MONETTA FUND INC
485APOS, 1996-11-18
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<PAGE>

    
   As filed with the Securities and Exchange Commission on November 18, 1996    

                                         Securities Act registration no. 33-1398
                                        Investment Company Act file no. 811-4466
                                                                               
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM N-1A
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
    
                        Post-Effective Amendment No. 16     

                                      and

        REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
    
                               Amendment No. 18     
                         ----------------------------
                              MONETTA FUND, INC.

                                 (Registrant)

                    1776-A South Naperville Road, Suite 207

                         Wheaton, Illinois  60187-8133

                        Telephone number:  708/462-9800

                         ----------------------------
              Robert S. Bacarella               Janet D. Olsen
              Monetta Fund, Inc.                Bell, Boyd & Lloyd
       1776-A South Naperville Road, #207   Three First National Plaza, #3300
          Wheaton, Illinois  60187-8133        Chicago, Illinois  60602

                             (Agents for service)

                          ----------------------------
                Amending Parts A, B and C and filing exhibits.

            It is proposed that this filing will become effective:

     ___    immediately upon filing pursuant to rule 485(b)

     ___    On ___________ pursuant to rule 485(b)
   
     ___    60 days after filing pursuant to rule 485(a)(1)
       
     ___    on ___________ pursuant to rule 485(a)(1)     

     ___    75 days after filing pursuant to rule 485(a)(2)
    
      X     on February 2, 1997 pursuant to rule 485(a)(2)      
     ___
         
Registrant has elected to register an indefinite number of its shares of common
stock pursuant to Rule 24f-2. Registrant filed its Rule 24f-2 Notice for the
fiscal year ended December 31, 1995 on February 22, 1996.
<PAGE>
 
                              MONETTA FUND, INC.

         Cross-reference sheet pursuant to rule 495(a) of Regulation C

   Item         Location or caption*
 --------       --------------------------------
                    
                Part A (Prospectus)
                -------------------
                
1(a)-(b)        Front Cover
                
2(a)            Fund Expenses
 (b)-(c)        Summary
                
3(a)            Financial Highlights
 (b)            Not Applicable
 (c)            Investment Return
                
4(a)(i)         Other Information
 (a)(ii)&(b)    Investment Objectives and Policies; Risks and Investment
                Considerations; Investment Restrictions
                
 (c)            Investment Objectives and Policies; Risks and Investment 
                Considerations
                
5(a)            Management of the Funds
 (b)            Management of the Funds; Rear Cover; Fund Expenses
 (c)            Management of the Funds
 (d)            Not Applicable
 (e)            How To Purchase Shares; How to Redeem Shares; Other Information
 (f)            Management of the Funds; Fund Expenses
 (g)            Management of the Funds
                
5A              The required information is included in registrant's annual 
                report to shareholders
                 
6(a)            Other Information
 (b)-(d)        Not Applicable
 (e)            Other Information
 (f)-(g)        Dividends, Distributions and Federal Taxes
 (h)            Not Applicable
                
7               How to Purchase Shares
 (a)            Management of the Funds
 (b)            How to Purchase Shares; Determination of Net Asset Value
 (c)-(d)        How to Purchase Shares; Shareholder Services
 (e)-(f)        Management of the Funds
                
8(a)-(d)        How to Redeem Shares
                
9               Not Applicable     


                                       i
<PAGE>

 
  Item              Location or caption*
- --------        --------------------------------
    
                Part B (Statement of Additional Information)
                --------------------------------------------

10(a)-(b)       Front Cover

11              Table of Contents

12              Not Applicable

13(a)-(c)       Investment Objectives and Policies; Risks and Investment
                Considerations; Investment Restrictions
 (d)            Portfolio Transactions

14(a)-(b)       Directors/Trustees and Officers
 (c)            Not Applicable

15(a)-(c)       Directors/Trustees and Officers

16(a)           Investment Adviser; Directors/Trustees and Officers
 (b)            Investment Adviser
 (c)-(e)        Not Applicable
 (f)            Service and Distribution Plan
 (g)            Not Applicable
 (h)            Custodian; Independent Auditors
 (i)            Not Applicable

17(a)-(d)       Portfolio Transactions; Investment Adviser
 (e)            Not Applicable

18(a)-(b)       Not Applicable

19(a)-(c)       Purchasing and Redeeming Shares; More Information About Net
                Assets Value

20              Tax Status

21(a)           Distributor
 (b)            Not Applicable
 (c)            Distributor

22(a)-(b)       Performance Information

23              Front Cover     

                                      ii
<PAGE>
 
   Item             Location or caption*
 --------       ----------------------------
    
                Part C (Other Information)
                --------------------------

24              Financial statements and exhibits

25              Persons controlled by or under common control with
                registrant

26              Number of holders of securities

27              Indemnification

28              Business and other connections of investment advisor

29              Principal underwriters

30              Location of accounts and records

31              Management services

32              Undertakings     

- ----------------------------
*   References are to captions within the part of the registration statement
    to which the particular item relates except as otherwise indicated. 

                                      iii
<PAGE>

                                                                      PROSPECTUS
    
                                                                February 2, 1997
     
Monetta
NO SALES LOAD FUNDS
NO REDEMPTION FEE
- --------------------------------------------------------------------------------
1776-A SOUTH NAPERVILLE ROAD, SUITE 207  .  WHEATON, IL 60187   .  1-800-MONETTA
- --------------------------------------------------------------------------------
    
 .    MONETTA FUND, INC.
 .    MONETTA SMALL-CAP EQUITY FUND
 .    MONETTA MID-CAP EQUITY FUND
 .    MONETTA LARGE-CAP EQUITY FUND       

Each seeks long-term capital growth by investing in common stocks believed to
have above average growth potential. The Funds differ from each other with
respect to the (i) market capitalizations of the companies in which they invest
and (ii) relative importance placed on investing for current income.

 .    MONETTA BALANCED FUND

Seeks a favorable total rate of return through capital appreciation and current
income consistent with preservation of capital, derived from investing in a
portfolio of equity and fixed income securities.

 .    MONETTA INTERMEDIATE BOND FUND

Seeks high current income consistent with the preservation of capital by
investing primarily in marketable debt securities.

 .    MONETTA GOVERNMENT MONEY MARKET FUND

Seeks maximum current income consistent with safety of capital and maintenance
of liquidity. The Fund invests in U. S. Government Securities maturing in
thirteen months or less from the date of purchase and repurchase agreements for
U. S. Government Securities. U. S. Government Securities include securities
issued or guaranteed by the U. S. Government or by its agencies or
instrumentalities.
    
GOVERNMENT MONEY MARKET FUND IS A "NO-LOAD" MONEY MARKET FUND AND ATTEMPTS TO
MAINTAIN ITS NET ASSET VALUE AT $1.00 PER SHARE. SHARES OF THIS FUND ARE NOT
INSURED OR GUARANTEED BY THE U. S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT
MONETTA GOVERNMENT MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE $1.00 PER
SHARE NET ASSET VALUE.       
    
Monetta Small-Cap Equity Fund, Monetta Mid-Cap Equity Fund , Monetta Large-Cap
Equity Fund , Monetta Balanced Fund , Monetta Intermediate Bond Fund and Monetta
Government Money Market Fund are series of Monetta Trust. Each Fund is a "no-
load" fund, and there are no sales or redemption charges. Each series of the
Trust has a 12b-1 plan.       

MINIMUM INVESTMENT:
    
     Initial Investment (General Account) $1,000       

    
     Initial investment for:
      UGMA accounts $250
      UTMA accounts $250
      Automatic Investment Plan accounts $250
      Individual Retirement Account $250       

     Subsequent Investments $50

Your initial investment may be divided among the Funds, but an investment in any
single Fund may not be less than $250.

PLANS AVAILABLE:
    
     Automatic Investment Plan
     Individual Retirement Account
     SIMPLE-IRA
     Profit Sharing
     401(k)
     403(b)       
    
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing. An investor should read this
Prospectus and retain it for future reference. A Statement of Additional
Information about the Funds (which bears the same date as this Prospectus and
together with any supplement to it is incorporated by reference) has been filed
with the Securities and Exchange Commission. That statement is available without
charge by writing or calling the Funds at the address and telephone number
printed above or may be retrieved electronically for free from
http://www.sec.gov.       

================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE

<PAGE>
 
                                    SUMMARY
    
Monetta Small-Cap Equity Fund, ("Small-Cap Fund") , Monetta Mid-Cap Equity Fund
("Mid-Cap Fund"), Monetta Large-Cap Equity Fund ("Large-Cap Fund"), Monetta
Balanced Fund ("Balanced Fund"), Monetta Intermediate Bond Fund ("Intermediate
Bond Fund") and Monetta Government Money Market Fund ("Government Money Market
Fund") are series of Monetta Trust (the "Trust"). Monetta Fund, Inc. ("Monetta
Fund") and each of the Trust series are collectively referred to as the "Funds."
Each of the Funds is a "no-load" fund and there are no sales or redemption
charges. Each series of the Trust has a 12b-1 plan.       

INVESTMENT OBJECTIVES
    
MONETTA FUND, SMALL-CAP FUND, MID-CAP FUND and LARGE-CAP FUND each seek long-
term capital growth by investing in common stocks believed to have above average
growth potential. The Funds differ from each other with respect to the (i)
market capitalizations of the companies in which they invest and (ii) relative
importance placed on investing for current income.       

  MONETTA FUND generally invests in smaller and medium-sized companies with
  market capitalizations ranging from $50 million to $1 billion. Monetta Fund's
  primary investment objective is to provide shareholders with capital
  appreciation by investing at least 70% of the Fund's assets in equity
  securities. A secondary objective of the Fund is to seek to provide its
  shareholders with income by investing in dividend-paying equity securities or
  fixed income securities.
    
  SMALL-CAP FUND typically invests in small-sized companies with market
  capitalization less than $1 billion ("small-cap companies"). Under normal
  market conditions, the Fund invests at least 65% of its total assets in common
  stocks of small-cap companies.       
    
  MID-CAP FUND typically invests in medium-sized companies with market
  capitalizations of $1 billion to $5 billion ("mid-cap companies"). Under
  normal market conditions, the Fund invests at least 65% of its total assets in
  common stocks of mid-cap companies.       
    
  LARGE-CAP FUND typically invests in large companies with market
  capitalizations in excess of $5 billion ("large-cap companies"). Under normal
  market conditions, the Fund invests at least 65% of its total assets in common
  stocks of large-cap companies.       

BALANCED FUND seeks a favorable total rate of return through capital
appreciation and current income consistent with preservation of capital, derived
from investing in a portfolio of equity and fixed income.

INTERMEDIATE BOND FUND seeks high current income, consistent with the
preservation of capital, by investing primarily in marketable debt securities.

GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with safety
of capital and maintenance of liquidity. The Fund invests in securities issued
or guaranteed by the U. S. Government or by its agencies or instrumentalities
("U. S. Government Securities") maturing in thirteen months or less from the
date of purchase and repurchase agreements for U. S. Government Securities
regardless of the maturities of such securities.

There can be no assurance that any Fund will achieve its investment objective.

INVESTMENT RISKS
    
All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. Monetta Fund, Small-Cap Fund, Mid-Cap Fund and 
Large-Cap Fund are designed for long-term investors who can accept the
fluctuations in portfolio value and other risks associated with seeking long-
term capital growth through investments in common stocks. Balanced Fund is
designed for long-term investors who can accept asset value fluctuations from
interest rate changes and credit risks associated with fixed income investments,
and other risks associated with investments in common stocks. Intermediate Bond
     
Page 2
<PAGE>
 
Fund is designed for investors who seek high income with less net asset value
fluctuation from interest rate changes than with a longer-term fund but more net
asset value fluctuation than with a shorter-term fund, and who can accept the
credit and other risks associated with securities that are high and upper-medium
quality. Government Money Market Fund is designed for investors who seek income
with minimum risk (including the risk of principal loss) other than the risk of
changes in yield caused by fluctuations in prevailing levels of interest rates.
Because Government Money Market Fund may invest in U. S. Government Securities
that are not backed by the full faith and credit of the U. S. Treasury,
investment in that Fund might involve risks that are different in some respects
from an investment in a fund that invests only in securities that are backed by
the full faith and credit of the U. S. Treasury. See "Risks and Investment
Considerations" for a more complete description of the risks of investing in
each of the Funds.

DIVIDENDS AND CAPITAL GAINS
    
Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund each pay income
dividends, if any, at least annually; Balanced Fund pays income dividends, if
any, quarterly; and Intermediate Bond Fund and Government Money Market Fund pay
income dividends monthly. Capital gains, if any, are distributed by each Fund at
least annually. Distributions are automatically reinvested in additional shares
of that Fund at net asset value unless payment in cash is requested. See
"Dividends, Distributions and Federal Taxes."       

PURCHASES AND REDEMPTIONS

The minimum initial investment in the Monetta Funds is $1,000, which may be
allocated among the Funds so long as at least $250 is invested in each Fund in
which you choose to invest. The minimum initial investment for Uniform
Gifts/Transfers to Minors Act ("UGMA") accounts, Automatic Investment Plan
accounts and individual retirement accounts is $250. Additional investments in
ANY Fund must be at least $50. Each Fund has a minimum account balance of $250.
MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995, HOWEVER, WILL BE ALLOWED TO
MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT FUND.

There are no sales charges. See "How to Purchase Shares." Shares will be
redeemed at current net asset value. There are no redemption charges. See "How
to Redeem Shares."

ADVISER AND FEES
    
Monetta Financial Services, Inc. (the "Adviser") is investment adviser to the
Funds. For a description of the Adviser and the advisory fees paid by the Funds,
see "Management of the Funds." Small-Cap Fund, Mid-Cap Fund, Large-Cap Fund,
Balanced Fund, Intermediate Bond Fund and Government Money Market Fund have a
Service and Distribution Plan adopted pursuant to rule 12b-1 under the
Investment Company Act of 1940. See "Management of the Funds."       

                                                                          Page 3
<PAGE>
 
                                 FUND EXPENSES

The purpose of the table below is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly in an investment in
a Fund.

<TABLE>
<CAPTION>
                                                                                                                         Government
                                 Monetta    Small-Cap    Mid-Cap     Large-Cap     Balanced    Intermediate Bond    Money Market
                                  Fund        Fund        Fund         Fund          Fund            Fund               Fund
                                 -------    ---------    -------     ---------     --------    -----------------    ------------
<S>                              <C>         <C>         <C>           <C>          <C>            <C>                  <C> 
SHAREHOLDER TRANSACTION EXPENSES
 Maximum sales load on         
  purchases                       NONE        NONE        NONE          NONE         NONE             NONE               NONE
 Maximum sales load on           
  reinvested dividends            NONE        NONE        NONE          NONE         NONE             NONE               NONE
 Deferred sales load              NONE        NONE        NONE          NONE         NONE             NONE               NONE
 Redemption fee (a)               NONE        NONE        NONE          NONE         NONE             NONE               NONE
 Telephone exchange fee          $5.00       $5.00       $5.00         $5.00        $5.00            $5.00              $5.00
                                 
ANNUAL FUND OPERATING EXPENSES
 (AS A PERCENTAGE OF AVERAGE 
 NET ASSETS)
 Management fees (b)              1.00%        .75%        .75%          .75%         .40%             .35%               .25%
 12b-1 fees (c)                   NONE         .25%        .25%          .25%         .25%             .25%               .10%
 Other Expenses                    .36%        .25%*       .25%          .30%         .30%             .27%(d)            .24%(d)
                                 -----       -----       -----         -----        -----            -----              -----
 Total fund operating             
  expenses                        1.36%       1.25%       1.25%         1.30%         .95%             .87%(d)            .59%(d)  
                                 -----       -----       -----         -----        -----            -----              -----
     *Estimated.
============================================================================================================================
     
</TABLE>
(a) If you request payment of redemption proceeds by wire, you must pay the cost
    of the wire (currently $10.00).

(b) The Adviser pays all of the ordinary operating expenses of each Fund, except
    the fees and expenses of the Fund's transfer agent and custodian, the non-
    interested board members and the 12b-1 fees.  Ordinary operating expenses do
    not include taxes or interest, if any, or costs relating to purchases and
    sales of portfolio securities, including brokerage commissions. See
    "Management of the Funds."
    
(c) The 12b-1 fee is not based on historical data but is expected to equal the
    maximum amount allowed under the plan.  See "Service and Distribution Plan."
     
    
(d) In 1995, the Adviser voluntarily waived part or all of its management fee
    for both the Intermediate Bond Fund and Government Money Market Fund.
    Additionally, the Adviser absorbed some of the custodial fees for the
    Government Money Market Fund. As a result, the "Total Fund Operating
    Expenses" actually paid by the Intermediate Bond Fund in 1995 were .27% of
    Average Net Assets. The "Total Fund Operating Expenses" actually paid by the
    Government Money Market Fund were .07% of Average Net Assets in 1995. As of
    the date of the Prospectus, the waiver of management fees for the Government
    Money Market Fund continues in effect, subject to review and possible
    termination by the Adviser at the beginning of each quarter.     

EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming (i) a 5%
annual return as required by the Securities and Exchange Commission for purposes
of this example; (ii) the percentage amounts listed under Annual Fund Operating
Expenses above remain the same in each of the periods; (iii) all income,
dividends and capital gain distributions are reinvested in additional shares of
the Funds; and (iv) redemption at the end of each period:
    
<TABLE>
<CAPTION>
                                                      One         Three      Five        Ten
                                                      Year        Years      Years      Years
                                                      ----        -----      -----      -----
<S>                                                   <C>          <C>         <C>       <C>
         Monetta Fund, Inc.                           $14          $44         $76       $167
         Monetta Small-Cap Equity Fund                 13           40         n/a        n/a
         Monetta Mid-Cap Equity Fund                   13           40          70        154
         Monetta Large-Cap Equity Fund                 14           42         n/a        n/a
         Monetta Balanced Fund                         10           31         n/a        n/a
         Monetta Intermediate Bond Fund                 9           28          49        109
         Monetta Government Money Market Fund           6           19          34         75
</TABLE>
     
    
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor might incur. This example is not necessarily
indicative of past or future expenses, and actual expenses may be greater or
lesser than those shown. Although information such as that shown above is useful
in reviewing the Funds' projected expenses and in providing some basis for
comparison with other investment alternatives, it should not be used for
comparison with other investments using different     

Page 4

<PAGE>
     
assumptions or time periods. Because Small-Cap Fund, Large-Cap Fund and Balanced
Fund are new, the above amounts are estimates and are projected only for the
first three years of operations. See "Management of the Funds."     

                             FINANCIAL HIGHLIGHTS
    
The following information for a share outstanding throughout each period through
1995 has been audited by KPMG Peat Marwick LLP, independent auditors. The
information for the period ended June 30, 1996 is unaudited. The audited
financial statements for 1995 and the interim (unaudited) financial statements
for the period ended June 30, 1996 of Monetta Fund are contained in its 1995
annual report to shareholders, and 1996 semi-annual report, respectively, which
may be obtained upon request at no charge.       

                                 MONETTA FUND
    
<TABLE>
<CAPTION>

                       
                                                                                                                    
                       6 Months                                                                                             
                        Ended                                                                                              5/6/86 
                       6/30/96                                                                                            Through
                     (unaudited)  1995      1994      1993      1992      1991      1990      1989      1988      1987    12/31/86
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>         <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>   
Net asset value
 at beginning of     
 period                $15.591   $14.515   $15.539   $15.992   $15.731   $10.963   $10.441   $ 9.933   $ 9.649    $9.670   $10.000 
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment
 income (loss)          (0.040)    0.029    (0.026)   (0.028)    0.006     0.081     0.103     0.219     0.106     0.113     0.115
Net realized and
 unrealized gain
 (loss) on          
 investments             0.765     4.075    (0.938)    0.105     0.855     6.037     1.106     1.274     2.158     0.016    (0.335) 
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
 investment 
 operations:             0.725     4.104    (0.964)    0.077     0.861     6.118     1.209     1.493     2.264     0.129    (0.220)
Less:
Distributions from 
 net investment       
 income                  0.000    (0.028)    0.000     0.000    (0.006)   (0.081)   (0.103)   (0.219)   (0.106)   (0.150)   (0.110) 
Distributions in
 excess of net          
 investment income       0.000    (3.000)   (0.060)   (0.475)   (0.594)   (1.208)   (0.584)   (0.766)   (1.874)    0.000     0.000 
Distributions from 
 net realized gains 
 on securities           0.000     0.000     0.000    (0.055)    0.000    (0.061)    0.000     0.000     0.000     0.000     0.000 
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions      0.000    (3.028)   (0.060)   (0.530)   (0.600)   (1.350)   (0.687)   (0.985)   (1.980)   (0.150)   (0.110)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value
 at end of period      $16.316   $15.591   $14.515   $15.539   $15.992   $15.731   $10.963   $10.441   $ 9.933    $9.649   $ 9.670

Total return               4.7%     28.0%    (6.21)%    0.49%     5.49%    55.90%    11.37%    15.20%    23.07%     1.54%    (2.20)%
Ratio to average
 net assets
Expenses*                 1.38%+    1.36%     1.35%     1.38%     1.45%     1.42%     1.50%     1.57%*    1.50%     2.31%     1.27%+
Net investment       
 income*                 (0.22)%+   0.18%    (0.15)%   (0.19)%    0.16%     0.93%     1.09%     2.18%*    0.96%     1.33%     2.45%+
Portfolio turnover      116.60%+  272.00%   191.27%   226.85%   126.60%   153.80%   206.51%   258.42%   170.43%   333.47%    80.02%+
Net assets 
 (in millions)         $ 307.4   $ 362.7   $ 364.9   $ 524.3   $ 408.0   $  57.1   $   6.1   $   3.5   $   2.6    $  2.1   $   1.9
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
     
    
* If certain expenses had not been assumed by the investment advisor in 1989,
  the ratios of expenses and net investment income to average net assets would
  have been 1.83% and 1.92%, respectively.     
    
+ Annualized.     
   
The per share ratios are calculated using the weighted average number of shares
outstanding during the period.

                                                                          Page 5

<PAGE>
 
                             FINANCIAL HIGHLIGHTS
    
The following information for a share outstanding throughout each period through
1995 has been audited by KPMG Peat Marwick LLP, independent auditors. The
information for the period ended June 30, 1996 is unaudited. The audited
financial statements for 1995 and the interim (unaudited) financial statements
for the period ended June 30, 1996 of Mid-Cap Fund, Large-Cap Fund, Balanced
Fund, Intermediate Bond Fund and Government Money Market fund are contained in
its 1995 annual report to shareholders, and 1996 semi-annual report,
respectively, which may be obtained upon request at no charge.       

                                 MONETTA TRUST
    
<TABLE>
<CAPTION>
 
                                                                                LARGE-CAP
                                    MID-CAP EQUITY FUND                        EQUITY FUND             BALANCED FUND
                     ---------------------------------------------------------------------------------------------------
                       6 Months                                          6 Months                  6 Months
                        Ended         Year       Year        3/1/93        Ended       9/1/95        Ended       9/1/95
                       6/30/96        Ended      Ended      Through       6/30/96     Through        6/30/96    Through
                     (unaudited)    12/31/95    12/31/94    12/31/93    (unaudited)   12/31/95    (unaudited)   12/31/95
- ------------------------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>         <C>        <C>          <C>           <C>           <C>        <C>
Net asset value
 at beginning of       
 period*                $11.962      $12.199     $12.537     $10.000       $10.571     $10.000       $10.605     $10.000
- ------------------------------------------------------------------------------------------------------------------------
Net investment      
 income                   0.021        0.059       0.071       0.006         0.029       0.005         0.074       0.009
Net realized and
 unrealized gain          
 (loss) on                
 investments              1.274        2.874       0.193       3.531         1.317       0.570         1.227       0.602
- ------------------------------------------------------------------------------------------------------------------------
Total from                
 investment
 operations               1.295        2.933       0.264       3.537         1.346       0.575         1.301       0.611
Less:
Distributions
 from net                 
 investment
 income                   0.000       (0.050)     (0.069)     (0.006)        0.000      (0.004)       (0.065)     (0.004)
Distributions in
 excess of net           
 investment
 income                   0.000       (2.990)     (0.533)     (0.994)        0.000       0.000         0.000      (0.002)
Distributions
 from net                 
 realized gains
 on securities            0.000       (0.130)      0.000       0.000         0.000       0.000         0.000       0.000
- ------------------------------------------------------------------------------------------------------------------------
Total                     
 distributions            0.000       (3.170)     (0.602)     (1.000)        0.000      (0.004)       (0.065)     (0.006)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value       
 at end of period       $13.257      $11.962     $12.199     $12.537       $11.917     $10.571       $11.841     $10.605
- ------------------------------------------------------------------------------------------------------------------------
Total return*             10.87%       24.54%       2.17%      35.40%        12.77%       5.74%        12.23%       6.16%
Ratios to
 average net
 assets:
Expenses**                 1.22%+       1.25%       1.30%       1.12%+        1.46%+      0.69%+        1.42%+      0.91%+
Net investment           
 income**                  0.16%+       0.44%       0.57%       0.07%+        0.26%+      0.05%+        0.66%+      0.08%+
Portfolio           
 turnover                 58.08%+     254.35%     209.97%     128.12%+      107.60%+     38.20%+      107.91%+     54.78%+
Net assets (in         
 thousands)             $17,773      $14,216     $11,736     $ 9,841       $ 1,349     $ 1,072       $   576     $   410
</TABLE>
     
    
*   Ratios and total return for the year of inception are calculated from the
    date of inception to the end of the period.     
    
