RYDEX SERIES TRUST, 485APOS, 1999-12-16

RYDEX SERIES TRUST
485APOS, 1999-12-16

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<PAGE>

As Filed with the Securities and Exchange Commission On December 16, 1999

File Nos. 33-59692 and 811-7584

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933(X)

Pre-Effective Amendment No.___( )

Post-Effective Amendment No. 36 (X)
and/or

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

Amendment No. 37 (X)

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

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

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

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

Copies to:

W. John McGuire John H. Grady, Jr., Esq.
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
1800 M Street, N.W. 1701 Market Street
Washington, D.C. 20036 Philadelphia, PA 19103

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

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

If appropriate, check the following box:
___ This post-effective amendment designates a new effective date for a
previously-filed post-effective amendment.

<PAGE>
PROSPECTUS

RYDEX SERIES TRUST

EUROPE FUND
JAPAN 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 thirty
separate investment portfolios (the "Rydex Funds"), two of which are described
in this Prospectus (the "Funds" or the "International Funds"). Shares of the
Funds are sold principally to professional money managers and to private
investors whose strategy includes index-based mutual funds.

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>
RISK/RETURN INFORMATION COMMON TO THE FUNDS

THE FUNDS' INVESTMENT OBJECTIVES

Each Fund has a separate investment objective. THE INVESTMENT OBJECTIVE OF
EACH FUND IS NON-FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.

RISKS OF INVESTING IN THE FUNDS

- The value of the Funds may fluctuate in value from day to day.

- Fund shares may decline in value, and you may lose money.

THE FUNDS:

<TABLE>
<S> <C>
- are not federally insured - are not bank deposits

- are not guaranteed by any government - are not guaranteed to achieve their
agency objectives
</TABLE>
<PAGE>
- ------
2 PROSPECTUS

FUND INFORMATION -- EUROPE FUND

FUND OBJECTIVE

[ICON]
The Europe Fund seeks to provide investment results that match the
performance of a specific benchmark on a daily basis. The Fund's current
benchmark is 125% of the performance of the Dow Jones Stoxx 50-SM- Index ("Stoxx
50-SM- Index").

If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by 125% of the value of any increase in the Stoxx
50-SM-Index. For example, if the Stoxx 50-SM- Index goes up by 4%, the value of
the Fund's shares should go up by 5%. When the value of the Stoxx 50-SM- Index
declines, the value of the Fund's shares should also decrease on a daily basis
by 125% of the value of any decrease in the Index.

PORTFOLIO INVESTMENT STRATEGY

[ICON]
The Fund invests principally in securities of companies included on
the Stoxx 50-SM- Index and in leveraged instruments, such as futures contracts
and options on securities, futures contracts, and stock indices. 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 or
to securities whose performance is highly correlated to its benchmark. 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 Europe 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 equity securities and any futures and options contracts may
fluctuate significantly from day to day. This volatility may cause the
value of your investment in the Fund to decrease.

- LEVERAGING RISK -- The more the Fund invests in leveraged instruments, the
more this leverage will magnify any losses on those investments.

- FOREIGN INVESTING RISK -- Investments in securities of foreign companies
can be more volatile than investments in U.S. companies. Diplomatic,
political, or economic developments could adversely effect investment in
foreign countries. Foreign companies generally are not subject to
accounting, auditing, and financial reporting standards comparable to
those applicable to U.S. companies.

- CURRENCY RISK -- Under normal circumstances, the Fund does not plan to
hedge against the risk of currency exchange rate fluctuations. As a
result, the value of the Fund's assets measured in U.S. dollars will be
affected by changes in
<PAGE>
PROSPECTUS 3
--------

the exchange rates of currencies in which the Fund's securities are
denominated.

