<PAGE>
PROSPECTUS -- ADVISOR CLASS
<TABLE>
<C> <S>
1 INTRODUCTION
---
2 BANKING FUND
---
4 BASIC MATERIALS FUND
---
6 BIOTECHNOLOGY FUND
---
8 CONSUMER PRODUCTS FUND
---
10 ELECTRONICS FUND
---
12 ENERGY FUND
---
14 ENERGY SERVICES FUND
---
16 FINANCIAL SERVICES FUND
---
18 HEALTH CARE FUND
---
20 LEISURE FUND
---
22 RETAILING FUND
---
24 TECHNOLOGY FUND
---
26 TELECOMMUNICATIONS FUND
---
28 TRANSPORTATION FUND
---
30 U.S. GOVERNMENT MONEY MARKET FUND
---
32 MORE INFORMATION ABOUT RISK
---
34 SHAREHOLDER INFORMATION
---
40 MANAGEMENT
---
41 DIVIDENDS, DISTRIBUTIONS AND TAXES
---
43 FINANCIAL HIGHLIGHTS
---
BC ADDITIONAL INFORMATION
---
</TABLE>
AUGUST 1, 1999
RYDEX SERIES TRUST
SECTOR FUNDS
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-two separate investment portfolios (the "Rydex Funds"), fifteen of which
are described in this Prospectus (the "Funds"). Advisor Class Shares of the
Funds are sold principally through broker-dealers and other financial
institutions whose clients 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.
<PAGE>
ICON LEGEND
Fund Objective
[ICON]
The fund's particular investment goal.
Portfolio Investments
[ICON]
The primary types of securities in which the fund invests.
Risk Considerations
[ICON]
The major risk factors associated with the fund.
Fund Performance and Fee Information
[ICON]
The overall costs incurred by an investor in the fund.
Financial Highlights
[ICON]
A table showing the fund's financial performance.
ii
<PAGE>
PROSPECTUS 1
--------
INTRODUCTION
THE SECTOR FUNDS' INVESTMENT OBJECTIVE
Each Sector Fund seeks capital appreciation by investing in companies which
operate in a specific economic sector.
THE ADVISOR'S INVESTMENT METHODOLOGY
In managing the Sector Funds, PADCO Advisors, Inc.'s (the "Advisor")
investment team employs a quantitative model that considers a number of factors.
To develop a liquid portfolio of stocks that adequately represents a particular
market sector, the Advisor applies filters to the broad universe of stocks of
issuers that are "principally engaged" in business activities in each industry
sector. Specifically, the Advisor's investment process screens stocks primarily
based on liquidity, market capitalization, and correlation relative to the
entire industry sector. The Advisor also may consider other factors.
The Advisor monitors the Sector Funds' portfolios on an ongoing basis, and
adds or deletes stocks from the portfolios as needed.
After constructing a portfolio for each Sector Fund, the Advisor may utilize
futures contracts and options to leverage a Fund's exposure to the relevant
business sector. The use of leverage will result in each Fund being exposed to
its relevant business sector with more than 100% of its total assets.
Each business sector typically consists of numerous industries. For purposes
of the Advisor's investment methodology and the policies for each Fund, a
company is considered to be "principally engaged" in a designated business
activity in a particular economic sector if at least 50% of its assets, gross
income, or net profits are committed to, or derived from, that activity. If a
question exists as to whether a company meets these standards, the Advisor will
determine whether the company's primary business is within the business sector
designated for investment by that Fund.
RISKS OF INVESTING IN THE FUNDS
Your investment in the Funds is subject to certain risks. Some of the risks
that are common to each of the Funds (except the U.S. Government Money Market
Fund) are discussed below.
- NON-DIVERSIFICATION RISK -- Since each Fund is non-diversified, each Fund
may invest in the securities of a relatively few number of issuers. To the
extent that a Fund invests a significant percentage of its assets in a
limited number of issuers, the Fund is subject to the risks of investing
in those few issuers, and may be more susceptible to a single adverse
economic or regulatory occurrence.
- CONCENTRATION RISK -- Since the Funds invest in the securities of a
limited number of issuers conducting business in a specific industry, it
is subject to the risk that those issuers (or that industry) will perform
poorly, and the Fund will be negatively impacted by that poor performance.
THE INVESTMENT OBJECTIVE OF EACH SECTOR FUND IS NON-FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL. THERE CAN BE NO ASSURANCE THAT A FUND WILL
ACHIEVE ITS INVESTMENT OBJECTIVE.
THE FUNDS:
- Are not federally insured
- Are not guaranteed by any government agency
- Are not bank deposits
- Are not guaranteed to achieve their objectives
<PAGE>
- ------
2 PROSPECTUS
FUND INFORMATION -- BANKING FUND
FUND OBJECTIVE
[ICON]
The Banking Fund seeks to provide capital appreciation by investing in
companies that are involved in the banking sector, including commercial banks
(and their holding companies) and savings and loan institutions ("Banking
Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Banking Companies that are traded in the United States. Banking
Companies are engaged in accepting deposits and making commercial and
principally non-mortgage consumer loans and include state chartered banks,
savings and loan institutions, and banks that are members of the Federal Reserve
System. The Fund may also engage in futures and options transactions, purchase
ADRs and U.S. Government securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Banking Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- BANKING SECTOR CONCENTRATION RISK -- The risk that the securities of
Banking Companies that the Fund purchases will underperform the market as
a whole. To the extent that the Fund's investments are concentrated in
Banking Companies, the Fund is subject to legislative or regulatory
changes, adverse market conditions and/or increased competition affecting
Banking Companies. The prices of the securities of Banking Companies may
fluctuate widely due to the broadening of regional and national interstate
banking powers, the reduction in the number of publicly-traded Banking
Companies, and general economic conditions which could create exposure to
credit losses.
<PAGE>
PROSPECTUS 3
--------
FUND PERFORMANCE AND FEE INFORMATION
The Banking Fund commenced operations on April 1, 1998, and therefore does
not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Banking Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses .98%
---------
Total Annual Fund Operating Expenses 2.08%
</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
Advisor Class Shares of the Banking 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>
$211 $652 $1,119 $2,410
</TABLE>
<PAGE>
- ------
4 PROSPECTUS
FUND INFORMATION -- BASIC MATERIALS FUND
FUND OBJECTIVE
[ICON]
The Basic Materials Fund seeks capital appreciation by investing in
companies engaged in the mining, manufacture, or sale of basic
materials, such as lumber, steel, iron, aluminum, concrete, chemicals and other
basic building and manufacturing materials ("Basic Materials Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Basic Materials Companies that are traded in the United States.
Basic Materials Companies are engaged in the manufacture, mining, processing, or
distribution of raw materials and intermediate goods used in the industrial
sector, and may be involved in the production of metals, textiles, and wood
products, including equipment suppliers and railroads. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Basic Materials Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- BASIC MATERIALS SECTOR CONCENTRATION RISK -- The risk that the securities
of issuers in the basic materials sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Basic Materials Companies
may fluctuate widely due to the level and volatility of commodity prices,
the exchange value of the dollar, import controls, worldwide competition,
liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control devices.
<PAGE>
PROSPECTUS 5
--------
FUND PERFORMANCE AND FEE INFORMATION
The Basic Materials Fund commenced operations on April 1, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Basic Materials Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses .85%
---------
Total Annual Fund Operating Expenses 1.95%
</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
Advisor Class Shares of the Basic Materials 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>
$198 $612 $1,052 $2,275
</TABLE>
<PAGE>
- ------
6 PROSPECTUS
FUND INFORMATION -- BIOTECHNOLOGY FUND
FUND OBJECTIVE
[ICON]
The Biotechnology Fund seeks capital appreciation by investing in
companies that are involved in the biotechnology industry, including
companies involved in research and development, genetic or other biological
engineering, and in the design, manufacture, or sale of related biotechnology
products or services ("Biotechnology Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Biotechnology Companies that are traded in the United States.
Biotechnology Companies are engaged in the research, development, and
manufacture of various biotechnological products, services, and processes;
manufacture and/or distribute biotechnological and biomedical products,
including devices and instruments; provide or benefit significantly from
scientific and technological advances in biotechnology; or provide processes or
services instead of, or in addition to, products. The Fund may also engage in
futures and options transactions, purchase ADRs and U.S. Government securities,
and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Biotechnology Fund is subject to a number of risks that will affect
the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- BIOTECHNOLOGY SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the biotechnology sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Biotechnology Companies
may fluctuate widely due to patent considerations, intense competition,
rapid technological change and obsolescence, and regulatory requirements
of the Food and Drug Administration, the Environmental Protection Agency,
state and local governments, and foreign regulatory authorities.
- SMALL ISSUER RISK -- Many Biotechnology Companies are relatively small and
have thinly traded equity securities, may not yet offer products or offer
a single product, and may have persistent losses during a new product's
transition from development to production or erratic revenue patterns.
<PAGE>
PROSPECTUS 7
--------
FUND PERFORMANCE AND FEE INFORMATION
The Biotechnology Fund commenced operations on April 1, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Biotechnology Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses 1.06%
---------
Total Annual Fund Operating Expenses 2.16%
</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
Advisor Class Shares of the Biotechnology 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>
$219 $676 $1,159 $2,493
</TABLE>
<PAGE>
- ------
8 PROSPECTUS
FUND INFORMATION -- CONSUMER PRODUCTS FUND
FUND OBJECTIVE
[ICON]
The Consumer Products Fund seeks capital appreciation by investing in
companies engaged in manufacturing finished goods and services both domestically
and internationally ("Consumer Products Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Consumer Products Companies that are traded in the United States.
Consumer Products Companies include companies that manufacture, wholesale or
retail durable goods such as major appliances and personal computers, or that
retail non-durable goods such as beverages, tobacco, health care products,
household and personal care products, apparel, and entertainment products (E.G.,
books, magazines, TV, cable, movies, music, gaming, sports), as well as
companies that provide consumer products and services such as lodging, child
care, convenience stores, and car rentals. The Fund may also engage in futures
and options transactions, purchase ADRs and U.S. Government securities, and
enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Consumer Products Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- CONSUMER PRODUCTS SECTOR CONCENTRATION RISK -- The risk that the
securities of issuers in the consumer products sector that the Fund
purchases will underperform the market as a whole. To the extent that the
Fund's investments are concentrated in issuers conducting business in the
same economic sector, the Fund is subject to legislative or regulatory
changes, adverse market conditions and/or increased competition affecting
that economic sector. The performance of Consumer Products Companies has
historically been closely tied to the performance of the overall economy,
and is also affected by interest rates, competition, consumer confidence
and relative levels of disposable household income and seasonal consumer
spending. Changes in demographics and consumer tastes can also affect the
demand for, and success of, consumer products in the marketplace.
<PAGE>
PROSPECTUS 9
--------
FUND PERFORMANCE AND FEE INFORMATION
The Consumer Products Fund commenced operations on July 6, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Consumer Products Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses .94%
---------
Total Annual Fund Operating Expenses 2.04%
</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
Advisor Class Shares of the Consumer Products 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>
$207 $640 $1,098 $2,369
</TABLE>
<PAGE>
- ------
10 PROSPECTUS
FUND INFORMATION -- ELECTRONICS FUND
FUND OBJECTIVE
[ICON]
The Electronics Fund seeks capital appreciation by investing in
companies that are involved in the electronics sector, including
semiconductor manufacturers and distributors, and makers and vendors of other
electronic components and devices ("Electronics Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Electronics Companies that are traded in the United States.
Electronics Companies include companies involved in the manufacture and
development of semiconductors, connectors, printed circuit boards and other
components; equipment vendors to electronic component manufacturers; electronic
component distributors; electronic instruments and electronic systems vendors;
and also include companies involved in all aspects of the electronics business
and in new technologies or specialty areas such as defense electronics, advanced
design and manufacturing technologies, or lasers. The Fund may also engage in
futures and options transactions, purchase ADRs and U.S. Government securities,
and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Electronics Fund is subject to a number of risks that will affect
the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- ELECTRONICS SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the electronics sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Electronics Companies may
fluctuate widely due to risks of rapid obsolescence of products, intense
competition, the economic performance of their customers, high technology
and research costs (especially in light of decreased defense spending by
the U.S. Government), and may face competition from subsidized foreign
competitors with lower production costs.
- SMALL ISSUER RISK -- Many Electronics Companies are relatively small and
have thinly traded securities, may offer only one or a limited number of
rapidly obsolescing products, and may have persistent losses during a new
product's transition from development to production.
<PAGE>
PROSPECTUS 11
--------
FUND PERFORMANCE AND FEE INFORMATION
The Electronics Fund commenced operations on April 1, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Electronics Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses .94%
---------
Total Annual Fund Operating Expenses 2.04%
</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
Advisor Class Shares of the Electronics 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>
$207 $640 $1,098 $2,369
</TABLE>
<PAGE>
- ------
12 PROSPECTUS
FUND INFORMATION -- ENERGY FUND
FUND OBJECTIVE
[ICON]
The Energy Fund seeks capital appreciation by investing in companies
involved in the energy field, including the exploration, production, and
development of oil, gas, coal and alternative sources of energy ("Energy
Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Energy Companies that are traded in the United States. Energy
Companies are involved in all aspects of the energy industry, including the
conventional areas of oil, gas, electricity, and coal, and alternative sources
of energy such as nuclear, geothermal, oil shale, and solar power, and include
companies that produce, transmit, market, distribute or measure energy;
companies involved in providing products and services to companies in the energy
field; and companies involved in the exploration of new sources of energy,
conservation, and energy-related pollution control. The Fund may also engage in
futures and options transactions, purchase ADRs and U.S. Government securities,
and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Energy Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- ENERGY SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the energy sector that the Fund purchases will underperform the
market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector.
The prices of the securities of Energy Companies may fluctuate widely due
to changes in value and dividend yield, which depend largely on the price
and supply of energy fuels, international political events relating to oil
producing countries, international politics, energy conservation, the
success of exploration projects, and tax and other governmental regulatory
policies.
<PAGE>
PROSPECTUS 13
--------
FUND PERFORMANCE AND FEE INFORMATION
The Energy Fund commenced operations on April 21, 1998, and therefore does
not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Energy Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses .88%
---------
Total Annual Fund Operating Expenses 1.98%
</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
Advisor Class Shares of the Energy 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>
$201 $621 $1,068 $2,306
</TABLE>
<PAGE>
- ------
14 PROSPECTUS
FUND INFORMATION -- ENERGY SERVICES FUND
FUND OBJECTIVE
[ICON]
The Energy Services Fund seeks capital appreciation by investing in
companies that are involved in the energy services field, including
those that provide services and equipment in the areas of oil, coal, and gas
exploration and production ("Energy Services Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Energy Services Companies that are traded in the United States.
Energy Services Companies are engaged in one or more businesses in the energy
service field, including those that provide services and equipment to companies
engaged in the production, refinement or distribution of oil, gas, electricity,
and coal; companies involved with the production and development of newer
sources of energy such as nuclear, geothermal, oil shale, and solar power;
companies involved with onshore or offshore drilling; companies involved in
production and well maintenance; companies involved in exploration engineering,
data and technology; companies involved in energy transport; and companies
involved in equipment and plant design or construction. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Energy Services Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- ENERGY SERVICES SECTOR CONCENTRATION RISK -- The risk that the securities
of issuers in the energy services sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Energy Services Companies
may fluctuate widely due to the supply and demand both for their specific
products or services and for energy products in general, the price of oil
and gas, exploration and production spending, governmental regulation and
environmental issues, and world events and economic conditions generally
affecting energy supply companies.
<PAGE>
PROSPECTUS 15
--------
FUND PERFORMANCE AND FEE INFORMATION
The Energy Services Fund commenced operations on April 1, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Energy Services Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses .94%
---------
Total Annual Fund Operating Expenses 2.04%
</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
Advisor Class Shares of the Energy Services 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>
$207 $640 $1,098 $2,369
</TABLE>
<PAGE>
- ------
16 PROSPECTUS
FUND INFORMATION -- FINANCIAL SERVICES FUND
FUND OBJECTIVE
[ICON]
The Financial Services Fund seeks capital appreciation by investing in
companies that are involved in the financial services sector. ("Financial
Services Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Financial Services Companies that are traded in the United States.
Financial Service Companies include commercial banks, savings and loan
associations, insurance companies and brokerage companies. The Fund may also
engage in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements. Under SEC regulations, the
Fund may not invest more than 5% of its total assets in the equity securities of
any company that derives more than 15% of its revenues from brokerage or
investment management activities.
RISK CONSIDERATIONS
[ICON]
The Financial Services Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- FINANCIAL SERVICES SECTOR CONCENTRATION RISK -- The risk that the
securities of issuers in the financial services sector that the Fund
purchases will underperform the market as a whole. To the extent that the
Fund's investments are concentrated in issuers conducting business in the
same economic sector, the Fund is subject to legislative or regulatory
changes, adverse market conditions and/or increased competition affecting
that economic sector. Financial Services Companies are subject to
extensive governmental regulation, which may limit both the amounts and
types of loans and other financial commitments they can make, and the
rates and fees they can charge. Profitability is largely dependent on the
availability and cost of capital, and can fluctuate significantly when
interest rates change. Credit losses resulting from financial difficulties
of borrowers also can negatively impact the sector.
<PAGE>
PROSPECTUS 17
--------
FUND PERFORMANCE AND FEE INFORMATION
The Financial Services Fund commenced operations on April 2, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Financial Services Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses 1.02%
---------
Total Annual Fund Operating Expenses 2.12%
</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
Advisor Class Shares of the Financial Services 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>
$215 $664 $1,139 $2,452
</TABLE>
<PAGE>
- ------
18 PROSPECTUS
FUND INFORMATION -- HEALTH CARE FUND
FUND OBJECTIVE
[ICON]
The Health Care Fund seeks capital appreciation by investing in
companies that are involved in the health care industry ("Health Care
Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Health Care Companies that are traded in the United States. Health
Care Companies include pharmaceutical companies, companies involved in research
and development of pharmaceutical products and services, companies involved in
the operation of health care facilities, and other companies involved in the
design, manufacture, or sale of health care-related products or services. The
Fund may also engage in futures and options transactions, purchase ADRs and U.S.
Government securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Health Care Fund is subject to a number of risks that will affect
the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- HEALTH CARE SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the health care sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Health Care Companies may
fluctuate widely due to government regulation and approval of their
products and services, which can have a significant effect on their price
and availability. Furthermore, the types of products or services produced
or provided by these companies may quickly become obsolete. Moreover,
liability for products that are later alleged to be harmful or unsafe may
be substantial, and may have a significant impact on a Health Care
Company's market value and/or share price.
<PAGE>
PROSPECTUS 19
--------
FUND PERFORMANCE AND FEE INFORMATION
The Health Care Fund commenced operations on April 17, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Health Care Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses 1.13%
---------
Total Annual Fund Operating Expenses 2.23%
</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
Advisor Class Shares of the Health Care 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>
$226 $697 $1,195 $2,565
</TABLE>
<PAGE>
- ------
20 PROSPECTUS
FUND INFORMATION -- LEISURE FUND
FUND OBJECTIVE
[ICON]
The Leisure Fund seeks capital appreciation by investing in companies
engaged in leisure and entertainment businesses. ("Leisure Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Leisure Companies that are traded in the United States. Leisure
Companies are engaged in the design, production, or distribution of goods or
services in the leisure industries. Leisure Companies include hotels and
resorts, casinos, radio and television broadcasting and advertising, motion
picture production, toys and sporting goods manufacture, musical recordings and
instruments, alcohol and tobacco, and publishing. The Fund may also engage in
futures and options transactions, purchase ADRs and U.S. Government securities,
and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Leisure Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- LEISURE SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the leisure sector that the Fund purchases will underperform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector.
Securities of Leisure Companies may be considered speculative, and
generally exhibit greater volatility than the overall market. The prices
of the securities of Leisure Companies may fluctuate widely due to
unpredictable earnings, due in part to changing consumer tastes and
intense competition, strong reaction to technological developments and to
the threat of increased government regulation, particularly in the gaming
arena.
<PAGE>
PROSPECTUS 21
--------
FUND PERFORMANCE AND FEE INFORMATION
The Leisure Fund commenced operations on April 1, 1998, and therefore does
not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Leisure Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses 1.12%
---------
Total Annual Fund Operating Expenses 2.22%
</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
Advisor Class Shares of the Leisure 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>
$225 $694 $1,190 $2,554
</TABLE>
<PAGE>
- ------
22 PROSPECTUS
FUND INFORMATION -- RETAILING FUND
FUND OBJECTIVE
[ICON]
The Retailing Fund seeks capital appreciation by investing in
companies engaged in merchandising finished goods and services,
including department stores, restaurant franchises, mail order operations and
other companies involved in selling products to consumers ("Retailing
Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Retailing Companies that are traded in the United States. Retailing
Companies include drug and department stores; suppliers of goods and services
for homes, home improvements and yards; clothing, jewelry, electronics and
computer retailers; franchise restaurants; motor vehicle and marine dealers;
warehouse membership clubs; mail order operations; and companies involved in
alternative selling methods. The Fund may also engage in futures and options
transactions, purchase ADRs and U.S. Government securities, and enter into
repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Retailing Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- RETAILING SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the retailing sector that the Fund purchases will underperform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector.
The prices of the securities of Retailing Companies may fluctuate widely
due to consumer spending, which is affected by general economic conditions
and consumer confidence levels. The retailing industry is highly
competitive, and a Retailing Company's success is often tied to its
ability to anticipate and react to changing consumer tastes. Many
Retailing Companies are thinly capitalized, and are dependent upon a
relatively few number of business days to achieve their overall results.
<PAGE>
PROSPECTUS 23
--------
FUND PERFORMANCE AND FEE INFORMATION
The Retailing Fund commenced operations on April 1, 1998, and therefore does
not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Retailing Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses .84%
---------
Total Annual Fund Operating Expenses 1.94%
</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
Advisor Class Shares of the Retailing 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>
$197 $609 $1,047 $2,264
</TABLE>
<PAGE>
- ------
24 PROSPECTUS
FUND INFORMATION -- TECHNOLOGY FUND
FUND OBJECTIVE
[ICON]
The Technology Fund seeks capital appreciation by investing in
companies that are involved in the technology sector, including
computer software and service companies, semiconductor manufacturers, networking
and telecommunications equipment manufacturers, PC hardware and peripherals
companies ("Technology Companies")
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Technology Companies that are traded in the United States.
Technology Companies are companies which the Advisor believes have, or will
develop, products, processes, or services that will provide technological
advances and improvements. These companies may include, for example, companies
that develop, produce or distribute products or services in the computer,
semiconductor, electronics, communications, health care, and biotechnology
sectors. The Fund may also engage in futures and options transactions, purchase
ADRs and U.S. Government securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Technology Fund is subject to a number of risks that will affect
the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TECHNOLOGY SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the technology sector that the Fund purchases will underperform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Technology Companies may
fluctuate widely due to competitive pressures, increased sensitivity to
short product cycles and aggressive pricing, problems relating to bringing
their products to market, very high price/ earnings ratios, and high
personnel turnover due to severe labor shortages for skilled technology
professionals.
<PAGE>
PROSPECTUS 25
--------
FUND PERFORMANCE AND FEE INFORMATION
The Technology Fund commenced operations on April 14, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Technology Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses 1.07%
---------
Total Annual Fund Operating Expenses 2.17%
</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
Advisor Class Shares of the Technology 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>
$220 $679 $1,164 $2,503
</TABLE>
<PAGE>
- ------
26 PROSPECTUS
FUND INFORMATION -- TELECOMMUNICATIONS FUND
FUND OBJECTIVE
[ICON]
The Telecommunications Fund seeks capital appreciation by investing in
companies engaged in the development, manufacture, or sale of communications
services or communications equipment ("Telecommunications Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Telecommunications Companies that are traded in the United States.