**  If certain investment advisory fees and charges of the Trust's custodian and
    transfer agent had not been assumed by the investment advisor, the ratios of
    expenses and net income to average net assets would be as follows: for the
    Intermediate Bond Fund, expenses would have been 0.83%, 0.75%, 0.88% and
    0.75% for the six months ended 6/30/96, the years ended 1995 and 1994 and
    period ended December 31, 1993, respectively. For the Government Money
    Market Fund, expenses would have been .067%, 0.59%, 0.66% and 0.69% for the
    six months ended 6/30/96, the years ended 1995 and 1994 and period ended
    December 31, 1993, respectively. For the Intermediate Bond Fund, net
    investment income would have been 2.69%, 5.46%, 5.34% and 3.66% for the six
    months ended 6/30/96, the years ended 1995 and 1994 and period ended
    December 31, 1993, respectively. For the Government Money Market Fund, the
    investment income would have been 2.26%, 5.17%, 3.39% and 1.66% for the six
    months ended 6/30/96, the years ended 1995 and 1994 and period ended
    December 31, 1993, respectively.     
    
+   Annualized     

The per share ratios are calculated using the weighted average number of shares
outstanding during the period.

Page 6
<PAGE>

<TABLE> 
<CAPTION>
     
                                            INTERMEDIATE BOND FUND                          GOVERNMENT MONEY MARKET FUND
                                --------------------------------------------------------------------------------------------------
                                 6 Months                                          6 Months
                                   Ended        Year        Year       3/5/93        Ended         Year        Year       3/1/93
                                  6/30/96      Ended       Ended      Through       6/30/96        Ended       Ended      Through
                                (unaudited)   12/31/95    12/31/94    12/31/93    (unaudited)    12/31/95    12/31/94    12/31/93
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>           <C>         <C>         <C>         <C>            <C>         <C>         <C>
Net asset value at   
 beginning of period*             $10.244     $ 9.624     $10.345     $10.000       $ 1.000      $ 1.000     $ 1.000     $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income               0.287       0.655       0.589       0.357         0.024        0.059       0.040       0.023
Net realized and unrealized
 gain (loss) on investments        (0.175)      0.740      (0.690)      0.447         0.000        0.000       0.000       0.000
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment
 operations                         0.112       1.395      (0.101)      0.804         0.024        0.059       0.040       0.023 
Less:
Distributions from net
 investment income                 (0.280)     (0.655)     (0.580)     (0.357)       (0.024)      (0.059)     (0.040)     (0.023)
Distributions in excess
 of net investment income           0.000      (0.120)     (0.040)     (0.102)        0.000        0.000       0.000       0.000
Distributions from net
 realized gains on securities       0.000       0.000       0.000       0.000         0.000        0.000       0.000       0.000
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions                (0.280)     (0.775)     (0.620)     (0.459)       (0.024)      (0.059)     (0.040)     (0.023)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at 
 end of period                    $10.076     $10.244     $ 9.624     $10.345       $ 1.000      $ 1.000     $ 1.000     $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
Total return*                        1.20%      14.84%      (1.04)%      8.17%         2.47%        5.87%       4.04%       2.21%
Ratios to average net assets:
Expenses**                           0.53%+      0.27%       0.28%       0.28%+        0.32%+       0.07%       0.00%       0.03%+
Net investment income**              2.83%+      5.94%       5.94%       4.13%+        2.43%+       5.69%       4.04%       2.32%+
Portfolio turnover                  22.64%+     75.07%      94.48%      32.26%+         N/A          N/A         N/A         N/A
Net assets (in thousands)         $ 3,675     $ 3,589     $ 3,010     $ 2,959       $ 5,652      $ 4,393     $ 3,315     $ 1,859
- ----------------------------------------------------------------------------------------------------------------------------------
     
</TABLE>

<PAGE>
 
                      INVESTMENT OBJECTIVES AND POLICIES

The Funds' investment objectives differ principally in the types of securities
selected for investment and the relative importance each Fund places on growth
potential, current income and preservation of capital as considerations in
selecting investments.
    
 .  MONETTA FUND, SMALL-CAP FUND, MID-CAP FUND AND LARGE-CAP FUND     
    
Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund each seek long-
term capital growth by investing in common stocks believed to have above average
growth potential. The Funds differ from each other with respect to the (i)
market capitalizations of the companies in which they invest and (ii) relative
importance placed on investing for current income.     
    
Each Fund's investment approach emphasizes a competitive return in rising
markets and preservation of capital in declining markets in an attempt to
generate long-term capital growth over a complete business cycle (approximately
3 to 5 years) when compared to the broader stock market indices. The Adviser's
emphasis will be on common stocks with improving earnings per share growth, a
history of growth and sound management, and a strong balance sheet. The Adviser
may invest up to 20% of Monetta Fund's assets and 25% of the assets of Small-Cap
Fund, Mid-Cap Fund and Large-Cap Fund's assets in securities not meeting the
above criteria but believed by the Adviser to be undervalued based on a
company's current price-earnings ratio relative to its estimated earnings growth
rate. No Fund intends to invest more than 5% of its assets in derivative
securities (options and futures).     

The securities in which each Fund invests will be listed on a national
securities exchange or traded on an over-the-counter market.
    
Monetta Fund, Small-Cap Fund, Mid-Cap Fund, Large-Cap Fund and Balanced Fund (in
its investments in equity securities, as discussed below) each pursue a selling
discipline to preserve capital gains and limit losses. At the time a security is
purchased, the Adviser determines approximate prices (on both the upside and the
downside) at which a given security will be sold, if such prices are reached. A
security will generally be sold if it appreciates or depreciates to the sell
points, it becomes less attractive compared to a new stock idea, or company
fundamentals deteriorate with little perceived prospect for improvement within a
reasonable time frame. The actual timing of the sale of a security may be
affected by liquidity constraints or other factors affecting the market for that
security. This selling discipline may result in higher than average portfolio
turnover.     

MONETTA FUND'S primary investment objective is to provide its shareholders with
capital appreciation by investing at least 70% of the Fund's assets in equity
securities believed to have growth potential. A secondary objective of Monetta
Fund is to provide its shareholders with income, in part by investing the
balance of the Fund's assets in dividend paying equity securities or in long-
term (greater than one year) debt securities. The Fund's investments in long-
term debt securities will consist of United States Treasury Notes and Treasury
Bonds of various maturities and investment grade securities rated at least A or
better by either Moody's Investor Services, Inc. ("Moody's") or Standard and
Poor's Corporation ("S&P"). A complete description of the ratings is contained
in an appendix to the Statement of Additional Information.

Monetta Fund generally invests in smaller companies with aggregate market
capitalizations ranging from $50 million to $1 billion. See "Risks and
Investment Considerations--Equity Securities."
    
SMALL-CAP FUND typically invests in smaller companies with market capitalization
of less than $1 billion. See "Risks and Investment Considerations--Equity
Securities." Under normal market conditions, the Fund invests at least 65% of
its total assets in common stocks of small-cap companies.     
    
MID-CAP FUND typically invests in medium-sized companies with market
capitalizations of $1 billion to $5 billion. See "Risks and Investment
Considerations--Equity Securities." Under normal market conditions, the Fund
invests at least 65% of its total assets in common stocks of mid-cap 
companies.     

Page 8
<PAGE>

   
LARGE-CAP FUND typically invests in large companies with market capitalizations
in excess of $5 billion. See "Risks and Investment Considerations--Equity
Securities." Under normal market conditions, the Fund invests 65% of its total
assets in common stocks of large-cap companies.       

 .  BALANCED FUND

BALANCED FUND seeks a favorable total rate of return through capital
appreciation and current income consistent with preservation of capital, derived
from investing in a portfolio of equity and fixed income securities.

   
The investment approach for Balanced Fund combines the equity growth strategy
used for Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund and the
income strategy employed by Intermediate Bond Fund, as discussed below.       

   
The Fund may emphasize fixed income securities or equity securities or hold
equal amounts of both, depending upon the Adviser's analysis of market,
financial and economic conditions. Under normal circumstances, the Fund invests
at least 80% of its total assets in fixed income and equity securities. At least
25% of the Fund's assets invested in fixed income securities will consist of
corporate bonds and debentures rated A or better and securities issued or
guaranteed as to principal and interest by the U.S. Government and its agencies
and instrumentalities. The Fund does not presently intend to invest more than
10% of its assets in securities rated below investment grade (commonly called
"junk bonds") or, if unrated, determined by the Adviser to be of comparable
credit quality. See "Risks and Investment Considerations--Debt Securities."
     

 .  INTERMEDIATE BOND FUND

INTERMEDIATE BOND FUND seeks a high level of current income, consistent with the
preservation of capital, by investing primarily in marketable debt securities.

Under normal market conditions, Intermediate Bond Fund invests at least 70% of
the value of its total assets (taken at market value at the time of investment)
in the following:

(1) Marketable straight-debt securities of domestic issuers, and of foreign
    issuers payable in U. S. dollars, rated at the time of purchase within the
    three highest grades assigned by Moody's or by S&P;

(2) Securities issued or guaranteed by the U. S. Government or by its agencies
    or instrumentalities;

(3) Commercial paper rated Prime-1 by Moody's or A-1 by S&P at time of purchase,
    or, if unrated, issued or guaranteed by a corporation with any outstanding
    debt rated A or better by Moody's or by S&P;

(4) Variable rate demand notes, if unrated, determined by the Adviser to be of
    credit quality comparable to the commercial paper in which the Fund may
    invest; or

(5) Bank obligations, including repurchase agreements,/*/ of banks having total
    assets in excess of $500 million.

Under normal market condition, the Fund invests at least 65% of its total assets
in bonds and debentures, and at least 75% of its assets in securities with an
average life of less than 15 years, and expects that the dollar-weighted average
life of its portfolio will be between 3 and 10 years. Average life is the
weighted average period over which the Adviser expects the principal to be paid,
and differs from stated maturity in that it includes the estimated effect of
maturity-shortening devices, such as calls, refundings or redemption provisions
of which the Adviser believes it is probable that the issuer will take
advantage. With respect to GNMA securities and other mortgage-backed securities,
average life is likely to be substantially less than

- -----------------------------
/*/  A repurchase agreement is a sale of securities to a Fund in which the
     seller (a bank or broker-dealer believed by the Adviser to be financially
     sound) agrees to repurchase the securities at a higher price, which
     includes an amount representing interest on the purchase price, within a
     specified time.


Page 9
<PAGE>
 
the stated maturity of the mortgages in the underlying pools. With respect to
obligations with call provisions, average life is typically the next call date
on which the Adviser believes it is probable that the obligation will be called.
Securities without prepayment or call provisions generally have an average life
equal to their stated maturity. During periods of rising interest rates, the
average life of mortgage-backed securities and callable obligations may increase
substantially because they are not likely to be prepaid, which may result in
greater net asset value fluctuation.

The Fund also may invest in other debt securities (including those convertible
into or carrying warrants to purchase common stocks or other equity interests,
and privately placed debt securities), preferred stocks, and marketable common
stocks that the Adviser considers likely to yield relatively high income in
relation to cost. Equity securities acquired by conversion or exercise of a
warrant may be held by the Fund for a sufficient time to permit orderly
disposition or to establish a long-term holding period for tax purposes. If,
after purchase by the Fund, the rating of a portfolio security is lost or
reduced, the Fund would not be required to sell the security, but the Adviser
would consider such a change in deciding whether the Fund should retain the
security in its portfolio. See "Risks and Investment Considerations--Debt
Securities." Intermediate Bond Fund will not invest more than 20% of its assets
in debt securities rated below investment grade or, if unrated, determined by
the Adviser to be of comparable credit quality.

 .  GOVERNMENT MONEY MARKET FUND

GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with safety
of capital and maintenance of liquidity. The Fund invests in U.S. Government
Securities maturing in thirteen months or less from the date of purchase and
repurchase agreements for U.S. Government Securities.

U.S. Government Securities include:

(1) Securities issued by the U.S. Treasury;

(2) Securities issued or guaranteed as to principal and interest by agencies or
    instrumentalities of the U.S. Government that are backed by the full faith
    and credit guarantee of the U.S. Government;

(3) Securities issued or guaranteed as to principal and interest by agencies or
    instrumentalities of the U.S. Government that are not backed by the full
    faith and credit guarantee of the U.S. Government; and

(4) Repurchase agreements for securities listed in (1), (2), and (3) above,
    regardless of the maturities of such underlying securities.

The Fund is a money market fund and follows procedures, described in the
Statement of Additional Information, designed to stabilize its net asset value
per share at $1.00. The Fund maintains a dollar-weighted average portfolio
maturity appropriate to its objective of maintaining a stable net asset value
per share and, in any case, not in excess of 90 days.

The U.S. Government Securities in which the Fund is permitted to invest include:

(i) bills, notes, bonds, and other debt securities, differing as to maturity and
rates of interest, that are issued by and are direct obligations of the U.S.
Treasury; and (ii) other securities that are issued or guaranteed as to
principal and interest by agencies or instrumentalities of the U.S. Government
and that include, but are not limited to, Federal Farm Credit Banks, Federal
Home Loan Banks, Government National Mortgage Association, Farmers Home
Administration, Federal Home Loan Mortgage Corporation and Federal National
Mortgage Association. The Fund also invests in repurchase agreements for U.S.
Government Securities. See "Risks and Investment Considerations."

Page 10
<PAGE>
 
                      RISKS AND INVESTMENT CONSIDERATIONS

RISKS

All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. The risks inherent in each Fund depend primarily
upon the types of securities in the Fund's portfolio, as well as on market
conditions. There can be no guarantee that a Fund will achieve its objective.

   
MONETTA FUND, SMALL-CAP FUND, MID-CAP FUND and LARGE-CAP FUND are designed for
long-term investors who can accept the fluctuations in portfolio value and other
risks associated with seeking capital growth through investment in common
stocks.       

BALANCED FUND is appropriate for long-term investors who can accept asset value
fluctuations from interest rate changes and credit risks associated with fixed
income investments, and other risks associated with investments in common
stocks.

INTERMEDIATE BOND FUND is appropriate for investors who seek high income with
less net asset value fluctuation from interest rate changes than that of a
longer-term fund but more net asset value fluctuation than with a shorter-term
fund, and who can accept the credit and others risks associated with securities
that are high and upper-medium quality. A longer-term bond fund will usually
provide a higher yield than an intermediate term fund like Intermediate Bond
Fund; conversely, an intermediate term fund usually has less net asset value
fluctuation, although there can be no guarantee that this will be the case.

GOVERNMENT MONEY MARKET FUND is designed for investors who seek income with
minimum risk (including the risk of principal loss) other than the risk of
changes in yield caused by fluctuation in prevailing levels of interest rates.
Because Government Money Market Fund's investment policy permits it to invest in
U. S. Government Securities that are not backed by the full faith and credit of
the U. S. Government, investment in that Fund may involve risks that are
different in some respects from an investment in a fund that invests only in
securities that are backed by the full faith and credit of the U. S. Government.
Such risks may include a greater risk of loss of principal and interest on the
securities in the Fund's portfolio that are supported only by the issuing or
guaranteeing U. S. Government agency or instrumentality since the Fund must look
principally or solely to that entity for ultimate repayment. There can be no
guarantee that Government Money Market Fund will be able at all times to
maintain its net asset value per share at $1.00.

INVESTMENT CONSIDERATIONS

EQUITY SECURITIES. Common stocks represent an equity interest in a corporation.
Although common stocks have a history of long-term growth in value, their prices
tend to fluctuate in the short term. The securities of smaller companies, as a
class, have had periods of favorable results and other periods of less favorable
results compared to the securities of larger companies as a class. Stocks of
small to mid-size companies tend to be more volatile and less liquid than stocks
of large companies. Smaller companies, as compared to larger companies, may have
a shorter history of operations, may not have as great an ability to raise
additional capital, may have a less diversified product line making them
susceptible to market pressure, and may have a smaller public market for their
shares.

DEBT SECURITIES. Bonds and other debt instruments are methods for an issuer to
borrow money from investors. Debt securities have varying levels of sensitivity
to interest rate changes and varying degrees of quality. A decline in prevailing
levels of interest rates generally increases the value of debt securities, while
an increase in rates usually reduces the value of those securities. As a result,
interest rate fluctuations will affect a Fund's net asset value, but not the
income received by a Fund from its portfolio securities. (Because yields on debt
securities available for purchase by a Fund vary over time, no specific yield on
shares of a Fund can be assured.) In addition, if the bonds in a Fund's
portfolio contain call, prepayment or redemption provisions, during a period of
declining interest rates, these securities are likely to be redeemed, and the
Fund will probably be unable to replace them with securities having a comparable
yield. There can be no assurance that payments of interest and principal on
portfolio securities will be made when due.

                                                                         Page 11
<PAGE>
 
"Investment grade" debt securities are those rated within the four highest
ratings categories of Moody's or S&P or, if unrated, determined by the Adviser
to be of comparable quality. Bonds rated Baa or BBB have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity of their issuers to make principal
and interest payments than is the case with higher grade bonds. Lower-rated debt
securities (commonly called "junk bonds") on balance, are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation and therefore carry
greater investment risk, including the possibility of issuer default and
bankruptcy; they are likely to be less marketable and more adversely affected by
economic downturns than higher-quality debt securities. Convertible debt
securities are frequently unrated or, if rated, are below investment grade. For
more information, see discussion of debt securities in the Fund's Statement of
Additional Information.

SHORT-TERM INVESTMENT. The Funds (other than Government Money Market Fund) may
make short-term investments without limitation in periods when the Adviser
determines that a temporary defensive position is warranted. Such investments
may be in U. S. Government Securities of the type in which Government Money
Market Fund may invest; certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of at least $500 million and
which are regulated by the U. S. Government, its agencies or instrumentalities;
commercial paper rated in the highest category by a recognized rating agency;
and demand notes comparable in quality, in the Adviser's judgment, to commercial
paper rated in the highest category.

LOANS OF PORTFOLIO SECURITIES. Subject to certain restrictions, Balanced Fund
and Intermediate Bond Fund may lend their portfolio securities to broker-dealers
and banks. Any such loan must be continuously secured by collateral in cash or
cash equivalents maintained on a current basis in an amount at least equal to
the market value of the securities loaned by the Fund. The Fund would continue
to receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned, and would also receive an additional return that may be in
the form of a fixed fee or a percentage of the collateral. The Fund would have
the right to call the loan and obtain the securities loaned at any time on
notice of not more than five business days. In the event of bankruptcy or other
default of the borrower, the Fund could experience both delays in liquidating
the loan collateral or recovering the loaned securities and losses including (a)
possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto; (b) possible subnormal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Balanced Fund, Intermediate Bond
Fund and Government Money Market Fund may invest in securities purchased on a
when-issued or delayed-delivery basis. Although the payment and interest terms
of these securities are established at the time the purchaser enters into the
commitment, the securities may be delivered and paid for a month or more after
the date of purchase, when their value may have changed. A Fund makes such
commitments only with the intention of actually acquiring the securities, but
may sell the securities before settlement date if the Adviser deems it advisable
for investment reasons. Government Money Market Fund may purchase securities on
a standby commitment basis, which is a delayed-delivery agreement in which the
Fund binds itself to accept delivery of a security at the option of the other
party to the agreement. When a Fund commits to purchase securities on a when-
issued or delayed-delivery basis, the Fund segregates assets to secure its
ability to perform and to avoid the creation of leverage.

REPURCHASE AGREEMENTS. Balanced Fund, Intermediate Bond Fund and Government
Money Market Fund may enter into repurchase agreements. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, a Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) possible decline in the value of the collateral during the period
while the Fund seeks to enforce its rights thereto; (b) possible subnormal
levels of income and lack of access to income during this period; and (c)
expenses of enforcing its rights.

OPTIONS AND FUTURES. Consistent with their objectives, Balanced Fund and
Intermediate Bond Fund may each purchase and write both call options and put
options on securities and on indexes, and enter into interest rate and index
futures contracts and options on such futures contracts (such put and call
options, futures contracts, and options on futures contracts are referred to as
"derivative products") in order to

Page 12
<PAGE>
 
provide additional revenue, or to hedge against changes in security prices or
interest rates. The Fund may write a call or put option only if the option is
covered. The Fund will limit its use of futures contracts and options on futures
contacts to hedging transactions to the extent required to do so by regulatory
agencies. There are several risks associated with the use of derivative
products. As the writer of a covered call option, the Fund foregoes, during the
option's life, the opportunity to profit from increases in market value of the
security covering the call option. Because of low margin deposits required, the
use of futures contracts involves a high degree of leverage, and may result in
losses in excess of the amount of the margin deposit. Since there can be no
assurance that a liquid market will exist when the Fund seeks to close out a
derivative product position, these risks may become magnified. Because of these
and other risks, successful use of derivative products depends on the Adviser's
ability to predict correctly changes in the level and the direction of stock
prices, interest rates, and other market factors, but even a well-conceived
transaction may be unsuccessful because of an imperfect correlation between the
securities and derivative product markets. When either Balanced Fund or
Intermediate Bond Fund enter into a futures contract, it segregates assets to
secure its ability to perform and to avoid the creation of leverage. For
additional information, please refer to the Fund's Statement of Additional
Information.
    
PORTFOLIO TURNOVER. Monetta Fund and Small-Cap Fund engage in an above-average
number of portfolio transactions. Their annual portfolio turnover rates are
likely to exceed 100%, and in some years may exceed 200% (excluding Treasury
Bills and other short-term money market instruments which mature in less than
one year). Mid-Cap Fund, Large-Cap Fund and Balanced Fund may also engage in an
above-average number of portfolio transactions and have an annual portfolio
turnover rate exceeding 100%, although that rate is not expected to exceed 200%
annually under normal market conditions. A high portfolio turnover rate
increases aggregate brokerage commission expenses and taxes which must be borne
directly by a Fund and ultimately by its shareholders. These portfolio turnover
rates and the resulting commission expenses and taxes are higher on a relative
basis than those of mutual funds which may not trade as frequently, including
those with a policy of capital appreciation. Substantial trading involves
substantial risk and may be speculative. Investors should not consider purchase
of a Fund's shares as a complete investment program.      

                            INVESTMENT RESTRICTIONS

The Funds' investment restrictions, noted below, and investment objectives
cannot be changed without shareholder approval. All investment restrictions for
each Fund are described in the Funds' Statement of Additional Information.

 .    MONETTA FUND

In pursuing its investment objective, Monetta Fund will not:

(1) Invest more than 5% of its assets in the securities of any one issuer
    (except obligations issued or guaranteed by the United States Government,
    its agencies or instrumentalities);

(2) Buy more than 10% of any class of securities of any one issuer; or

(3) Borrow money in excess of 5% of the value of its total assets, or pledge,
    mortgage, or hypothecate its assets taken at market value, to an extent
    greater than 10% of the Fund's total assets taken at cost (and no borrowing
    may be undertaken except from banks as a temporary measure for extraordinary
    or emergency purposes).

                                                                         Page 13
<PAGE>
     
 . SMALL-CAP FUND      
 . MID-CAP FUND
 . LARGE-CAP FUND
 . BALANCED FUND
 . INTERMEDIATE BOND FUND
 . GOVERNMENT MONEY MARKET FUND

In pursuing its investment objective, each Fund will not:

(1) Invest more than 5% of its total assets (valued at the time of investment)
    in the securities of any one issuer, except U. S. Government Securities and
    repurchase agreements (this restriction applies to only 75% of the total
    assets of all Funds except Government Money Market Fund);

(2) Acquire more than 10%, taken at the time of a particular purchase, of the
    outstanding voting securities of any issuer; or

(3) Borrow money, except as a temporary measure for extraordinary or emergency
    purposes, and then the aggregate borrowings at any one time may not exceed
    10% of its assets (at market value). A Fund will not purchase additional
    securities when its borrowings exceed 5% of total assets.

                               INVESTMENT RETURN
    
"Average Annual Total Return" for a given period may be computed by finding the
average annual compounded rate that would equate a hypothetical initial $1,000
investment to the value of that investment that could be redeemed at the end of
the period, assuming reinvestment of all dividends and distributions.     

Balanced Fund and Intermediate Bond Fund may quote their yield, calculated by
dividing net investment income per share (a hypothetical figure as defined in
the SEC rules) during a 30-day period by the net asset value per share on the
last day of the period. The yield formula provides for semi-annual compounding,
which assumes that net investment income is earned and reinvested at a constant
rate and annualized at the end of a six-month period.

Because Government Money Market Fund strives to maintain a $1.00 per share
value, its return is usually quoted either as a current seven-day yield,
calculated by adding the dividends on a Fund share for the previous seven days
and restating that yield as an annual rate, or as an effective yield, calculated
by adjusting the current yield to assume daily compounding. To obtain current
yield information, call 1-800-MONETTA (1-800-666-3882) or write to the address
shown on the back cover. Government Money Market Fund may also quote its Total
Return or Average Annual Total Return.

In advertising and sales literature, a Fund's performance may be compared to
market indexes and to the performance of other mutual funds. A Fund may also
publicize its comparative performance as computed in rankings or ratings
determined by independent services or publications including Lipper Analytical
Services, Inc., Morningstar, Inc. and others.

Page 14
<PAGE>
 
          
    
More information about a Fund's performance is included in its 1995 annual
report and 1996 semi-annual report to shareholders, copies of which may be
obtained upon request at no charge.      

