<PAGE>
RYDEX
DYNAMIC FUNDS
C CLASS SHARES
PROSPECTUS
OCTOBER 9, 2000
AS SUPPLEMENTED NOVEMBER 14, 2000
TITAN 500 FUND
VELOCITY 100 FUND
RYDEX SERIES FUNDS
U.S. GOVERNMENT MONEY MARKET FUND
(DATED AUGUST 1, 2000 AS SUPPLEMENTED OCTOBER 9, 2000)
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.
[LOGO]
RYDEX
TOOLS THAT POWER PORTFOLIOS
<PAGE>
TABLE OF CONTENTS
2 RYDEX DYNAMIC FUNDS OVERVIEW
2 Titan 500 Fund
4 Velocity 100 Fund
6 RYDEX SERIES FUNDS OVERVIEW
6 U.S. Government Money Market Fund
8 ADDITIONAL FUND INFORMATION
8 The Funds' Investment Objectives
8 Advisor's Investment Strategy in Managing the Dynamic Funds
9 Master-Feeder Investment Structure
10 Who May Want to Invest in the Rydex Dynamic Funds
11 Risks of Investing in the Funds
16 SHAREHOLDER INFORMATION GUIDE
16 Purchasing C Class Shares
16 Purchasing Shares By Exchange Transactions
17 Determination of Net Asset Value
17 Minimum Investment
18 Making Investments by Mail, Telephone, or Fax
20 Tax-Qualified Retirement Plans
20 Exchanges
21 Redeeming Fund Shares
22 Sales Charges
22 Distribution and Shareholder Services Plan
23 Procedures for Exchanges and Redemptions
24 Management of the Funds
26 DIVIDENDS, DISTRIBUTIONS, AND TAXES
26 Dividends and Distributions
26 Tax Information
28 FINANCIAL HIGHLIGHTS
31 BENCHMARK INFORMATION
<PAGE>
PROSPECTUS
RYDEX DYNAMIC FUNDS
C CLASS SHARES
9601 BLACKWELL ROAD, SUITE 500, ROCKVILLE, MARYLAND 20850
800.820.0888 - 301.296.5100 - WWW.RYDEXFUNDS.COM
Rydex Dynamic Funds (the "Trust") is a mutual fund with eight separate
investment portfolios, two of which are described in this Prospectus (the
"Dynamic Funds"). In addition, Rydex U.S. Government Money Market Fund (the
"Money Market Fund") is a portfolio within Rydex Series Funds, a separate mutual
fund in the Rydex Family of Funds (together with the Dynamic Funds, the
"Funds"). C Class Shares of the Funds are sold primarily through broker-dealers
and other financial institutions whose clients take part in certain strategic
and tactical asset allocation investment programs. Investors may exchange and
redeem shares of the Funds through the Rydex Web site - www.rydexfunds.com - and
over the phone.
THE FUNDS' INVESTMENT OBJECTIVES
Each Fund has a separate investment objective. The investment objective of each
Dynamic 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
|1
<PAGE>
RYDEX DYNAMIC FUNDS OVERVIEW
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-Registered Trademark- Index
(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).
INVESTMENT STRATEGY
The Fund employs as its investment strategy a program of investing in leveraged
instruments, such as equity index swaps, futures contracts and options on
securities, futures contracts, and stock indices. Equity index swaps and 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
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.
SWAP COUNTERPARTY CREDIT RISK - The Fund is subject to credit risk on the amount
it expects to receive from swap agreement counterparties. If a swap counterparty
defaults on its payment obligations to the Fund, this default will 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 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.
2|
<PAGE>
PROSPECTUS
TITAN 500 FUND
--------------------------------------------------------------------------------
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.
PERFORMANCE
The Fund is new and therefore does not have a performance history for a full
calendar year.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
C Class Shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES* .........................................................NONE
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF ORIGINAL PURCHASE PRICE OR REDEMPTION
PROCEEDS, WHICHEVER IS LESS) ..............................................1.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES ........................................................... .90%
DISTRIBUTION (12b-1) AND SHAREHOLDER SERVICE FEES .........................1.00%
OTHER EXPENSES** .......................................................... .60%
TOTAL ANNUAL FUND OPERATING EXPENSES ......................................2.50%
</TABLE>
* 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 the C
Class Shares of the 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:
<TABLE>
<CAPTION>
TITAN 500 FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IF YOU SELL YOUR SHARES
AT THE END OF THE PERIOD: $363 $806 $1,376 $2,924
IF YOU DO NOT SELL YOUR
SHARES AT THE END OF
THE PERIOD: $263 $806 $1,376 $2,924
</TABLE>
|3
<PAGE>
RYDEX DYNAMIC FUNDS OVERVIEW
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-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 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).