Telecommunications Companies range from traditional local and long-distance
telephone services or equipment providers, to companies involved in developing
technologies such as cellular telephone or paging services, Internet equipment
and service providers, and fiber-optics. The Fund may also engage in futures and
options transactions, purchase ADRs and U.S. Government securities, and enter
into repurchase agreements. Although many established Telecommunications
Companies pay an above-average dividend, the Fund's investment decisions are
primarily based on growth potential and not on income.
RISK CONSIDERATIONS
[ICON]
The Telecommunications Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TELECOMMUNICATIONS SECTOR CONCENTRATION RISK -- The risk that the
securities of issuers in the telecommunications sector that the Fund
purchases will underperform the market as a whole. To the extent that the
Fund's investments are concentrated in issuers conducting business in the
same economic sector, the Fund is subject to legislative or regulatory
changes, adverse market conditions and/or increased competition affecting
that economic sector. The prices of the securities of Telecommunications
Companies may fluctuate widely due to both federal and state regulations
governing rates of return and services that may be offered, fierce
competition for market share, and competitive challenges in the U.S. from
foreign competitors engaged in strategic joint ventures with U.S.
companies, and in foreign markets from both U.S. and foreign competitors.
In addition, recent industry consolidation trends may lead to increased
regulation of Telecommunications Companies in their primary markets.
<PAGE>
PROSPECTUS 27
--------
FUND PERFORMANCE AND FEE INFORMATION
The Telecommunications Fund commenced operations on April 1, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Telecommunications Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses 1.24%
---------
Total Annual Fund Operating Expenses 2.34%
</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
Advisor Class Shares of the Telecommunications 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>
$237 $730 $1,250 $2,676
</TABLE>
<PAGE>
- ------
28 PROSPECTUS
FUND INFORMATION -- TRANSPORTATION FUND
FUND OBJECTIVE
[ICON]
The Transportation Fund seeks capital appreciation by investing in
companies engaged in providing transportation services or companies
engaged in the design, manufacture, distribution, or sale of transportation
equipment ("Transportation Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Transportation Companies that are traded in the United States.
Transportation Companies may include, for example, companies involved in the
movement of freight or people, such as airline, railroad, ship, truck and bus
companies; equipment manufacturers (including makers of trucks, automobiles,
planes, containers, railcars or other modes of transportation and related
products); parts suppliers; and companies involved in leasing, maintenance, and
transportation-related services. The Fund may also engage in futures and options
transactions, purchase ADRs and U.S. Government securities, and enter into
repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Transportation Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRANSPORTATION SECTOR CONCENTRATION RISK -- The risk that the securities
of issuers in the transportation sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Transportation Companies
may fluctuate widely due to their cyclical nature, occasional sharp price
movements which may result from changes in the economy, fuel prices, labor
agreements, and insurance costs, the recent trend of government
deregulation, and increased competition from foreign companies, many of
which are partially funded by foreign governments and which may be less
sensitive to short-term economic pressures.
<PAGE>
PROSPECTUS 29
--------
FUND PERFORMANCE AND FEE INFORMATION
The Transportation Fund commenced operations on April 2, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the Transportation Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses .97%
---------
Total Annual Fund Operating Expenses 2.07%
</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
Advisor Class Shares of the Transportation 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>
$210 $649 $1,114 $2,400
</TABLE>
<PAGE>
- ------
30 PROSPECTUS
FUND INFORMATION -- U.S. GOVERNMENT MONEY MARKET FUND
FUND OBJECTIVE
[ICON]
The U.S. Government Money Market Fund seeks to provide security of
principal, high current income, and liquidity.
PORTFOLIO INVESTMENTS
[ICON]
The U.S. Government Money Market Fund invests primarily in money
market instruments issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, and enters into repurchase
agreements fully collateralized by U.S. Government securities. The Fund operates
under SEC rules which impose certain liquidity, maturity and diversification
requirements. All securities purchased by the Fund must have remaining
maturities of 397 days or less, and must be found by the Advisor to represent
minimal credit risk and be of eligible quality.
RISK CONSIDERATIONS
[ICON]
The U.S. Government Money Market Fund is subject to the following risk
that will potentially affect the value of its shares:
- INTEREST RATE RISK -- Interest Rate Risk involves the potential for
decline in the rate of dividends the Fund pays in the event of declining
interest rates.
- STABLE PRICE PER SHARE RISK -- The Fund's assets are valued using the
amortized cost method, which enables the Fund to maintain a stable price
of $1.00 per share. ALTHOUGH THE FUND IS MANAGED TO MAINTAIN A STABLE
PRICE PER SHARE OF $1.00, THERE IS NO GUARANTEE THAT THE PRICE WILL BE
CONSTANTLY MAINTAINED, AND IT IS POSSIBLE TO LOSE MONEY.
<PAGE>
PROSPECTUS 31
--------
FUND PERFORMANCE AND FEE INFORMATION
U.S. GOVERNMENT MONEY MARKET FUND PERFORMANCE
[ICON]
The bar chart and table below show the performance of Investor Class
Shares of the U.S. Government Money Market Fund (which are not offered
in this Prospectus) both year-by-year and as an average over different
periods of time. Since Investor Class Shares are invested in the same
portfolio of securities, returns for the Advisor Class Shares of the
Fund will be substantially similar to that of the Investor Class Shares
shown here, and will differ only to the extent that each Class has
different expenses. The variability of performance over time provides
an indication of the risks of investing in the Fund. Of course, this
past performance does not necessarily indicate how the Fund will perform in the
future.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND
<S> <C>
1998 4.72%
1997 4.59%
1996 4.49%
1995 4.93%
1994 3.23%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 2.00%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
1.27% (QUARTER ENDED JUNE 30, 1995) AND THE LOWEST RETURN FOR A QUARTER WAS
1.03% (QUARTER ENDED JUNE 30, 1996).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS SHARES 90-DAY TREASURY COMPOSITE(2)
----------------------------------------------------
<S> <C> <C>
Past One Year 4.72% 4.78%
Past Five Years 4.39% 4.91%
Since Inception (12/03/93) 4.33% 4.88%
</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, 1999, the seven-day yield of Advisor Class Shares of the
Fund was 3.52%.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the U.S. Government Money Market Fund.
- --------------------------------------------------------------------------------
<TABLE>
<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 .25%
Other Expenses .58%
---------
Total Annual Fund Operating Expenses 1.33%
</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
Advisor Class Shares of the U.S. Government Money Market 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>
$135 $422 $730 $1,606
</TABLE>
<PAGE>
- ------
32 PROSPECTUS
MORE INFORMATION ABOUT RISK
As indicated below, the Funds are subject to a number of risks that may
affect the value of Fund shares.
EQUITY RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) -- The Funds
may invest in public and privately issued equity securities, including common
and preferred stocks, warrants, and rights, as well as instruments that attempt
to track the price movement of equity indices. Investments in equity securities
and equity derivatives in general are subject to market risks that may cause
their prices to fluctuate over time. The value of securities convertible into
equity securities, such as warrants or convertible debt, is also affected by
prevailing rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which the Funds invest will
cause the net asset value of the Funds to fluctuate. An investment in the Funds
may be more suitable for long-term investors who can bear the risk of short-term
principal fluctuations.
TRADING HALT RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) -- The
Funds typically will hold short-term options and futures contracts. The major
exchanges on which these contracts are traded, such as the Chicago Mercantile
Exchange ("CME"), have established limits on how much an option or futures
contract may decline over various time periods within a day. If an option or
futures contract's price declines more than the established limits, trading on
the exchange is halted on that instrument. If a trading halt occurs at the close
of a trading day, a Fund may not be able to purchase or sell options or futures
contracts. In such an event, a Fund also may be required to use a "fair-value"
method to price its outstanding contracts.
FUTURES AND OPTIONS CONTRACTS (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET
FUND) -- The Funds may invest a percentage of their assets in leveraged
instruments such as futures and options contracts. The more a Fund invests in
leveraged instruments, the more this leverage will magnify any losses on those
investments. The Funds may use futures contracts and related options for bona
fide hedging purposes to offset changes in the value of securities held or
expected to be acquired. They may also be used to gain exposure to a particular
market or instrument, to create a synthetic money market position, and for
certain other tax-related purposes. The Funds will only enter into futures
contracts traded on a national futures exchange or board of trade. Futures and
options contracts are described in more detail below:
FUTURES CONTRACTS -- Futures contracts and options on futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. An option on a futures contract gives the purchaser the
right, in exchange for a premium, to assume a position in a futures 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.
<PAGE>
PROSPECTUS 33
--------
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.
The risks associated with the use of these leveraging techniques include:
- A Fund experiencing losses over certain ranges in the market that exceed
losses experienced by a Fund that does not use futures contracts and
options.
- There may be an imperfect correlation between the changes in market value
of the securities held by a Fund and the prices of futures and options on
futures.
- Although the Funds will only purchase exchange-traded futures 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.
- 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.
PORTFOLIO TURNOVER RATE RISK (ALL FUNDS EXCEPT THE U.S. GOVERNMENT MONEY MARKET
FUND) -- 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 higher levels of
transaction costs and generating greater tax liabilities for shareholders.
EARLY CLOSING RISK (ALL FUNDS EXCEPT THE U.S. GOVERNMENT MONEY MARKET FUND) --
The normal close of trading of securities listed on the National Association of
Securities Dealers Automated Quotations system ("NASDAQ") and the New York Stock
Exchange ("NYSE") is 4:00 P.M., Eastern Time. Unanticipated early closings may
result in a Fund being unable to sell or buy securities on that day. If an
exchange closes early on a day when one or more of the Funds needs to execute a
high volume of securities trades late in a trading day, a Fund might incur
substantial trading losses.
FOREIGN COMPANY RISKS (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) --
Investments in securities of foreign companies can be more volatile than
investments in U.S.
<PAGE>
- ------
34 PROSPECTUS
companies. Diplomatic, political, or economic developments could affect
investments in foreign countries. Foreign companies generally are not subject to
uniform accounting, auditing, and financial reporting standards comparable to
those applicable to U.S. domestic companies.
SMALL ISSUER RISK (BIOTECHNOLOGY AND ELECTRONICS FUNDS) -- Small and medium
capitalization companies may be more vulnerable than larger, more established
organizations to adverse business or economic developments. In particular, small
capitalization companies may have limited product lines, markets, and financial
resources and may be dependent upon a relatively small management group. These
securities may trade over-the-counter or listed on an exchange and may or may
not pay dividends.
YEAR 2000 RISK (ALL FUNDS) -- The Funds depend on the smooth functioning of
computer systems in almost every aspect of their business. Like other mutual
funds, businesses and individuals around the world, the Funds could be adversely
affected if the computer systems used by its service providers do not properly
process dates on and after January 1, 2000 and distinguish between the year 2000
and the year 1900. The Trust has asked its service providers whether they expect
to have their computer systems adjusted for the year 2000 transition, and has
received assurances from all that they have devoted significant resources to
prevent material adverse consequences to the Funds. The Funds and their
respective shareholders may experience losses if these assurances prove to be
incorrect or as a result of year 2000 computer difficulties experienced by
issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others with which the Funds do business. Furthermore, many
foreign countries are not as prepared as the U.S. for the year 2000 transition.
Computer difficulties in foreign markets and with foreign institutions as a
result of the year 2000 may add to the possibility of losses to the Funds and
their shareholders.
SHAREHOLDER INFORMATION
HOW TO INVEST IN THE FUNDS
PURCHASING SHARES
Advisor Class Shares are offered continuously through intermediaries 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 for the Sector Funds is
calculated once each Business Day after the close of the New York Stock Exchange
(currently, 4:00 p.m., Eastern Time). If the exchange or market where a Fund's
securities or other investments are primarily traded closes early, the NAV may
be calculated earlier. To
<PAGE>
PROSPECTUS 35
--------
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.
Intermediaries may have earlier cutoff times.
MINIMUM INVESTMENT
If an intermediary such as a broker-dealer or other financial institution
has discretionary authority over your account, the minimum initial investment in
the Advisor Class Shares of the Sector Funds is $25,000. This minimum also
applies to retirement plan accounts. The Trust, at its discretion, may accept
lesser amounts in certain circumstances. Intermediaries may charge fees for
services provided in connection with buying, selling or exchanging shares. Each
intermediary also may have its own rules about share transactions. For more
information about how to purchase shares through an intermediary, you should
contact that intermediary directly. If you invest in the Trust, by any method
referenced below, without designating which Fund you want to invest in, your
money will be invested in the U.S. Government 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 only through intermediaries or
securities dealers who have the responsibility to transmit orders promptly and
who may charge a processing fee.
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. To open an account, fill out an application and
make a check payable to "Rydex Series Trust." Mail the check, along with an
application if you are making an initial investment, to:
Rydex Series Trust
6116 Executive Boulevard, Suite 400
Attn: Ops. Dept.
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.
<PAGE>
- ------
36 PROSPECTUS
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 Firstar along with
the following instructions:
Firstar
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 (YOUR BANK MAY CHARGE A
FEE FOR SUCH SERVICES) 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. If the purchase is canceled
because your wire transfer is not received, you may be liable for any loss that
the Trust incurs.
Telephone calls for wire transfers for both initial investments (which must
be preceded by an 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 in order to be
processed at that Business Day's NAV (1:00 p.m., Eastern time, for the U.S.
Government Money Market Fund). An initial application that is faxed to the Trust
does not constitute a purchase order until the application has been processed
and correct payment has been received by the Trust. Intermediaries may have
earlier cutoff times for purchases. For more information about how to purchase
through an intermediary, you should contact that intermediary directly.
TAX-QUALIFIED RETIREMENT PLANS
Investors may purchase shares of the 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
<PAGE>
PROSPECTUS 37
--------
For retirement plan accounts that have engaged an intermediary with
discretionary authority over the retirement plan account with the Trust, the
minimum initial investment in Advisor 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 taken at the time of closing from the proceeds. Additional
information regarding these accounts 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 by wire. Telephone redemptions will be sent only to your address or your
bank account (as listed in the Trust's records) if you redeem by wire. 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. You may have to transmit your redemption
request to your intermediary at an earlier time in order for your redemption to
be effective that Business Day. Please contact your intermediary to find out
their specific requirements for written and telephone requests for redemptions
and signature guarantees.
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.
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
<PAGE>
- ------
38 PROSPECTUS
required minimum of $25,000, the Trust reserves the right to redeem your
remaining shares without ANY additional notification to you.
SUSPENSION OF REDEMPTIONS
With respect to each Fund, and as permitted by the Securities and Exchange
Commission ("Commission"), the right of redemption may be suspended, or the date
of payment postponed: (i) for any period during which the NYSE, the Federal
Reserve Bank of New York (the "New York Fed"), NASDAQ, the CME or the Chicago
Board Options Exchange ("CBOE") as appropriate, is closed (other than customary
weekend or holiday closings) or trading on the NYSE, NASDAQ, the CME or the CBOE
as appropriate, is restricted; (ii) for any period during which an emergency
exists so that disposal of Fund investments or the determination of NAV is not
reasonably practicable; or (iii) for such other periods as the Commission, by
order, may permit for protection of Fund investors. On any day that the New York
Fed or the NYSE closes early, the principal government securities and corporate
bond markets close early (such as on days in advance of holidays generally
observed by participants in these markets), or as permitted by the Commission,
the right is reserved to advance the time on that day by which purchase and
redemption orders must be received.
EXCHANGES
You may exchange Advisor Class Shares of any Fund for Advisor Class Shares
of any other Rydex Fund Advisor Class Shares, 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 lessor of $1,000 or 100% of the account value
of the Rydex Fund from which the exchange is to be made. The Trust currently is
composed of twenty-two separate Funds. Advisor Class Shares of three Benchmark
Funds and Investor 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>
PROSPECTUS 39
--------
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
Arktos
- ----------------------------------------------------------------------------------------------
Sector Funds 3:30 p.m.
Precious Metals
- ----------------------------------------------------------------------------------------------
U.S. Government Bond 2:45 p.m.
Juno
- ----------------------------------------------------------------------------------------------
</TABLE>
Intermediaries may have earlier cutoff times.
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, Attn: Ops. Dept., 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 the 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 this Prospectus. The Trust's
offices are open between 8:30 a.m. and 5:30 p.m., Eastern Time on each Business
Day.
If you own shares that are registered in your intermediary's name, and you
want to transfer the registration to another intermediary or want the shares
registered in your name, then you should contact your intermediary for
instructions to make this change.
TRANSACTIONS OVER THE 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
<PAGE>
- ------
40 PROSPECTUS
instructions they reasonably believe to be genuine. If you or your intermediary
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.
MANAGEMENT OF THE FUNDS
PADCO Advisors, Inc., (the "Advisor") 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 paid
the Advisor a fee at an annualized rate for the fiscal period ended March 31,
1999, based on the average daily net assets for each Fund, as set forth below:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE
- ------------------------------ -----
<S> <C>
Sector Funds.............. .85%
U.S. Government Money
Market Fund............... .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.
Each Sector Fund is managed by a team and no one person is responsible for
making investment decisions for a Sector Fund.
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
The Funds have adopted a Distribution and Shareholder Services Plan (the
"Plan") applicable to Advisor Class Shares that allows the Funds to pay
distribution and service fees to PADCO Financial Services, Inc. (the
"Distributor") and other firms that provide distribution and shareholder
services ("Service Providers"). If a Service Provider provides distribution
services, the Funds will pay distribution fees to the Distributor at an annual
rate not to exceed .25% of average daily net assets, pursuant to Rule 12b-1 of
the 1940 Act. If a Service Provider provides shareholder services, the Funds
<PAGE>
PROSPECTUS 41
--------
will pay service fees to the Distributor at an annual rate not to exceed .25% of
the average daily net assets of a Fund. The Distributor will, in turn, pay the
Service Provider out of its fees. Because the Funds pay these fees out of assets
on an ongoing basis, over time these fees may cost you more than other types of
sales charges.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Income dividends, if any, are paid at least annually by each of the Funds,
except the U.S. Government Money Market Fund, which declares dividends daily and
pays them monthly. If you own Fund shares on a Fund's record date, you will be
entitled to receive the dividend. The Funds may declare and pay dividends on the
same date. The Funds make distributions of capital gains, if any, at least
annually. The Trust, however, may declare a special capital gains distribution
if the Trustees believe that such a distribution would be in the best interest
of the shareholders of a Fund.
You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. If you have not
already elected to receive cash payments on your application, you must notify
the Trust in writing prior to the date of distribution. Your election will
become effective for dividends paid after the Trust receives your written
notice. To cancel your election, simply send written notice to the Trust.
Dividends and distributions from a Fund are taxable to you whether they are
reinvested in additional shares of the Fund or are received in cash. You will
receive an account statement at least quarterly.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial or administrative action. The Trust has
not tried to present a detailed explanation of the tax treatment of the Funds,
or of the tax consequences of an investment in the Funds. MORE INFORMATION ABOUT
TAXES IS LOCATED IN THE STATEMENT OF ADDITIONAL INFORMATION (SAI). YOU ARE URGED
TO CONSULT YOUR TAX ADVISOR REGARDING SPECIFIC QUESTIONS AS TO FEDERAL, STATE
AND LOCAL INCOME TAXES.
TAX STATUS OF EACH FUND
Each Fund is treated as a separate entity for federal tax purposes, and
intends to qualify for the special tax treatment afforded regulated investment
companies. As long as a Fund qualifies as a regulated investment company, it
pays no federal income tax on the earnings it distributes to Shareholders.
<PAGE>
- ------
42 PROSPECTUS
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.
- Corporate shareholders may be entitled to a dividends-received deduction
for the portion of dividends they receive which are attributable to
dividends received by a Fund from U.S. corporations.
- Capital gains distributions will result from gains on the sale or exchange
of capital assets held for more than one year.
- Distributions paid in January but declared by a Fund in October, November
or December of the previous year, may be taxable to you in the previous
year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE, OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
YOU SHOULD CONSIDER THE TAX CONSEQUENCES OF ANY REDEMPTION OR EXCHANGE BEFORE
MAKING SUCH A REQUEST, ESPECIALLY WITH RESPECT TO REDEMPTIONS, IF YOU INVEST IN
THE FUNDS THROUGH A TAX-QUALIFIED RETIREMENT PLAN.
STATE TAX CONSIDERATIONS
A Fund is not liable for any income or franchise tax in Delaware as long as
it qualifies as a regulated investment company for Federal income tax purposes.
Distributions by the Funds may be subject to state and local taxation. You
should verify your tax liability with your tax advisor.
<PAGE>
PROSPECTUS 43
--------
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Funds' financial performance for the period of the Funds' operations.
Certain information reflects financial results for a single Advisor Class
Share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in an Advisor Class Share of
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the financial statements and related notes, appears in the Trust's 1999 Annual
Report. Our 1999 Annual Report is available by telephoning us at 800-820-0888 or
(301) 468-8520. The Annual Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
ADVISOR CLASS
--------------------------------------------------------
FOR THE PERIOD ENDED MARCH 31, 1999*
--------------------------------------------------------
FINANCIAL HEALTH BASIC
ENERGY SERVICES CARE TECHNOLOGY MATERIALS
FUND FUND FUND FUND FUND
-------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:+
Net Asset Value -- Beginning of Period............ $ 10.07 $ 10.47 $ 9.93 $ 10.84 $ 10.56
-------- --------- -------- ---------- ---------
Net Investment Income (Loss)+................... (.14) (.05) (.18) (.20) .13
Net Realized and Unrealized Gains (Losses) on
Securities..................................... (.92) (.47) 1.62 6.26 (2.97)
-------- --------- -------- ---------- ---------
Net Increase (Decrease) in Net Asset Value
Resulting from Operations...................... (1.06) (.52) 1.44 6.06 (2.84)
Distributions to Shareholders................... -- -- -- -- --
-------- --------- -------- ---------- ---------
Net Increase (Decrease) in Net Asset Value...... (1.06) (.52) 1.44 6.06 (2.84)
-------- --------- -------- ---------- ---------
Net Asset Value -- End of Period.................. $ 9.01 $ 9.95 $ 11.37 $ 16.90 $ 7.72
-------- --------- -------- ---------- ---------
-------- --------- -------- ---------- ---------
Total Investment Return........................... (10.53)% (4.97)% 14.50% 55.90% (26.89)%
Ratios to Average Net Assets:
Gross Expenses**................................ 1.99% 2.13% 2.24% 2.18% 1.96%
Net Expenses**.................................. 1.98% 2.12% 2.23% 2.17% 1.95%
Net Investment Income (Loss)**.................. (1.75)% (0.60)% (1.96)% (1.78)% 1.25%
Supplementary Data:
Portfolio Turnover Rate......................... 6,070% 7,269% 4,465% 4,598% 5,704%
Net Assets, End of Period (000's omitted)....... $ 609 $21,387 $ 24 $ 2,269 $ 688
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
* COMMENCEMENT OF OPERATIONS: MAY 5, 1998--ENERGY FUND, APRIL 6,
1998--FINANCIAL SERVICES FUND, MAY 11, 1998-- HEALTH CARE FUND, APRIL 29,
1998--TECHNOLOGY FUND, APRIL 14, 1998--BASIC MATERIALS FUND.
