & POOR'S RATINGS
GROUP CORPORATE BOND RATINGS

AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

MOODY'S INVESTORS SERVICE, INC.
CORPORATE BOND RATINGS
Aaa -- Bonds rate "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to a "gilt-edged."
Interest payments are protected by a large or by an exceptionally stable margin,
and principal is secure. While the various protective elements are likely

A-1
<PAGE>

to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Caa -- Bonds rated "Caa" are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

A-2
<PAGE>

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

(a)(1) Certificate of Trust of Rydex Variable Trust is incorporated by
reference to Exhibit (a) of the Initial Registration Statement,
filed on June 17, 1998.

(a)(2) Declaration of Trust of Rydex Variable Trust is incorporated by
reference to Exhibit (a) of the Initial Registration Statement,
filed on June 17, 1998.

(b) By-Laws are incorporated by reference to Exhibit (b) of the Initial
Registration Statement, filed on June 17, 1998.

(d)(1) Investment Advisory Agreement between the Registrant and PADCO
Advisors II, Inc. is incorporated herein by reference to Exhibit (d)
of the Post-Effective Amendment No. 1 to this Registration
Statement, filed on April 16, 1999.

(d)(2) Amendment to Investment Advisory Agreement between the Registrant
and PADCO Advisors II, Inc. dated February 25, 2000 is filed
herewith.

(e)(1) Distribution Agreement between the Registrant and PADCO Financial
Services, Inc. is incorporated herein by reference to Exhibit (e)(1)
of the Post-Effective Amendment No. 1 to this Registration
Statement, filed on April 16, 1999.

(e)(2) Participation Agreement between the Registrant and PADCO Financial
Services, Inc. is herein incorporated by reference to Pre-Effective
Amendment No. 1 as filed on October 14, 1998.

(e)(3) Investor Service Agreement and Plan are incorporated herein by
reference to Exhibit (e)(3) of the Post-Effective Amendment No. 1 to
this Registration Statement, filed on April 16, 1999.

(e)(4) Amendments to Investor Services Agreement and Plan between
Registrant and PADCO Service Company, Inc. Dated February 25, 2000
are filed herewith.

(f) Not Applicable.
<PAGE>

(g) Custodian Agreement between the Registrant and Star Bank, N.A. is
herein incorporated by reference to Pre-Effective Amendment No. 1 as
filed on October 14, 1998.

(h)(1) Service Agreement between the Registrant and PADCO Service Company,
Inc. is incorporated herein by reference to Exhibit (h)(1) of the
Post-Effective Amendment No. 1 to this Registration Statement, filed
on April 16, 1999.

(h)(2) Accounting Services Agreement between the Registrant and PADCO
Service Company, Inc. is incorporated herein by reference to Exhibit
(h)(2) of the Post-Effective Amendment No. 1 to this Registration
Statement, filed on April 16, 1999.

(h)(3) Amendment to Service Agreement between the Registrant and PADCO
Service Company, Inc. dated February 25, 2000 is filed herewith.

(h)(4) Amendment to Accounting Services Agreement between the Registrant
and PADCO Service Company, Inc. dated February 25, 2000 is filed
herewith.

(i) Legal Opinion of Morgan, Lewis & Bockius LLP is filed herewith.

(j) Consent of Deloitte & Touche LLP, Independent Accountants is filed
herewith.

(k) Not Applicable.

(l) Not Applicable.

(m) Not Applicable.

(n) Not Applicable.

(o) Not Applicable.

(p) Combined Code of Ethics for Rydex Series Funds, Rydex Variable
Trust, Rydex Dynamic Funds, PADCO Advisors, Inc. d/b/a Rydex Global
Advisors, PADCO Advisors II, Inc. d/b/a Rydex Global Advisors, Rydex
Distributors, Inc., PADCO Service Company, Inc. is incorporated
herein by reference to exhibit (p) of the Post-Effective Amendment
No. 3 to this Registration Statement, filed on April 5, 2000.

(q) Powers of Attorney for Albert P. Viragh, Jr., Carl G. Verboncoeur,
Corey A. Colehour, J. Kenneth Dalton, John O. Demaret, Patrick T.
McCarville, and Roger Somers are filed herewith.

iv
<PAGE>

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND

Not Applicable.