- TRACKING ERROR RISK -- The Advisor may not be able to cause the Fund's
performance to match that of the Fund's benchmark, either on a daily or
aggregate basis. Tracking Error may cause the Fund's return to be less
than you expect.
<PAGE>
- ------
4 PROSPECTUS

FUND PERFORMANCE AND FEE INFORMATION

EUROPE FUND PERFORMANCE

[ICON]
The Europe Fund is new 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 shares of the Europe Fund.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
SHAREHOLDER FEES None
Redemption Fees*

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees .90%
Distribution (12b-1) Fees .25%
Other Expenses** .75%
-----
Total Annual Fund Operating Expenses 1.90%
</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
Europe Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's estimated operating expenses remain the same. Although your actual costs
may be higher of lower, based on these assumptions your cost would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C>
-----------------
$ $
</TABLE>
<PAGE>
PROSPECTUS 5
--------

FUND INFORMATION -- JAPAN FUND

FUND OBJECTIVE

[ICON]
The Japan Fund seeks to provide investment results that match the
performance of a specific benchmark on a daily basis. The Fund's current
benchmark is 125% of the performance of the Nikkei 225 Stock Average ("Nikkei
225").

If the Fund meets its objective, the value of the Fund's shares will tend to
increase on a daily basis by 125% of the value of any increase in the Nikkei
225. For example, if the Nikkei 225 goes up by 4%, the value of the Fund's
shares should go up by 5%. When the value of the Nikkei 225 declines, the value
of the Fund's shares should also decrease on a daily basis by 125% of the value
of any decrease in the Index.

PORTFOLIO INVESTMENT STRATEGY

[ICON]
The Fund invests principally in securities of companies included in
the Nikkei 225 and in leveraged instruments, such as futures contracts and
options on securities, futures contracts, and stock indices. 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 or to
securities whose performance is highly correlated to its benchmark. 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 Japan Fund is subject to a number of risks that will affect the
value of its shares, including:

- LEVERAGING RISK -- The more the Fund invests in leveraged instruments, the
more this leverage will magnify any losses on those investments.

- GEOGRAPHIC CONCENTRATION IN JAPAN -- Targeting a single country could hurt
the Fund's performance or may cause the Fund to be more volatile than a
more geographically diversified equity fund.

FUND PERFORMANCE AND FEE INFORMATION

JAPAN FUND PERFORMANCE

[ICON]
The Japan Fund is new 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 shares of the Japan Fund.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
SHAREHOLDER FEES None
Redemption Fees*
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees .90%
Distribution (12b-1) Fees .25%
Other Expenses** .75%
-----
Total Annual Fund Operating Expenses 1.90%
</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
Japan Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's estimated operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your cost would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C>
-----------------
$ $
</TABLE>
<PAGE>
- ------
8 PROSPECTUS

MORE INFORMATION ABOUT FUND INVESTMENTS AND RISK

THE INTERNATIONAL FUNDS' INVESTMENT OBJECTIVES

Each Fund's objective is to provide investment results that match the
performance of a specific benchmark. The investment objective of each Fund is
non-fundamental and may be changed without shareholder approval. The current
benchmark used by each Fund is set forth below:

<TABLE>
FUND (TICKER SYMBOL) BENCHMARK
- -----------------------------------------------------------------------------------------------------
<S> <C>
Europe Fund (RY__X) 125% of the performance, measured on a daily basis, of the
Dow Jones Stoxx 50-SM- Index
- -----------------------------------------------------------------------------------------------------
Japan Fund (RY__X) 125% of the performance, measured on a daily basis, of the
NIKKEI 225 Stock Average
- -----------------------------------------------------------------------------------------------------
</TABLE>

A BRIEF GUIDE TO THE BENCHMARKS.

THE DOW JONES STOXX 50-SM- INDEX (STOXX 50-SM- INDEX). The Stoxx 50-SM- Index is
a capitalization-weighted index composed of 50 European blue chip stocks. Index
members are chosen by Stoxx Ltd. from 16 countries under criteria designed to
identify highly liquid companies that are leaders in their sectors.

THE NIKKEI 225 STOCK AVERAGE (NIKKEI 225). The Nikkei 225 is a price-weighted
index of 225 top-rated companies listed on the First Section of the Tokyo Stock
Exchange.

ADVISOR'S INVESTMENT METHODOLOGY

In managing the Funds, the Advisor uses a "passive" investment strategy to
manage each Fund's portfolio, meaning that the Advisor does not attempt to
select securities based on their individual potential to perform better than the
market. The Advisor's primary objective is to match the performance of each
Fund's benchmark as closely as possible on a daily basis. The Advisor uses
quantitative analysis techniques to structure each Fund to obtain the highest
correlation to its particular benchmark. The Advisor does not engage in
temporary defensive investing, keeping each Fund's assets fully invested in all
market environments. The Advisor monitors each Fund on an ongoing basis, and
makes adjustments to its portfolio, as necessary, to minimize tracking error and
to maximize liquidity. The Advisor will regularly utilize futures and options
contracts to leverage a Fund's investment exposure.