INVESTMENT STRATEGY
The Fund employs as its investment strategy a program of investing in leveraged
instruments, such as equity index swaps, futures contracts and options on
securities, futures contracts, and stock indices. Equity index swaps and 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
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.
SWAP COUNTERPARTY CREDIT RISK - The Fund is subject to credit risk on the amount
it expects to receive from swap agreement counterparties. If a swap counterparty
defaults on its payment obligations to the Fund, this default will 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 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.
4|
<PAGE>
PROSPECTUS
VELOCITY 100 FUND
--------------------------------------------------------------------------------
INVESTOR PROFILE
Investors who expect the NASDAQ 100 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 NASDAQ 100 Index goes down.
PERFORMANCE
The Fund is new and therefore does not have a performance history for a full
calendar year.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
C Class Shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES* .........................................................NONE
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF ORIGINAL PURCHASE PRICE OR REDEMPTION
PROCEEDS, WHICHEVER IS LESS) ..............................................1.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES ........................................................... .90%
DISTRIBUTION (12b-1) AND SHAREHOLDER SERVICE FEES .........................1.00%
OTHER EXPENSES** .......................................................... .60%
TOTAL ANNUAL FUND OPERATING EXPENSES ......................................2.50%
</TABLE>
* 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 the
C Class Shares of the 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:
<TABLE>
<CAPTION>
VELOCITY 100 FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IF YOU SELL YOUR SHARES
AT THE END OF THE PERIOD: $363 $806 $1,376 $2,924
IF YOU DO NOT SELL YOUR
SHARES AT THE END OF
THE PERIOD: $263 $806 $1,376 $2,924
</TABLE>
|5
<PAGE>
RYDEX SERIES FUNDS OVERVIEW
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.
INVESTMENT STRATEGY
The 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 Securities and Exchange
Commission ("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 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.
PERFORMANCE
The following bar chart and table provide some indication of the risks of
investing in the Fund by showing both the year-to-year performance of the Fund's
Investor Class Shares and the Fund's average annual returns, compared to the
performance of an appropriate broad-based index, over different periods of time.
Performance of the Fund's C Class Shares would differ only to the extent that
each Class has different expenses. Past performance is no guarantee of future
results.
U.S. GOVERNMENT MONEY MARKET FUND
[CHART]
<TABLE>
<S> <C>
1999 4.25
1998 4.72
1997 4.59
1996 4.49
1995 4.93
1994 3.23
</TABLE>
HIGHEST QUARTER RETURN 1.27%
(QUARTER ENDED 6/30/95)
LOWEST QUARTER RETURN 0.50%
(QUARTER ENDED 3/31/94)
*THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 2000 THROUGH JUNE 30,
2000 IS 2.51%.
6|
<PAGE>
PROSPECTUS
U.S. GOVERNMENT MONEY MARKET FUND
------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (FOR PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------------------
<S> <C> <C> <C>
INVESTOR CLASS SHARES(2) 4.25% 4.60% 4.31%
90-DAY TREASURY COMPOSITE(3) 4.64% 5.00% 4.84%
</TABLE>
(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.
(2) THE 90-DAY TREASURY COMPOSITE INDEX IS AN UNMANAGED INDEX THAT IS A
WIDELY RECOGNIZED INDICATOR OF GENERAL MONEY MARKET PERFORMANCE.
YIELD
Call (800) 820-0888 or visit www.rydexfunds.com for the Fund's current yield.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
C Class Shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES*
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF ORIGINAL PURCHASE PRICE OR REDEMPTION
PROCEEDS, WHICHEVER IS LESS) ..............................................1.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES ........................................................... .50%
DISTRIBUTION (12b-1) AND SHAREHOLDER SERVICE FEES .........................1.00%
OTHER EXPENSES** .......................................................... .38%
TOTAL ANNUAL FUND OPERATING EXPENSES ......................................1.88%
</TABLE>
* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.
EXAMPLE
This example is intended to help you compare the cost of investing in the
C Class Shares of the 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 operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your cost would be:
<TABLE>
<CAPTION>
US. GOVERNMENT MONEY
MARKET FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IF YOU SELL YOUR SHARES
AT THE END OF THE PERIOD: $297 $610 $1,049 $2,266
IF YOU DO NOT SELL YOUR
SHARES AT THE END OF
THE PERIOD: $197 $610 $1,049 $2,266
</TABLE>
|7
<PAGE>
ADDITIONAL FUND INFORMATION
THE FUNDS' INVESTMENT OBJECTIVES
Each Dynamic Fund's objective is to provide investment results that match the
performance of a specific benchmark. The current benchmark used by each Dynamic
Fund is set forth below:
FUND NAME BENCHMARK
TITAN 500 FUND 200% OF THE PERFORMANCE, MEASURED ON A DAILY BASIS, OF
THE S&P 500 INDEX
VELOCITY 100 FUND 200% OF THE PERFORMANCE, MEASURED ON A DAILY BASIS, OF
THE NASDAQ 100 INDEX
A BRIEF GUIDE TO THE BENCHMARKS
The S&P 500. 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
("NASDAQ").