ITEM 25. INDEMNIFICATION

The Registrant is organized as a Delaware business trust and is operated
pursuant to a Declaration of Trust, dated as of June 11, 1998 (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 misfeasance, 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 THE INVESTMENT ADVISER

ADVISER
PADCO Advisors II, Inc., d/b/a Rydex Global Advisors, (the "Advisor") is the
investment advisor for the Trust. The principal address of the Advisor is 6116
Executive Drive, Rockville, Maryland. The Advisor is an investment adviser
registered under the Advisers Act.

v
<PAGE>

The officers and directors of the Advisor, including information as to any other
business profession, vocation or employment of substantial nature engaged in by
such officers and directors during the past two years, are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Albert P. Viragh, Jr. Chairman and President
Albert P. Viragh, Jr. Treasurer
Amanda C. Viragh Secretary
Amanda C. Viragh Assistant Treasurer
</TABLE>

ITEM 27. PRINCIPAL UNDERWRITERS

(a) Rydex Distributors, Inc. (formerly, PADCO Financial Services, Inc.)
serves as the principal underwriter for shares of the Registrant, Advisor
Class Shares and International Funds Shares of Rydex Series Funds, and
shares of Rydex Dynamic Funds.

(b) The following information is furnished with respect to the directors and
officers of Rydex Distributors, Inc.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS* UNDERWRITER WITH REGISTRANT
- ------------------ -------------------------- ---------------------
<S> <C> <C>
Albert P. Viragh, Jr. Chairman of the Board of Directors, Chairman of the Board
President and Treasurer of Trustees and President

Amanda C. Viragh Director None

Carl G. Verboncoeur Vice President Vice President
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:

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 6116 Executive
Boulevard, Rockville, Maryland 20852.

vi
<PAGE>

ITEM 29. MANAGEMENT SERVICES

Not Applicable.

ITEM 30. UNDERTAKINGS

Not Applicable.

vii
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for the effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 4 to the Registration Statement (File No.
811-08821) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rockville, State of Maryland on this 17th day of
April, 2000.

Rydex Variable Trust

By: /s/ Albert P. Viragh, Jr.
---------------------------
Albert P. Viragh, Jr.,
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 4 to the Registration Statement has been signed
below by the following persons in the capacity and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Albert P. Viragh, Jr. Chairman of the Board of Trustees, April 17, 2000
- ----------------------------- Principal Executive Officer, and
Albert P. Viragh, Jr. President

* Member of the Board of Trustees April 17, 2000
- -----------------------------
Corey A. Colehour

* Member of the Board of Trustees April 17, 2000
- -----------------------------
J. Kenneth Dalton

* Member of the Board of Trustees April 17, 2000
- -----------------------------
John O. Demaret

* Member of the Board of Trustees April 17, 2000
- -----------------------------
Roger Somers

* Member of the Board of Trustees April 17, 2000
- -----------------------------
Patrick T. McCarville

/s/Carl G. Verboncoeur Vice President and Treasurer April 17, 2000
- -----------------------------
Carl G. Verboncoeur

/s/ Albert P. Viragh, Jr.
- ---------------------------------------
Albert P. Viragh, Jr., Attorney in Fact
*Powers of Attorney previously filed
</TABLE>

viii
<PAGE>

EXHIBIT INDEX

(a)(1) Certificate of Trust of Rydex Variable Trust is incorporated by
reference to Exhibit (a) of the Initial Registration Statement, filed
on June 17, 1998.

(a)(2) Declaration of Trust of Rydex Variable Trust is incorporated by
reference to Exhibit (a) of the Initial Registration Statement, filed
on June 17, 1998.

(b) By-Laws are incorporated by reference to Exhibit (b) of the Initial
Registration Statement, filed on June 17, 1998.

(d)(1) Investment Advisory Agreement between the Registrant and PADCO Advisors
II, Inc. is incorporated herein by reference to Exhibit (d) of the
Post-Effective Amendment No. 1 to this Registration Statement, filed on
April 16, 1999.

(d)(2) Amendment to Investment Advisory Agreement between the Registrant and
PADCO Advisors II, Inc. dated February 25, 2000 is filed herewith.

