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PROSPECTUS
RYDEX DYNAMIC FUNDS
TITAN 500 FUND
TEMPEST 500 FUND
VELOCITY 100 FUND
VENTURE 100 FUND
6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852
1-800-820-0888 301-468-8520
Rydex Dynamic Funds (the "Trust") is a no-load mutual fund complex with
eight separate investment portfolios (the "Funds"), four of which are
described in this Prospectus (the "Funds"). Shares of the Funds are sold
principally to professional money managers and to investors who take part in
certain strategic and tactical asset-allocation investment programs. Shares
of the Funds are designed to be sold to investors through the Trust's
Internet Web site -- www.rydexfunds.com.
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.
NOVEMBER 30, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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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 value from day to day.
- Fund shares may decline in value, and you may lose money.
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FUND INFORMATION -- TITAN 500 FUND
FUND OBJECTIVE
Titan 500 Fund seeks to provide investment results that 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.
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 and enter into repurchase agreements.
RISK CONSIDERATIONS
Titan 500 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.
INVESTOR PROFILE
Investors who expect the S&P 500 Index to go up and want highly accelerated
investment gains when the Index does so. These investors must also be
willing to bear the risk of equally accelerated losses if the S&P 500 Index
goes down.
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FUND PERFORMANCE AND FEE INFORMATION
TITAN 500 FUND PERFORMANCE
Titan 500 Fund commenced operations on ____________, 2000, and therefore
did not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold shares of Titan 500 Fund.
SHAREHOLDER FEES
Exchange Fees* None
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees 1.00%
Distribution (12b-1) Fees .25%
Other Expenses** .85%
------
Total Annual Fund Operating Expenses 2.10%
* THE FUND MAY IMPOSE A PROCESSING CHARGE OF $50 ON TRANSACTIONS MADE OTHER
THAN BY INTERNET THROUGH THE TRUST'S WEB SITE - www.rydexfunds.com. IN
ADDITION, THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN
REDEMPTIONS UNDER $5,000.
** OTHER EXPENSES ARE ESTIMATED.
EXAMPLE
This Example is intended to help you compare the cost of investing in Titan
500 Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's estimated operating expenses remain the same. Although your actual costs
may be higher of lower, based on these assumptions your cost would be:
1 YEAR 3 YEARS
-------------------------------
$213 $658
4
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FUND INFORMATION -- TEMPEST 500 FUND
FUND OBJECTIVE
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 enter into repurchase agreements.
RISK CONSIDERATIONS
Tempest 500 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.
- 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.
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INVESTOR PROFILE
Investors who expect the S&P 500 Index to go down and want highly
accelerated investment gains when the Index does so. These investors must
also be willing to bear the risk of equally accelerated losses if the S&P
500 Index goes up.
FUND PERFORMANCE AND FEE INFORMATION
TEMPEST 500 FUND PERFORMANCE
Tempest 500 Fund commenced operations on ____________, 2000, and therefore
did not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold shares of Tempest 500 Fund.
SHAREHOLDER FEES
Exchange Fees* None
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees 1.00%
Distribution (12b-1) Fees .25%
Other Expenses** .85%
------
Total Annual Fund Operating Expenses 2.10%
* THE FUND MAY IMPOSE A PROCESSING CHARGE OF $50 ON TRANSACTIONS MADE OTHER
THAN BY INTERNET THROUGH THE TRUST'S WEB SITE - www.rydexfunds.com. IN
ADDITION, THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN
REDEMPTIONS UNDER $5,000.
** OTHER EXPENSES ARE ESTIMATED.
EXAMPLE
This Example is intended to help you compare the cost of investing in
Tempest 500 Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
period indicated and then redeem all of your shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's estimated operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your cost would be:
1 YEAR 3 YEARS
-------------------------------
$213 $658
6
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FUND INFORMATION -- VELOCITY 100 FUND
FUND OBJECTIVE
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-TM-.
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-TM-. When the value of the NASDAQ 100 Index-TM- 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-TM- 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 and enter into repurchase agreements.
RISK CONSIDERATIONS
Velocity 100 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.
INVESTOR PROFILE
Investors who expect the NASDAQ 100 Index-TM-to go up and want highly
accelerated investment gains when the Index does so. These investors must
also be willing to bear the risk of equally accelerated losses if the
NASDAQ 100 Index-TM-goes down.