** ANNUALIZED
<PAGE>
- ------
44 PROSPECTUS
<TABLE>
<CAPTION>
ADVISOR CLASS
---------------------------------------------------------------
FOR THE PERIOD ENDED MARCH 31, 1999*
---------------------------------------------------------------
CONSUMER TELECOMMUNI-
PRODUCTS LEISURE RETAILING CATIONS TRANSPORTATION
FUND FUND FUND FUND FUND
-------- -------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:+
Net Asset Value -- Beginning of Period............ $ 8.73 $ 9.35 $ 10.01 $ 10.00 $ 9.26
-------- -------- --------- ------------ -------
Net Investment Loss............................. (.08) (.12) (.15) (.03) (.10)
Net Realized and Unrealized Gains (Losses) on
Securities..................................... 1.05 1.93 3.64 2.94 (1.21)
-------- -------- --------- ------------ -------
Net Increase (Decrease) in Net Asset Value
Resulting from Operations...................... .97 1.81 3.49 2.91 (1.31)
Distributions to Shareholders................... -- -- -- -- --
-------- -------- --------- ------------ -------
Net Increase (Decrease) in Net Asset Value...... .97 1.81 3.49 2.91 (1.31)
-------- -------- --------- ------------ -------
Net Asset Value -- End of Period.................. $ 9.70 $ 11.16 $ 13.50 $ 12.91 $ 7.95
-------- -------- --------- ------------ -------
-------- -------- --------- ------------ -------
Total Investment Return........................... 11.11% 19.36% 34.87% 29.10% (14.15)%
Ratios to Average Net Assets:
Gross Expenses**................................ 2.05% 2.23% 1.95% 2.35% 2.08%
Net Expenses**.................................. 2.04% 2.22% 1.94% 2.34% 2.07%
Net Investment Income (Loss)**.................. (1.38)% (1.95)% (1.37)% (0.27)% (1.38)%
Supplementary Data:
Portfolio Turnover Rate......................... 1,255% 5,581% 3,243% 2,788% 7,583%
Net Assets, End of Period (000's omitted)....... $20,952 $ 8 $ 337 $ 1,929 $ 4
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
* COMMENCEMENT OF OPERATIONS: AUGUST 17, 1998--CONSUMER PRODUCTS FUND, JUNE
3, 1998--LEISURE FUND, APRIL 21, 1998-- RETAILING FUND, APRIL 1,
1998--TELECOMMUNICATIONS FUND, JUNE 9, 1998--TRANSPORTATION FUND.
** ANNUALIZED
<PAGE>
PROSPECTUS 45
--------
<TABLE>
<CAPTION>
ADVISOR CLASS
-----------------------------------------------
FOR THE PERIOD ENDED MARCH 31, 1999*
-----------------------------------------------
ENERGY BIO-
SERVICES BANKING TECHNOLOGY ELECTRONICS
FUND FUND FUND FUND
-------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:+
Net Asset Value -- Beginning of Period $ 9.86 $ 10.00 $ 10.00 $ 9.98
-------- --------- ---------- -----------
Net Investment Income (Loss).................... (.09) .03 .18 (.23)
Net Realized and Unrealized Gains (Losses) on
Securities..................................... (3.76) (1.29) 2.48 4.21
-------- --------- ---------- -----------
Net Increase (Decrease) in Net Asset Value
Resulting from Operations...................... (3.85) (1.26) 2.66 3.98
Distributions to Shareholders................... -- -- -- --
-------- --------- ---------- -----------
Net Increase (Decrease) in Net Asset Value...... (3.85) (1.26) 2.66 3.98
-------- --------- ---------- -----------
Net Asset Value -- End of Period.................. $ 6.01 $ 8.74 $ 12.66 $ 13.96
-------- --------- ---------- -----------
-------- --------- ---------- -----------
Total Investment Return........................... (39.05)% (12.60)% 26.60% 39.88%
Ratios to Average Net Assets:
Gross Expenses**................................ 2.05% 2.08% 2.16% 2.05%
Net Expenses**.................................. 2.04% 2.08% 2.16% 2.04%
Net Investment Income (Loss)**.................. (1.66)% 0.28% 1.79% (1.86)%
Supplementary Data:
Portfolio Turnover Rate......................... 3,170% 11,211% 2,670% 3,011%
Net Assets, End of Period (000's omitted)....... $22,323 $ 2 $ 1,838 $ 4,024
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
* COMMENCEMENT OF OPERATIONS: APRIL 2, 1998--ENERGY SERVICES FUND, APRIL 1,
1998--BANKING FUND, BIOTECHNOLOGY FUND, APRIL 2, 1998--ELECTRONICS FUND.
** ANNUALIZED
<PAGE>
- ------
46 PROSPECTUS
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY MARKET FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
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 Advisor Class Share. The total returns in
the table represent the rate that an investor would have earned (or lost)
on an investment in an Advisor Class Share of the Fund (assuming
reinvestment of all dividends and distributions). In addition, financial
highlights information has been provided for Investor Class Shares. This
information has been audited by Deloitte & Touche LLP, whose report, along with
the financial statements and related notes, appears in the Trust's 1999 Annual
Report. Our 1999 Annual Report is available by telephoning us at 800-820-0888 or
(301) 468-8520. The Annual Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
ADVISOR
CLASS
-----------
PERIOD
ENDED MARCH
31, 1999*
-----------
<S> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of Period................................................. $ 1.00
-----------
Net Investment Income (Loss)+........................................................ .04
-----------
Net Increase in Net Asset Value Resulting from Operations............................ .04
Dividends to Shareholders from Net Investment Income................................. (.04)
-----------
Net Increase in Net asset Value........................................................ .00
-----------
Net Asset Value -- End of Period....................................................... $ 1.00
-----------
-----------
Total Investment Return................................................................ 4.02%
Ratios to Average Net Assets
Gross Expenses**..................................................................... 1.34%
Net Expenses**....................................................................... 1.33%
Net Investment Income (Loss)**....................................................... 3.83%
Supplementary Data
Net Assets, End of Period (000's omitted)............................................ $ 321,581
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS: APRIL 1, 1998.
** ANNUALIZED.
<PAGE>
Additional information about the Funds is included in a Statement of Additional
Information dated August 1, 1999 (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. Additional
information about the Funds' investments is available in the annual and semi-
annual reports. Also, in the Funds' annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Funds' performance during its last fiscal year.
- --------------------------------------------------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR PADCO ADVISORS,
INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST IN ANY
JURISDICTION WHERE SUCH AN OFFERING IS NOT LAWFUL.
<PAGE>
PROSPECTUS -- INVESTOR CLASS
<TABLE>
<C> <S>
1 INTRODUCTION
---
2 BANKING FUND
---
4 BASIC MATERIALS FUND
---
6 BIOTECHNOLOGY FUND
---
8 CONSUMER PRODUCTS FUND
---
10 ELECTRONICS FUND
---
12 ENERGY FUND
---
14 ENERGY SERVICES FUND
---
16 FINANCIAL SERVICES FUND
---
18 HEALTH CARE FUND
---
20 LEISURE FUND
---
22 RETAILING FUND
---
24 TECHNOLOGY FUND
---
26 TELECOMMUNICATIONS FUND
---
28 TRANSPORTATION FUND
---
30 PRECIOUS METALS FUND
---
32 U.S. GOVERNMENT MONEY MARKET FUND
---
34 MORE INFORMATION ABOUT RISK
---
36 SHAREHOLDER INFORMATION
---
42 MANAGEMENT
---
43 DIVIDENDS, DISTRIBUTIONS AND TAXES
---
45 FINANCIAL HIGHLIGHTS
---
BC ADDITIONAL INFORMATION
---
</TABLE>
AUGUST 1, 1999
RYDEX SERIES TRUST
SECTOR FUNDS
PRECIOUS METALS 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-two separate investment portfolios (the "Rydex Funds"), sixteen 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.
<PAGE>
ICON LEGEND
Fund Objective
[ICON]
The fund's particular investment goal.
Portfolio Investments
[ICON]
The primary types of securities in which the fund invests.
Risk Considerations
[ICON]
The major risk factors associated with the fund.
Fund Performance and Fee Information
[ICON]
The overall costs incurred by an investor in the fund.
Financial Highlights
[ICON]
A table showing the fund's financial performance.
ii
<PAGE>
PROSPECTUS 1
--------
INTRODUCTION
THE SECTOR FUNDS' INVESTMENT OBJECTIVE
Each Sector Fund seeks capital appreciation by investing in companies which
operate in a specific economic sector.
THE ADVISOR'S INVESTMENT METHODOLOGY
In managing the Sector Funds, PADCO Advisors, Inc.'s (the "Advisor")
investment team employs a quantitative model that considers a number of factors.
To develop a liquid portfolio of stocks that adequately represents a particular
market sector, the Advisor applies filters to the broad universe of stocks of
issuers that are "principally engaged" in business activities in each industry
sector. Specifically, the Advisor's investment process screens stocks primarily
based on liquidity, market capitalization, and correlation relative to the
entire industry sector. The Advisor also may consider other factors.
The Advisor monitors the Sector Funds' portfolios on an ongoing basis, and
adds or deletes stocks from the portfolios as needed.
After constructing a portfolio for each Sector Fund, the Advisor may utilize
futures contracts and options to leverage a Fund's exposure to the relevant
business sector. The use of leverage will result in each Fund being exposed to
its relevant business sector with more than 100% of its total assets.
Each business sector typically consists of numerous industries. For purposes
of the Advisor's investment methodology and the policies for each Fund, a
company is considered to be "principally engaged" in a designated business
activity in a particular economic sector if at least 50% of its assets, gross
income, or net profits are committed to, or derived from, that activity. If a
question exists as to whether a company meets these standards, the Advisor will
determine whether the company's primary business is within the business sector
designated for investment by that Fund.
RISKS OF INVESTING IN THE FUNDS
Your investment in the Funds is subject to certain risks. Some of the risks
that are common to each of the Funds (except the U.S. Government Money Market
Fund) are discussed below.
- NON-DIVERSIFICATION RISK -- Since each Fund is non-diversified, each Fund
may invest in the securities of a relatively few number of issuers. To the
extent that a Fund invests a significant percentage of its assets in a
limited number of issuers, the Fund is subject to the risks of investing
in those few issuers, and may be more susceptible to a single adverse
economic or regulatory occurrence.
- CONCENTRATION RISK -- Since the Funds invest in the securities of a
limited number of issuers conducting business in a specific industry, it
is subject to the risk that those issuers (or that industry) will perform
poorly, and the Fund will be negatively impacted by that poor performance.
THE INVESTMENT OBJECTIVE OF EACH SECTOR FUND IS NON-FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL. THERE CAN BE NO ASSURANCE THAT A FUND WILL
ACHIEVE ITS INVESTMENT OBJECTIVE.
The Funds:
- Are not federally insured
- Are not guaranteed by any government agency
- Are not bank deposits
- Are not guaranteed to achieve their objectives
<PAGE>
- ------
2 PROSPECTUS
FUND INFORMATION -- BANKING FUND
FUND OBJECTIVE
[ICON]
The Banking Fund seeks to provide capital appreciation by investing in
companies that are involved in the banking sector, including commercial banks
(and their holding companies) and savings and loan institutions ("Banking
Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Banking Companies that are traded in the United States. Banking
Companies are engaged in accepting deposits and making commercial and
principally non-mortgage consumer loans and include state chartered banks,
savings and loan institutions, and banks that are members of the Federal Reserve
System. The Fund may also engage in futures and options transactions, purchase
ADRs and U.S. Government securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Banking Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- BANKING SECTOR CONCENTRATION RISK -- The risk that the securities of
Banking Companies that the Fund purchases will underperform the market as
a whole. To the extent that the Fund's investments are concentrated in
Banking Companies, the Fund is subject to legislative or regulatory
changes, adverse market conditions and/or increased competition affecting
Banking Companies. The prices of the securities of Banking Companies may
fluctuate widely due to the broadening of regional and national interstate
banking powers, the reduction in the number of publicly-traded Banking
Companies, and general economic conditions which could create exposure to
credit losses.
<PAGE>
PROSPECTUS 3
--------
FUND PERFORMANCE AND FEE INFORMATION
The Banking Fund commenced operations on April 1, 1998, and therefore does
not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Banking Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .72%
---------
Total Annual Fund Operating Expenses 1.57%
</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
Investor Class Shares of the Banking 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>
$160 $496 $855 $1,867
</TABLE>
<PAGE>
- ------
4 PROSPECTUS
FUND INFORMATION -- BASIC MATERIALS FUND
FUND OBJECTIVE
[ICON]
The Basic Materials Fund seeks capital appreciation by investing in
companies engaged in the mining, manufacture, or sale of basic
materials, such as lumber, steel, iron, aluminum, concrete, chemicals and other
basic building and manufacturing materials ("Basic Materials Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Basic Materials Companies that are traded in the United States.
Basic Materials Companies are engaged in the manufacture, mining, processing, or
distribution of raw materials and intermediate goods used in the industrial
sector, and may be involved in the production of metals, textiles, and wood
products, including equipment suppliers and railroads. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Basic Materials Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- BASIC MATERIALS SECTOR CONCENTRATION RISK -- The risk that the securities
of issuers in the basic materials sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Basic Materials Companies
may fluctuate widely due to the level and volatility of commodity prices,
the exchange value of the dollar, import controls, worldwide competition,
liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control devices.
<PAGE>
PROSPECTUS 5
--------
FUND PERFORMANCE AND FEE INFORMATION
The Basic Materials Fund commenced operations on April 1, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Basic Materials Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .76%
---------
Total Annual Fund Operating Expenses 1.61%
</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
Investor Class Shares of the Basic Materials 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>
$164 $508 $876 $1,911
</TABLE>
<PAGE>
- ------
6 PROSPECTUS
FUND INFORMATION -- BIOTECHNOLOGY FUND
FUND OBJECTIVE
[ICON]
The Biotechnology Fund seeks capital appreciation by investing in
companies that are involved in the biotechnology industry, including
companies involved in research and development, genetic or other biological
engineering, and in the design, manufacture, or sale of related biotechnology
products or services ("Biotechnology Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Biotechnology Companies that are traded in the United States.
Biotechnology Companies are engaged in the research, development, and
manufacture of various biotechnological products, services, and processes;
manufacture and/or distribute biotechnological and biomedical products,
including devices and instruments; provide or benefit significantly from
scientific and technological advances in biotechnology; or provide processes or
services instead of, or in addition to, products. The Fund may also engage in
futures and options transactions, purchase ADRs and U.S. Government securities,
and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Biotechnology Fund is subject to a number of risks that will affect
the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- BIOTECHNOLOGY SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the biotechnology sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Biotechnology Companies
may fluctuate widely due to patent considerations, intense competition,
rapid technological change and obsolescence, and regulatory requirements
of the Food and Drug Administration, the Environmental Protection Agency,
state and local governments, and foreign regulatory authorities.
- SMALL ISSUER RISK -- Many Biotechnology Companies are relatively small and
have thinly traded equity securities, may not yet offer products or offer
a single product, and may have persistent losses during a new product's
transition from development to production or erratic revenue patterns.
<PAGE>
PROSPECTUS 7
--------
FUND PERFORMANCE AND FEE INFORMATION
The Biotechnology Fund commenced operations on April 1, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Biotechnology Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .70%
---------
Total Annual Fund Operating Expenses 1.55%
</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
Investor Class Shares of the Biotechnology 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>
$158 $490 $845 $1,845
</TABLE>
<PAGE>
- ------
8 PROSPECTUS
FUND INFORMATION -- CONSUMER PRODUCTS FUND
FUND OBJECTIVE
[ICON]
The Consumer Products Fund seeks capital appreciation by investing in
companies engaged in manufacturing finished goods and services both domestically
and internationally ("Consumer Products Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Consumer Products Companies that are traded in the United States.
Consumer Products Companies include companies that manufacture, wholesale or
retail durable goods such as major appliances and personal computers, or that
retail non-durable goods such as beverages, tobacco, health care products,
household and personal care products, apparel, and entertainment products (E.G.,
books, magazines, TV, cable, movies, music, gaming, sports), as well as
companies that provide consumer products and services such as lodging, child
care, convenience stores, and car rentals. The Fund may also engage in futures
and options transactions, purchase ADRs and U.S. Government securities, and
enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Consumer Products Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- CONSUMER PRODUCTS SECTOR CONCENTRATION RISK -- The risk that the
securities of issuers in the consumer products sector that the Fund
purchases will underperform the market as a whole. To the extent that the
Fund's investments are concentrated in issuers conducting business in the
same economic sector, the Fund is subject to legislative or regulatory
changes, adverse market conditions and/or increased competition affecting
that economic sector. The performance of Consumer Products Companies has
historically been closely tied to the performance of the overall economy,
and is also affected by interest rates, competition, consumer confidence
and relative levels of disposable household income and seasonal consumer
spending. Changes in demographics and consumer tastes can also affect the
demand for, and success of, consumer products in the marketplace.
<PAGE>
PROSPECTUS 9
--------
FUND PERFORMANCE AND FEE INFORMATION
The Consumer Products Fund commenced operations on July 6, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Consumer Products Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .69%
---------
Total Annual Fund Operating Expenses 1.54%
</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
Investor Class Shares of the Consumer Products 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>
$157 $486 $839 $1,835
</TABLE>
<PAGE>
- ------
10 PROSPECTUS
FUND INFORMATION -- ELECTRONICS FUND
FUND OBJECTIVE
[ICON]
The Electronics Fund seeks capital appreciation by investing in
companies that are involved in the electronics sector, including
semiconductor manufacturers and distributors, and makers and vendors of other
electronic components and devices ("Electronics Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Electronics Companies that are traded in the United States.
Electronics Companies include companies involved in the manufacture and
development of semiconductors, connectors, printed circuit boards and other
components; equipment vendors to electronic component manufacturers; electronic
component distributors; electronic instruments and electronic systems vendors;
and also include companies involved in all aspects of the electronics business
and in new technologies or specialty areas such as defense electronics, advanced
design and manufacturing technologies, or lasers. The Fund may also engage in
futures and options transactions, purchase ADRs and U.S. Government securities,
and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Electronics Fund is subject to a number of risks that will affect
the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- ELECTRONICS SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the electronics sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Electronics Companies may
fluctuate widely due to risks of rapid obsolescence of products, intense
competition, the economic performance of their customers, high technology
and research costs (especially in light of decreased defense spending by
the U.S. Government), and may face competition from subsidized foreign
competitors with lower production costs.
- SMALL ISSUER RISK -- Many Electronics Companies are relatively small and
have thinly traded securities, may offer only one or a limited number of
rapidly obsolescing products, and may have persistent losses during a new
product's transition from development to production.
<PAGE>
PROSPECTUS 11
--------
FUND PERFORMANCE AND FEE INFORMATION
The Electronics Fund commenced operations on April 1, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Electronics Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .71%
---------
Total Annual Fund Operating Expenses 1.56%
</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
Investor Class Shares of the Electronics 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>
$159 $493 $850 $1,856
</TABLE>
<PAGE>
- ------
12 PROSPECTUS
FUND INFORMATION -- ENERGY FUND
FUND OBJECTIVE
[ICON]
The Energy Fund seeks capital appreciation by investing in companies
involved in the energy field, including the exploration, production, and
development of oil, gas, coal and alternative sources of energy ("Energy
Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Energy Companies that are traded in the United States. Energy
Companies are involved in all aspects of the energy industry, including the
conventional areas of oil, gas, electricity, and coal, and alternative sources
of energy such as nuclear, geothermal, oil shale, and solar power, and include
companies that produce, transmit, market, distribute or measure energy;
companies involved in providing products and services to companies in the energy
field; and companies involved in the exploration of new sources of energy,
conservation, and energy-related pollution control. The Fund may also engage in
futures and options transactions, purchase ADRs and U.S. Government securities,
and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Energy Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- ENERGY SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the energy sector that the Fund purchases will underperform the
market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector.
The prices of the securities of Energy Companies may fluctuate widely due
to changes in value and dividend yield, which depend largely on the price
and supply of energy fuels, international political events relating to oil
producing countries, energy conservation, the success of exploration
projects, and tax and other governmental regulatory policies.
<PAGE>
PROSPECTUS 13
--------
FUND PERFORMANCE AND FEE INFORMATION
The Energy Fund commenced operations on April 21, 1998, and therefore does
not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Energy Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .77%
---------
Total Annual Fund Operating Expenses 1.62%
</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
Investor Class Shares of the Energy 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>
$165 $511 $881 $1,922
</TABLE>
<PAGE>
- ------
14 PROSPECTUS
FUND INFORMATION -- ENERGY SERVICES FUND
FUND OBJECTIVE
[ICON]
The Energy Services Fund seeks capital appreciation by investing in
companies that are involved in the energy services field, including
those that provide services and equipment in the areas of oil, coal, and gas
exploration and production ("Energy Services Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Energy Services Companies that are traded in the United States.
Energy Services Companies are engaged in one or more businesses in the energy
service field, including those that provide services and equipment to companies
engaged in the production, refinement or distribution of oil, gas, electricity,
and coal; companies involved with the production and development of newer
sources of energy such as nuclear, geothermal, oil shale, and solar power;
companies involved with onshore or offshore drilling; companies involved in
production and well maintenance; companies involved in exploration engineering,
data and technology; companies involved in energy transport; and companies
involved in equipment and plant design or construction. The Fund may also engage
in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Energy Services Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- ENERGY SERVICES SECTOR CONCENTRATION RISK -- The risk that the securities
of issuers in the energy services sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Energy Services Companies
may fluctuate widely due to the supply and demand both for their specific
products or services and for energy products in general, the price of oil
and gas, exploration and production spending, governmental regulation and
environmental issues, and world events and economic conditions generally
affecting energy supply companies.
<PAGE>
PROSPECTUS 15
--------
FUND PERFORMANCE AND FEE INFORMATION
The Energy Services Fund commenced operations on April 1, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Energy Services Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .72%
---------
Total Annual Fund Operating Expenses 1.57%
</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
Investor Class Shares of the Energy Services 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>
$160 $496 $855 $1,867
</TABLE>
<PAGE>
- ------
16 PROSPECTUS
FUND INFORMATION -- FINANCIAL SERVICES FUND
FUND OBJECTIVE
[ICON]
The Financial Services Fund seeks capital appreciation by investing in
companies that are involved in the financial services sector. ("Financial
Services Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Financial Services Companies that are traded in the United States.
Financial Service Companies include commercial banks, savings and loan
associations, insurance companies and brokerage companies. The Fund may also
engage in futures and options transactions, purchase ADRs and U.S. Government
securities, and enter into repurchase agreements. Under SEC regulations, the
Fund may not invest more than 5% of its total assets in the equity securities of
any company that derives more than 15% of its revenues from brokerage or
investment management activities.
RISK CONSIDERATIONS
[ICON]
The Financial Services Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- FINANCIAL SERVICES SECTOR CONCENTRATION RISK -- The risk that the
securities of issuers in the financial services sector that the Fund
purchases will underperform the market as a whole. To the extent that the
Fund's investments are concentrated in issuers conducting business in the
same economic sector, the Fund is subject to legislative or regulatory
changes, adverse market conditions and/or increased competition affecting
that economic sector. Financial Services Companies are subject to
extensive governmental regulation, which may limit both the amounts and
types of loans and other financial commitments they can make, and the
rates and fees they can charge. Profitability is largely dependent on the
availability and cost of capital, and can fluctuate significantly when
interest rates change. Credit losses resulting from financial difficulties
of borrowers also can negatively impact the sector.