(e)(1) Distribution Agreement between the Registrant and PADCO Financial
Services, Inc. is incorporated herein by reference to Exhibit (e)(1) of
the Post-Effective Amendment No. 1 to this Registration Statement,
filed on April 16, 1999.

(e)(2) Participation Agreement between the Registrant and PADCO Financial
Services, Inc. is herein incorporated by reference to Pre-Effective
Amendment No. 1 as filed on October 14, 1998.

(e)(3) Investor Service Agreement and Plan are incorporated herein by
reference to Exhibit (e)(3) of the Post-Effective Amendment No. 1 to
this Registration Statement, filed on April 16, 1999.

(e)(4) Amendments to Investor Services Agreement and Plan between Registrant
and PADCO Service Company, Inc. Dated February 25, 2000 are filed
herewith.

(f) Not Applicable.

(g) Custodian Agreement between the Registrant and Star Bank, N.A. is
herein incorporated by reference to Pre-Effective Amendment No. 1 as
filed on October 14, 1998.

ix
<PAGE>

(h)(2) Accounting Services Agreement between the Registrant and PADCO Service
Company, Inc. is incorporated herein by reference to Exhibit (h)(2) of
the Post-Effective Amendment No. 1 to this Registration Statement,
filed on April 16, 1999.

(h)(3) Amendment to Service Agreement between the Registrant and PADCO Service
Company, Inc. dated February 25, 2000 is filed herewith.

(h)(4) Amendment to Accounting Services Agreement between the Registrant and
PADCO Service Company, Inc. dated February 25, 2000 is filed herewith.

(i) Legal Opinion of Morgan, Lewis & Bockius LLP is filed herewith.

(j) Consent of Deloitte & Touche LLP, Independent Accountants is filed
herewith.

(k) Not Applicable.

(l) Not Applicable.

(m) Not Applicable.

(n) Not Applicable.

(o) Not Applicable.

(p) Combined Code of Ethics for Rydex Series Funds, Rydex Variable Trust,
Rydex Dynamic Funds, PADCO Advisors, Inc. d/b/a Rydex Global Advisors,
PADCO Advisors II, Inc. d/b/a Rydex Global Advisors, Rydex
Distributors, Inc., PADCO Service Company, Inc. is incorporated herein
by reference to exhibit (p) of the Post-Effective Amendment No. 3 to
this Registration Statement, filed on April 5, 2000.

(q) Powers of Attorney for Albert P. Viragh, Jr., Carl G. Verboncoeur,
Corey A. Colehour, J. Kenneth Dalton, John O. Demaret, Patrick T.
McCarville, and Roger Somers are filed herewith.

<PAGE>

AMENDMENT,
DATED FEBRUARY 25, 2000,
TO
INVESTMENT ADVISORY AGREEMENT
BETWEEN RYDEX VARIABLE TRUST
AND PADCO ADVISORS II, INC.,
DATED JULY 5, 1994,
AS AMENDED

<PAGE>

AMENDMENT TO

INVESTMENT ADVISORY AGREEMENT

BETWEEN

RYDEX VARIABLE TRUST

AND

PADCO ADVISORS II, INC.

The following amendment is made to Section 4 of the Investment Advisory
Agreement between Rydex Variable Trust (the "Trust") and PADCO Advisors II, Inc.
(the "Advisor"), dated July 5, 1994, as amended to date (the "Agreement"), and
is hereby incorporated into and made a part of the Agreement:

Section 4 of the Agreement is amended, effective February 25, 2000, to
read as follows:

"In exchange for the rendering of advice and services pursuant hereto,
the Trust shall pay the Advisor, and the Advisor shall accept as full
compensation for the services to be rendered and as full reimbursement
for all the charges and expenses to be assumed and paid by the Advisor
as provided in Section 2, a fee at an annual rate applied to the daily
net assets of a Fund in accordance with the following schedule:
<TABLE>
<S> <C>
U.S. Government Bond Fund ..............0.50% (50/100s of one percent)
U.S. Government Money Market Fund ......0.50% (50/100s of one percent)
Nova Fund ..............................0.75% (75/100s of one percent)
Ursa Fund ..............................0.90% (90/100s of one percent)
Arktos Fund ............................0.90% (90/100s of one percent)
Juno Fund ..............................0.90% (90/100s of one percent)
OTC Fund ...............................0.75% (75/100s of one percent)
TITAN 500 FUND .........................0.90% (90/100s OF ONE PERCENT)
TEMPEST 500 FUND .......................0.90% (90/100s OF ONE PERCENT)
VELOCITY 100 FUND ......................0.90% (90/100s OF ONE PERCENT)
VENTURE 100 FUND .......................0.90% (90/100s OF ONE PERCENT)
LARGE-CAP EUROPE FUND ..................0.90% (90/100s OF ONE PERCENT)
LARGE-CAP JAPAN FUND ...................0.90% (90/100s OF ONE PERCENT)
Banking Fund ...........................0.85% (85/100s of one percent)
Basic Materials Fund ...................0.85% (85/100s of one percent)
Biotechnology Fund .....................0.85% (85/100s of one percent)

<PAGE>

Consumer Products Fund .................0.85% (85/100s of one percent)
Electronics Fund .......................0.85% (85/100s of one percent)
Energy Fund ............................0.85% (85/100s of one percent)
Energy Services Fund ...................0.85% (85/100s of one percent)
Financial Services Fund ................0.85% (85/100s of one percent)
Health Care Fund .......................0.85% (85/100s of one percent)
INTERNET FUND ..........................0.85% (85/100s OF ONE PERCENT)
Leisure Fund ...........................0.85% (85/100s of one percent)
Precious Metals Fund ...................0.75% (75/100s of one percent)
Retailing Fund .........................0.85% (85/100s of one percent)
Technology Fund ........................0.85% (85/100s of one percent)
Telecommunications Fund ................0.85% (85/100s of one percent)
Transportation Fund ....................0.85% (85/100s of one percent)
UTILITIES FUND .........................0.85% (85/100s OF ONE PERCENT)
</TABLE>

The fee will be accrued daily by each Fund and paid to the Advisor
monthly not later than the fifth (5th) business day of the month
following the month for which services have been provided. In the
event of termination of this Agreement, the fee shall be computed on
the basis of the period ending on the last business day on which this
Agreement is in effect subject to a pro rata adjustment based on the
number of days elapsed in the current month as a percentage of the
total number of days in such month, and such fee shall be payable on
the date of termination of this Agreement with respect to the Fund.
For purposes of calculating the Advisor's fee, the value of the net
assets of each respective Fund of the Trust shall be determined in the
same manner as the Fund uses to compute the value of the Fund's net
assets in connection with the determination of the Net Asset Value of
the Fund, all as set forth more fully in the current Prospectus and
Statement of Additional Information for the Funds included in the
Registration Statement."

<PAGE>

In witness whereof, the parties hereto have caused this Amendment to be
executed in their names and on their behalf and through their duly-authorized
officers as of the 25th day of February 2000.

RYDEX VARIABLE TRUST

/s/Albert P. Viragh, Jr.
-----------------------------------
By: Albert P. Viragh, Jr.
Title: President

PADCO ADVISORS II, INC.

/s/Albert P. Viragh, Jr.
-----------------------------------
By: Albert P. Viragh, Jr.
Title: President

<PAGE>

AMENDMENT,
DATED FEBRUARY 25, 2000,
TO
INVESTOR SERVICES AGREEMENT
BETWEEN RYDEX VARIABLE TRUST
AND PADCO SERVICE COMPANY, INC.,
DATED DECEMBER 31, 1998,
AS AMENDED

<PAGE>

AMENDMENT TO
INVESTOR SERVICES AGREEMENT
BETWEEN
RYDEX VARIABLE TRUST
AND
PADCO FINANCIAL SERVICES, INC.

EXHIBIT A

RYDEX VARIABLE TRUST

RYDEX FUNDS

Nova Fund
Ursa Fund
Precious Metals Fund
OTC Fund
Juno Fund
LARGE-CAP EUROPE FUND
LARGE-CAP JAPAN FUND
TITAN 500 FUND
TEMPEST 500 FUND
VELOCITY 100 FUND
VENTURE 100 FUND
U.S. Government Bond Fund
U.S. Government Money Market Fund
INTERNET FUND
UTILITIES FUND

ADDITIONS and [DELETIONS] are noted in BOLD.

