RYDEX SERIES TRUST, 485APOS, 1998-05-29

RYDEX SERIES TRUST
485APOS, 1998-05-29

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<PAGE>

As Filed with the Securities and Exchange Commission On May 29, 1998

File Nos. 33-59692 and 811-7584

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)

Pre-Effective Amendment No.___ ( )

Post-Effective Amendment No.31 (X)

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 (X)

Amendment No. 32 (X)

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

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

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

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

Copies to:

John H. Grady, Jr., Esq.
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036

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

immediately upon filing pursuant to paragraph (b) of rule 485
- ---
on (date) pursuant to paragraph (b)(1)(v) of rule 485
- ---
X 60 days after filing pursuant to paragraph (a)(1) of rule 485
- ---
on (date) pursuant to paragraph (a)(1) of rule 485
- ---
75 days after filing pursuant to paragraph (a)(2) of rule 485
- ---
on (date) pursuant to paragraph (a)(2) of rule 485
- ---

If appropriate, check the following box:

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

<PAGE>

RYDEX-Registered Trademark-
INVESTMENT FLEXIBILITY
FOR INSTITUTIONAL MONEY MANAGERS

RYDEX SERIES TRUST
INVESTOR CLASS

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

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

Rydex Series Trust (the "Trust") is a no-load mutual fund complex with
twenty-one separate investment portfolios (the "Rydex Funds"), seven of which
are described in this Prospectus (the "Funds"). Investor Class Shares of the
Funds are sold principally to professional money managers and to investors who
take part in certain strategic and tactical asset-allocation investment
programs.

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

August 1, 1998

PROSPECTUS

<PAGE>

TABLE OF CONTENTS

Risk/Return Summary..........................................................
Investment Summaries....................................................
Investment Strategies...................................................
Risk Considerations.....................................................
Fund Performance and Fee Information.........................................
Nova Fund...............................................................
Ursa Fund...............................................................
OTC Fund................................................................
Precious Metals Fund....................................................
U.S. Government Bond Fund...............................................
Juno Fund...............................................................
U.S. Government Money Market Fund.......................................
Additional Risk Information.............................................
Shareholder Information......................................................
Management...................................................................
Dividends, Distributions and Taxes...........................................
Financial Highlights.........................................................
Benchmark Information........................................................
Additional Information.............................................Back Cover

2
<PAGE>

RISK/RETURN SUMMARY

INVESTMENT SUMMARIES

Most of the Funds seek to match the performance of a specific benchmark or
index. The benchmark or index used by each Fund is set forth below:

- --------------------------------------------------------------------------------
FUND (Ticker Symbol) BENCHMARK/INDEX
- --------------------------------------------------------------------------------
Nova Fund (RYNVX) 150% of the performance of the S&P 500 Composite
Stock Price Index-TM- (SPX)
- --------------------------------------------------------------------------------
Ursa Fund (RYURX) Inverse (opposite) of the S&P 500 Composite Stock
Price Index-TM-
- --------------------------------------------------------------------------------
OTC Fund (RYOCX) NASDAQ 100 Index-TM- (NDX)
- --------------------------------------------------------------------------------
Precious Metals Fund Philadelphia Stock Exchange Gold/Silver Index-TM-
(RYPMX) (XAU
- --------------------------------------------------------------------------------
U.S. Government Bond 120% of the price movement of the Long Treasury
Fund (RYGBX) Bond
- --------------------------------------------------------------------------------
Juno Fund (RYJUX) Inverse (opposite) of the price movement of the Long
Treasury Bond
- --------------------------------------------------------------------------------

A BRIEF GUIDE TO THE BENCHMARKS.
- --------------------------------------------------------------------------------

THE S&P 500 COMPOSITE STOCK PRICE INDEX-TM- (S&P 500 INDEX). The S&P 500
Index is composed of 500 large capitalization common stocks, which are chosen
by the Standard & Poor's Corporation ("S&P"), on a statistical basis to be
included in the S&P 500 Index.

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

THE PHILADELPHIA STOCK EXCHANGE GOLD/SILVER INDEX-TM- (XAU INDEX). The XAU
Index is a capitalization-weighted index featuring securities of ten widely-held
companies in the gold and silver mining and production industry, or companies
that invest in such mining and production companies.

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

<PAGE>

EQUITY BENCHMARK FUNDS
The NOVA FUND'S investment objective is to provide investment returns that
correspond to 150% of the performance of the S&P 500 Index.

The URSA FUND'S investment objective is to provide investment results that
inversely correlate to the performance of the S&P 500 Index.

The OTC FUND'S investment objective is to provide investment results that
correspond to a benchmark for over-the-counter securities.

The PRECIOUS METALS FUND'S ("Metals Fund") investment objective is to provide
investment results that correspond to a benchmark primarily for metals-related
securities.

FIXED INCOME BENCHMARK FUNDS
The U.S. GOVERNMENT BOND FUND'S (the "Bond Fund") investment objective is to
provide investment results that correspond to a benchmark for U.S. Government
securities.

The JUNO FUND'S investment objective is to provide returns that inversely
correlates to the price movements of a benchmark for U.S. Treasury debt
instruments or futures contract on a specified debt instrument.

MONEY MARKET FUND
The U.S. GOVERNMENT MONEY MARKET FUND'S ("Money Market Fund") investment
objective is to provide security of principal, high current income, and
liquidity.

INVESTMENT STRATEGIES

PADCO Advisors, Inc. (the "Advisor") primarily uses statistical and quantitative
analysis to select investments. While the Advisor attempts to minimize any
"tracking error" (the difference between the investment results of a Fund and
the Fund's benchmark), a Fund's investment results may vary from that of its
benchmark. It is the policy of these Funds to pursue their investment
objectives regardless of market conditions, to remain nearly fully invested, and
not to take defensive positions.

EQUITY BENCHMARK FUNDS
The NOVA FUND primarily invests in equity securities, stock index futures
contracts, options on stock index futures contracts, and options on securities
and stock indexes.

The URSA FUND engages primarily in certain transactions in stock index futures
contracts, options on stock index future contracts, and options on securities
and stock indexes.

The OTC FUND invests principally in securities in its current benchmark, the
NASDAQ 100 Index-TM-. The Fund may purchase other instruments consistent
with achieving returns that correspond to those of the NASDAQ 100 Index-TM-.
The Fund may engage in transactions on stock index futures contracts, options
on stock index futures contracts, and options on securities and stock indexes.

The METALS FUND invests principally in securities included in its current
benchmark, the XAU Index. In addition, the Fund may invest in other
instruments consistent with achieving returns that correspond to those of the
XAU Index. The Fund may invest in securities of foreign issuers.

<PAGE>

FIXED INCOME BENCHMARK FUNDS
The BOND FUND invests primarily in U.S. Government Securities to achieve returns
that correlate to 120% of the price movement of the Long Treasury Bond. The
Fund may engage in transactions in futures contracts on U.S. Treasury bonds.
The Fund may invest in zero coupon U.S. Treasury bonds.

The JUNO FUND engages primarily in transactions in futures contracts and options
on U.S. Government Securities to achieve returns that inversely correlate to the
price movement of the Long Treasury Bond.
MONEY MARKET FUND
The MONEY MARKET FUND invests primarily in money market instruments issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities, and enters into repurchase agreements fully collateralized by
U.S. Government Securities.

RISK CONSIDERATIONS

The Funds are designed for professional money managers and knowledgeable
investors who intend to invest in the Funds as part of a strategic or tactical
asset-allocation investment strategy. The Funds:

- are not federally insured - are not bank deposits
- are not guaranteed by any - are not guaranteed to achieve their
government agency objectives

Although the Money Market Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.

In addition, one or more of the Funds may be subject to the following risks:

TRACKING ERROR RISK - While the Funds do not expect returns to deviate from
their respective benchmarks by more than ten percent, factors such as Fund
expenses, imperfect correlation between the Funds' investments and those of
their benchmarks, rounding of share prices, changes to the benchmark,
regulatory policies, and leverage, may affect their ability to achieve
perfect correlation. The magnitude of any tracking error may be affected by
a higher portfolio turnover rate.

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

<PAGE>

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

NON-DIVERSIFICATION RISK - Since each Fund (except the Money Market Fund) is
non-diversified, each Fund may invest in the securities of a relatively few
number of issuers. If the assets of a Fund are invested in a limited number of
issuers, the Fund may be more susceptible to a single adverse economic or
regulatory occurrence.

CONCENTRATION RISK - None of the Funds will invest 25% or more of the value of
the Fund's total assets in the securities of one or more issuers conducting
their principal business activities in the same industry; EXCEPT THAT, to the
extent the benchmark index selected for a particular Fund is concentrated in a
particular industry, the Fund will be concentrated in that industry. This
limitation does not apply to investments or obligations of the U.S. Government
or any of its agencies or instrumentalities.

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

LEVERAGING RISK - Leveraging activities include, among other things, borrowing
and the use of short sales, options and futures. There are risks associated
with leveraging activities, including:

- - Leveraging may result in a Fund experiencing losses over certain ranges in
the market that exceed losses experienced by a non-leveraged Fund.

- - There may be an imperfect or no correlation between the changes in market
value of the securities held by a Fund and the prices of futures and
options on futures.

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

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

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

FUND PERFORMANCE

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

[GRAPH]
* The year-to-date return for the period from
January 1, 1998 through June 30, 1998 is _____%.

During the period shown in the bar chart, the
highest return for a quarter was 25.15% (quarter
ended June 30, 1997) and the lowest return for a
quarter was -8.31% (quarter ended March 31, 1994).

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1997)(1)

<TABLE>
<CAPTION>
Investor Class Shares S&P 500(2)
-----------------------------------------------
<S> <C> <C>
Past One Year 42.34% 31.01%
Since Inception 25.64% (07/12/93) 18.80%
</TABLE>

1 These figures assume the reinvestment of dividends and capital gains
distributions.
2 The S&P 500 Index is an unmanaged index that is a widely recognized
indicator of general stock market performance.

FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class Shares of the NOVA FUND.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .75%
Distribution (12b-1) Fees None
Other Expenses .36%
-----
Total Annual Fund Operating Expenses 1.11%
</TABLE>

* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.

EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE NOVA
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

THE EXAMPLE ASSUMES THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIOD
INDICATED AND THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE
EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE
FUND'S OPERATING EXPENSES REMAIN THE SAME. ALTHOUGH YOUR ACTUAL COSTS MAY BE
HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS YOUR COST WOULD BE:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$113 $353 $612 $1,352
</TABLE>

7
<PAGE>

FUND INFORMATION

NOVA FUND

FUND OBJECTIVE

The NOVA FUND seeks to provide investment returns that are one and one-half
times that of the S&P 500 Index.

PORTFOLIO INVESTMENTS

The Fund invests, to a significant extent, in futures contracts and options
on securities, futures contracts, and stock indexes. These instruments, if
properly utilized, may enable the Fund to meet its objective without
investing directly in the securities included in the benchmark index. The
Fund also may purchase equity securities and enter into repurchase agreements.

RISK CONSIDERATIONS

The Nova Fund is subject to Leveraging Risk, Tracking Error Risk, and Trading
Halt Risk, as described in the "RISK CONSIDERATIONS" section.

The value of the Fund's shares will tend to increase by one and one-half times
the value of any increase in the S&P 500 Index. However, when the value of the
S&P 500 Index declines, the value of the Fund's shares should also decrease by
one and one-half times the value of any decrease in the Index.

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

FUND PERFORMANCE

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

[GRAPH]

*The year-to-date return for the period from
January 1, 1998 through June 30, 1998 is ____%.

During the period shown in the bar chart, the
highest return for a quarter was 1.69% (quarter
ended December 31, 1994) and the lowest return for
a quarter was -14.1% (quarter ended June 30,
1997).

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1997)(1)

<TABLE>
<CAPTION>
Investor Class Shares S&P 500(2)
-----------------------------------------------
<S> <C> <C>
Past One Year 20.99% 31.01%
Since Inception -12.98%(01/07/94) 19.97%
</TABLE>

- --------------------
1 These figures assume the reinvestment of dividends and capital gains
distributions.
2 The S&P 500 Index is an unmanaged index that is a widely recognized
indicator of general stock market performance.

FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class Shares of the URSA FUND.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .90%
Distribution (12b-1) Fees None
Other Expenses .44%
-----
Total Annual Fund Operating Expenses 1.34%
</TABLE>

* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.

EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE URSA
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$137 $425 $734 $1,612
</TABLE>

<PAGE>

FUND INFORMATION

URSA FUND

FUND OBJECTIVE

The URSA FUND seeks to provide investment results that will inversely correlate
to the performance of the S&P 500 Index.

PORTFOLIO INVESTMENTS

RISK CONSIDERATIONS

The Ursa Fund is subject to Trading Error Risk and Trading Halt Risk, as
described in the "RISK CONSIDERATIONS" section.

The value of the Fund's shares will tend to increase during times when the value
of the S&P 500 Index is decreasing. When the value of the S&P 500 Index is
increasing, however, the value of the Fund's shares should decrease by an
inversely proportionate amount (E.G., if the S&P 500 Index goes up by 10%, the
value of the Fund's shares should go down by 10%).

10
<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

FUND PERFORMANCE

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

[GRAPH]
*The year-to-date return for the period from
January 1, 1998 through June 30, 1998 is ____%.

During the period shown in the bar chart, the
highest return for a quarter was 21.65% (quarter
ended June 30, 1995) and the lowest return for a
quarter was -9.67% (quarter ended December 31,
1997).

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1997)(1)

<TABLE>
<CAPTION>
Investor Class Shares NASDAQ 100 Index-TM-(2)
---------------------------------------------------
<S> <C> <C>
Past One Year 21.85% 20.63%
Since Inception 26.00%(02/14/94) 25.93%
</TABLE>

- --------------------------
1 These figures assume the reinvestment of dividends and capital gains
distributions.
2 The NASDAQ 100 Index-TM- is an unmanaged index that is a widely recognized
indicator of OTC market performance.

FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class Shares of the OTC FUND.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .75%
Distribution (12b-1) Fees None
Other Expenses .38%
-----
Total Annual Fund Operating Expenses 1.13%
</TABLE>

* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.

EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE OTC
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$115 $359 $622 $1,375
</TABLE>

<PAGE>

FUND INFORMATION

OTC FUND

FUND OBJECTIVE

The OTC FUND seeks to provide investment results that correspond to a benchmark
for over-the-counter securities. The Fund's current benchmark is the NASDAQ 100
Index-TM-.

PORTFOLIO INVESTMENTS

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

RISK CONSIDERATIONS

The OTC Fund is subject to a number of risks, including Early Closing Risk,
Tracking Error Risk, and Portfolio Turnover Risk, as described in the "RISK
CONSIDERATIONS" section.

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

FUND PERFORMANCE

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

[GRAPH]
* The year-to-date return for the period from
January 1, 1998 through June 30, 1998 is _____%.

During the period shown in the bar chart, the
highest return for a quarter was 19.23% (quarter
ended March 31, 1996) and the lowest return for a
quarter was -32.91% (quarter ended December 31,
1997).

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1997)(1)

<TABLE>
<CAPTION>
Investor Class Shares XAU Index(2)
---------------------------------------------------
<S> <C> <C>
Past One Year -37.62% -36.45%
Since Inception -14.06%(12/01/93) -11.26%
</TABLE>

- -----------------------
1 These figures assume the reinvestment of dividends and capital gains
distributions.
2 The XAU Index is an unmanaged index that is a widely recognized indicator
of precious metals sector performance.

FEES AND OPERATING EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class Shares of the PRECIOUS METALS FUND.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .75%
Distribution (12b-1) Fees None
Other Expenses .66%
-----
Total Annual Fund Operating Expenses 1.41%
</TABLE>

* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.

EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
PRECIOUS METALS FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$144 $446 $771 $1,691
</TABLE>

<PAGE>

FUND INFORMATION

PRECIOUS METALS FUND

FUND OBJECTIVE

The PRECIOUS METALS FUND seeks to provide investment results that correspond to
a benchmark primarily for metals-related securities. The Fund's current
benchmark is the XAU Index.

PORTFOLIO INVESTMENTS

The Fund invests in securities of companies included in the XAU Index, as well
as securities whose performance is expected to track the performance of the XAU
Index. The Fund also may engage in futures and options transactions, purchase
ADRs and other securities of foreign issuers, and enter into repurchase
agreements.

RISK CONSIDERATIONS

The Precious Metals Fund is subject to a number of risks, including Tracking
Error Risk, as described in the "RISK CONSIDERATIONS" section, and Sector
Risk. Sector risk is the risk that the economic sector in which a Fund
focuses its investments will underperform the market as a whole. To the
extent that the Fund's investments are concentrated in issuers conducting
business in the precious metals sector, the Fund is subject to the risks of
investing in that sector, including legislative or regulatory changes,
adverse market conditions and/or increased competition.

- - The Fund is also subject to Foreign Company Risks, including:
- - VOLATILITY - Investments in securities of foreign companies can be more
volatile than investments in U.S. companies. Diplomatic, political, or
economic developments could affect investments in foreign countries.
- - REGULATORY ENVIRONMENT - Foreign companies generally are not subject to
uniform accounting, auditing, and financial reporting standards comparable
to those applicable to U.S. domestic companies. At present, there
generally is less government regulation of listed companies abroad than in
the U.S.

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

FUND PERFORMANCE

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

[GRAPH]

* The year-to-date return for the period from
January 1, 1998 through June 30, 1998 is ____%.

During the period shown in the bar chart, the
highest return for a quarter was 13.9% (quarter
ended June 30, 1995) and the lowest return for a
quarter was -10.68% (quarter ended March 31,
1996).

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1997)(1)
<TABLE>
<CAPTION>
Investor Class Shares Lehman Long Treasury Index(2)
------------------------------------------------------
<S> <C> <C>
Past One Year 16.37% 7.80%
Since Inception 4.84%(01/03/94) -0.18%
</TABLE>

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

FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy or hold
Investor Class Shares of the U.S. GOVERNMENT BOND FUND.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .50%
Distribution (12b-1) Fees None
Other Expenses .61%
-----
Total Annual Fund Operating Expenses 1.11%
</TABLE>

* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.

EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE BOND
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$113 $353 $612 $1,352
</TABLE>

<PAGE>

FUND INFORMATION

U.S. GOVERNMENT BOND FUND

FUND OBJECTIVE

The U.S. GOVERNMENT BOND FUND seeks to provide investment results that
correspond to a benchmark for U.S. Government securities. The Fund's current
benchmark is 120% of the price movement of the Long Treasury Bond.

PORTFOLIO INVESTMENTS

The Fund invests principally in U.S. Government Securities, futures
contracts, and options. In addition, the Fund may enter into transactions
involving zero coupon U.S. Treasury Bonds and repurchase agreements.

RISK CONSIDERATIONS

The U.S. Government Bond Fund is subject to a number of risks, including
Leveraging Risk and Trading Halt Risk, as described in the "RISK CONSIDERATIONS"
section. The Fund is also subject to Interest Rate Risk, which is the potential
for decline in the price of fixed income securities due to rising interest
rates.

The value of the Fund's shares should increase by 120% of any price increase by
the Long Treasury Bond. In contrast, when the price of the Long Treasury Bond
declines, the value of the Fund's shares should decline by 120% of any price
decline of the Long Treasury Bond.

16
<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

FUND PERFORMANCE

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

[GRAPH]
* The year-to-date performance for the period from
January 1, 1998 through June 30, 1998 is ____%.

During the period shown in the bar chart, the
highest return for a quarter was 8.77% (quarter
ended March 31, 1996) and the lowest return for a
quarter was -7.9% (quarter ended June 30, 1995).

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1997)(1)

<TABLE>
<CAPTION>
Investor Class Shares Lehman Long Treasury Index(2)
---------------------------------------------------------
<S> <C> <C>
Past One Year -5.56% 7.80%
Since Inception -4.72% (03/03/95) 5.58%
</TABLE>

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

FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class Shares of the JUNO FUND.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .90%
Distribution (12b-1) Fees None
Other Expenses .69%
-----
Total Annual Fund Operating Expenses 1.59%
</TABLE>

* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.

EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE JUNO
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$162 $502 $866 $1,889
</TABLE>

<PAGE>

FUND INFORMATION

JUNO FUND

FUND OBJECTIVE

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

PORTFOLIO INVESTMENTS

The Fund enters into short sales and engages in futures and options
transactions. These techniques, if properly utilized, may enable the Fund to
meet its objective without investing directly in the securities included in the
benchmark index. The Fund also may enter into repurchase agreements.