ADVISOR'S INVESTMENT STRATEGY IN MANAGING THE DYNAMIC FUNDS
In managing the Dynamic Funds, Rydex Global Advisors (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.
8|
<PAGE>
PROSPECTUS
The Advisor pursues the Dynamic Funds' investment objectives by regularly
utilizing leveraged instruments, such as equity index swap agreements and
futures contracts and options on securities, futures contracts, and stock
indices.
MASTER-FEEDER INVESTMENT STRUCTURE
Each Dynamic Fund reserves the right to pursue its investment objective
indirectly by investing through what is sometimes referred to as a
"master-feeder arrangement." However, none of the Funds currently invest through
a master-feeder arrangement and each Fund anticipates that it will pursue its
investment objective directly by following the investment strategy previously
described in its respective "Dynamic Funds Overview" section. A Dynamic Fund is
permitted to change its investment strategy in order 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," which is a separate mutual fund that has an
identical investment objective (e.g., you would hold shares of a "feeder fund"
that holds shares of its master fund as its only investment). As a result, the
feeder 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 a 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 in order 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.
|9
<PAGE>
ADDITIONAL FUND INFORMATION
[SIDENOTE]
INVESTORS SEEK TO UTILIZE "CONSISTENTLY APPLIED LEVERAGE"
WHO MAY WANT TO INVEST IN THE RYDEX DYNAMIC FUNDS
The Dynamic Funds may be appropriate for investors who believe that over the
long term, the value of a particular index will increase or decrease, and
that by investing with the objective of doubling the index's daily return
they will achieve superior results over time. Investors should understand
that since each Fund seeks to double the daily performance of the index
underlying its benchmark, it should have twice the daily volatility of a
conventional index fund. This increases the potential risk of loss.
[SIDENOTE]
DYNAMIC ASSET ALLOCATORS
The Dynamic Funds may be appropriate for investors who use an investment
strategy that relies on frequent buying, selling, or exchanging among stock
mutual funds, since the Funds do not limit how often an investor may exchange
among Funds. In addition, the Funds do not impose any transaction fees (other
than wire fees for redemptions under $5,000) when investors buy, sell, or
exchange shares. The Funds provide multiple opportunities for investors to
capitalize on market trends and to capture market momentum with intra-day Fund
share pricing and trading. Dynamic asset allocators may also utilize intra-day
trading as a defensive strategy to react to market movements before investments
are adversely affected.
[SIDENOTE]
STRATEGIC ASSET ALLOCATORS
The Dynamic Funds may be appropriate for investors who use an investment
strategy that involves the strategic allocation of investments among different
asset classes. By utilizing consistently applied leverage, the Funds' investment
strategy can create alternative investment opportunities for strategic asset
allocators who seek to match the S&P 500's or NASDAQ 100's daily return because
less capital is needed to achieve a desired exposure. For example, an investor
might invest $50,000 in a conventional S&P 500 Index fund. Alternatively, that
same investor could invest half that amount - $25,000 - in the Titan 500 Fund
and target the same daily return. This increased cash position could then be
used for a tactical overlay, such as the introduction of an additional asset
class or an undervalued market sector.
10|
<PAGE>
PROSPECTUS
RISKS OF INVESTING IN THE FUNDS
As indicated below, the Funds are subject to a number of risks that may affect
the value of the Funds' shares.
[SIDENOTE]
EQUITY RISK
ALL DYNAMIC FUNDS - 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.
[SIDENOTE]
NON-DIVERSIFICATION RISK
ALL DYNAMIC FUNDS - 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.
[SIDENOTE]
INDUSTRY CONCENTRATION RISK
ALL DYNAMIC FUNDS - 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 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 Velocity 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 or group
of industries is that the Fund will be more susceptible to the risks associated
with that industry or group of industries than a fund that does not concentrate
its investments.
|11
<PAGE>
ADDITIONAL FUND INFORMATION
[SIDENOTE]
TRACKING ERROR RISK
ALL DYNAMIC 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.
[SIDENOTE]
TRADING HALT RISK
ALL DYNAMIC 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, 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.
[SIDENOTE]
FUTURES AND OPTIONS RISK
ALL DYNAMIC FUNDS - 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 to the right:
12|
<PAGE>
PROSPECTUS
[SIDENOTE]
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.