<PAGE>

AMENDMENT,
DATED FEBRUARY 25, 2000,
TO
RYDEX VARIABLE TRUST
INVESTOR SERVICES PLAN,
DATED DECEMBER 31, 1998,
AS AMENDED

<PAGE>

AMENDMENT TO
RYDEX VARIABLE TRUST
INVESTOR SERVICES PLAN

EXHIBIT A

RYDEX VARIABLE TRUST
INVESTOR SERVICE FEE

RYDEX FUNDS

ADDITIONS and [DELETIONS] are noted in BOLD.

INVESTOR SERVICE FEE ............................Twenty-Five basis points (.25%)

CALCULATION OF FEE

The investor service fee is based on a percentage of the Funds' average
daily net assets attributable to Shares of the Funds.

<PAGE>

AMENDMENT,
DATED FEBRUARY 25, 2000,
TO
SERVICE AGREEMENT
BETWEEN RYDEX VARIABLE TRUST
AND PADCO SERVICE COMPANY, INC.,
DATED AUGUST 11, 1998,
AS AMENDED

<PAGE>

AMENDMENT TO

SERVICE AGREEMENT

BETWEEN

RYDEX VARIABLE TRUST

AND

PADCO SERVICE COMPANY, INC.

The following Amendment is made to Section 4 of the Service Agreement between
the Trust and the Servicer, and is hereby incorporated into and made a part of
the Service Agreement:

Section 4 of the Service Agreement is amended, effective February 25,
2000, to read as follows:

"As consideration for the services provided hereunder, the Trust will
pay the Servicer a fee on the last day of each month in which this
Agreement is in effect, at the following annual rates based on the
average daily net assets (the "Assets") of each of the Trust's series
for such month:

<TABLE>
<S> <C>
U.S. Government Bond Fund .............................0.20%
U.S. Government Money Market Fund .....................0.20%
Nova Fund .............................................0.25%
Ursa Fund .............................................0.25%
Arktos Fund ...........................................0.25%
Juno Fund .............................................0.25%
OTC Fund ..............................................0.20%
TITAN 500 FUND ........................................0.25%
TEMPEST 500 FUND ......................................0.25%
VELOCITY 100 FUND .....................................0.25%
VENTURE 100 FUND ......................................0.25%
LARGE-CAP EUROPE FUND .................................0.25%
LARGE-CAP JAPAN FUND ..................................0.25%
Banking Fund ..........................................0.25%
Basic Materials Fund ..................................0.25%
Biotechnology Fund ....................................0.25%
Consumer Products Fund ................................0.25%
Electronics Fund ......................................0.25%
Energy Fund ...........................................0.25%
Energy Services Fund ..................................0.25%

<PAGE>

Financial Services Fund ...............................0.25%
Health Care Fund ......................................0.25%
INTERNET FUND .........................................0.25%
Leisure Fund ..........................................0.25%
Precious Metals Fund ..................................0.20%
Retailing Fund ........................................0.25%
Technology Fund .......................................0.25%
Telecommunications Fund ...............................0.25%
Transportation Fund ...................................0.25%
UTILITIES FUND ........................................0.25%
</TABLE>

ADDITIONS and [DELETIONS] are noted in BOLD.

In the event that this Agreement commences on a date other than on the
beginning of any calendar month, or if this Agreement terminates on a
date other than the end of any calendar month, the fees payable
hereunder by the Trust shall be proportionately reduced according to
the number of days during such month that services were not rendered
hereunder by the Servicer."

In witness whereof, the parties hereto have caused this Amendment to be
executed in their names and on their behalf and through their duly-authorized
officers as of the 25th day of February 2000.

RYDEX VARIABLE TRUST

/s/Albert P. Viragh, Jr.
-----------------------------------
By: Albert P. Viragh, Jr.
Title: President

PADCO SERVICE COMPANY, INC.