RISK CONSIDERATIONS

The Juno Fund is subject to Trading Halt Risk, as described in the "RISK
CONSIDERATIONS" section. The Fund is also subject to Interest Rate Risk, which
is the potential for an increase in the price of fixed income securities due to
falling interest rates.

The value of the Fund's shares will tend to increase during periods when the
price of the Long Treasury Bond decreases. When the price of the Long Treasury
Bond increases, however, the value of the Fund's shares should decrease by an
inversely proportionate amount (E.G., if the price of the Long Treasury Bond
increases by 2%, the value of the Fund's shares should go down by 2%).

<PAGE>

FUND PERFORMANCE AND FEE INFORMATION

FUND PERFORMANCE

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

[GRAPH]

* The year-to-date return for the period from
January 1, 1998 through June 30, 1998 is ____%.

During the period shown in the bar chart, the
highest return for a quarter was 1.24% (quarter
ended June 30, 1995) and the lowest return for a
quarter was .50% (quarter ended March 31, 1994).

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1997)(1)

<TABLE>
<CAPTION>
Investor Class Shares 90-Day Treasury Composite(2)
------------------------------------------------------
<S> <C> <C>
Past One Year 4.60% _____%
Since Inception 4.27% (12/03/93) _____%
</TABLE>

- ----------------------------
1 These figures assume the reinvestment of dividends and capital gains
distributions.
2 The 90-Day Treasury Composite Index is an unmanaged index that is a widely
recognized indicator of general money market performance.

YIELD - AS OF JUNE 30, 1998, THE CURRENT YIELD OF THE FUND WAS % AND THE
EFFECTIVE YIELD WAS %.

FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class Shares of the U.S. GOVERNMENT MONEY MARKET FUND.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .50%
Distribution (12b-1) Fees None
Other Expenses .39%
----
Total Annual Fund Operating Expenses .89%
</TABLE>

* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.

EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE U.S.
GOVERNMENT MONEY MARKET FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$91 $284 $493 $1,096
</TABLE>

<PAGE>

FUND INFORMATION

U.S. GOVERNMENT MONEY MARKET FUND

FUND OBJECTIVE

The U.S. GOVERNMENT MONEY MARKET FUND seeks to provide security of principal,
high current income, and liquidity.

PORTFOLIO INVESTMENTS

The Money Market Fund invests primarily in money market instruments issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities, and enters into repurchase agreements fully collateralized by
U.S. Government Securities.

RISK CONSIDERATIONS

The Money Market Fund is subject to Interest Rate Risk, which is the potential
for a decline in the price of government securities due to rising interest
rates. This risk will be greater for longer-term government securities than for
shorter-term government securities.

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

<PAGE>

ADDITIONAL RISK INFORMATION

Certain of the Funds may enter into the following types of transactions:

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS provide for the future sale
by one party and purchase by another party of a specified amount of a specific
security at a specified future time and at a specified price. An option on a
futures contract gives the purchaser the right, in exchange for a premium, to
assume a position in a futures contract at a specified exercise price during the
term of the option.

Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An index futures contract obligates the seller
to deliver (and the purchaser to take) an amount of cash equal to a specific
dollar amount times a pre-determined multiplier and times the difference between
the value of a specific index at the close of the last trading day of the
contract and the price at which the agreement is made.

A Fund may use futures contracts and related options for bona fide hedging
purposes to offset changes in the value of securities held or expected to be
acquired. They may also be used to gain exposure to a particular market or
instrument, to create a synthetic money market position, and for certain other
tax-related purposes. A Fund will only enter into futures contracts traded on a
national futures exchange or board of trade.

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

Alternatively, a Fund may cover its position by maintaining in a segregated
account cash or liquid securities equal in value to the exercise price of the
call option written by the Fund. With respect to put options written (sold) by
the Fund, the Fund will establish a segregated account with its custodian bank
consisting of cash or liquid securities in an amount equal to the amount the
Fund would be required to pay upon exercise of the put option.

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

SHORT SALES are transactions in which a Fund sells a security it does not own.
To complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund then is obligated to replace the security borrowed by
purchasing the security at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the Fund.

<PAGE>

SHAREHOLDER INFORMATION

HOW TO INVEST IN THE FUNDS

PURCHASING SHARES

Shares are offered continuously, and may be purchased on any day that the NYSE
is open for business (a "Business Day"). The price per share (the offering
price) will be the net asset value per share ("NAV") next determined after your
purchase order is received by the Trust. No sales charges are imposed on initial
or subsequent investments in a Fund. NAV is calculated by (1) taking the
current market value of a Fund's total assets, (2) subtracting the liabilities,
and (3) dividing that amount by the total number of shares owned by
shareholders. For most Funds, the NAV is calculated once each Business Day
after the close of the New York Stock Exchange (currently, 4:00 p.m., Eastern
Time) and the settlement time for the Funds' futures and options contracts, if
any (typically, 4:15 p.m., Eastern Time). The NAV of the Bond Fund and the Juno
Fund is determined each day on which the CBOT is open for trading futures
contracts on U.S. Treasury bonds as of the close of normal trading on the CBOT
(normally 3:00 P.M., Eastern Time). If the exchange or market where a Fund's
securities or other investments are primarily traded closes early, the NAV may
be calculated earlier in accordance with the policies set forth in the Funds'
SAI. To receive the current Business Day's NAV, the Trust must receive your
purchase order before the cutoff times specified below for each method of
investing.

MINIMUM INVESTMENT

If a registered investment advisor has discretionary authority over your
account, the minimum initial investment in the Investor Class Shares of the
Funds is $15,000. For all other shareholder accounts ("Self-Directed
Accounts"), the minimum initial investment in the Investor Class Shares of the
Funds is $25,000. These minimums also apply to retirement plan accounts. The
Trust, at its discretion, may accept lesser amounts in certain circumstances.
If you invest in the Trust without designating which Fund you want to invest in
on your account application, your check or your wire advice, your money will
be invested in the Money Market Fund until you tell us where to invest your
money. There is no minimum amount for subsequent investments in a Fund. The
Trust reserves the right to modify its minimum investment requirements at any
time. The Trust also reserves the right to reject or refuse, at the Trust's
discretion, any order for the purchase of a Fund's shares in whole or in part.

Investments in the Funds may be made (i) through securities dealers who have the
responsibility to transmit orders promptly and who may charge a processing fee,
or (ii) directly with the Trust by mail or by bank wire transfer as follows:

<PAGE>

BY MAIL

Initial applications and investments, as well as subsequent investments, in the
Funds made BY MAIL must be received in good form by the Trust, on any Business
Day, at or prior to 2:00 p.m., Eastern Time, in order to be processed for that
Business Day's NAV. Fill out an application and make a check payable to "Rydex
Series Trust." Mail the check, along with the application to:

Rydex Series Trust
6116 Executive Boulevard, Suite 400
Rockville, Maryland 20852

IN ADDITION TO CHARGES DESCRIBED ELSEWHERE IN THIS PROSPECTUS, THE TRUST ALSO
MAY CHARGE $25.00 FOR CHECKS RETURNED FOR INSUFFICIENT OR UNCOLLECTIBLE FUNDS.

BY BANK WIRE TRANSFER

First, fill out an application and fax the completed application, along with a
request for a shareholder account number, to the Trust at 301-468-8585. Then,
request that your bank wire transfer the purchase amount to our custodian, Star
Bank, N.A., along with the following instructions:

Star Bank, N.A.
Cincinnati, Ohio
Routing Number: 0420-00013
For Account of Rydex Series Trust
Trust Account Number: 48038-9030
[Your Name]
[Your Shareholder Account Number and Fund Designation]

AFTER INSTRUCTING YOUR BANK TO TRANSFER MONEY BY WIRE FOR BOTH INITIAL AND
SUBSEQUENT PURCHASES, YOU MUST CALL THE TRUST AT 1-800-820-0888 AND INFORM THE
TRUST AS TO THE AMOUNT THAT YOU HAVE TRANSFERRED AND THE NAME OF THE BANK
SENDING THE TRANSFER IN ORDER TO OBTAIN SAME-DAY PRICING OR CREDIT. FOR INITIAL
PURCHASES, YOU MUST ALSO SUPPLY THE TIME THE WIRE WAS SENT AND THE FED WIRE
REFERENCE NUMBER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. IF THE
PURCHASE IS CANCELED BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE
LIABLE FOR ANY LOSS THAT THE TRUST INCURS.

Wire transfers for both initial investments (which must be preceded by a faxed
application) and subsequent investments in the Funds must be received in good
form at the Trust, on any Business Day, at or prior to the cutoff time of the
Funds as outlined in the "EXCHANGES" section (1:00 p.m., Eastern Time, for the
Money Market Fund) in order to be processed at that Business Day's NAV. An
initial application that is faxed to the Trust does not constitute a purchase
order until the application has been processed and correct payment by check or
wire transfer has been received by the Trust.

<PAGE>

TAX-QUALIFIED RETIREMENT PLANS

Investors may purchase shares of the Funds through any of the following types of
tax-qualified retirement plans:

Individual Retirement Accounts (IRAs) (including Roth IRAs)
Keogh Accounts -- Defined Contribution Plans (Profit Sharing Plans)
Keogh Accounts -- Pension Plans (Money Purchase Plans)
Internal Revenue Code Section 403(b) Plans

For retirement plan accounts that have engaged a registered investment advisor
with discretionary authority over the retirement plan account with the Trust,
the minimum initial investment in Investor Class Shares of the Funds is $15,000.
For retirement plan accounts that are Self-Directed Accounts, the minimum
initial investment in Investor Class Shares of the Funds is $25,000.

Retirement plans are charged an annual $15.00 maintenance fee and a $15.00
account closing fee. Additional information regarding these accounts, including
the annual maintenance fee, may be obtained by calling 1-800-820-0888 or
301-468-8520.

REDEEMING FUND SHARES

GENERAL

You may redeem all or any portion of your Fund shares at the next determined NAV
after receipt of the redemption request (subject to applicable account
minimums). You may redeem your shares by letter or by telephone subject to the
procedures set forth below. Your redemption proceeds normally will be sent
within five Business Days of the Trust receiving your request. For investments
made by check, payment on redemption requests may be delayed until the Trust's
transfer agent is reasonably satisfied that payment has been collected by the
Trust (which may require up to 10 Business Days). If you invest by check, you
may not wire out any redemption proceeds for the 30 calendar days following the
purchase. You may avoid a delay in receiving redemption proceeds by purchasing
shares with a certified check. Telephone redemptions will be sent only to your
address or your bank account (as listed in the Trust's records). The Trust may
charge $15 for certain wire transfers of redemption proceeds.

The proceeds of non-telephone redemptions will be sent directly to your address
(as listed in the Trust's records). If you request payment of redemption
proceeds to a third party or to a location other than your address or your bank
account (as listed in the Trust's records), this request must be in writing and
must include a signature guarantee.

REDEMPTIONS FROM TAX-QUALIFIED RETIREMENT PLANS MAY HAVE ADVERSE TAX
CONSEQUENCES. YOU SHOULD CONSULT YOUR TAX ADVISOR BEFORE REDEEMING SHARES FROM
YOUR TAX-QUALIFIED ACCOUNT.

<PAGE>

INVOLUNTARY REDEMPTIONS

Because of the administrative expense of handling small accounts, any request
for a redemption when your account balance (a) is below the currently applicable
minimum investment, or (b) would be below that minimum as a result of the
redemption, will be treated as a request for the complete redemption of that
account. If, due to withdrawals or transfers, your account balance drops below
the required minimum of $15,000 ($25,000 for Self-Directed Accounts), you may be
required to redeem your shares.

SUSPENSION OF REDEMPTIONS

With respect to each Fund, and as permitted by the Securities & Exchange
Commission ("Commission"), the right of redemption may be suspended, or the date
of payment postponed: (i) for any period during which the NYSE, the Federal
Reserve Bank of New York (the "New York Fed"), NASDAQ, the Chicago Mercantile
Exchange ("CME"), the Chicago Board Options Exchange ("CBOE"), or the CBOT, as
appropriate, is closed (other than customary weekend or holiday closings) or
trading on the NYSE, NASDAQ, the CME, the CBOE, or the CBOT, as appropriate, is
restricted; (ii) for any period during which an emergency exists so that
disposal of Fund investments or the determination of NAV is not reasonably
practicable; or (iii) for such other periods as the Commission, by order, may
permit for protection of Fund investors. On any day that the New York Fed or
the NYSE closes early, the principal government securities and corporate bond
markets close early (such as on days in advance of holidays generally observed
by participants in these markets), or as permitted by the Commission, the right
is reserved to advance the time on that day by which purchase and redemption
orders must be received.

EXCHANGES

You may exchange Investor Class Shares of any Fund for Investor Class Shares of
any other Rydex Fund on the basis of the respective net asset values of the
shares involved. An exchange involving a Self-Directed Account must be for at
least the lesser of $1,000 or 100% of the account value of the Rydex Fund from
which the redemption is to be made. The Trust currently is composed of
twenty-one separate Funds. Investor Class Shares of 14 Sector Funds and
Advisor Class Shares of certain Funds are offered in separate prospectuses.
Exchanges may be made by letter or by telephone subject to the procedures set
forth below.

To exchange your shares, you need to provide certain information, including the
name on the account, the account number (or your taxpayer identification
number), the number or dollar value of shares (or the percentage of the total
value of your account) you want to exchange, and the names of the Rydex Funds
involved in the exchange transaction. If you are contemplating an exchange for
shares of a Rydex Fund not described in this Prospectus, you should obtain and
review the current prospectus of that Rydex Fund before making the exchange.

<PAGE>

Exchange orders into other Rydex Funds must be received by the time set forth
below for either the relevant Rydex Fund from which an exchange is being made
and into which an exchange is being made (whichever is earlier):

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FUND(S) CUT OFF TIME
- --------------------------------------------------------------------------------
<S> <C>
Nova 3:45 p.m.
Ursa
OTC
- --------------------------------------------------------------------------------
Rydex Sector Funds 3:30 p.m.
Precious Metals
- --------------------------------------------------------------------------------
U.S. Government Bond 2:45 p.m.
Juno
- --------------------------------------------------------------------------------
</TABLE>

The exchange privilege may be modified or discontinued at any time.

PROCEDURES FOR REDEMPTIONS AND EXCHANGES

Written requests for redemptions and exchanges should be sent to Rydex Series
Trust, 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852, and
should be signed by the record owner or owners. With proper authorization,
telephone and electronic redemption and transfer requests are also permitted.
Telephone redemption and exchange requests may be made by calling 1-800-820-0888
or 301-468-8520 by 3:30 p.m., Eastern Time, or by any earlier cutoff time
specified above for exchanges between funds, on any Business Day. The Trust
reserves the right to suspend the right of redemption in accordance with the
SAI. The Trust's offices are open between 8:30 a.m. and 5:30 p.m., Eastern Time
on each Business Day.

TRANSACTIONS OVER THE TELEPHONE

Telephone redemption and exchange transactions are extremely convenient, but are
not risk-free. To ensure that your telephone transactions are safe, secure, and
as risk-free as possible, the Trust has instituted certain safeguards and
procedures for determining the identity of callers and authenticity of
instructions, including recording telephone inquiries. As a result, neither the
Trust nor its transfer agent will be responsible for any loss, liability, cost,
or expense for following telephone or wire instructions they reasonably believe
to be genuine. If you make exchange or redemption requests by telephone, you
will generally bear the risk of any loss. If you are unable to reach the Trust
by telephone, you may want to try to reach the Trust by other means.

<PAGE>

MANAGEMENT

THE ADVISOR'S INVESTMENT METHODOLOGY

In managing the Funds, the Advisor's primary objective is to match the
performance of each Fund's benchmark as closely as possible. Through the use
of quantitative analysis techniques, each Fund is structured to match the
risk and return characteristics of the appropriate benchmark, while remaining
fully invested in all market environments. The Advisor monitors each Fund on
an ongoing basis, and makes adjustments, as necessary, to minimize tracking
error and to maximize liquidity. The Advisor may utilize options contracts
to leverage a Fund's investment exposure. In addition, some Funds may
require short selling techniques designed to inversely correlate to the
performance of an index or benchmark.

MANAGEMENT OF THE FUNDS

THE INVESTMENT ADVISOR

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

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

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

<PAGE>

- --------------------------------------------------------------------------------
Juno .90%
- --------------------------------------------------------------------------------
U.S. Government Money Market .50%
- --------------------------------------------------------------------------------
</TABLE>

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

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

The portfolio manager of the Nova Fund and the Juno Fund is Thomas Michael, who
joined the Advisor in March 1994. From 1992 to February 1994, Mr. Michael was a
financial markets analyst at Cedar Street Investment Management Co., of Chicago,
Illinois, an institutional consulting firm specializing in developing hedging
and speculative strategies in stock index futures contracts and U.S. Treasury
bond futures contracts.

The portfolio manager of the Metals Fund is T. Daniel Gillespie, who joined the
Advisor in January 1997. From July 1994 to January 1997, Mr. Gillespie was a
portfolio manager for GIT Investment Funds, a registered investment company in
Arlington, Virginia, where Mr. Gillespie managed over $160 million in equity,
bond, and money market mutual fund assets. From 1991 to 1994, Mr. Gillespie
worked as a portfolio manager to The Rushmore Funds, Inc., in Bethesda,
Maryland, a registered investment company, where Mr. Gillespie managed over $900
million in mutual fund assets.

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

28
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

Income dividends, if any, are paid at least annually by each of the Funds,
except the Money Market and Bond Funds, which declare dividends daily and pay
them monthly. If you own Fund shares on a Fund's record date, you will be
entitled to receive the dividend. The Funds may declare and pay dividends on
the same date. The Funds make distributions of capital gains at least annually.
The Trust, however, may declare a special capital gains distribution if the
Trustees believe that such a distribution would be in the best interest of the
shareholders of a Fund.

You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. If you have not
already elected to receive cash payments on your application, you must notify
the Trust in writing prior to the date of distribution. Your election will
become effective for dividends paid after the Trust receives your written
notice. To cancel your election, simply send written notice to the Trust.

Dividends and distributions from a Fund are taxable to you whether they are
reinvested in additional shares of the Fund or are received in cash. You will
receive an account statement at least quarterly.

TAX INFORMATION

The following is a summary of some important tax issues that affect the Funds
and their Shareholders. The summary is based on current tax laws, which may be
changed by legislative, judicial or administrative action. We have not tried to
present a detailed explanation of the tax treatment of the Funds, or of the tax
consequences of an investment in the Funds. MORE INFORMATION ABOUT TAXES IS
LOCATED IN THE SAI. WE URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING SPECIFIC
QUESTIONS AS TO FEDERAL, STATE AND LOCAL INCOME TAXES.

TAX STATUS OF EACH FUND

Each Fund is treated as a separate entity for federal tax purposes, and intends
to qualify for the special tax treatment afforded regulated investment
companies. As long as a Fund qualifies as a regulated investment company, it
pays no federal income tax on the earnings it distributes to Shareholders.

TAX STATUS OF DISTRIBUTIONS

- - Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME
WHETHER YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.

<PAGE>

- - Corporate shareholders may be entitled to a dividends-received deduction
for the portion of dividends they receive which are attributable to
dividends received by a Fund from U.S. corporations.

- - Capital gains distributions will result from gains on the sale or exchange
of capital assets held for more than one year, and will be taxed at
different rates depending on how long the Fund held the assets.

- - Distributions paid in January but declared by a Fund in October, November
or December of the previous year, may be taxable to you in the previous
year.

TAX STATUS OF SHARE TRANSACTIONS

EACH SALE, EXCHANGE, OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
YOU SHOULD CONSIDER THE TAX CONSEQUENCES OF ANY REDEMPTION OR EXCHANGE BEFORE
MAKING SUCH A REQUEST, ESPECIALLY WITH RESPECT TO REDEMPTIONS, IF YOU INVEST IN
THE FUNDS THROUGH A TAX-QUALIFIED RETIREMENT PLAN.

STATE TAX CONSIDERATIONS

A Fund is not liable for any income or franchise tax in Delaware as long as it
qualifies as a regulated investment company for Federal income tax purposes.