[SIDENOTE]
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 positions 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.
[SIDENOTE]
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.
|13
<PAGE>
ADDITIONAL FUND INFORMATION
[SIDENOTE]
EARLY CLOSING RISK
ALL DYNAMIC FUNDS - The normal close of trading of securities listed on 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.
[SIDENOTE]
SWAPS
ALL DYNAMIC FUNDS - 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.
14|
<PAGE>
PROSPECTUS
ROLE OF THE MONEY MARKET FUND
--------------------------------------------------------------------------------
In order to purchase shares of the Dynamic Funds, investors may first have to
purchase shares of the Money Market Fund. The Money Market Fund shares may then
be exchanged for shares of the Dynamic Funds. Investors may make subsequent
exchanges directly from one or more Dynamic Funds to other Dynamic Funds.
Investors wishing to exchange Dynamic Fund shares for shares of other Rydex
Funds, not included in the Dynamic Funds complex, must first exchange shares of
the Dynamic Funds for shares of the Money Market Fund. For additional
information, please see "Purchasing Shares by Exchange Transactions."
C Class Shares of the Money Market Fund are primarily utilized by individuals
investing through certain financial intermediaries, who provide distribution
and/or shareholder services to their customers. To find out if shares of the
Dynamic Funds may be purchased directly, without first purchasing shares of the
Money Market Fund, investors should check with their financial intermediaries.
--------------------------------------------------------------------------------
|15
<PAGE>
SHAREHOLDER INFORMATION GUIDE
PURCHASING C CLASS SHARES
You may acquire C Class Shares of the Dynamic Funds either through a financial
intermediary or directly through the transfer agent. You are encouraged to
consult with a financial intermediary who can open an account for you and help
you with your financial decisions. In most cases, you may only invest in a
Dynamic Fund through an exchange transaction as described below. Nonetheless,
you may be able to purchase shares of the Dynamic Funds through your financial
intermediary, without first purchasing shares of the Money Market Fund. Please
contact your financial intermediary directly for more information and to
determine if this option is available to you.
PURCHASING SHARES BY EXCHANGE TRANSACTIONS
[SIDENOTE]
SHARES OF THE FUNDS ARE AVAILABLE PRIMARILY THROUGH EXCHANGES.
- Investors generally need to make two separate transactions to acquire
shares of the Dynamic Funds. First, you must purchase shares of the Money
Market Fund. Then, you may acquire shares of the Dynamic Funds by
exchanging your Money Market Fund shares. There are no fees for these
transactions.
- You can acquire shares through exchange transactions among the Dynamic
Funds or with the Money Market Fund.
- Investors may purchase shares of the Money Market Fund and make exchanges
on any day that the NYSE is open for business (a "Business Day").
- You may purchase shares of the Money Market Fund by check or bank wire
transfer. Once you open an account, you may make subsequent wire purchases
by telephone. Procedures for purchasing shares of the Money Market Fund by
mail, telephone or fax are discussed in more detail in the "Making
Investments by Mail, Telephone or Fax" section.
[SIDENOTE]
PROCEDURES FOR SUBSEQUENT EXCHANGES FROM THE MONEY MARKET FUND INTO THE DYNAMIC
FUNDS (AND EXCHANGES AMONG THE DYNAMIC FUNDS) ARE DISCUSSED IN MORE DETAIL IN
THE "EXCHANGES" SECTION
- Shareholders may acquire shares of the Funds through exchange transactions
by using the Rydex Web site - www.rydexfunds.com. By using this option, you
can direct your requests for exchange transactions to the transfer agent by
following the directions described on the Rydex Web site.
- You may only purchase shares of the Dynamic 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.
- Initial applications and investments, as well as subsequent investments, in
the Money Market Fund must be received in good form
16|
<PAGE>
PROSPECTUS
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. 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.
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 exchange request is processed by the transfer
agent. 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. No sales charges are imposed
on initial or subsequent investments in a Fund.
The Dynamic Funds calculate NAV twice each Business Day, first in the morning
and again in the afternoon. The morning NAV is calculated at 10:45 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 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. On days when the
exchange or market is scheduled to close early, such as the day before a
holiday, the Funds will only calculate NAV once at the close of the exchange or
market. For more information on these early closings, please call 800.820.0888
or visit the Rydex Web site. To receive the current NAV, the transfer agent must
receive your purchase order before the cutoff times specified in the
"Exchanges"
section 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 C Class Shares is $1,000 for all IRA, Roth IRA
and other retirement accounts and $2,500 for all other accounts. The transfer
agent, at its discretion, may accept lesser amounts in certain circumstances.