RISKS OF INVESTING IN THE INTERNATIONAL FUNDS

As indicated below, the Funds are subject to a number of risks that may
affect the value of Fund shares.
<PAGE>
PROSPECTUS 9
--------

EQUITY RISK -- The Funds invest primarily in equity securities as well as
instruments that attempt to track the price movement of equity indices.
Investments in equity securities and equity derivatives are subject to market
risks that cause their prices to fluctuate over time. Fluctuations in the value
of equity securities in which the Funds invest will cause the net asset value of
the Funds to fluctuate. Historically, the equity markets have moved in cycles,
and the value of the Funds' securities may fluctuate considerably from day to
day. This price volatility is the principal risk of investing in equity
securities. Because of their link to the equity markets, an investment in the
Funds may be more suitable for long-term investors who can bear the risk of
short-term principal fluctuations.

FOREIGN SECURITIES RISK -- Investing in securities of foreign companies may
involve risks not typically associated with investing in U.S. companies. The
value of securities denominated in foreign currencies, and of dividends from
such securities, can change significantly when foreign currencies strengthen or
weaken relative to the U.S. dollar. Foreign securities markets generally have
less trading volume and less liquidity than U.S. markets, and prices in some
foreign markets can be extremely volatile. Many foreign countries lack
accounting and disclosure standards comparable to those that apply to U.S.
companies, and it may be more difficult to obtain reliable information regarding
a foreign issuer's financial condition and operations. Transaction costs and
costs associated with custody services are generally higher for foreign
securities than they are for U.S. securities. Some foreign governments levy
withholding taxes against dividend and interest income. Although in some
countries a portion of these taxes are recoverable, the non-recovered portion
will reduce the income received by the Funds.

FOREIGN CURRENCY RISK -- The Funds' investments in securities denominated in
foreign currencies are subject to currency risk. Currency risks include the
following:

- The value of a Fund's assets measured in U.S. dollars may be affected by
changes in currency exchange rates and exchange control regulations.

- A Fund may incur transaction costs in connection with conversions between
various currencies.

Under normal circumstances, the Funds do not plan to engage in hedging against
the risks of variation in currency exchange rates relative to the U.S. dollar.
As a result, the value of securities denominated in foreign currencies can
change significantly when foreign currencies strengthen or weaken relative to
the U.S. dollar.

FUTURES AND OPTIONS RISK -- The Funds will invest a percentage of their assets
in futures and options contracts. The Funds may use futures contracts and
related options for bona fide hedging purposes to offset changes in the value of
securities held or expected to be acquired. They may also be used to gain
exposure to a particular market or instrument, to create a synthetic money
market position or for certain other tax-related purposes. The Funds may enter
into futures contracts traded
<PAGE>
- ------
10 PROSPECTUS

on a national futures exchange or board of trade or in the over-the-counter
market. Futures and options contracts are described in more detail below:

FUTURES CONTRACTS -- Futures contracts and options on futures contracts
provide for the sale by one party and purchase by another party of a
specified amount of a security at a specified future time and 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 whose value is determined, in part, by the value of the securities
in the designated index. Index futures for various indices 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 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 selling call options on securities, a Fund may
cover its position by owning the underlying security 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 sold.

The risks associated with the Funds' use of futures and options contracts
include:

- 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.

- 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 not always be a liquid secondary market for a futures contract.
As a result, the Funds may be unable to close out their futures contracts
at an advantageous time.

- 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.

GEOGRAPHIC CONCENTRATION IN JAPAN RISK (JAPAN FUND) -- Political and economic
conditions and changes in regulatory, tax or economic policy in Japan could
significantly affect the market value of Japanese securities. The economy is
characterized by government intervention and protectionism, an unstable
financial services sector, and relatively high unemployment. Economic growth is
dependent on international trade, reform of the financial services sector and
other troubled sectors, and consistent government policy. The risk of
concentrating the Japan Fund's investments in a single
<PAGE>
PROSPECTUS 11
--------

country -- Japan -- is that the country's economy will perform poorly as a
whole, and the Fund will be negatively impacted by that poor performance.