Distributions by the Funds may be subject to state and local taxation. You
should verify your tax liability with your tax advisor.

<PAGE>

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Nova Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
whose report, along with the financial statements and related notes, appears in
the Trust's 1998 Annual Report. Our 1998 Annual Report is available by
telephoning us at 800-820-0888 or (301) 468-8520. The Annual Report is
incorporated by reference in the SAI.

<TABLE>
<CAPTION>
NOVA FUND
---------------------------
YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
MARCH MARCH 31, JUNE 30, JUNE 30, JUNE 30,
31, 1998 1997* 1996 1995 1994**
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
NET ASSET VALUE -- BEGINNING OF
PERIOD $ 17.89 $ 15.68 $ 11.81 $ 9.77 $ 10.01
-------- -------- -------- -------- --------

Net Investment Income .59 .35 .56 .28 .01

Net Realized and Unrealized
Gains (Losses) on Securities 11.39 2.19 3.31 2.88 (.25)
-------- -------- -------- -------- --------

Net Increase (Decrease) in
Net Asset Value Resulting
from Operations 11.98 2.54 3.87 3.16 (.24)

Dividends to Shareholders
from Net Investment Income .00 .00 .00 (.29) .00

Distributions to
Shareholders from Net
Realized Capital Gain (.05) (.33) .00 (.83) .00
-------- -------- -------- -------- --------

Net Increase (Decrease) in
Net Asset Value 11.93 2.21 3.87 2.04 (.24)
-------- -------- -------- -------- --------

NET ASSET VALUE -- END OF PERIOD $ 29.82 $ 17.89 $ 15.68 $ 11.81 $ 9.77
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

TOTAL INVESTMENT RETURN 67.02% 20.92%*** 32.77% 32.65% (2.47)%

RATIOS TO AVERAGE NET

Gross Expenses 1.13% 1.19%***

Net Expenses 1.11% 1.16%*** 1.31% 1.43% 1.73%***

Net Investment Income 2.42% 2.69%*** 3.14% 2.62% 1.05%***

SUPPLEMENTARY DATA

Portfolio Turnover Rate**** 0% 0% 0% 0% 0%

Net Assets, End of Period
(000's omitted) $986,247 $181,930 $224,541 $ 62,916 $ 77,914
</TABLE>

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

+ The per share date of the Financial Highlights table is calculated
using the daily shares outstanding average for the year.
* On March 12, 1997, the Trustees changed the Trust's fiscal year end
from June 30 to March 31.
** Commencement of Operations: July 12, 1993.
*** Annualized.
**** Portfolio turnover ratio is calculated without regard to securities
having a maturity of less than one year. The Nova Fund typically
holds most of its investments in options and futures contracts, which
are deemed short-term securities.

<PAGE>

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Ursa Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
whose report, along with the financial statements and related notes, appears in
the Trust's 1998 Annual Report. Our 1998 Annual Report is available by
telephoning us at 800-820-0888 or (301) 468-8520. The Annual Report is
incorporated by reference in the SAI.

<TABLE>
<CAPTION>
URSA FUND
---------------------------
YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
MARCH MARCH 31, JUNE 30, JUNE 30, JUNE 30,
31, 1998 1997* 1996 1995 1994**
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
NET ASSET VALUE -- BEGINNING OF
PERIOD $ 7.02 $ 7.55 $ 8.79 $ 10.54 $ 10.00
-------- -------- -------- -------- --------

Net Investment Income .19 .17 .30 .35 .01

Net Realized and
Unrealized Gains
(Losses) on Securities (2.23) (.68) (1.54) (1.78) .53
-------- -------- -------- -------- --------

Net Increase
(Decrease) in Net
Asset Value Resulting
from Operations (2.04) (.51) (1.24) (1.43) .54

Dividends to
Shareholders from Net
Investment Income (.02) (.02) .00 (.32) .00
-------- -------- -------- -------- --------
Net Increase
(Decrease) in Net
Asset Value (2.06) (.53) (1.24) (1.75) .54
-------- -------- -------- -------- --------

NET ASSET VALUE --
END OF PERIOD $ 4.96 $ 7.02 $ 7.55 $ 8.79 $ 10.54
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

TOTAL INVESTMENT RETURN (29.06)% (8.98)%*** (14.11)% (14.08)% 10.89%

RATIOS TO AVERAGE NET ASSETS

Gross Expenses 1.36% 1.36%***

Net Expenses 1.34% 1.34%*** 1.39% 1.39% 1.67%***

Net Investment Income 3.18% 3.21%*** 3.38% 3.50% 1.43%***

SUPPLEMENTARY DATA

Portfolio Turnover Rate**** 0% 0% 0% 0% 0%
Net Assets, End of
Period (000's omitted) $254,225 $582,288 $192,553 $127,629 $110,899
</TABLE>

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

+ The per share data of the Financial Highlights table is calculated
using the daily shares outstanding average for the year.
* On March 12, 1997, the Trustees changed the Trust's fiscal year end
from June 30 to March 31.
** Commencement of Operations: January 7, 1994.
*** Annualized.
**** Portfolio turnover ratio is calculated without regard to securities
having a maturity of less than one year. The Ursa Fund typically
holds most of its investments in options and futures contracts, which
are deemed short-term securities.

32
<PAGE>

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single OTC Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
whose report, along with the financial statements and related notes, appears in
the Trust's 1998 Annual Report. Our 1998 Annual Report is available by
telephoning us at 800-820-0888 or (301) 468-8520. The Annual Report is
incorporated by reference in the SAI.

<TABLE>
<CAPTION>
OTC Fund
----------------------------
Year Period Year Year Period
Ended Ended Ended Ended Ended
March 31, March 31, June 30, June 30, June 30,
1998 1997* 1996 1995 1994**
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
NET ASSET VALUE -- BEGINNING OF
PERIOD $ 17.93 $ 15.16 $ 12.22 $ 8.76 $ 10.00
-------- ------------ ----------- ----------- -----------
Net Investment Income (.14) .01 .06 .14 .01

Net Realized and Unrealized
Gains (Losses) on Securities 9.99 2.84 3.24 4.17 (1.25)
-------- ------------ ----------- ----------- -----------
Net Increase (Decrease) in Net
Asset Value Resulting from
Operations 9.85 2.85 3.30 4.31 (1.24)

Dividends to Shareholders from
net Investment Income .00 (.07) .00 (.12) .00
Distributions to Shareholders
from Net Realized Capital Gain (.10) (.01) (.36) (.73) .00
-------- ------------ ----------- ----------- -----------
Net Increase (Decrease) in Net
Asset Value 9.75 2.77 2.94 3.46 (1.24)
-------- ------------ ----------- ----------- -----------
NET ASSET VALUE -- END OF PERIOD $ 27.68 $ 17.93 $ 15.16 $ 12.22 $ 8.76
-------- ------------ ----------- ----------- -----------
-------- ------------ ----------- ----------- -----------
TOTAL INVESTMENT RETURN 55.05% 24.77%*** 26.44% 49.00% (30.17)%
RATIOS TO AVERAGE NET ASSETS

Gross Expenses 1.13% 1.27%***

Net Expenses 1.13% 1.27%*** 1.33% 1.41% 1.97%***

Net Investment Income (.58)% .08%*** .44% 1.34% 1.69%***

SUPPLEMENTARY DATA
Portfolio Turnover Rate**** 971.80% 1,140.35 2,578.56% 2,241.00% 1,171.00%

Net Assets, End of Period
(000's omitted) $449,794 $ 52,278 $ 48,716 $ 61,948 $ 30,695
</TABLE>

+ The per share data of the Financial Highlights table is calculated
using the daily shares outstanding average for the year.
* On March 12, 1997, the Trustees changed the Trust's fiscal year end
from June 30 to March 31.
** Commencement of Operations: February 14, 1994.
*** Annualized.
**** Portfolio turnover ratio is calculated without regard to securities
having a maturity of less than one year.

<PAGE>

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Precious Metals Fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the financial statements and related notes,
appears in the Trust's 1998 Annual Report. Our 1998 Annual Report is available
by telephoning us at 800-820-0888 or (301) 468-8520. The Annual Report is
incorporated by reference in the SAI.

<TABLE>
<CAPTION>
Precious Metals Fund
-----------------------------------
Year Period Year Year Period
Ended Ended Ended Ended Ended
March 31, March 31, June 30, June 30, June 30,
1998 1997* 1996 1995 1994**
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
NET ASSET VALUE -- BEGINNING OF PERIOD $ 7.64 $ 9.05 $ 8.73 $ 8.29 $ 10.00
-------- ------- ------- -------- ---------
Net Investment Income .00 .00 .00 .10 .01

Net Realized and Unrealized
Gains (Losses) on Securities (1.82) (1.41) .32 .43 (1.72)
-------- ------- ------- -------- ---------
Net Increase (Decrease) in Net
Asset Value Resulting from Operations (1.82) (1.41) .32 .53 (1.71)

Dividends to Shareholders from Net
Investment Income .00 .00 .00 (.09) .00
-------- ------- ------- -------- ---------
Net Increase (Decrease) in Net
Asset Value (1.82) (1.41) .32 .44 (1.71)
-------- ------- ------- -------- ---------
NET ASSET VALUE -- END OF PERIOD $ 5.82 $ 7.64 $ 9.05 $ 8.73 $ 8.29
-------- ------- ------- -------- ---------
-------- ------- ------- -------- ---------
TOTAL INVESTMENT RETURN (23.82)% (20.77)%*** 3.67% 6.21% (29.27)%

RATIOS TO AVERAGE NET ASSETS

Gross Expenses 1.42% 1.49%***
Net Expenses 1.41% 1.45%*** 1.33% 1.38% 2.06%***
Net Investment Income .05% .00%*** (.01)% 1.15% 1.23%***

SUPPLEMENTARY DATA

Portfolio Turnover Rate**** 752.05% 743.33% 1,036.37% 1,765.00% 2,728.00%

Average Commission Rate Paid***** .0140 .0101 .0151 -- --

Net Assets, End of Period
(000's omitted) $ 34,538 $ 23,680 $ 36,574 $ 40,861 $ 1,526
</TABLE>

+ The per share date of the Financial Highlights table is calculated using the
daily shares outstanding average for the year.
* On March 12, 1997, the Trustees changed the Trust's fiscal year end from
June 30 to March 31.
** Commencement of Operations: December 1, 1993.
*** Annualized.
**** Portfolio turnover ratio is calculated without regard to securities
having a maturity of less than one year.
***** For fiscal years beginning on or after September 1, 1995, the fund is
required to disclose its average commission rate per share for
purchases and sales of equity securities.

<PAGE>

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single U.S. Government Bond Fund
share. The total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the financial statements and related notes,
appears in the Trust's 1998 Annual Report. Our 1998 Annual Report is available
by telephoning us at 800-820-0888 or (301) 468-8520. The Annual Report is
incorporated by reference in the SAI.

U.S. Government Bond Fund
--------------------------------------
Year Period Year Year Period
Ended Ended Ended Ended Ended
March 31, March 31, June 30, June 30, June 30,
1998 1997* 1996 1995 1994**
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
NET ASSET VALUE -- BEGINNING OF PERIOD $8.52 $ 8.97 $ 9.55 $ 8.24 $ 10.00
--------- --------- -------- -------- --------
Net Investment Income .45 .34 .46 .39 .02

Net Realized and Unrealized
Gains (Losses) on Securities 1.50 (.45) (.45) 1.17 (1.76)
--------- --------- -------- -------- --------
Net Increase (Decrease) in Net
Asset Value Resulting from Operations 1.95 (.11) .01 1.56 (1.74)

Dividends to Shareholders from
Net Investment Income (.43) (.34) (.46) (.25) (.02)

Distributions to Shareholders from
Net Realized Capital Gain .00 .00 (.13) .00 .00
--------- --------- -------- -------- --------
Net Increase (Decrease) in Net
Asset Value 1.52 (.45) (.58) 1.31 (1.76)
--------- --------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $10.04 $ 8.52 $ 8.97 $ 9.55 $ 8.24
--------- --------- -------- -------- --------
--------- --------- -------- -------- --------
TOTAL INVESTMENT RETURN 24.72% (.46)%*** (1.48)% 18.97% (32.63)%
RATIOS TO AVERAGE NET ASSETS

Gross Expenses 1.13% 1.51%***

Net Expenses 1.11% 1.49%*** 1.26% 2.26% 3.05%***

Net Investment Income 4.65% 5.06%*** 4.73% 4.64% 3.39%***

SUPPLEMENTARY DATA
Portfolio Turnover Rate**** 1.496.21% 962.17% 780.30% 3,452.59% 1,290.00%

Net Assets, End of Period (000's omitted) $20,508 $ 3,302 $ 18,331 $ 2,592 $ 1,564
</TABLE>

* On March 12, 1997, the Trustees changed the Trust's fiscal year end
from June 30 to March 31.
** Commencement of Operations: January 3, 1994.
*** Annualized.
**** Portfolio turnover ratio is calculated without regard to securities
having a maturity of less than one year.

<PAGE>

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Juno Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
whose report, along with the financial statements and related notes, appears in
the Trust's 1998 Annual Report. Our 1998 Annual Report is available by
telephoning us at 800-820-0888 or (301) 468-8520. The Annual Report is
incorporated by reference in the SAI.

Juno Fund
-----------
Year Period Year Period
Ended Ended Ended Ended
March 31, March 31, June 30, June 30,
1998 1997* 1996 1995**
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
NET ASSET VALUE -- BEGINNING OF PERIOD $9.69 $ 9.47 $ 9.08 $ 10.00
--------- ---------- ----------- ------------
Net Investment Income .16 .25 .34 .14

Net Realized and Unrealized Gains
(Losses) on Securities (1.12) .00 .05 (1.06)
--------- ---------- ----------- ------------
Net Increase (Decrease) in Net Asset
Value Resulting from Operations (.96) .25 .39 (.92)

Dividends to Shareholders from Net
Investment Income (.08) (.03) .00 .00
--------- ---------- ----------- ------------
Net Increase (Decrease) in Net
Asset Value (1.04) .22 .39 (.92)

NET ASSET VALUE -- END OF PERIOD $8.65 $ 9.69 $ 9.47 $ 9.08
--------- ---------- ----------- ------------
--------- ---------- ----------- ------------
TOTAL INVESTMENT RETURN (9.92)% 3.75%*** 4.30% (9.20)%

RATIOS TO AVERAGE NET ASSETS
Gross Expenses 1.61% 1.60%***
Net Expenses 1.59% 1.58%*** 1.64% 1.50%***

Net Investment Income 3.55% 3.51%*** 3.63% 1.32%***

SUPPLEMENTARY DATA

Portfolio Turnover Rate**** 0% 0% 0% 0%

Net Assets, End of Period
(000's omitted) $12,887 $32,577 $18,860 $4,301
</TABLE>

+ The per share data of the Financial Highlights table is calculated
using the daily shares outstanding average for the year.
* On March 12, 1997, the Trustees changed the Trust's fiscal year end
from June 30 to March 31.
** Commencement of Operations: March 3, 1995.
*** Annualized.
**** Portfolio turnover ratio is calculated without regard to securities
having a maturity of less than one year. The Juno Fund typically
holds most of its investments in options and futures contracts, which
are deemed short-term securities.

<PAGE>

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single U.S. Government Money Market
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
Deloitte & Touche LLP, whose report, along with the financial statements and
related notes, appears in the Trust's 1998 Annual Report. Our 1998 Annual
Report is available by telephoning us at 800-820-0888 or (301) 468-8520. The
Annual Report is incorporated by reference in the SAI.

U.S. Government Money Market Fund
---------------------------------
Year Period Year Year Period
Ended Ended Ended Ended Ended
March 31, March 31, June 30, June 30, June 30,
1998 1997* 1996 1995 1994**
---------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:+
NET ASSET VALUE - BEGINNING OF PERIOD $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- --------- -------- --------
Net Investment Income .04 .03 .04 .04 .01

Net Increase in Net Asset Value
Resulting from Operations .04 .03 .04 .04 .01

Dividends to Shareholders from
Net Investment Income (.04) (.03) (.04) (.04) (.01)
---------- ---------- --------- -------- --------
Net Increase in Net asset Value .00 .00 .00 .00 .00
---------- ---------- --------- -------- --------
NET ASSET VALUE - END OF PERIOD $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- --------- -------- --------
---------- ---------- --------- -------- --------
TOTAL INVESTMENT RETURN 4.69% 4.39%*** 4.60% 4.43% 2.47%

RATIOS TO AVERAGE NET ASSETS
Gross Expenses .89% .86%***
Net Expenses .89% .86%*** .99% .89% 1.16%***
Net Investment Income 4.37% 4.06%*** 4.18% 4.23% 2.34%***

SUPPLEMENTARY DATA
Portfolio Turnover Rate**** 0% 0% 0% 0% 0%
Net Assets, End of Period
(000's omitted) $253,295 $283,553 $153,925 $284,198 $88,107
</TABLE>

+ The per share data of the Financial Highlights table is calculated
using the daily shares outstanding average for the year.
* On March 12, 1997, the Trustees changed the Trust's fiscal year end
from June 30 to March 31.
** Commencement of Operations: December 3, 1993.
*** Annualized.
**** Portfolio Turnover Rate is calculated without regard to short-term
securities having a maturity of less than one year.

<PAGE>

BENCHMARK INFORMATION.

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

NONE OF S&P, NASDAQ, AND PHLX MAKE ANY REPRESENTATION OR WARRANTY, IMPLIED OR
EXPRESS, TO THE INVESTORS IN THE FUNDS, OR ANY MEMBER OF THE PUBLIC, REGARDING
THE ADVISABILITY OF INVESTING IN INDEX FUNDS OR THE ABILITY OF THE S&P 500
INDEX, NASDAQ 100 INDEX-TM-, AND THE XAU INDEX, RESPECTIVELY, TO TRACK GENERAL
STOCK MARKET PERFORMANCE.

NONE OF S&P , NASDAQ, AND PHLX GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE S&P 500 INDEX, NASDAQ 100 INDEX-TM-, AND THE XAU INDEX, RESPECTIVELY, OR
ANY DATA INCLUDED THEREIN.

NONE OF S&P, NASDAQ, AND PHLX MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY ANY OF THE FUNDS, THE INVESTORS IN THE FUNDS, OR ANY
PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX, THE NASDAQ 100 INDEX-TM-,
THE XAU INDEX, RESPECTIVELY, OR ANY DATA INCLUDED THEREIN.

NONE OF S&P, NASDAQ, AND PHLX MAKE ANY EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE FOR USE WITH RESPECT TO THE
S&P 500 INDEX, THE NASDAQ 100 INDEX-TM-, THE XAU INDEX, RESPECTIVELY, OR ANY
DATA INCLUDED THEREIN.
38

<PAGE>

Additional information about the Funds is included in a Statement of Additional
Information dated August 1, 1998 (the "SAI"), which contains more detailed
information about the Funds. The SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus and, therefore, legally forms a part of this Prospectus. The SEC
maintains a Web site ("http://www.sec.gov") that contains the SAI, material
incorporated by reference, and other information regarding registrants that file
electronically with the SEC. You may also review and copy documents at the SEC
Public Reference Room in Washington, D.C. (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a duplication
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, D.C. 20549-6009. To help you to obtain additional
information, the Fund's SEC registration number is 811-7584.

You may obtain a copy of the SAI or the annual or semi-annual reports,
without charge by calling 1-800-820-0888 or by writing to Rydex Series Trust,
at 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH
INFORMATION OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR PADCO
ADVISORS, INC. This prospectus does not constitute an offering by the Trust in
any jurisdiction where such an offering is not lawful.

RYDEX SERIES TRUST

RYDEX-Registered Trademark-
INVESTMENT FLEXIBILITY
FOR INSTITUTIONAL MONEY MANAGERS
39
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

RYDEX SERIES TRUST

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

Rydex Series Trust (the "Trust") is a no-load mutual fund complex with
twenty-one separate investment portfolios (the "Rydex Funds"). This Statement
of Additional Information ("SAI") relates to the Investor Class Shares of the
following seven portfolios:

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

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Trust's Prospectus, dated August 1, 1998. A copy of the
Trust's Prospectus is available, without charge, upon request to the Trust at
the address above or by telephoning the Trust at the telephone numbers above.

The date of this Statement of Additional Information is August 1, 1998.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

PAGE
----

GENERAL INFORMATION ABOUT THE TRUST. . . . . . . . . . . . . . . . . . . . . .