<PAGE>
PROSPECTUS 17
--------
FUND PERFORMANCE AND FEE INFORMATION
The Financial Services Fund commenced operations on April 2, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Financial Services Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees 85%
Distribution (12b-1) Fees None
Other Expenses .72%
---------
Total Annual Fund Operating Expenses 1.57%
</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
Investor Class Shares of the Financial Services 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>
$160 $496 $855 $1,867
</TABLE>
<PAGE>
- ------
18 PROSPECTUS
FUND INFORMATION -- HEALTH CARE FUND
FUND OBJECTIVE
[ICON]
The Health Care Fund seeks capital appreciation by investing in
companies that are involved in the health care industry ("Health Care
Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Health Care Companies that are traded in the United States. Health
Care Companies include pharmaceutical companies, companies involved in research
and development of pharmaceutical products and services, companies involved in
the operation of health care facilities, and other companies involved in the
design, manufacture, or sale of health care-related products or services. The
Fund may also engage in futures and options transactions, purchase ADRs and U.S.
Government securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Health Care Fund is subject to a number of risks that will affect
the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- HEALTH CARE SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the health care sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Health Care Companies may
fluctuate widely due to government regulation and approval of their
products and services, which can have a significant effect on their price
and availability. Furthermore, the types of products or services produced
or provided by these companies may quickly become obsolete. Moreover,
liability for products that are later alleged to be harmful or unsafe may
be substantial, and may have a significant impact on a Health Care
Company's market value and/or share price.
<PAGE>
PROSPECTUS 19
--------
FUND PERFORMANCE AND FEE INFORMATION
The Health Care Fund commenced operations on April 17, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Health Care Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .58%
---------
Total Annual Fund Operating Expenses 1.43%
</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
Investor Class Shares of the Health Care 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>
$146 $452 $782 $1,713
</TABLE>
<PAGE>
- ------
20 PROSPECTUS
FUND INFORMATION -- LEISURE FUND
FUND OBJECTIVE
[ICON]
The Leisure Fund seeks capital appreciation by investing in companies
engaged in leisure and entertainment businesses. ("Leisure Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Leisure Companies that are traded in the United States. Leisure
Companies are engaged in the design, production, or distribution of goods or
services in the leisure industries. Leisure Companies include hotels and
resorts, casinos, radio and television broadcasting and advertising, motion
picture production, toys and sporting goods manufacture, musical recordings and
instruments, alcohol and tobacco, and publishing. The Fund may also engage in
futures and options transactions, purchase ADRs and U.S. Government securities,
and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Leisure Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- LEISURE SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the leisure sector that the Fund purchases will underperform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector.
Securities of Leisure Companies may be considered speculative, and
generally exhibit greater volatility than the overall market. The prices
of the securities of Leisure Companies may fluctuate widely due to
unpredictable earnings, due in part to changing consumer tastes and
intense competition, strong reaction to technological developments and to
the threat of increased government regulation, particularly in the gaming
arena.
<PAGE>
PROSPECTUS 21
--------
FUND PERFORMANCE AND FEE INFORMATION
The Leisure Fund commenced operations on April 1, 1998, and therefore does
not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Leisure Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .74%
---------
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
Investor Class Shares of the Leisure 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>
$162 $502 $866 $1,889
</TABLE>
<PAGE>
- ------
22 PROSPECTUS
FUND INFORMATION -- RETAILING FUND
FUND OBJECTIVE
[ICON]
The Retailing Fund seeks capital appreciation by investing in
companies engaged in merchandising finished goods and services,
including department stores, restaurant franchises, mail order operations and
other companies involved in selling products to consumers ("Retailing
Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Retailing Companies that are traded in the United States. Retailing
Companies include drug and department stores; suppliers of goods and services
for homes, home improvements and yards; clothing, jewelry, electronics and
computer retailers; franchise restaurants; motor vehicle and marine dealers;
warehouse membership clubs; mail order operations; and companies involved in
alternative selling methods. The Fund may also engage in futures and options
transactions, purchase ADRs and U.S. Government securities, and enter into
repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Retailing Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- RETAILING SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the retailing sector that the Fund purchases will underperform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector.
The prices of the securities of Retailing Companies may fluctuate widely
due to consumer spending, which is affected by general economic conditions
and consumer confidence levels. The retailing industry is highly
competitive, and a Retailing Company's success is often tied to its
ability to anticipate and react to changing consumer tastes. Many
Retailing Companies are thinly capitalized, and are dependent upon a
relatively few number of business days to achieve their overall results.
<PAGE>
PROSPECTUS 23
--------
FUND PERFORMANCE AND FEE INFORMATION
The Retailing Fund commenced operations on April 1, 1998, and therefore does
not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Retailing Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .57%
---------
Total Annual Fund Operating Expenses 1.42%
</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
Investor Class Shares of the Retailing 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>
$145 $449 $776 $1,702
</TABLE>
<PAGE>
- ------
24 PROSPECTUS
FUND INFORMATION -- TECHNOLOGY FUND
FUND OBJECTIVE
[ICON]
The Technology Fund seeks capital appreciation by investing in
companies that are involved in the technology sector, including
computer software and service companies, semiconductor manufacturers, networking
and telecommunications equipment manufacturers, PC hardware and peripherals
companies ("Technology Companies")
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Technology Companies that are traded in the United States.
Technology Companies are companies which the Advisor believes have, or will
develop, products, processes, or services that will provide technological
advances and improvements. These companies may include, for example, companies
that develop, produce or distribute products or services in the computer,
semiconductor, electronics, communications, health care, and biotechnology
sectors. The Fund may also engage in futures and options transactions, purchase
ADRs and U.S. Government securities, and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Technology Fund is subject to a number of risks that will affect
the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TECHNOLOGY SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the technology sector that the Fund purchases will underperform
the market as a whole. To the extent that the Fund's investments are
concentrated in issuers conducting business in the same economic sector,
the Fund is subject to legislative or regulatory changes, adverse market
conditions and/or increased competition affecting that economic sector.
The prices of the securities of Technology Companies may fluctuate widely
due to competitive pressures, increased sensitivity to short product
cycles and aggressive pricing, problems relating to bringing their
products to market, very high price/ earnings ratios, and high personnel
turnover due to severe labor shortages for skilled technology
professionals.
<PAGE>
PROSPECTUS 25
--------
FUND PERFORMANCE AND FEE INFORMATION
The Technology Fund commenced operations on April 14, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Technology Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .54%
---------
Total Annual Fund Operating Expenses 1.39%
</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
Investor Class Shares of the Technology 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>
$142 $440 $761 $1,669
</TABLE>
<PAGE>
- ------
26 PROSPECTUS
FUND INFORMATION -- TELECOMMUNICATIONS FUND
FUND OBJECTIVE
[ICON]
The Telecommunications Fund seeks capital appreciation by investing in
companies engaged in the development, manufacture, or sale of communications
services or communications equipment ("Telecommunications Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Telecommunications Companies that are traded in the United States.
Telecommunications Companies range from traditional local and long-distance
telephone services or equipment providers, to companies involved in developing
technologies such as cellular telephone or paging services, Internet equipment
and service providers, and fiber-optics. The Fund may also engage in futures and
options transactions, purchase ADRs and U.S. Government securities, and enter
into repurchase agreements. Although many established Telecommunications
Companies pay an above-average dividend, the Fund's investment decisions are
primarily based on growth potential and not on income.
RISK CONSIDERATIONS
[ICON]
The Telecommunications Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TELECOMMUNICATIONS SECTOR CONCENTRATION RISK -- The risk that the
securities of issuers in the telecommunications sector that the Fund
purchases will underperform the market as a whole. To the extent that the
Fund's investments are concentrated in issuers conducting business in the
same economic sector, the Fund is subject to legislative or regulatory
changes, adverse market conditions and/or increased competition affecting
that economic sector. The prices of the securities of Telecommunications
Companies may fluctuate widely due to both federal and state regulations
governing rates of return and services that may be offered, fierce
competition for market share, and competitive challenges in the U.S. from
foreign competitors engaged in strategic joint ventures with U.S.
companies, and in foreign markets from both U.S. and foreign competitors.
In addition, recent industry consolidation trends may lead to increased
regulation of Telecommunications Companies in their primary markets.
<PAGE>
PROSPECTUS 27
--------
FUND PERFORMANCE AND FEE INFORMATION
The Telecommunications Fund commenced operations on April 1, 1998, and
therefore does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Telecommunications Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .70%
---------
Total Annual Fund Operating Expenses 1.55%
</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
Investor Class Shares of the Telecommunications 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>
$158 $490 $845 $1,845
</TABLE>
<PAGE>
- ------
28 PROSPECTUS
FUND INFORMATION -- TRANSPORTATION FUND
FUND OBJECTIVE
[ICON]
The Transportation Fund seeks capital appreciation by investing in
companies engaged in providing transportation services or companies
engaged in the design, manufacture, distribution, or sale of transportation
equipment ("Transportation Companies").
PORTFOLIO INVESTMENTS
[ICON]
The Fund invests substantially all of its assets in equity securities
of Transportation Companies that are traded in the United States.
Transportation Companies may include, for example, companies involved in the
movement of freight or people, such as airline, railroad, ship, truck and bus
companies; equipment manufacturers (including makers of trucks, automobiles,
planes, containers, railcars or other modes of transportation and related
products); parts suppliers; and companies involved in leasing, maintenance, and
transportation-related services. The Fund may also engage in futures and options
transactions, purchase ADRs and U.S. Government securities, and enter into
repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Transportation Fund is subject to a number of risks that will
affect the value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRANSPORTATION SECTOR CONCENTRATION RISK -- The risk that the securities
of issuers in the transportation sector that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
economic sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
economic sector. The prices of the securities of Transportation Companies
may fluctuate widely due to their cyclical nature, occasional sharp price
movements which may result from changes in the economy, fuel prices, labor
agreements, and insurance costs, the recent trend of government
deregulation, and increased competition from foreign companies, many of
which are partially funded by foreign governments and which may be less
sensitive to short-term economic pressures.
<PAGE>
PROSPECTUS 29
--------
FUND PERFORMANCE AND FEE INFORMATION
The Transportation Fund commenced operations on April 2, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Transportation Fund.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES
Redemption Fees* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses .73%
---------
Total Annual Fund Operating Expenses 1.58%
</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
Investor Class Shares of the Transportation 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>
$161 $499 $860 $1,878
</TABLE>
<PAGE>
- ------
30 PROSPECTUS
FUND INFORMATION -- PRECIOUS METALS FUND
FUND OBJECTIVE
[ICON]
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 Philadelphia Stock Exchange Gold/Silver Index-TM-(XAU
Index) which 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.
PORTFOLIO INVESTMENTS
[ICON]
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 U.S. Government securities, and enter into repurchase
agreements. The Fund may also invest a portion of its assets in securities of
foreign issuers.
RISK CONSIDERATIONS
[ICON]
The Precious Metals Fund is subject to a number of risks that will
affect the value of the Fund's shares, including:
- PRECIOUS METALS CONCENTRATION RISK -- The risk that the relatively few
securities of issuers in the mining industry that the Fund purchases will
underperform the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
industry, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that
industry, as well as to the volatility of global prices for precious
metals. The prices of precious metals may fluctuate widely due to changes
in inflation or inflation expectations, currency fluctuations,
speculation, worldwide demand and political developments in precious
metals producing countries.
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by the amount of the increase in value of the XAU
Index. However, when the value of the XAU Index declines, the value of the
Fund's shares should also decrease on a daily basis by the amount of the
decrease in value of the Index.
<PAGE>
PROSPECTUS 31
--------
FUND PERFORMANCE AND FEE INFORMATION
PRECIOUS METALS FUND PERFORMANCE
[ICON]
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PRECIOUS METALS FUND
<S> <C>
1998 -14.42%
1997 -37.62%
1996 -2.62%
1995 11.54%
1994 -25.44%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 2.63%.
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).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS SHARES S&P 500 INDEX(2) XAU INDEX(3)
-------------------------------------------------------
<S> <C> <C> <C>
Past One Year (14.42)% 26.67% (12.43)%
Past Five Years (15.43)% 21.36% (13.21)%
Since Inception (12/01/93) (14.13)% 21.23% (11.49)%
</TABLE>
(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.
(2) THE S&P 500 INDEX IS AN UNMANAGED INDEX THAT IS A WIDELY RECOGNIZED
INDICATOR OF GENERAL STOCK MARKET PERFORMANCE.
(3) THE XAU INDEX IS AN UNMANAGED INDEX THAT IS A WIDELY RECOGNIZED INDICATOR OF
PRECIOUS METALS SECTOR PERFORMANCE.
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>
<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 .61%
---------
Total Annual Fund Operating Expenses 1.36%
</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.
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>
$138 $431 $745 $1,635
</TABLE>
<PAGE>
- ------
32 PROSPECTUS
FUND INFORMATION -- U.S. GOVERNMENT MONEY MARKET FUND
FUND OBJECTIVE
[ICON]
The U.S. Government Money Market Fund seeks to provide security of
principal, high current income, and liquidity.
PORTFOLIO INVESTMENTS
[ICON]
The U.S. Government Money Market Fund invests primarily in money
market instruments issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, and enters into repurchase
agreements fully collateralized by U.S. Government securities. The Fund operates
under SEC rules which impose certain liquidity, maturity and diversification
requirements. All securitites purchased by the Fund must have remaining
maturities of 397 days or less, and must be found by the Advisor to represent
minimal credit risk and be of eligible quality.
RISK CONSIDERATIONS
[ICON]
The U.S. Government Money Market Fund is subject to the following risk
that will potentially affect the value of its shares:
- INTEREST RATE RISK -- Interest Rate Risk involves the potential for
decline in the rate of dividends the Fund pays in the event of declining
interest rates.
- STABLE PRICE PER SHARE RISK -- The Fund's assets are valued using the
amortized cost method, which enables the Fund to maintain a stable price
of $1.00 per share. ALTHOUGH THE FUND IS MANAGED TO MAINTAIN A STABLE
PRICE PER SHARE OF $1.00, THERE IS NO GUARANTEE THAT THE PRICE WILL BE
CONSTANTLY MAINTAINED, AND IT IS POSSIBLE TO LOSE MONEY.
<PAGE>
PROSPECTUS 33
--------
FUND PERFORMANCE AND FEE INFORMATION
U.S. GOVERNMENT MONEY MARKET FUND PERFORMANCE
[ICON]
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND
<S> <C>
1998 4.72%
1997 4.59%
1996 4.49%
1995 4.93%
1994 3.23%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 2.00%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
1.27% (QUARTER ENDED JUNE 30, 1995) AND THE LOWEST RETURN FOR A QUARTER WAS
1.03% (QUARTER ENDED JUNE 30, 1996).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS SHARES 90-DAY TREASURY COMPOSITE(2)
------------------------------------------------------
<S> <C> <C>
Past One Year 4.72% 4.78%
Past Five Years 4.39% 4.91%
Since Inception (12/03/93) 4.33% 4.88%
</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, 1999, the seven-day yield of the Fund was 4.02%.
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>
<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 .33%
---------
Total Annual Fund Operating Expenses .83%
</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.
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>
$85 $265 $461 $1,029
</TABLE>
<PAGE>
- ------
34 PROSPECTUS
MORE INFORMATION ABOUT RISK
As indicated below, the Funds are subject to a number of risks that may
affect the value of Fund shares.
EQUITY RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) -- The Funds
may invest in public and privately issued equity securities, including common
and preferred stocks, warrants, and rights, as well as instruments that attempt
to track the price movement of equity indices. Investments in equity securities
and equity derivatives in general are subject to market risks that may cause
their prices to fluctuate over time. The value of securities convertible into
equity securities, such as warrants or convertible debt, is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provision. Fluctuations in the value of equity securities in which the Funds
invest will cause the net asset value of the Funds to fluctuate. An investment
in the Funds may be more suitable for long-term investors who can bear the risk
of short-term principal fluctuations.
TRADING HALT RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) -- The
Funds typically will hold short-term options and futures contracts. The major
exchanges on which these contracts are traded, such as the Chicago Mercantile
Exchange ("CME"), have established limits on how much an option or futures
contract may decline over various time periods within a day. If an option or
futures contract's price declines more than the established limits, trading on
the exchange is halted on that instrument. If a trading halt occurs at the close
of a trading day, a Fund may not be able to purchase or sell options or futures
contracts. In such an event, a Fund also may be required to use a "fair-value"
method to price its outstanding contracts.
FUTURES AND OPTIONS CONTRACTS RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY
MARKET FUND) -- The Funds may invest a percentage of their assets in leveraged
instruments such as futures and options contracts. The more a Fund invests in
leveraged instruments, the more this leverage will magnify any losses on those
investments. The Funds may use futures contracts and related options for bona
fide hedging purposes to offset changes in the value of securities held or
expected to be acquired. They may also be used to gain exposure to a particular
market or instrument, to create a synthetic money market position, and for
certain other tax-related purposes. The Funds will only enter into futures
contracts traded on a national futures exchange or board of trade. Futures and
options contracts are described in more detail below:
FUTURES CONTRACTS -- Futures contracts and options on futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. An option on a futures contract gives the purchaser the
right, in exchange for a premium, to assume a position in a futures 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.
<PAGE>
PROSPECTUS 35
--------
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.
The risks associated with the use of these leveraging techniques include:
- A Fund experiencing losses over certain ranges in the market that exceed
losses experienced by a Fund that does not use futures contracts and
options.
- There may be an imperfect correlation between the changes in market value
of the securities held by a Fund and the prices of futures and options on
futures.
- Although the Funds will only purchase exchange-traded futures 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.
- 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.
PORTFOLIO TURNOVER RATE RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET
FUND) -- 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 higher levels of
transaction costs and generating greater tax liabilities for shareholders.
EARLY CLOSING RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) -- The
normal close of trading of securities listed on the National Association of
Securities Dealers Automated Quotations system ("NASDAQ") and the New York Stock
Exchange ("NYSE") is 4:00 P.M., Eastern Time. Unanticipated early closings may
result in a Fund being unable to sell or buy securities on that day. If an
exchange closes early on a day when one or more of the Funds needs to execute a
high volume of securities trades late in a trading day, a Fund might incur
substantial trading losses.
FOREIGN COMPANY RISKS (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) --
Investments in securities of foreign companies can be more volatile than
investments in U.S.
<PAGE>
- ------
36 PROSPECTUS
companies. Diplomatic, political, or economic developments could affect
investments in foreign countries. Foreign companies generally are not subject to
uniform accounting, auditing, and financial reporting standards comparable to
those applicable to U.S. domestic companies.
SMALL ISSUER RISK (BIOTECHNOLOGY AND ELECTRONICS FUNDS) -- Small and medium
capitalization companies may be more vulnerable than larger, more established
organizations to adverse business or economic developments. In particular, small
capitalization companies may have limited product lines, markets, and financial
resources and may be dependent upon a relatively small management group. These
securities may trade over-the-counter or listed on an exchange and may or may
not pay dividends.
YEAR 2000 RISK (ALL FUNDS) -- The Funds depend on the smooth functioning of
computer systems in almost every aspect of their business. Like other mutual
funds, businesses and individuals around the world, the Funds could be adversely
affected if the computer systems used by its service providers do not properly
process dates on and after January 1, 2000 and distinguish between the year 2000
and the year 1900. The Trust has asked its service providers whether they expect
to have their computer systems adjusted for the year 2000 transition, and has
received assurances from all that they have devoted significant resources to
prevent material adverse consequences to the Funds. The Funds and their
respective shareholders may experience losses if these assurances prove to be
incorrect or as a result of year 2000 computer difficulties experienced by
issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others with which the Funds do business. Furthermore, many
foreign countries are not as prepared as the U.S. for the year 2000 transition.
Computer difficulties in foreign markets and with foreign institutions as a
result of the year 2000 may add to the possibility of losses to the Funds and
their shareholders.
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
the Sector 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). If the
exchange or market where a Fund's securities or other investments are primarily
traded closes early, the NAV may be calculated earlier. To receive the current
Business Day's NAV, the Trust must
<PAGE>
PROSPECTUS 37
--------
receive your purchase order before the cutoff times specified below for each
method of investing. Intermediaries may have earlier cutoff times.
MINIMUM INVESTMENT
If a registered investment advisor has discretionary authority over your
account, the minimum initial investment in the Investor Class Shares of the
Sector 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.
Intermediaries may charge fees for services provided in connection with buying,
selling or exchanging shares. Each intermediary also may have its own rules
about share transactions. For more information about how to purchase shares
through an intermediary, you should contact that intermediary directly. If you
invest in the Trust, by any method referenced below, without designating which
Fund you want to invest in, your money will be invested in the U.S. Government
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 brokers and
dealers or other financial institutions who may have the responsibility to
transmit orders promptly and who may charge a processing fee for purchases,
redemptions or exchanges of shares, or (ii) directly with the Trust by mail or
by bank wire transfer as follows:
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. To open an account, fill out an application and
make a check payable to "Rydex Series Trust." Mail the check, along with an
application, if you are making an initial investment, to:
Rydex Series Trust
6116 Executive Boulevard, Suite 400
Attn: Ops. Dept.
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.
<PAGE>
- ------
38 PROSPECTUS
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 Firstar along with
the following instructions:
Firstar
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 (YOUR BANK MAY CHARGE A
FEE FOR SUCH SERVICES) 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. IF THE PURCHASE IS CANCELED
BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE LIABLE FOR ANY LOSS THAT
THE TRUST INCURS.
Telephone calls for wire transfers for both initial investments (which must
be preceded by an 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 has been received by the Trust. Intermediaries may have earlier cutoff
times for purchases. For more information about how to purchase through an
intermediary, you should contact that intermediary directly.
TAX-QUALIFIED RETIREMENT PLANS
Investors may purchase shares of the 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
<PAGE>
PROSPECTUS 39
--------
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 taken at the time of closing from the proceeds. Additional
information regarding these accounts 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 by wire. Telephone redemptions will be sent only to your address or your
bank account (as listed in the Trust's records) if you redeem by wire. 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. You may have to transmit your redemption
request to your intermediary at an earlier time in order for your redemption to
be effective that Business Day. Please contact your intermediary to find out
their specific requirements for written and telephone requests for redemptions
and signature guarantees.
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.
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
<PAGE>
- ------
40 PROSPECTUS
required minimum of $15,000 ($25,000 for Self-Directed Accounts), the Trust
reserves the right to redeem your remaining shares without ANY additional
notification to you.
SUSPENSION OF REDEMPTIONS
With respect to each Fund, and as permitted by the Securities and Exchange
Commission ("Commission"), the right of redemption may be suspended, or the date
of payment postponed: (i) for any period during which the NYSE, the Federal
Reserve Bank of New York (the "New York Fed"), NASDAQ, the CME or the Chicago
Board Options Exchange ("CBOE") as appropriate, is closed (other than customary
weekend or holiday closings) or trading on the NYSE, NASDAQ, the CME or the CBOE
as appropriate, is restricted; (ii) for any period during which an emergency
exists so that disposal of Fund investments or the determination of NAV is not
reasonably practicable; or (iii) for such other periods as the Commission, by
order, may permit for protection of Fund investors. On any day that the New York
Fed or the NYSE closes early, the principal government securities and corporate
bond markets close early (such as on days in advance of holidays generally
observed by participants in these markets), or as permitted by the Commission,
the right is reserved to advance the time on that day by which purchase and
redemption orders must be received.