                            HOW TO PURCHASE SHARES
    
You may purchase shares of any of the Funds by check, by wire (into an existing
account only) or by exchange from your account with another Fund. Your initial
investment in the Monetta Funds must be at least $1,000, which may be allocated
among the Funds so long as at least $250 is invested in each Fund in which you
choose to invest. The minimum initial investment for UGMA or UTMA accounts,
Automatic Investment Plan accounts and individual retirement accounts is $250.
Additional investments in ANY Fund must be at least $50. Each Fund has a minimum
account balance of $250. MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995,
HOWEVER, WILL BE ALLOWED TO MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT
FUND. If you are purchasing shares to be held by a tax-sheltered retirement plan
sponsored by the Adviser, you must use special application forms which you      

                                                                         Page 15
<PAGE>
 
can obtain by calling the Funds at 1-800-MONETTA. (See "Shareholder Services-
Tax-Sheltered Retirement Plans.") Your purchase order must be received by the
Funds' Transfer Agent before the close of regular session trading on the New
York Stock Exchange (ordinarily 3:00 p. m., Central time) to receive the net
asset value calculated on that day. See "Purchase Price of Shares" below.
PURCHASES BY AN INDIVIDUAL SHAREHOLDER CANNOT BE MADE BY TELEPHONING OR FAXING
AN APPLICATION TO THE FUNDS OR THE TRANSFER AGENT.

PURCHASE BY CHECK

To purchase shares of a Fund by check, complete and sign the Share Purchase
Application included in this Prospectus and return it, with a check or other
negotiable bank draft made payable to MONETTA FUNDS, to: MONETTA, C/O FIRSTAR
TRUST COMPANY, P. O. BOX 701, MILWAUKEE, WISCONSIN 53201-0701. IF YOU INTEND TO
USE AN OVERNIGHT DELIVERY SERVICE, THE APPLICATION AND CHECK SHOULD BE SENT TO:
FIRSTAR TRUST COMPANY, MUTUAL FUND DIVISION, 615 EAST MICHIGAN STREET, 3RD
FLOOR, MILWAUKEE, WISCONSIN 53202-5207. If a phone number is requested, use: 1-
414-765-4124. Applications will not be accepted unless accompanied by payment.
Additional purchases (minimum $50 for any Fund) may be made at any time by
mailing a check payable to MONETTA FUNDS, to the address above, together with
the detachable form from a prior account statement or a letter indicating the
account number to which the subsequent purchase is to be credited and the
name(s) of the registered owner(s).

Purchases must be made in U. S. dollars and checks must be drawn on U. S. banks.
No cash or third party checks will be accepted. If your order to purchase shares
is canceled because your check does not clear, you will be responsible for a
$20.00 return item fee and any resulting loss incurred by the Fund.

PURCHASES BY WIRE

Shares may also be purchased by wire transfer of funds INTO AN EXISTING ACCOUNT
ONLY. Before wiring funds call Firstar Trust Company at 1-800-241-9772 to ensure
prompt and accurate handling of your account. Then, instruct your bank to wire
the purchase amount to: Firstar Bank-Milwaukee N. A., 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, ABA number 0750-00022, credit Firstar Trust Company,
account number 112-952-137, further credit Monetta Funds, (shareholder name and
account number). Your bank may charge you a fee for sending the wire. The Funds
will not be responsible for the consequences of any delays, including delays in
the banking or Federal Reserve wire systems.

PURCHASES BY EXCHANGE

You may purchase shares by exchange of shares from another existing Fund account
either by phone (if you have not declined the Telephone Exchange Privilege on
the account form which the exchange is being made) or by mail. Restrictions
apply; please review the information under "How to Redeem Shares--By Exchange."
    
PURCHASES THROUGH INTERMEDIARIES

You may also purchase (and redeem) shares through investment dealers, banks or
other institutions. The Funds may enter into an arrangement with such an
institution allowing the institution to process purchase orders or redemption
requests for its customers with the Funds on an expedited basis, including
requesting share purchases and redemptions by telephone. If you purchase shares
through an investment dealer, the dealer will be responsible for promptly
forwarding your order to the Fund's transfer agent. Although these arrangements
might permit you to effect a purchase or redemption of Fund shares through the
institution more quickly than would otherwise be possible, the institution may
impose charges for its services. Such fees may constitute a substantial portion
of a smaller account and may not be in your best interest. You should check with
the investment dealer, bank or other institution through which you purchased
Fund shares to determine if that institution offers telephone redemptions. You
may purchase or redeem shares directly from the Funds without any charges other
than those described in this Prospectus. In some cases, the Funds and the
Adviser may enter into arrangements with such intermediaries by which a Fund may
pay to such an intermediary up to 0.25% of the value of shares      

Page 16
<PAGE>
     
purchased through that intermediary, to compensate the intermediary for the
services provided to those Fund shareholders and the intermediary's 
distribution-related services. Any payments by a Fund would be pursuant to its
Service and Distribution Plan. Any such payments by a Fund are borne by all Fund
shareholders, not just those purchasing shares through such intermediaries. See
"Management of the Funds-Service and Distribution Plan." The Adviser may pay
additional amounts to such intermediaries from the Adviser's own resources.     

PURCHASE PRICE OF SHARES

The price paid for shares is the net asset value per share of a Fund next
determined after receipt by Firstar Trust Company (the "Transfer Agent") of your
purchase order in proper form. (See "Determination of Net Asset Value.") Money
sent to purchase additional shares for existing accounts must be accompanied by
the shareholder's account number. Money sent to open a new account must be
preceded or accompanied by a completed application form.

CONDITIONS OF PURCHASE
    
All of your income dividends and capital gain distributions will be reinvested
in additional shares of the Fund paying the dividend or distribution unless you
elect to have distributions paid to you in cash. (See "Dividends, Distributions
and Taxes.") Each Fund reserves the right to reinvest the proceeds and future
distributions in additional Fund shares at the current net asset values if
checks mailed to you for distributions are returned as undeliverable or are not
presented for payment within six months.     
    
A purchase order for Fund shares is not binding until accepted and entered on
the books of that Fund. Once your purchase order has been accepted, you may not
cancel or revoke it; however, you may redeem the shares. The Funds reserve the
right not to accept any purchase order that it determines not to be in the best
interest of the Fund or of a Fund's shareholders. Election of the Telephone
Exchange Privilege authorizes the Funds and the Transfer Agent to tape-record
instructions to purchase. Reasonable procedures are used to confirm that
instructions received by telephone are genuine, such as requesting personal
identification information that appears on your application and requiring
permission to record the conversation. You will bear the risk of loss due to
unauthorized or fraudulent instructions regarding your account, although the
Funds may have a risk of such loss if reasonable procedures were not used. The
Funds also reserve the right to waive or change the investment minimums for any
reason. Monetta Fund and the Trust do not issue certificates for Fund shares
because of the availability of the telephone exchange and redemption privileges.
     

                             HOW TO REDEEM SHARES

FOR CASH
    
In Writing. You may redeem all or part of the shares in your account without
charge by sending a written redemption request "in good order" to the Transfer
Agent, Firstar Trust Company, P. O. Box 701, Attention: Monetta Funds,
Milwaukee, Wisconsin 53201-0701. If you intend to use an overnight delivery
service, please send to: Firstar Trust Company, Mutual Fund Division, 615 East
Michigan Street, 3rd Floor, Milwaukee, Wisconsin 53202-5207. A redemption
request will be considered to have been received in good order if the following
conditions are satisfied:     

(1) The request must be in writing, indicating the Fund, the number of shares or
    dollar amount to be redeemed, and the shareholder's account number;

(2) The request must be signed by the shareholder(s) exactly as the shares are
    registered;

(3) The signature(s) on the written redemption request must be guaranteed if the
    shares to be redeemed have a value of $50,000 or more or the redemption
    proceeds are to be sent to an address other than your address of record (see
    "Signature Guarantee" below).

                                                                         Page 17
<PAGE>
 
(4) Corporations and associations must submit with each request a form of
    acceptable resolution; and

(5) Other supporting legal documents may be required from organizations,
    executors, administrators, trustees, or others acting on accounts not
    registered in their names.

SHARES MAY NOT BE REDEEMED BY FACSIMILE OR BY TELEPHONE (except for a telephone
exchange).

Signature Guarantee.  The signature on your redemption request must be
guaranteed if the redemption proceeds are $50,000 or more, when the proceeds are
to be mailed to an address other than your address of record or if a change of
address request has been received by the Fund or transfer agent within the last
15 days. The guarantor must be a bank, member firm of a national securities
exchange, savings and loan association, credit union, or other entity authorized
by state law to guarantee signatures. A notary public may not guarantee
signatures. The signature guarantee must appear on the written redemption
request (the guarantor must use the phrase "signature guaranteed" and must
include the name of the guarantor bank or firm and an authorized signature).

    
By Telephone.  You may redeem shares having a value up to $50,000 by calling
Firstar at 1-800-241-9772, if you have authorized the Funds to accept telephone
instructions for your account.  Telephone redemptions can be authorized on the
account application.  Reasonable procedures are used to confirm that 
instructions received by telephone are genuine, such as requesting personal
identification information that appears on the purchase application and
recording the conversation.  The shareholder bears the risk of any loss that
might result from a fraudulent instruction, although a Fund may bear such risk
if reasonable procedures were not used.  To reduce the risk of a fraudulent
instruction, proceeds of telephone redemptions may be sent only to the
shareholder's address of record or to a bank or brokerage account designated by
the shareholder, in writing, on the purchase application or in a letter with the
signature(s) guaranteed.  The Funds reserve the right to record all telephone
redemption requests.  See "General Redemption Policies," below.      
    
For Information on how to redeem shares through intermidiaries see "How to
Purchase Shares - Purchases Through Intermidiaries"     

BY EXCHANGE

By writing (without charge) to, or by telephoning (for a fee) the Transfer
Agent, you may exchange all or any portion of your shares of any of the Monetta
Funds for shares of another Fund offered by Monetta for sale in your state. A
signed, properly completed Share Purchase Application must be on file. AN
EXCHANGE TRANSACTION IS A SALE AND PURCHASE OF SHARES FOR FEDERAL INCOME TAX
PURPOSES AND MAY RESULT IN CAPITAL GAIN OR LOSS. The registration of the account
to which you are making an exchange must be exactly the same as that of the Fund
account from which the exchange is made and the amount you exchange must meet
any applicable minimum investment of the Fund being purchased. Unless you have
elected to receive your dividends in cash, on an exchange of all shares, any
accrued unpaid dividends will be invested in the Fund to which you exchange on
the next business day. An exchange may be made by following the redemption
procedure described above and indicating the Fund to be purchased, except that a
signature guarantee normally is not required.
    
To use the Telephone Exchange Privilege to exchange between your Monetta
accounts in the amount of $250 or more, call 1-800-241-9772 before 3:00 p. m.,
Central time. The Funds' Transfer Agent imposes a charge (currently $5.00) for
each Telephone Exchange. The general redemption policies apply to redemption of
shares of Telephone Exchange. See "General Redemption Policies" below. The Funds
reserve the right at any time without prior notice to suspend or terminate the
use of the Telephone Exchange Privilege by any person or class of persons, or to
terminate the Privilege in its entirety. Because such a step would be taken only
if their respective Boards believe it would be in the best interests of the
Funds, the Funds expect to provide shareholders with prior written notice of any
such action unless it appears that the resulting delay in the suspension,
limitation, modification, or termination of the Telephone Exchange Privilege
would adversely affect the Funds. If the Funds were to suspend, limit, modify,
or     

Page 18
<PAGE>
 
terminate the Telephone Exchange Privilege, a shareholder expecting to make a
Telephone Exchange might find that an exchange could not be processed or that
there might be a delay in the implementation of the exchange.
         
BY CHECKWRITING - GOVERNMENT MONEY MARKET FUND ONLY

An investor in the Government Money Market Fund may request on the Share
Purchase Application that the Government Money Market Fund provide redemption
checks drawn on the Fund. Checks may be in amounts of $500 up to $50,000. The
shares redeemed by check will continue earning dividends until the check has
cleared. Checks will not be returned. If selected on the Application Form, a
book of 10 checks and 2 deposit forms will be sent to the shareholder.
Additional checks and deposit forms will be sent to the shareholder upon request
for a fee of $5.00 per book. This amount will be deducted from the shareholder's
account. In order to establish this checkwriting privilege after an account has
been opened, the shareholder must send a written request to the Government Money
Market Fund, P. O. Box 701, Attention: Monetta Funds, Milwaukee, Wisconsin 
53201-0701. A fee of $20 will be charged for each stop payment request. If there
are insufficient shares in the shareholder's account to cover the amount of the
redemption by check, the check will be returned marked "insufficient funds," and
a fee of $20 will be charged to the shareholder's account. Because dividends on
the Fund accrue daily, checks may not be used to close an account, as a small
balance is likely to result. The Checkwriting Privilege is only available to
Government Money Market Fund shareholders. The Checkwriting Privilege is not
available for IRAs or other retirement accounts.

REDEMPTION PRICE

The redemption price will be the net asset value (see "Determination of Net
Asset Value") per share of the Fund next determined after receipt by the
Transfer Agent of a redemption request in good order. This means that your
redemption request (including a telephone exchange request) must be received in
good order by the Transfer Agent before the close of regular session trading on
the New York Stock Exchange (ordinarily 3:00 p. m., Central time) to receive the
net asset value calculated that day. The principal value and return on your
investment will fluctuate and on redemption your shares may be worth more or
less than your original cost.

GENERAL REDEMPTION POLICIES

You may not cancel or revoke your redemption request once instructions have been
received and accepted. The Funds cannot accept a redemption request that
specifies a particular date or price for redemption or any special conditions.
Please telephone the Funds if you have any question about requirements for a
redemption before submitting your request. If you wish to redeem shares held by
one of the tax-sheltered retirement plans sponsored by the Adviser, special
procedures of those plans apply. (See "Tax-Sheltered Retirement Plans.") If you
request payment of redemption proceeds by wire, you must pay the cost of the
wire (currently $10.00).

YOUR REDEMPTION REQUEST MUST BE SENT TO THE TRANSFER AGENT AT ITS ADDRESS IN
MILWAUKEE SHOWN ON THE BACK COVER. IF A REDEMPTION REQUEST IS SENT DIRECTLY TO
THE FUNDS, IT WILL BE FORWARDED TO THE TRANSFER AGENT AND WILL RECEIVE THE
REDEMPTION PRICE NEXT CALCULATED AFTER RECEIPT BY THE TRANSFER AGENT. If you
redeem shares though an investment dealer, the dealer will be responsible for
promptly forwarding your request to the Fund's transfer agent. The Funds do not
consider the U. S. Postal Service or other independent delivery services to be
its agents. Deposit in the mail or with such services or receipt of redemption
requests at Firstar Trust Company's Post Office Box does not constitute receipt
by Firstar Trust Company or the Funds. CORRESPONDENCE BY OVERNIGHT COURIER
SHOULD BE SENT TO FIRSTAR TRUST COMPANY, 615 EAST MICHIGAN STREET, 3RD FLOOR,
MILWAUKEE, WISCONSIN 53202-5207. The Funds generally pay proceeds of a
redemption no later than seven days after proper instructions are received. If
you attempt to redeem shares within 15 days after they have been purchased by
check, a Fund may delay payment of the redemption proceeds to you until it can
verify that payment for the purchase of those shares has been (or will be)
collected.

                                                                         Page 19
<PAGE>

     
During periods of volatile economic and market conditions, you may have
difficulty placing your redemption or exchange by telephone which might delay
implementation of the redemption or exchange. Use of the Telephone Redemption or
Exchange Privilege authorizes the Funds and the Transfer Agent to tape-record
all instructions to redeem shares. Reasonable procedures are used to confirm
that instructions received by telephone are genuine, such as requesting personal
identification information that appears on your application and requiring
permission to record the conversation. You will bear the risk of loss due to
unauthorized or fraudulent instructions regarding your account, although the
Funds may have a risk of such loss if reasonable procedures were not used.
                                                                                
Because of the relatively high cost of maintaining smaller accounts, the Funds
reserve the right to redeem shares in any account with a balance of less than
$250 in share value. Prior to any such redemption, a Fund will give the
shareholder thirty days' written notice during which time the shareholder may
increase his investment to avoid having his shares redeemed. The $250 minimum
balance will be waived if the account balance drops below the required minimum
due to market erosion. MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995 WILL BE
ALLOWED TO MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT FUND.


                  DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
    
Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund declare and pay
income dividends, if any, at least annually. Balanced Fund pays income
dividends, if any, quarterly. Intermediate Bond Fund declares and pays income
dividends monthly. Income dividends of Government Money Market Fund are declared
daily and paid monthly. Capital gains, if any, are distributed by each Fund at
least annually. Distributions of a Fund are automatically reinvested in
additional shares of that Fund unless you elect payment in cash. Cash dividends
can be sent to you by check or deposited directly into your bank account. Call
the Transfer Agent at 1-800-241-9772 for more information and forms to sign up
for direct deposit.       

Each Fund is a separate entity for Federal income tax purposes. Each Fund
intends to continue to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, and thus not be subject to Federal
income taxes on amounts it distributes to shareholders.

Each Fund will distribute all of its net income and gains to shareholders.
Dividends from investment income and net short-term capital gains are taxable as
ordinary income. Distributions of long-term capital gains are taxable as long-
term gains regardless of the length of time you have held your shares in a Fund.
Distributions will be taxable to you whether received in cash or reinvested in
shares of a Fund. You will be advised annually as to the source of your
distributions for tax purposes. If you are not subject to income taxation, you
will not be required to pay tax on amounts distributed to you. If you purchase
shares shortly before a record date for a distribution you will, in effect,
receive a return of a portion of your investment, but the distribution will be
taxable to you even if the net asset value of your shares is reduced below your
cost. However, for Federal income tax purposes your original cost would continue
as your tax basis.

If you fail to furnish your social security or other tax identification number
or to certify properly that it is correct, the Funds may be required to withhold
Federal income tax, currently at the rate of 31% ("backup withholding"), from
dividend, capital gain and redemption payments to you. Your dividend and capital
gain payments may also be subject to backup withholding if you fail to certify
properly that you are not subject to backup withholding due to the under-
reporting of certain income. These certifications are contained in the Share
Purchase Application, which you should complete and return when you make your
initial investment.


                       DETERMINATION OF NET ASSET VALUE

The purchase and redemption price of each Fund's shares is its net asset value
per share. The net asset value of a share of each Fund is determined as of the
close of trading on the New York Stock Exchange (currently 3:00 p. m., Central
time) by dividing the difference between the values of the Fund's assets and

Page 20
<PAGE>
 
liabilities by the number of shares outstanding. This is referred to as "net
asset value per share", which is determined as of the close of regular session
trading at the New York Stock Exchange on each day on which that exchange is
open for trading. A security listed or traded on a national securities exchange
or traded on the Nasdaq National Market is valued at its last quoted sales price
on the day the valuations are made. Listed securities and securities traded on
the over-the-counter market that do not trade on a particular day are valued at
the mean between the quoted bid and asked price.

VALUATION

Securities for which market quotations are readily available at the time of
valuation are valued on that basis. Each security traded on a national stock
exchange is valued at its last sale price on that exchange on the day of
valuation or, if there are no sales that day, at the mean of the latest bid and
asked quotations. Each over-the-counter security for which the last sale price
on the day of valuation is available from the Nasdaq National Market is valued
at that price. All other over-the-counter securities for which reliable
quotations are available are valued at the mean of the latest bid and asked
quotations. Long-term straight-debt securities for which market quotations are
not readily available are valued at a fair value based on valuations provided by
pricing services approved by the respective Boards, which may employ electronic
data processing techniques, including a matrix system, to determine valuations.
Short-term debt securities for which market quotations are not readily available
are valued by use of a matrix prepared by the Adviser based on quotations for
comparable securities. Other assets and securities held by a Fund for which
these valuation methods do not produce a fair value are valued by a method that
the Board believes will determine a fair value.

VALUATION OF GOVERNMENT MONEY MARKET FUND

Government Money Market Fund attempts to maintain its net asset value at $1.00
per share. Portfolio securities are valued based on their amortized cost, which
does not take into account unrealized gains or losses. Other assets and
securities of the Fund for which this valuation method does not produce a fair
value are valued at a fair value determined by the Board. The extent of any
deviation between the Fund's asset value based upon market quotations or
equivalents and $1.00 per share based on amortized cost will be examined by the
Board of Trustees. If such deviation were to exceed 1/2 of 1%, the Board would
consider what action, if any, should be taken, including selling portfolio
instruments, increasing, reducing or suspending distributions, or redeeming
shares in kind.


                             SHAREHOLDER SERVICES

REPORTING TO SHAREHOLDERS

You will receive a confirmation statement reflecting each of your purchases and
redemptions of shares of a Fund, as well as periodic statements detailing
distributions made by each Fund of which you are a shareholder. You may elect to
receive a combined statement for all Funds for which you are a shareholder. In
addition, you will receive semi-annual and annual reports showing the portfolio
holdings of each Fund and annual tax information.
    
CERTAIN ACCOUNT CHANGES       

Investors who wish to make a change in their address of record, a change in
investments made through an automatic investment plan or a change in the manner
in which dividends are received may do so by calling the transfer agent at 
1-800-241-9772.

AUTOMATIC INVESTMENT PLAN

The Funds have an Automatic Investment Plan which permits an existing
shareholder to purchase additional shares of any Fund (minimum $50 per
transaction) at regular intervals. Under the Automatic Investment Plan, shares
are purchased by transferring funds from a shareholder's checking, bank money
market, NOW account, or savings account in an amount of $50 or more designated
by the shareholder. At

                                                                         Page 21
<PAGE>
 
your option, the account designated will be debited and shares will be purchased
on the date elected by the shareholder. There must be a minimum of seven days
between automatic purchases. If the date elected by the shareholder is not a
business day, funds will be transferred the next business day thereafter. Only
an account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. To establish an Automatic Investment
Account, complete and sign Section 7 of the Shareholder Purchase Application
included in this Prospectus and send it to the Transfer Agent. You may cancel
this privilege or change the amount of purchase at any time by calling 
1-800-241-9772 or by mailing written notification to: MONETTA, C/O FIRSTAR TRUST
COMPANY, P.O. BOX 701, MILWAUKEE, WISCONSIN 53201-0701. The change will be
effective five business days following receipt of your notification by the
Transfer Agent. A Fund may modify or terminate this privilege at any time or
charge a service fee, although no such fee currently is contemplated. However, a
$20.00 fee will be imposed by Firstar Trust Company if sufficient funds are not
available in the shareholder's account at the time of the automatic transaction.

SYSTEMATIC EXCHANGE PLAN

The Funds offer a Systematic Exchange Plan whereby a shareholder may
automatically exchange shares (in increments of $250 or more) of one Monetta
Fund into another on any day, either monthly or quarterly, the shareholder
chooses. For additional information and a Systematic Exchange Plan form, please
call Firstar Trust Company at 1-800-241-9772. Before participating in the
Systematic Exchange Plan, an investor should consult a tax or other financial
adviser to determine the tax consequences of participation.

SYSTEMATIC WITHDRAWAL PLAN

The Funds offer a Systematic Withdrawal Plan for shareholders who own shares of
any Fund worth at least $10,000 at current net asset value. Under the Systematic
Withdrawal Plan, a fixed sum (minimum $500) will be distributed at regular
intervals (on any day, either monthly or quarterly). In electing to participate
in the Systematic Withdrawal Plan, investors should realize that within any
given period the appreciation of their investment in a particular Fund may not
be as great as the amount withdrawn. A shareholder may vary the amount or
frequency of withdrawal payments or temporarily discontinue them by notifying
Firstar Trust Company at 1-800-241-9772. The Systematic Withdrawal Plan does not
apply to shares of any Fund held in Individual Retirement Accounts or defined
contribution retirement plans. For additional information or to request an
application please call Firstar Trust Company at 1-800-241-9772.


                        TAX-SHELTERED RETIREMENT PLANS

The Adviser offers prototype tax-sheltered retirement plans for individuals,
businesses and nonprofit organizations. Please call 1-800-MONETTA for booklets
describing the following programs and the forms needed to establish them:
    
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs) for employed individuals and their non-
employed spouses.      
    
MONEY PURCHASE PENSION AND PROFIT SHARING PLANS, including salary deferral
(401(k)) plans, for self-employed individuals, partnerships and corporations. 
     
    
403(b) RETIREMENT PLANS for nonprofit organizations.     
    
SAVINGS INCENTIVE MATCH PLANS (SIMPLE-IRAs) permitting employers to provide
retirement benefits, including salary deferral, to their employees using IRAs
and minimizing administration and reporting requirements.        

Page 22
<PAGE>
 
                            MANAGEMENT OF THE FUNDS

     The Board of Directors of Monetta Fund and the Board of Trustees of the
Trust have overall responsibility for the conduct of the affairs of their
respective Funds.

INVESTMENT ADVISER

     Each Fund's investments are managed by the investment adviser, MONETTA
FINANCIAL SERVICES, INC. (the "Adviser"). Subject to the overall authority of
the respective Boards, the Adviser manages the business and investments of the
Funds under investment advisory agreements. The Adviser also furnishes all
office space, equipment and personnel used by it in performing its duties and
pays all of each Fund's ordinary operating expenses except the fees of the
custodian and transfer agent, fees and expenses of the non-interested board
members and payments under a Fund's Service and Distribution Plan. The Adviser
is controlled by Robert S. Bacarella, the President and Founder of Monetta Fund
and the Trust, whose principal occupation has been in the field of money
management since 1972. The Adviser's address is 1776-A S. Naperville Road, Suite
207, Wheaton, IL 60187.      