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

INVESTMENT POLICIES AND TECHNIQUES . . . . . . . . . . . . . . . . . . . . . .

INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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GENERAL INFORMATION ABOUT THE TRUST

The Trust was organized as a Delaware business trust on February 10, 1993. The
Trust is permitted to offer separate portfolios and different classes of shares.
The Trust currently offers two separate classes of shares, Investor Class Shares
and Advisor Class Shares. Investor Class Shares are sold principally to
professional money managers and to investors who take part in certain
asset-allocation investment strategies. Advisor Class Shares are offered
through broker-dealers and other financial institutions ("intermediaries") that
have entered into arrangements with the Trust's Distributor (the "Distributor")
to sell Advisor Class Shares to their customers. Advisor Class Shares differ
from Investor Class Shares primarily in the allocation of certain shareholder
servicing and distribution expenses and in the minimum initial investment
requirement. Sales of shares of each Class are made without a sales charge at
each Fund's per share net asset value. Additional Funds and/or classes may be
created from time to time.

Currently, the Trust has twenty-one separate series. All payments received by
the Trust for shares of any fund belong to that fund. Each fund has its own
assets and liabilities. This SAI relates only to Investor Class Shares of the
Nova Fund, the Ursa Fund, the OTC Fund, the Precious Metals Fund (the "Metals
Fund"),the U.S. Government Bond Fund (the "Bond Fund"), the Juno Fund, and the
U.S. Government Money Market Fund (the "Money Market Fund") (collectively the
"Funds").

In addition to the Funds described in this SAI, the Trust offers Investor
and Advisor Class shares in the following funds described in separate
prospectuses: Banking Fund, Basic Materials Fund, Biotechnology Fund,
Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services Fund,
Financial Services Fund, Health Care Fund, Leisure Fund, Retailing Fund,
Technology Fund, Telecommunications Fund, Transportation Fund (collectively
the "Sector Funds"), and The Rydex U.S. Government Money Market Fund (Advisor
Class only).

DESCRIPTION OF THE MONEY MARKET FUND

As discussed in the Prospectus, the Money Market Fund seeks to provide
security of principal, high current income, and liquidity. The Money Market
Fund invests primarily in money market instruments issued or guaranteed as to
principal and interest by the U.S. Government, its agencies or
instrumentalities, and may invest any remaining assets in receipts and enter
into repurchase agreements fully collateralized by U.S. Government
Securities.

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

INVESTMENT POLICIES AND TECHNIQUES

GENERAL
Each Fund's investment objective and permitted investments are described in the
Prospectuses under the headings "FUND INFORMATION" and "INFORMATION ABOUT THE
FUNDS' INVESTMENTS." The following information supplements, and should be read
in conjunction with, those sections of the Prospectuses.

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

BORROWING
The Nova Fund and the Bond Fund may borrow money, including borrowing for
investment purposes. Borrowing for investment is known as leveraging.
Leveraging investments, by purchasing securities with borrowed money, is a
speculative technique which increases investment risk, but also increases
investment opportunity. Since substantially all of a Fund's assets will
fluctuate in value, whereas the interest obligations on borrowings may be fixed,
the net asset value per share of the Fund will increase more when the Fund's
portfolio assets increase in value and decrease more when the Fund's portfolio
assets decrease in value than would otherwise be the case. Moreover, interest
costs on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the returns on the borrowed funds. Under adverse
conditions, the Nova Fund or the Bond Fund might have to sell portfolio
securities to meet interest or principal payments at a time investment
considerations would not favor such sales. The Nova Fund and the Bond Fund
intend to use leverage during periods when the Advisor believes that the
respective Fund's investment objective would be furthered.

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

As required by the Investment Company Act of 1940, as amended (the "1940 Act"),
a Fund must maintain continuous asset coverage (total assets, including assets
acquired with borrowed funds, less liabilities exclusive of borrowings) of 300%
of all amounts borrowed. If, at any time, the value of the Fund's assets should
fail to meet this 300% coverage test, the Fund, within three days (not including
Sundays and holidays), will reduce the amount of the Fund's borrowings to the
extent necessary to meet this 300% coverage. Maintenance of this percentage
limitation may result in the sale of portfolio securities at a time when
investment considerations otherwise indicate that it would be disadvantageous to
do so.

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

FOREIGN ISSUERS The Metals Fund may invest in issuers located outside the
United States. The Metals Fund may also purchase American Depository
Receipts ("ADRs"), "ordinary shares," or "New York shares" in the United
States. ADRs are dollar-denominated receipts representing interests in the
securities of a foreign issuer, which securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by United States banks and
trust companies which evidence ownership of underlying securities issued by a
foreign corporation. Generally, ADRs in registered form are designed for use
in domestic securities markets and are traded on exchanges or
over-the-counter in the United States. Ordinary shares are shares of foreign
issuers that are traded abroad and on a United States exchange. New York
shares are shares that a

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foreign issuer has allocated for trading in the United States. ADRs, ordinary
shares, and New York shares all may be purchased with and sold for U.S. dollars,
which protect the Metals Fund from the foreign settlement risks described below.

Investing in foreign companies may involve risks not typically associated with
investing in United States companies. The value of securities denominated in
foreign currencies, and of dividends from such securities, can change
significantly when foreign currencies strengthen or weaken relative to the U.S.
dollar. Foreign securities markets generally have less trading volume and less
liquidity than United States markets, and prices in some foreign markets can be
very volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those that apply to United States companies, and it may
be more difficult to obtain reliable information regarding a foreign issuer's
financial condition and operations. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions, and custodial
fees, generally are higher than for United States investments.

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

At the present time, there are five major producers and processors of gold
bullion and other precious metals and minerals. In order of magnitude, these
producers and processors are: the Republic of South Africa, the former republics
of the former Soviet Union, Canada, the United States, and Australia. Political
and economic conditions in several of these countries may have a direct effect
on the mining, distribution, and price of precious metals and minerals, and on
the sales of central bank gold holdings, particularly in the case of South
Africa and the former republics of the former Soviet Union. South African
mining stocks represent a special risk in view of the history of political
unrest in that country. Besides that factor, various government bodies such as
the South African Ministry of Mines and the Reserve Bank of South Africa
exercise regulatory authority over mining activity and the sale of gold. The
policies of these South African government bodies in the future could be
detrimental to the Metals Fund's objectives.

ILLIQUID SECURITIES
While none of the Funds anticipates doing so, each Fund may purchase illiquid
securities, including securities that are not readily marketable and securities
that are not registered ("restricted securities") under the Securities Act of
1933, as amended (the "1933 Act"), but which can be offered and sold to
"qualified institutional buyers" under Rule 144A under the 1933 Act. A Fund
will not invest more than 15% (10% with respect to the Money Market Fund) of the
Fund's net assets in illiquid securities. Each Fund will adhere to a more
restrictive limitation on the Fund's investment in illiquid securities as
required by the securities laws of those jurisdictions where shares of the Fund
are registered for sale. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities. Under the current guidelines of the staff of the Securities and
Exchange Commission (the "Commission"), illiquid securities also are considered
to include, among other securities, purchased over-the-counter options, certain
cover for over-the-counter options, repurchase agreements with maturities in
excess of seven days, and certain securities whose disposition is restricted
under the Federal securities laws. The Fund may not be able to sell illiquid
securities when the Advisor considers it desirable to do so or may have to sell
such

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<PAGE>

securities at a price that is lower than the price that could be obtained if the
securities were more liquid. In addition, the sale of illiquid securities also
may require more time and may result in higher dealer discounts and other
selling expenses than does the sale of securities that are not illiquid.
Illiquid securities also may be more difficult to value due to the
unavailability of reliable market quotations for such securities, and investment
in illiquid securities may have an adverse impact on net asset value.

LENDING OF PORTFOLIO SECURITIES
Subject to the investment restrictions set forth below, each of the Funds may
lend portfolio securities to brokers, dealers, and financial institutions,
provided that cash equal to at least 100% of the market value of the
securities loaned is deposited by the borrower with the Fund and is
maintained each business day in a segregated account pursuant to applicable
regulations. While such securities are on loan, the borrower will pay the
lending Fund any income accruing thereon, and the Fund may invest the cash
collateral in portfolio securities, thereby earning additional income. A
Fund will not lend its portfolio securities if such loans are not permitted
by the laws or regulations of any state in which the Fund's shares are
qualified for sale, and the Funds will not lend more than 33 1/3% of the
value of the Fund's total assets, except that the Money Market Fund will not
lend more than 10% of the value of the its total assets. Loans would be
subject to termination by the lending Fund on four business days' notice, or
by the borrower on one day's notice. Borrowed securities must be returned
when the loan is terminated. Any gain or loss in the market price of the
borrowed securities which occurs during the term of the loan inures to the
lending Fund and that Fund's shareholders. A lending Fund may pay reasonable
finders, borrowers, administrative, and custodial fees in connection with a
loan.

OPTIONS TRANSACTIONS

OPTIONS ON SECURITIES. The Nova Fund, the U.S. Government Bond Fund, the
Juno Fund, the OTC Fund and the Metals Fund may buy call options and write
(sell) put options on securities, and the Ursa Fund may buy put options and
write call options on securities for the purpose of realizing the Fund's
investment objective. By wiring a call option on securities, a Fund becomes
obligated during the term of the option to sell the securities underlying the
option at the exercise price if the option is exercised. By writing a put
option, a Fund becomes obligated during the term of the option to purchase
the securities underlying the option at the exercise price if the option is
exercised.

During the term of the option, the writer may be assigned an exercise notice by
the broker-dealer through whom

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<PAGE>

the option was sold. The exercise notice would require the writer to deliver,
in the case of a call, or take delivery of, in the case of a put, the underlying
security against payment of the exercise price. This obligation terminates upon
expiration of the option, or at such earlier time that the writer effects a
closing purchase transaction by purchasing an option covering the same
underlying security and having the same exercise price and expiration date as
the one previously sold. Once an option has been exercised, the writer may not
execute a closing purchase transaction. To secure the obligation to deliver the
underlying security in the case of a call option, the writer of a call option is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Option Clearing Corporation (the "OCC"), an
institution created to interpose itself between buyers and sellers of options.
The OCC assumes the other side of every purchase and sale transaction on an
exchange and, by doing so, gives its guarantee to the transaction.

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

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

PORTFOLIO TURNOVER
As discussed in the Trust's prospectus, the Trust anticipates that investors
in the Funds, as part of an asset allocation investment strategy, will
frequently exchange shares of the Funds for shares in other Funds pursuant to
the exchange policy of the Trust as well as frequently redeem shares of the
Funds (see "Exchanges" in the Trust's Prospectus). The nature of the Funds
has caused the Funds to experience substantial portfolio turnover. Because
each Fund's portfolio turnover rate to a great extent will depend on the
purchase, redemption, and exchange activity of the Fund's investors, it is
very difficult to estimate what the Fund's actual turnover rate will be in
the future. However, the Trust expects that the portfolio turnover
experienced by the Funds will continue to be substantial.

REPURCHASE AGREEMENTS
As discussed in the Trust's Prospectus, each of the Funds may enter into
repurchase agreements with financial institutions. The Funds each follow
certain procedures designed to minimize the risks inherent in such
agreements. These procedures include effecting repurchase transactions only
with large, well-capitalized and well-established financial institutions
whose condition will be continually monitored by the Advisor. In addition,
the value of the collateral underlying the repurchase agreement will always
be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy
by a selling financial institution, a Fund will seek to liquidate such
collateral. However, the exercising of each Fund's right to liquidate such
collateral could involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase were
less than the repurchase price, the Fund could suffer a loss. It is the
current policy of each of the Funds, other than the Money Market Fund, not to
invest in repurchase agreements that do not mature within seven days if any
such investment, together with any other illiquid assets held by the Fund,
amounts to more than 15% (10% with respect to the Money Market Fund) of the
Fund's total assets. The

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<PAGE>

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

REVERSE REPURCHASE AGREEMENTS

The Ursa Fund and the Juno Fund may use reverse repurchase agreements as part
of that Fund's investment strategy. Reverse repurchase agreements involve
sales by a Fund of portfolio assets concurrently with an agreement by the
Fund to repurchase the same assets at a later date at a fixed price.
Generally, the effect of such a transaction is that the Fund can recover all
or most of the cash invested in the portfolio securities involved during the
term of the reverse repurchase agreement, while the Fund will be able to keep
the interest income associated with those portfolio securities. Such
transactions are advantageous only if the interest cost to the Fund of the
reverse repurchase transaction is less than the cost of obtaining the cash
otherwise. Opportunities to achieve this advantage may not always be
available, and the Funds intend to use the reverse repurchase technique only
when this will be to the Fund's advantage to do so. Each Fund will establish
a segregated account with the Trust's custodian bank in which the Fund will
maintain cash or cash equivalents or other portfolio securities equal in
value to the Fund's obligations in respect of reverse repurchase agreements.

SHORT SALES
The Ursa Fund and the Juno Fund also may engage in short sales transactions
under which the Fund sells a security it does not own. To complete such a
transaction, the Fund must borrow the security to make delivery to the buyer.
The fund then is obligated to replace the security borrowed by purchasing the
security at the market price at the time of replacement. The price at such time
may be more or less than the price at which the security was sold by the Fund.
Until the security is replaced, the Fund is required to pay to the lender
amounts equal to any dividends or interest which accrue during the period of the
loan. To borrow the security, the Fund also may be required to pay a premium,
which would increase the cost of the security sold. The proceeds of the short
sale will be retained by the broker, to the extent necessary to meet the margin
requirements, until the short position is closed out.

Until the Ursa Fund or Juno Fund closes its short position or replaces the
borrowed security, the Fund will: (a) maintain a segregated account containing
cash or liquid securities at such a level that (i) the amount deposited in the
account plus the amount deposited with the broker as collateral will equal the
current value of the security sold short and (ii) the amount deposited in the
segregated account plus the amount deposited with the broker as collateral will
not be less than the market value of the security at the time the security was
sold short; or (b) otherwise cover the Fund's short position.

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

U.S. GOVERNMENT SECURITIES
The Bond Fund invests primarily in U.S. Government Securities, and each of the
other Funds also may invest in U.S. Government Securities. The Juno Fund may
enter into short transactions on U.S. Government Securities. Securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities
include U.S. Treasury securities, which are backed by the full faith and credit
of the U.S. Treasury and which differ only in their interest rates, maturities,
and times of issuance. U.S. Treasury bills have initial maturities of one year
or less; U.S. Treasury notes have initial maturities of one to ten years; and
U.S. Treasury bonds generally have initial maturities of greater than ten years.
Certain U.S. Government Securities are issued or guaranteed by agencies or
instrumentalities of the U.S. Government including, but not limited to,
obligations of U.S. Government agencies

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<PAGE>

or instrumentalities such as Fannie Mae, the Government National Mortgage
Association, the Small Business Administration, the Federal Farm Credit
Administration, the Federal Home Loan Banks, Banks for Cooperatives (including
the Central Bank for Cooperatives), the Federal Land Banks, the Federal
Intermediate Credit Banks, the Tennessee Valley Authority, the Export-Import
Bank of the United States, the Commodity Credit Corporation, the Federal
Financing Bank, the Student Loan Marketing Association, and the National Credit
Union Administration.

Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury. Other obligations issued by or guaranteed by
Federal agencies, such as those securities issued by Fannie Mae, are
supported by the discretionary authority of the U.S. Government to purchase
certain obligations of the Federal agency, while other obligations issued by
or guaranteed by Federal agencies, such as those of the Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the U.S.
Treasury, while the U.S. Government provides financial support to such U.S.
Government-sponsored Federal agencies, no assurance can be given that the
U.S. Government will always do so, since the U.S. Government is not so
obligated by law. U.S. Treasury notes and bonds typically pay coupon
interest semi-annually and repay the principal at maturity. The Bond Fund
will invest in such U.S. Government Securities only when the Advisor is
satisfied that the credit risk with respect to the issuer is minimal.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each Fund, from time to time, in the ordinary course of business, may purchase
securities on a when-issued or delayed-delivery basis (I.E., delivery and
payment can take place between a month and 120 days after the date of the
transaction). These securities are subject to market fluctuation and no
interest accrues to the purchaser during this period. At the time a Fund makes
the commitment to purchase securities on a when-issued or delayed-delivery
basis, the Fund will record the transaction and thereafter reflect the value of
the securities, each day, of such security in determining the Fund's net asset
value. A Fund will not purchase securities on a when-issued or delayed-delivery
basis if, as a result, more than 15% (10% with respect to the Money Market Fund)
of the Fund's net assets would be so invested. At the time of delivery of the
securities, the value of the securities may be more or less than the purchase
price. The Fund will also establish a segregated account with the Fund's
custodian bank in which the Fund will maintain cash or liquid securities equal
to or greater in value than the Fund's purchase commitments for such when-issued
or delayed-delivery securities. The Trust does not believe that a Fund's net
asset value or income will be adversely affected by the Fund's purchase of
securities on a when-issued or delayed-delivery basis.

ZERO COUPON BONDS
The Bond Fund may invest in U.S. Treasury zero-coupon bonds. These securities
are U.S. Treasury bonds which have been stripped of their unmatured interest
coupons, the coupons themselves, and receipts or certificates representing
interests in such stripped debt obligations and coupons. Interest is not
paid in cash during the term of these securities, but is accrued and paid at
maturity. Such obligations have greater price volatility than coupon
obligations and other normal interest-paying securities, and the value of
zero coupon securities reacts more quickly to changes in interest rates than
do coupon bonds. Since dividend income is accrued throughout the term of the
zero coupon obligation, but is not actually received until maturity, the Fund
may have to sell other securities to pay said accrued dividends prior to
maturity of the zero coupon obligation. Unlike regular U.S. Treasury bonds
which pay semi-annual interest, U.S. Treasury zero coupon bonds do not
generate semi-annual coupon payments. Instead, zero coupon bonds are
purchased at a substantial discount from the maturity value of such
securities, the discount reflecting the current value of the deferred
interest; this discount is amortized as interest income over the life of the
security, and is taxable even though there is no cash return until

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<PAGE>

maturity. Zero coupon U.S. Treasury issues originally were created by
government bond dealers who bought U.S. Treasury bonds and issued receipts
representing an ownership interest in the interest coupons or in the principal
portion of the bonds. Subsequently, the U.S. Treasury began directly issuing
zero coupon bonds with the introduction of "Separate Trading of Registered
Interest and Principal of Securities" (or "STRIPS"). While zero coupon bonds
eliminate the reinvestment risk of regular coupon issues, that is, the risk of
subsequently investing the periodic interest payments at a lower rate than that
of the security held, zero coupon bonds fluctuate much more sharply than regular
coupon-bearing bonds. Thus, when interest rates rise, the value of zero coupon
bonds will decrease to a greater extent than will the value of regular bonds
having the same interest rate.

TRACKING ERROR
While the Funds do not expect that the returns over a year will deviate
adversely from their respective benchmarks by more than ten percent, several
factors may affect their ability to achieve this correlation. Among these are:
(1) Fund expenses, including brokerage (which may, be increased by high
portfolio turnover); (2) less than all of the securities in the benchmark being
held by a Fund and securities not included in the benchmark being held by a
Fund; (3) an imperfect correlation between the performance of instruments held
by a Fund, such as futures contracts and options, and the dance of the
underlying securities in the cash market; (4) bid-ask spreads (the effect of
which may be increased by portfolio turnover); (5) a Fund holds instruments
traded in a market that has become illiquid or disrupted; (6) Fund share prices
being rounded to the nearest cent; (7) changes to the benchmark index that are
not disseminated in advance; (8) the need to conform a Fund's portfolio holdings
to comply with investment restrictions or policies or regulatory or tax law
requirements; or (9) market movements that run counter to a leveraged Fund's
investments (which will cause divergence between the Fund and its benchmark over
time due to the mathematical effects of leveraging). Market movements that run
counter to a leveraged Fund's investments will cause some divergence between the
Fund and its benchmark over time due to the mathematical effects of leveraging.
The magnitude of the divergence is dependent upon the magnitude of the market
movement, its duration, and the degree to which the Fund is leveraged. The
tracking error of a leveraged Fund is generally small during a well-defined
uptrend or downtrend in the market when measured from price peak to price peak,
access a market decline and subsequent recovery, however, the deviation of the
Fund from its benchmark may be significant.