EXCHANGES
You may exchange Investor Class Shares of any Fund for Investor Class Shares
of any other Rydex Fund Investor Class Shares, 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 exchange is to be made. The Trust currently is
composed of twenty-two separate Funds. Investor Class Shares of six Benchmark
Funds are offered in a separate prospectus. 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>
PROSPECTUS 41
--------
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
Arktos
- ----------------------------------------------------------------------------------------------
Sector Funds 3:30 p.m.
Precious Metals
- ----------------------------------------------------------------------------------------------
U.S. Government Bond 2:45 p.m.
Juno
- ----------------------------------------------------------------------------------------------
</TABLE>
Intermediaries may have earlier cutoff times.
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, Attn: Ops. Dept., 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 the 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 this Prospectus. 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 or your intermediary 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>
- ------
42 PROSPECTUS
MANAGEMENT OF THE FUNDS
PADCO Advisors, Inc., (the "Advisor") 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 paid
the Advisor a fee at an annualized rate for the fiscal period ended March 31,
1999, based on the average daily net assets for each Fund, as set forth below:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE
<S> <C>
- -------------------------------------
Sector Funds.............. .85%
Precious Metals........... .75%
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.
Each Sector Fund is managed by a team and no one person is responsible for
making investment decisions for a Sector Fund.
The portfolio manager of the Precious Metals Fund is T. Daniel Gillespie,
who joined the Advisor as a portfolio manager 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.
<PAGE>
PROSPECTUS 43
--------
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Income dividends, if any, are paid at least annually by each of the Funds,
except the U.S. Government Money Market Fund which declares dividends daily and
pays them monthly. If you own Fund shares on a Fund's record date, you will be
entitled to receive the dividend. The Funds may declare and pay dividends on the
same date. The Funds make distributions of capital gains, if any, at least
annually. The Trust, however, may declare a special capital gains distribution
if the Trustees believe that such a distribution would be in the best interest
of the shareholders of a Fund.
You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. If you have not
already elected to receive cash payments on your application, you must notify
the Trust in writing prior to the date of distribution. Your election will
become effective for dividends paid after the Trust receives your written
notice. To cancel your election, simply send written notice to the Trust.
Dividends and distributions from a Fund are taxable to you whether they are
reinvested in additional shares of the Fund or are received in cash. You will
receive an account statement at least quarterly.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial or administrative action. The Trust has
not tried to present a detailed explanation of the tax treatment of the Funds,
or of the tax consequences of an investment in the Funds. MORE INFORMATION ABOUT
TAXES IS LOCATED IN THE STATEMENT OF ADDITIONAL INFORMATION (SAI). YOU ARE URGED
TO CONSULT YOUR TAX ADVISOR REGARDING SPECIFIC QUESTIONS AS TO FEDERAL, STATE
AND LOCAL INCOME TAXES.
TAX STATUS OF EACH FUND
Each Fund is treated as a separate entity for federal tax purposes, and
intends to qualify for the special tax treatment afforded regulated investment
companies. As long as a Fund qualifies as a regulated investment company, it
pays no federal income tax on the earnings it distributes to Shareholders.
TAX STATUS OF DISTRIBUTIONS
- Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME
WHETHER YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.
<PAGE>
- ------
44 PROSPECTUS
- Corporate shareholders may be entitled to a dividends-received deduction
for the portion of dividends they receive which are attributable to
dividends received by a Fund from U.S. corporations.
- Capital gains distributions will result from gains on the sale or exchange
of capital assets held for more than one year.
- Distributions paid in January but declared by a Fund in October, November
or December of the previous year, may be taxable to you in the previous
year.
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>
PROSPECTUS 45
--------
FINANCIAL HIGHLIGHTS
SECTOR FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Funds' financial performance for the period of the Funds' operations.
Certain information reflects financial results for a single Investor
Class Share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in an Investor
Class Share of the Funds (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche, LLP
whose report, along with the financial statements and related notes, appears in
the Trust's 1999 Annual Report. Our 1999 Annual Report is available by
telephoning us at 1-800-820-0888 or (301) 468-8520. The Annual Report is
incorporated by reference in the SAI.
<TABLE>
<CAPTION>
INVESTOR CLASS
---------------------------------------------------------
FOR THE PERIOD ENDED MARCH 31, 1999*
---------------------------------------------------------
FINANCIAL HEALTH BASIC
ENERGY SERVICES CARE TECHNOLOGY MATERIALS
FUND FUND FUND FUND FUND
-------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:+
Net Asset Value -- Beginning of Period........................... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00
-------- --------- -------- ---------- ---------
Net Investment Income (Loss)................................... .05 (.01) (.02) (.16) --
Net Realized and Unrealized Gains (Losses) on Securities....... (1.06) -- 1.47 7.18 (2.25)
-------- --------- -------- ---------- ---------
Net Increase (Decrease) in Net Asset Value Resulting from
Operations.................................................... (1.01) (.01) 1.45 7.02 (2.25)
Distributions to Shareholders.................................. -- -- -- -- --
-------- --------- -------- ---------- ---------
Net Increase (Decrease) in Net Asset Value....................... (1.01) (.01) 1.45 7.02 (2.25)
-------- --------- -------- ---------- ---------
Net Asset Value -- End of Period................................. $ 8.99 $ 9.99 $ 11.45 $ 17.02 $ 7.75
-------- --------- -------- ---------- ---------
-------- --------- -------- ---------- ---------
Total Investment Return.......................................... (10.10)% (0.10)% 14.50% 70.20% (22.50)%
Ratios to Average Net Assets:
Gross Expenses**............................................... 1.62% 1.58% 1.44% 1.39% 1.62%
Net Expenses**................................................. 1.62% 1.57% 1.43% 1.39% 1.61%
Net Investment Income (Loss)**................................. 0.69% (0.07)% (0.21)% (1.23)% (0.02)%
Supplementary Data:
Portfolio Turnover Rate 6,070% 7,269% 4,465% 4,598% 5,704%
Net Assets, End of Period (000's omitted)...................... $ 17,442 $22,165 $ 14,016 $24,400 $2,179
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
* COMMENCEMENT OF OPERATIONS: APRIL 21, 1998 -- ENERGY FUND, APRIL 2, 1998
-- FINANCIAL SERVICES FUND, APRIL 17, 1998 -- HEALTH CARE FUND, APRIL 14,
1998 -- TECHNOLOGY FUND, APRIL 1, 1998 -- BASIC MATERIALS FUND.
** ANNUALIZED
<PAGE>
- ------
46 PROSPECTUS
<TABLE>
<CAPTION>
INVESTOR CLASS
--------------------------------------------------------------
FOR THE PERIOD ENDED MARCH 31, 1999*
--------------------------------------------------------------
CONSUMER TELECOMMUNI-
PRODUCTS LEISURE RETAILING CATIONS TRANSPORTATION
FUND FUND FUND FUND FUND
-------- ------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:+
Net Asset Value -- Beginning of Period................. $10.00 $10.00 $ 10.00 $ 10.00 $10.00
-------- ------- --------- ----------- ------
Net Investment Loss.................................. -- (.08) (.10) (.04) (.03)
Net Realized and Unrealized Gains (Losses) on
Securities.......................................... (.29) 1.29 3.64 3.07 (1.98)
-------- ------- --------- ----------- ------
Net Increase (Decrease) in Net Asset Value Resulting
from Operations..................................... (.29) 1.21 3.54 3.03 (2.01)
Distributions to Shareholders........................ -- -- -- -- --
-------- ------- --------- ----------- ------
Net Increase (Decrease) in Net Asset Value............. (.29) 1.21 3.54 3.03 (2.01)
-------- ------- --------- ----------- ------
Net Asset Value -- End of Period....................... $ 9.71 $11.21 $ 13.54 $ 13.03 $ 7.99
-------- ------- --------- ----------- ------
-------- ------- --------- ----------- ------
Total Investment Return................................ (2.90)% 12.10% 35.40% 30.30% (20.10)%
Ratios to Average Net Assets:
Gross Expenses**..................................... 1.55% 1.59% 1.42% 1.56% 1.58%
Net Expenses**....................................... 1.54% 1.59% 1.42% 1.55% 1.58%
Net Investment Income (Loss)**....................... (0.03)% (0.76)% (0.81)% (0.34)% (0.36)%
Supplementary Data:
Portfolio Turnover Rate.............................. 1,255% 5,581% 3,243% 2,788% 7,583%
Net Assets, End of Period (000's omitted)............ $1,280 $4,796 $45,219 $12,300 $3,014
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
* SINCE THE COMMENCEMENT OF OPERATIONS: JULY 6, 1998 -- CONSUMER PRODUCTS
FUND, APRIL 1, 1998 -- LEISURE FUND, RETAILING FUND, AND TELECOMMUNICATIONS
FUND, APRIL 2, 1998 -- TRANSPORTATION FUND.
** ANNUALIZED
<PAGE>
PROSPECTUS 47
--------
<TABLE>
<CAPTION>
INVESTOR CLASS
-----------------------------------------------
FOR THE PERIOD ENDED MARCH 31, 1999*
-----------------------------------------------
ENERGY BIO-
SERVICES BANKING TECHNOLOGY ELECTRONICS
FUND FUND FUND FUND
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:+
Net Asset Value -- Beginning of Period................. $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- ---------- -----------
Net Investment Income (Loss)......................... (.07) .01 (.16) (.15)
Net Realized and Unrealized Gains (Losses) on
Securities.......................................... (3.91) (1.24) 2.97 4.17
-------- -------- ---------- -----------
Net Increase (Decrease) in Net Asset Value Resulting
from Operations..................................... (3.98) (1.23) 2.81 4.02
Distributions to Shareholders........................ -- -- -- --
-------- -------- ---------- -----------
Net Increase (Decrease) in Net Asset Value............. (3.98) (1.23) 2.81 4.02
-------- -------- ---------- -----------
Net Asset Value -- End of Period....................... $ 6.02 $ 8.77 $ 12.81 $ 14.02
-------- -------- ---------- -----------
-------- -------- ---------- -----------
Total Investment Return................................ (39.80)% (12.30)% 28.10% 40.20%
Ratios to Average Net Assets:
Gross Expenses**..................................... 1.58% 1.58% 1.56% 1.57%
Net Expenses**....................................... 1.57% 1.57% 1.55% 1.56%
Net Investment Income (Loss)**....................... (1.14)% 0.13% (1.52)% (1.23)%
Supplementary Data:
Portfolio Turnover Rate.............................. 3,170% 11,211% 2,670% 3,011%
Net Assets, End of Period (000's omitted)............ $74,135 $ 7,827 $38,205 $12,814
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE PERIOD.
* COMMENCEMENT OF OPERATIONS: APRIL 1, 1998 -- ENERGY SERVICES FUND, BANKING
FUND, BIOTECHNOLOGY FUND, AND ELECTRONICS FUND.
** ANNUALIZED
<PAGE>
- ------
48 PROSPECTUS
FINANCIAL HIGHLIGHTS
PRECIOUS METALS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single Precious Metals Fund Investor
Class 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
1999 Annual Report. Our 1999 Annual Report is available by telephoning us at
800-820-0888 or (301) 468-8520. The Annual Report is incorporated by reference
in the SAI.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997* 1996 1995
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of Period................. $ 5.82 $ 7.64 $ 9.05 $ 8.73 $ 8.29
--------- --------- --------- -------- --------
Net Investment Income (Loss)+........................ (.03) .00 .00 .00 .10
Net Realized and Unrealized Gains (Losses) on
Securities.......................................... (1.60) (1.82) (1.41) .32 .43
--------- --------- --------- -------- --------
Net Increase (Decrease) in Net Asset Value Resulting
from Operations..................................... (1.63) (1.82) (1.41) .32 .53
Dividends to Shareholders from Net Investment
Income.............................................. .00 .00 .00 .00 (.09)
--------- --------- --------- -------- --------
Net Increase (Decrease) in Net Asset Value............. (1.63) (1.82) (1.41) .32 .44
--------- --------- --------- -------- --------
Net Asset Value -- End of Period....................... $ 4.19 $ 5.82 $ 7.64 $ 9.05 $ 8.73
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Total Investment Return................................ (28.01)% (23.82)% (20.77)%** 3.67% 6.21%
Ratios to Average Net Assets
Gross Expenses....................................... 1.37% 1.42% 1.49%**
Net Expenses......................................... 1.36% 1.41% 1.45%** 1.33% 1.38%
Net Investment Income (Loss)......................... (0.69)% .05% .00%** (.01)% 1.15%
Supplementary Data
Portfolio Turnover Rate***........................... 1,191% 752% 743% 1,036% 1,765%
Net Assets, End of Period (000's omitted).............. $26,823 $34,538 $23,680 $36,574 $40,861
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* ON MARCH 12, 1997, THE TRUSTEES CHANGED THE TRUST'S FISCAL YEAR END FROM
JUNE 30 TO MARCH 31.
** ANNUALIZED.
*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SECURITIES
HAVING A MATURITY OF LESS THAN ONE YEAR.
<PAGE>
PROSPECTUS 49
--------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY MARKET FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single U.S. Government Money Market Fund
Investor Class 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 1999 Annual
Report. Our 1999 Annual Report is available by telephoning us at 800-820-0888 or
(301) 468-8520. The Annual Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997* 1996 1995
--------- --------- --------- --------- --------
<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 (Loss)+.................................. .04 .04 .03 .04 .04
--------- --------- --------- --------- --------
Net Increase in Net Asset Value Resulting from Operations...... .04 .04 .03 .04 .04
Dividends to Shareholders from Net Investment Income........... (.04) (.04) (.03) (.04) (.04)
--------- --------- --------- --------- --------
Net Increase in Net Asset Value.................................. .00 .00 .00 .00 .00
--------- --------- --------- --------- --------
Net Asset Value -- End of Period................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
Total Investment Return.......................................... 4.55% 4.69% 4.39%** 4.60% 4.43%
Ratios to Average Net Assets
Gross Expenses................................................. .84% .89% .86%**
Net Expenses................................................... .83% .89% .86%** .99% .89%
Net Investment Income (Loss)................................... 4.37% 4.37% 4.06%** 4.18% 4.23%
Supplementary Data
Net Assets, End of Period (000's omitted)...................... $949,802 $253,295 $283,553 $ 153,925 $284,198
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* ON MARCH 12, 1997, THE TRUSTEES CHANGED THE TRUST'S FISCAL YEAR END FROM
JUNE 30 TO MARCH 31.
** ANNUALIZED.
<PAGE>
- ------
50 PROSPECTUS
BENCHMARK INFORMATION.
THE METALS FUND IS NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY THE
PHILADELPHIA STOCK EXCHANGE (PHLX), SPONSOR OF THE XAU INDEX.
PHLX DOES NOT MAKE ANY REPRESENTATION OR WARRANTY, IMPLIED OR EXPRESS, TO THE
INVESTORS IN THE METALS FUND, OR ANY MEMBER OF THE PUBLIC, REGARDING THE
ADVISABILITY OF INVESTING IN INDEX FUNDS OR THE ABILITY OF THE XAU INDEX TO
TRACK GENERAL STOCK MARKET PERFORMANCE.
PHLX DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE XAU INDEX OR
ANY DATA INCLUDED THEREIN.
PHLX DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE METALS FUND, THE INVESTORS IN THE FUND, OR ANY PERSON OR ENTITY
FROM THE USE OF THE XAU INDEX OR ANY DATA INCLUDED THEREIN.
PHLX DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE FOR USE WITH RESPECT TO THE XAU INDEX OR ANY
DATA INCLUDED THEREIN.
<PAGE>
Additional information about the Funds is included in a Statement of Additional
Information dated August 1, 1999 (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. Additional
information about the Funds' investments is available in the annual and semi-
annual reports. Also, in the Funds' annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Funds' performance during its last fiscal year.
- --------------------------------------------------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR PADCO ADVISORS,
INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST IN ANY
JURISDICTION WHERE SUCH AN OFFERING IS NOT LAWFUL.
<PAGE>
PROSPECTUS -- INVESTOR CLASS
<TABLE>
<C> <S>
1 INTRODUCTION
---
2 NOVA FUND
---
4 URSA FUND
---
6 OTC FUND
---
8 ARKTOS FUND
---
10 U.S. GOVERNMENT BOND FUND
---
12 JUNO FUND
---
14 U.S. GOVERNMENT MONEY MARKET FUND
---
16 MORE INFORMATION ABOUT RISK
---
18 SHAREHOLDER INFORMATION
---
24 MANAGEMENT
---
25 DIVIDENDS, DISTRIBUTIONS AND TAXES
---
27 FINANCIAL HIGHLIGHTS
---
34 BENCHMARK INFORMATION
---
BC ADDITIONAL INFORMATION
---
</TABLE>
AUGUST 1, 1999
RYDEX SERIES TRUST
NOVA FUND
URSA FUND
OTC FUND
ARKTOS 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-two 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.
<PAGE>
ICON LEGEND
[ICON]
Fund Objective
The fund's particular investment goal.
[ICON]
Portfolio Investments
The primary types of securities in which the fund invests.
[ICON]
Risk Considerations
The major risk factors associated with the fund.
[ICON]
Fund Performance and Fee Information
The overall costs incurred by an investor in the fund.
[ICON]
Financial Highlights
A table showing the fund's financial performance.
ii
<PAGE>
PROSPECTUS 1
--------
INTRODUCTION
The Funds (except the U.S. Government Money Market Fund) are designed to
provide investment results that match the performance of a specific benchmark.
The benchmark used by each Fund is set forth below:
<TABLE>
<CAPTION>
FUND (TICKER SYMBOL) BENCHMARK
<S> <C>
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 performance of S&P 500 Composite Stock
Price Index-TM- (SPX)
OTC Fund (RYOCX) 100% of the performance of the NASDAQ 100 Index-TM- (NDX)
Arktos Fund Inverse (opposite) of the performance of NASDAQ 100 Index-TM- (NDX)
U.S. Government Bond Fund (RYGBX) 120% of the price movement of the Long Treasury Bond
Juno Fund (RYJUX) Inverse (opposite) of the price movement of the Long
Treasury Bond
</TABLE>
A BRIEF GUIDE TO THE BENCHMARKS.
THE S&P 500 COMPOSITE STOCK PRICE INDEX-TM- (S&P 500 INDEX). The S&P 500 Index
is a capitalization-weighted index composed of 500 common stocks, which are
chosen by the Standard & Poor's Corporation ("S&P") on a statistical basis.
THE NASDAQ 100 INDEX-TM-. The NASDAQ 100 Index-TM- is a modified
capitalization-weighted index composed of 100 of the largest non-financial
companies listed on the National Association of Securities Dealers Automated
Quotations System.
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.
THE FUNDS:
- are not federally insured
- are not guaranteed by any government agency
- are not bank deposits
- are not guaranteed to achieve their objectives
INVESTING IN ANY OF THE FUNDS INVOLVES RISKS THAT MAY ADVERSELY AFFECT THE
FUNDS' NET ASSET VALUE, YIELD AND TOTAL RETURN. YOU MAY LOSE MONEY. Each Fund
(except the U.S. Government Money Market Fund) is non-diversified. Non-
diversified funds 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.
<PAGE>
- ------
2 PROSPECTUS
FUND INFORMATION -- NOVA FUND
FUND OBJECTIVE
[ICON]
The Nova Fund seeks to provide investment returns that are 150% of the
S&P 500 Index.
PORTFOLIO INVESTMENTS
[ICON]
Unlike a traditional index fund, as its primary investment strategy,
the Fund invests to a significant extent in leveraged instruments,
such as futures contracts and options on securities, futures contracts, and
stock indexes, as well as equity securities. Futures and options contracts, if
used properly, may enable the Fund to meet its objective without investing
directly in the securities included in the index, or in the same proportion that
those securities are represented in the index. On a day-to-day basis, the Fund
holds U.S. Government securities or cash equivalents to collateralize these
futures and options contracts. The Fund also may enter into repurchase
agreements.
RISK CONSIDERATIONS
[ICON]
The Nova Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- LEVERAGING RISK -- The more the Fund invests in leveraged instruments, the
more this leverage will magnify any losses on those investments.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by 150% of the value of any increase in the S&P 500
Index. However, when the value of the S&P 500 Index declines, the value of the
Fund's shares should also decrease on a daily basis by 150% of the value of any
decrease in the Index.
<PAGE>
PROSPECTUS 3
--------
FUND PERFORMANCE AND FEE INFORMATION
NOVA FUND PERFORMANCE
[ICON]
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NOVA FUND
<S> <C>
1998 35.13%
1997 42.34%
1996 27.29%
1995 50.42%
1994 -4.77%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 14.35%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
31.69% (QUARTER ENDED DEC. 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
(16.87)% (QUARTER ENDED SEPT. 30, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS
SHARES S&P 500 INDEX(2)
--------------------------------------
<S> <C> <C>
Past One Year 35.13% 26.67%
Past Five Years 28.49% 21.36%
Since Inception (07/12/93) 27.32% 20.20%
</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>
<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 .44%
---------
Total Annual Fund Operating Expenses 1.19%
</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>
$121 $378 $654 $1,443
</TABLE>
<PAGE>
- ------
4 PROSPECTUS
FUND INFORMATION -- URSA FUND
FUND OBJECTIVE
[ICON]
The Ursa Fund seeks to provide investment results that will inversely
correlate to the performance of the S&P 500 Index.
PORTFOLIO INVESTMENTS
[ICON]
Unlike a traditional index fund, the Fund's benchmark is to perform
exactly opposite the S&P 500 Index, and the Fund will not own the securities
included in the index. Instead, as its primary investment strategy, the Fund
invests to a significant extent in futures contracts and options on securities,
futures contracts, and stock indexes. On a day-to-day basis, the Fund holds U.S.
Government securities or cash equivalents to collateralize these futures and
options contracts. The Fund also may enter into repurchase agreements and sell
securities short.
RISK CONSIDERATIONS
[ICON]
The Ursa Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase during times when the value of the S&P 500 Index is decreasing. When
the value of the S&P 500 Index is increasing, however, the value of the Fund's
shares should decrease on a daily basis by an inversely proportionate amount
(e.g., if the S&P 500 Index goes up by 5%, the value of the Fund's shares should
go down by 5% on that day).
<PAGE>
PROSPECTUS 5
--------
FUND PERFORMANCE AND FEE INFORMATION
URSA FUND PERFORMANCE
[ICON]
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
URSA FUND
<S> <C>
1998 -19.01%
1997 -20.99%
1996 -12.17%
1995 -20.14%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS (8.38)%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
(10.86)% (QUARTER ENDED SEPT. 30, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
(17.06)% (QUARTER ENDED DEC. 31, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS S&P 500
SHARES INDEX(2)
------------------------------------
<S> <C> <C>
Past One Year (19.01)% 26.67%
Since Inception (01/07/94) (14.22)% 21.28%
</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>
<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 .48%
---------
Total Annual Fund Operating Expenses 1.38%
</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.
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>
$141 $437 $755 $1,657
</TABLE>
<PAGE>
- ------
6 PROSPECTUS
FUND INFORMATION -- OTC FUND
FUND OBJECTIVE
[ICON]
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
[ICON]
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 purchase U.S. Government
securities and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The OTC Fund is subject to a number of risks that will affect the value
of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by the amount of the increase in value of the NASDAQ
100 Index-TM-. However, when the value of the NASDAQ 100 Index-TM- declines, the
value of the Fund's shares should also decrease on a daily basis by the amount
of the decrease in value of the Index.