There is no minimum amount for subsequent investments in the Funds. The Funds
reserve the right to modify the minimum investment requirements at any time. The
Funds also reserve the right to reject or refuse, at the Fund's discretion, any
order for the purchase of a Fund's shares in whole or in part.
|17
<PAGE>
SHAREHOLDER INFORMATION GUIDE
MAKING INVESTMENTS BY MAIL, TELEPHONE, OR FAX
You may open an account in the Money Market Fund by mail or fax and, once you
open an account, make subsequent purchases by telephone. You may make initial
investments in the Money Market Fund by printing out the Account Application
Agreement located on the Rydex 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 301.296.5100. Investors must also make
arrangements for payment by either bank wire transfer or check using the
procedures described below.
Investments by mail, telephone 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 in the Money Market Fund at that Business Day's midday NAV and at or
prior to 3:45 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.
Procedures for payment by either bank wire transfer or check are as follows:
[SIDENOTE]
BY BANK WIRE TRANSFER
First, fill out the Account Application Agreement and send the completed
application, along with a request for a shareholder account number, to the
transfer agent. 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 by using the following
instructions:
FIRSTAR
CINCINNATI, OHIO
ROUTING NUMBER: 0420-00013
FOR ACCOUNT OF: RYDEX SERIES FUNDS - U.S. GOVERNMENT MONEY MARKET FUND
ACCOUNT NUMBER: 48038-9030
[YOUR NAME]
[YOUR SHAREHOLDER ACCOUNT NUMBER]
18|
<PAGE>
PROSPECTUS
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 Fund incurs.
[SIDENOTE]
BY CHECK
First, fill out the Account Application Agreement and send the completed
application, along with a request for a shareholder account number, to the
transfer agent. Then mail your check, payable to: Rydex Series Funds - U.S.
Government Money Market Fund, along with the application, to:
RYDEX SERIES FUNDS
U.S. GOVERNMENT MONEY MARKET FUND
ATTN: OPERATIONS DEPARTMENT
9601 BLACKWELL ROAD, SUITE 500
ROCKVILLE, MARYLAND 20850
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
transfer agent also may charge $50 for checks returned for insufficient or
uncollectible funds.
|19
<PAGE>
SHAREHOLDER INFORMATION GUIDE
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
301.296.5100.
EXCHANGES
You may exchange C Class Shares of any Dynamic Fund for C Class Shares of any
other Dynamic Fund that currently offers shares on the basis of the respective
net asset values of the shares involved. You may also acquire shares of the
Dynamic Funds through exchanges with the Money Market Fund. 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. Electronic investors should review the instructions
on the Rydex Web site for more information regarding procedures for exchanges
made via the Internet.
Exchange requests are processed at the NAV next determined after their receipt
by the transfer agent. Exchange requests received before 10:30 a.m. by the
transfer agent will be processed and communicated to a Dynamic Fund in time for
its 10:45 a.m. determination of NAV. Exchange requests received before 3:45 p.m.
by the transfer agent (3:55 p.m. for electronic investors) will be processed and
communicated to a Fund in time for its 4:00 p.m. determination of NAV. The
exchange privilege may be modified or discontinued at any time.
20|
<PAGE>
PROSPECTUS
REDEEMING FUND SHARES
[SIDENOTE]
GENERAL
You may redeem all or any portion of your Fund shares at the next determined NAV
after the transfer agent receives your redemption request (subject to applicable
account minimums). Each Fund may allow you to redeem your shares via the
Internet by following the procedures set forth on the Rydex Web site. Your
redemption proceeds normally will be sent within five Business Days of the
transfer agent's receipt of 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 transfer
agent's records). Each Fund may charge $15.00 for certain wire transfers of
redemption proceeds.
YOU MAY ALSO REDEEM YOUR SHARES BY LETTER OR BY TELEPHONE SUBJECT TO THE
PROCEDURES AND FEES SET FORTH IN "PROCEDURES FOR EXCHANGES AND REDEMPTIONS."
The proceeds of redemption requests will be sent directly to your address (as
listed in the transfer agent'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 transfer agent's records), this request must be in
writing and must include an original signature guarantee. 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.
[SIDENOTE]
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, each Fund
reserves the right to redeem your remaining shares without any additional
notification to you.
|21
<PAGE>
SHAREHOLDER INFORMATION GUIDE
[SIDENOTE]
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: (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 NAV is not reasonably practicable;
or (3) for such other periods as the Commission, by order, may permit for
protection of fund investors. In cases where NASDAQ, the CME or Chicago Board
Options Exchange ("CBOE") is closed or trading is restricted, a Fund may ask the
Commission to permit the right of redemption to be suspended. 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.