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

If a Fund invests in, and, thus, is a shareholder of, another investment
company, the Fund's shareholders will indirectly bear the Fund's proportionate
share of the fees and expenses paid by such other investment company, including
advisory fees, in addition to both the management fees payable directly by the
Fund to the Fund's own investment adviser and the other expenses that the Fund
bears directly in connection with the Fund's own operations.

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<PAGE>

INVESTMENT RESTRICTIONS

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

A Fund shall not:

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

2. Underwrite securities of any other issuer.

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

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

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

6. Invest in commodities except that the Fund may purchase and sell
futures contracts, including

11
<PAGE>

those relating to securities, currencies, indexes, and options on
futures contracts or indexes and currencies underlying or related to
any such futures contracts, and purchase and sell currencies (and
options thereon) or securities on a forward-commitment or
delayed-delivery basis.

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

7. Invest 25% or more of the value of the Fund's total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry. This limitation does not apply to
investments or obligations of the U.S. Government or any of its
agencies or instrumentalities.

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

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

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

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

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

9.1 THE URSA FUND AND THE JUNO FUND MAY ENGAGE IN SHORT SALES OF
PORTFOLIO SECURITIES OR MAINTAIN A SHORT POSITION IF AT ALL TIMES
WHEN A SHORT POSITION IS OPEN (i) THE FUND MAINTAINS A SEGREGATED
ACCOUNT WITH THE FUND'S CUSTODIAN TO COVER THE SHORT POSITION IN
ACCORDANCE WITH THE POSITION OF THE SECURITIES AND EXCHANGE
COMMISSION OR (ii) THE FUND OWNS AN EQUAL AMOUNT OF SUCH
SECURITIES OR SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE,
WITHOUT PAYMENT OF ANY FURTHER CONSIDERATION, FOR SECURITIES OF
THE SAME ISSUE AS, AND EQUAL IN AMOUNT TO, THE SECURITIES SOLD
SHORT.

12
<PAGE>

FUNDAMENTAL POLICIES APPLICABLE TO THE MONEY MARKET FUND

The Money Market Fund shall not:

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

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

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

13. Write or purchase put or call options.

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

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

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

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

Each Fund may not:

1. Invest in warrants.

2. Invest in real estate limited partnerships.

3. Invest in mineral leases.

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

13
<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to the general supervision by the Trustees, the Advisor is responsible
for decisions to buy and sell securities for each of the Funds, the selection of
brokers and dealers to effect the transactions, and the negotiation of brokerage
commissions, if any. The Advisor expects that the Funds may execute brokerage
or other agency transactions through registered broker-dealers, for a
commission, in conformity with the 1940 Act, the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder.

The Advisor may serve as an investment manager to a number of clients, including
other investment companies. It is the practice of the Advisor to cause purchase
and sale transactions to be allocated among the Funds and others whose assets
the Advisor manages in such manner as the Advisor deems equitable. The main
factors considered by the Advisor in making such allocations among the Funds and
other client accounts of the Advisor are the respective investment objectives,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held, and the opinions of the person(s) responsible, if any, for
managing the portfolios of the Funds and the other client accounts.

The policy of each Fund regarding purchases and sales of securities for the
Fund's portfolio is that primary consideration will be given to obtaining the
most favorable prices and efficient executions of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange, each
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. Each Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Advisor from obtaining a high quality of brokerage and
research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Advisor relies upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.

Purchases and sales of U.S. Government securities are normally transacted
through issuers, underwriters or major dealers in U.S. Government Securities
acting as principals. Such transactions are made on a net basis and do not
involve payment of brokerage commissions. The cost of securities purchased from
an underwriter usually includes a commission paid by the issuer to the
underwriters; transactions with dealers normally reflect the spread between bid
and asked prices.

In seeking to implement a Fund's policies, the Advisor effects transactions with
those brokers and dealers who the Advisor believes provide the most favorable
prices and are capable of providing efficient executions. If the Advisor
believes such prices and executions are obtainable from more than one broker or
dealer, the Advisor may give consideration to placing portfolio transactions
with those brokers and dealers who also furnish research and other services to
the Fund or the Advisor. Such services may include, but are not limited to, any
one or more of the following: information as to the availability of securities
for purchase or sale; statistical or factual information or opinions pertaining
to investment; wire services; and appraisals or evaluations of portfolio
securities. If the broker-dealer providing these additional services is acting
as a principal for its own account, no commissions would be payable. If the
broker-dealer is not a principal, a higher commission may be justified, at the
determination of the Advisor, for the additional services.

The information and services received by the Advisor from brokers and dealers
may be of benefit to the Advisor in the management of accounts of some of the
Advisor's other clients and may not in all cases benefit a Fund

14
<PAGE>

directly. while the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Advisor and thereby reduce the Advisor's expenses,
this information and these services are of indeterminable value and the
management fee paid to the Advisor is not reduced by any amount that may be
attributable to the value of such information and services.

For the fiscal periods ended June 30, 1996, March 31, 1997, and March 31, 1998
the Funds paid the following brokerage commissions:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AGGREGATE BROKERAGE COMMISSIONS
-----------------------------------------------
FUND 1996 1997* 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Nova Fund $293,000 $259,900 $836,833
- --------------------------------------------------------------------------------
Ursa Fund $669,000 $236,053 $284,054
- --------------------------------------------------------------------------------
OTC Fund $673,000 $15,491 $20,402
- --------------------------------------------------------------------------------
Metals Fund $35,000 $276,434 $415,695
- --------------------------------------------------------------------------------
Bond Fund $11,000 $7,829 $18,172
- --------------------------------------------------------------------------------
Juno Fund $23,000 $24,387 $40,740
- --------------------------------------------------------------------------------
Money Market Fund $0 $0 $0
- --------------------------------------------------------------------------------
</TABLE>
*For the nine-month period from July 1, 1996 to March 31, 1997

MANAGEMENT OF THE TRUST

The Trustees are responsible for the general supervision of the Trust's
business. The day-to-day operations of the Trust are the responsibilities of
the Trust's officers. The names and addresses (and ages) of the Trustees and
the officers of the Trust and the officers of the Advisor, together with
information as to their principal business occupations during the past five
years, are set forth below. Fees and expenses for non-interested Trustees will
be paid by the Trust.

TRUSTEES

(*)ALBERT P. VIRAGH, JR. (56)

Chairman of the Board of Trustees and President of the Trust; Chairman of
the Board, President, and Treasurer of PADCO Advisors, Inc., investment
adviser to the Trust, 1993 to present; Chairman of the Board, President,
and Treasurer of PADCO Service Company, Inc., shareholder and transfer
agent servicer to the Trust, 1993 to present; Chairman of the Board of
Managers of The Rydex Advisor Variable

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

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

15
<PAGE>

Annuity Account (the "Separate Account"), a separate account of Great
American Reserve Insurance Company, 1996 to present; Chairman of the Board,
President, and Treasurer of PADCO Advisors II, Inc., investment adviser to
the Separate Account, 1996 to present; Chairman of the Board, President,
and Treasurer of PADCO Financial Services, Inc., a registered broker-dealer
firm, 1996 to present; Vice President of Rushmore Investment Advisors Ltd.,
a registered investment adviser, 1985 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

COREY A. COLEHOUR (52)

Trustee of the Trust; Manager of the Separate Account, 1996 to present;
Senior Vice President of Marketing of Schield Management Company, a
registered investment adviser, 1985 to present. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

J. KENNETH DALTON (56)

Trustee of the Trust; Manager of the Separate Account, 1996 to present;
Mortgage Banking Consultant and Investor, The Dalton Group, April 1995 to
present; President, CRAM Mortgage Group, Inc. 1966 to April 1995. Address:
6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

JOHN O. DEMARET (57)

Trustee of the Trust; Manager of the Separate Account, 1997 to present;
Founder and Chief Executive Officer, Health Cost Controls America, Chicago,
Illinois, 1987 to 1996; sole practitioner, Chicago, Illinois, 1984 to 1987;
General Counsel for the Chicago Transit Authority, 1981 to 1984; Senior
Partner, O'Halloran, LaVarre & Demaret, Northbrook, Illinois, 1978 to 1981.
Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

PATRICK T. MCCARVILLE (55)

Trustee of the Trust; Manager of the Separate Account, 1997 to present;
Founder and Chief Executive Officer, Par Industries, Inc., Northbrook,
Illinois, 1977 to present; President and Chief Executive Officer, American
Health Resources, Northbrook, Illinois, 1984 to 1986. Address:
6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

ROGER SOMERS (53)

Trustee of the Trust; Manager of the Separate Account, 1996 to present;
President, Arrow Limousine, 1963 to present. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

OFFICERS

ROBERT M. STEELE (39)

Secretary and Vice President of the Trust; Vice President of PADCO
Advisors, Inc., investment adviser to the Trust, 1994 to present; Secretary
and Vice President of the Separate Account, 1996 to present; Vice President
of PADCO Advisors II, Inc., investment adviser to the Separate Account,
1996 to present; Vice President of The Boston Company, Inc., an
institutional money management firm, 1987 to 1994.

16
<PAGE>

Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

CARL G. VERBONCOEUR (44)

Vice President of Operations of the Trust; Vice President of Operations of
the Separate Account, 1997 to present; Senior Vice President, Crestar Bank,
1995 to 1997; Senior Vice President, Crestar Asset Management Company, a
registered investment adviser, 1993 to 1995; Vice President Perpetual
Savings Bank, 1987 to 1993. Address: 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852.

MICHAEL P. BYRUM (27)

Assistant Secretary of the Trust; Employee and senior portfolio manager of
PADCO Advisors, Inc., 1993 to present; portfolio manager of The Rydex OTC
Fund (since 1997) and The Rydex U.S. Government Bond Fund (since 1997),
each a series of the Trust; Assistant Secretary of the Separate Account,
1996 to present; Employee of PADCO Advisors II Inc., investment adviser to
the Separate Account; Investment Representative, Money Management
Associates, a registered investment adviser, 1992 to 1993; Student, Miami
University of Oxford, Ohio (B.A., Business Administration, 1992).
Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

The aggregate compensation paid by the Trust to each of its Trustees serving
during the fiscal year ended March 31, 1998, is set forth in the table below:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AGGREGATE PENSION OR ESTIMATED ANNUAL
NAME OF PERSON, COMPENSATION RETIREMENT BENEFITS BENEFITS UPON
POSITION FROM TRUST ACCRUED AS PART OF RETIREMENT
TRUST'S EXPENSES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Albert P. Viragh, Jr.*, $0 $0 $0
CHAIRMAN AND PRESIDENT
- --------------------------------------------------------------------------------
Corey A. Colehour, $10,500 $0 $0
TRUSTEE
- --------------------------------------------------------------------------------
J. Kenneth Dalton, $10,500 $0 $0
TRUSTEE
- --------------------------------------------------------------------------------
Roger Somers, $10,500 $0 $0
TRUSTEE
- --------------------------------------------------------------------------------
John O. Demaret, $6,500 $0 $0
TRUSTEE
- --------------------------------------------------------------------------------
Patrick T. McCarville, $6,500 $0 $0
TRUSTEE
- --------------------------------------------------------------------------------
</TABLE>

*Denotes an "interested person" of the Trust.
**Messrs. Demaret and McCarville were elected to the Board of Trustees in
December 1997.

As of the date of this Statement of Additional Information, the Trustees and the
officers of the Trust, as a group, owned, of record and beneficially, less than
1.0% of the outstanding shares of each Fund.

17
<PAGE>

THE ADVISORY AGREEMENT
Under an investment advisory agreement with the Advisor, dated May 14, 1993,
and amended on November 2, 1993, and also amended on December 13, 1994, March
8, 1996, and September 25, 1996, the Advisor serves as the investment adviser
for each series of the Trust and provides investment advice to the Funds and
oversees the day-to-day operations of the Funds, subject to direction and
control by the Trustees and the officers of the Trust. As of June 30, 1998,
net Trust assets under management of the Advisor were approximately $____
billion. Pursuant to the advisory agreement with the Advisor, the Funds pay
the Advisor the following fees at an annual rate based on the average daily
net assets for each respective Fund, as set forth below:

For the fiscal periods ended June 30, 1996, March 31, 1997 and March 31, 1998,
the Advisor received the following investment advisory fees:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ADVISORY FEES PAID
------------------------------------------------------
FUND ANNUAL 1996 1997* 1998
ADVISORY FEE
CONTRACTUAL
RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nova Fund 0.75% $1,022,794 $1,812,740 $4,588,393
- --------------------------------------------------------------------------------
Ursa Fund 0.90% $1,607,706 $2,070,135 $2,956,581
- --------------------------------------------------------------------------------
OTC Fund 0.75% $541,443 $775,607 $2,529,352
- --------------------------------------------------------------------------------
Metals Fund 0.75% $406,902 $185,396 $ 200,264
- --------------------------------------------------------------------------------
Bond Fund 0.50% $97,820 $35,394 $ 91,744
- --------------------------------------------------------------------------------
Juno Fund 0.90% $174,866 $130,573 $ 160,954
- --------------------------------------------------------------------------------
Money Market Fund 0.50% $891,864 $671,957 $1,361,674
- --------------------------------------------------------------------------------
</TABLE>
*For the nine-month period from July 1, 1996 to March 31, 1997

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

The Advisor, which has its office at 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852, was incorporated in the State of Maryland on
February 5, 1993. Albert P. Viragh, Jr., the Chairman of the Board of Trustees
and the President of the Advisor, owns a controlling interest in the Advisor.

18
<PAGE>

THE SERVICE AGREEMENT
General administrative, shareholder, dividend disbursement, transfer agent, and
registrar services are provided to the Trust and the Funds by PADCO Service
Company, Inc., 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852
(the "Servicer"), subject to the general supervision and control of the Trustees
and the officers of the Trust, pursuant to a service agreement between the Trust
and the Servicer, dated September 19, 1995, and amended on March 8, 1996 and
also amended on September 25, 1996. The Servicer is wholly-owned by Albert P.
Viragh, Jr., who is the Chairman of the Board and the President of the Trust and
the sole controlling person and majority owner of the Advisor.

For the fiscal periods ended June 30, 1996, March 31, 1997 and March 31, 1998,
the Funds paid PADCO the following service fees:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SERVICE FEES PAID
------------------------------------------------------
ANNUAL 1996 1997* 1998
FUND SERVICE
FEE RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nova Fund 0.25% $327,476 $606,411 $1,529,464
- --------------------------------------------------------------------------------
Ursa Fund 0.25% $451,107 $575,038 $ 821,273
- --------------------------------------------------------------------------------
OTC Fund 0.20% $123,358 $205,328 $ 674,494
- --------------------------------------------------------------------------------
Metals Fund 0.20% $114,476 $49,439 $ 53,408
- --------------------------------------------------------------------------------
Bond Fund 0.20% $37,793 $14,158 $ 36,617
- --------------------------------------------------------------------------------
Juno Fund 0.25% $47,333 $36,374 $ 44,710
- --------------------------------------------------------------------------------
Money Market Fund 0.20% $403,167 $268,855 $ 544,706
- --------------------------------------------------------------------------------
</TABLE>
*For the nine-month period from July 1, 1996 to March 31, 1997

Under the service agreement, the Servicer provides the Trust and each Fund
with all required general administrative services, including, without
limitation, office space, equipment, and personnel; clerical and general back
office services; bookkeeping, internal accounting, and secretarial services;
the determination of net asset values; and the preparation and filing of all
reports, registration statements, proxy statements, and all other materials
required to be filed or furnished by the Trust and each Fund under Federal
and state securities laws. The Servicer also maintains the shareholder
account records for each Fund, disburses dividends and distributions payable
by each Fund, and produces statements with respect to account activity for
each Fund and each Fund's shareholders. The Servicer pays all fees and
expenses that are directly related to the services provided by the Servicer
to each Fund; each Fund reimburses the Servicer for all fees and expenses
incurred by the Servicer which are not directly related to the services the
Servicer provides to the Fund under the service agreement.

COSTS AND EXPENSES
Each Fund bears all expenses of its operations other than those assumed by the
Advisor or the Servicer. Fund expenses include: the management fee; the
servicing fee (including administrative, transfer agent, and shareholder
servicing fees); custodian and accounting fees and expenses; legal and auditing
fees; securities valuation expenses; fidelity bonds and other insurance
premiums; expenses of preparing and printing prospectuses, confirmations, proxy
statements, and shareholder reports and notices; registration fees and expenses;
proxy and annual meeting

19
<PAGE>

expenses, if any; all Federal, state, and local taxes (including, without
limitation, stamp, excise, income, and franchise taxes); organizational
costs; non-interested Trustees' fees and expenses; the costs and expenses of
redeeming shares of the Fund; fees and expenses paid to any securities
pricing organization; dues and expenses associated with membership in any
mutual fund organization; and costs for incoming telephone WATTS lines. In
addition, each of the Funds pays an equal portion of the Trustee fees and
expenses for attendance at Trustee meetings for the Trustees of the Trust who
are not affiliated with or interested persons of the Advisor.

PRINCIPAL HOLDERS OF SECURITIES

As of May 1, 1998, the following persons were the only persons who were record
owners or, to the knowledge of the Trust, beneficial owners of 5% or more of the
shares of the Funds.

<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OWNERSHIP
- -------------------- ------------------------- ------------------- -------------
<S> <C> <C> <C>
NOVA FUND National Financial 4,314,230.693 16.35%
Services Corp.
P.O. Box 3908
New York, NY 10008

Schwab & Company 5,704,608.722 21.62%
101 Montgomery Street
San Francisco, CA 94104

Donaldson Lufkin Jenrette 1,955,057.580 ----
P.O. Box 2052
Jersey City, NJ

URSA FUND Schwab & Company 14,205,314.227 22.62%
101 Montgomery Street
San Francisco, CA 94104

National Financial 6,992,749.176 11.02%
Services Corp.
P.O. Box 3908
New York, NY 10008

Donaldson Lufkin Jenrette 4,247,916.643 6.75%
P.O. Box 2052
Jersey City, NJ 07303

OTC FUND Schwab & Company 2,578,892.330 17.26%
101 Montgomery Street
San Francisco, CA 94104

First Trust Corp. 852,951.632 5.71%
P.O. Box 173736
Denver, CO 80217
- --------------------------------------------------------------------------------
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OWNERSHIP
- -------------------- ------------------------- ------------------- -------------
<S> <C> <C> <C>

NATIONAL FINANCIAL 900,439.137 6.03%
SERVICES GROUP FOR
THE EXCLUSIVE BENEFIT
OF CUSTOMERS
PO BOX 3752,
CHURCH STREET STATION
NEW YORK, NY 10041-3299

Donaldson Lufkin Jenrette 1,439,063.751 9.63%
P.O. Box 2052
Jersey City, NJ 07303

Trust Company of America 888,100.171 5.94%
P.O. Box 6503
Englewood, CO 80155

PRECIOUS METALS First Trust Corp. 758,780.781 12.97%
FUND P.O. Box 173736
Denver, CO 80217

Donaldson Lufkin Jenrette 1,147,861.778 19.62%
P.O. Box 2052
Jersey City, NJ 07303

U.S. GOVERNMENT TRUST COMPANY OF AMERICA 563,713.327 34.72%
BOND FUND PO BOX 6503
ENGLEWOOD, CO 80155

CHARLES SCHWAB & CO. 155,280.693 9.56%
ATTN: MUTUAL FUND TEAM E
101 MONTGOMERY STREET
SAN FRANCISCO, CA 94104-4122

NATIONAL FINANCIAL 125,834.020 7.75%
SERVICES GROUP
FOR THE EXCLUSIVE BENEFIT
OF CUSTOMERS
PO BOX 3752,
CHURCH STREET STATION
NEW YORK, NY 10041-3299

NATIONAL INVESTOR 82,585.218 5.09%
SERVICES CORP.
FOR THE EXCLUSIVE BENEFIT
OF OUR CUSTOMERS
55 WATER STREET, 32ND FLOOR
NEW YORK, NY 10041-3299

JUNO FUND Donaldson Lufkin Jenrette 93,442.444 6.69%
P.O. Box 2052
Jersey City, NJ 07303
- --------------------------------------------------------------------------------
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OWNERSHIP
- -------------------- ------------------------- ------------------- -------------
<S> <C> <C> <C>
National Financial 108,142.785 7.74%
Services Corp.
P.O. Box 3908
New York, NY 10008

Schwab & Company 114,371.304 8.23%
101 Montgomery Street
San Francisco, CA 94104

Independent Trust Corp. 202,407.251 14.49%
Custodian Funds 98
15255 S. 94th Avenue
Orland Park, IL 60426

MONEY MARKET FUND National Financial 51,729,219.560 51.23%
Services Group
for the Exclusive Benefit
of Customers
P.O. Box 3752
Church Street Station
New York, NY 10041-3299

Trust Company of America 26,290,129.090 26.04%
P.O. Box 6503
Englewood, CO 80155

Independent Trust Corp. 15,909,268.530 15.76%
Custodian Funds 98
15255 S 94th Avenue,
Suite 303
Orland Park, IL 60462

First Trust & Co. 6,615,868.065 6.55%
(Datalynx)
P.O. Box 173736
Denver, CO 80217
</TABLE>

DETERMINATION OF NET ASSET VALUE

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

For purposes of determining net asset value per share of a Fund, options and
futures contracts will be valued 15 minutes after the 4:00 P.M., Eastern Time,
close of regular trading on the NYSE, except that futures contracts traded on
the Chicago Board of Trade ("CBOT") will be valued at 3:00 P.M., Eastern Time,
the close of trading of that exchange. Options on securities and indices
purchased by a Fund generally are valued at their last bid price

22
<PAGE>

in the case of exchange-traded options or, in the case of options traded in
the over-the-counter ("OTC") market, the average of the last bid price as
obtained from two or more dealers unless there is only one dealer, in which
case that dealer's price is used. The value of a futures contract equals the
unrealized gain or loss on the contract settlement price for a like contract
acquired on the day on which the futures contract is being valued. The value
of options on futures contracts is determined based upon the current
settlement price for a like option acquired on the day on which the option is
being valued. A settlement price may not be used for the foregoing purposes
if the market makes a limit move with respect to a particular commodity.