<PAGE>
PROSPECTUS 7
--------
FUND PERFORMANCE AND FEE INFORMATION
OTC FUND PERFORMANCE
[ICON]
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OTC FUND
<S> <C>
1998 86.48%
1997 21.85%
1996 43.46%
1995 44.24%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 25.17%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
35.51% (QUARTER ENDED DEC. 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
(9.67)% (QUARTER ENDED DEC. 31, 1997).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS NASDAQ 100
SHARES INDEX-TM- (2)
-------------------------------------------
<S> <C> <C>
Past One Year 86.48% 85.31 %
Since Inception (02/14/94) 36.54% 36.30 %
</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>
<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 .40%
---------
Total Annual Fund Operating Expenses 1.15%
</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.
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>
$117 $365 $633 $1,398
</TABLE>
<PAGE>
- ------
8 PROSPECTUS
FUND INFORMATION -- ARKTOS FUND
FUND OBJECTIVE
[ICON]
The Arktos Fund seeks to provide investment results that will match
the performance of a specific benchmark. The Fund's current benchmark
is the inverse of the performance of the NASDAQ 100 Index-TM-.
PORTFOLIO INVESTMENTS
[ICON]
Unlike a traditional index fund, the Fund's benchmark is to perform
exactly opposite the NASDAQ 100 Index-TM-, and the Fund will not own the
securities included in the Index. Instead, as its primary investment strategy,
the Fund engages to a significant extent in short sales of securities, futures
contracts and options on securities, futures contracts, and stock indexes. On a
day-to-day basis, the Fund holds U.S. Government securities or cash equivalents
to collateralize these futures and options contracts. The Fund also may enter
into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The Arktos Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase during times when the value of the NASDAQ 100 Index-TM- is decreasing.
When the value of the NASDAQ 100 Index-TM- is increasing, however, the value of
the Fund's shares should decrease on a daily basis by an inversely proportionate
amount (e.g., if the NASDAQ 100 Index-TM- goes up by 5%, the value of the Fund's
shares should go down by 5% on that day).
<PAGE>
PROSPECTUS 9
--------
FUND PERFORMANCE AND FEE INFORMATION
ARKTOS FUND PERFORMANCE
[ICON]
The Arktos Fund commenced operations September 3, 1998, and therefore
does not have a performance history for a full calendar year.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Arktos Fund.
- --------------------------------------------------------------------------------
<TABLE>
<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** .47%
---------
Total Annual Fund Operating Expenses 1.37%
</TABLE>
* THE FUND MAY IMPOSE A WIRE TRANSFER CHARGE OF $15 ON CERTAIN REDEMPTIONS
UNDER $5,000.
** OTHER EXPENSES ARE ESTIMATED.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the
Arktos 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>
$139 $434 $750 $1,646
</TABLE>
<PAGE>
- ------
10 PROSPECTUS
FUND INFORMATION -- U.S. GOVERNMENT BOND FUND
FUND OBJECTIVE
[ICON]
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
[ICON]
The Fund invests principally in U.S. Government securities and in
leveraged instruments, such as certain futures and options contracts. Some of
the Fund's U.S. Government securities, or cash equivalents, will be used to
collateralize these futures and options. Futures and options contracts, if used
properly, may enable the Fund to meet its objective by increasing the Fund's
exposure to the securities included in its benchmark. In addition, the Fund may
enter into transactions involving zero coupon U.S. Treasury bonds and repurchase
agreements.
RISK CONSIDERATIONS
[ICON]
The U.S. Government Bond Fund is subject to a number of risks that will
affect the value of its shares, including:
- FIXED INCOME RISK -- The Fund's fixed income investments will change in
value in response to interest rate changes and other factors. In addition,
the value of securities with longer maturities will fluctuate more in
response to interest rate changes.
- LEVERAGING RISK -- The more the Fund invests in leveraged instruments, the
more this leverage will magnify any losses on those investments.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares should
increase on a daily basis by 120% of any price increase by the Long Treasury
Bond. In contrast, when the price of the Long Treasury Bond declines, the value
of the Fund's shares should decline on a daily basis by 120% of any price
decline of the Long Treasury Bond.
<PAGE>
PROSPECTUS 11
--------
FUND PERFORMANCE AND FEE INFORMATION
U.S. GOVERNMENT BOND FUND PERFORMANCE
[ICON]
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. GOVERNMENT BOND FUND
<S> <C>
1998 15.83%
1997 16.36%
1996 -7.09%
1995 36.14%
1994 -17.96%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS (13.41)%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
13.90% (QUARTER ENDED JUNE 30, 1995) AND THE LOWEST RETURN FOR A QUARTER WAS
(10.68)% (QUARTER ENDED MARCH 31, 1996).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS
SHARES LEHMAN LONG TREASURY INDEX(2)
--------------------------------------------------
<S> <C> <C>
Past One Year 15.83% 13.49%
Past Five Years 6.95% 9.69%
(Inception 01/03/94)
</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>
<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 .46%
---------
Total Annual Fund Operating Expenses .96%
</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 Bond 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>
$98 $306 $532 $1,182
</TABLE>
<PAGE>
- ------
12 PROSPECTUS
FUND INFORMATION -- JUNO FUND
FUND OBJECTIVE
[ICON]
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
[ICON]
Unlike a traditional fund, the Fund's benchmark is to perform exactly
opposite the Long Treasury Bond. As its primary investment strategy, the Fund
enters into short sales and engages in futures and options transactions. On a
day-to-day basis, the Fund holds U.S. Government securities or cash equivalents
to collateralize these obligations. The Fund also may enter into repurchase
agreements.
RISK CONSIDERATIONS
[ICON]
The Juno Fund is subject to a number of risks that will affect the
value of its shares, including:
- FIXED INCOME RISK -- The Fund's fixed income investments will change in
value in response to interest rate changes and other factors. In addition,
the value of securities with longer maturities will fluctuate more in
response to interest rate changes.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase during periods when the price of the Long Treasury Bond decreases. When
the price of the Long Treasury Bond increases, however, the value of the Fund's
shares should decrease on a daily basis by an inversely proportionate amount
(e.g., if the price of the Long Treasury Bond increases by 2%, the value of the
Fund's shares should go down by 2% on that day).
<PAGE>
PROSPECTUS 13
--------
FUND PERFORMANCE AND FEE INFORMATION
JUNO FUND PERFORMANCE
[ICON]
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
JUNO FUND
<S> <C>
1998 -4.58%
1997 -5.56%
1996 8%
</TABLE>
* THE YEAR-TO-DATE PERFORMANCE FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE
30, 1999 IS 11.23%.
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
(7.90)% (QUARTER ENDED JUNE 30, 1995).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS LEHMAN LONG TREASURY
SHARES INDEX(2)
------------------------------------------------
<S> <C> <C>
Past One Year (4.58)% 13.49%
Since Inception (03/03/95) (4.68)% 13.38%
</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>
<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 .66%
---------
Total Annual Fund Operating Expenses 1.56%
</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.
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>
$159 $493 $850 $1,856
</TABLE>
<PAGE>
- ------
14 PROSPECTUS
FUND INFORMATION -- U.S. GOVERNMENT MONEY MARKET FUND
FUND OBJECTIVE
[ICON]
The U.S. Government Money Market Fund seeks to provide security of
principal, high current income, and liquidity.
PORTFOLIO INVESTMENTS
[ICON]
The U.S. Government Money Market Fund invests primarily in money
market instruments issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, and enters into repurchase
agreements fully collateralized by U.S. Government securities. The Fund operates
under SEC rules which impose certain liquidity, maturity and diversification
requirements. All securities purchased by the Fund must have remaining
maturities of 397 days or less, and must be found by the Advisor to represent
minimal credit risk and be of eligible quality.
RISK CONSIDERATIONS
[ICON]
The U.S. Government Money Market Fund is subject to the following risk
that will potentially affect the value of its shares:
- INTEREST RATE RISK -- Interest Rate Risk involves the potential for
decline in the rate of dividends the Fund pays in the event of declining
interest rates.
- STABLE PRICE PER SHARE RISK -- The Fund's assets are valued using the
amortized cost method, which enables the Fund to maintain a stable price
of $1.00 per share. ALTHOUGH THE FUND IS MANAGED TO MAINTAIN A STABLE
PRICE PER SHARE OF $1.00, THERE IS NO GUARANTEE THAT THE PRICE WILL BE
CONSTANTLY MAINTAINED, AND IT IS POSSIBLE TO LOSE MONEY.
<PAGE>
PROSPECTUS 15
--------
FUND PERFORMANCE AND FEE INFORMATION
U.S. GOVERNMENT MONEY MARKET FUND PERFORMANCE
[ICON]
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND
<S> <C>
1998 4.72%
1997 4.59%
1996 4.49%
1995 4.93%
1994 3.23%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 2.00%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
1.27% (QUARTER ENDED JUNE 30, 1995) AND THE LOWEST RETURN FOR A QUARTER WAS
1.03% (QUARTER ENDED JUNE 30, 1996).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS SHARES 90-DAY TREASURY COMPOSITE(2)
------------------------------------------------------
<S> <C> <C>
Past One Year 4.72% 4.78%
Past Five Years 4.39% 4.91%
Since Inception (12/03/93) 4.33% 4.88%
</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, 1999, the seven-day yield of the Fund was 4.02%.
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>
<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 .33%
---------
Total Annual Fund Operating Expenses .83%
</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.
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>
$85 $265 $461 $1,029
</TABLE>
<PAGE>
- ------
16 PROSPECTUS
MORE INFORMATION ABOUT RISK
As indicated below, the Funds are subject to a number of risks that may
affect the value of Fund shares.
EQUITY RISK (NOVA, URSA, OTC AND ARKTOS FUNDS) -- The Funds may invest in public
and privately issued equity securities, including common and preferred stocks,
warrants, and rights, as well as instruments that attempt to track the price
movement of equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause their prices
to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which the Funds invest will
cause the net asset value of the Funds to fluctuate. An investment in the Funds
may be more suitable for long-term investors who can bear the risk of short-term
principal fluctuations.
FIXED INCOME RISK (U.S. GOVERNMENT BOND AND JUNO FUNDS) -- The market value of
fixed income investments will change in response to interest rate changes and
other factors. During periods of falling interest rates, the values of
outstanding fixed income securities generally rise. Conversely, during periods
of rising interest rates, the values of such securities generally decline.
Moreover, while securities with longer maturities tend to produce higher yields,
the prices of longer maturity securities are also subject to greater market
fluctuations as a result of changes in interest rates.
TRACKING ERROR RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) --
While the Funds do not expect returns to deviate significantly from their
respective benchmarks on a daily basis, factors such as Fund expenses, imperfect
correlation between the Funds' investments and those of their benchmarks,
rounding of share prices, changes to the benchmark, regulatory policies, and
leverage, may affect their ability to achieve close correlation. The cumulative
effect of these factors may over time cause the Fund's returns to deviate from
their respective benchmarks on an aggregate basis. The magnitude of any tracking
error may be affected by a higher portfolio turnover rate.
TRADING HALT RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) -- The
Funds typically will hold short-term options and futures contracts. The major
exchanges on which these contracts are traded, such as the Chicago Mercantile
Exchange ("CME"), have established limits on how much an option or futures
contract may decline over various time periods within a day. If an option or
futures contract's price declines more than the established limits, trading on
the exchange is halted on that instrument. If a trading halt occurs at the close
of a trading day, a Fund may not be able to purchase or sell options or futures
contracts. In such an event, a Fund also may be required to use a "fair-value"
method to price its outstanding contracts.
<PAGE>
PROSPECTUS 17
--------
FUTURES AND OPTIONS RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET
FUND) -- The Funds may invest a percentage of their assets in futures and
options contracts. The Funds may use futures contracts and related options for
bona fide hedging purposes to offset changes in the value of securities held or
expected to be acquired. They may also be used to gain exposure to a particular
market or instrument, to create a synthetic money market position, and for
certain other tax-related purposes. The Funds will only enter into futures
contracts traded on a national futures exchange or board of trade. Futures and
options contracts are described in more detail below:
FUTURES CONTRACTS -- Futures contracts and options on futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. An option on a futures contract gives the purchaser the
right, in exchange for a premium, to assume a position in a futures contract
at a specified exercise price during the term of the option. Index futures
are futures contracts for various indices that are traded on registered
securities exchanges.
OPTIONS -- The buyer of an option acquires the right to buy (a call option)
or sell (a put option) a certain quantity of a security (the underlying
security) or instrument at a certain price up to a specified point in time.
The seller or writer of an option is obligated to sell (a call option) or
buy (a put option) the underlying security. When writing (selling) call
options on securities, 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.
The risks associated with the Funds' use of futures and options contracts
include:
- A Fund experiencing losses over certain ranges in the market that exceed
losses experienced by a Fund that does not use futures and options
contracts.
- There may be an imperfect correlation between the changes in market value
of the securities held by a Fund and the prices of futures and options on
futures.
- Although the Funds will only purchase exchange-traded futures 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.
- Because option premiums paid or received by the Funds are small in
relation to the market value of the investments underlying the options,
buying and selling put and call options can be more speculative than
investing directly in securities.
<PAGE>
- ------
18 PROSPECTUS
SHORT SALES RISK (ARKTOS FUND) -- Short sales are transactions in which a Fund
sells a security it does not own. To complete the transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund is then obligated to
replace the security borrowed by purchasing the security at the market price at
the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. If the price is lower, the
Fund will make money on the transaction. Conversely, if the price is higher, the
Fund will lose money on the transaction. The risk of such price increases is the
principal risk of engaging in short sales.
PORTFOLIO TURNOVER RATE RISK (NOVA, OTC AND U.S. GOVERNMENT BOND FUNDS) -- 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 higher levels of transaction
costs and generating greater tax liabilities for shareholders.
EARLY CLOSING RISK (OTC AND ARKTOS FUNDS) -- The normal close of trading of
securities listed on the National Association of Securities Dealers Automated
Quotations system ("NASDAQ") and the New York Stock Exchange ("NYSE") is 4:00
P.M., Eastern Time. Unanticipated early closings may result in a Fund being
unable to sell or buy securities on that day. If an exchange closes early on a
day when one or more of the Funds needs to execute a high volume of securities
trades late in a trading day, a Fund might incur substantial trading losses.
YEAR 2000 RISK (ALL FUNDS) -- The Funds depend on the smooth functioning of
computer systems in almost every aspect of their business. Like other mutual
funds, businesses and individuals around the world, the Funds could be adversely
affected if the computer systems used by its service providers do not properly
process dates on and after January 1, 2000 and distinguish between the year 2000
and the year 1900. The Trust has asked its service providers whether they expect
to have their computer systems adjusted for the year 2000 transition, and has
received assurances from all that they have devoted significant resources to
prevent material adverse consequences to the Funds. The Funds and their
respective shareholders may experience losses if these assurances prove to be
incorrect or as a result of year 2000 computer difficulties experienced by
issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others with which the Funds do business.
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
<PAGE>
PROSPECTUS 19
--------
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). The NAV of the
Bond Fund and the Juno Fund is determined each Business day as of the close of
normal trading on the CBOT (normally 3:00 P.M., Eastern Time). If the exchange
or market where a Fund's securities or other investments are primarily traded
closes early, the NAV may be calculated earlier. 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. Intermediaries may have earlier
cutoff times.
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, by any method referenced below, without designating which
Fund you want to invest in, your money will be invested in the U.S. Government
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 brokers and
dealers or other financial institutions who have the responsibility to transmit
orders promptly and who may charge a processing fee for purchases, redemptions
or exchanges of shares, or (ii) directly with the Trust by mail or by bank wire
transfer as follows:
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. To open an account, fill out an application and
make a check payable to "Rydex Series Trust." Mail the check, along with an
application if you are making an initial investment, to:
Rydex Series Trust
6116 Executive Boulevard, Suite 400
Attn: Ops. Dept.
Rockville, Maryland 20852
<PAGE>
- ------
20 PROSPECTUS
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 Firstar along with
the following instructions:
Firstar
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.
Telephone calls for wire transfers for both initial investments (which must
be preceded by an 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 has been received by the Trust. Intermediaries may have earlier cutoff
times for purchases. For more information about how to purchase through an
intermediary, you should contact that intermediary directly.
TAX-QUALIFIED RETIREMENT PLANS
Investors may purchase shares of the 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)
<PAGE>
PROSPECTUS 21
--------
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 taken at the time of closing from the proceeds. Additional
information regarding these accounts 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 by wire. Telephone redemptions will be sent only to your address or your
bank account (as listed in the Trust's records) if you redeem by wire. 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. You may have to transmit your redemption
request to your intermediary at an earlier time in order for your redemption to
be effective that Business Day. Please contact your intermediary to find out
their specific requirements for written and telephone requests for redemptions
and signature guarantees.
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>
- ------
22 PROSPECTUS
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), the Trust
reserves the right to redeem your remaining shares without any additional
notification to you.
SUSPENSION OF REDEMPTIONS
With respect to each Fund, and as permitted by the Securities and Exchange
Commission ("Commission"), the right of redemption may be suspended, or the date
of payment postponed: (i) for any period during which the NYSE, the Federal
Reserve Bank of New York (the "New York Fed"), NASDAQ, the CME, 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 exchange is to be made. The Trust currently is composed of twenty-two
separate Funds. Investor Class Shares of 14 Sector Funds and the Precious Metals
Fund 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>
PROSPECTUS 23
--------
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
Arktos
- ----------------------------------------------------------------------------------------------
Rydex Sector Funds 3:30 p.m.
Precious Metals
- ----------------------------------------------------------------------------------------------
U.S. Government Bond 2:45 p.m.
Juno
</TABLE>
Intermediaries may have earlier cutoff times.
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, Attn: Ops. Dept., 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 the 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 this Prospectus. 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>
- ------
24 PROSPECTUS
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 on a daily basis.
Through the use of quantitative analysis techniques, each Fund is structured to
obtain the highest correlation to its particular benchmark, while remaining
fully invested in all market environments. The Advisor monitors each Fund on an
ongoing basis, and makes adjustments to its portfolio, as necessary, to minimize
tracking error and to maximize liquidity. The Advisor may 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 paid
the Advisor a fee at an annualized rate for the fiscal year ended March 31,
1999, based on the average daily net assets for each Fund, as set forth below:
<TABLE>
<CAPTION>
FUND ADVISORY FEE
- ----------------------------------------------------------------------------------------------
<S> <C>
Nova .75%
Ursa .90%
OTC .75%
Arktos .90%
U.S. Government Bond .50%
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
<PAGE>
PROSPECTUS 25
--------
its own resources to broker-dealers and other financial institutions in
connection with the sale of Fund shares.
The portfolio manager of the OTC Fund and the Arktos Fund is Michael P.
Byrum, who is the Advisor's senior portfolio manager. Prior to joining the
Advisor as a portfolio manager in July 1993, Mr. Byrum worked as an investor
representative with MMA.
The portfolio manager of the Nova Fund is Thomas Michael, who joined the
Advisor as a portfolio manager in March 1994. From 1992 to February 1994, Mr.
Michael was a financial markets analyst at Cedar Street Investment Management
Co., of Chicago, Illinois, an institutional consulting 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 U.S. Government Bond Fund is Anne H. Ruff, who
joined the Advisor as a portfolio manager in August 1996. From 1989 to 1995, Ms.
Ruff worked as a portfolio manager for United Services Life Insurance Company in
Arlington, Virginia, where Ms. Ruff managed $2.5 billion in fixed-income
portfolios.
The portfolio manager of the Ursa Fund and the Juno Fund is Adam V. Croll,
who joined the Advisor as an assistant portfolio manager in 1996. Mr. Croll was
promoted to portfolio manager in 1998. Prior to joining the Advisor, Mr. Croll
attended the University of Maryland.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Income dividends, if any, are paid at least annually by each of the Funds,
except the U.S. Government 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, if
any, at least annually. The Trust, however, may declare a special capital gains
distribution if the Trustees believe that such a distribution would be in the
best interest of the shareholders of a Fund.
You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. If you have not
already elected to receive cash payments on your application, you must notify
the Trust in writing prior to the date of distribution. Your election will
become effective for dividends paid after the Trust receives your written
notice. To cancel your election, simply send written notice to the Trust.
Dividends and distributions from a Fund are taxable to you whether they are
reinvested in additional shares of the Fund or are received in cash. You will
receive an account statement at least quarterly.
<PAGE>
- ------
26 PROSPECTUS
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.
- Corporate shareholders may be entitled to a dividends-received deduction
for the portion of dividends they receive which are attributable to
dividends received by a Fund from U.S. corporations.
- Capital gains distributions will result from gains on the sale or exchange
of capital assets held for more than one year.
- Distributions paid in January but declared by a Fund in October, November
or December of the previous year, may be taxable to you in the previous
year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE, OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
YOU SHOULD CONSIDER THE TAX CONSEQUENCES OF ANY REDEMPTION OR EXCHANGE BEFORE
MAKING SUCH A REQUEST, ESPECIALLY WITH RESPECT TO REDEMPTIONS, IF YOU INVEST IN
THE FUNDS THROUGH A TAX-QUALIFIED RETIREMENT PLAN.
STATE TAX CONSIDERATIONS
A Fund is not liable for any income or franchise tax in Delaware as long as
it qualifies as a regulated investment company for Federal income tax purposes.
Distributions by the Funds may be subject to state and local taxation. You
should verify your tax liability with your tax advisor.
<PAGE>
PROSPECTUS 27
--------
FINANCIAL HIGHLIGHTS
NOVA FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single Nova Fund Investor Class 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 1999 Annual Report. Our 1999 Annual Report
is available by telephoning us at 800-820-0888 or (301) 468-8520. The Annual
Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997* 1996 1995
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of Period........................... $ 29.82 $ 17.89 $ 15.68 $ 11.81 $ 9.77
--------- --------- --------- -------- --------
Net Investment Income (Loss)+.................................. .45 .59 .35 .56 .28
Net Realized and Unrealized Gains (Losses) on Securities....... 5.01 11.39 2.19 3.31 2.88
--------- --------- --------- -------- --------
Net Increase (Decrease) in Net Asset Value Resulting from
Operations.................................................... 5.46 11.98 2.54 3.87 3.16
Dividends to Shareholders from Net Investment Income........... (.41) .00 .00 .00 (.29)
Distributions to Shareholders from Net Realized Capital Gain... .00 (.05) (.33) .00 (.83)
--------- --------- --------- -------- --------
Net Increase (Decrease) in Net Asset Value....................... 5.05 11.93 2.21 3.87 2.04
--------- --------- --------- -------- --------
Net Asset Value -- End of Period................................. $ 34.87 $ 29.82 $ 17.89 $ 15.68 $ 11.81
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Total Investment Return.......................................... 18.54% 67.02% 20.92%** 32.77% 32.65%
Ratios to Average Net Assets
Gross Expenses................................................. 1.19% 1.13% 1.19%**
Net Expenses................................................... 1.19% 1.11% 1.16%** 1.31% 1.43%
Net Investment Income (Loss)................................... 1.47% 2.42% 2.69%** 3.14% 2.62%
Supplementary Data
Portfolio Turnover Rate***..................................... 445% 0% 0% 0% 0%
Net Assets, End of Period (000's omitted)...................... $655,275 $986,247 $181,930 $224,541 $62,916
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* ON MARCH 12, 1997, THE TRUSTEES CHANGED THE TRUST'S FISCAL YEAR END FROM
JUNE 30 TO MARCH 31.
** ANNUALIZED.
*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SECURITIES
HAVING A MATURITY OF LESS THAN ONE YEAR. FOR THE YEARS ENDED MARCH 31,
1998 AND PRIOR, THE NOVA FUND TYPICALLY HELD MOST OF ITS INVESTMENTS IN
OPTIONS AND FUTURES CONTRACTS, WHICH ARE DEEMED SHORT-TERM SECURITIES.