/s/Albert P. Viragh, Jr.
-----------------------------------
By: Albert P. Viragh, Jr.
Title: President

<PAGE>

AMENDMENT,
DATED FEBRUARY 25, 2000,
TO
ACCOUNTING SERVICES AGREEMENT
BETWEEN RYDEX VARIABLE TRUST
AND PADCO SERVICE COMPANY, INC.,
DATED AUGUST 11, 1998,
AS AMENDED

<PAGE>

AMENDMENT TO

ACCOUNTING SERVICES AGREEMENT

BETWEEN

RYDEX VARIABLE TRUST

AND

PADCO SERVICE COMPANY, INC.

The following Amendment is made to the Service Agreement between the Trust and
the Servicer, and is hereby incorporated into and made a part of the Accounting
Services Agreement:

The fourth paragraph under the section "Witnesseth" of the Accounting
Services Agreement is amended, effective February 25, 2000, to read as
follows:

WHEREAS, the board of trustees of the Trust (the "Trustees") have
created the following Funds of the Trust: The U.S. Government Bond Fund,
The U.S. Government Money Market Fund, The Nova Fund, The Ursa Fund, The
Arktos Fund, The Juno Fund, The Rydex OTC Fund, THE TITAN 500 FUND, THE
TEMPEST 500 FUND, THE VELOCITY 100 FUND, THE VENTURE 100 FUND, THE
LARGE-CAP EUROPE FUND, THE LARGE-CAP JAPAN FUND, The Banking Fund, The
Basic Materials Fund, The Biotechnology Fund, The Consumer Products Fund,
The Electronics Fund, The Energy Fund, The Energy Services Fund, The
Financial Services Fund, The Health Care Fund, THE INTERNET FUND, The
Leisure Fund, The Precious Metals Fund, The Retailing Fund, The Technology
Fund, The Telecommunications Fund, and The Transportation Fund, and THE
UTILITIES FUND (collectively, the "Rydex Funds");

ADDITIONS and [DELETIONS] are noted in BOLD.

<PAGE>

In witness whereof, the parties hereto have caused this Amendment to be
executed in their names and on their behalf and through their duly-authorized
officers as of the 25th day of February 2000.

RYDEX VARIABLE TRUST

/s/Albert P. Viragh, Jr.
-----------------------------------
By: Albert P. Viragh, Jr.
Title: President

PADCO SERVICE COMPANY, INC.
-----------------------------------
/s/Albert P. Viragh, Jr.
By: Albert P. Viragh, Jr.
Title: President

<PAGE>

Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
215-963-5000

April 17, 2000

Rydex Variable Trust
6116 Executive Boulevard
Suite 400
Rockville, MD 20852

Re: Opinion of Counsel regarding Post-Effective Amendment No. 4 to the
Registration Statement filed on Form N-1A under the Securities Act of 1933
--------------------------------------------------------------------------

Ladies and Gentlemen:

We have acted as counsel to Rydex Variable Trust, a Delaware business trust (the
"Trust"), in connection with the above-referenced Registration Statement (as
amended, the "Registration Statement") which relates to the Trust's units of
beneficial interest, no par value per share (collectively, the "Shares"). This
opinion is being delivered to you in connection with the Trust's filing of
Post-Effective Amendment No. 4 to the Registration Statement (the "Amendment")
to be filed with the Securities and Exchange Commission pursuant to Rule 485(b)
of the Securities Act of 1933 (the "1933 Act"). With your permission, all
assumptions and statements of reliance herein have been made without any
independent investigation or verification on our part except to the extent
otherwise expressly stated, and we express no opinion with respect to the
subject matter or accuracy of such assumptions or items relied upon.

In connection with this opinion, we have reviewed, among other things, executed
copies of the following documents:

(a) a certificate of the State of Delaware as to the existence and good
standing of the Trust;

(b) the Agreement and Declaration of Trust for the Trust and all
amendments and supplements thereto (the "Declaration of Trust");

(c) a certificate executed by Robert M. Steele, the Secretary of the
Trust, certifying as to, and attaching copies of, the Trust's
Declaration of Trust and Amended and Restated By-Laws (the "By-Laws"),
and certain resolutions adopted by the Board of Trustees of the Trust
authorizing the issuance of the Shares; and

<PAGE>

Rydex Variable Trust
April 17, 2000
Page 2

(d) a printer's proof of the Amendment.

In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.

Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Declaration
of Trust and By-Laws, and for the consideration described in the Registration
Statement, will be legally issued, fully paid and nonassessable under the laws
of the State of Delaware.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.