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

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

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

The Money Market Fund will utilize the amortized cost method in valuing its
portfolio securities for purposes of determining the net asset value of its
shares even though the portfolio securities may increase or decrease in market
value, generally, in connection with changes in interest rates. The amortized
cost method of valuation involves valuing a security at its cost adjusted by a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument while
this method provides certainty in valuation, this method may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Money Market Fund would receive if this Fund sold the instrument.
During such periods, the yield to investors in the Money Market Fund may differ
somewhat from that obtained in a similar company which uses mark-to-market
values for all its portfolio securities. For example, if the use of amortized
cost resulted in a lower (higher) aggregate portfolio value on a particular day,
a prospective investor in the Money Market Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such a
similar company and existing investors would receive less (more) investment
income. The purpose of this

23
<PAGE>

method of calculation is to facilitate the maintenance of a constant net
asset value per share of $1.00.

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

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

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

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

PERFORMANCE INFORMATION

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

Performance information for each of the Funds contained in reports to
shareholders or prospective shareholders, advertisements, and other
promotional literature may be compared to the record of various unmanaged
indexes. Performance information for the Nova Fund, the Ursa Fund, and the
Metals Fund may be compared to various unmanaged indexes, including, but not
limited to, the S&P 500 Index or the Dow Jones Industrial Average.
Performance information for the Metals Fund also may be compared to its
current benchmark, the XAU Index. Performance information for the OTC Fund
may be compared to various unmanaged indexes, including, but not limited to,
its current benchmark, the NASDAQ 100 Index-TM-, and the NASDAQ Composite
Index-TM-. The OTC Fund has the ability to invest in securities not included
in the NASDAQ 100 Index-TM- or the NASDAQ Composite Index-TM-, and

24
<PAGE>

the OTC Fund's investment portfolio may or may not be similar in composition
to NASDAQ 100 Index-TM- or the NASDAQ Composite Index-TM-. Performance
information for the Bond Fund and the Juno Fund may be compared to various
unmanaged indexes, including, but not limited to, the Shearson Lehman
Government (LT) Index.

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

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

CALCULATION OF RETURN QUOTATIONS

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

M
P(1+T) = ERV

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

T = average annual total return;

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

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

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

25
<PAGE>

invested to the ending redeemable value.

For the one-year period ended March 31, 1998, and for the period from the
respective commencement of operations of the Funds to March 31, 1998, the
average annual compounded rate of return of the respective Funds (other than the
Money Market Fund), assuming the reinvestment of all dividends and
distributions, was as follows:

<TABLE>
<CAPTION>
FOR THE
PERIOD
FOR THE FROM THE
ONE YEAR COMMENCEMENT
PERIOD ENDED OF OPERATIONS TO
MARCH 31, 1998 MARCH 31, 1998
------------------ --------------------
<S> <C> <C>
Nova Fund 67.02% 28.95%(1)
Ursa Fund (29.06)% (14.93)%(2)
OTC Fund 55.05% 30.87%(3)
Precious Metals Fund (23.82)% (11.57)%(4)
U.S. Government Bond Fund 24.72% 4.82%(5)
Juno Fund (9.92)% (4.17)%(6)
</TABLE>

- -----------------------------
(1)Commenced operations 7/12/93 (4)Commenced operations 12/1/93
(2)Commenced operations 1/7/94 (5)Commenced operations 1/3/94
(3)Commenced operations 2/14/94 (6)Commenced operations 3/3/95

INFORMATION ON COMPUTATION OF YIELD

THE BOND FUND
In addition to the total return quotations discussed above, the Bond Fund also
may advertise its yield based on a thirty-day (or one month) period ended on the
date of the most recent balance sheet included in the Trust's Registration
Statement, computed by dividing the net investment income per share of the Fund
earned during the period by the maximum offering price per Fund share on the
last day of the period, according to the following formula:

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

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

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

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

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

Under this formula, interest earned on debt obligations for purposes of "a"
above, is calculated by (i) computing the yield to maturity of each obligation
held by the Bond Fund based on the market value of the obligation (including
actual accrued interest) at the close of business on the last day of each month,
or, with respect to

26
<PAGE>

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

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

Any quotation of performance stated in terms of yield (whether based on a
thirty-day or one month period) will be given no greater prominence than the
information prescribed under SEC Rules. In addition, all advertisements
containing performance data of any kind will include a legend disclosing that
such performance data represents past performance and that the investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost of such
shares.

The Bond Fund's yield, as of March 31, 1998, based on a thirty-day base period,
was approximately 4.17%.

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

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

The Money Market Fund's annualized effective yield and annualized current yield,
for the seven-day period ended March 31, 1998, were approximately 4.90% and
4.74%, respectively.

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

27
<PAGE>

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

PURCHASE AND REDEMPTION OF SHARES

MINIMUM INVESTMENT REQUIREMENTS
Shareholders will be informed of any increase in the minimum investment
requirements by a new prospectus or a prospectus supplement, in which the new
minimum is disclosed. Any request for a redemption (including pursuant to check
writing privileges) by an investor whose account balance is (a) below the
currently applicable minimum investment, or (b) would be below that minimum as a
result of the redemption, will be treated as a request by the investor of a
complete redemption of that account. In addition, the Trust may redeem an
account whose balance (due in whole or in part to redemptions since the time of
last purchase) has fallen below the minimum investment amount applicable at the
time of the shareholder's most recent purchase of Fund shares (unless the
shareholder brings his or her account value up to the currently applicable
minimum investment).

TAX CONSEQUENCES
Note that in the case of tax-qualified retirement plans, a redemption from such
a plan may have adverse tax consequences. A shareholder contemplating such a
redemption should consult his or her own tax advisor. Other shareholders should
consider the tax consequences of any redemption.

SUSPENSION OF THE RIGHT OF REDEMPTION
The Funds may suspend the right of redemption or the date of payment: (i) for
any period during which the NYSE, the Federal Reserve Bank of New York, the
NASDAQ, the Chicago Mercantile Exchange ("CME"), the CBOT, or any other
exchange, as appropriate, is closed (other than customary weekend or holiday
closings), or trading on the NYSE, the NASDAQ, the CME, the CBOT, or any other
exchange, as appropriate, is restricted; (ii) for any period during which an
emergency exists so that sales of a Fund's investments or the determination of
its NAV is not reasonably practicable; or (iii) for such other periods as the
SEC may permit for the protection of a Fund's investors.

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

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

28
<PAGE>

DIVIDENDS, DISTRIBUTIONS, AND TAXES

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

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

The Trustees may revise the dividend policy, or postpone the payment of
dividends, if the Money Market Fund should have or anticipate any large
unexpected expense, loss, or fluctuation in net assets which, in the opinion of
the Trustees, might have a significant adverse effect on shareholders of the
Money Market Fund. On occasion, in order to maintain a constant $1.00 per share
net asset value for the Money Market Fund, the Trustees may direct that the
number of outstanding shares of the Money Market Fund be reduced in each
shareholder's account. Such reduction may result in taxable income to a
shareholder of the Money Market Fund in excess of the net increase (I.E.,
dividends, less such reduction), if any, in the shareholder's account for a
period of time. Furthermore, such reduction may be realized as a capital loss
when the shares are liquidated.

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

REGULATED INVESTMENT COMPANY STATUS
As a RIC, a Fund would not be subject to Federal income taxes on the net
investment income and capital gains that the Fund distributes to the Fund's
shareholders. The distribution of net investment income and capital gains will
be taxable to Fund shareholders regardless of whether the shareholder elects to
receive these distributions in cash or in additional shares. Distributions
reported to Fund shareholders as long-term capital gains shall be taxable as
such, regardless of how long the shareholder has owned the shares. Fund
shareholders will be notified annually by the Fund as to the Federal tax status
of all distributions made by the Fund. Distributions may be subject to state
and local taxes.

Shareholders of the Money Market Fund will be subject to Federal income tax on
dividends paid from interest income delved from taxable securities and on
distributions of realized net short-term capital gains. Interest and realized
net short-term capital gains distributions are taxable to a shareholder of the
Money Market Fund as

29
<PAGE>

ordinary dividend income regardless of whether the shareholder receives such
distributions in additional shares of the Money Market Fund or in cash.
Since the Money Market Fund's income is expected to be derived entirely from
interest rather than dividends, none of such distributions will be eligible
for the Federal dividends received deduction available to corporations.

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

In the event of a failure by a Fund to quality as an RIC, the Fund's
distributions, to the extent such distributions are derived from the Fund's
current or accumulated earnings and profits, would constitute dividends that
would be taxable to the shareholders of the fund as ordinary income and would be
eligible for the dividends received deduction for corporate shareholders. This
treatment would also apply to any portion of the distributions that might have
been treated in the shareholder's hands as long-term capital gains, as discussed
below, had the Fund qualified as an RIC.

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

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

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

Under the Code, special rules are provided for certain transactions in a foreign
currency other than the taxpayer's

30
<PAGE>

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

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

TRANSACTIONS BY THE FUNDS

Each of the Nova Fund, the Ursa Fund, the OTC Fund, and the Metals Fund in its
operations also will utilize options on stock indexes.

31
<PAGE>

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

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

BACK-UP WITHHOLDING
Each Fund is required to withhold and remit to the U.S. Treasury 31% of
(i) reportable taxable dividends and distributions and (ii) the proceeds of any
redemptions of Fund shares with respect to any shareholder who is not exempt
from withholding and who fails to furnish the Trust with a correct taxpayer
identification number, who fails to report fully dividend or interest income, or
who fails to certify to the Trust that the shareholder has provided a correct
taxpayer identification number and that the shareholder is not subject to
withholding. (An individual's taxpayer identification number is the
individual's social security number.) The 31% "back-up withholding tax" is not
an additional tax and may be credited against a taxpayer's regular Federal
income tax liability.

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

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

OTHER INFORMATION

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

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

32
<PAGE>

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

SHAREHOLDER INQUIRIES
You may call 1-800-820-0888 or 301-468-8520 to obtain information on account
statements, procedures, and other related information.

COUNSEL

Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C. 20036, serves
as counsel to the Trust.

AUDITORS AND CUSTODIAN

Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, are the
auditors and the independent certified public accountants of the Trust and each
of the Funds. Star Bank, N.A. (the "Custodian"), Star Bank Center, 425 Walnut
Street, Cincinnati, Ohio 45202, serves as custodian for the Trust and the Funds
under a custody agreement between the Trust and the Custodian. Under the
custody agreement, the Custodian holds the portfolio securities of each Fund and
keeps all necessary related accounts and records.

FINANCIAL STATEMENTS

The Trust's financial statements for the fiscal year ended March 31, 1998,
including notes thereto and the report of Deloitte & Touche LLP thereon have
been filed with the SEC and are incorporated by reference into this Statement of
Additional Information. A copy of the Trust's Annual Report to Shareholders
(the "Annual Report") must accompany the delivery of this Statement of
Additional Information.

33
<PAGE>

APPENDIX A

BOND RATINGS

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

STANDARD & POOR'S RATINGS
GROUP CORPORATE BOND RATINGS

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

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

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

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

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

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

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

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

Aa - Bonds rate "Aa" are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because

34
<PAGE>

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

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

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

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

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

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

35
<PAGE>

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

(b) Exhibits

(a)(1) Certificate of Trust of Rydex Series Trust (the "Registrant" or
the "Trust") incorporated herein by reference to Exhibit 1a of
Post-Effective Amendment No. 27 to this Registration Statement
filed on October 30, 1996.
(a)(2) Declaration of Trust of the Registrant incorporated herein by
reference to Exhibit 1b of Post-Effective Amendment No. 27 to
this Registration Statement filed on October 30, 1996.
(b) By-Laws of Registrant incorporated herein by reference to Exhibit
2 of Post-Effective Amendment No. 27 to this Registration
Statement filed on October 30, 1996.
(c) Not applicable.
(d)(1) Investment Advisory Agreement between Registrant and PADCO
Advisors, Inc. incorporated herein by reference to Exhibit 5a of
Post-Effective Amendment No. 27 to this Registration Statement
filed on October 30, 1996.
(d)(2) Sub-Advisory Agreement between PADCO Advisors, Inc. and Loomis,
Sayles & Company, L.P. incorporated herein by reference to
Exhibit 5b of Post-Effective Amendment No. 27 to this
Registration Statement filed on October 30, 1996.
(d)(3) AMENDMENT TO ADVISORY AGREEMENT BETWEEN THE REGISTRANT AND PADCO
ADVISORS, INC. DATED MARCH 16, 1998 IS FILED HEREWITH.
(e) DISTRIBUTION AGREEMENT BETWEEN THE REGISTRANT AND PADCO FINANCIAL
SERVICES, INC. RELATING TO THE ADVISER CLASS SHARES IS FILED
HEREWITH.
(f) Not applicable.
(g) Custody Agreement between Registrant and Star Bank, N.A.
incorporated herein by reference to Post-Effective Amendment No.
27 to Exhibit 8 of this Registration Statement filed on October
30, 1996.
(h)(1) Service Agreement between Registrant and PADCO Service Company,
Inc. incorporated herein by reference to Exhibit 9c of Post-
Effective Amendment No. 27 to this Registration Statement filed
on October 30, 1996.
(h)(2) Portfolio Accounting Services Agreement between Registrant and
PADCO Service Company, Inc. incorporated herein by reference to
Exhibit 9d of Post-Effective Amendment No. 27 to this
Registration Statement filed on October 30, 1996.
(h)(3) AMENDMENT TO SERVICE AGREEMENT BETWEEN REGISTRANT AND PADCO
SERVICE COMPANY DATED MARCH 16, 1998 IS FILED HEREWITH.

5
<PAGE>

ITEM 23. EXHIBITS (continued)

(i) Not applicable.
(j) CONSENT OF DELOITTE & TOUCHE IS FILED HEREWITH.
(k) Not applicable.
(l ) Not applicable.
(m)(1) Plan of Distribution for The Rydex Institutional Money Market
Fund incorporated herein by reference to Exhibit 15a of Post-
Effective Amendment No. 24 to this Registration Statement, filed
on October 27, 1995.
(m)(2) Plan of Distribution for The Rydex Institutional Money Market
Fund as revised, March 12, 1997 incorporated herein by reference
to Exhibit 15b of Post-Effective Amendment No. 24 to this
Registration Statement, filed on October 27, 1995.
(m)(3) Plan of Distribution for The Rydex Institutional Money Market
Fund as revised, June 23, 1997 incorporated herein by reference
to Exhibit 15c Post-Effective Amendment No. 24 to this
Registration Statement, filed on October 27, 1995.
(m)(4) Plan of Distribution for The Rydex High Yield Fund incorporated
herein by reference to Post-Effective Amendment No. 26 to Exhibit
15d of this Registration Statement, filed on September 11, 1996.
(m)(5) Plan of Distribution for The Rydex High Yield Fund, as revised
March 12, 1995 incorporated herein by reference to Exhibit 15e of
Post-Effective Amendment No. 24 to this Registration Statement,
filed on October 27, 1995.
(m)(6) Plan of Distribution for The Rydex High Yield Fund, as revised
June 23, 1997 incorporated herein by reference to Exhibit 15f of
Post-Effective Amendment No. 24 to this Registration Statement,
filed on October 27, 1995.
(m)(7) Shareholder Servicing Support Agreements between PADCO Financial
Services, Inc. and Selling Recipients in connection with the Plan
of Distribution for The Rydex Institutional Money Market Fund
incorporated herein by reference to Exhibit 15g of Post-Effective
Amendment No. 25 to this Registration Statement, filed on March
1, 1996.
(m)(8) Shareholder Servicing Support Agreement between PADCO Financial
Services, Inc. and Selling Recipients in connection with the Plan
of Distribution for The Rydex High Yield Fund incorporated herein
by reference to Exhibit 15h of Post-Effective Amendment No. 26 to
this Registration Statement, filed on September 11, 1996.
(m)(9) Distribution Plan and Shareholder Servicing Agreement for Advisor
Class Shares is incorporated by reference to Exhibit 15i of Post-
Effective Amendment No. 30.
(n) Financial Data Schedules are filed herewith.
(o) Rule 18f-3 Plan is incorporated by reference to Exhibit 18 of
Post-Effective Amendment No. 30.

6
<PAGE>

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

The following persons may be deemed to be directly or indirectly controlled by
or under the common control with the Registrant, a Delaware business trust:

PERCENTAGE OF VOTING
SECURITIES OWNED AND/OR
STATE OF ORGANIZATION AND CONTROLLED BY THE
RELATIONSHIP (IF ANY) TO CONTROLLING PERSON OR
COMPANY THE REGISTRANT OTHER BASIS OF COMMON
CONTROL
- --------------------------------------------------------------------------------

PADCO Advisors, Inc. a Maryland corporation, 80% of the voting
(the "Advisor) a registered investment securities of the Advisor
adviser, and the are owned by Albert P.
Registrant's investment Viragh, Jr., the Chairman
adviser of the Board of
Directors, the President,
and the Treasurer of the
Advisor, and 100% of the
voting securities are
controlled by Albert P.
Viragh, Jr.

PADCO Service Company, a Maryland corporation, 100% of the voting
Inc. (the "Servicer") a registered transfer securities of the
agent, and the Servicer are owned by
Registrant's shareholder Albert P. Viragh, Jr.,
and transfer agent the Chairman of the Board
servicer of Directors, the
President, and the
Treasurer of the Servicer

PADCO Financial Services, a Maryland corporation, a 100% of the voting
Inc. (the "Distributor") registered broker-dealer, securities of the
and the distributor of Distributor are owned by
the shares of The Rydex Albert P. Viragh, Jr.,
Institutional Money the Chairman of the Board
Market Fund, a series of of Directors, the
the Registrant President, and the
Treasurer of the
Distributor

7
<PAGE>

PADCO Advisors II, Inc. a Maryland corporation 100% of the voting
and a registered securities are owned by
investment adviser (PADCO Albert P. Viragh, Jr.,
II is not otherwise the Chairman of the Board
related to the of Directors, the
Registrant) President, and the
Treasurer of PADCO II

Rydex Advisor Variable a managed separate the investment advisers
Annuity Account (the account of Great American for the Separate Account
"Separate Account") Reserve Insurance and the Registrant are
Company, which is under the common control
organized under the laws of Albert P. Viragh, Jr.,
of the State of Texas and the Chairman of the Board
is advised by PADCO II of Trustees, President,
and Treasurer of the
Registrant

* The principal business address for each of the aforementioned directors and
officers of PADCO Financial Services, Inc., is 6116 Executive Boulevard,
Suite 400, Rockville, Maryland 20852.