<PAGE>
- -------
28 PROSPECTUS
FINANCIAL HIGHLIGHTS
URSA FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single Ursa Fund Investor Class 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 1999 Annual Report. Our 1999 Annual Report
is available by telephoning us at 800-820-0888 or (301) 468-8520. The Annual
Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997* 1996 1995
--------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:++
Net Asset Value -- Beginning of Period........................... $ 9.92 $ 14.04 $ 15.10 $ 17.58 $ 21.08
--------- --------- --------- -------- ---------
Net Investment Income (Loss)+.................................. .25 .38 .34 .60 .70
Net Realized and Unrealized Gains (Losses) on Securities....... (1.48) (4.46) (1.36) (3.08) (3.56)
--------- --------- --------- -------- ---------
Net Increase (Decrease) in Net Asset Value Resulting from
Operations.................................................... (1.23) (4.08) (1.02) (2.48) (2.86)
Dividends to Shareholders from Net Investment Income........... (.03) (.04) (.04) -- (.64)
--------- --------- --------- -------- ---------
Net Increase (Decrease) in Net Asset Value....................... (1.26) (4.12) (1.06) (2.48) (3.50)
--------- --------- --------- -------- ---------
Net Asset Value -- End of Period................................. $ 8.66 $ 9.92 $ 14.04 $ 15.10 $ 17.58
--------- --------- --------- -------- ---------
--------- --------- --------- -------- ---------
Total Investment Return.......................................... (12.47)% (29.06)% (8.98)%** (14.11)% (14.08)%
Ratios to Average Net Assets
Gross Expenses................................................. 1.39% 1.36% 1.36%**
Net Expenses................................................... 1.38% 1.34% 1.34%** 1.39% 1.39%
Net Investment Income (Loss)................................... 3.29% 3.18% 3.21%** 3.38% 3.50%
Supplementary Data
Portfolio Turnover Rate***..................................... 0% 0% 0% 0% 0%
Net Assets, End of Period (000's omitted)...................... $482,340 $254,225 $582,288 $192,553 $ 127,629
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
++ PER SHARE AMOUNTS FOR THE PERIODS ENDED JUNE 30, 1995 THROUGH MARCH 31,
1998 HAVE BEEN RESTATED TO REFLECT A 1:2 REVERSE STOCK SPLIT EFFECTIVE
AUGUST 14, 1998.
* ON MARCH 12, 1997, THE TRUSTEES CHANGED THE TRUST'S FISCAL YEAR END FROM
JUNE 30 TO MARCH 31.
** 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.
<PAGE>
PROSPECTUS 29
--------
FINANCIAL HIGHLIGHTS
OTC FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single OTC Fund Investor Class 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 1999 Annual Report. Our 1999 Annual Report
is available by telephoning us at 800-820-0888 or (301) 468-8520. The Annual
Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
YEAR PERIOD YEAR YEAR
YEAR ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997* 1996 1995
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of Period...................... $ 27.68 $ 17.93 $ 15.16 $ 12.22 $ 8.76
----------- --------- --------- --------- ---------
Net Investment Income (Loss)+............................. (.36) (.14) .01 .06 .14
Net Realized and Unrealized Gains (Losses) on
Securities............................................... 20.65 9.99 2.84 3.24 4.17
----------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset Value Resulting from
Operations............................................... 20.29 9.85 2.85 3.30 4.31
Dividends to Shareholders from Net Investment Income...... .00 .00 (.07) .00 (.12)
Distributions to Shareholders from Net Realized Capital
Gain....................................................... (.27) (.10) (.01) (.36) (.73)
----------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset Value.................. 20.02 9.75 2.77 2.94 3.46
----------- --------- --------- --------- ---------
Net Asset Value -- End of Period............................ $ 47.70 $ 27.68 $ 17.93 $ 15.16 $ 12.22
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total Investment Return..................................... 73.73% 55.05% 24.77%** 26.44% 49.00%
Ratios to Average Net Assets
Gross Expenses............................................ 1.15% 1.13% 1.27%**
Net Expenses.............................................. 1.15% 1.13% 1.27%** 1.33% 1.41%
Net Investment Income (Loss).............................. (.97)% (.58)% .08%** .44% 1.34%
Supplementary Data
Portfolio Turnover Rate***................................ 773% 972% 1,140% 2,579% 2,241%
Net Assets, End of Period (000's omitted)................. $ 1,277,571 $449,794 $ 52,278 $ 48,716 $ 61,948
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* ON MARCH 12, 1997, THE TRUSTEES CHANGED THE TRUST'S FISCAL YEAR END FROM
JUNE 30 TO MARCH 31.
** ANNUALIZED.
*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SECURITIES
HAVING A MATURITY OF LESS THAN ONE YEAR.
<PAGE>
- -------
30 PROSPECTUS
FINANCIAL HIGHLIGHTS
ARKTOS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
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 Arktos Fund
Investor Class Share. The total returns in the table represent the rate
that an investor would have earned (or lost) on an investment in an
Investor Class Share of the Fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the financial statements and related notes,
appears in the Trust's 1999 Annual Report. Our 1999 Annual Report is available
by telephoning us at 800-820-0888 or (301) 468-8520. The Annual Report is
incorporated by reference in the SAI.
<TABLE>
<CAPTION>
PERIOD
ENDED
MARCH 31,
1999**
---------
<S> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of Period................................ $ 15.00
---------
Net Investment Income (Loss)+....................................... .13
Net Realized and Unrealized Gains (Losses) on Securities............ (7.08)
---------
Net Increase (Decrease) in Net Asset Value Resulting from
Operations......................................................... (6.95)
Dividends to Shareholders from Net Investment Income................ (.01)
---------
Net Increase (Decrease) in Net Asset Value............................ (6.96)
---------
Net Asset Value -- End of Period...................................... $ 8.04
---------
---------
Total Investment Return............................................... (46.35)%
Ratios to Average Net Assets
Gross Expenses...................................................... 1.38%***
Net Expenses........................................................ 1.37%***
Net Investment Income (Loss)........................................ 2.20%***
Supplementary Data
Portfolio Turnover Rate****......................................... 1,332%
Net Assets, End of Period (000's omitted)........................... $118,622
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
** COMMENCEMENT OF OPERATIONS: SEPTEMBER 3, 1998.
*** ANNUALIZED.
**** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SECURITIES
HAVING A MATURITY OF LESS THAN ONE YEAR. THE ARKTOS FUND TYPICALLY HOLDS
MOST OF ITS INVESTMENTS IN OPTIONS AND FUTURES CONTRACTS, WHICH ARE
DEEMED SHORT-TERM SECURITIES.
<PAGE>
PROSPECTUS 31
--------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT BOND FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single U.S. Government Bond Fund
Investor Class 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 1999 Annual
Report. Our 1999 Annual Report is available by telephoning us at 800-820-0888 or
(301) 468-8520. The Annual Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997* 1996 1995
--------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of Period........................ $ 10.04 $ 8.52 $ 8.97 $ 9.55 $ 8.24
--------- --------- --------- -------- ---------
Net Investment Income (Loss)+............................... .42 .45 .34 .46 .39
Net Realized and Unrealized Gains (Losses) on Securities.... .02 1.50 (.45) (.45) 1.17
--------- --------- --------- -------- ---------
Net Increase (Decrease) in Net Asset Value Resulting from
Operations................................................. .44 1.95 (.11) .01 1.56
Dividends to Shareholders from Net Investment Income........ (.42) (.43) (.34) (.46) (.25)
Distributions to Shareholders from Net Realized Capital
Gain....................................................... (.01) .00 .00 (.13) .00
--------- --------- --------- -------- ---------
Net Increase (Decrease) in Net Asset Value.................... .01 1.52 (.45) (.58) 1.31
--------- --------- --------- -------- ---------
Net Asset Value -- End of Period.............................. $ 10.05 $ 10.04 $ 8.52 $ 8.97 $ 9.55
--------- --------- --------- -------- ---------
--------- --------- --------- -------- ---------
Total Investment Return....................................... 4.24% 24.72% (.46)%** (1.48)% 18.97%
Ratios to Average Net Assets
Gross Expenses.............................................. 0.97% 1.13% 1.51%**
Net Expenses................................................ 0.96% 1.11% 1.49%** 1.26% 2.26%
Net Investment Income (Loss)................................ 3.88% 4.65% 5.06%** 4.73% 4.64%
Supplementary Data
Portfolio Turnover Rate***.................................. 1,339% 1,496% 962% 780% 3,453%
Net Assets, End of Period (000's omitted)................... $ 27,623 $ 20,508 $ 3,302 $18,331 $ 2,592
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* ON MARCH 12, 1997, THE TRUSTEES CHANGED THE TRUST'S FISCAL YEAR END FROM
JUNE 30 TO MARCH 31.
** ANNUALIZED.
*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SECURITIES
HAVING A MATURITY OF LESS THAN ONE YEAR.
<PAGE>
- ------
32 PROSPECTUS
FINANCIAL HIGHLIGHTS
JUNO FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
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
Investor Class 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
1999 Annual Report. Our 1999 Annual Report is available by telephoning us at
800-820-0888 or (301) 468-8520. The Annual Report is incorporated by reference
in the SAI.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997* 1996 1995**
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of Period........................... $ 8.65 $ 9.69 $ 9.47 $ 9.08 $ 10.00
--------- --------- --------- --------- --------
Net Investment Income (Loss)+.................................. .27 .16 .25 .34 .14
Net Realized and Unrealized Gains (Losses) on Securities....... (.20) (1.12) .00 .05 (1.06)
--------- --------- --------- --------- --------
Net Increase (Decrease) in Net Asset Value Resulting from
Operations.................................................... .07 (.96) .25 .39 (.92)
Dividends to Shareholders from Net Investment Income........... (.02) (.08) (.03) .00 .00
--------- --------- --------- --------- --------
Net Increase (Decrease) in Net Asset Value..................... .05 (1.04) .22 .39 (.92)
--------- --------- --------- --------- --------
Net Asset Value -- End of Period................................. $ 8.70 $ 8.65 $ 9.69 $ 9.47 $ 9.08
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
Total Investment Return.......................................... 0.78% (9.92)% 3.75%*** 4.30% (9.20)%
Ratios to Average Net Assets
Gross Expenses................................................. 1.57% 1.61% 1.60%***
Net Expenses................................................... 1.56% 1.59% 1.58%*** 1.64% 1.50%***
Net Investment Income (Loss)................................... 3.25% 3.55% 3.51%*** 3.63% 1.32%***
Supplementary Data
Portfolio Turnover Rate****.................................... 0% 0% 0% 0% 0%
Net Assets, End of Period (000's omitted)...................... $ 12,789 $ 12,887 $ 32,577 $ 18,860 $ 4,301
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING 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>
PROSPECTUS 33
--------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY MARKET FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single U.S. Government Money Market Fund
Investor Class 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 1999 Annual
Report. Our 1999 Annual Report is available by telephoning us at 800-820-0888 or
(301) 468-8520. The Annual Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997* 1996 1995
--------- --------- --------- --------- ---------
<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 (Loss)+.................................. .04 .04 .03 .04 .04
--------- --------- --------- --------- ---------
Net Increase in Net Asset Value Resulting from Operations...... .04 .04 .03 .04 .04
Dividends to Shareholders from Net Investment Income........... (.04) (.04) (.03) (.04) (.04)
--------- --------- --------- --------- ---------
Net Increase in Net asset Value.................................. .00 .00 .00 .00 .00
--------- --------- --------- --------- ---------
Net Asset Value -- End of Period................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total Investment Return.......................................... 4.55% 4.69% 4.39%** 4.60% 4.43%
Ratios to Average Net Assets
Gross Expenses................................................. 0.84% .89% .86%**
Net Expenses................................................... 0.83% .89% .86%** .99% .89%
Net Investment Income (Loss)................................... 4.37% 4.37% 4.06%** 4.18% 4.23%
Supplementary Data
Net Assets, End of Period (000's omitted)...................... $949,802 $253,295 $283,553 $ 153,925 $ 284,198
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* ON MARCH 12, 1997, THE TRUSTEES CHANGED THE TRUST'S FISCAL YEAR END FROM
JUNE 30 TO MARCH 31.
** ANNUALIZED.
<PAGE>
- -------
34 PROSPECTUS
BENCHMARK INFORMATION.
NEITHER THE NOVA FUND NOR THE URSA FUND IS SPONSORED, ENDORSED, SOLD, OR
PROMOTED BY STANDARD & POOR'S CORP. (S&P); NEITHER THE OTC FUND NOR THE ARKTOS
FUND IS SPONSORED, ENDORSED, SOLD, OR PROMOTED BY NASDAQ OR ANY OF NASDAQ'S
AFFILIATES (NASDAQ AND ITS AFFILIATES HEREINAFTER COLLECTIVELY REFERRED TO AS
"NASDAQ").
NEITHER S&P NOR NASDAQ MAKE ANY REPRESENTATION OR WARRANTY, IMPLIED OR EXPRESS,
TO THE INVESTORS IN THE FUNDS, OR ANY MEMBER OF THE PUBLIC, REGARDING THE
ADVISABILITY OF INVESTING IN INDEX FUNDS OR THE ABILITY OF THE S&P 500 INDEX OR
NASDAQ 100 INDEX-TM-, RESPECTIVELY, TO TRACK GENERAL STOCK MARKET PERFORMANCE.
NEITHER S&P NOR NASDAQ GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX AND THE NASDAQ 100 INDEX-TM-, RESPECTIVELY, OR ANY DATA INCLUDED
THEREIN.
NEITHER S&P NOR NASDAQ MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO
BE OBTAINED BY ANY OF THE FUNDS, THE INVESTORS IN THE FUNDS, OR ANY PERSON OR
ENTITY FROM THE USE OF THE S&P 500 INDEX OR THE NASDAQ 100 INDEX-TM-,
RESPECTIVELY, OR ANY DATA INCLUDED THEREIN.
NEITHER S&P NOR NASDAQ 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-, RESPECTIVELY, OR ANY DATA INCLUDED THEREIN.
<PAGE>
Additional information about the Funds is included in a Statement of Additional
Information dated August 1, 1999 (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. Additional
information about the Funds' investments is available in the annual and semi-
annual reports. Also, in the Funds' annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Funds' performance during its last fiscal year.
- --------------------------------------------------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR PADCO ADVISORS,
INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST IN ANY
JURISDICTION WHERE SUCH AN OFFERING IS NOT LAWFUL.
<PAGE>
PROSPECTUS -- ADVISOR CLASS
<TABLE>
<C> <S>
1 INTRODUCTION
---
2 NOVA FUND
---
4 URSA FUND
---
6 OTC FUND
---
8 U.S. GOVERNMENT MONEY MARKET FUND
---
10 MORE INFORMATION ABOUT RISK
---
12 SHAREHOLDER INFORMATION
---
18 MANAGEMENT
---
19 DIVIDENDS, DISTRIBUTIONS AND TAXES
---
22 FINANCIAL HIGHLIGHTS
---
23 BENCHMARK INFORMATION
---
BC ADDITIONAL INFORMATION
---
</TABLE>
AUGUST 1, 1999
RYDEX SERIES TRUST
NOVA FUND
URSA FUND
OTC 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-two separate investment portfolios (the "Rydex Funds"), four of which are
described in this Prospectus (the "Funds"). Advisor Class Shares of the Funds
are sold principally through broker-dealers and other financial institutions
whose clients 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.
<PAGE>
ICON LEGEND
Fund Objective
[ICON]
The fund's particular investment goal.
Portfolio Investments
[ICON]
The primary types of securities in which the fund invests.
Risk Considerations
[ICON]
The major risk factors associated with the fund.
Fund Performance and Fee Information
[ICON]
The overall costs incurred by an investor in the fund.
Financial Highlights
[ICON]
A table showing the fund's financial performance.
ii
<PAGE>
PROSPECTUS 1
--------
INTRODUCTION
The Funds (except the U.S. Government Money Market Fund) are designed to
provide investment results that match the performance of a specific benchmark.
The benchmark used by each Fund is set forth below:
<TABLE>
<CAPTION>
FUND BENCHMARK
<S> <C>
Nova Fund 150% of the performance of the S&P 500 Composite Stock Price
Index-TM- (SPX)
Ursa Fund Inverse (opposite) of the performance of S&P 500 Composite Stock
Price Index-TM- (SPX)
OTC Fund 100% of the performance of the NASDAQ 100 Index-TM- (NDX)
</TABLE>
A BRIEF GUIDE TO THE BENCHMARKS.
THE S&P 500 COMPOSITE STOCK PRICE INDEX-TM- (S&P 500 INDEX). The S&P 500 Index
is a capitalization-weighted index composed of 500 common stocks, which are
chosen by the Standard & Poor's Corporation ("S&P") on a statistical basis.
THE NASDAQ 100 INDEX-TM-. The NASDAQ 100 Index-TM- is a modified
capitalization-weighted index composed of 100 of the largest non-financial
companies listed on the National Association of Securities Dealers Automated
Quotations System.
THE FUNDS:
- are not federally insured
- are not guaranteed by any government agency
- are not bank deposits
- are not guaranteed to achieve their objectives
INVESTING IN ANY OF THE FUNDS INVOLVES RISKS THAT MAY ADVERSELY AFFECT THE
FUNDS' NET ASSET VALUE, YIELD AND TOTAL RETURN. YOU MAY LOSE MONEY. Each Fund
(except the U.S. Government Money Market Fund) is non-diversified. Non-
diversified funds 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.
<PAGE>
- ------
2 PROSPECTUS
FUND INFORMATION -- NOVA FUND
FUND OBJECTIVE
[ICON]
The Nova Fund seeks to provide investment returns that are 150% of the
S&P 500 Index.
PORTFOLIO INVESTMENTS
[ICON]
Unlike a traditional index fund, as its primary investment strategy,
the Fund invests to a significant extent in leveraged instruments,
such as futures contracts and options on securities, futures contracts, and
stock indexes, as well as equity securities. Futures and options contracts, if
used properly, may enable the Fund to meet its objective without investing
directly in the securities included in the index, or in the same proportion that
those securities are represented in the index. On a day-to-day basis, the Fund
holds U.S. Government securities or cash equivalents to collateralize these
futures and options contracts. The Fund also may enter into repurchase
agreements.
RISK CONSIDERATIONS
[ICON]
The Nova Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- LEVERAGING RISK -- The more the Fund invests in leveraged instruments, the
more this leverage will magnify any losses on those investments.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by 150% of the value of any increase in the S&P 500
Index. However, when the value of the S&P 500 Index declines, the value of the
Fund's shares should also decrease on a daily basis by 150% of the value of any
decrease in the Index.
<PAGE>
PROSPECTUS 3
--------
FUND PERFORMANCE AND FEE INFORMATION
NOVA FUND PERFORMANCE
[ICON]
The bar chart and table below show the performance of Investor Class
Shares of the Nova Fund (which are not offered in this Prospectus) both
year-by-year and as an average over different periods of time. Since
Investor Class shares are invested in the same portfolio of securities,
returns for the Advisor Class Shares of the Fund will be substantially
similar to that of the Investor Class Shares shown here, and will
differ only to the extent that each Class has different expenses. The
variability of performance over time provides an indication of the
risks of investing in the Fund. Of course, this past performance does not
necessarily indicate how the Fund will perform in the future.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NOVA FUND
<S> <C>
1998 35.13%
1997 42.34%
1996 27.29%
1995 50.42%
1994 -4.77%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 14.08%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
31.69% (QUARTER ENDED DEC. 31, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
(16.87)% (QUARTER ENDED SEPT. 30, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS
SHARES S&P 500 INDEX(2)
--------------------------------------
<S> <C> <C>
Past One Year 35.13% 26.67%
Past Five Years 28.49% 21.36%
Since Inception (07/12/93) 27.32% 20.20%
</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 Advisor Class Shares of the Nova Fund.
- --------------------------------------------------------------------------------
<TABLE>
<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 .25%
Other Expenses .58%
---------
Total Annual Fund Operating Expenses 1.58%
</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
Advisor Class Shares of 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>
$161 $499 $860 $1,878
</TABLE>
<PAGE>
- ------
4 PROSPECTUS
FUND INFORMATION -- URSA FUND
FUND OBJECTIVE
[ICON]
The Ursa Fund seeks to provide investment results that will inversely
correlate to the performance of the S&P 500 Index.
PORTFOLIO INVESTMENTS
[ICON]
Unlike a traditional index fund, the Fund's benchmark is to perform
exactly opposite the S&P 500 Index, and the Fund will not own the securities
included in the index. Instead, as its primary investment strategy, the Fund
invests to a significant extent in futures contracts and options on securities,
futures contracts, and stock indexes. On a day-to-day basis, the Fund holds U.S.
Government securities or cash equivalents to collateralize these futures and
options contracts. The Fund also may enter into repurchase agreements and sell
securities short.
RISK CONSIDERATIONS
[ICON]
The Ursa Fund is subject to a number of risks that will affect the
value of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase during times when the value of the S&P 500 Index is decreasing. When
the value of the S&P 500 Index is increasing, however, the value of the Fund's
shares should decrease on a daily basis by an inversely proportionate amount
(e.g., if the S&P 500 Index goes up by 5%, the value of the Fund's shares should
go down by 5% on that day).
<PAGE>
PROSPECTUS 5
--------
FUND PERFORMANCE AND FEE INFORMATION
URSA FUND PERFORMANCE
[ICON]
The bar chart and table below show the performance of Investor Class
Shares of the Ursa Fund (which are not offered in this Prospectus) both
year-by-year and as an average over different periods of time. Since
Investor Class Shares are invested in the same portfolio of securities,
returns for the Advisor Class Shares of the Fund will be substantially
similar to that of the Investor Class Shares shown here, and will
differ only to the extent that each Class has different expenses. The
variability of performance over time provides an indication of the
risks of investing in the Fund. Of course, this past performance does not
necessarily indicate how the Fund will perform in the future.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
URSA FUND
<S> <C>
1998 -19.01%
1997 -20.99%
1996 -12.17%
1995 -20.14%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS (8.74)%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
10.86% (QUARTER ENDED SEPT. 30, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
(17.06)% (QUARTER ENDED DEC. 31, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS S&P 500
SHARES INDEX(2)
-----------------------------------
<S> <C> <C>
Past One Year (19.01)% 26.67%
Since Inception (01/07/94) (14.22)% 21.28%
</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 Advisor Class Shares of the Ursa Fund.
- --------------------------------------------------------------------------------
<TABLE>
<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 .25%
Other Expenses .70%
---------
Total Annual Fund Operating Expenses 1.85%
</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
Advisor Class Shares of the Ursa 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>
$188 $582 $1,001 $2,169
</TABLE>
<PAGE>
- ------
6 PROSPECTUS
FUND INFORMATION -- OTC FUND
FUND OBJECTIVE
[ICON]
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
[ICON]
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 purchase U.S. Government
securities and enter into repurchase agreements.
RISK CONSIDERATIONS
[ICON]
The OTC Fund is subject to a number of risks that will affect the value
of its shares, including:
- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's securities and futures and options contracts may fluctuate
drastically from day-to-day. This volatility may cause the value of your
investment in the Fund to decrease.
- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match the performance of the Fund's benchmark, either on a
daily or aggregate basis. Tracking Error may cause the Fund's performance
to be less than you expect.
If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by the amount of the increase in value of the NASDAQ
100 Index-TM-. However, when the value of the NASDAQ 100 Index-TM- declines, the
value of the Fund's shares should also decrease on a daily basis by the amount
of the decrease in value of the Index.