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FUND PERFORMANCE AND FEE INFORMATION
VELOCITY 100 FUND PERFORMANCE
Velocity 100 Fund commenced operations on ____________, 2000, and therefore
did not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold shares of Velocity 100 Fund.
SHAREHOLDER FEES
Exchange Fees* None
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees 1.00%
Distribution (12b-1) Fees .25%
Other Expenses** .85%
------
Total Annual Fund Operating Expenses 2.10%
* THE FUND MAY IMPOSE A PROCESSING CHARGE OF $50 ON TRANSACTIONS MADE OTHER
THAN BY INTERNET THROUGH THE TRUST'S WEB SITE - www.rydexfunds.com. IN
ADDITION, THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN
REDEMPTIONS UNDER $5,000.
** OTHER EXPENSES ARE ESTIMATED.
EXAMPLE
This Example is intended to help you compare the cost of investing in
Velocity 100 Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's estimated operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your cost would be:
1 YEAR 3 YEARS
-------------------------------
$213 $658
8
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FUND INFORMATION -- VENTURE 100 FUND
FUND OBJECTIVE
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-TM-.
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-TM- (e.g., if the NASDAQ 100 Index-TM- 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-TM- 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-TM- 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.
On a day-to-day basis, the Fund holds U.S. Government securities or cash
equivalents to collateralize these futures and options contracts. Short
sales and futures and options contracts enable the Fund to pursue its
objective without investing directly in the securities included in the
benchmark. The Fund also may enter into repurchase agreements.
RISK CONSIDERATIONS
Venture 100 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.
- 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.
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INVESTOR PROFILE
Investors who expect the NASDAQ 100 Index-TM- to go down and want highly
accelerated investment gains when the Index does so. These investors must
also be willing to bear the risk of equally accelerated losses if the
NASDAQ 100 Index-TM- goes up.
FUND PERFORMANCE AND FEE INFORMATION
VENTURE 100 FUND PERFORMANCE
Venture 100 Fund commenced operations on ____________, 2000, and therefore
did not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold shares of Venture 100 Fund.
SHAREHOLDER FEES
Exchange Fees* None
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees 1.00%
Distribution (12b-1) Fees .25%
Other Expenses** .85%
------
Total Annual Fund Operating Expenses 2.10%
* THE FUND MAY IMPOSE A PROCESSING CHARGE OF $50 ON TRANSACTIONS MADE OTHER
THAN BY INTERNET THROUGH THE TRUST'S WEB SITE - www.rydexfunds.com. IN
ADDITION, THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN
REDEMPTIONS UNDER $5,000.
** OTHER EXPENSES ARE ESTIMATED.
EXAMPLE
This Example is intended to help you compare the cost of investing in
Venture 100 Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's estimated operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your cost would be:
1 YEAR 3 YEARS
-------------------------------
$213 $658
10
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MORE INFORMATION ABOUT FUND INVESTMENTS AND RISK
THE 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:
<TABLE>
<CAPTION>
- ---------------------------------------- -----------------------------------------------------------------------------------------
FUND (TICKER SYMBOL) BENCHMARK
- ---------------------------------------- -----------------------------------------------------------------------------------------
<S> <C>
Titan 500 Fund 200% of the performance, measured on a daily basis, of the S&P 500 Composite Stock
Price Index-TM- (SPX)
- ---------------------------------------- -----------------------------------------------------------------------------------------
Tempest 500 Fund 200% of the inverse (opposite) performance, measured on a daily basis, of the S&P 500
Composite Stock Price Index-TM- (SPX)
- ---------------------------------------- -----------------------------------------------------------------------------------------
Velocity 100 Fund 200% of the performance, measured on a daily basis, of the NASDAQ 100 Index-TM- (NDX)
- ---------------------------------------- -----------------------------------------------------------------------------------------
Venture 100 Fund 200% of the inverse (opposite) performance, measured on a daily basis, of the NASDAQ
100 Index-TM- (NDX)
- ---------------------------------------- -----------------------------------------------------------------------------------------
</TABLE>
A BRIEF GUIDE TO THE BENCHMARKS.