SALES CHARGES
You can buy C Class Shares at the offering price, which is the net asset value
per share, without any up-front sales charge so that the full amount of your
purchase is invested in the Funds. If you sell your shares within 12 months of
purchase, you will normally have to pay a 1% CDSC based on your purchase or sale
price, whichever is lower. You do not pay a CDSC on any C Class Shares you
purchase by reinvesting dividends.
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
The Funds have adopted a Distribution and Shareholder Services Plan (the "C
Class Plan") applicable to its C Class Shares that allows the Funds to pay
annual distribution and service fees of 1.00% of the Funds' average daily net
assets. The annual .25% service fee compensates your financial advisor for
providing on-going services to you. Rydex Distributors, Inc. (the
"Distributor") retains the service and distribution fees on accounts with no
authorized dealer of record. The annual .75% distribution fee reimburses the
Distributor for paying your financial advisor an on-going sales commission.
The Distributor advances the first year's service and distribution fees.
Because the Fund pays these fees out of assets on an on-going basis, over
time these fees may cost you more than other types of sales charges.
22|
<PAGE>
PROSPECTUS
PROCEDURES FOR EXCHANGES AND REDEMPTIONS
You should follow the procedures described on the Rydex Web site for all
exchanges and redemptions allowed via the Internet. The transfer agent
anticipates that most shareholders will make exchange and redemption requests
via the Internet through the Rydex Web site.
You may also request redemptions and exchanges by mail or telephone. Written
requests for redemptions and exchanges should be sent to:
RYDEX DYNAMIC FUNDS
ATTN: OPERATIONS DEPARTMENT
9601 BLACKWELL ROAD, SUITE 500
ROCKVILLE, MARYLAND 20850
(REQUESTS SHOULD BE SIGNED BY THE RECORD OWNER OR OWNERS.)
Telephone redemption and exchange requests may be made by calling 800.820.0888
or 301.296.5100 by the cutoff time specified in the "Exchanges" section for
exchanges between Funds, on any Business Day. The transfer agent's offices are
open between 8:30 a.m. and 5:30 p.m., Eastern Time on each Business Day. The
Funds reserve the right to suspend the right of redemption as described in the
previous section.
If you own shares that are registered in your intermediary's name, and you want
to either transfer the registration to another intermediary or register the
shares in your name, contact your intermediary for instructions to make this
change.
[SIDENOTE]
CONFIRMATION OF SHAREHOLDER TRANSACTIONS
You will receive confirmation of your investment transactions. The transfer
agent may allow you to choose to receive your confirmation either electronically
or through the mail by following the instructions made available on the Rydex
Web site. If you consent to receive electronic confirmation of your
transactions, you may print a copy of the electronic confirmation you receive
for your records. Shareholders who consent to receive all communications (such
as trade confirmations; prospectuses and shareholder reports; etc.) from the
Funds through the Rydex Web site or other electronic means must:
- Have and maintain access to the Rydex Web site and provide the transfer
agent with a valid and current e-mail address.
- Notify the transfer agent immediately if they no longer have access to the
Rydex Web site, change their e-mail address or wish to revoke their consent
to receive all communications from the Funds through the Rydex Web site or
other electronic means.
|23
<PAGE>
SHAREHOLDER INFORMATION GUIDE
You may revoke your consent to receive electronic confirmations and other
communications from the Funds through the Rydex Web site or other electronic
means at any time by informing the transfer agent in writing.
[SIDENOTE]
TRANSACTIONS OVER THE INTERNET OR TELEPHONE
Internet and telephone redemption and exchange transactions are extremely
convenient, but are not risk-free. To ensure that your Internet and telephone
transactions are safe, secure, and as risk-free as possible, the transfer agent
has instituted certain safeguards and procedures for determining the identity of
Web site users (including the use of secure passwords and 128-bit encryption
technology) and of telephone callers and authenticity of instructions. As a
result, neither the Funds nor the transfer agent will be responsible for any
loss, liability, cost, or expense for following Internet, telephone or wire
instructions they reasonably believe to be genuine. If you or your intermediary
make exchange or redemption requests via the Internet or telephone, you will
generally bear the risk of any loss. If you are unable to reach the transfer
agent by Internet or by calling 800.820.0888 or 301.296.5100, you may want to
try to reach the transfer agent by other means.
MANAGEMENT OF THE FUNDS
[SIDENOTE]
THE INVESTMENT ADVISOR
Rydex Global Advisors with offices at 9601 Blackwell Road, Suite 500, Rockville,
Maryland 20850, serves as investment advisor and manager of the Funds.