PORTFOLIO TURNOVER RATE RISK -- The Trust anticipates that investors who are
part of a tactical or strategic asset-allocation strategy will frequently redeem
or exchange shares, which will cause the Funds 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.

NON-DIVERSIFICATION RISK -- Since each Fund is non-diversified, each Fund may
invest in the securities of a limited number of issuers. To the extent that a
Fund invests a significant percentage of its assets in a limited number of
issuers, the Fund is subject to the risks of investing in those few issuers, and
may be more susceptible to a single adverse economic or regulatory occurrence.

TRACKING ERROR RISK -- While the Funds do not expect returns to deviate
significantly from their respective benchmarks on a daily basis, factors such as
Fund expenses, imperfect correlation between the Funds' investments and those of
their benchmarks, rounding of share prices, changes to the benchmark, regulatory
policies, and leverage, may affect their ability to achieve close correlation.
The cumulative effect of these factors may over time cause the Funds' returns to
deviate from their respective benchmarks on an aggregate basis. The magnitude of
any tracking error may be affected by a higher portfolio turnover rate.

TRADING HALT AND EARLY CLOSING RISK -- The Funds typically will hold short-term
options and futures contracts. The major exchanges on which these contracts are
traded have established limits on how much an option or futures contract may
decline over various time periods within a day. If an option or futures
contract's price declines more than the established limits, trading on the
exchange is halted on that instrument. If a trading halt occurs, the Fund may
temporarily be unable to purchase or sell options or futures contracts. Such a
trading halt near the time the Fund prices its shares may limit the Fund's
ability to use leverage and may prevent the Fund from achieving its investment
objective. In such an event, a Fund also may be required to use a "fair-value"
method to price its outstanding contracts. In addition, unanticipated early
closings of the equity markets 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 both of
the Funds needs to execute a high volume of securities trades late in a trading
day, a Fund might incur substantial trading losses.
<PAGE>
- ------
12 PROSPECTUS

SHAREHOLDER INFORMATION

HOW TO INVEST IN THE INTERNATIONAL FUNDS

PURCHASING SHARES

Shares are offered continuously, and may be purchased on any day that both
the New York Stock Exchange (the "NYSE") is open for business and the underlying
index of the Funds' benchmark is published (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.

You may also make investments in the Funds through intermediaries or
securities dealers who have the responsibility to transmit orders promptly.
Intermediaries may charge fees for services provided in connection with buying,
selling or exchanging shares. Each intermediary also may have its own rules
about share transactions. For more information about how to purchase and
exchange shares through an intermediary, you should contact that intermediary
directly.

DETERMINATION OF NET ASSET VALUE

The price per share (the offering price) will be the net asset value per
share ("NAV") next determined after your purchase order or exchange request is
received by the Trust. No sales charges are imposed on initial or subsequent
investments in a Fund. NAV is calculated by (1) taking the current market value
of a Fund's total assets, (2) subtracting the liabilities, and (3) dividing the
amount by the total number of shares owned by shareholders. The Funds calculate
NAV once each Business Day at 4:00 p.m., Eastern Time. If market prices are
unavailable or become unreliable because of events occurring during or after the
close of trading in any of the relevant foreign markets, fair value prices may
be determined by the Advisor, in good faith, using methods approved by the Board
of Trustees. Occasionally events that affect the values of foreign securities
and foreign exchange rates may occur between the times at which they are
determined and the close of the NYSE and will, therefore, not be reflected in
the computation of a Fund's net asset value. If events materially affecting the
values of these foreign securities occur during this period, the securities will
be valued in accordance with procedures established by the Trustees. As such,
values ascribed to certain securities maintained by a fund may not be the quoted
or published prices of those securities on their primary markets or exchanges.
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 who process orders on behalf of the Funds may have earlier cutoff
times.