     The Adviser employs a team approach to management of the Fund. The
management team is comprised of the lead portfolio manager, other Adviser
portfolio managers and research analysts. Team members share responsibility for
providing ideas, information, knowledge and expertise in managing the Fund. Each
team member has one or more areas of expertise that is applied to the management
of the Fund. Daily decisions on portfolio selection rest with the lead portfolio
manager who utilizes the input and advice of the management team in making
purchase and sale determinations.      

     Effective November 8, 1996, Robert S. Bacarella and Kevin D. Moore are co-
managers of Mid-Cap Fund, Large Cap Fund, Balanced Fund, Intermediate Bond Fund
and Government Money Market Fund.      

     Mr. Bacarella has been Chairman and CEO since October, 1996, Director since
1984 and President of the Adviser from 1984 to 1996. He has served as the
portfolio manager of Monetta Fund since it began operations. Mr. Bacarella was
Director - Pension Fund Investments, for Borg-Warner Corporation until 1989.
    
     Mr. Moore joined the Adviser as senior analyst in October 1995. He has
served as the co-manager of Large-Cap Fund and Balanced Fund since May, 1996.
Mr. Moore was a senior portfolio manager and Vice President of First of America
Investment Corporation from 1992 to 1995. He was directly responsible for
managing over $450 million in assets.        

     In return for its services, and for the assumption of each Fund's ordinary
operating expenses except the fees and expenses of the custodian, transfer
agent, the fees and expenses of the non-interested directors and trustees and
payments under a Fund's Service and Distribution Plan, the Adviser receives a
monthly fee from each Fund based on that Fund's average net assets, computed and
accrued daily. The annualized rate of fee for Monetta Fund is 1% of average net
assets, for each of Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund is .75 of 1%
of average net assets; that of Balanced Fund is .40 of 1% of average net assets;
that of Intermediate Bond Fund is .35 of 1% of average net assets; and that of
Government Money Market Fund is .25 of 1% of average net assets.       

     Monetta Fund, the Trust and the Funds use "Monetta" in their names by
license from the Adviser and would be required to stop using those names if
Monetta Financial Services ceased to be the Adviser. The Adviser has the right
to use the name for other enterprises, including other investment companies.

     The Adviser seeks the best combination of net price and execution in
selecting broker-dealers to execute portfolio transactions for the Funds.
Subject to that overriding consideration, and consistent with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., the Adviser
may consider sales of Fund shares, or recommendations that clients purchase Fund
shares, as a factor in the selection of broker-dealers to execute transactions
for the Funds. Brokerage transactions for the Funds may be executed through
Monetta Brokerage, Inc., a registered broker-dealer and an affiliate of the
Adviser.

                                                                         Page 23

<PAGE>

    
At September 30, 1996, the Adviser owned 56.3% of the outstanding shares of the
Balanced Fund, 18.6% of the outstanding shares of the Government Money Market
Fund, 27.3% of the outstanding shares of the Intermediate Bond Fund, 10.0% of
the outstanding shares of the Large-Cap Fund and less than 1% of the Mid-Cap
Fund. Ownership of a majority of the outstanding shares of the Government Money
Market Fund gives the Adviser control over the outcome of any matter requiring
approval of the shareholders of Government Money Market Fund, and ownership of a
significant percentage of the outstanding shares of the Trust reduces the number
of other shares that must be voted in accordance with the Adviser's vote to
approve or disapprove any proposal requiring the approval of the shareholders of
the Trust.       
    
DISTRIBUTOR

Shares of each Fund are distributed by Funds Distributor, Inc., 60 State Street,
Boston, Massachusetts 02109.

DISTRIBUTION AND SERVICE PLAN

Pursuant to a Service and Distribution Plan (the "Plan") adopted by each series
of the Trust pursuant to Rule 12b-1 under the Investment Company Act of 1940 as
amended (the "Act"), each series of the Trust may enter into agreements with
service organizations and may compensate those organizations for their
accounting, shareholder services and distribution services in amounts up to .25
of 1% for Small-Cap Fund, Mid-Cap Fund, Large-Cap Fund, Balanced Fund and
Intermediate Bond Fund and .10 of 1% for Government Money Market Fund per annum
of the values of accounts of shareholders purchasing through such organizations.
In addition, each Fund may pay for other services relating to distribution of
Fund shares, including the fees and expenses of the distributor, the
registration fees payable to the states and other jurisdictions in which Fund
shares are offered for sale, and the cost of printing prospectuses and
shareholder reports used for marketing purposes. The maximum amounts payable by
a Fund under the Plan, for service fees and other distribution related expenses,
are .10 of 1% of the average net assets of Government Money Market Fund and .25
of 1% of the average net assets of each of Small-Cap Fund, Mid-Cap Fund, Large-
Cap Fund, Balanced Fund and Intermediate Bond Fund. Additional service fees and
additional amounts for other distribution-related expenses may be paid by the
Adviser from its own resources.      

                               OTHER INFORMATION

All shareholder inquiries and instructions concerning Fund accounts should be
directed to: MONETTA, c/o Firstar Trust Company, P. O. Box 701, Milwaukee,
Wisconsin 53201-0701.

In approving the use of a single combined Prospectus, the Board of Directors of
Monetta Fund and the Board of Trustees of the Trust considered the possibility
that one Fund might be liable for misstatements in the Prospectus regarding
information concerning another Fund.

 .    MONETTA FUND

Monetta Fund is an open-end diversified management investment company
incorporated under the laws of the State of Maryland on October 16, 1985.

The Fund has one class of capital stock, $0.01 par value. Each full share is
entitled to one vote and to participate equally in dividends and distributions
declared by the Fund (fractional shares have the same rights, proportionally, as
full shares). Fund shares are fully paid and non-assessable when issued and have
no preemptive, conversion or exchange rights. The obligations and liabilities
associated with ownership or shares in the Fund are limited to the extent of a
shareholder's investment in the Fund.

Voting rights are non-cumulative, so that the holders of more than 50% of the
shares voting in any election can, if they choose to do so, elect all of the
directors of the Fund.


Page 24
<PAGE>
   
As a Maryland corporation registered under the Investment Company Act of 1940,
the Fund is not required to hold routine annual meetings of shareholders and
does not expect to do so. Maryland law permits shareholders to remove directors
and requires the Fund to assist in shareholder communication under certain
circumstances.

 .    THE TRUST
    
Small-Cap Fund, Mid-Cap Fund, Large-Cap Fund, Balanced Fund, Intermediate Bond
Fund and Government Money Market Fund are each a series of Monetta Trust, which
was organized as a Massachusetts business trust on October 20, 1992 and is an
open-end diversified management investment company.     

Under the terms of the Trust's agreement and declaration of trust ("Declaration
of Trust"), the trustees may issue an unlimited number of shares of beneficial
interest without par value for each series of shares authorized by the trustees.
All shares issued are fully paid and non-assessable when issued and have no pre-
emptive, conversion or exchange rights.

Each Fund's shares are entitled to participate pro rata in any dividends and
other distributions declared by the Board of Trustees with respect to shares of
that Fund. All shares of a Fund have equal rights in the event of liquidation of
that Fund.

Under Massachusetts law, the shareholders of the Trust may, under certain
circumstances, be held personally liable for the Trust's obligations. However,
the Declaration of Trust disclaims liability of the shareholders, trustees, and
officers of the Trust for acts or obligations of any Fund, which are binding
only on the assets and property of that Fund. The Declaration of Trust requires
that notice of such disclaimer be given in each agreement, obligation, or
contract entered into or executed by the Trust or the Board of Trustees. The
Declaration of Trust provides for indemnification out of a Fund's assets of all
losses and expenses of any Fund shareholder held personally liable for the
Fund's obligations. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is remote, since it is limited to circumstances
in which the disclaimer is inoperative and the Fund itself is unable to meet its
obligations. The risk of a particular Fund incurring financial loss on account
of an unsatisfied liability of another Fund of the Trust is also believed to be
remote, because it would be limited to claims to which the disclaimer did not
apply and to circumstances in which the other Fund was unable to meet its
obligations.

Each share has one vote and fractional shares have fractional votes. As a
business trust, the Trust is not required to hold annual shareholder meetings.
However, special meetings may be called for purposes such as electing or
removing trustees, changing fundamental policies or approving an investment
advisory agreement. On any matters submitted to a vote of shareholders, shares
are voted by individual series and not in the aggregate, except when voting in
the aggregate is required by the 1940 Act of other applicable law. Shares of a
Fund are not entitled to vote on any matter not affecting that Fund. All shares
of the Trust vote together in the election of trustees.

The trustees serve indefinite terms of unlimited duration. The trustees appoint
their own successors, provided that at least two-thirds of the trustees, after
any such appointment, have been elected by the shareholders. Shareholders may
remove a trustee, with or without cause, upon the declaration in writing or vote
of two-thirds of the outstanding shares of the Trust, respectively. A trustee
may be removed with or without cause upon the written declaration of a majority
of the trustees.


                                                                         Page 25
<PAGE>
 
                 TABLE OF CONTENTS

    
<TABLE>
<S>                                               <C>
Summary                                             2 
Fund Expenses                                       4
Financial Highlights                                5
Investment Objectives and Policies                  8
Risks and Investment Considerations                11
Investment Restrictions                            13
Investment Return                                  14
How to Purchase Shares                             14
How to Redeem Shares                               16
Dividends, Distributions and Federal Taxes         19
Determination of Net Asset Value                   20
Shareholder Services                               20
Tax-Sheltered Retirement Plans                     21
Management of The Funds                            22
Other Information                                  23

</TABLE>       
SHAREHOLDERS NOTE:

  SEND ALL SHARE PURCHASE APPLICATIONS, CHANGES OF ADDRESS, REQUESTS FOR ACCOUNT
INFORMATION AND REDEMPTION REQUESTS TO THE TRANSFER AGENT

  Firstar Trust Company
  P. O. Box 701
  Milwaukee, WI  53201-0701
  1-800-241-9772

  Hearing Impaired Services
  TDD  1-800-684-3416


INVESTMENT ADVISER:

Monetta Financial Services, Inc.


ADDRESS OF FUNDS AND ADVISER:

1776-A South Naperville Road
Suite 207
Wheaton, Illinois  60187-8133

    
DISTRIBUTOR:

Funds Distributor, Inc.
Boston, Massachusetts 02109     

AUDITORS:

KPMG Peat Marwick LLP
Chicago, Illinois  60601


LEGAL COUNSEL:

Bell, Boyd & Lloyd
Chicago, Illinois  60602


                               [LOGO OF MONETTA]

 
                              Monetta Fund, Inc.
                            Monetta Small-Cap Fund     
                          Monetta Mid-Cap Equity Fund
                         Monetta Large-Cap Equity Fund
                             Monetta Balanced Fund
                        Monetta Intermediate Bond Fund
                     Monetta Government Money Market Fund


                             No-Load Mutual Funds


                              No Redemption Fees

         

                                  PROSPECTUS


    
                               FEBRUARY 2, 1997     
<PAGE>
 
                           SHARE PURCHASE APPLICATION

Mail Completed Application to:  Overnight Express Mail to:
  Monetta                         Monetta
  Mutual Fund Services            Mutual Fund Services, 3rd Floor
  P.O.Box 701                     615 East Michigan Street
  Milwaukee, WI 53201-0701        Milwaukee, WI 53202

                                                                   1-800-MONETTA

      Use this form for individual, custodial, trust, profit sharing or
pension plan accounts. Do not use this form for Monetta Funds-sponsored IRA,
Defined Contribution (401(k) or 403(b)) plans which require forms available from
Monetta Funds. For information please call 1-800-666-3882.
===============================================================================
1.  ACCOUNT REGISTRATION


[_] Individual

    Name
    ---------------------------------------------------------------------------

    Social Security Number              Citizen of  [_] US  [_] Other
    =========================================================================== 
[_] Joint Owner*

    Name
    ---------------------------------------------------------------------------

    Social Security Number              Citizen of  [_] US  [_] Other
    =========================================================================== 
[_] Gift to Minor

    Custodian
    ---------------------------------------------------------------------------

    Minor                               Minor's Birthdate
    ---------------------------------------------------------------------------
    Minor's Social Security Number      Citizen of  [_] US  [_] Other
    =========================================================================== 
[_] Corporation, Partnership or Other Entity

    Name of Entity
    ---------------------------------------------------------------------------
    Taxpayer Identification Number
    --------------------------------------------------------------------------- 
    . A corporate resolution form or certificate is required for corporate
      accounts.
    =========================================================================== 
[_] Trust, Estate or Guardianship

    Name
    ---------------------------------------------------------------------------
    Name of Fiduciary(ies)
    --------------------------------------------------------------------------- 
    Taxpayer Identification Number      Date of Trust
    ===========================================================================
    .  Additional documentation and certification may be requested.

*  Registration will be Joint Tenants with Rights of Survivorship (JTWROS)
   unless otherwise specified
=============================================================================== 
<PAGE>
 
2. MAILING ADDRESS                      [_] Send Duplicate Confirmations To:

- ---------------------------------           ------------------------------------
Street, Apt.                                Name

- ---------------------------------           ------------------------------------
City, State, Zip Code                       Street, Apt.

- ---------------------------------           ------------------------------------
Daytime Phone Number                        City, State, Zip Code
================================================================================

3. INVESTMENT INSTRUCTION & DISTRIBUTION


     The minimum initial investment is $1,000 for shares in any of the Monetta
Funds which may be allocated among the Funds so long as at least $250 is
invested in each Fund in which you choose to invest (For UGMA, AIP, or IRA the
minimum initial investment is $250). Subsequent investment to any Fund is $50
(also $50 for the Automatic Investment Plan).

                             DISTRIBUTION OPTIONS
                          Capital Gains and Dividends
                                            Amount       Reinvested   Cash
[_] Monetta Fund                            $            [_]          [_]
- --------------------------------------------------------------------------------
    
[_] Monetta Small-Cap Fund                  $            [_]          [_]      
- --------------------------------------------------------------------------------
[_] Monetta Mid-Cap Equity Fund             $            [_]          [_]
- --------------------------------------------------------------------------------
[_] Monetta Large-Cap Equity Fund           $            [_]          [_]
- --------------------------------------------------------------------------------
[_] Monetta Balanced Fund                   $            [_]          [_]
- --------------------------------------------------------------------------------
[_] Monetta Intermediate Bond Fund          $            [_]          [_]
- --------------------------------------------------------------------------------
[_] Monetta Government Money Market Fund    $            [_]          [_]  
- --------------------------------------------------------------------------------
    Total Investment                      $              (If no distribution
                                           ============  option is checked,
                                                         dividends and capital
                                                         gains will be 
                                                         reinvested.)

4.  CHECKWRITING (Monetta Government Money Market Fund Only. Not available for
    IRA or other retirement accounts.)

[_] Check this box if you would like to establish check redemption privileges
    for the Monetta Government Money Market Fund and have 10 checks and 2
    deposits forms printed. Each additional book of checks and deposit forms
    will be $5.00. This amount will be deducted from your account. Check
    redemption privileges are subject to the conditions on the reverse side.
 
                              ---------------------------------------------

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

                              --------------------------------------------- 
                              Account Number (For Bank Use Only)

    ----------------------------------------------------------------------------
    Name on Monetta Government Money Market Fund Account (must be the same as
    Account Registration-please print)

    ----------------------------------------------------------------------------
    Authorized Signature(s) (For joint accounts, all owners must sign.)

    For a corporate, trust, or other entity, or a joint account, how many
    authorized signatures are required?
================================================================================
<PAGE>
 
5. BACKUP WITHHOLDING

[_] Check this box only if the IRS has notified you that you are subject to
    backup withholding.
================================================================================

6. Telephone Exchange Privilege

     You automatically have the Telephone Exchange Privilege unless you check
the box below. Under this Privilege, the Funds and their transfer agent are
authorized to accept telephone instructions from any person to redeem shares
from your account and apply the proceeds to purchase shares for your account in
another Fund offered by Monetta, for sale in your state ("exchange"). The
Exchange Privilege may not be used to redeem shares purchased by check (except
certified and cashier checks) within the preceding 15 days. Telephone exchanges
must be for at least $250. Telephone exchanges may be made only to accounts with
identical registrations. You further agree that your election shall continue
until five business days after the Fund and its transfer agent receive written
notice of termination from you. The Privilege will be transferred automatically
to any new account you open within the Fund into which a telephone or written
exchange is made. See the statements below under "Signature."

      [_] DECLINE TELEPHONE EXCHANGE. If you want to establish a Telephone
          Exchange Privilege at a later date, you will be required to obtain a
          signature guarantee.
================================================================================

7.   AUTOMATIC INVESTMENT PLAN (AIP)  Your signed Application must be received
at least 15 business days prior to initial transaction. An unsigned voided check
from your checking account or a savings account deposit slip is required with
your application.

     In many cases, the key to achieving long-term investment objectives is a
periodic and consistent investment program. The Funds' Automatic Investment Plan
will provide you with an easy and systematic approach to investing. Based on
your instructions, Firstar Trust Company, the transfer agent for Monetta Funds,
will automatically transfer money directly from your checking, bank money
market, NOW account or savings account named below on the day of each month or
funds will be transferred the next business day thereafter. If you have any
questions, call 1-800-MONETTA.

     Your Monetta account must be established with $250 minimum deposit before
the Plan goes into effect. Please start my AIP as described in the Prospectus
beginning: Month __________ Year ______. I hereby instruct Firstar Trust
Company, transfer agent for Monetta Funds, to automatically transfer $_________
(minimum $50) directly from my checking, Now or savings account named below on
the ______ day of each month or the first business day thereafter into my
_______________________ account. I understand that I will be assessed a $20 fee
if the automatic purchase cannot be made due to insufficient funds, stop
payment, or for any other reason.

Name(s) on Bank Account
                        --------------------------------------------------------
Bank Name                             Account Number
          ---------------------------                ---------------------------
Bank Address
             -------------------------------------------------------------------

 
- ------------------------------------   -----------------------------------------
Signature of Bank Account Owner        Signature of Joint Owner

 .  Termination must be in writing or by calling Firstar Trust Company. Allow 5
   business days to become effective. Your participation in the Plan will
   terminate automatically if you redeem all your Monetta Fund shares.

 .  IRA contributions apply as a current year purchase (purchases may not be used
   for prior year contributions).
================================================================================
<PAGE>
 
8. SIGNATURE & CERTIFICATION  Required by The Internal Revenue Service
 
     I affirm that I have received a current prospectus of the Funds and agree
to be bound by its terms. I certify that I have full authority and legal
capacity to purchase shares of the Fund(s) and to establish and use any related
Privileges, and agree that such Privileges and their terms and conditions shall
be governed by Illinois law. If I have not provided a social security or other
tax identification number in Part 1 of the Application, by signing the
Application, 1: (i) certify, under penalties of perjury, that I have not been
issued a number, but have applied (or soon will apply for one; and (ii)
understand that if I do not provide the Funds or their transfer agent with a
certified number within 60 days, they will be required to withhold 31% from all
dividend, capital gain, and redemption payments from my account(s) until I
provide them with a certified number. 

     I understand that the Telephone Exchange Privilege will apply to my account
unless I have specifically declined the privilege in Part 6, above. I understand
that by signing this application unless the Privilege is declined, I agree that
neither the Funds nor their transfer agent, their agents, officers, trustees or
employees will be liable for any loss, liability, cost or expense for acting
instructions given under the Privilege, placing the risk of any loss on me. See
"How to Redeem Shares--By Exchange" in the prospectus.

     I agree that any of the Funds and their transfer agent may redeem shares
and retain the proceeds from any of my account(s) with any Fund(s) up to a total
of (a) any IRS penalties attributable to my failure to provide any of the Funds
or their transfer agent with correct and complete information requested by
either, and (b) any tax not withheld from distributions to me which should have
been withheld by them.

     UNDER THE PENALTY OF PERJURY, I CERTIFY THAT (1) THE SOCIAL SECURITY NUMBER
OR TAXPAYER IDENTIFICATION NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
IDENTIFICATION NUMBER, AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER
BECAUSE I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS, OR THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING. The IRS does not require your consent to any provision of this
document other than the certification in this paragraph required to avoid backup
withholding. (Note: you must check the box in Part 5 of this Application if the
IRS has notified you that you are subject to backup withholding due to your
failure to report such income.)

- ----------  ------------------------------   -----------------------------------
Date        Signature*                       Signature of Co-Owner, if any

*If shares are to be registered in the name of (1) two persons jointly, both
persons must sign, (2) a custodian for a minor, the custodian must sign, (3) a
trust, the trustee(s) must sign, or (4) a corporation or other entity, an
officer must sign and print name and title on space provided below.

- --------------------------------------------------------------------------------
Print name and title of officer signing for a corporation or other entity
================================================================================
CONDITIONS OF REDEMPTION OPTION

     Checks may not be for less than $500 or such other minimum amounts as may
from time to time be established by the Monetta Government Money Market Fund
upon prior written notice to its shareholders. Maximum amount for withdrawal is
$50,000. Shares purchased by check, (including certified or cashier's check)
will not be redeemed by check-writing or any other method of redemption until
the transfer agent is reasonably satisfied that the check has been collected,
which could take up to 7 days from the purchase date.

     By signing this card, I appoint the Firstar Bank Milwaukee, NA my agent to
present checks drawn on this account to the transfer agent, Firstar Trust
Company, as requests to redeem shares and I authorize the Monetta Government
Money Market Fund and Firstar Trust Company to honor such requests and redeem
shares in an amount equal to the amount of the check. I agree to be subject to
the rules pertaining to the check redemption privileges as amended from time to
time. The Monetta Government Money Market Fund or Firstar Trust Company may
reserve the right to modify or terminate this account and authorization at any
time.

B.N. 0
      ------------ ------------ ------------    
                    Internal Use Only
<PAGE>

     
MONETTA FUND, INC.                           STATEMENT OF ADDITIONAL INFORMATION
MONETTA SMALL-CAP EQUITY FUND
MONETTA MID-CAP EQUITY FUND                                     FEBRUARY 2, 1997
MONETTA LARGE-CAP EQUITY FUND
MONETTA BALANCED FUND                                         MONETTA FUND, INC.
MONETTA INTERMEDIATE BOND FUND                                     MONETTA TRUST
MONETTA GOVERNMENT MONEY MARKET FUND                               NO-LOAD FUNDS
     

                    1776-A SOUTH NAPERVILLE ROAD, SUITE 207
                               WHEATON, IL  60187
                                 1-800-MONETTA
                                (1-800-666-3882)

                               TABLE OF CONTENTS
    
<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
     <S>                                                               <C>
     Other Fund Information............................................B-1
     Investment Objectives and Policies................................B-1
     Risks and Investment Considerations...............................B-5
     Investment Restrictions...........................................B-11
     Performance Information...........................................B-14
     Investment Adviser................................................B-19
     Service and Distribution Plan.....................................B-20
     Directors/Trustees and Officers...................................B-21
     Purchasing and Redeeming Shares...................................B-25
     More Information About Net Asset Value............................B-25
     Tax Status........................................................B-27
     Portfolio Transactions............................................B-27
     Distributor.......................................................B-30
     Custodian.........................................................B-30
     Independent Auditors..............................................B-30
     Appendix - Ratings................................................B-32
</TABLE>       

      his Statement of Additional Information is not a prospectus, but provides
additional information that should be read in conjunction with the Funds'
prospectus dated February 2, 1997 and any supplement thereto.  The prospectus
and additional copies of the annual and semi-annual reports may be obtained
without charge by writing or telephoning the Funds at the address or telephone
number shown on the previous page.      

<PAGE>
 
OTHER FUND INFORMATION

     Monetta Fund, Inc. ("Monetta Fund") is an open-end diversified management
investment company organized under the laws of the State of Maryland.  Monetta
Small-Cap Equity Fund (Small-Cap Fund"), Monetta Mid-Cap Equity Fund ("Mid-Cap
Fund"), Monetta Large-Cap Equity Fund ("Large-Cap Fund"), Monetta Balanced Fund
("Balanced Fund"), Monetta Intermediate Bond Fund ("Intermediate Bond Fund") and
Monetta Government Money Market Fund ("Government Money Market Fund") are series
of Monetta Trust (the "Trust"), a Massachusetts business trust (the "Trust").
Monetta Fund and each of the Trust series are collectively referred to as the
"Funds."       

     The 1995 annual reports of Monetta Fund and the Trust, copies of which
accompany this Statement of Additional Information, contain financial
statements, notes thereto, and the report of independent auditors, all of  which
(but no other part of the annual report) are incorporated herein by reference.
The 1996 semi-annual reports of Monetta Fund and the Trust, copies of which
accompany this Statement of Additional Information, contain interim unaudited
financial statements and notes thereto for the six months ended June 30, 1996
all of  which (but no other part of such report) are incorporated herein by
reference.       

INVESTMENT OBJECTIVES AND POLICIES

     The following information supplements the discussion of the Funds'
investment objectives and policies in the prospectus.  In pursuing its
objective, each Fund will invest as described below and in the prospectus.  Each
Fund's investment objective is a fundamental policy, which may not be changed
without the approval of a "majority of  the outstanding voting securities" of
that Fund./1/

     The Funds' investment objectives differ principally in the types of
securities selected for investment and the relative importance each Fund places
on growth potential, current income and preservation of capital as
considerations in selecting investments.