[SIDENOTE]
CHAIRMAN OF THE BOARD AND THE PRESIDENT OF THE ADVISOR
Albert P. Viragh, Jr., 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 both, the Trust and the Rydex Series Funds, supervise the
Advisor and establish policies that the Advisor must follow in its day-to-day
management activities.
24|
<PAGE>
PROSPECTUS
Under investment advisory agreements with 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:
<TABLE>
<CAPTION>
FUND ADVISORY FEE
<S> <C>
TITAN 500 FUND ........................................ .90%
VELOCITY 100 FUND ..................................... .90%
U.S. GOVERNMENT MONEY MARKET FUND ..................... .50%
</TABLE>
- Each Dynamic 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 C Class Shares of the Dynamic Funds at an
"expense cap" of 2.50% (before sales charge). This means that the Advisor
will reimburse certain expenses of the class so that expenses do not exceed
2.50% (before sales charge). 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 C Class Shares of any Fund and 2.50%
(before sales charge) to recapture any of its prior reimbursements.
|25
<PAGE>
DIVIDENDS, DISTRIBUTIONS, AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Income dividends, if any, are paid at least annually by each of the Funds,
except the Money Market Fund, which declares dividends daily and pays them
monthly. 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. Each
Fund, 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 transfer agent in writing prior to the date of distribution. Your election
will become effective for dividends paid after the transfer agent receives your
written notice. To cancel your election, simply send written notice to the
transfer agent.
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. This is not intended
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 each Statement of Additional Information ("SAI"). You are urged to
consult your tax advisor regarding specific questions as to federal, state and
local income taxes.
[SIDENOTE]
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.
[SIDENOTE]
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.
26|
<PAGE>
PROSPECTUS
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.
[SIDENOTE]
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.
[SIDENOTE]
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.
|27
<PAGE>
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY MARKET FUND
--------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the Money
Market Fund's financial performance for the past five years. Certain information
reflects financial results for a single Investor Class Share. The total returns
in the table represent the rate that an investor would have earned (or lost) on
an investment in an Investor Class Share of the Fund (assuming reinvestment of
all dividends and distributions). C Class Shares of the Funds were not offered
as of 3/31/00 and therefore no financial highlights are presented for that
class. Because C Class Shares are subject to different sales charges and expense
levels, total return will ordinarily differ for the same period. This
information has been audited by Deloitte & Touche LLP, whose report, along with
the financial statements and related notes, appears in the Rydex Series Funds'
2000 Annual Report. The 2000 Annual Report is available by telephoning the
transfer agent at 800.820.0888 or 301.296.5100. The Annual Report is
incorporated by reference in the SAI.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
INVESTOR CLASS - YEAR YEAR YEAR PERIOD YEAR
U.S. GOVERNMENT ENDED ENDED ENDED ENDED ENDED
MONEY MARKET FUND 3/31/00 3/31/99 3/31/98 3/31/97* 6/30/96
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE++:
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .04 .04 .04 .03 .04
-----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSET VALUE RESULTING
FROM OPERATIONS .04 .04 .04 .03 .04
DISTRIBUTIONS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME (.04) (.04) (.04) (.03) (.04)
NET INCREASE IN NET ASSET VALUE .00 .00 .00 .00 .00
-----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===========================================================================================================
TOTAL INVESTMENT RETURN (%) 4.48 4.55 4.69 4.39** 4.60
===========================================================================================================
RATIOS TO AVERAGE NET ASSETS
GROSS EXPENSES (%) .89 .84 .89 .86** --
NET EXPENSES (%) .88 .83 .89 .86** .99
NET INVESTMENT INCOME (%) 4.36 4.37 4.37 4.06 4.18
-----------------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
NET ASSETS, END OF YEAR $686,198 $949,802 $253,295 $283,553 $153,925
(000'S OMITTED)
-----------------------------------------------------------------------------------------------------------
</TABLE>
++ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* DURING 1997, THE TRUST CHANGED ITS FISCAL YEAR END FROM JUNE 30 TO MARCH 31.
ACCORDINGLY, THE PERIOD ENDED MARCH 31, 1997 REFLECTS NINE MONTHS OF ACTIVITY.