THE S&P 500 COMPOSITE STOCK PRICE INDEX-TM- (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-TM-. The NASDAQ 100 Index-TM- 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.
ADVISOR'S INVESTMENT STRATEGY IN MANAGING THE FUNDS
In managing the 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 200% of the performance
of the S&P 500 Index and the NASDAQ 100 Index, respectively.
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MASTER-FEEDER INVESTMENT STRUCTURE
Each Fund anticipates that it will pursue its investment objective directly
by following the investment strategy previously described in its respective
"FUND INFORMATION" section. However, each Fund reserves the right to pursue its
investment objective indirectly by investing through what is sometimes referred
to as a "master-feeder arrangement." A FUND IS PERMITTED TO CHANGE ITS
INVESTMENT STRATEGY TO PURSUE ITS INVESTMENT OBJECTIVE THROUGH A MASTER-FEEDER
ARRANGEMENT WITHOUT SHAREHOLDER APPROVAL IF THE TRUST DETERMINES THAT DOING SO
WOULD BE IN THE BEST INTERESTS OF SHAREHOLDERS.
Under a master-feeder arrangement, a Fund's investment portfolio is
composed solely of shares of a "master fund," a separate mutual fund that has an
identical investment objective, e.g., the Titan 500 Fund would act as a "feeder
fund," holding shares of its master fund as its only investment. As a result,
the Fund has an indirect interest in all of the securities owned by the master
fund. Because of this indirect interest, the Fund's investment returns should be
the same as those of the master fund, adjusted for Fund expenses.
If a Fund pursues its investment objective through master-feeder
arrangement, the Advisor would manage the investment portfolios of both the Fund
and its corresponding master fund. Under such an arrangement, the Advisor would
adjust its fees so as to avoid any "layering" of fees, e.g., a Fund's Total
Annual Operating Expenses would not increase as a result of investing through a
master-feeder arrangement. In addition, the Advisor may choose to discontinue
investing through the master-feeder arrangement and resume managing the Fund
directly if the Trust determines that doing so would be in the best interests of
shareholders.
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 -- The Funds invest primarily in 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 may 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.
NON-DIVERSIFICATION RISK -- 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
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investing in those few issuers, and may be more susceptible to a single adverse
economic or regulatory occurrence.
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 the industry 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 Velocity 100 Fund and the Venture
100 Fund's benchmark - the NASDAQ 100 Index-TM- - 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 that are associated with of those issuers (or that
industry) than a fund that does not concentrate its investments.
TRACKING ERROR RISK -- 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 -- 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.
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 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
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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 experiencing 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. 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.
EARLY CLOSING RISK -- 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.
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
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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.
15
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SHAREHOLDER INFORMATION
HOW TO INVEST IN THE FUNDS
PURCHASING SHARES BY EXCHANGE TRANSACTIONS
Shares of the Funds are available solely through exchanges. You can acquire
shares through exchange transactions among the Funds of the Trust or with the
Rydex Series Trust U.S. Government Money Market Fund (the "Money Market Fund"),
a separate mutual fund offered through a separate prospectus. You may obtain a
prospectus for the Money Market Fund from the Trust's Web site --
www.rydexfunds.com -- or by calling 800-820-0888 or 301-468-8520. Investors may
make exchanges and purchase shares of the Money Market Fund on any day that the
New York Stock Exchange ("NYSE") is open for business (a "Business Day").
Procedures for subsequent exchanges from the Money Market Fund into the Funds
are discussed in more detail in the "EXCHANGES" section.
After obtaining and reading the Money Market Fund's prospectus, you may
purchase shares of the Money Market Fund (and make any subsequent exchanges into
the Funds) by following the directions on the Trust's Web site --
www.rydexfunds.com. You can also make exchange transactions involving shares of
the Funds by mail, telephone or fax, but you may be charged a processing fee by
the Trust's transfer agent if you do not meet certain minimum account balance
requirements. The minimum account balance requirements are discussed in more
detail in the "MINIMUM INVESTMENT" section.
You may also make investments in the Money Market Fund and exchanges into
the Funds through intermediaries or securities dealers who have the
responsibility to transmit orders promptly. Intermediaries may charge fees for
services provided in connection with buying, selling or exchanging shares. Each
intermediary also may have its own rules about share transactions. For more
information about how to purchase and exchange shares through an intermediary,
you should contact that intermediary directly.