     In pursuing the investment objectives of each of Small-Cap Fund, Mid-Cap
Fund, Large-Cap Fund and Balanced Fund, the Adviser pursues an active and
disciplined trading strategy.  Those selling disciplines result in a higher than
average rate of portfolio turnover, as discussed in the prospectus.  In
addition, it may be necessary for a Fund to sell short against the box rather
than sell outright a security it wants to sell, to control the timing of the
disposition of that security for federal income tax purposes.  In a short sale
against the box, the Fund sells short a security it owns and enters into an
arrangement with the broker/dealer through which the short sale is executed to
receive income from the proceeds of the short sale for as long as the short
position remains open.  The Fund incurs transaction costs in connection with
short sales that are       

- -------------
/1/  A "majority of the outstanding voting securities" means the approval of the
     lesser of (i) 67% of the Fund's shares present at a meeting if more than
     50% of the shares outstanding are present or (ii) more than 50% of the
     Fund's outstanding shares.

                                      B-1
<PAGE>
 
likely to exceed the transaction costs that would be incurred in an outright
sale. See "Risks and Investment Considerations." The Funds have no present
intention to sell short securities comprising 5% or more of its total assets.
    
 .  Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund

     Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund each seek
long-term capital growth by investing in common stocks believed to have above
average growth potential.  The Funds differ from each other with respect to the
(i) market capitalizations of the companies in which they invest and (ii)
relative importance placed on investing for current income.

     Each Fund's investment approach emphasizes a competitive return in rising
markets and preservation of capital in declining markets in an attempt to
generate long-term capital growth over a complete business cycle (approximately
3 to 5 years) when compared to the broader stock market indices.  The Adviser's
emphasis is on common stocks with improving earnings per share growth, a history
of growth and sound management, and a strong balance sheet.  The Adviser may
invest up to 20% of Monetta Fund's assets and 25% of Small-Cap Fund, Mid-Cap
Fund and Large-Cap Fund's assets in securities not meeting the above criteria
but believed by the Adviser to be undervalued based on a company's current
price-earnings ratio relative to its estimated earnings growth rate.      

     The securities in which each Fund invests will be listed on a national
securities exchange or traded on an over-the-counter market.
    
     MONETTA FUND'S primary investment objective is to provide its shareholders
with capital appreciation by investing at least 70% of the Fund's assets in
equity securities believed to have growth potential.  A secondary objective of
Monetta Fund is to provide its shareholders with income, in part by investing
the balance of the Fund's assets in dividend paying equity securities or in
long-term (greater than one year) debt securities.  The Fund's investments in
long-term debt securities will consist of United States Treasury Notes and
Treasury Bonds of various maturities and investment grade securities rated at
least A or better by either Moody's Investor Services, Inc. ("Moody's") or
Standard and Poor's Corporation ("S&P").

     Monetta Fund generally invests in smaller companies with aggregate market
capitalizations ranging from $50 million to $1 billion.

     SMALL-CAP FUND typically invests in small-sized companies with market
capitalization of less than $1 billion ("small-cap companies").  Under normal
market conditions, the Fund invests at least 65% of its total assets in common
stocks of small-cap companies.

     MID-CAP FUND typically invests in medium-sized companies with market
capitalizations of $1 billion to $5 billion ("mid-cap companies").  Under normal
market conditions, the Fund invests at least 65% of its total assets in common
stocks of mid-cap companies.      

                                      B-2
<PAGE>
     
     LARGE-CAP FUND typically invests in large companies with market
capitalizations in excess of $5 billion ("large-cap companies").  Under normal
market conditions, the Fund invests at least 65% of its total assets in common
stocks of large-cap companies.      

 .  BALANCED FUND

     BALANCED FUND seeks a favorable total rate of return through capital
appreciation and current income consistent with preservation of capital, derived
from investing in a portfolio of equity and fixed income securities.
    
     The investment approach for Balanced Fund combines the equity growth
strategy used for Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund
and the income strategy employed by Intermediate Bond Fund, as discussed below.

     The Fund may emphasize fixed income securities or equity securities or hold
equal amounts of both, depending upon the Adviser's analysis of market,
financial and economic conditions.  Under normal circumstances, the Fund invests
at least 80% of its net assets in fixed income and equity securities.  At least
25% of the Fund's assets invested in fixed income securities will consist of
corporate bonds and debentures rated A or better and securities issued or
guaranteed as to principal and interest by the U.S. Government and its agencies
and instrumentalities.  The Fund does not presently intend to invest more than
10% of its assets in securities rated below investment grade or, if unrated,
determined by the Adviser to be of comparable credit quality.      

 .  INTERMEDIATE BOND FUND

     INTERMEDIATE BOND FUND seeks high current income, consistent with the
preservation of capital, by investing primarily in marketable debt securities.

     Under normal market conditions, Intermediate Bond Fund invests at least 65%
of the value of its total assets in bonds and debentures and at least 70% of the
value of its total assets (taken at market value at the time of investment) in
the following:

     1.   Marketable straight-debt securities of domestic issuers, and of
          foreign issuers payable in U.S. dollars, rated at time of purchase
          within the three highest grades assigned by Moody's or S&P; 2.
          Securities issued or guaranteed by the U.S. Government or by its
          agencies or instrumentalities;

     3.   Commercial paper rated Prime-1 by Moody's or A-1 by S&P at time of
          purchase, or, if unrated, issued or guaranteed by a corporation with
          any outstanding debt rated A or better by Moody's or S&P;

     4.   Variable rate demand notes, if unrated, determined by the Adviser to
          be of credit quality comparable to the commercial paper in which the
          Fund may invest; or

                                      B-3
<PAGE>
 
     5.   Bank obligations, including repurchase agreements,/2/ of banks having
          total assets in excess of $500 million.

 .  GOVERNMENT MONEY MARKET FUND

     GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with
safety of capital and maintenance of liquidity.  The Fund invests in U.S.
Government Securities maturing in 13 months or less from the date of purchase.
U.S. Government Securities include:

     1.   Securities issued by the U.S. Treasury;

     2.   Securities issued or guaranteed as to principal and interest by
          agencies or instrumentalities of the U.S. Government that are backed
          by the full faith and credit guarantee of the U.S. Government;

     3.   Securities issued or guaranteed as to principal and interest by
          agencies or instrumentalities of the U.S. Government that are not
          backed by the full faith and credit guarantee of the U.S. Government;
          and

     4.   Repurchase agreements for securities listed in (1), (2), and (3)
          above, regardless of the maturities of such underlying securities.
    
     U.S. Government Securities include: (i) bills, notes, bonds and other debt
securities, differing as to maturity and rates of interest, that are issued by
and are direct obligations of the U.S. Treasury; and (ii) other securities that
are issued or guaranteed as to principal and interest by agencies or
instrumentalities of the U.S. Government and that include, but are not limited
to, Federal Farm Credit Banks, Federal Home Loan Banks, Government National
Mortgage Association, Farmers Home Administration, Federal Home Loan Mortgage
Corporation and Federal National Mortgage Association.      

     Because the Fund's investment policy permits it to invest in U.S.
Government Securities that are not backed by the full faith and credit of the
U.S. Treasury, investment in the Fund may involve risks that are different in
some respects from an investment in a fund that invests only in securities that
are backed by the full faith and credit of the U.S. Treasury.  Such risks may
include a greater risk of loss of principal and interest in the securities in
the Fund's portfolio that are supported only by the issuing or guaranteeing
agency or instrumentality and, accordingly, the Fund must look principally or
solely to that entity for ultimate repayment.

- -------------
/2/  A repurchase agreement is a sale of securities to a Fund in which the
     seller (a bank or broker-dealer believed by the Adviser to be financially
     sound) agrees to repurchase the securities at a higher price, which
     includes an amount representing interest on the purchase price, within a
     specified time.

                                       B-4
<PAGE>
 
     The Fund will not enter into a repurchase agreement maturing in more than
seven days if as a result thereof more than 10% of its net assets (taken at
market value at the time of investment) would be invested in illiquid
securities, including repurchase agreements maturing in more than seven days:
however, there is otherwise no limitation on the percentage of the Fund's assets
that may be invested in repurchase agreements.  The Fund will enter into
repurchase agreements only where (i) the underlying securities are U.S.
Government Securities and (ii) the seller agrees that the value of the
underlying U.S. Government Securities, including accrued interest (if
purchased), will at all times be equal to or exceed the value of the repurchase
agreement.

     The Fund maintains a dollar-weighted average portfolio maturity appropriate
to its objective of maintaining a stable net asset value per share, and, in any
case, not in excess of 90 days.

     It is the Fund's intention, in general, to hold securities to maturity.
However, the Fund may attempt, from time to time, to increase its yield by
trading to take advantage of variations in the markets for U.S. Government
Securities.  In addition, redemptions of the Fund's shares could necessitate the
sale of portfolio securities, and such sales  may occur at times when sales
would not otherwise be desirable.  An increase in prevailing interest rates will
generally reduce the value of the Fund's portfolio investments, and a decline in
prevailing interest rates will generally increase the market value of the Fund's
portfolio investments.

RISKS AND INVESTMENT CONSIDERATIONS
    
     Equity Securities. Common stocks represent an equity interest in a
corporation. Although common stocks have a history of long-term growth in value,
their prices tend to fluctuate in the short term. The securities of smaller
companies, as a class, have had periods of favorable results and other periods
of less favorable results compared to the securities of larger companies as a
class. Stocks of small to mid-size companies tend to be more volatile and less
liquid than stocks of large companies. Smaller companies, as compared to larger
companies, may have a shorter history of operations, may not have as great an
ability to raise additional capital, may have a less diversified product line
making them susceptible to market pressure, and may have a smaller public market
for their shares.

     Debt Securities.  In pursuing its investment objective, each Fund may
invest in debt securities of corporate and governmental issuers.  The risks
inherent in debt securities depend primarily on the term and quality of the
obligations in a Fund's portfolio as well as on market conditions.  A decline in
the prevailing levels of interest rates generally increases the value of debt
securities, while an increase in rates usually reduces the value of those
securities.  As a result, interest rate fluctuations will affect a Fund's net
asset value, but not the income received by a Fund from its portfolio
securities.  (Because yields on debt securities available for purchase by a Fund
vary over time, no specific yield on shares of a Fund can be assured.)  In
addition, if the bonds in a Fund's portfolio contain call, prepayment or
redemption provisions, during a period of declining interest rates, these
securities are likely to be redeemed, and a Fund will      

                                      B-5
<PAGE>
 
probably be unable to replace them with securities having a comparable yield.
There can be no assurance that payments of interest and principal on portfolio
securities will be made when due.

     Convertible Securities. Convertible securities include any corporate debt
security or preferred stock that may be converted into underlying shares of
common stock. The common stock underlying convertible securities may be issued
by a different entity than the issuer of the convertible securities. Convertible
securities entitle the holder to receive interest payments paid on corporate
debt securities or the dividend preference on a preferred stock until such time
as the convertible security matures or is redeemed or until the holder elects to
exercise the conversion privilege.

     The value of convertible securities is influenced by both the yield of non-
convertible securities of comparable issuers and by the value of a convertible
security viewed without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its investment value. The
investment value of the convertible security will typically fluctuate inversely
with changes in prevailing interest rates. However, at the same time, the
convertible security will be influenced by its 'conversion value,' which is the
market value of the underlying common stock that would be obtained if the
convertible security were converted. Conversion value fluctuates directly with
the price of the underlying common stock.
    
     By investing in convertible securities, a Fund obtains the right to benefit
from the capital appreciation potential in the underlying stock upon exercise of
the conversion right, while earning higher current income than would be
available if the stock were purchased directly. In determining whether to
purchase a convertible security, the Adviser will consider substantially the
same criteria that would be considered in purchasing the underlying stock.
Convertible securities purchased by a Fund are frequently rated investment
grade. Convertible securities rated below investment grade (a) tend to be more
sensitive to interest rate and economic changes, (b) may be obligations of
issuers who are less creditworthy than issuers of higher quality convertible
securities, and (c) may be more thinly traded due to such securities being less
well known to investors than either common stock or conventional debt
securities.      
    
     Lending of Portfolio Securities. Subject to certain restrictions under
"Investment Restrictions" in this statement of additional information, Balanced
Fund and Intermediate Bond Fund may lend their portfolio securities to broker-
dealers and banks. Any such loan must be continuously secured by collateral in
cash or cash equivalents maintained on a current basis in an amount at least
equal to the market value of the securities loaned by the Fund. The Fund would
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities loaned, and also would receive an additional return
that may be in the form of a fixed fee or a percentage of the collateral. The
Fund would have the right to call the loan and obtain the securities loaned at
any time on notice of not more than five business days. The Fund would not have
the right to vote the securities during the existence of the loan but would call
the loan to permit voting of the securities if, in the Adviser's judgment, a
material event requiring a shareholder vote would otherwise occur before the
loan was repaid. In the event of bankruptcy or other default of the borrower,
the Fund could experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses, including (a) possible decline in
the      

                                      B-6
<PAGE>
 
value of the collateral or in the value of the securities loaned during the
period while the Fund seeks to enforce its rights thereto, (b) possible
subnormal levels of income and lack of access to income during this period, and
(c) expenses of enforcing its rights.
    
     When-Issued and Delayed Delivery Securities. Balanced Fund, Intermediate
Bond Fund and Government Money Market Fund may purchase securities on a when-
issued or delayed-delivery basis. Although the payment and interest terms of
these securities are established at the time a Fund enters into the commitment,
the securities may be delivered and paid for a month or more after the date of
purchase, when their value may have changed. A Fund makes such commitments only
with the intention of actually acquiring the securities, but may sell the
securities before settlement date if the Adviser deems it advisable for
investment reasons. At the time a Fund enters into a binding obligation to
purchase securities on a when-issued or delayed-delivery basis, assets of the
Fund having a value at least as great as the purchase price of the securities to
be purchased will be segregated on the books of the Fund and held by the
custodian throughout the period of the obligation. The use of this investment
strategy may increase net asset value fluctuation.      

     Repurchase Agreements. A repurchase agreement is a sale of securities to a
Fund in which the seller (a bank or broker-dealer believed by the Adviser to be
financially sound) agrees to repurchase the securities at a higher price, which
includes an amount representing interest on the purchase price, within a
specified time. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, a Fund could experience both delays in liquidating the
underlying securities and losses, including: (a) possible decline in the value
of the collateral during the period while the Fund seeks to enforce its rights
thereto; (b) possible below normal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights.

     Options on Securities and Indexes. Balanced Fund and Intermediate Bond Fund
may purchase and sell put options and call options on securities and on indexes
and enter into interest rate and index futures contracts and options on futures
contracts.

     An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified exercise price at any
time during the term of the option (normally not exceeding nine months). The
writer of an option on an individual security has the obligation upon exercise
of the option to deliver the underlying security upon payment of the exercise
price or to pay the exercise price upon delivery of the underlying security or
foreign currency. Upon exercise, the writer of an option on an index is
obligated to pay the difference between the cash value of the index and the
exercise price multiplied by the specified multiplier for the index option. (An
index is designed to reflect specified facets of a particular financial or
securities market, a specific group of financial instruments or securities, or
certain economic indicators.)

     A Fund will write call options and put options only if they are "covered."
For example, in the case of a call option on a security, the option is "covered"
if a Fund owns the security

                                      B-7
<PAGE>
 
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, assets having a value at least equal to that amount
are held in a segregated account by its custodian) upon conversion or exchange
of other securities held in its portfolio.

     If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by the Fund expires, the Fund realizes a capital loss equal to the
premium paid.

     Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price, and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when a Fund desires.
    
     A Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the market
value of a put or a call option include supply and demand, interest rates, the
current market price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying security or
index, and the time remaining until the expiration date.      

     A put or call option purchased by a Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an option
written by a Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at the closing
price on the exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and asked
prices.

     There are several risks associated with transactions in options. For
example, there are significant differences between the securities markets, the
currency markets, and the options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objectives. A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or expected events.

     There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option would expire and become worthless. If
a Fund were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option on a security, a Fund foregoes,
during the option's life, the opportunity to profit from increases in the market
value of the security covering the call option above the sum of the premium and
the exercise price of the call.

                                      B-8
<PAGE>
 
     If trading were suspended in an option purchased or written by the Fund,
the Fund would not be able to close out the option.  If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it has purchased.

     Futures Contracts and Options on Futures Contracts.  A Fund may use
interest rate futures contracts, index futures contracts, and options on such
futures contracts.  An interest rate, index or option on a futures contract
provides for the future sale by one party and purchase by another party of a
specified quantity of a financial instrument or the cash value of an index/3/ at
a specified price and time.  A public market exists in futures contracts
covering a number of indexes (including, but not limited to:  the S&P 500 Index,
the Value Line Composite Index, and the New York Stock Exchange Composite Index)
as well as financial instruments (including, but not limited to:  U.S. Treasury
bonds, U.S. Treasury notes, Eurodollar certificates of deposit, and foreign
currencies).  Other index and financial instrument futures contracts are
available and it is expected that additional futures contracts will be developed
and traded.

     A Fund may purchase and write call and put futures options.  Futures
options possess many of the same characteristics as options on securities and
indexes (discussed above).  A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price at any time during the
period of the option.  Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position.  In the case of a put option, the opposite is true.  A Fund
might, for example, use futures contracts to hedge against or gain exposure to
fluctuations in the general level of stock prices, anticipated changes in
interest rates or currency fluctuations that might adversely affect either the
value of the Fund's securities or the price of the securities that the Fund
intends to purchase.  Although other techniques could be used to reduce or
increase a Fund's exposure to stock price, interest rate and currency
fluctuations, a Fund may be able to achieve its exposure more effectively and
perhaps at a lower cost by using futures contracts and futures options.

     A Fund will only enter into futures contracts and futures options that are
standardized and traded on an exchange, board of trade, or similar entity, or
quoted on an automated quotation system.

     There are several risks associated with the use of futures contracts and
futures options.  A purchase or sale of a futures contract may result in losses
in excess of the amount invested in the futures contract.  In trying to increase
or reduce market exposure, there can be no guarantee that

- --------------------
/3/  A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading day
of the contract and the price at which the index contract was originally
written. Although the value of a securities index is a function of the value of
certain specified securities, no physical delivery of those securities is made.

                                      B-9
<PAGE>
 
there will be a correlation between price movements in the futures contract and
in the portfolio exposure sought. In addition, there are significant differences
between the securities and futures markets that could result in an imperfect
correlation between the markets, causing a given transaction not to achieve its
objectives. The degree of imperfection of correlation depends on circumstances
such as: variations in speculative market demand for futures, futures options
and the related securities, including technical influences in futures and
futures options trading and differences between the securities market and the
securities underlying the standard contracts available for trading. For example,
in the case of index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the composition of
a Fund's portfolio, and, in the case of interest rate futures contracts, the
interest rate levels, maturities, and creditworthiness of the issues underlying
the futures contract may differ from the financial instruments held in a Fund's
portfolio. A decision as to whether, when and how to use futures contracts
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected stock price or interest rate trends.

     Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day.  The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session.  Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit.  The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions.  For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.  Stock index futures contracts are not normally subject to
such daily price change limitations.

     There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures or futures option position.  A Fund would
be exposed to possible loss on the position during the interval of inability to
close, and would continue to be required to meet margin requirements until the
position is closed.  In addition, many of the contracts discussed above are
relatively new instruments without a significant trading history.  As a result,
there can be no assurance that an active secondary market will develop or
continue to exist.
    
     Short Sales.  Each Fund may make short sales "against the box."  In a short
sale, a Fund sells a borrowed security and is required to return the identical
security to the lender.  A short sale "against the box" involves the sale of a
security with respect to which the Fund already owns an equivalent security in
kind and amount.  A short sale "against the box" enables the Fund to obtain the
current market price of a security which it desires to sell but is unavailable
for settlement or to control the timing of recognition of a gain or loss for tax
purposes.     
    
     Portfolio Turnover.  Monetta Fund and Small-Cap Fund engage in an above-
average number of portfolio transactions.  Their annual portfolio turnover rates
are likely to exceed 100%, and in some years may exceed 200% (excluding Treasury
Bills and other short-term     

                                      B-10
<PAGE>
 
money market instruments which mature in less than one year). Mid-Cap Fund,
Large-Cap Fund and Balanced Fund may also engage in an above-average number of
portfolio transactions and an annual portfolio turnover rate exceeding 100%,
although that rate is not expected to exceed 200% annually under normal market
conditions. A high portfolio turnover rate increases aggregate brokerage
commission expenses and taxes which must be borne directly by a Fund and
ultimately by its shareholders. These portfolio turnover rates and the resulting
commission expenses and taxes are higher on a relative basis than those of
mutual funds which may not trade as frequently, including those with a policy of
capital appreciation. Substantial trading involves substantial risk and may be
speculative. Investors should not consider purchase of a Fund's shares as a
complete investment program.

INVESTMENT RESTRICTIONS

     MONETTA FUND operates under the following investment restrictions:

     1.   The Fund will not issue any senior securities;

     2.   The Fund will not (i) sell securities short (unless the Fund owns an
          equal amount of such securities or owns securities that are
          convertible or exchangeable, without payment of further consideration,
          into an equal amount of such securities), (ii) purchase securities on
          margin, or (iii) write put and call options;

     3.   The Fund will not borrow money in excess of 5% of the value of its
          total assets, or pledge, mortgage or hypothecate its assets taken at
          market value to an extent greater than 10% of the Fund's total assets
          taken at cost (and no borrowing may be undertaken  except from banks
          as a temporary measure for extraordinary or emergency purposes);

     4.   The Fund will not invest more than 5% of its total assets in the
          securities of any one issuer (except that this limitation shall not
          apply to obligations issued or guaranteed by the United States
          Government, its agencies or instrumentalities);

     5.   The Fund will not purchase the securities of companies in a particular
          industry if thereafter more than 25% of the Fund's total assets would
          consist of securities issued by companies in that industry (except
          that this limitation shall not apply to obligations issued or
          guaranteed by the United States Government, its agencies or
          instrumentalities);

     6.   The Fund will not acquire more than 10% of the outstanding voting
          securities, or 10% of all of the securities, of any one issuer;

     7.   The Fund will not purchase the securities of any other investment
          company;

     8.   The Fund will not purchase securities of any company with a record of
          less than 3 years continuous operation (including that of predecessor
          companies) if such

                                      B-11
<PAGE>
 
          purchase would cause the Fund's investments in all such companies
          taken at cost to exceed 5% of the value of the Fund's total assets;

     9.   The Fund will not purchase or retain the securities of any issuer if
          the officers and directors of the Fund or its Investment Adviser own
          individually more than 1/2 of 1% of the securities of such issuer or
          together own more than 5% of the securities of such issuer;

     10.  The Fund will not act as securities underwriter, except to the extent
          necessary in connection with the disposition of Fund shares, or invest
          in real estate (although it may purchase shares of a real estate
          investment trust),/4/ or invest in commodities, commodities contracts
          or financial futures contracts;

     11.  The Fund will not invest in companies for the purpose of exercising
          control or management of such company.

     12.  The Fund will not invest in securities commonly called "restricted
          securities", or repurchase agreements which mature in more than seven
          days, which it would be required to register under the Securities Act
          of 1933 before the securities could be resold to the public;

     13.  The Fund will not purchase shares which are not readily marketable;
          and

     14.  The Fund will not make loans other than in accordance with the Fund's
          investment objectives, including for the purchase of a portion of an
          issue of publicly distributed bonds, debentures, or other securities
          whether or not the purchase was made upon the original issuance of the
          securities.

     Each of the restrictions noted above is "fundamental" which means that it
cannot be changed without the approval of a majority of the Fund's outstanding
voting securities.

     THE TRUST AND EACH OF ITS FUNDS operate under the following investment
restrictions.  A Fund may not:

     1.   [for all Funds except Government Money Market Fund] With respect to
          75% of the value of a Fund's total assets, invest more than 5% of its
          total assets (valued at the time of investment) in securities of a
          single issuer, except that this restriction does not apply to U.S.
          Government Securities;

          [for Government Money Market Fund] Invest more than 5% of its total
          assets (valued at the time of investment) in securities of a single
          issuer, except that this

- --------------
/4/  Monetta Fund has not invested in real estate investment trusts and does not
currently intend to do so.

                                      B-12
<PAGE>
 
          restriction does not apply to (i) U.S. Government Securities or (ii)
          repurchase agreements;

     2.   Acquire securities of any one issuer that at the time of investment
          represent more than 10% of the outstanding voting securities of the
          issuer;

     3.   Invest more than 25% of its total assets (valued at the time of
          investment) in securities of companies in any one industry, except
          that this restriction does not apply to U.S. Government Securities or
          [for Government Money Market Fund only] to repurchase agreements;

     4.   Make loans, but this restriction shall not prevent the Fund from:

          [for all Funds except Government Money Market Fund] (a) buying bonds,
          debentures, or other debt obligations that are publicly distributed or
          a type privately placed with financial institutions, (b) investing in
          repurchase agreements, or (c) lending portfolio securities, provided
          that it may not lend securities if, as a result, the aggregate value
          of all securities loaned would exceed 33% of its total assets (taken
          at market value at the time of such loan);/5/ [for Government Money
          Market Fund] (a) purchasing U.S. Government Securities or (b) entering
          into repurchase agreements;

     5.   Borrow money except (a) from banks for temporary or emergency purposes
          in amounts not exceeding 10% of the value of the Fund's total assets
          at the time of borrowing, provided that the Fund will not purchase
          additional securities when its borrowings exceed 5% of total assets
          and (b) [for Balanced Fund and Intermediate Bond Fund only] in
          connection with transactions in options, futures and options on
          futures;

     6.   Underwrite the distribution of securities of other issuers except
          insofar as it may be deemed to be an "underwriter" for purposes of the
          Securities Act of 1933 on disposition of securities subject to legal
          or contractual restrictions on resale;/6/

     7.   Purchase and sell real estate or interests in real estate, although it
          may invest in marketable securities of enterprises that invest in real
          estate or interests in real estate;

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

/5/  Although they have the power to do so, the Balanced Fund and Intermediate
     Bond Fund do not intend to lend portfolio securities.