** ANNUALIZED
28|
<PAGE>
FINANCIAL HIGHLIGHTS PROSPECTUS
TITAN 500 FUND
--------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the Fund's
financial performance for its period of operations. Certain information reflects
financial results for a single E Class Share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in an E Class Share of the Fund (assuming reinvestment of all dividends and
distributions). C Class Shares of the Funds were not offered as of 3/31/00 and
therefore no financial highlights are presented for that class. Because C Class
Shares are subject to different sales charges and expense levels, total return
will ordinarily differ for the same period. This information has not been
audited. The 2000 Semi-Annual Report is available by telephoning the transfer
agent at 800.820.0888 or 301.296.5100. The Semi-Annual Report is incorporated by
reference in the SAI.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
INVESTOR CLASS - ENDED
TITAN 500 FUND* 6/30/00
-------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE++:
NET ASSET VALUE,
BEGINNING OF PERIOD $25.00
-------------------------------------------------------
NET INVESTMENT INCOME 0.06
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON SECURITIES 1.01
-------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSET VALUE RESULTING FROM
OPERATIONS 1.07
DISTRIBUTIONS TO SHAREHOLDERS --
-------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSET VALUE 1.07
-------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $26.07
=======================================================
TOTAL INVESTMENT RETURN (%) 4.28
RATIOS TO AVERAGE NET ASSETS
GROSS EXPENSES (%)** 8.18
NET EXPENSES (%)** 1.75
NET INVESTMENT
INCOME (%)** 2.02
-------------------------------------------------------
SUPPLEMENTARY DATA
PORTFOLIO TURNOVER RATE*** 0%
NET ASSETS, END OF PERIOD $ 16,311
(000'S OMITTED)
-------------------------------------------------------
</TABLE>
* COMMENCEMENT OF OPERATIONS: MAY 19, 2000 - TITAN 500 FUND
** 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.
|29
<PAGE>
FINANCIAL HIGHLIGHTS
VELOCITY 100 FUND
--------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the Fund's
financial performance for its period of operations. Certain information reflects
financial results for a single E Class Share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in an E Class Share of the Fund (assuming reinvestment of all dividends and
distributions). C Class Shares of the Funds were not offered as of 3/31/00 and
therefore no financial highlights are presented for that class. Because C Class
Shares are subject to different sales charges and expense levels, total return
will ordinarily differ for the same period. This information has not been
audited. The 2000 Semi-Annual Report is available by telephoning the transfer
agent at 800.820.0888 or 301.296.5100. The Semi-Annual Report is incorporated by
reference in the SAI.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
INVESTOR CLASS - ENDED
VELOCITY 100 FUND* 6/30/00
-------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERORMANCE++:
NET ASSET VALUE,
BEGINNING OF PERIOD $25.00
-------------------------------------------------------
NET INVESTMENT INCOME 0.10
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON SECURITIES 8.29
-------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSET VALUE RESULTING FROM
OPERATIONS 8.39
DISTRIBUTIONS TO SHAREHOLDERS --
-------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSET VALUE 8.39
-------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $33.39
=======================================================
TOTAL INVESTMENT RETURN (%) 33.56
RATIOS TO AVERAGE NET ASSETS
GROSS EXPENSES (%)** 4.88
NET EXPENSES (%)** 1.74
NET INVESTMENT
INCOME (%)** 3.19
-------------------------------------------------------
SUPPLEMENTARY DATA
PORTFOLIO TURNOVER RATE*** 0%
NET ASSETS, END OF PERIOD $49,303
(000'S OMITTED)
-------------------------------------------------------
</TABLE>
* COMMENCEMENT OF OPERATIONS: MAY 24, 2000 - VELOCITY 100 FUND
** 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.
30|
<PAGE>
BENCHMARK INFORMATION PROSPECTUS
The Titan 500 Fund is not sponsored, endorsed, sold, or promoted by S&P; and the
Velocity 100 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 S&P nor 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 or
the NASDAQ 100 Index, 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 and NASDAQ 100 Index, respectively, or any date 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, 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, respectively, or any data included
therein.
|31
<PAGE>
Additional information about the Dynamic Funds is included in a Statement of
Additional Information dated October 9, 2000 (an "SAI"), which contains more
detailed information about the Dynamic Funds. Additional information about the
Money Market Fund is included in an SAI dated August 1, 2000, as supplemented
October 9, 2000, which contains more information about the Rydex Series Funds.
Each 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 each 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 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 each SAI or the annual or semi-annual reports, without
charge by calling 800.820.0888 or by writing to Rydex Dynamic Funds, at 9601
Blackwell Road, Suite 500, Rockville, Maryland 20850. Additional information
about the Funds' investments is available in the annual and semi-annual reports.
Also, in the Funds' annual reports, 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 each SAI in connection with
the offering of Fund Shares. Do not rely on any such information or
representations as having been authorized by the Funds or Rydex Global Advisors.
This prospectus does not constitute an offering by the Funds in any jurisdiction
where such an offering is not lawful.
The Dynamic Funds' SEC registration number is 811-9525. The Rydex Series Funds'
SEC registration number is 811-7584.
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RYDEX TOOLS THAT POWER PORTFOLIOS
9601 Blackwell Road, Suite 500,
Rockville, Maryland 20850
www.rydexfunds.com