<PAGE>
PROSPECTUS 7
--------
FUND PERFORMANCE AND FEE INFORMATION
OTC FUND PERFORMANCE
[ICON]
The bar chart and table below show the performance of Investor Class
Shares of the OTC Fund (which are not offered in this Prospectus) both
year-by-year and as an average over different periods of time. Since
Investor Class Shares are invested in the same portfolio of securities,
returns for the Advisor Class Shares of the Fund will be substantially
similar to that of the Investor Class Shares shown here, and will
differ only to the extent that each Class has different expenses. The
variability of performance over time provides an indication of the
risks of investing in the Fund. Of course, this past performance does not
necessarily indicate how the Fund will perform in the future.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OTC FUND
<S> <C>
1998 86.48%
1997 21.85%
1996 43.46%
1995 44.24%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 24.88%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
35.51% (QUARTER ENDED DEC. 21, 1998) AND THE LOWEST RETURN FOR A QUARTER WAS
(9.67)% (QUARTER ENDED DEC. 31, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS NASDAQ 100 INDEX-TM-
SHARES (2)
------------------------------------------
<S> <C> <C>
Past One Year 86.48% 85.31%
Since Inception (02/14/94) 36.54% 36.30%
</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 Advisor Class Shares of the OTC Fund.
- --------------------------------------------------------------------------------
<TABLE>
<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 .25%
Other Expenses .47%
---------
Total Annual Fund Operating Expenses 1.47%
</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
Advisor Class Shares of the OTC 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>
$150 $465 $803 $1,757
</TABLE>
<PAGE>
- ------
8 PROSPECTUS
FUND INFORMATION -- U.S. GOVERNMENT MONEY MARKET FUND
FUND OBJECTIVE
[ICON]
The U.S. Government Money Market Fund seeks to provide security of
principal, high current income, and liquidity.
PORTFOLIO INVESTMENTS
[ICON]
The U.S. Government Money Market Fund invests primarily in money
market instruments issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, and enters into repurchase
agreements fully collateralized by U.S. Government securities. The Fund operates
under SEC rules which impose certain liquidity, maturity and diversification
requirements. All securities purchased by the Fund must have remaining
maturities of 397 days or less, and must be found by the Advisor to represent
minimal credit risk and be of eligible quality.
RISK CONSIDERATIONS
[ICON]
The U.S. Government Money Market Fund is subject to the following risk
that will potentially affect the value of its shares:
- INTEREST RATE RISK -- Interest Rate Risk involves the potential for
decline in the rate of dividends the Fund pays in the event of declining
interest rates.
- STABLE PRICE PER SHARE RISK -- The Fund's assets are valued using the
amortized cost method, which enables the Fund to maintain a stable price
of $1.00 per share. ALTHOUGH THE FUND IS MANAGED TO MAINTAIN A STABLE
PRICE PER SHARE OF $1.00, THERE IS NO GUARANTEE THAT THE PRICE WILL BE
CONSTANTLY MAINTAINED, AND IT IS POSSIBLE TO LOSE MONEY.
<PAGE>
PROSPECTUS 9
--------
FUND PERFORMANCE AND FEE INFORMATION
U.S. GOVERNMENT MONEY MARKET FUND PERFORMANCE
[ICON]
The bar chart and table below show the performance of Investor Class
Shares of the U.S. Government Money Market Fund (which are not offered
in this Prospectus) both year-by-year and as an average over different
periods of time. Since Investor Class Shares are invested in the same
portfolio of securities, returns for the Advisor Class Shares of the
Fund will be substantially similar to that of the Investor Class Shares
shown here, and will differ only to the extent that each Class has
different expenses. The variability of performance over time provides
an indication of the risks of investing in the Fund. Of course, this
past performance does not necessarily indicate how the Fund will perform in the
future.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND
<S> <C>
1998 4.72%
1997 4.59%
1996 4.49%
1995 4.93%
1994 3.23%
</TABLE>
* THE YEAR-TO-DATE RETURN FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JUNE 30,
1999 IS 2.00%.
DURING THE PERIOD SHOWN IN THE BAR CHART, THE HIGHEST RETURN FOR A QUARTER WAS
1.27% (QUARTER ENDED JUNE 30, 1995) AND THE LOWEST RETURN FOR A QUARTER WAS
1.03% (QUARTER ENDED JUNE 30, 1996).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1998)(1)
INVESTOR CLASS
SHARES 90-DAY TREASURY COMPOSITE(2)
--------------------------------------------------
<S> <C> <C>
Past One Year 4.72% 4.78%
Past Five Years 4.39% 4.91%
Since Inception (12/03/93) 4.33% 4.88%
</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, 1999, the seven-day yield of Advisor Class Shares of the
Fund was 3.52%.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold Advisor Class Shares of the U.S. Government Money Market Fund.
- --------------------------------------------------------------------------------
<TABLE>
<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 .25%
Other Expenses .58%
---------
Total Annual Fund Operating Expenses 1.33%
</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
Advisor Class Shares of the U.S. Government Money Market 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>
$135 $422 $730 $1,606
</TABLE>
<PAGE>
- ------
10 PROSPECTUS
MORE INFORMATION ABOUT RISK
As indicated below, the Funds are subject to a number of risks that may
affect the value of Fund shares.
EQUITY RISK (NOVA, URSA AND OTC FUNDS) -- The Funds may invest in public and
privately issued equity securities, including common and preferred stocks,
warrants, and rights, as well as instruments that attempt to track the price
movement of equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause their prices
to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which the Funds invest will
cause the net asset value of the Funds to fluctuate. An investment in the Funds
may be more suitable for long-term investors who can bear the risk of short-term
principal fluctuations.
TRACKING ERROR RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) --
While the Funds do not expect returns to deviate significantly from their
respective benchmarks on a daily basis, factors such as Fund expenses, imperfect
correlation between the Funds' investments and those of their benchmarks,
rounding of share prices, changes to the benchmark, regulatory policies, and
leverage, may affect their ability to achieve close correlation. The cumulative
effect of these factors may over time cause the Funds' returns to deviate from
their respective benchmarks on an aggregate basis. The magnitude of any tracking
error may be affected by a higher portfolio turnover rate.
TRADING HALT RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) -- The
Funds typically will hold short-term options and futures contracts. The major
exchanges on which these contracts are traded, such as the Chicago Mercantile
Exchange ("CME"), have established limits on how much an option or futures
contract may decline over various time periods within a day. If an option or
futures contract's price declines more than the established limits, trading on
the exchange is halted on that instrument. If a trading halt occurs at the close
of a trading day, a Fund may not be able to purchase or sell options or futures
contracts. In such an event, a Fund also may be required to use a "fair-value"
method to price its outstanding contracts.
<PAGE>
PROSPECTUS 11
--------
FUTURES AND OPTIONS RISK (ALL FUNDS EXCEPT U.S. GOVERNMENT MONEY MARKET FUND) --
The Funds may invest a percentage of their assets in futures and options
contracts. The 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. The Fund will only enter into futures contracts traded on
a national futures exchange or board of trade. Futures and options contracts are
described in more detail below:
FUTURES CONTRACTS -- Futures contracts and options on futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. An option on a futures contract gives the purchaser the
right, in exchange for a premium, to assume a position in a futures contract
at a specified exercise price during the term of the option. Index futures
are futures contracts for various indices that are traded on registered
securities exchanges.
OPTIONS -- The buyer of an option acquires the right to buy (a call option)
or sell (a put option) a certain quantity of a security (the underlying
security) or instrument at a certain price up to a specified point in time.
The seller or writer of an option is obligated to sell (a call option) or
buy (a put option) the underlying security. When writing (selling) call
options on securities, 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.
The risks associated with the Funds' use of futures and options contracts
include:
- A Fund experiencing losses over certain ranges in the market that exceed
losses experienced by a Fund that does not use futures and options
contracts.
- There may be an imperfect correlation between the changes in market value
of the securities held by a Fund and the prices of futures and options on
futures.
- Although the Fund 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 Fund 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.
- Because option premiums paid or received by the 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 RISK -- 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
<PAGE>
- ------
12 PROSPECTUS
is then obligated to replace the security borrowed by purchasing the security at
the market price at the time of replacement. The price at such time may be more
or less than the price at which the security was sold by the Fund. If the price
is lower, the Fund will make money on the transaction. Conversely, if the price
is higher, the Fund will lose money on the transaction. The risk of such price
increases is the principal risk of engaging in short sales.
PORTFOLIO TURNOVER RATE RISK (NOVA FUND AND OTC FUND) -- 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 higher levels of transaction costs and
generating greater tax liabilities for shareholders.
EARLY CLOSING RISK (OTC FUND) -- 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.
YEAR 2000 RISK (ALL FUNDS) -- The Funds depend on the smooth functioning of
computer systems in almost every aspect of their business. Like other mutual
funds, businesses and individuals around the world, the Funds could be adversely
affected if the computer systems used by its service providers do not properly
process dates on and after January 1, 2000 and distinguish between the year 2000
and the year 1900. The Trust has asked its service providers whether they expect
to have their computer systems adjusted for the year 2000 transition, and has
received assurances from all that they have devoted significant resources to
prevent material adverse consequences to the Funds. The Funds and their
respective shareholders may experience losses if these assurances prove to be
incorrect or as a result of year 2000 computer difficulties experienced by
issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others with which the Funds do business.
SHAREHOLDER INFORMATION
HOW TO INVEST IN THE FUNDS
PURCHASING SHARES
Advisor Class Shares are offered continuously through intermediaries 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,
<PAGE>
PROSPECTUS 13
--------
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).
If the exchange or market where a Fund's securities or other investments are
primarily traded closes early, the NAV may be calculated earlier. 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. Intermediaries
may have earlier cutoff times.
MINIMUM INVESTMENT
If an intermediary such as a broker-dealer or other financial institution
has discretionary authority over your account, the minimum initial investment in
the Advisor Class Shares of the Funds is $25,000. This minimum also applies to
retirement plan accounts. The Trust, at its discretion, may accept lesser
amounts in certain circumstances. Intermediaries may charge fees for services
provided in connection with buying, selling or exchanging shares. Each
intermediary also may have its own rules about share transactions. For more
information about how to purchase shares through an intermediary, you should
contact that intermediary directly. If you invest in the Trust, by any method
referenced below, without designating which Fund you want to invest in, your
check or your wire advice, your money will be invested in the U.S. Government
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 only through intermediaries or
securities dealers who have the responsibility to transmit orders promptly and
who may charge a processing fee.
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. To open an account, fill out an application and
make a check payable to "Rydex Series Trust." Mail the check, along with an
application if you are making an initial investment, to:
Rydex Series Trust
6116 Executive Boulevard, Suite 400
Attn: Ops. Dept.
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.
<PAGE>
- ------
14 PROSPECTUS
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 Firstar along with
the following instructions:
Firstar
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 (YOUR BANK MAY CHARGE A
FEE FOR SUCH SERVICES) 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. IF THE PURCHASE IS CANCELED
BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE LIABLE FOR ANY LOSS THAT
THE TRUST INCURS.
Telephone calls for wire transfers for both initial investments (which must
be preceded by an 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 U.S. Government 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 has been received by the Trust. Intermediaries may
have earlier cutoff times for purchases. For more information about how to
purchase through an intermediary, you should contact that intermediary directly.
TAX-QUALIFIED RETIREMENT PLANS
Investors may purchase shares of the 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
<PAGE>
PROSPECTUS 15
--------
For retirement plan accounts that have engaged an intermediary with
discretionary authority over the retirement plan account with the Trust, the
minimum initial investment in Advisor 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 taken at the time of closing from the proceeds. Additional
information regarding these accounts 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 by wire. Telephone redemptions will be sent only to your address or your
bank account (as listed in the Trust's records) if you redeem by wire. 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. You may have to transmit your redemption
request to your intermediary at an earlier time in order for your redemption to
be effective that Business Day. Please contact your intermediary to find out
their specific requirements for written and telephone requests for redemptions
and signature guarantees.
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.
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
<PAGE>
- ------
16 PROSPECTUS
required minimum of $25,000, the Trust reserves the right to redeem your
remaining shares without any additional notification to you.
SUSPENSION OF REDEMPTIONS
With respect to each Fund, and as permitted by the Securities and Exchange
Commission ("Commission"), the right of redemption may be suspended, or the date
of payment postponed: (i) for any period during which the NYSE, the Federal
Reserve Bank of New York (the "New York Fed"), NASDAQ, the CME or the Chicago
Board Options Exchange ("CBOE") as appropriate, is closed (other than customary
weekend or holiday closings) or trading on the NYSE, NASDAQ, the CME or the CBOE
as appropriate, is restricted; (ii) for any period during which an emergency
exists so that disposal of Fund investments or the determination of NAV is not
reasonably practicable; or (iii) for such other periods as the Commission, by
order, may permit for protection of Fund investors. On any day that the New York
Fed or the NYSE closes early, the principal government securities and corporate
bond markets close early (such as on days in advance of holidays generally
observed by participants in these markets), or as permitted by the Commission,
the right is reserved to advance the time on that day by which purchase and
redemption orders must be received.
EXCHANGES
You may exchange Advisor Class Shares of any Fund for Advisor Class Shares
of any other Rydex Fund that currently offers shares, or for shares of any other
Rydex Fund that does not offer Advisor Class Shares, 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 exchange is to be made. The Trust
currently is composed of twenty-two separate Funds. Advisor Class Shares of 14
Sector Funds and Investor 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>
PROSPECTUS 17
--------
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
Arktos
- ----------------------------------------------------------------------------------------------
Rydex Sector Funds 3:30 p.m.
Precious Metals
- ----------------------------------------------------------------------------------------------
U.S. Government Bond 2:45 p.m.
Juno
- ----------------------------------------------------------------------------------------------
</TABLE>
Intermediaries may have earlier cutoff times.
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, Attn: Ops. Dept., 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 the 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 this Prospectus. The Trust's
offices are open between 8:30 a.m. and 5:30 p.m., Eastern Time on each Business
Day.
If you own shares that are registered in your intermediary's name, and you
want to transfer the registration to another intermediary or want the shares
registered in your name, then you should contact your intermediary for
instructions to make this change.
TRANSACTIONS OVER THE 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
<PAGE>
- ------
18 PROSPECTUS
instructions they reasonably believe to be genuine. If you or your intermediary
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.
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 to its portfolio, as necessary, to minimize
tracking error and to maximize liquidity. The Advisor will regularly utilize
options contracts to leverage a Fund's investment exposure. In addition, some
Funds will regularly utilize short selling techniques designed to help their
performance 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 paid
the Advisor a fee at an annualized rate for the fiscal year ended March 31,
1999, based on the average daily net assets for each Fund, as set forth below:
<TABLE>
<CAPTION>
FUND ADVISORY FEE
- ----------------------------------------------------------------------------------------------
<S> <C>
Nova .75%
Ursa .90%
OTC .75%
U.S. Government Money Market .50%
</TABLE>
<PAGE>
PROSPECTUS 19
--------
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 OTC Fund is Michael P. Byrum, who is the
Advisor's senior portfolio manager. Prior to joining the Advisor as a portfolio
manager in July 1993, Mr. Byrum worked as an investor representative with MMA.
The portfolio manager of the Nova Fund is Thomas Michael, who joined the
Advisor as a portfolio manager in March 1994. From 1992 to February 1994, Mr.
Michael was a financial markets analyst at Cedar Street Investment Management
Co., of Chicago, Illinois, an institutional consulting 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 Ursa Fund is Adam V. Croll, who joined the
Advisor as an assistant portfolio manager in 1996. Mr. Croll was promoted to
portfolio manager in 1998. Prior to joining the Advisor, Mr. Croll attended the
University of Maryland.
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
The Funds have adopted a Distribution and Shareholder Services Plan (the
"Plan") applicable to Advisor Class Shares that allows the Funds to pay
distribution and service fees to PADCO Financial Services, Inc. (the
"Distributor") and other firms that provide distribution and shareholder
services ("Service Providers"). If a Service Provider provides distribution
services, the Funds will pay distribution fees to the Distributor at an annual
rate not to exceed .25% of average daily net assets, pursuant to Rule 12b-1 of
the 1940 Act. If a Service Provider provides shareholder services, the Funds
will pay service fees to the Distributor at an annual rate not to exceed .25% of
the average daily net assets of a Fund. The Distributor will, in turn, pay the
Service Provider out of its fees. Because the Funds pay these fees out of assets
on an ongoing basis, over time these fees may cost you more than other types of
sales charges.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Income dividends, if any, are paid at least annually by each of the Funds,
except the U.S. Government Money Market Fund, which declares dividends daily and
pays them monthly. If you own Fund shares on a Fund's record date, you will be
entitled to receive the dividend. The Funds may declare and pay dividends on the
same date. The Funds make distributions of capital gains, if any, at least
annually. 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.
<PAGE>
- ------
20 PROSPECTUS
You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. If you have not
already elected to receive cash payments on your application, you must notify
the Trust in writing prior to the date of distribution. Your election will
become effective for dividends paid after the Trust receives your written
notice. To cancel your election, simply send written notice to the Trust.
Dividends and distributions from a Fund are taxable to you whether they are
reinvested in additional shares of the Fund or are received in cash. You will
receive an account statement at least quarterly.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial or administrative action. The Trust has
not tried to present a detailed explanation of the tax treatment of the Funds,
or of the tax consequences of an investment in the Funds. MORE INFORMATION ABOUT
TAXES IS LOCATED IN THE STATEMENT OF ADDITIONAL INFORMATION (SAI). YOU ARE URGED
TO CONSULT YOUR TAX ADVISOR REGARDING SPECIFIC QUESTIONS AS TO FEDERAL, STATE
AND LOCAL INCOME TAXES.
TAX STATUS OF EACH FUND
Each Fund is treated as a separate entity for federal tax purposes, and
intends to qualify for the special tax treatment afforded regulated investment
companies. As long as a Fund qualifies as a regulated investment company, it
pays no federal income tax on the earnings it distributes to Shareholders.
TAX STATUS OF DISTRIBUTIONS
- Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME
WHETHER YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.
- Corporate shareholders may be entitled to a dividends-received deduction
for the portion of dividends they receive which are attributable to
dividends received by a Fund from U.S. corporations.
- Capital gains distributions will result from gains on the sale or exchange
of capital assets held for more than one year.
- Distributions paid in January but declared by a Fund in October, November
or December of the previous year, may be taxable to you in the previous
year.
<PAGE>
PROSPECTUS 21
--------
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>
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22 PROSPECTUS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
[ICON]
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 Advisor Class
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 1999 Annual Report. Our
1999 Annual Report is available by telephoning us at 800-820-0888 or (301)
468-8520. The Annual Report is incorporated by reference in the SAI.
<TABLE>
<CAPTION>
ADVISOR CLASS
-----------------------------------------
FOR THE PERIOD ENDED MARCH 31, 1999*
-----------------------------------------
U.S.
GOVERNMENT
MONEY
NOVA URSA OTC MARKET
FUND FUND FUND FUND
-------- ------- ------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value -- Beginning of Period................................ $ 26.91 $ 10.25 $ 30.52 $ 1.00
-------- ------- ------- ----------
Net Investment Income (Loss)+....................................... (.11) .21 (.31) .04
Net Realized and Unrealized Gains (Losses) on Securities............ 8.39 (1.81) 17.65 .00
-------- ------- ------- ----------
Net Increase (Decrease) in Net Asset Value Resulting from
Operations......................................................... 8.28 (1.60) 17.34 .04
Distributions to Shareholders:
From Net Investment Income.......................................... .00 (0.03) .00 (.04)
From Net Realized Capital Gain...................................... .00 .00 (.27) .00
In Excess of Current Period Net Investment Income................... (.41) .00 .00 .00
-------- ------- ------- ----------
Net Increase (Decrease) in Net Asset Value........................ 7.87 (1.63) 17.07 .00
-------- ------- ------- ----------
Net Asset Value -- End of Period...................................... $ 34.78 $ 8.62 $ 47.59 $ 1.00
-------- ------- ------- ----------
-------- ------- ------- ----------
Total Investment Return............................................... 31.03% (15.68)% 57.20% 4.02%
Ratios to Average Net Assets **
Gross Expenses...................................................... 1.60% 1.86% 1.49% 1.34%
Net Expenses........................................................ 1.58% 1.85% 1.47% 1.33%
Net Investment Income............................................... (0.70)% 2.96% (1.31)% 3.83%
Supplementary Data:
Portfolio Turnover Rate***.......................................... 445% 0% 773% 0%
Net Assets, End of Year (000's omitted)............................. $ 36,187 $ 3,073 $ 6,893 $321,581
</TABLE>
- ------------
+ CALCULATED USING THE AVERAGE DAILY SHARES OUTSTANDING FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS: OCTOBER 15, 1998--NOVA FUND, AUGUST 5,
1998--URSA FUND, SEPTEMBER 22, 1998--OVER-THE-COUNTER FUND, APRIL 1,
1998--U.S. GOVERNMENT MONEY MARKET FUND.
** ANNUALIZED.
*** PORTFOLIO TURNOVER RATIO IS CALCULATED WITHOUT REGARD TO SHORT-TERM
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.
<PAGE>
PROSPECTUS 23
--------
BENCHMARK INFORMATION.
NEITHER THE NOVA FUND NOR THE URSA FUND IS SPONSORED, ENDORSED, SOLD, OR
PROMOTED BY STANDARD & POOR'S CORP. (S&P); AND THE OTC FUND IS NOT SPONSORED,
ENDORSED, SOLD, OR PROMOTED BY NASDAQ OR ANY OF NASDAQ'S AFFILIATES (NASDAQ AND
ITS AFFILIATES HEREINAFTER COLLECTIVELY REFERRED TO AS "NASDAQ").
NEITHER S&P NOR NASDAQ MAKE ANY REPRESENTATION OR WARRANTY, IMPLIED OR EXPRESS,
TO THE INVESTORS IN THE FUNDS, OR ANY MEMBER OF THE PUBLIC, REGARDING THE
ADVISABILITY OF INVESTING IN INDEX FUNDS OR THE ABILITY OF THE S&P 500 INDEX OR
THE NASDAQ 100 INDEX-TM-, RESPECTIVELY, TO TRACK GENERAL STOCK MARKET
PERFORMANCE.
NEITHER S&P NOR NASDAQ GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE
S&P 500 INDEX AND NASDAQ 100 INDEX-TM-, RESPECTIVELY, OR ANY DATA INCLUDED
THEREIN.
NEITHER S&P NOR NASDAQ MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO
BE OBTAINED BY ANY OF THE FUNDS, THE INVESTORS IN THE FUNDS, OR ANY PERSON OR
ENTITY FROM THE USE OF THE S&P 500 INDEX OR THE NASDAQ 100 INDEX-TM-,
RESPECTIVELY, OR ANY DATA INCLUDED THEREIN.
NEITHER S&P NOR NASDAQ MAKE ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE FOR USE WITH RESPECT TO THE S&P 500 INDEX OR
THE NASDAQ 100 INDEX-TM- RESPECTIVELY, OR ANY DATA INCLUDED THEREIN.
<PAGE>
Additional information about the Funds is included in a Statement of Additional
Information dated August 1, 1999 (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. Additional
information about the Funds' investments is available in the annual and semi-
annual reports. Also, in the Funds' annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Funds' performance during its last fiscal year.
- --------------------------------------------------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR PADCO ADVISORS,
INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST IN ANY
JURISDICTION WHERE SUCH AN OFFERING IS NOT LAWFUL.