/6/  The Funds do not currently intend to invest in restricted securities.

                                      B-13
<PAGE>
 
     8.   Purchase and sell commodities or commodity contracts, except [for
          Balanced Fund and Intermediate Bond Fund only] that it may enter into
          futures and options on futures;

     9.   Make margin purchases of securities, except for use of such short-term
          credits as are needed for clearance of transactions and [for Balanced
          Fund and Intermediate Bond Fund only] except in connection with
          transactions in options, futures and options on futures;

     10.  Sell securities short or maintain a short position, except securities
          that the Fund owns or has the right to acquire without payment of
          additional consideration; and

     11.  Issue any senior security except to the extent permitted under the
          Investment Company Act of 1940.
    
     Restrictions 1 through 11 above are "fundamental."  In addition, Small-Cap
Fund, Mid-Cap Fund, Large-Cap Fund, Balanced Fund, Intermediate Bond Fund and
Government Money Market Fund are subject to a number of restrictions that may be
changed by the Board of Trustees of the Trust without shareholder approval.
Under those non-fundamental restrictions, a Fund will not:      

     a.   Invest in companies for the purpose of management or the exercise of
          control;
         
     b.   Invest more than 5% of its total assets (valued at time of investment)
          in securities of issuers with less than three years' operation
          (including predecessors);

     c.   Acquire securities of other registered investment companies except in
          compliance with the Investment Company Act of 1940 and applicable
          state law;
         
     d.   Invest more than 10% of its net assets (valued at the time of each
          investment) in illiquid securities, including repurchase agreements
          maturing in more than seven days.
         
PERFORMANCE INFORMATION

     Yield.  Balanced Fund and Intermediate Bond Fund may quote yield figures
from time to time.  "Yield" is computed by dividing the net investment income
per share earned during a 30-day period (using the average number of shares
entitled to receive dividends) by the net asset value per share on the last day
of the period.  The Yield formula provides for semiannual compounding which
assumes that net investment income is earned and reinvested at a constant rate
and annualized at the end of a six-month period.

                                      B-14
<PAGE>
 
     The Yield formula is as follows:

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


          Where:    a =  dividends and interest earned during the period. (For
                         this purpose, the Fund will recalculate the yield to
                         maturity based on market value of each portfolio
                         security on each business day on which net asset value
                         is calculated.)

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

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

                    d =  the net asset value of the Fund.
    
     Intermediate Bond Fund's yield for the 30 days ended June 30, 1996 was
6.08%.       

     Current or Effective Yield.  Government Money Market Fund may quote a
"Current Yield" or "Effective Yield" or both from time to time.  The Current
Yield is an annualized yield based on the actual total return for a seven-day
period.  The Effective Yield is an annualized yield based on a daily compounding
of the Current Yield.  These yields are each computed by first determining the
"Net Change in Account Value" for a hypothetical account having a share balance
of one share at the beginning of a seven-day period ("Beginning Account Value"),
excluding capital changes.  The Net Change in Account Value will always equal
the total dividends declared with respect to the account, assuming a constant
net asset value of $1.00.

     The Yields are then computed as follows:

          Current Yield = Net Change in Account Value x 365
                          ---------------------------   ---
                            Beginning Account Value      7

          Effective Yield = [1 + Net Change in Account Value]/365/7/- 1
                            ---------------------------------          
                                 Beginning Account Value

     In addition to fluctuations reflecting changes in net income of the Fund
resulting from changes in income earned on its portfolio securities and in its
expenses, the Fund's yield also would be affected if the Fund were to restrict
or supplement its dividends in order to maintain its net asset value at $1.00.
(See "Net Asset Value" in the Prospectus and " Additional Information on the
Determination of Net Asset Value" herein.)  Portfolio changes resulting from net
purchases or net redemptions of Fund shares may affect yield.  Accordingly, the
Fund's yield may vary from day to day and the yield stated for a particular past
period is not a representation

                                      B-15
<PAGE>
 
as to its future yield. The Fund's yield is not assured, and its principal is
not insured; however, the Fund will attempt to maintain its net asset value per
share at $1.00.
    
     For the seven days ended June 30, 1996 the Government Money Market Fund's
current yield was 4.77% and the effective yield was 4.88%.      
    
     Total Return. From time to time, each Fund may give information about its
performance by quoting figures in advertisements and sales literature. "Average
Annual Total Return" is the average annual compounded rate of change in value
represented by the total return percentage for the period.      
    
     Average Annual Total Return is computed as follows:       

          ERV = P(1+T)/n/
 
     Where:    P = the amount of an assumed initial investment in Fund shares

               T = average annual total return

               n = number of years from initial investment to the end of the
                   period

               ERV = ending redeemable value of shares held at the end of the
                     period

              

                                     B-16
<PAGE>
 
         
    
     The following table shows each Fund's Average Annual Total Return for the
following periods: the year ended June 30, 1996 (where applicable); for Monetta
Fund, the five-year period ended June 30, 1996 and the ten-year period ended
June 30, 1996; and for all other Funds, the commencement of operations through
June 30, 1996     

<TABLE>
<CAPTION>
    

                                                                                                 Comencement of
                                                                                                   operations
                                           Year ended     Five years ended   Ten years ended        through
                                          June 30, 1996     June 30, 1996     June 30, 1996      June 30, 1996
                                          -------------     -------------     -------------      -------------
<S>                                       <C>               <C>               <C>                <C>
               Monetta Fund                   14.3%             11.2%             12.5%               N/A

               Mid-Cap Fund                   15.5%              N/A               N/A               21.5%

               Large-CapFund                   N/A               N/A               N/A               19.3%

               Balanced Fund                   N/A               N/A               N/A               19.2%

               Intermediate Bond Fund          4.9%              N/A               N/A                6.8%

               Government Money
               Market Fund                     5.4%              N/A               N/A                4.4%
</TABLE>
     
The commencement of  operations for each of the Funds is as follows: Monetta
Fund, May 6; 1986; Mid-Cap Fund, March 1, 1993; Large-Cap Fund, September 1,
1995, Balanced Fund, September 1, 1995; Intermediate Bond Fund, March 5, 1993;
and Government Money Market Fund March 1, 1993.

     General.  Investment performance figures assume reinvestment of all
dividends and distributions, and do not take into account any Federal, state or
local income taxes which shareholders must pay on a current basis.  They are not
necessarily indicative of future results.

     In advertising and sales literature, a Fund may compare its yield and
performance with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial

                                      B-17
<PAGE>
 
assets or data and other competing investment and deposit products available
from or through other financial institutions.  The composition of these indexes
or averages differs from that of the Funds.  Comparison of a Fund to an
alternative investment should be made with consideration of differences in
features and expected performance.

     All of the indexes and averages used will be obtained from the indicated
sources or reporting services, which the Funds believe to be generally accurate.
A Fund may also note its mention in newspapers, magazines or other media from
time to time.  However, the Funds assume no responsibility for the accuracy of
such data.  Newspapers and magazines which might mention a Fund include, but are
not limited to, the following:

          Business Week                     Los Angeles Times
          Changing Times                    Money
          Chicago Tribune                   Mutual Fund Letter
          Chicago Sun-Times                 Morningstar
          Crain's Chicago Business          Newsweek
          Consumer Reports                  The New York Times
          Consumer Digest                   Pensions and Investment
          Financial World                   Personal Investor
          Forbes                            Stanger Reports
          Fortune                           Time
          Investor's Daily                  USA Today
          Kiplinger's                       U.S. News and World Report
          L/G No-Load Fund Analyst          The Wall Street Journal

     When a newspaper, magazine or other publication mentions the Fund, such
mention may include: (i) listings of some or all of the Fund's holdings, (ii)
descriptions of characteristics of some or all of the securities held by the
Fund, including price-earnings ratios, earnings, growth rates and other
statistical information, and comparisons of that information to similar
statistics for the securities comprising any of the indexes or averages listed
above; and (iii) descriptions of the Fund's or a portfolio manager's economic
and market outlook.

     A Fund's performance is a result of conditions in the securities markets,
portfolio management, and operating expenses.  Although information such as that
described above may be useful in reviewing a Fund's performance and in providing
some basis for comparison with other investment alternatives, it is not
necessarily indicative of future performance and should not be used for
comparison with other investments using different reinvestment assumptions or
time periods.
    
     The Funds may also compare their performances to various stock indices
(groups of unmanaged common stocks), including Standard & Poor's 500 Stock
Index, the Value Line Composite Average, the Russell Indixes, the Nasdaq
Composite Index and the Dow Jones Industrial Average, or to the Consumer Price
Index or groups of comparable mutual funds, including rankings determined by
Lipper Analytical Services, Inc., an independent service that     

                                      B-18
<PAGE>
 
monitors the performance of over 1,000 mutual funds, Morningstar, Inc., or that
of another service.
    
     The Funds may also cite its ranking, recognition, or other mention by
Morningstar.  Morningstar's ranking system is based on risk-adjusted total
return performance and is expressed in a star-rated format.  The risk-adjusted
number is computed by subtracting a fund's risk score (which is a function of
the fund's monthly return less the 3-month Treasury bill return) from the fund's
load-adjusted total return score.  This numerical score is then translated into
ranking categories, with the top 10% labeled five star, the next 22.5% labeled
four star, the next 35% labeled three star, and next 22.5% labeled two star, and
the bottom 10% one star.  A high ranking reflects either above-average
performance or below average risk or both.     

INVESTMENT ADVISER
    
     The investment adviser for Monetta Fund and the Trust is Monetta Financial
Services, Inc. ("MFSI" or the "Adviser").  The Adviser furnishes continuing
investment supervision to the Funds and is responsible for overall management of
the Trust's business affairs pursuant to investment advisory agreements dated
November 10, 1988 and Febuary 1, 1997, respectively.  The Adviser furnishes
office space, equipment and personnel to the Funds and assumes all of the Funds'
ordinary operating expenses except the charges of the custodian, transfer agent
and fees paid to non-interested trustees.     
    
     Please refer to the description of the Adviser, investment agreement and
advisory fees under "Management of the Funds" in the Prospectus, which is
incorporated herein by reference. For the six months ended June 30, 1996 and for
the years ended 1995, 1994 and 1993, the Monetta Fund paid the following
aggregate advisory fees to the Adviser: $1,651,213, $3,648,564, $4,403,137 and
$5,115,675. For the six months ended June 30, 1996, for the years ended 1995 and
1994 and for the period ending December 31, 1993, the following Funds paid
aggregate advisory fees to the Adviser: Mid-Cap Fund - $77,523, $134,677,
$112,433 and $48,431; Intermediate Bond Fund - $11,138, $19,834, $17,439 and
$9,389; and Government Money Market Fund - $9,239, $12,563, $7,857 and $3,864.
For the six months ended June 30, 1996 and for the period ended December 31,
1995, the following Funds paid aggregate advisory fees to the Adviser: Large-Cap
Fund $6,185 and $2,844; Balanced Fund - $1,574 and $570.     
    
     Investment advisory fees waived for the six months ended June 30, 1996, for
the years ended December 31, 1995 and 1994 and for the period ending December
31, 1993, for the Intermediate Bond Fund were $5,569, $17,132, $17,439 and
$9,389, respectively, on total fees of $11,138, $19,834, $17,439 and $9,389.
Investment advisory fees waived for the six months ended June 30, 1996, for the
year ended December 31, 1995 and 1994 and for the period ending December 31,
1993, for the Government Money Market Fund were $9,239, $12,563, $7,857 and
$3,864, respectively on total fees of $9,239, $12,563, $7,857 and $3,864.
Custodian and Transfer Agent charges of $0 and $6,111 for the period ended June
30, 1996 and the year ended December 31, 1995 for the Government Money Market
Fund were absorbed by the Adviser.    

     Robert S. Bacarella, president and a director of the Monetta Fund and
president and a trustee of the Trust, owns 71% of the outstanding voting
securities of the Adviser.  Paul W. Henry and John W. Bakos, directors of
Monetta Fund, each own 2% of the outstanding voting

                                      B-19
<PAGE>
 
securities of the Adviser.  The Adviser's address is 1776-A South Naperville
Road, Wheaton, Illinois 60187.
    
     Mr. Bacarella, is a shareholders of Monetta Brokerage, Inc. ("MBI"), a
registered broker-dealer.  His percentage ownership interest in MBI is 83%.
The investment advisory agreements authorize MBI to act as broker for a Fund in
connection with the purchase or sale of securities by or to the Fund in
conformity with SEC rules.  See "Portfolio Transactions."     
    
SERVICE AND DISTRIBUTION PLAN     
    
     Pursuant to a Service and Distribution Plan (the "Plan") adopted pursuant
to Rule 12b-1 under the 1940 Act effective February 1, 1997, each series of the
Trust may enter into agreements with service organizations and may compensate
those organizations for their accounting, shareholder services and distribution
services in amounts up to .10 of 1% for Government Money Market Fund and .25 of
1% for each other series of the Trust, per annum of the values of accounts of
shareholders purchasing through such organizations.     
    
     Servicing activities provided by service agents to their customers
investing in the Funds may include, among other things, one or more of the
following:  establishing and maintaining shareholder accounts and records;
processing purchase and redemption transactions; answering customer inquiries
regarding the Fund; assisting customers in changing dividend options; account
designations and addresses; performing sub-accounting; investing customer cash
account balances automatically in Fund shares; providing periodic statements
showing a customer's account balance and integrating such statements with those
of other transactions and balances in the customer's other accounts serviced by
the service agent; arranging for bank wires; distribution and such other
services as the Fund may request, to the extent the service agent is permitted
by applicable statute, rule or regulation.     
    
     In addition, each Fund pays other costs and expenses in connection with
advertising and marketing shares of that Fund, including but not limited to:
advertising, direct mail, and promotional expenses; compensation to a
distributor and its employees; compensation to and expenses, including overhead
and telephone and other communication expenses, of a distributor, service
organization and selected dealers and their affiliates who engage in or support
the distribution of shares or who service shareholder accounts; fulfillment
expenses, including the costs of printing and distributing prospectuses,
statements of additional information, and reports for other than existing
shareholders; the costs of preparing, printing and distributing sales literature
and advertising materials; and the costs of registration or notification under
state securities laws.     
    
     The maximum aggregate amount a Fund may pay for service fees and other
distribution-related expenses is .10 of 1% of the average net assets of
Government Money Market Fund and .25 of 1% of the average net assets of each
other Fund of the Trust.  Additional service fees and additional amounts for
other distribution-related expenses may be paid by the Adviser from its own
resources.     

                                      B-20
<PAGE>

     
     The Plan will continue in effect only so long as it is approved at least
annually, and any material amendment or agreement related thereto is approved,
by the Trust's board of trustees, including those trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreement related to the Plan
("Qualified Trustees"), acting in person at a meeting called for that purpose,
unless terminated by vote of a majority of the Qualified Trustees, or by vote of
a majority of the outstanding voting securities of a Fund.     
    
     It is the opinion of the board of trustees that the Plan is necessary to
maintain a flow of subscriptions to offset redemptions and to encourage sales of
shares to permit the Funds to reach an economically viable size. Redemptions of
mutual fund shares are inevitable. If redemptions are not offset by
subscriptions, a fund shrinks in size and its ability to maintain quality
shareholder services declines. Eventually, redemptions could cause a fund to
become uneconomic. Furthermore, an extended period of significant net
redemptions may be detrimental to orderly management of the portfolio. The
offsetting of redemptions through sales efforts benefits shareholders by
maintaining the viability of a fund. Additional benefits may accrue from net
sales of shares relative to portfolio management and increased shareholder
servicing capability. Increased assets enable a fund to further diversify its
portfolio, which spreads and reduces investment risk while increasing
opportunity. In addition, increased assets enable the establishment and
maintenance of a better shareholder servicing staff which can respond more
effectively and promptly to shareholder inquiries and needs.     

DIRECTORS/TRUSTEES AND OFFICERS
    
     The ages at October 29, 1996 and principal business activities during the
past five years of the directors/ trustees and officers of Monetta Fund and the
Trust are:     
    
<TABLE>
<CAPTION>

                                POSITION(S)    POSITION(S)
                                   HELD           HELD            PRINCIPAL OCCUPATIONS
Name                     AGE     WITH FUND     WITH TRUST         AND OTHER AFFILIATIONS
____                     ---    -----------    -----------      ------------------------------------
<S>                      <C>    <C>            <C>              <C>
Robert S. Bacarella+*    47     Director and   Trustee and      Chairman, Chief Executive Officer
                                 President      President       and Director, MFSI, since October 1,
                                                                1996; President and Director, MFSI,
                                                                1984 to September 1996; Secretary,
                                                                Treasurer and Director, Monetta
                                                                Brokerage, Inc., since 1987; 
                                                                President and Director, Monetta 
                                                                Fund, Inc., (registered investment
                                                                company) since 1985; President and
                                                                Director, Monetta Trust (registered
                                                                investment company) since 1993.

John W. Bakos+*          49     Director       Trustee          Division Placement Manager, Sears, 
                                                                Roebuck & Co., since 1969; Director 
                                                                and Vice President, MFSI, 1984-1991.
</TABLE> 
     


                                     B-21
<PAGE>

    
<TABLE> 
 
                                Position(s)    Position(s)
                                   Held           Held            Principal Occupations
Name                     Age     With Fund     With Trust         and other Affiliations
- ----                     ---    -----------    -----------        ----------------------
<S>                      <C>    <C>            <C>              <C>
John L. Guy Jr.          44        n/a         Trustee          President, Heller First Capital
                                                                Corporation, since May 1995; Senior 
                                                                Vice President and Treasurer, Heller
                                                                Financial Inc., (August 1992-May 
                                                                1995); Senior Vice President,
                                                                Director Internal Audit (November
                                                                1989-August 1992).

Paul W. Henry+           54     Director          n/a           Manager, Financial Systems,
                                                                Signature Group (Telemarketing)
                                                                since August 1994; Manager, 
                                                                Computer Systems, Bann
                                                                International, (Computer Software) 
                                                                December 1993 to June 1994; 
                                                                Manager, Special Projects, Waste
                                                                Management, Inc. (waste collection 
                                                                of hazardous and chemical waste
                                                                materials), 1987 to December 1993;
                                                                Director, MFSI, 1984 - 1996, and 
                                                                Vice President, 1984-1991.

Mark F. Ogan             54     Director       Trustee          President, DuPage Capital Management, 
                                                                Ltd., April 1995 to present;
                                                                President and Secretary, Salida 
                                                                Corp. (formerly Pollenex Corp.), 
                                                                February 1993 to April 1995; Vice President,
                                                                Sunbeam-Oster Corp. May 1992 to 
                                                                December 1992; President,
                                                                Sunbeam-Oster Household Products 
                                                                Group, May 1991 to May 1992; 
                                                                Vice President, Business
                                                                Development and Corporate
                                                                Strategy, Sunbeam-Oster Co., 
                                                                October 1990 - May 1991.

Richard D. Russo         44     Director       Trustee          Attorney at law-Richard Russo & Associates; 
                                                                President of Associated Legal Services Chartered, 
                                                                a Professional Corporation 1985 to Present.

William M. Valiant*      71       n/a          Trustee          Retired; Director, MFSI, since February, 91;
                                                                Director, MBI, since 1988; Vice
                                                                President and Treasurer, Borg-
                                                                Warner Corporation, until July 1990.

Albert A. Pisterzi       56      Vice          Vice             President and  Director, MFSI, since
                               President    President           October 1, 1996; Vice President, 
                                                                MFSI, January 1995 to September 
                                                                1996; prior thereto, Director of
                                                                Marketing, Harris Associates L.P.,
                                                                September 1988 to January 1995.
</TABLE> 
     

                                     B-22
<PAGE>
    
<TABLE> 
<CAPTION> 

                               Position(s)      Position(s)    
                                 Held             Held             Principal Occupations 
Name                   Age      with Fund       with Trust         and other Affiliations 
- ----                   ---      ---------       ----------         ---------------------- 
<S>                   <C>       <C>             <C>               <C> 
John P. Rozinsky       57         Vice            Vice             Vice President, MFSI, since May
                                President      President           1991; Director, MFSI, May 1991
                                                                   to February 1994; Secretary, MFSI,
                                                                   1991-1996; Treasurer, MFSI,
                                                                   1991-1994; Vice President,
                                                                   Monetta Trust, since 1993; Trustee,
                                                                   Monetta Trust, 1993 to November 1996;
                                                                   Vice President and Director, MBI, since
                                                                   January 1990; Vice President, Monetta Fund,
                                                                   Inc., since 1985; Director, Monetta Fund,
                                                                   Inc., 1985 to November 1996.

Maria Cesario DeNicolo 47      Treasurer       Secretary           Secretary, MFSI, since October, 1996;
                             and Assistant        and              Treasurer, MFSI, since February 1994;      
                               Secretary       Treasurer           Controller, MFSI, since June 1992;
                                                                   Secretary, Monetta Trust, since 1993;
                                                                   Treasurer, Monetta Trust, since 1994;
                                                                   Treasurer, Monetta Fund, Since 1993;
                                                                   Chief Financial Office, MBI, since 1995;
                                                                   Sole proprietor, Cesario DeNicolo C.P.A.
                                                                   and Associates, since May 1990 to June 1993.

Valerie A. LeFevre     61      Secretary       Assistant           Secretary, Monetta Fund, since January
                                               Treasurer           1986; Secretary and Treasurer; MFSI,
                                                                   1987-1992.
</TABLE>       
     +  Messrs. Bacarella, Bakos, and Henry are "interested persons" of Monetta
Fund, as defined in the Investment Company Act of 1940 (the "1940 Act"), for the
following reasons:  Mr. Bacarella - as an officer of Monetta Fund and as a
shareholder, officer and director of MFSI; and Messrs. Bakos and Henry - as
shareholders of MFSI.       
    
     *  Messrs. Bacarella, Bakos and Valiant are "interested persons" of the
Trust, as defined in the 1940 Act, as officers of the Trust and as officers and
directors (and, in the case of Messrs. Bacarella and Bakos, as shareholders) of
MFSI.     

     The address of Messrs. Bacarella, Bakos, Guy, Henry, Ogan, Pisterzi,
Rozinski, Russo and Valiant and of Ms. DeNicolo and Ms. LeFevre is 1776-A South
Naperville Road, Suite 207, Wheaton, Illinois 60187.       

     At October 29, 1996, the directors and officers of Monetta Fund as a group
owned beneficially less than 1% of the issued and outstanding shares of common
stock of Monetta Fund.  No person was known by Monetta Fund to own beneficially
5% or more of the outstanding shares of the Fund at that date.      
                 
                                      B-23
<PAGE>
 
     Shares owned by the Adviser, trustees and officers at October 31, 1996
were as follows:      

    
<TABLE>
<CAPTION>

                                            Adviser                Trustees & Officers
                                         ---------------           ------------------
                                                    % of                        % of
                                          Shares    Fund           Shares      Fund
                                         ---------  ----           ------      ----
<S>                                      <C>        <C>            <C>         <C>
 Mid-Cap Fund                                7,347   0.6%          ______      ____%
 Large-Cap Fund                             10,004   7.6%          ______      ____%
 Balanced Fund                              28,805  23.6%          ______      ____%
 Intermediate Bond Fund                     72,474  28.0%          ______      ____%
 Government Money Market Fund            1,306,475  19.6%          ______      ____%
</TABLE>        
     

     Ownership of a significant percentage of the outstanding shares of the
Balanced Fund, the Intermediate Bond Fund and of the Money Market Fund reduces
the number of other shares that must be voted in accordance with the Adviser's
vote to approve or disapprove any proposal requiring the approval of the
shareholders of the Trust or of the Funds.

     Mr. Bacarella and Mr. Russo serve as members of the Executive Committee of
Monetta Fund and Monetta Trust.  The Executive Committees, which meet between
regular meetings of the respective boards, are authorized to exercise all of the
powers of the boards.      

     The following table sets forth compensation paid by Monetta Fund and the
Trust to their respective directors and trustees during 1995.

<TABLE>
<CAPTION>
                               COMPENSATION   COMPENSATION   COMPENSATION
                              RECEIVED FROM  RECEIVED FROM  RECEIVED FROM
                                 THE FUND       THE TRUST    FUND COMPLEX (2)
NAME OF PERSON                -------------  -------------  -------------
- --------------
<S>                            <C>            <C>            <C>
Robert S. Bacarella(1)               0           $  0         $    0
John W. Bakos(1)                     0              0              0
John L. Guy, Jr.                     0            100            100
Paul W. Henry(1)                     0              0              0
Mark F. Ogan                     2,000            400          2,400
Richard Russo                        0            300            300
William Valiant                      0            200            200
</TABLE>

     (1) Directors and/or trustees who are interested persons, including all
employees of MFSI, receive no compensation from Monetta Fund or the Trust.