MINIMUM INVESTMENT

If a registered investment advisor has discretionary authority over your
account, the minimum initial investment in the Funds is $15,000. For all other
shareholder accounts ("Self-Directed
<PAGE>
PROSPECTUS 13
--------

Accounts"), the minimum initial investment in 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 Rydex U.S. Government Money Market Fund, a
separate series of the Trust, 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 3:30 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 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
<PAGE>
- ------
14 PROSPECTUS

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
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
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. 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 the Funds is $15,000. For retirement
plan accounts that are Self-Directed Accounts, the minimum initial investment in
Funds is $25,000.

Retirement plans are charged an annual $15.00 maintenance fee and a $15.00
account closing fee. Additional information regarding these accounts, including
the annual maintenance fee, may be obtained by calling 1-800-820-0888 or
301-468-8520.
<PAGE>
PROSPECTUS 15
--------

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 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

than customary weekend or holiday closings) or trading 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 any of the securities exchanges on which the Fund's
securities trade 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 shares of either Fund for 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-four separate Funds which
are offered in separate prospectuses. If you are contemplating an exchange for
shares of a Fund not described in this Prospectus, you should obtain and review
the current prospectus of that Fund before making the exchange. 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>
- --------------------------------------------------------------------------
Europe 3:30 p.m.
Japan
- --------------------------------------------------------------------------
Nova 3:45 p.m.
Ursa
OTC
Arktos
- --------------------------------------------------------------------------
Sector Funds 3:30 p.m.
- --------------------------------------------------------------------------
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

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 INTERNATIONAL 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 pay
the Advisor a fee at an annualized rate, based on the average daily net assets
for each Fund, as set forth below:

<TABLE>
<CAPTION>
FUND ADVISORY FEE
- ---- ------------
<S> <C>
Europe .90%
Japan .90%
</TABLE>

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

The International Funds are managed by Charles J. Tennes. Mr. Tennes joined
the Advisor in April, 1999. From 1985 to 1997, he was affiliated with GIT
Investment Funds, and from 1993 managed GIT's equity funds, including the
Worldwide Growth Portfolio, an emerging markets fund which invested in more than
thirty countries. From 1997 to 1999, Mr. Tennes worked for US-AID and other
contractors as a consultant on equity investment in developing nations.

DISTRIBUTION PLAN

The Funds have adopted a Distribution Plan (the "Plan") that allows the
Funds to pay distribution fees to PADCO Financial Services, Inc. (the
"Distributor") and other firms that provide distribution
<PAGE>
PROSPECTUS 19
--------

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. 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.
If you own Fund shares on the 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 in writing to receive payment in cash. Your
election will become effective for dividends paid after the Trust receives your
written notice. To cancel your election, send written notice to the Trust.

You will receive an account statement at least quarterly.

TAX INFORMATION

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

TAX STATUS OF EACH FUND

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

The Funds may be able to pass along a tax credit for any foreign income
taxes they pay. The Trust will notify you of any such tax credit.

TAX STATUS OF DISTRIBUTIONS

- Each Fund will distribute substantially all of its income. THE 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.
If you invest in the Funds through a tax-qualified retirement plan, you should
consider the tax consequences of any redemption or exchange before making such a
request, especially with respect to redemptions.

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 21
--------

BENCHMARK INFORMATION

THE EUROPE FUND IS NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY DOW
JONES, INC. ("DOW JONES") OR STOXX, LTD. ("STOXX") OR ANY AFFILIATE OF DOW JONES
OR STOXX; AND THE JAPAN FUND IS NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY
THE NIHON KEIZAI SHIMBUN, INC. ("NIKKEI"), THE PUBLISHER OF THE NIKKEI 225.

NEITHER DOW JONES, STOXX NOR NIKKEI MAKE ANY REPRESENTATION OR WARRANTY, IMPLIED
OR EXPRESS, TO THE INVESTOR IN THE FUNDS, OR ANY MEMBER OF THE PUBLIC, REGARDING
THE ADVISABILITY OF INVESTING IN INDEX FUNDS OR THE ABILITY OF THE STOXX
50-SM-INDEX OR THE NIKKEI 225 TO TRACK GENERAL EUROPEAN OR JAPANESE STOCK MARKET
PERFORMANCE.

NEITHER DOW JONES, STOXX NOR NIKKEI GUARANTEES THE ACCURACY AND/OR THE
COMPLETENESS OF THE STOXX 50-SM- INDEX AND THE NIKKEI 225, RESPECTIVELY, OR ANY
DATA INCLUDED THEREIN.