Very truly yours,

/s/Morgan, Lewis & Bockius LLP

/s/John H. Grady, Jr.
- ---------------------
John H. Grady

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Post-Effective
Amendment No. 4 to Registration Statement No. 333-57017 of our reports dated
February 8, 2000 appearing in the Rydex Variable Trust's Annual Report to
Shareholders for the periods ended December 31, 1999. We also consent to the
references to us under the headings "Financial Highlights" in the Prospectus
and "Independent Auditors" in the Statement of Additional Information, both
of which are part of such Registration Statement.

DELOITTE & TOUCHE LLP
Princeton, New Jersey
April 17, 2000

<PAGE>

RYDEX SERIES TRUST
RYDEX VARIABLE TRUST
NEWCO TRUST

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee of Rydex
Series Trust, Rydex Variable Trust, and NewCo Trust each a business trust
("Trust") organized under the laws of the State of Delaware, hereby
constitutes and appoints Albert P. Viragh, Jr. and Carl G. Verboncoeur, and
each of them singly, his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, to sign for him and in his
name, place and stead, and in the capacity indicated below, to sign any and
all Registration Statements and all amendments thereto relating to the
offering of the Trust's shares under the provisions of the Investment Company
Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ J. Kenneth Dalton Date: November 22, 1999
- -----------------------------
J. Kenneth Dalton
Trustee

<PAGE>

RYDEX SERIES TRUST
RYDEX VARIABLE TRUST
NEWCO TRUST

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Corey A. Colehour Date: November 22, 1999
- -----------------------------
Corey A. Colehour
Trustee

Sworn to me this 22nd day of November, 1999

/s/ Debra G. Boggett
- -----------------------------
Commission Expires: 01/02/2000

<PAGE>

RYDEX SERIES TRUST
RYDEX VARIABLE TRUST
NEWCO TRUST

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ J. Kenneth Dalton Date: November 22, 1999
- -----------------------------
J. Kenneth Dalton
Trustee

<PAGE>

RYDEX SERIES TRUST
RYDEX VARIABLE TRUST
NEWCO TRUST

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Roger Somers Date: November 22, 1999
- -----------------------------
Roger Somers
Trustee

<PAGE>

RYDEX SERIES TRUST
RYDEX VARIABLE TRUST
NEWCO TRUST

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ John O. Demaret Date: November 22, 1999
- -----------------------------
John O. Demaret
Trustee

<PAGE>

RYDEX SERIES TRUST
RYDEX VARIABLE TRUST
NEWCO TRUST

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Patrick T. McCarville Date: November 22, 1999
- -----------------------------
Patrick T. McCarville
Trustee

<PAGE>

RYDEX SERIES TRUST
RYDEX VARIABLE TRUST
NEWCO TRUST

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee of Rydex
Series Trust, Rydex Variable Trust, and NewCo Trust each a business trust
("Trust") organized under the laws of the State of Delaware, hereby
constitutes and appoints Albert P. Viragh, Jr., his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
to sign for him and in his name, place and stead, and in the capacity
indicated below, to sign any and all Registration Statements and all
amendments thereto relating to the offering of the Trust's shares under the
provisions of the Investment Company Act of 1940 and/or the Securities Act of
1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Carl G. Verboncoeur Date: November 22, 1999
- -----------------------------
Carl G. Verboncoeur
Vice President and Treasurer

<PAGE>

RYDEX SERIES TRUST
RYDEX VARIABLE TRUST
NEWCO TRUST

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee of
Rydex Series Trust, Rydex Variable Trust, and NewCo Trust each a business
trust ("Trust") organized under the laws of the State of Delaware, hereby
constitutes and appoints Carl G. Verboncoeur, his true and lawful
attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him and in his name, place and stead, and in the
capacity indicated below, to sign any and all Registration Statements and all
amendments thereto relating to the offering of the Trust's shares under the
provisions of the Investment Company Act of 1940 and/or the Securities Act of
1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full
power and authority to do and perform each and every act and thing requisite
or necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Albert P. Viragh, Jr. Date: November 22, 1999
- -----------------------------
Albert P. Viragh, Jr.
President