     (2) The Monetta Fund Complex consists of Monetta Fund, the Trust and the
Trust portfolios.  Neither Monetta Fund nor the Trust offers any retirement or
deferred compensation plan to Board Members.

                                      B-24
<PAGE>
     
PURCHASING AND REDEEMING SHARES     

     Purchases and redemptions are discussed in the Funds' Prospectus under the
headings "How to Purchase Shares," "How to Redeem Shares" and "Determination of
Net Asset Value." All of that information is incorporated herein by reference.
The Prospectus discloses that you may purchase (or redeem) shares through
investment dealers, banks or other institutions.

     The Funds reserves the right to suspend or postpone redemptions of shares
of any Fund during any period when: (a) trading on the New York Stock Exchange
("NYSE") is restricted, as determined by the Securities and Exchange Commission,
or the NYSE is closed for other than customary weekend and holiday closings; (b)
the Securities and Exchange Commission has by order permitted such suspension;
or (c) an emergency, as determined by the Securities and Exchange Commission,
exists, making disposal of portfolio securities or valuation of net assets of
such Fund not reasonably practicable.

     Monetta Fund and the Trust have each elected to be governed by Rule 18f-1
under the 1940 Act, pursuant to which it is obligated to redeem shares of each
Fund solely in cash up to the lesser of $250,000 or 1% of the net asset value of
that Fund during any 90-day period for any one shareholder. Redemptions in
excess of the above amounts will normally be paid in cash, but may be paid
wholly or partly by a distribution of securities in kind.

More Information About Net Asset Value

     Each Fund's net asset value is determined on days on which the New York
Stock Exchange ("NYSE") is open for trading. The NYSE is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in February, Good
Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving and
Christmas. If one of these holidays falls on a Saturday or Sunday, the Exchange
will be closed on the preceding Friday or the following Monday, respectively.

     For purposes of calculating the net asset value per share, the assets of
the Fund are valued as follows:

     Valuation.  Securities for which market quotations are readily available at
the time of valuation are valued on that basis. Each security traded on a
national stock exchange or on the Nasdaq National Market is valued at its last
sale price on that day or, if there are no sales that day, at the mean of the
latest bid and asked quotations. All other over-the-counter securities for which
reliable quotations are available are valued at the mean of the latest bid and
asked quotations. Long-term straight-debt securities for which market quotations
are not readily available are valued at a fair value based on valuations
provided by pricing services approved by the Board, which may employ electronic
data processing techniques, including a matrix system, to determine valuations.
Short-term debt securities for which market quotations are not readily available
are valued by use of a matrix prepared by the Adviser based on quotations for
comparable securities. Other assets and securities held by a Fund for which
these valuation methods do not produce a fair value are valued by a method that
the Board believes will determine a fair value.

                                     B-25
<PAGE>
 
     Valuation of Government Money Market Fund. Government Money Market Fund
values its portfolio by the "amortized cost method" by which it attempts to
maintain its net asset value at $1.00 per share. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. Although this method
provides certainty in valuation, it may result in periods during which value as
determined by amortized cost is higher or lower than the price the Fund would
receive if it sold the instrument. Other assets are valued at a fair value
determined in good faith by the board of trustees.

     In connection with the Government Money Market Fund's use of amortized cost
and the maintenance of the Fund's per share net asset value of $1.00, the Trust
has agreed (i) to seek to maintain a dollar-weighted average portfolio maturity
appropriate to the Fund's objective of maintaining relative stability of
principal and not in excess of 90 days; (ii) not to purchase a portfolio
instrument with a remaining maturity of greater than thirteen months; and (iii)
to limit its purchase of portfolio instruments to those instruments that are
denominated in U.S. dollars which the Board of Trustees determines present
minimal credit risks and that are of eligible quality as determined by any major
rating service as defined under SEC Rule 2a-7 or, in the case of any instrument
that is not rated, of comparable quality as determined by the Board.

     The Trust has established procedures reasonably designed to stabilize the
Fund's price per share as computed for the purpose of sales and redemptions at
$1.00. Those procedures include review of the Fund's portfolio holdings by the
Board of Trustees, at such intervals as it deems appropriate to determine
whether the Fund's net asset values calculated by using available market
quotations or market equivalents deviate from $1.00 per share based on amortized
cost. Calculations are made to compare the value of its investments valued at
amortized cost with market value. Market values are obtained by using actual
quotations provided by market makers, estimates of market value, values from
yield data obtained from the Adviser's matrix, or values obtained from an
independent pricing service. Any such service might value the Fund's investments
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. The service may also employ electronic
data processing techniques, a matrix system or both to determine valuations.

     In connection with the Fund's use of the amortized cost method of portfolio
valuation to maintain its net asset value at $1.00 per share, the Fund might
incur or anticipate an unusual expense, loss, depreciation, gain or appreciation
that would affect its net asset value per share or income for a particular
period. The extent of any deviation between the Fund's net asset value based
upon available market quotations or market equivalents and $1.00 per share based
on amortized cost will be examined by the Board of Trustees as it deems
appropriate. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, should be initiated. In the event the
Board of Trustees determines that a deviation exists that may result in material
dilution or other unfair results to investors or existing shareholders, it will
take such action as it considers appropriate to eliminate or reduce to the
extent reasonably practicable such dilution or unfair results. Actions which the
Board might take include: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average

                                     B-26
<PAGE>
 
portfolio maturity; increasing, reducing or suspending dividends or
distributions from capital or capital gains; or redeeming shares in kind. The
board might also establish a net asset value per share by using market values,
as a result of which the net asset value might deviate from $1.00 per share.

Tax Status

     Each Fund intends to continue to qualify to be taxed as a regulated
investment company under the Internal Revenue Code of 1986, as amended, so as to
be relieved of federal income tax on its capital gains and net investment income
currently distributed to shareholders.

Portfolio Transactions

     The Adviser has discretion to select brokers and dealers to execute
portfolio transactions initiated by the Adviser and to select the markets in
which such transactions are to be executed. The primary responsibility regarding
portfolio transactions is to seek the best combination of net price and
execution for the Funds. When executing transactions for the Funds, the Adviser
will consider all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission.

     Transactions of the Funds in the over-the-counter market are executed with
primary market makers acting as principal except where it is believed that
better prices and execution may be obtained otherwise.
    
     In selecting brokers or dealers to execute particular transactions and in
evaluating the best net price and execution available, the adviser is authorized
to consider "brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934), statistical quotations,
specifically the quotations necessary to determine the Funds' asset values, and
other information provided to the Funds or the Adviser. The Adviser is also
authorized to cause the Funds to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. The Adviser must
determine in good faith, however, that such commission was reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms of that particular transaction or in terms of all the accounts over which
the Adviser exercises investment discretion. It is possible that certain of the
services received by the Adviser attributable to a particular transaction will
benefit one or more other accounts for which investment discretion is exercised
by the Adviser.      

     In valuing research services, the Adviser makes a judgment of the
usefulness of research and other information provided by a broker to the Adviser
in managing the Funds' investment portfolios. In some cases, the information,
e.g., data or recommendations concerning particular securities, relates to the
specific transaction placed with the broker, but for the greater part, the
research consists of a wide variety of information concerning companies,
industries, investment strategy and economic, financial and political conditions
and prospects, useful to the Adviser in advising the Funds.

                                     B-27
<PAGE>
 
     The Adviser is the principal source of information and advice to the Funds
and is responsible for making and initiating the execution of investment
decisions by the Funds.  However, the respective boards recognize that it is
important for the Adviser, in performing its responsibilities to the Funds, to
continue to receive and evaluate the broad spectrum of economic and financial
information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Funds to take into account the
value of the information received for use in advising the Funds.  The extent, if
any, to which the obtaining of such information may reduce the expenses of the
Adviser in providing management services to the Funds is not determinable.  In
addition, it is understood by the respective board that other clients of the
Adviser might also benefit from the information obtained for the Funds, in the
same manner that the Funds might also benefit from the information obtained by
the Adviser in performing services for others.

     Although investment decisions for the Funds are made independently from
those for other investment advisory clients of the Adviser, it may develop that
the same investment decision is made for a Fund and one or more other advisory
clients.  If a Fund and other clients purchase or sell the same class of
securities on the same day, the transactions will be allocated as to amount and
price in a manner considered equitable to each.

     The board of directors of Monetta Fund and the board of trustees of the
Trust have each determined that portfolio brokerage transactions for their
respective Funds may be executed through Monetta Brokerage, Inc. ("MBI") if, in
the judgment of the Adviser, the use of MBI is likely to result in prices and
execution at least as favorable to the Fund as those available from other
qualified brokers and, if, in such transaction, MBI charges the Fund commission
rates consistent with those charged by MBI to comparable unaffiliated customers
in similar transactions.  The board of directors of Monetta Fund, including a
majority of the directors who are not "interested" directors, and the board of
trustees of the Trust, including a majority of the trustees who are not
"interested" trustees, have each adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to MBI
are consistent with the foregoing standard.  The Funds will not effect principal
transactions with MBI.

    
     Brokerage commissions incurred by Monetta Fund for the six months ended 
June 30, 1996, and the years ended December 31, 1995, 1994 and 1993 aggregated
$411,836, $1,449,063, $1,974,854 and $2,080,880, respectively, not including
the gross underwriting spread on securities purchased in underwritten public
offerings. Of these amounts, the Fund paid brokerage commissions aggregating
$312,447, $1,034,235, $1,290,759 and $1,394,802, respectively, in connection
with portfolio transactions involving purchases and sales aggregating
$122,172,724, $366,529,232, $512,538,346, and $556,301,080, respectively, to
brokers who furnished investment research services to the Fund.      

     Brokerage commissions incurred by Mid-Cap Fund for the six months ended
June 30, 1996 and the years ended December 31, 1995 and 1994 aggregated $23,600,
$85,201 and $69,865, respectively, not including the gross underwriting spread
on securities purchased in underwritten public offerings.  Of this amount, Mid-
Cap Fund paid brokerage commissions of $21,426, $78,743 and $50,407, 
respectively, in connection with portfolio
     
                                     B-28
<PAGE>

   
transactions involving purchases and sales aggregating $9,496,761, $33,625,853
and $20,848,618, respectively, to brokers who furnished research services to the
Fund.
 
     Brokerage commissions incurred by Large-Cap Fund for the six months ended
June 30, 1996 and the period September 1, 1995 through December 31, 1995
aggregated $1,770 and $1,507, respectively, not including the gross
underwriting spread on securities purchased in underwritten public offerings.
Of this amount, Large-Cap Fund paid brokerage commissions of $518 and
$1,316, respectively, in connection with portfolio transactions involving
purchases and sales aggregating $331,826 and $1,082,682, respectively, to
brokers who furnished research services to the Fund.  

     Brokerage commissions incurred by Balanced Fund for the six months ended
June 30, 1996 and the period September 1, 1995 through December 31, 1995
aggregated $614 and $350, respectively, not including the gross underwriting
spread on securities purchased in underwritten public offerings.  Of this
amount, Balanced Fund paid brokerage commissions of $368 and $301,
respectively, in connection with portfolio transactions involving purchases and
sales aggregating $157,982 and $182,600, respectively, to brokers who
furnished research services to the Fund.

     Of the aggregate brokerage commissions paid by Monetta Fund for the six
months ended June 30, 1996, and the years ended December 31, 1995, 1994 and 1993
an aggregate amount of $7,375, $70,235, $170,815 and $325,800,
respectively, was paid to MBI. This aggregate amount represented 1.8%, 4.8%,
8.7% and 15.7%, respectively, of all commissions paid by Monetta Fund on
transactions aggregating 1.5%, 6.4%, 10.3% and 23.4%, respectively, of the
aggregate dollar amount of transactions involving the payment of 
commissions.

     Of the aggregate brokerage commissions paid by Mid-Cap Fund for the six
months ended June 30, 1996, and the years ended December 31, 1995 and 1994 an
aggregate amount of $0, $0 and $4,125, respectively, was paid to MBI. This
aggregate amount represented 0.0%, 0.0% and 5.9%, respectively, of all
commissions paid by Mid-Cap Fund on transactions aggregating 0.0%, 0.0% and
10.6%, respectively, of the aggregate dollar amount of transactions involving
the payment of commissions. 

     All securities transactions of Large-Cap Fund and Balanced Fund in 1996 and
1995 were executed on a principal basis.  All securities transactions of
Intermediate Bond Fund and Government Money Market Fund in 1996, 1995 and 1994
were executed on a principal basis.      

     The portfolio turnover rates of Monetta Fund for 1995 and 1994 were 272.0%
and 191.27%, respectively.  The Fund's portfolio turnover rate may vary greatly
from year to year, and is likely to be greater than 100% and in some years may
exceed 200%.  Greater portfolio activity increases the Fund's transaction costs,
including brokerage commissions.
    
     The portfolio turnover rate of the Intermediate Bond Fund for 1995 and
1994 were 75.1% and 94.4%, and is expected to be less than 100% annually.  The
portfolio turnover rates of Mid-Cap Fund were 254.4% and 210.0% for 1995 and
1994, and may continue to be greater than        

                                     B-29
<PAGE>
     
100%. There was no significant variation in either Fund's respective 1995 and
1994 portfolio turnover rates. The portfolio turnover rate for Large-Cap Fund
for 1995 was 38.2% and the portfolio turnover rate for Balanced Fund for
1995 was 54.8%. Greater portfolio activity increases a Fund's transaction
costs, including brokerage commissions.  

DISTRIBUTOR

     The shares of each Fund are offered for sale on a continuous basis through
Funds Distributor, Inc. ("Distributor") pursuant to written Distribution
Agreements with Monetta Fund and the Trust.  Those agreements continue from year
to year, provided such continuance is approved annually (i) by a majority of the
board members or by a majority of the outstanding voting securities of the
affected Funds and (ii) by a majority of the board members  who are not parties
to the Agreements or interested persons of any such party.  There are no sales
commissions or charges directly to shareholders of the Funds.  The fees and
expenses of the Distributor are paid (i) by each Fund of Monetta Trust to the
extent it is able to do so within the limits of its Distribution and Service
Plan, and (ii) to the extent Fund assets are not available under the Plan, by
the Adviser.  The Adviser pays all the fees and expenses of the Distributor for
Monetta Fund. 

     As agent, the Distributor offers shares of each Fund to investors at net
asset value, without sales commissions or other sales load. The Distributor
offers the Funds' shares only on a best-efforts basis. 

     The Distributor or another broker affiliated with the Distributor may
receive brokerage commissions on purchases and sales of portfolio securities by
a Fund.  Those amounts, if any, are described under "Portfolio Transactions."
     
CUSTODIAN

     Firstar Trust Company, 615 East Michigan Street, 3rd Floor, Milwaukee,
Wisconsin 53202 is the custodian for the Funds.  It is responsible for holding
all securities and cash of the Funds, receiving and paying for securities
purchased, delivering against payment securities sold, receiving and collecting
income from investments, making all payments covering expenses of the Funds, and
performing other administrative duties, all as directed by authorized persons of
the Funds.  The custodian does not exercise any supervisory function in such
matters as purchase and sale of portfolio securities, payment of dividends, or
payment of expenses of the Funds.  The Funds have authorized the custodian to
deposit certain portfolio securities in central depository systems as permitted
under federal law.  The Funds may invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.

INDEPENDENT AUDITORS

     The independent auditors for the Funds are KPMG Peat Marwick LLP, 303
Wacker Drive, Chicago, Illinois 60601.  The independent auditors audit and
report on the Funds' annual financial statements, review certain regulatory
reports and the Fund's income tax returns, and

                                     B-30
<PAGE>
 
perform other professional accounting, auditing, tax and advisory services when
engaged to do so by the Funds.

                                     B-31
<PAGE>
 
APPENDIX - RATINGS
- ------------------                    


RATINGS IN GENERAL
- ------------------

     A rating by a rating service represents the service's opinion as to the
credit quality of the security being rated.  However, the ratings are general
and are not absolute standards of quality or guarantees as to the credit-
worthiness of an issuer.  Consequently, the Adviser believes that the quality of
debt securities in which the Fund invests should be continuously reviewed and
that individual analysts give different weightings to the various factors
involved in credit analysis.  A rating is not a recommendation to purchase,
sell, or hold a security, because it does not take into account market value or
suitability for a particular investor.  When a security has received a rating
from more than one service, each rating should be evaluated independently.
Ratings are based on current information furnished by the issuer or obtained by
the rating services from other sources which they consider reliable.  Ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.

     The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").

BOND RATINGS

RATINGS BY MOODY'S:

     Aaa.  Bonds rated Aaa are judged to be the best quality.  They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or an exceptionally stable margin and
principal is secure.  Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.

     Aa.  Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds.  They are rated lower than the best bonds because margins of protections
may not be as large as in the Aaa Bonds, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.

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

     Baa.  Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured.  Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically

                                     B-32
<PAGE>
 
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

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

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

     Caa.  Bonds rated Caa are of poor standing.  Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.  NOTE:  Moody's applies numerical modifiers 1, 2, and 3 in each of
these generic rating classifications in its corporate bond rating systems.  The
modifier 1 indicates that the  security ranks in the higher end of its generic
rating category.

     Ratings by Standard and Poor's:

     AAA.  Debt rated AAA has the highest rating.  Capacity to pay interest and
repay principal is extremely strong.

     AA.  Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.

     A.  Debt rated A has a very strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

     BBB.  Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal.  Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

     BB-B-CC.  Bonds rated BB, B and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations.  While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

     NOTE:  These ratings may be modified by the addition of a plus(+) or
minus(-) sign to show relative standing within the major rating categories.

COMMERCIAL PAPER RATINGS

     Ratings by Moody's:

                                     B-33
<PAGE>
 
     The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's.  Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.  These factors are all
considered in determining whether the commercial paper is rated P-2 or P-3.

RATINGS BY STANDARD & POOR'S:

     The rating A-1+ is the highest, and A-1 the second highest, commercial
paper rating assigned by S&P.  Paper rated A-1+ must have either the direct
credit support of an issuer or guarantor that possesses excellent long-term
operating and financial strengths combined with strong liquidity characteristics
(typically, such issuers or guarantors would display credit quality
characteristics which would warrant a senior bond rating of AA or higher), or
the direct credit support of an issuer or guarantor that possesses above average
long-term fundamental operating and financing capabilities combined with ongoing
excellent liquidity characteristics.  Paper rated A-1 must have the following
characteristics:  liquidity ratios are adequate to meet cash requirements, long-
term senior debt is rated A or better, the issuer has access to at least two
additional channels of borrowing, and basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances.  Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry and the reliability and quality of management are
unquestioned.  Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-2 or A-3.

                                     B-34
<PAGE>
 
                          PART C -- OTHER INFORMATION
                          ---------------------------

Item 24.        Financial Statement and Exhibits
- -------         --------------------------------

(a) Financial statements:

    (1)         Financial statements included in Part A of this registration
                statement:

                  None

    (2)         Financial statements included in Part B of this amendment:

                     
                  The following financial statements, but no other part of the
                    report, are incorporated by reference to the following
                    portions of Monetta Fund's semi-annual report to
                    shareholders for the period ended June 30, 1996:      

                  Schedule of Investments at June 30, 1996       

                  Statement of Assets and Liabilities at June 30, 1996       

                  Statement of Operations for the period ended June 30, 1996 
                                                                             
                   
                  Statement of Changes in Net Assets for the period ended June
                   30, 1996 and the period ended December 31, 1995     
                    
                  Notes to financial statements     
                     
                  Independent Auditors' Report     
                    
                    Note:  The following schedules have been omitted for the
                            following reasons:     

                         Schedule I - The required information is presented
                          in the schedule of investments at June 30, 1996.     

                         Schedules II, III, IV and V - the required information
                          is not present.       
                      
                  The following financial statements, but no other part of the
                    report, are incorporated by reference to the following
                    portions of Monetta Fund's annual report to shareholders
                    for the year ended December 31, 1995:       

                  Schedule of Investments at December 31, 1995

                  Statement of Assets and Liabilities at December 31, 1995

                  Statement of Operations for the year ended December 31, 1995

                  Statement of Changes in Net Assets for the year ended
                   December 31, 1995 and the year ended December 31, 1994

                                      C-1
<PAGE>
 
                Notes to financial statements

                Independent Auditors' Report

                  Note:  The following schedules have been omitted for the
                          following reasons:

                      Schedule I - The required information is presented
                       in the schedule of investments at December 31, 1995.
    
                      Schedules II, III, IV and V - the required information
                       is not present     

(b) Exhibits:

    NOTE:   As used herein the term "Registration Statement" refers to the
              registration statement of registrant on form N-1A, no. 33-1398.

    1       Amended and restated charter of registrant (2)

    1.1     Articles supplementary dated February 4, 1992 (3)

    1.2     Articles of amendment dated February 14, 1992 (3)

    2       Bylaws of registrant (amended and restated 11/10/88) (2)

    3       None

    4       Form of stock certificate (1)
 
    5       Investment Advisory Agreement with Monetta Financial Services, Inc.
              dated November 10, 1988 (2)
    
    6       Distribution Agreement with Funds Distributor, Inc.     

    7       None

    8       Custody agreement with Firstar Trust Company (formerly First
              Wisconsin Trust Company) (1)

    9       None

    10      Opinion of counsel (1)

    11      Consent of independent auditors

    12      None

    13      Subscription agreement (1)

    14      Monetta Funds Individual retirement account prototype plan,
              disclosure statement and application (4)

    15      None
                                      
                                      C-2
<PAGE>

    16      Schedule for computation of performance quotations (2)

    17      Financial Data Schedule

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

(1)  Incorporated by reference to the exhibit of the same number to the
     Registration Statement.

(2)  Incorporated by reference to the exhibit of the same number filed with 
     post-effective amendment no. 4 to the Registration Statement.

(3)  Incorporated by reference to the exhibit of the same number filed with 
     post-effective amendment no. 9 to the Registration Statement.

(4)  Incorporated by reference to the exhibit of the same number filed with 
     post-effective amendment no. 13 to the Registration Statement.


Item 25.  Persons Controlled By or Under Common Control with Registrant
- -------   -------------------------------------------------------------

          The registrant does not consider that there are any persons directly
or indirectly controlling, controlled by, or under common control with, the
registrant within the meaning of this item. The information in the prospectus
under the caption "Management of the Fund" and in the Statement of Additional
Information under the captions "Investment Adviser" and "Directors/Trustees and
Officers" is incorporated by reference.


Item 26.  Number of Holders of Securities
- -------   -------------------------------
    
          As of November 1, 1996 there were 15,351,745 record holders of capital
stock of the registrant. The registrant has no other class of securities
outstanding.     


Item 27.  Indemnification
- -------   ---------------

          Section 2-418 of the General Corporation Law of Maryland authorizes
the registrant to indemnify its directors and officers under specified
circumstances.  Section 9.01 of Article IX of the bylaws of the registrant
(exhibit 2 to this amendment, which is incorporated herein by reference)
provides in effect that the registrant shall provide certain indemnification of
its directors and officers.  In accordance with section 17(h) of the Investment
Company Act, this provision of the bylaws shall not protect any person against
any liability to the registrant or its shareholders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.

                                      C-3
<PAGE>
 
          Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

Item 28.  Business and Other Connections of Investment Adviser
- -------   ----------------------------------------------------
    
          Monetta Financial Services, Inc. ("MFSI"), registrant's investment
adviser, also acts as investment adviser to Monetta Fund, Inc. and to individual
and institutional clients. The directors and officers of MFSI are: Robert S.
Bacarella, Chairman and Director; Albert A. Pisterzi, President and Director;
William M. Valiant, Director; John P. Rozinsky, Vice President; and Maria C.
DeNicolo, Controller, Secretary and Treasurer. The information in the Statement
of Additional Information under the heading "Directors/Trustees and Officers"
describing the principal occupations and other affiliations of Mr. Bacarella,
Mr. Pisterzi, Mr. Valiant, Mr. Rozinsky and Ms. DeNicolo is incorporated herein
by reference. Mr. Valiant, who is now retired, was Vice President and Treasurer,
Borg-Warner Corporation, until July 1990.      

Item 29.  Principal Underwriters
- -------   ----------------------
    
          (a) Funds Distributor, Inc. (the "Distributor") also acts as principal
underwriter for the following investment companies.

BJB Investment Funds
Foreign Fund, Inc.
Fremont Mutual Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
The JPM Advisor Funds
The JPM Institutional Funds
The JPM Pierpont Funds
LKCM Fund
The Munder Funds Trust
The Munder Funds, Inc.
The PanAgora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
St. Clair Money Market Fund
The Skyline Funds
Waterhouse Investors Cash Management Fund, Inc.

Funds Distributor is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
Funds Distributor is an indirect wholly-owned subsidiary of Boston Institutional
Group, Inc., a holding company all of whose outstanding shares are owned by key
employees.

          (b) The information required by this Item 29(b) with respect to each 
director, officer, or partner of Funds Distributor is incorporated by reference 
to Schedule A of Form BD filed by Funds Distributor with the Securities and 
Exchange Commission pursuant to the Securities Act of 1934 (File No. 8-20518).
     

                                      C-4
<PAGE>
 
         


          (c)  Not applicable

Item 30.  Location of Accounts and Records
- -------   --------------------------------

          Robert S. Bacarella
          Monetta Fund, Inc.
          1776-A South Naperville Road,
          Suite 207
          Wheaton, Illinois  60187-8133

Item 31.  Management Services
- -------   -------------------

          None

Item 32.  Undertakings
- -------   ------------

          (a)  Not applicable.