DETERMINATION OF NET ASSET VALUE
The price per share (the offering price) will be the net asset value per
share ("NAV") next determined after your purchase order or exchange request is
received by the Trust. No sales charges are imposed on initial or subsequent
investments in a Fund. NAV is calculated by (1) taking the current market value
of a Fund's total assets, (2) subtracting the liabilities, and (3) dividing the
amount by the total number of shares owned by shareholders.
The Funds calculate NAV twice each Business Day, first in the morning and
again in the afternoon. The morning NAV is calculated at 10:30 a.m., Eastern
Time and the afternoon NAV is calculated at the close of the New York Stock
Exchange (currently 4:00 p.m., Eastern Time). The Money Market Fund calculates
its NAV twice each Business Day, first at midday and again in the afternoon. The
midday NAV is calculated at 1:00 p.m., Eastern Time and the afternoon
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NAV is calculated at the close of the New York Stock Exchange (currently 4:00
p.m., Eastern Time).
If the exchange or market where a Fund's securities or other investments
are primarily traded closes early, NAV may be calculated earlier. To receive the
current NAV, the Trust must receive your purchase order before the cutoff times
specified below for each method of investing. INTERMEDIARIES MAY HAVE EARLIER
CUTOFF TIMES. IN ADDITION, INTERMEDIARIES MAY NOT OFFER INTRA-DAY TRADING OR
PRICING REGARDLESS OF WHEN YOU PLACE YOUR ORDER WITH YOUR INTERMEDIARY.
MINIMUM INVESTMENT
The minimum initial investment in the Funds is $25,000. However, the Trust
will waive this minimum for shareholders that invest at least $10,000 and agree
to interact with the Funds solely by means of the Trust's Web site ("Electronic
Investors"). Electronic Investors must:
- Consent to receiving all communications (such as trade confirmations;
prospectuses and shareholder reports; etc.) from the Funds through the
Trust's Web site;
- Consent to send all communications (such as requests for exchanges or
redemptions; account balance inquiries; requests for additional
information; etc.) to the Funds through the Trust's Web site;
- Have and maintain access to the Trust's Web site;
- Provide the Trust with a valid and current e-mail address;
- Notify the Trust immediately if they no longer have access to the
Trust's Web site, change their e-mail address or wish to revoke their
consent to receive all communications from the Funds through the
Trust's Web site; and
- Agree to be subject to a $50 processing fee for any communications or
requests that could otherwise be made or obtained through the Trust's
Web site.
The minimums stated above also apply to retirement plan accounts. The
Trust, at its discretion, may accept lesser amounts in certain circumstances.
There is no minimum amount for subsequent investments in the Funds. The Trust
reserves the right to modify its minimum investment requirements at any time.
The Trust also reserves the right to reject or refuse, at the Trust's
discretion, any order for the purchase of a Fund's shares in whole or in part.
INVESTING BY INTERNET -- www.rydexfunds.com
Investing by Internet (or "Electronic Investing") means that all of the
communications between you and the Funds will take place over the Internet,
through the use of the Trust's Web site.
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<PAGE>
Initial applications and investments, as well as subsequent investments, in
the Money Market Fund made by Internet must be received in good form by the
transfer agent, on any Business Day, at or prior to 1:00 p.m., Eastern Time in
order to be processed at that Business Day's midday NAV and at or prior to 3:50
p.m., Eastern Time in order to be processed for that Business Day's afternoon
NAV. YOU MAY ONLY PURCHASE SHARES OF THE FUNDS BY EXCHANGE AT ANY BUSINESS DAY'S
AFTERNOON NAV IF YOUR INVESTMENT IN THE MONEY MARKET FUND IS PROCESSED AT THAT
BUSINESS DAY'S MIDDAY NAV. Procedures for other purchases made by exchange are
discussed in more detail in the "EXCHANGES" section.
An initial application that is sent to the transfer agent does not
constitute a purchase order until the application has been processed and correct
payment by check or wire transfer has been received by the transfer agent.
Intermediaries may have earlier cutoff times for purchases. For more information
about how to purchase through an intermediary, you should contact that
intermediary directly.