ITEM 25. INDEMNIFICATION

The Registrant is organized as a Delaware business trust and is operated
pursuant to a Declaration of Trust, dated as of March 13, 1993 (the "Declaration
of Trust"), that permits the Registrant to indemnify its trustees and officers
under certain circumstances. Such indemnification, however, is subject to the
limitations imposed by the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended. The Declaration of Trust of the
Registrant provides that officers and trustees of the Trust shall be indemnified
by the Trust against liabilities and expenses of defense in proceedings against
them by reason of the fact that they each serve as an officer or trustee of the
Trust or as an officer or trustee of another entity at the request of the
entity. This indemnification is subject to the following conditions:

(a) no trustee or officer of the Trust is indemnified against any
liability to the Trust or its security holders which was the result of
any willful misfeasance, bad faith, gross negligence, or reckless
disregard of his duties;

(b) officers and trustees of the Trust are indemnified only for actions
taken in good faith which the officers and trustees believed were in
or not opposed to the best interests of the Trust; and

8
<PAGE>

(c) expenses of any suit or proceeding will be paid in advance only if the
persons who will benefit by such advance undertake to repay the
expenses unless it subsequently is determined that such persons are
entitled to indemnification.

The Declaration of Trust of the Registrant provides that if indemnification is
not ordered by a court, indemnification may be authorized upon determination by
shareholders, or by a majority vote of a quorum of the trustees who were not
parties to the proceedings or, if this quorum is not obtainable, if directed by
a quorum of disinterested trustees, or by independent legal counsel in a written
opinion, that the persons to be indemnified have met the applicable standard.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Each of the directors of the Trust's investment adviser, PADCO Advisors, Inc.
(the "Advisor"), Albert P. Viragh, Jr., the Chairman of the Board of Directors,
President, and Treasurer of the Advisor, and Amanda C. Viragh, the Secretary of
the Advisors, is an employee of the Advisor at 6116 Executive Boulevard, Suite
400, Rockville, Maryland 20852. Albert P. Viragh, Jr. also has served (and
continues to serve) as: (i) the Chairman of the Board of Trustees and the
President of the Trust since the Trust's organization as a Delaware business
trust on March 13, 1993; (ii) the Chairman of the Board of Directors, the
President, and the Treasurer of PADCO Service Company, Inc. (the "Servicer"),
the Trust's registered transfer agent and shareholder servicer, since the
incorporation of the Servicer in the State of Maryland on October 6, 1993; (iii)
the Chairman of the Board of Directors, the President, and the Treasurer of
PADCO Advisors II, Inc. ("PADCO II"), a registered investment adviser, since the
incorporation of PADCO II in the State of Maryland on July 5, 1994; and (iv) the
Chairman of the Board of Directors, the President, and the Treasurer of PADCO
Financial Services, Inc. (the "Distributor"), the distributor of the shares of
The Rydex High Yield Fund and The Rydex Institutional Money Market Fund, each a
series of the Trust, since the incorporation of the Distributor in the State of
Maryland on March 21, 1996. Amanda C. Viragh also has served (and continues to
serve) as the Secretary of the Advisor, the Servicer, and PADCO II, and also as
the Assistant Treasurer of the Servicer.

ITEM 27. PRINCIPAL UNDERWRITER

(a) PADCO Financial Services Inc. serves as the principal underwriter for the
securities of (i) The Rydex Institutional Money Market Fund and The Rydex
High Yield Fund, each a series of the Registrant, (ii) The Rydex Advisor
Variable Annuity Account, a managed separate account of Great American
Reserve Insurance Company that is a registered investment company advised
by PADCO Advisors II, Inc., and (iii) the Adviser Class of the Rydex Sector
Funds and U.S. Government Money Market Fund but does not currently serve as
the principal underwriter for the securities of any other investment
company.

9
<PAGE>

(b) The following information is furnished with respect to the directors and
officers of PADCO Financial Services, Inc., the principal underwriter for
The Rydex Institutional Money Market Fund and The Rydex High Yield Fund,
each a series of the Registrant:

NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS* UNDERWRITER WITH REGISTRANT
- ------------------ -------------------------- ---------------------

Albert P. Viragh, Jr. Chairman of the Board of Chairman of the Board
Directors, President and of Trustees and President
Treasurer

Amanda C. Viragh Director None

Carl G. Verboncoeur

Michael P. Byrum Secretary Assistant Secretary

Sothara Chin Compliance Officer Compliance Officer

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books, and records required to be maintained and preserved by
Section 31(a) of the Investment Company Act of 1940, as amended, and Rules 31a-1
and 31a-2 thereunder, will be kept by the Registrant at 6116 Executive
Boulevard, Rockville, Maryland 20852.

ITEM 29. MANAGEMENT SERVICES

There are no management-related service contracts not discussed in Parts
A and B.

ITEM 30. UNDERTAKINGS

None

10
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Rockville in the State of Maryland on the 28th day of May, 1998.

RYDEX SERIES TRUST

/s/ Albert P. Viragh, Jr.
----------------------------------------------
Albert P. Viragh, Jr., Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been duly signed below by the following persons in the capacities
on the date indicated.

Signatures Title Date
---------- ----- ----

/s/ Albert P. Viragh, Jr.
- ------------------------- Chairman of the Board of Trustees May 28, 1998
Albert P. Viragh, Jr. President, and Trustee

/s/ Carl G. Verboncoeur
- ------------------------- Treasurer May 28, 1998
Carl G. Verboncoeur

*
- ------------------------- Trustee May 28, 1998
Corey A. Colehour

*
- ------------------------- Trustee May 28, 1998
J. Kenneth Dalton

*
- ------------------------- Trustee May 28, 1998
Roger Somers

*
- ------------------------- Trustee May 28, 1998
John O. Demaret

*
- ------------------------- Trustee May 28, 1998
Patrick T. McCarville

*By /s/ Albert P. Viragh, Jr.
--------------------------
Albert P. Viragh, Jr.
Attorney-in-Fact

11
<PAGE>

EXHIBIT INDEX

12
<PAGE>

(m)(3) Plan of Distribution for The Rydex Institutional Money Market
Fund as revised, June 23, 1997 incorporated herein by reference
to Exhibit 15c Post-Effective Amendment No. 24 to this
Registration Statement, filed on October 27, 1995.
(m)(4) Plan of Distribution for The Rydex High Yield Fund incorporated
herein by reference to Post-Effective Amendment No. 26 to Exhibit
15d of this Registration Statement, filed on September 11, 1996.
(m)(5) Plan of Distribution for The Rydex High Yield Fund, as revised
March 12, 1995 incorporated herein by reference to Exhibit 15e of
Post-Effective Amendment No. 24 to this Registration Statement,
filed on October 27, 1995.
(m)(6) Plan of Distribution for The Rydex High Yield Fund, as revised
June 23, 1997 incorporated herein by reference to Exhibit 15f of
Post-Effective Amendment No. 24 to this Registration Statement,
filed on October 27, 1995.
(m)(7) Shareholder Servicing Support Agreements between PADCO Financial
Services, Inc. and Selling Recipients in connection with the Plan
of Distribution for The Rydex Institutional Money Market Fund
incorporated herein by reference to Exhibit 15g of Post-Effective
Amendment No. 25 to this Registration Statement, filed on March
1, 1996.
(m)(8) Shareholder Servicing Support Agreement between PADCO Financial
Services, Inc. and Selling Recipients in connection with the Plan
of Distribution for The Rydex High Yield Fund incorporated herein
by reference to Exhibit 15h of Post-Effective Amendment No. 26 to
this Registration Statement, filed on September 11, 1996.
(m)(9) Distribution Plan and Shareholder Servicing Agreement for Advisor
Class Shares is incorporated by reference to Exhibit 15i of Post-
Effective Amendment No. 10.
(n) Financial Data Schedules are filed herewith.
(o) Rule 18f-3 Plan is incorporated by reference to Exhibit 18 of
Post-Effective Amendment No. 30.

<PAGE>

AMENDMENT TO

INVESTMENT MANAGEMENT CONTRACT

BETWEEN

RYDEX SERIES TRUST

AND

PADCO ADVISORS, INC.

AMENDMENT TO INCLUDE THE RYDEX SECTOR FUNDS UNDER THE MANAGEMENT CONTRACT
AND TO SET THE MANAGER'S COMPENSATION THEREUNDER. The following amendment is
made to Section 4 of the Investment Management contract between Rydex Series
Trust (the "Trust") and PADCO Advisors, Inc. (the "Manager"), dated September
25, 1996, and as amended on November 2, 1993, and as further amended on December
13, 1994, and as further amended on March 8, 1996, and as further amended
September 25, 1996 (the "Contract"), and is hereby incorporated into and made a
part of the Contract:

Section 4 of the Contract is amended, effective March 16, 1998, to
read as follows:

"As compensation for the services to be rendered and charges and
expenses to be assumed and paid by the Manager as provided in Section
2, the Funds shall pay the Manager an annual fee based on the average
daily net value of the respective Funds in accordance with the
following schedule:

<TABLE>
<CAPTION>
<S> <C>
The Nova Fund 0.75% (75/100's of one percent)

The Rydex U.S. Government
Money Market Fund 0.50% (50/100's of one percent)

The Rydex Precious Metals Fund 0.75% (75/100's of one percent)

The Ursa Fund 0.90% (90/100's of one percent)

The Rydex U.S. Government
Bond Fund 0.50% (50/100's of one percent)

The Rydex OTC Fund 0.75% (75/100's of one percent)

The Juno Fund 0.90% (90/100's of one percent)

The Rydex Institutional
Money Market Fund 0.55% (55/100's of one percent)

The Rydex High Yield Fund 0.75% (75/100's of one percent)

<PAGE>

The Rydex Banking Fund 0.85% (85/100's of one percent)

The Rydex Basic Materials Fund 0.85% (85/100's of one percent)

The Rydex Biotechnology Fund 0.85% (85/100's of one percent)

The Rydex Consumer Products Fund 0.85% (85/100's of one percent)

The Rydex Electronics Fund 0.85% (85/100's of one percent)

The Rydex Energy Fund 0.85% (85/100's of one percent)

The Rydex Energy Services Fund 0.85% (85/100's of one percent)

The Rydex Financial Services Fund 0.85% (85/100's of one percent)

The Rydex Health Care Fund 0.85% (85/100's of one percent)

The Rydex Leisure Fund 0.85% (85/100's of one percent)

The Rydex Retailing Fund 0.85% (85/100's of one percent)

The Rydex Technology Fund 0.85% (85/100's of one percent)

The Rydex Telecommunications Fund 0.85% (85/100's of one percent)

The Rydex Transportation Fund 0.85% (85/100's of one percent)
</TABLE>

The fee will be paid monthly not later than the fifth (5th) business
day of the month following the month for which services have been
provided. In the event of termination of this Contract, the fee shall
be computed on the basis of the period ending on the last business day
on which this Contract is in effect subject to a pro rata adjustment
based on the number of days elapsed in the current month as a
percentage of the total number of days in such month, and such fee
shall be payable on the date of termination of this Contract with
respect to each such Fund. For purposes of calculating the Manager's
fee, the value of the net assets of each respective Fund shall be
determined in the same manner as such Fund uses to compute the value
of its net assets in connection with the determination of the net
asset value of its shares, all as set forth more fully in such Fund's
current Prospectus and Statement of Additional Information."

2
<PAGE>

In witness whereof, the parties hereto have caused these Amendments to be
executed in their names and on their behalf and through their duly-authorized
officers as of the 16th day of March 1998.

RYDEX SERIES TRUST

------------------------------
By: Albert P. Viragh, Jr.
Title: President

PADCO ADVISORS, INC.

------------------------------
By: Albert P. Viragh, Jr.
Title: President

<PAGE>

DISTRIBUTION AGREEMENT
RYDEX SERIES TRUST
ADVISOR CLASS SHARES

THIS DISTRIBUTION AND SHAREHOLDER SERVICES AGREEMENT is made as of March
16, 1998 (the "Agreement") by and between Rydex Series Trust, a Delaware
business trust (the "Trust"), and PADCO Financial Services, Inc. ("PADCO"), a
Maryland corporation.

WHEREAS, the Trust is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act"); and its units of beneficial
interest are registered with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933 (the "1933 Act"); and

WHEREAS, PADCO is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, and is a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD"); and

WHEREAS, the Trust desires to retain PADCO to: (i) distribute, or to retain
a Service Provider to distribute, the Advisor Class Shares (the "Shares") of
certain investment portfolios of the Trust (the "Funds"); (ii) provide, pursuant
to the Distribution and Shareholder Services Plan (the "Plan") as adopted by the
Trust under Rule 12b-1 under the 1940 Act, for the sale and distribution of the
Funds, and for such additional classes or series as the Trust may issue; and
(iii) provide, or to retain a Service Provider to provide, shareholder services
to shareholders of the Trust ("Clients") who purchase Shares of the Funds; and

WHEREAS PADCO, or such other service provider as PADCO shall determine, is
prepared to provide such services commencing on the date first written above;
and

WHEREAS, the Trust and PADCO wish to enter into an agreement with each
other with respect to the continuous offering of the Trust's Shares.

NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein, PADCO and the Trust hereto agree as follows:

1. DEFINITIONS

1.1 "Recipient" shall mean any broker or dealer, administrator, investment
adviser, institution, including bank trust departments, or other person or
entity that; (i) renders, or has rendered, assistance (whether direct
and/or administrative) in the distribution of the Funds or in shareholder
services to Clients of the Funds; (ii) has, or will, furnish PADCO with
such information as PADCO has requested, or may request, to answer such
questions as may arise regarding the sale of shares of the Funds; and
(iii) has been selected by PADCO to receive payments under the Plan.

1.2 "Qualified Holdings" shall mean, as to any Recipient, all shares of the
Fund owned beneficially or of record by (i) such Recipients or (ii) such
brokerage or other customers, investment advisory or other Clients, and/or
accounts as to which such Recipient is fiduciary, co-fiduciary, custodian
or co-custodian, but in no event shall any such shares be deemed owned by
more than one Recipient.

<PAGE>

2. DISTRIBUTION AND SHAREHOLDER SERVICES

2.1 The Trust hereby appoints, and PADCO hereby agrees, to act as the Trust's
agent to sell and arrange for the sale of the Shares covered by the
Registration Statement under the 1933 Act.

2.2 Pursuant to the Plan, the Trust shall compensate PADCO for distribution
services and expenses incurred in promoting the sale of the Funds' Shares
at a rate not to exceed .25% per annum of the Funds' average daily net
assets attributable to shares of the Funds that were sold by or through
Recipients. The Funds shall bear their own respective costs of
distribution, and compensation shall be made from the assets of the Funds,
the Shares of which have been sold. Such costs shall be calculated and
accrued daily and paid within fifteen (15) days of the end of each month.
PADCO shall use such payments received from the Funds to compensate
Recipients for distribution services and expenses of the type contemplated
herein and reviewed from time to time by the Trustees of the Trust, in
promoting the sale of the Funds' Shares, including, but not limited to
providing distribution assistance and administrative support services for
the Funds. PADCO may, in its discretion, retain a portion of such payments
to compensate itself for distribution services and distribution related
expenses such as the costs of preparation, printing, mailing or otherwise
disseminating sales literature, advertising, and prospectuses (other than
those furnished to current shareholders of the Funds), promotional and
incentive programs, and such other marketing expense that PADCO may incur.

2.3 Pursuant to the Plan, the Trust shall compensate PADCO for shareholder
service expenses incurred in servicing the Clients of the Funds, at a rate
not to exceed .25% per annum of the Funds' average daily net assets
attributable to Shares of the Funds. Compensation shall be made from the
assets of the Funds, the Shares of which have been sold. Such costs shall
be calculated and accrued daily and paid within fifteen (15) days of the
end of each month. PADCO shall use such payments received from the Funds
to compensate Recipients for shareholder services and shareholder servicing
expenses of the type contemplated herein and reviewed from time to time by
the Trustees of the Trust, which services may include: (i) maintaining
accounts relating to Clients that invest in Shares; (ii) arranging for bank
wires; (iii) responding to Client inquiries relating to the services
performed by Recipients; (iv) responding to inquiries from Clients
concerning their investment in Shares; (v) assisting Clients in changing
dividend options, account designations and addresses; (vi) providing
information periodically to Clients showing their position in Shares; (vii)
forwarding shareholder communications from the Funds such as proxies,
shareholder reports, annual reports, and dividend distribution and tax
notices to Clients; (viii) processing purchase exchange and redemption
requests from Clients and placing orders with the Funds or its service
providers; (ix) providing sub-accounting with respect to Shares
beneficially owned by Clients; and (x) processing dividend payments from
the Funds on behalf of Clients.

2.4 Pursuant to the Plan, PADCO shall make payments to any Recipient within
fifteen (15) days of the end of each fiscal quarter of the Trust, at an
annualized rate not to exceed .25% for (i) distribution expenses, as listed
in Section 2.2 above; and (ii) shareholder services, as listed in Section
2.3 above. Such annualized rate shall be calculated as a percentage of net
asset value of Qualified Holdings owned beneficially or of record by
Recipients or by Recipients' Clients during such quarter. PROVIDED,
HOWEVER, that no such payments shall be made to any Recipient for any such
quarter in which the Recipient's Qualified Holdings do not equal or exceed,
at the end of such quarter, the asset

2
<PAGE>

minimum ("Minimum Qualified Holdings") to be set from time to time by PADCO
with the approval of the Trustees of the Trust.

2.5 PADCO shall comply with all applicable laws, rules and regulations,
including, without limitations, all rules and regulations made or adopted
by the SEC or by any securities association registered under the 1934 Act.
PADCO shall maintain the required licenses and registrations for itself as
a broker or dealer, and for its registered representatives or other
associated persons, under the 1934 Act and applicable state securities
laws.

2.6 PADCO is not authorized by the Trust to give on behalf of the Trust any
information or to make any representations in connection with the sale of
Shares other than the information and representations contained in a
Registration Statement filed with the SEC under the 1933 Act and the 1940
Act, as such Registration Statement may be amended from time to time, or
contained in shareholder reports or other material that may be prepared by
or on behalf of the Trust for PADCO's use.

2.7 The Trust understands that PADCO is now, or may in the future be, the
distributor of the shares of several investment companies or series
(collectively, the "Investment Entities"), including Investment Entities
having investment objectives similar to those of the Trust. The Trust
further understands that investors and potential investors in the Trust may
invest in shares of such other Investment Entities. The Trust agrees that
PADCO's duties to such Investment Entities shall not be deemed in conflict
with its duties to the Trust under this Section 2.7.

2.8 PADCO shall not utilize any materials in connection with the sale or
offering of Shares except the Trust's current prospectus and statement of
additional information ("SAI") and such other materials as the Trust shall
provide or approve.

2.9 All activities by PADCO and its employees, as distributor of the Shares,
shall comply with all applicable laws, rules and regulations, including,
without limitation, all rules and regulations made or adopted by the SEC or
the National Association of Securities Dealers.

2.10 Whenever in its judgment such action is warranted by unusual market,
economic or political conditions or abnormal circumstances of any kind, the
Trust may decline to accept any orders for, or make any sales of, the
Shares until such time as the Trust deems it advisable to accept such
orders and to make such sales, and the Trust advises PADCO promptly of such
determination.

2.11 The Trust 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 Funds hereunder, and all expenses in connection with
the preparation and printing of the Funds' prospectuses and SAI for current
shareholders, for regulatory purposes and for distribution to current
shareholders.

2.12 The Trust agrees at its own expense to execute any and all documents and to
furnish any and all information and otherwise to take all actions that may
be reasonably necessary in connection with the qualification of the Shares
for sale in such states as PADCO may designate. The Trust shall notify
PADCO in writing of the states in which the Shares may be sold and shall
notify PADCO in writing of any changes to the information contained in the
previous notification.

3
<PAGE>

2.13 The Trust shall furnish from time to time, for use in connection with the
sale of the Shares, such information with respect to the Trust and the
Shares as PADCO may reasonably request. The Trust shall also furnish PADCO
upon request with: (a) audited annual statements and unaudited semi-annual
statements of a Fund's books and accounts prepared by the Trust,
(b) quarterly earnings statements prepared by the Trust, (c) a monthly
itemized list of the securities in the Funds, (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 financial condition of the Trust
as PADCO may reasonably request.