          (b)  Not applicable

          (c)  Registrant undertakes to furnish each person to whom a prospectus
               is delivered with a copy of Registrant's latest annual report to
               shareholders, upon request and without charge.

                                      C-5
<PAGE>
     
          Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it has duly caused
this amendment to its registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Wheaton, Illinois on November 7,
1996.       

                                         MONETTA FUND, INC.

 
 
                                         By: /s/ Robert S. Bacarella
                                             ------------------------------
                                             Robert S. Bacarella, President

          Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the following
persons in the capacities and on the dates indicated.

    
<TABLE>
<CAPTION>

          Name                 Title                                         Date
          ----                 -----                                         ----
<C>                            <S>                                  <C>
/s/ Robert S. Bacarella        Director and President           )
- --------------------------     (principal executive officer)    )
Robert S. Bacarella                                             )
                                                                )
                                                                )
                                                                )
/s/ John W. Bakos             Director                          )
- --------------------------                                      )
John W. Bakos                                                   )
                                                                )
                                                                )
                                                                )
/s/ Paul W. Henry             Director                          )
- --------------------------                                      )
Paul W. Henry                                                   )
                                                                )   
                                                                )   November 7, 1996
                                                                )   
/s/ Mark F. Ogan              Director                          )
- --------------------------                                      )
Mark F. Ogan                                                    )
                                                                )
                                                                )
                                                                )
/s/ Richard D. Russo          Director                          )
- --------------------------                                      )
Richard D. Russo                                                )
                                                                )
                                                                )
                                                                )
/s/ Maria Cesario DeNicolo    Treasurer                         ) 
- --------------------------    (principal financial officer)     )
Maria Cesario DeNicolo                                          )
 
</TABLE>
     
<PAGE>
 
                  Index of Exhibits Filed with this Amendment
                  -------------------------------------------
    
<TABLE> 
<CAPTION> 

Exhibit
Number                Exhibit                                             Page
- -------     ------------------------                                      ----
<C>         <S>                                                           <C> 
   6        Form of Distribution Agreement with Funds Distributor, Inc.

  11        Consent of Independent Auditors

  17        Financial Data Schedule

</TABLE>      

<PAGE>


                            DISTRIBUTION AGREEMENT

                              MONETTA FUND, INC.
                         1776-A SOUTH NAPERVILLE ROAD
                                   SUITE 207
                            WHEATON, ILLINOIS 60187


                                                                February 1, 1997



Funds Distributor, Inc.
60 State Street
Suite 1300
Boston, Massachusetts 02109

Dear Sirs:

     This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the "Fund") has
agreed that you shall be, for the period of this agreement, the distributor of
(a) shares of each Series of the Fund set forth on Exhibit A hereto, as such
Exhibit may be revised from time to time (each, a "Series") or (b) if no Series
are set forth on such Exhibit, shares of the Fund.  For purposes of this
agreement the term "Shares" shall mean the authorized shares of the relevant
Series, if any, and otherwise shall mean the Fund's authorized shares.

     1.   Services as Distributor

     1.1  You will act as agent for the distribution of Shares covered by, and
in accordance with, the registration statement and prospectus then in effect
under the Securities Act of 1933, as amended, and will transmit promptly any
orders received by you for purchase or redemption of Shares to the Transfer and
Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing.

     1.2  You agree to use your best efforts to solicit orders for the sale of
Shares.  It is contemplated that you may enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.

     1.3  You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitations, all
rules and regulations made or adopted pursuant to the Investment Company Act of
1940, as amended, (the "NASD") Rules of Fair Practice. You represent and warrant
that you are a broker-dealer registered with the Securities and Exchange
Commission and that you are registered with the relevant securities regulatory
agencies in all fifty states, the District of Columbia and Puerto Rico. You also
represent and
<PAGE>
 
warrant that you are a member of the NASD. by the Securities and Exchange
Commission or any securities association registered under the Securities
Exchange Act of 1934, as amended.

     1.4  You shall file Fund advertisements, sales literature and other
marketing and sales related materials with the appropriate regulatory agencies
and shall obtain such approvals for their use as may be required by the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. and/or state securities administrators.

     1.5  Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind
deemed by the parties hereto to render sales of a Fund's Shares not in the best
interest of the Fund, the parties hereto may decline to accept any orders for,
or make any sales of, any Shares until such time as those parties deem it
advisable to accept such orders and to make such sales and each party shall
advise promptly the other party of  any such determination.

     1.6  The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided however, that
the Fund shall not pay any of the costs of advertising or promotion for the sale
of Shares.

     1.7  The Fund agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
qualification of Shares for sale in such states as you may designate to the Fund
and the Fund may approve, and the Fund agrees to pay all expenses which may be
incurred in connection with such qualification. You shall pay all expenses
connected with your own qualification as a dealer under state or Federal laws
and, except as otherwise specifically provided in this agreement, all other
expenses incurred by you in connection with the sale of Shares as contemplated
in this agreement.

     1.8  The Fund shall furnish you from time to time, for use in connection
with the sale of Shares, such information with respect to the Fund or any
relevant Series and the Shares as you may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information, when so signed
by the Fund's officers, shall be true and correct.  The Fund also shall furnish
you upon request with:  (a) semi-annual reports and annual audited reports of
the Fund's books and accounts made by independent public accountants regularly
retained by the Fund, (b) quarterly earnings statements prepared by the Fund,
(c) a monthly itemized list of the securities in the Fund's or, if applicable,
each Series' portfolio, (d) monthly balance sheets as soon as practicable after
the end of each month, and (e) from time to time such additional information
regarding the Fund's financial condition as you may reasonably request.

     1.9  The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the 

                                       2
<PAGE>
 
Shares have been carefully prepared in conformity with the requirements of said
Acts and rules and regulations of the Securities and Exchange Commission
thereunder. As used in this agreement the terms "registration statement" and
"prospectus" shall mean any registration statement and prospectus, including the
statement of additional information incorporated by reference therein, filed
with the Securities and Exchange Commission and any amendments and supplements
thereto which at any time shall have been filed with said Commission. The Fund
represents and warrants to you that any registration statement and prospectus,
when such registration statement becomes effective, will contain all statements
required to be stated therein in conformity with said Acts and the rules and
regulations of said Commission; that all statements of fact contained in any
such registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Fund may, but shall not be obligated to, propose from time
to time such amendment or amendments to any registration statement and such
supplement or supplements to any prospectus as, in the light of future
developments, may, in the opinion of the Fund's counsel, be necessary or
advisable. If the Fund shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Fund of a
written request from you to do so, you may, at your option, terminate this
agreement or decline to make offers of the Fund's securities until such
amendments are made. The Fund shall not file any amendment to any registration
statement or supplement to any prospectus without giving you reasonable notice
thereof in advance; provided, however, that nothing contained in this agreement
shall in any way limit the Fund's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Fund may deem advisable, such right being in all respects
absolute and unconditional.

     1.10  The Fund authorizes you and any dealers with whom you have entered
into dealer agreements to use any prospectus in the form furnished by the Fund
in connection with the sale of Shares.  The Fund agrees to indemnify, defend and
hold you, your several officers and directors, and any person who controls you
within the meaning of Section 15 of the Securities Act of 1933, as amended, free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the reasonable cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling persons, may incur under the Securities Act of 1933, as amended,
the Investment Company Act of 1940, as amended, or common law or otherwise,
arising out of or on the basis of any untrue statement, or alleged untrue
statement, of a material fact required to be stated in either any registration
statement or any prospectus or any statement of additional information, or
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in any registration statement, any
prospectus or any statement of additional information or necessary to make the
statements in any of them not misleading, except that the Fund's agreement to
indemnify you, your officers or directors, and any such controlling person will
not be deemed to cover any such claim, demand, liability or expense to the
extent that it arises out of or is based upon any such untrue statement, alleged
untrue statement, omission or alleged omission made in any registration
statement, any prospectus or any statement of additional information in reliance
upon information furnished by you, your officers, directors or any such
controlling person to the Fund or its representatives for 

                                       3
<PAGE>
 
use in the preparation thereof, and except that the Fund's agreement to
indemnify you and the Fund's representations and warranties set out in paragraph
1.8 of this Agreement will not be deemed to cover any liability to the Funds or
their shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties under this
Agreement ("Disqualifying Conduct"). The Fund's agreement to indemnify you, your
officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any action brought
against you, your officers or directors, or any such controlling person, such
notification to be given by letter, by facsimile or by telegram addressed to the
Fund at its address set forth above within a reasonable period of time after the
summons or other first legal process shall have been served. The failure so to
notify the Fund of any such action shall not relieve the Fund from any liability
which the Fund may have to the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Fund's indemnity agreement contained
in this paragraph 1.9. The Fund will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing chosen by the Fund
and approved by you. In the event the Fund elects to assume the defense of any
such suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the reasonable fees and expenses of any
additional counsel retained by any of them; but in case the Fund does not elect
to assume the defense of any such suit, the Fund will reimburse you, your
officers and directors, or the controlling person or persons named as defendant
or defendants in such suit, for the fees and expenses of any counsel retained by
you or them. The Fund's indemnification agreement contained in this paragraph
1.9 and the Fund's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of you, your officers and directors, or any controlling person, and
shall survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your several officers and
directors, and their respective estates, and to the benefit of any controlling
persons and their successors. The Fund agrees promptly to notify you of the
commencement of any litigation or proceedings against the Fund or any of its
officers or Board members in connection with the issue and sale of Shares.

     1.11  You agree to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the reasonable cost of investigating or defending such claims,
demands or liabilities and any reasonable counsel fees incurred in connection
therewith) which the Fund, its officers or Board members, or any such
controlling person, may incur under the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, or under common law or otherwise,
but only to the extent that such liability or expense incurred by the Fund, its
officers or Board members, or such controlling person resulting from such claims
or demands, (a) shall arise out of or be based upon any unauthorized sales
literature, advertisements, information, statements or representations or any
Disqualifying Conduct in connection with the offering and sale of any Shares, or
(b) shall arise out of or be based upon any untrue, or alleged untrue, statement
of a material fact contained in information furnished in writing by you to the
Fund specifically for use in the Fund's registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements 

                                       4
<PAGE>
 
made in the prospectus or statement of additional information, or shall arise
out of or be based upon any omission, or alleged omission, to state a material
fact in connection with such information furnished in writing by you to the Fund
and required to be stated in such answers or necessary to make such information
not misleading. Your agreement to indemnify the Fund, its officers and Board
members, and any such controlling person, as aforesaid, is expressly conditioned
upon your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter, by facsimile or by telegram addressed to you at your address set forth
above within a reasonable period of time after the summons or other first legal
process shall have been served. You shall have the right to control the defense
of such action, with counsel of your own choosing, satisfactory to the Fund, if
such action is based solely upon such alleged misstatement or omission on your
part, and in any other event the Fund, its officers or Board members, or such
controlling person shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify you of
any such action shall not relieve you from any liability which you may have to
the Fund, its officers or Board members, or to such controlling person by reason
of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of your indemnity agreement contained in
this paragraph 1.10. This agreement of indemnity will inure exclusively to the
Fund's benefit, to the benefit of the Fund's officers and Board members, and
their respective estates, and to the benefit of any controlling persons and
their successors. You agree promptly to notify the Fund of the commencement of
any litigation or proceedings against you or any of your officers or directors
in connection with the issue and sale of Shares.

     1.12  No Shares shall be offered by either you or the Fund under any of the
provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provide, however, that nothing contained in
this paragraph 1.11 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares from any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.

     1.13. The Fund agrees to advise you immediately in writing:

           (a)  of any request by the Securities and Exchange Commission for
     amendments to the registration statement or prospectus then in effect or
     for additional information;

           (b)  in the event of the issuance by the Securities and Exchange
     Commission of any stop order suspending the effectiveness of the
     registration statement or prospectus then in effect or the initiation of
     any proceeding for that purpose;

           (c)  of the happening of any event which makes untrue any statement
     of a material fact made in the registration statement or prospectus then in
     effect or which requires the making of a change in such registration
     statement or prospectus in order to make the statements therein not
     misleading; and

                                       5
<PAGE>
 
          (d)  of all actions of the Securities and Exchange Commission with
     respect to any amendments to any registration statement or prospectus which
     may from time to time be filed with the Securities and Exchange Commission.

     2.   Offering Price

     Shares of any class of the Fund offered for sale by you at a price per
share (the "offering price") approximately equal to (a) the net asset value
(determined in the manner set forth in the Fund's charter documents) plus (b) a
sales charge, if any and except to those persons set forth in the then-current
prospectus, which shall be the percentage of the offering price of such Shares
as set forth in the Fund's then-current prospectus. The offering price, if not
an exact multiple of one cent, shall be adjusted to the nearest cent. In
addition, Shares of any class of the Fund offered for sale by you may be subject
to a contingent deferred sales charge as set forth in the Fund's then-current
prospectus. You shall be entitled to receive any sales charge or contingent
deferred sales charge in respect of the Shares. Any payments to dealers shall be
governed by a separate agreement between you and such dealer and the Fund's
then-current prospectus.

     3.   Term

     This Agreement shall become effective with respect to the Fund as of the
date hereof and will continue for an initial one-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Fund's Board or (ii) by a vote of a majority of the Shares
of the Fund or the relevant Series, as the case may be, provided that in either
event its continuance also is approved by a majority of the Board members who
are not "interested persons" of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
agreement is terminable with respect to a Fund, without penalty, on not less
than sixty days' notice, by the Fund's Board of Directors, by vote of a majority
of the outstanding voting securities of such Fund, or by you. This Agreement
will automatically and immediately terminate in the event of its "assignment."
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meanings
as such terms have in the Investment Company Act of 1940). You agree to notify
the Fund immediately upon the event of your expulsion or suspension by the NASD.
This Agreement will automatically and immediately terminate in the event of your
expulsion or suspension by the NASD.

     4.   Miscellaneous

     4.1  The Fund recognizes that, except to the extent otherwise agreed to by
the parties hereto, your directors, officers and employees may from time to time
serve as directors, trustees, officers and employees of corporations and
business trusts (including other investment companies), and that you or your
affiliates may enter into distribution or other agreements with such other
corporations and trusts.

     4.2  No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.

                                       6

<PAGE>
 
     4.3  This Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts without giving effect to principles of conflicts
of laws.

     4.4  If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.

          Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding Agreement between us.

                                       Very truly yours,

                                       MONETTA FUND, INC.


                                       By: _____________________________


                                       Name: ___________________________


                                       Title: __________________________


Accepted:

FUNDS DISTRIBUTOR, INC.


By: ___________________________


Name: _________________________


Title: ________________________


                                       7

<PAGE>
 
                                   EXHIBIT A
                                Series of Funds
                                ---------------

                              MONETTA FUND, INC.

                                       8

<PAGE>
 
Dear Sirs:

          As the principal underwriter of shares of certain registered 
investment companies presently or hereafter managed, advised or administered by 
Monetta Financial Services, Inc., shares of which companies are distributed by 
us at their respective net asset values plus sales charges as applicable, 
pursuant to our Distribution Agreements with such companies (the "Funds"), we 
invite you to participate as a non-exclusive agent in the distribution of shares
of any and all of the Funds upon the following terms and conditions:

1.   You are to offer and sell such shares only at the public offering prices
     that shall be currently in effect, in accordance with the terms of the
     then current prospectus and statements of additional information of the
     Funds subject in each case to the delivery prior to or at the time of such
     sales of the then current prospectus.  You agree to act only as agent in
     such transactions and nothing in this Agreement shall constitute either of
     us the agent of the other or shall constitute you or the fund the agent of
     the other.  In all transactions in these shares between you and us, we are
     acting as agent for the Fund and not as principal.  All orders are subject
     to acceptance by us and become effective only upon confirmation by us. We
     reserve the right in our sole discretion to reject any order.  The minimum
     dollar purchase of shares of the Funds shall be the applicable minimum
     amounts described in the then current prospectuses and statements of
     additional information and no order for less than such amounts will be
     accepted.

2.   On each purchase of shares by you from us, the total sales charges and
     discount to selected dealer, if any, shall be as in each Fund's then
     current prospectus.

     Such sales charges and discount to selected dealers are subject to
     reductions under a variety of circumstances as described in each Fund's
     then current prospectus and statement of additional information.  To obtain
     these reductions, we must be notified when the sale takes place which would
     qualify for the reduced charge.

     There is no sales charge or discount to selected dealers on the 
     reinvestment of any dividends or distributions.

3.   All purchases of shares of a Fund made under any cumulative purchase
     privilege as set forth in a Fund's then current effective prospectus shall
     be considered an individual transaction for the purpose of determining the
     concession from the public offering price to which you are entitled as set
     forth in paragraph 2 hereof.

4.   As an authorized agent to sell shares of the Fund, you agree to purchase
     shares of the funds only through us or from your customers.  Purchases
     through us shall be made only for your own investment purposes or for the
     purpose of covering purchase orders already received from your customers,
     and we agree that we will not place orders for the purchase of shares from
     a Fund except to cover purchase orders already receive by us.  Purchases
     from your customers shall be at a price not less than the net asset value
     quoted by each such Fund at the time of such purchase.  Nothing herein
     contained shall prevent you from selling any
<PAGE>
  
     shares of a Fund for the account of a record holder to us or to such Fund
     at the net asset value quoted by us and charging your customer a fair
     commission for handling the transaction.

5.   You agree that you will not withhold placing customers' orders so as to 
     profit yourself as a result of such withholding.

6.   You agree to sell shares of the Funds only (a) to your customers at the
     public offering prices then in effect or (b) to us as agent for the Funds
     or to each such Fund itself at the redemption price, as described in each
     Fund's then current effective prospectus.

7.   Settlement shall be made promptly, but in no case later than the time
     customary for such payments after our acceptance of the order or, if so
     specified by you, we will make delivery by draft on you, the amount of
     which draft you agree to pay on presentation to you.  If payment is not so
     received or made, the right is reserved forthwith to cancel the sale or at
     our option to resell the shares to the applicable Fund, at then 
     prevailing net asset value in which latter case you agree to be responsible
     for any loss resulting to such Fund or to us from your failure to make
     payment as aforesaid.

8.   If any shares sold to you under the terms of this Agreement are repurchased
     by a Fund or by us as agent, or purchased for the account of that Fund or
     tendered to that Fund for purchase at liquidating value under the terms of
     the Articles of Incorporation or Declaration of Trust or other document
     governing such Fund within seven (7) business days after the date of
     confirmation to your of your original purchase order therefor, you agree to
     pay forthwith to us the full amount of the concession allowed to you on the
     original sale and we agree to pay such amount to the Fund when received by
     us.  We shall notify you of such repurchase within ten (10) days of the
     effective date of such repurchase.

9.   All sales will be subject to receipt of shares by us from the Funds.  We
     reserve the right in our discretion, without notice to you, to suspend
     sales or withdraw the offering of shares entirely, or to modify or cancel
     this Agreement.

10.  No person is authorized to make any representations concerning the Funds or
     shares of the Funds except those contained in each Fund's then current
     effective prospectus or statement of additional information and any such
     information as may be released by a Fund as information supplemental to
     such prospectus or statement of additional information.  In purchasing
     shares through us you shall rely solely on the representations contained in
     each Fund's then current effective prospectus or statement of additional
     information and above-mentioned supplemental information.

11.  Additional copies of each such prospectus or statement of additional
     information and any printed information issued as supplemental to each such
     prospectus or statement of additional information will be supplied by us to
     you and your selling agents in reasonable quantities upon request.


                                       2
<PAGE>
 
12.  With respect to Funds offering shares subject to a front-end sales charge,
     shares subject to a contingent deferred sales charge, and/or institutional
     class shares not subject to a sales charge, you shall conform to such
     written compliance standards as we have provided you in the past or may
     from time to time provide to you in the future.

13.  We, our affiliates and the Funds shall not be liable for any losses,
     expenses, damages, costs or other claims arising out of any redemption or
     exchange pursuant to telephone instructions from any person, or our refusal
     to execute such instructions for any reason.

14.  All notices or other communications hereunder to either party shall be in
     writing and shall be deemed sufficient if mailed to such party at the
     address of such party set forth on page 5 of this Agreement or at such
     other address as such party may be designated by written notice to the
     other, or by telex, telecopier, telegram or similar means of same day
     delivery (with a confirming copy by mail as provided herein).

15.  This Agreement may be terminated upon written notice by either party at any
     time, and shall automatically terminate upon its attempted assignment by
     you, whether by operation of law or otherwise, or by us otherwise than by
     operation of law.

16.  By accepting this Agreement, you represent that you are registered as a
     broker-dealer under the Securities Exchange Act of 1934, are qualified to
     act as a broker or dealer in the states or other jurisdictions where you 
     transact business, and are a member in good standing of the National
     Association of Securities Dealers, Inc., and you agree that you will
     maintain such registrations, qualifications, and membership in good
     standing and in full force and effect throughout the term of this
     Agreement. You further agree to comply with all applicable Federal laws,
     the laws of the states or other jurisdictions concerned, and the rules and
     regulations promulgated thereunder and with the Constitution, By-Laws and
     Rules of Fair Practice of the National Association of Securities Dealers,
     Inc., and that you will not offer or sell shares of the Funds in any state
     or jurisdiction where they may not lawfully be offered and/or sold.

     If you are offering and selling shares of the Funds in jurisdictions
     outside the several states, territories, and possessions of the United
     States and are not otherwise required to be registered, qualified, or a
     member of the National Association of Securities Dealers, Inc., as set
     forth above you nevertheless agree to observe the applicable laws of the
     jurisdiction in which such offer and/or sale is made, to comply with the
     full disclosure requirements of the Securities Act of 1933 and the
     regulations promulgated thereunder, to conduct your business in accordance
     with the spirit of the Rules of Fair Practice of the National Association
     of Securities Dealers, Inc. You agree to indemnify and hold the Funds,
     their investment advisor, and us harmless from loss or damage resulting
     from any failure on your part to comply with applicable laws.

17.  You agree to maintain records of all sales of shares made through you and 
     to furnish us with copies of each record on request.

                                       3
<PAGE>
 
18.  This Agreement and all amendments to this Agreement shall take effect with
     respect to and on the date of any orders placed by you after the date set
     forth below or, as applicable, after the date of the motive of amendment
     sent to you by the undersigned.

19.  This Agreement shall be construed in accordance with the laws of the
     Commonwealth of Massachusetts and shall be binding upon both parties 
     hereto when signed and accepted by you in the space provided below.



FOR:
FUNDS DISTRIBUTOR, INC.
60 STATE STREET, SUITE 1300
BOSTON, MA 02109

- -------------------------------------------------------------------------------
     By:                                                                   Date


FOR:
- -------------------------------------------------------------------------------


- -------------------------------------------------------------------------------
     Address of Principal Office


- -------------------------------------------------------------------------------
     City                              State                        Zip Code


BY:                                    ITS:
- ----------------------------------    -------------------------    ------------
     Authorized Signature                     Title                    Date


- ----------------------------------
     Print Name

                                       4

<PAGE>
 
                                   
[KPMG PEAT MARWICK LLP LETTER HEAD]





                        CONSENT OF INDEPENDENT AUDITORS



To the Board of Trustees and Shareholders
  of Monetta Fund, Inc.:

We consent to the use of our report which is incorporated by reference into the 
Statement of Additional Information and to the reference to our Firm under the 
headings "Financial Highlights" in the Prospectus and "Independent Auditors" in 
the Statement of Additional Information.


                                       /s/ KPMG Peat Marwick LLP

Chicago, Illinois
November 13, 1996

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from 
the 6-30-96 Semi Annual Report of the Registrant and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1996  
<PERIOD-START>                             JAN-01-1996  
<PERIOD-END>                               JUN-30-1996  
<INVESTMENTS-AT-COST>                          295,716
<INVESTMENTS-AT-VALUE>                         326,313
<RECEIVABLES>                                    7,482
<ASSETS-OTHER>                                      29
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                                 333,824
<PAYABLE-FOR-SECURITIES>                        25,794
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                          649
<TOTAL-LIABILITIES>                             26,443
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                       284,312
<SHARES-COMMON-STOCK>                           18,840
<SHARES-COMMON-PRIOR>                           23,265
<ACCUMULATED-NII-CURRENT>                        (833)
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                        (6,695)
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                        30,597
<NET-ASSETS>                                   307,381
<DIVIDEND-INCOME>                                  115
<INTEREST-INCOME>                                1,305
<OTHER-INCOME>                                       5
<EXPENSES-NET>                                   2,258
<NET-INVESTMENT-INCOME>                          (833)
<REALIZED-GAINS-CURRENT>                       (5,634)
<APPREC-INCREASE-CURRENT>                       21,192
<NET-CHANGE-FROM-OPS>                           14,725
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                            0
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                            598
<NUMBER-OF-SHARES-REDEEMED>                        598
<SHARES-REINVESTED>                                  0
<NET-CHANGE-IN-ASSETS>                        (55,339)
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                      (1,061)
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                            1,651
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                  2,258
<AVERAGE-NET-ASSETS>                           328,070
<PER-SHARE-NAV-BEGIN>                            15.59
<PER-SHARE-NII>                                  (.04)
<PER-SHARE-GAIN-APPREC>                            .77
<PER-SHARE-DIVIDEND>                                 0
<PER-SHARE-DISTRIBUTIONS>                            0
<RETURNS-OF-CAPITAL>                                 0
<PER-SHARE-NAV-END>                              16.32
<EXPENSE-RATIO>                                   1.38
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        


</TABLE>


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