You will receive electronic confirmation of your investments or any other
transactions you may request. You may print a copy of the electronic
confirmation you receive for your records. IF YOUR ACCOUNT BALANCE IS LESS THAN
$25,000 AND YOU REQUEST A PAPER COPY OF ANY TRADE CONFIRMATION TO BE MAILED TO
YOU, THE TRUST MAY CHARGE YOU A $50 PROCESSING FEE.
SENDING YOUR PURCHASE PAYMENT BY BANK WIRE TRANSFER
First, fill out the Account Application Agreement located on the Trust's
Web site and send the completed application, along with a request for a
shareholder account number, to the transfer agent by following the procedures
described on the Trust's Web site. You do not need to fill out an Account
Application Agreement to make subsequent investments in the Money Market Fund.
Then, request that your bank wire transfer the purchase amount to our custodian,
along with the following instructions:
Firstar
Cincinnati, Ohio
Routing Number: 0420-00013
For Account of: Rydex Series Trust Money Market Fund
Account Number: __________
[Your Name]
[Your Shareholder Account Number]
AFTER INSTRUCTING YOUR BANK TO TRANSFER MONEY BY WIRE FOR BOTH INITIAL AND
SUBSEQUENT PURCHASES INTO THE MONEY MARKET FUND, YOU MUST CONTACT THE TRANSFER
AGENT BY TELEPHONE AT 800-820-0888 AND INFORM THE TRANSFER AGENT AS TO THE
AMOUNT THAT YOU HAVE TRANSFERRED AND THE NAME OF THE BANK SENDING THE TRANSFER
IN ORDER TO OBTAIN SAME-DAY OR MIDDAY PRICING OR CREDIT. FOR INITIAL PURCHASES,
YOU MUST ALSO SUPPLY THE TIME THE WIRE WAS SENT AND THE FED WIRE REFERENCE
NUMBER. IF THE PURCHASE IS CANCELED BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED,
YOU MAY BE LIABLE FOR ANY LOSS THAT THE TRUST INCURS.
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<PAGE>
SENDING YOUR PURCHASE PAYMENT BY MAIL
First, fill out the Account Application Agreement located on the Trust's
Web site and send the completed application, along with a request for a
shareholder account number, to the transfer agent by following the procedures
described on the Trust's Web site. Then mail your check, along with the
application to:
Rydex Series Trust Money Market Fund
6116 Executive Boulevard, Suite 400
Attn: Ops. Dept.
Rockville, Maryland 20852
The transfer agent will not process your request until it receives your
check. You may avoid a delay in processing your purchase request by purchasing
shares by wire.
IN ADDITION TO CHARGES DESCRIBED ELSEWHERE IN THIS PROSPECTUS, THE TRUST
ALSO MAY CHARGE $25 FOR CHECKS RETURNED FOR INSUFFICIENT OR UNCOLLECTIBLE FUNDS.
INVESTING BY MAIL OR FAX
Alternatively, investors may make initial and subsequent investments in the
Money Market Fund by printing out the Account Application Agreement located on
the Trust's Web site, completing it offline and sending it by mail or fax to the
transfer agent. You may also obtain an Account Application Agreement by calling
800-820-0888 or 301-468-8520. Investors must also make arrangements for payment
by either bank wire transfer or check using the procedures described above.
Investments by mail or fax for both initial investments and subsequent
investments in the Money Market Fund must be received in good form by the
transfer agent, on any Business Day, at or prior to 1:00 p.m. to be processed at
that Business Day's midday NAV and at or prior to 3:50 p.m. to be processed at
that Business Day's afternoon NAV. Intermediaries may have earlier cutoff times
for purchases. For more information about how to purchase through an
intermediary, you should contact that intermediary directly.
TAX-QUALIFIED RETIREMENT PLANS
Investors may purchase shares of the Money Market Fund (and make subsequent
exchanges) through any of the following types of tax-qualified retirement plans:
Individual Retirement Accounts (IRAs, including Roth IRAs)
Keogh Accounts -- Defined Contribution Plans (Profit Sharing Plans)
Keogh Accounts -- Pension Plans (Money Purchase Plans)
Internal Revenue Code Section 403(b) Plans
Retirement plans are charged an annual $15.00 maintenance fee and a $15.00
account closing fee. Additional information regarding these accounts, including
the annual maintenance fee, may be obtained by calling 800-820-0888 or
301-468-8520.