2.14 The Trust represents to PADCO that all Registration Statements and
prospectuses filed by the Trust with the SEC under the 1933 Act with
respect to the Shares have been prepared in conformity with the
requirements of the 1933 Act and the rules and regulations of the SEC
thereunder. As used in this Agreement, the term "Registration Statement"
shall mean any registration statement and any prospectus and any SAI
relating to the Trust filed with the SEC and any amendments or supplements
thereto at any time filed with the SEC. Except as to information included
in the Registration Statement in reliance upon information provided to the
Trust, PADCO or any affiliate of PADCO, expressly for use in the
Registration Statement, the Trust represents and warrants to PADCO that any
Registration Statement, when such Registration Statement becomes effective,
will contain statements required to be stated therein in conformity with
the 1933 Act and the rules and regulations of the SEC; that all statements
of fact contained in any such Registration Statement will be true and
correct when such Registration Statement becomes effective, and that no
Registration Statement 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 to a purchaser of the Shares. PADCO 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 Trust's counsel, be necessary or advisable. The Trust shall
promptly notify PADCO of any advice given to it by its counsel regarding
the necessity or advisability of amending or supplementing such
Registration Statement. The Trust shall not file any amendment to any
Registration Statement or supplement to any prospectus without giving PADCO
reasonable notice thereof in advance; provided, however, that nothing
contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendments to any Registration Statements and/or
supplements to any prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.

3. INDEMNIFICATION AND NOTIFICATION

3.1 The Trust agrees to indemnify and hold harmless PADCO, its officers,
directors, and employees, and any person who controls PADCO within the
meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, costs, expenses (including reasonable attorneys' fees)
losses, damages, charges, payments an liabilities of any sort or kind which
PADCO, its officers, directors, employees or any such controlling person
may incur under the 1933 Act, under any other statute, at common law or
otherwise, but only to the extent that such liability or expense incurred
by PADCO, its officers, directors, employees or any controlling person
resulting from such claims or demands arises out of the acquisition of
Shares by any person which is based upon: (i) any untrue statement, or
alleged untrue statement, of a material fact contained in the Trust's
Registration Statement, prospectus, SAI, or sales literature (including
amendments and supplements thereto), or

4
<PAGE>

(ii) any omission, or alleged omission, to state a material fact required
to be stated in the Trust's Registration Statement, prospectus, SAI or
sales literature (including amendments or supplements thereto), necessary
to make the statements therein not misleading.

Notwithstanding the foregoing, the Trust shall not be obligated to
indemnify any entity or person pursuant to this paragraph 3.1 against any
losses, claims, costs, charges, payments, damages, liabilities or expenses
(including attorneys' fees) of any sort or kind arising (i) out of the
acquisition of Shares by any person which is based upon any untrue
statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information furnished to the Trust by
PADCO or its affiliated persons for use in the Trust's Registration
Statement (including amendments or supplements thereto), prospectus, SAI or
sales literature; (ii) by reason of PADCO's willful misfeasance, bad faith
or negligence in the performance of PADCO's duties hereunder; (iii) by
reason of reckless disregard of PADCO's obligations or duties hereunder,
from reliance on information furnished to the Trust by PADCO or its
affiliates; or (iv) by reason of PADCO's refusal or failure to comply with
the terms or conditions of this Agreement.

3.2 PADCO agrees to indemnify and hold harmless the Trust, its several officers
and Trustees and each person, if any, who controls a Fund or Funds within
the meaning of Section 15 of the 1933 Act against any and all claims,
costs, expenses (including reasonable attorneys' fees), losses, damages,
charges, payments and liabilities of any sort or kind which the Trust, its
officers or Trustees, or any such controlling person may incur under the
1933 Act, under any other statute, at common law or otherwise, but only to
the extent that such liability or expense incurred by the Trust, its
officers or Trustees, or any controlling person resulting from such claims
or demands arose (i) out of the acquisition of any Shares by any person
which may be based upon any untrue statement, or alleged untrue statement,
of a material fact contained in the Trust's Registration Statement
(including amendments and supplements thereto), prospectus, SAI or sales
literature alleged omission, to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished or
confirmed in writing to the Trust by PADCO or its affiliated persons (as
defined in the 1940 Act); (ii) by reason of PADCO's willful misfeasance,
bad faith or negligence in performance of PADCO's duties or obligations
hereunder or by reason of reckless disregard of its duties or obligations
hereunder; (iii) from reliance on information furnished to the Trust by
PADCO or its affiliates; or (iv) from PADCO's refusal or failure to comply
with the terms or conditions of this Agreement.

3.3 In any case in which one party hereto (the "Indemnifying Party") may be
asked to indemnify or hold the other party hereto (the "Indemnified Party")
harmless, the Indemnified Party will notify the Indemnifying Party promptly
after identifying any situation which it believes presents or appears
likely to present a claim for indemnification (an "Indemnification Claim")
against the Indemnifying Party, although the failure to do so shall not
prevent recovery by the Indemnified Party, and shall keep the Indemnifying
Party advised with respect to all developments concerning such situation.
The Indemnifying Party shall have the option to defend the Indemnified
Party against any Indemnification Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects,
such defense shall be conducted by counsel chosen by the Indemnifying Party
and satisfactory to the Indemnified Party, whose approval shall not be
unreasonably withheld. In the event that the Indemnifying Party elects to
assume the defense of any Indemnification Claim and retains legal counsel,
the Indemnified Party shall bear the fees and expenses of any additional
legal counsel retained by it. The Indemnified Party will not confess any

5
<PAGE>

Indemnification Claim or make any compromise in any case in which the
Indemnifying Party will be asked to provide indemnification, except with
the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Section 3.3 shall survive the termination of this
Agreement.

In the event that the Indemnifying Party does not elect to assume the
defense of any such suit, or in case the Indemnified Party reasonably does
not approve of counsel chosen by the Indemnified Party, or in case there is
a conflict of interest between the Trust and PADCO, the Indemnifying Party
will reimburse the Indemnified Party, its officers, trustees, directors and
employees, or the controlling person or persons named as defendant or
defendants in such suit, for the reasonable fees and expenses of any
counsel retained by the Indemnified Party or such defendants. The
Indemnifying Party's indemnification agreement contained in this
Section 3.3 and the Indemnifying Party'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 the Indemnified
Party, its officers, directors, trustees or employees, or any controlling
persons, and shall survive the delivery of any Shares. This agreement of
indemnity will inure exclusively to the Indemnified Party's benefit, to the
benefit of its several officers, trustees, directors and employees, and
their respective estates and to the benefit of the controlling person(s)
and their successors. The Indemnifying Party agrees promptly to notify the
Indemnified Party of the commencement of any litigation or proceedings
against the Indemnifying Party or any of its officers, trustees or
directors in connection with the issue and sale of any Shares.

3.4 No Shares shall be offered by either PADCO or the Trust under any of the
provisions of this Agreement and no orders for the purchase or sale of
Shares hereunder shall be accepted by the Trust if and so long as
effectiveness of the Registration Statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
1933 Act, or if and so long as a current prospectus as required by
Section 5(b)(2) of the 1933 Act is not on file with the SEC; provided,
however, that nothing contained in this Section 3.4 shall in any way
restrict or have any application to or bearing upon the Trust's obligation
to redeem Shares tendered for redemption by any shareholder in accordance
with the provisions of the Trust's Registration Statement, Declaration of
Trust, or bylaws.

3.5 The Trust agrees to advise PADCO as soon as reasonably practical by a
notice in writing delivered to PADCO:

(i) in the event of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement, prospectus or SAI then in
effect or the initiation by service of process on the Trust of any
proceeding for that purpose;

(ii) of any happening of any event that makes untrue any statement of a
material fact made in the Registration Statement, prospectus or SAI then in
effect or that requires the making of a change in such Registration
Statement, prospectus or SAI in order to make the statements therein not
misleading, and

(iii) of all actions of the SEC with respect to any amendments to any
Registration Statement, prospectus or SAI which may from time to time be
filed with the SEC.

6
<PAGE>

For purposes of this section, informal requests by or acts of the Staff of
the SEC shall not be deemed actions of the SEC.

4. TERM

4.1 This Agreement shall become effective on the date first written above and,
unless sooner terminated as provided herein, shall continue for an initial
two-year term and thereafter shall be renewed for successive one-year terms
in accordance with the requirements of the 1940 Act. This Agreement is
terminable without penalty, on at least sixty days' written notice, by
either party. This Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act and the rules
thereunder).

4.2 In the event a termination notice is given by the Trust, all reasonable
expenses associated with movement of records and materials and conversion
thereof will be borne by the Trust.

5. LIMITATION OF LIABILITY

5.1 PADCO shall at all times act in good faith and agrees to use its best
efforts, within commercially reasonable limits, to ensure the accuracy of
all services performed under this Agreement. PADCO shall not be liable to
the Trust for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the performance of its obligations
and duties under this Agreement, except a loss resulting from: (i) PADCO's
willful misfeasance, bad faith or negligence in the performance of such
obligations and duties, or by reason of its reckless disregard thereof;
(ii) reliance on information furnished to the Trust by PADCO or its
affiliates; or (iii) PADCO's refusal or failure to comply with the terms
or conditions of this Agreement.

5.2 The Trust shall not be liable to PADCO for any error of judgment or mistake
of law or for any loss suffered by PADCO, except a loss resulting from the
Trust's willful misfeasance, bad faith or negligence in the performance of
its duties and obligations hereunder, or by reason of reckless disregard
thereof.

5.3 Each party shall have the duty to mitigate damages for which the other
party may become responsible.

6. EXCLUSION OF WARRANTIES

THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, PADCO DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, MADE TO THE TRUST, THE FUNDS OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE
(IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY
SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS
AGREEMENT. PADCO DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT
EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT.

7
<PAGE>

7. MODIFICATIONS AND WAIVERS

No change, termination, modification, or waiver of any term or condition of
the Agreement shall be valid unless made in writing signed by each party.
No such writing shall be effective as against PADCO unless said writing is
executed by an officer of PADCO. A party's waiver of a breach of any term
or condition in the Agreement shall not be deemed a waiver of any
subsequent breach of the same or another term or condition.

8. NO PRESUMPTION AGAINST DRAFTER

PADCO and the Trust have jointly participated in the negotiation and
drafting of this Agreement. The Agreement shall be construed as if drafted
jointly by the Trust and PADCO, and no presumptions arise favoring any
party by virtue of the authorship of any provision of this Agreement.

9. PUBLICITY

Neither PADCO nor the Trust shall release or publish news releases, public
announcements, advertising or other publicity relating to this Agreement or
to the transactions contemplated by it without prior review and written
approval of the other party; provided, however, that either party may make
such disclosures as are required by legal, accounting or regulatory
requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.

10. SEVERABILITY

The parties intend every provision of this Agreement to be severable. If a
court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not
affect the validity of the remainder of this Agreement. In such case, the
parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality
of this paragraph, if a court determines that any remedy stated in this
Agreement has failed of its essential purpose, then all other provisions of
this Agreement, including the limitations on liability, shall remain fully
effective.

11. FORCE MAJEURE

11.1 No party shall be liable for any default or delay in the performance of its
obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature
or other acts of God; (ii) any outbreak or escalation of hostilities, war,
riots or civil disorders in any country, (iii) any act or omission of the
other party or any governmental authority; (iv) any labor disputes (whether
or not the employees' demands are reasonable or within the party's power to
satisfy); or (v) nonperformance by a third party or any similar cause
beyond the reasonable control of such party, including without limitation,
failures or fluctuations in telecommunications or other equipment. In any
such event, the non-performing party shall be excused from any further
performance and observance of the obligations so affected only for so long
as such circumstances prevail and such party continues to use commercially
reasonable efforts to recommence performance or observance as soon as
practicable.

8
<PAGE>

11.2 Notwithstanding any other provision in this Agreement, in the event of
equipment failures or the occurrence of events beyond PADCO's control which
render its performance under this Agreement impossible, PADCO shall at no
additional expense to the Trust take reasonable steps to minimize service
interruptions. PADCO shall develop and maintain a plan for recovery from
equipment failures which may include contractual arrangements with
appropriate third parties making reasonable provisions for emergency use of
electronic data processing equipment.

12. YEAR 2000

In addition to any other express or implied warranties made in this
Agreement, PADCO hereby represents and warrants that each and every
commercial and noncommercial hardware, software, firmware, mechanical, or
electrical product ("Product(s)") utilized, created, assembled,
manufactured, developed or modified in connection with any services offered
or provided under this Agreement shall, at no additional cost to the Trust,
be able to store and process accurately any and all date and date-related
data (including, but not limited to, calculating, comparing, storing,
processing, recording, valuing, recognizing, validating, presenting, and
sequencing) during the year 2000 and thereafter, in the manner performed
prior thereto, not withstanding the year 2000. The Trust may, at no
additional cost, require PADCO to demonstrate compliance and/or compliance
techniques and test procedures it intends to follow, or evidence of
compliance by Recipients, consistent with the date-related representations,
warranties, and obligation contained herein.

13. MISCELLANEOUS

Any notice or other instrument authorized or required by this Agreement to
be given in writing to the Trust or PADCO shall be sufficiently given if
addressed to the party and received by it at its office set forth below or
at such other place as it may from time to time designate in writing.

To the Trust:

Rydex Series Trust
6116 Executive Boulevard
Suite 400
Rockville, MD 20852
Attn:____________________

To PADCO:

PADCO Financial Services, Inc.
6116 Executive Boulevard
Suite 400
Rockville, MD 20852
Attn:____________________

14. GOVERNING LAW/VENUE. The laws of the State of Maryland, excluding the laws
on conflicts of laws, and the applicable provision of the 1940 Act shall
govern the interpretation, validity, and enforcement of this Agreement. To
the extent the provisions of Maryland law or the provisions hereof conflict
with the 1940 Act, the 1940 Act shall control. All actions arising from or
related to

9
<PAGE>

this Agreement shall be brought in the state and federal courts within the
State of Maryland, and PADCO and the Trust hereby submit themselves to the
exclusive jurisdiction of those courts.

15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and which
collectively shall be deemed to constitute only one instrument.

16. CAPTIONS. The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.

17. SUCCESSORS. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and is not
intended to confer upon any other person any rights or remedies hereunder.

18. ARBITRATION. Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered
by the American Arbitration Association in accordance with its applicable
rules, except that the Federal Rules of Evidence and the Federal Rules of
Civil Procedure with respect to the discovery process shall apply. The
parties hereby agree that judgment upon the aware rendered by the
arbitrator may be entered in any court having jurisdiction.

The parties acknowledge and agree that the performance of the obligations
under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law
provisions in this Agreement, the parties agree that the Federal
Arbitration Act shall govern and control with respect to the provision of
this Article.

19. OBLIGATIONS OF THE TRUST

The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them or any shareholder of the Trust individually or to impose any
liability on any of them or any shareholder of the Trust personally, but
shall bind only the assets and property of the Trust as provided in the
Trust's Declaration of Trust.

20. ENTIRE AGREEMENT

This Agreement, including all Schedules hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous proposals, agreements, contracts,
representations, and understandings, whether written or oral, between the
parties with respect to the subject matter hereof.

10
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

RYDEX SERIES TRUST

By: ____________________________________

Name: __________________________________

Title: _________________________________

PADCO FINANCIAL SERVICES, INC.

By: ____________________________________

Name: __________________________________

Title: _________________________________

<PAGE>

AMENDMENT TO

SERVICE AGREEMENT

BETWEEN

RYDEX SERIES TRUST

AND

PADCO SERVICES COMPANY, INC.

AMENDMENT TO INCLUDE THE RYDEX SECTOR FUNDS UNDER THIS AGREEMENT. The following
Amendment is made to Section 4 of the Service Agreement between the Trust and
the Servicer, and is hereby incorporated into and made a part of the Service
Agreement:

Section 4 of the Service Agreement is amended, effective March 16,
1998, to read as follows:

"As consideration for the services provided hereunder, the Trust will
pay the Servicer a fee on the last day of each month in which this
Agreement is in effect, at the following annual rates based on the
average daily net assets (the "Assets") of each of the Trust's series
for such month:

THE NOVA FUND

0.25% of Assets

THE RYDEX U.S. GOVERNMENT MONEY MARKET FUND

0.20% of Assets

THE RYDEX PRECIOUS METALS FUND

0.20% of Assets

THE URSA FUND

0.25% of Assets

THE RYDEX U.S. GOVERNMENT BOND FUND

0.20% of Assets

THE RYDEX OTC FUND

<PAGE>

0.20% of Assets

THE JUNO FUND

0.25% of Assets

THE RYDEX INSTITUTIONAL MONEY MARKET FUND

0.20% of Assets

THE RYDEX HIGH YIELD FUND

0.20% of Assets

THE RYDEX BANKING FUND

0.25% of Assets

THE RYDEX BASIC MATERIALS FUND

0.25% of Assets

THE RYDEX BIOTECHNOLOGY FUND

0.25% of Assets

THE RYDEX CONSUMER PRODUCTS FUND

0.25% of Assets

THE RYDEX ELECTRONICS FUND

0.25% of Assets

THE RYDEX ENERGY FUND

0.25% of Assets

THE RYDEX ENERGY SERVICE FUND

0.25% of Assets

THE RYDEX FINANCIAL SERVICES FUND

0.25% of Assets

2
<PAGE>

THE RYDEX HEALTH CARE FUND

0.25% of Assets

THE RYDEX LEISURE FUND

0.25% of Assets

THE RYDEX RETAILING FUND

0.25% of Assets

THE RYDEX TECHNOLOGY FUND

0.25% of Assets

THE RYDEX TELECOMMUNICATIONS FUND

0.25% of Assets

THE RYDEX TRANSPORTATION FUND

0.25% of Assets

In the event that this Agreement commences on a date other than
on the beginning of any calendar month, or if this Agreement
terminates on a date other than the end of any calendar month,
the fees payable hereunder by the Trust shall be proportionately
reduced according to the number of days during such month that
services were not rendered hereunder by the Servicer."

3
<PAGE>

In witness whereof, the parties hereto have caused this Amendment to be
executed in their names and on their behalf and through their duly-authorized
officers as of the 16th day of March 1998.

RYDEX SERIES TRUST

-------------------------------
By: Albert P. Viragh, Jr.
Title: President

PADCO SERVICE COMPANY, INC.

-------------------------------
By: Albert P. Viragh, Jr.
Title: President

<PAGE>

EXHIBIT (j)

INDEPENDENT AUDITORS' CONSENT

Rydex Series Trust:

We consent to the incorporation by reference in Post-Effective Amendment No. 31
to Registration Statement No. 33-59692 of our report dated May 22, 1998
appearing in the Rydex Series Trust's Annual Report to Shareholders - March 31,
1998 and to the references to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Princeton, New Jersey
May 26, 1998

<PAGE>
<ARTICLE> 6
<CIK> 0000899148
<NAME> RYDEX SERIES TRUST
<SERIES>
<NUMBER> 1
<NAME> NOVA
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 899,938,392
<INVESTMENTS-AT-VALUE> 912,832,907
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</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000899148
<NAME> RYDEX SERIES TRUST
<SERIES>
<NUMBER> 2
<NAME> U.S. GOVERNMENT MONEY MARKET FUND
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
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</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000899148
<NAME> RYDEX SERIES TRUST
<SERIES>
<NUMBER> 3
<NAME> RYDEX PRECIOUS METELS FUNDS
<MULTIPLIER> 1

<S> <C>
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</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000899148
<NAME> RYDEX SERIES TRUST
<SERIES>
<NUMBER> 4
<NAME> RYDEX U.S. GOVERNMENT BOND FUND
<MULTIPLIER> 1

<S> <C>
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</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000899148
<NAME> RYDEX SERIES TRUST
<SERIES>
<NUMBER> 5
<NAME> URSA FUND
<MULTIPLIER> 1

<S> <C>
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</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000899148
<NAME> RYDEX SERIES TRUST
<SERIES>
<NUMBER> 6
<NAME> RYDEX OTC FUND
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000899148
<NAME> RYDEX SERIES TRUST
<SERIES>
<NUMBER> 7
<NAME> JUNO FUND
<MULTIPLIER> 1

<S> <C>
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</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000899148
<NAME> RYDEX SERIES TRUST
<SERIES>
<NUMBER> 9
<NAME> RYDEX HIGH YIELD FUND
<MULTIPLIER> 1

<S> <C>
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</TABLE>