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EXCHANGES
You may exchange shares of any Fund of the Trust for shares of any other
Fund of the Trust that currently offers shares on the basis of the respective
net asset values of the shares involved. You may also acquire shares of the
Funds through exchanges with the Rydex Series Trust U.S. Government Money Market
Fund, a separate fund that is offered in a separate prospectus. Exchanges may be
made subject to the procedures set forth below.
To exchange your shares, you need to provide certain information, including
the name on the account, the account number (or your taxpayer identification
number), the number or dollar value of shares (or the percentage of the total
value of your account) you want to exchange, and the names of the Funds involved
in the exchange transaction. Investors should review the "Exchange Request Form"
on the Trust's Web site for more information. The cutoff times for exchange
requests are as follows:
<TABLE>
<CAPTION>
MORNING CUT OFF AFTERNOON CUT OFF
FUND(S) TIME TIME
- --------------------------------------------------------------------------------
<S> <C> <C>
Titan 500
Tempest 500 10:15 a.m. 3:50 p.m.
Velocity 100
Venture 100
- -------------------------------------------------------------------------------
</TABLE>
Exchanges between the Funds and the Money Market Fund can be made on the
basis of either that Business Day's morning or afternoon NAV. Exchange requests
received after a Fund's cutoff time will receive the next determined NAV (i.e.,
if your exchange request is received after the morning cutoff time, you will
receive that Business Day's afternoon NAV). The exchange privilege may be
modified or discontinued at any time.
REDEEMING FUND SHARES
GENERAL
You may redeem all or any portion of your Fund shares at the next
determined NAV after receipt of the redemption request (subject to applicable
account minimums). You may redeem your shares by Internet by following the
procedures set forth on the Trust's Web site. Your redemption proceeds normally
will be sent within five Business Days of the Trust receiving your request. For
investments made by check, payment on redemption requests may be delayed until
the transfer agent is reasonably satisfied that payment has been collected
(which may require up to 10 Business Days). If you invest by check, you may not
wire out any redemption proceeds for the 30 calendar days following the
purchase. You may avoid a delay in receiving redemption proceeds by purchasing
shares by wire. Telephone redemptions will be sent only to your address or your
bank account (as listed in the Trust's records). The Trust may charge $15.00 for
certain wire transfers of redemption proceeds.
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<PAGE>
You may also redeem your shares by letter or by telephone subject to the
procedures and fees set forth in "Procedures For Redemptions and Exchanges."
The proceeds of redemption requests will be sent directly to your address
(as listed in the Trust's records). If you request payment of redemption
proceeds to a third party or to a location other than your address or your bank
account (as listed in the Trust's records), this request must be in writing,
must include a signature guarantee. SHAREHOLDERS WITH AN ACCOUNT BALANCE OF LESS
THAN $25,000, MAY BE SUBJECT TO A $50 PROCESSING FEE FOR REQUESTING REDEMPTION
PROCEEDS BE SENT TO A THIRD PARTY OR TO A LOCATION OTHER THAN YOUR ADDRESS OR
YOUR BANK ACCOUNT. You may have to transmit your redemption request to your
intermediary at an earlier time in order for your redemption to be effective
that Business Day. Please contact your intermediary to find out their specific
requirements for written and telephone requests for redemptions and signature
guarantees.
INVOLUNTARY REDEMPTIONS
Because of the administrative expense of handling small accounts, any
request for a redemption when your account balance (a) is below the currently
applicable minimum investment, or (b) would be below that minimum as a result of
the redemption, will be treated as a request for the complete redemption of that
account. If, due to withdrawals or transfers, your account balance across all
Funds advised by the Advisor drops below the required minimum, the Trust
reserves the right to redeem your remaining shares without any additional
notification to you. In addition, if you maintain an account balance of less
than $25,000, the Trust reserves the right to redeem your remaining shares
without any additional notification to you if you no longer have access to the
Trust's Web site, fail to notify the Trust of any change to your e-mail address
or wish to revoke your consent to receive all communications from the Funds
through the Trust's Web site.
SUSPENSION OF REDEMPTIONS
With respect to each Fund, and as permitted by the Securities and Exchange
Commission ("Commission"), the right of redemption may be suspended, or the date
of payment postponed: (i) for any period during which the NYSE, the Federal
Reserve Bank of New York (the "New York Fed"), NASDAQ, the CME or the Chicago
Board Options Exchange ("CBOE") as appropriate, is closed (other than customary
weekend or holiday closings) or trading on the NYSE, NASDAQ, the CME or the CBOE
as appropriate, 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 Commission, by
order, may permit for protection of fund investors. 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 Commission,
the right is reserved to advance the time on that day by which purchase and
redemption orders must be received.
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PROCEDURES FOR EXCHANGES AND REDEMPTIONS
You should follow the procedures described above and on the Trust's Web
site for all exchanges and redemptions, made by Internet or otherwise. The Trust
anticipates that most shareholders will make exchange and redemption requests by
Internet through the Trust's Web site. The Trust reserves the right to suspend
the right of redemption in the section above.
You may also request redemptions and exchanges by mail or telephone.
Written requests for redemptions and exchanges should be sent to Rydex Dynamic
Funds, 6116 Executive Boulevard, Suite 400, Attn: Ops. Dept., Rockville,
Maryland 20852, and should be signed by the record owner or owners. Telephone
redemption and exchange requests may be made by calling 1-800-820-0888 or
301-468-8520 by the cutoff time specified above for exchanges between Funds, on
any Business Day. The Trust's offices are open between 8:30 a.m. and 5:30 p.m.,
Eastern Time on each Business Day.
IF YOUR ACCOUNT BALANCE IS LESS THAN $25,000, IN ADDITION TO CHARGES
DESCRIBED ELSEWHERE IN THIS PROSPECTUS, THE TRUST MAY ALSO CHARGE A PER
TRANSACTION FEE OF $50 FOR EACH EXCHANGE OR REDEMPTION REQUEST THAT IS NOT
TRANSMITTED BY INTERNET.
If you own shares that are registered in your intermediary's name, and you
want to transfer the registration to another intermediary or want the shares
registered in your name, then you should contact your intermediary for
instructions to make this change.
TRANSACTIONS OVER THE INTERNET
Internet redemption and exchange transactions are extremely convenient, but
are not risk-free. To ensure that your Internet transactions are safe, secure,
and as risk-free as possible, the Trust has instituted certain safeguards and
procedures for determining the identity of Web site users and authenticity of
instructions. As a result, neither the Trust nor its transfer agent will be
responsible for any loss, liability, cost, or expense for following Internet or
wire instructions they reasonably believe to be genuine. If you or your
intermediary make exchange or redemption requests by Internet, you will
generally bear the risk of any loss. If you are unable to reach the Trust by
Internet, you may want to try to reach the Trust by other means. The Trust will
waive any processing fees that may otherwise apply during periods when the
Trust's Web site is not functioning properly.
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISOR -- PADCO Advisors, Inc., a Maryland corporation with
offices at 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852,
serves as investment 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.
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<PAGE>
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:
FUND ADVISORY FEE
Titan 500 Fund 1.00%
Tempest 500 Fund 1.00%
Velocity 100 Fund 1.00%
Venture 100 Fund 1.00%
Each Fund is managed by a team and no one person is responsible for making
investment decisions for a Fund.
The Advisor bears all of its own costs associated with providing these
advisory services and the expenses of the Trustees which 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.
The Advisor has voluntarily agreed to maintain the actual Total Annual
Operating Expenses of the Funds at an "expense cap" of 2.10%. This means that
the Advisor will reimburse certain expenses of the Funds so that expenses do not
exceed 2.10%. Because the Advisor's agreement to maintain an expense cap is
voluntary, the Advisor may discontinue all or part of its reimbursements at any
time. In addition, if at any point during the first three years of Fund
operations it becomes unnecessary for the Advisor to make reimbursements, the
Advisor may retain the difference between the Total Annual Operating Expenses of
any Fund and 2.10% to offset any of its prior reimbursements.
DISTRIBUTION PLAN
The Funds have adopted a Distribution Plan (the "Plan") that allows the
Funds to pay distribution fees to PADCO Financial Services, Inc. (the
"Distributor") and other firms that provide distribution services ("Service
Providers"). The Funds will pay distribution fees to the Distributor at an
annual rate not to exceed .25% of average daily net assets, pursuant to Rule
12b-1 of the 1940 Act. If a Service Provider provides distribution services, the
Distributor will, in turn, pay the Service Provider out of its fees. Because the
Funds pay these fees out of assets on an ongoing basis, over time these fees may
cost you more than other types of sales charges.
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<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Income dividends, if any, are paid at least annually by each of the Funds.
If you own Fund shares on a Fund's record date, you will be entitled to receive
the dividend. The Funds may declare and pay dividends on the same date. The
Funds make distributions of capital gains, if any, at least annually. The Trust,
however, 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.
You will receive dividends and distributions in the form of additional fund
shares unless you have elected to receive payment in cash. If you have not
already elected to receive cash payments on your application, you must notify
the Trust in writing prior to the date of distribution. Your election will
become effective for dividends paid after the Trust receives your written
notice. To cancel your election, simply send written notice to the Trust.
Dividends and distributions from a Fund are taxable to you whether they are
reinvested in additional shares of the Fund or are received in cash. You will
receive an account statement at least quarterly.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial or administrative action. The Trust has
not tried to present a detailed explanation of the tax treatment of the Funds,
or the tax consequences of an investment in the Funds. MORE INFORMATION ABOUT
TAXES IS LOCATED IN THE STATEMENT OF ADDITIONAL INFORMATION (SAI). YOU ARE URGED
TO CONSULT YOUR TAX ADVISOR REGARDING SPECIFIC QUESTIONS AS TO FEDERAL, STATE
AND LOCAL INCOME TAXES.
TAX STATUS OF EACH FUND
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.
TAX STATUS OF DISTRIBUTIONS
- Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME
WHETHER YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.
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<PAGE>
- Corporate shareholders may be entitled to a dividends-received
deduction for the portion of dividends they receive which are
attributable to dividends received by a fund from U.S. corporations.
- Capital gains distributions will result from gains on the sale or
exchange of capital assets held for more than one year.
- Distributions paid in January but declared by a Fund in October,
November or December of the previous year, may be taxable to you in the
previous year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE, OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO
YOU. YOU SHOULD CONSIDER THE TAX CONSEQUENCES OF ANY REDEMPTION OR EXCHANGE
BEFORE MAKING SUCH A REQUEST, ESPECIALLY WITH RESPECT TO REDEMPTIONS, IF YOU
INVEST IN THE FUNDS THROUGH A TAX-QUALIFIED RETIREMENT PLAN.
STATE TAX CONSIDERATIONS
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.
Distributions by the Funds may be subject to state and local taxation. You
should verify your tax liability with your tax advisor.
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<PAGE>
BENCHMARK INFORMATION
NEITHER TITAN 500 NOR TEMPEST 500 IS SPONSORED, ENDORSED, SOLD, OR PROMOTED BY
STANDARD & POOR'S CORP. (S&P); AND NEITHER VELOCITY 100 NOR VENTURE 100 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, IMPLIES 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 OR
THE NASDAQ 100 INDEX-TM-, RESPONSIBILITY, TO TRACK GENERAL STOCK MARKET
PERFORMANCE.
NEITHER S&P NOR NASDAQ GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE
S&P 500 INDEX AND NASDAQ 100 INDEX-TM-, RESPECTIVELY, OR ANY DATA INCLUDED
THEREIN.
NEITHER S&P NOR 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 OR THE NASDAQ 100 INDEX-TM-,
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 OR THE NASDAQ 100 INDEX-TM-, RESPECTIVELY, OR ANY DATA INCLUDED
THEREIN.
26
<PAGE>
Additional information about the Funds is included in a Statement of Additional
Information dated ______________, 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 the EDGAR database on its 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 on the operation of the Public Reference Room, call 1-202-942-8090).
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 this 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, without
charge by calling 800-820-0888 or by writing to Rydex Dynamic Funds, at 6116
Executive Boulevard, Suite 400, Rockville, Maryland 20852.
Additional information about the Funds' investments is available in the annual
and semi-annual reports. Also, in the Funds' annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Funds' 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 PADCO
ADVISORS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST IN
ANY JURISDICTION WHERE SUCH AN OFFERING IS NOT LAWFUL.
THE FUND'S SEC REGISTRATION NUMBER IS 811-9525.
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