NEITHER THE STOXX 50-SM- INDEX NOR THE NIKKEI 225 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 STOXX 50-SM- INDEX OR THE
NIKKEI 225, RESPECTIVELY, OR ANY DATA INCLUDED THEREIN.

NEITHER THE STOXX 50-SM- INDEX NOR THE NIKKEI 225 MAKES ANY EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE FOR USE WITH
RESPECT TO THE STOXX 50-SM- INDEX OR THE NIKKEI 225, RESPECTIVELY, OR ANY DATA
INCLUDED THEREIN.
<PAGE>
Additional information about the Funds is included in a Statement of Additional
Information dated , 2000 (the "SAI"), which contains more
detailed information about the Funds. The SAI has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus and, therefore, legally forms a part of this Prospectus. The SEC
maintains the EDGAR database on its Web site ("http://www.sec.gov") that
contains the SAI, material incorporated by reference, and other information
regarding registrants that file electronically with the SEC. You may also review
and copy documents at the SEC Public Reference room in Washington, D.C. (for
information on the operation of the Public Reference Room, call 1-202-942-8090).
You may request documents by mail from the SEC, upon payment of a duplication
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, D.C. 20549-0102. You may also obtain this information, upon
payment of a duplicating fee, by e-mailing the SEC at the following address:
[email protected].

You may obtain a copy of the SAI or the annual or semi-annual reports, without
charge by calling 800-820-0888 or by writing to Rydex Dynamic Funds, at 6116
Executive Boulevard, Suite 400, Rockville, Maryland 20852. Additional
information about the Funds' investments is available in the annual and semi-
annual reports. Also, in the Funds' annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Funds' performance during its last fiscal year.

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

NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR PADCO ADVISORS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST IN ANY JURISDICTION
WHERE SUCH AN OFFERING IS NOT LAWFUL.

The Fund's SEC registration number is 811-07584.
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

RYDEX SERIES TRUST

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

Rydex Series Trust (the "Trust") is a no-load mutual fund complex with thirty
separate investment portfolios (the "Funds"). This Statement of Additional
Information ("SAI") relates to shares of the following portfolios:

EUROPE FUND
JAPAN FUND

This SAI is not a prospectus. It should be read in conjunction with the Trust's
Prospectus, dated , 2000. A copy of the Trust's Prospectus is available,
without charge, upon request to the Trust at the address above or by telephoning
the Trust at the telephone number above.

The date of this SAI is , 2000.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

Page
----

GENERAL INFORMATION ABOUT THE TRUST............................................3

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS...............................3

INVESTMENT RESTRICTIONS.......................................................14

PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................15

MANAGEMENT OF THE TRUST.......................................................17

DETERMINATION OF NET ASSET VALUE..............................................21

PERFORMANCE INFORMATION.......................................................22

CALCULATION OF RETURN QUOTATIONS..............................................22

PURCHASE AND REDEMPTION OF SHARES.............................................23

DIVIDENDS, DISTRIBUTIONS, AND TAXES...........................................24

OTHER INFORMATION.............................................................26

COUNSEL.......................................................................27

AUDITORS AND CUSTODIAN........................................................27

APPENDIX......................................................................28

2
<PAGE>

GENERAL INFORMATION ABOUT THE TRUST

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

Currently, the Trust has thirty separate series. The Nova, Ursa, OTC, Arktos,
Precious Metals, U.S. Government Bond, and Juno Funds (collectively, the
"Benchmark Funds") are designed to provide investment results which match the
performance of a specific benchmark. The Europe and Japan Funds (collectively,
the "International Funds") are also designed to provide investment results which
match the performance of a specific benchmark. The Banking, Basic Materials,
Biotechnology, Consumer Products, Electronics, Energy, Energy Services,
Financial Services, Health Care, Leisure, Retailing, Technology,
Telecommunications and Transportation Funds (collectively, the "Sector Funds")
are designed to provide exposure to specific economic sectors. The Ursa Master,
Arktos Master, Juno Master, and Utilities Master Funds (collectively, the
"Master Funds") serve as master funds in a master-feeder arrangement with other
series of the Trust. The Trust also offers shares of the U.S. Government Money
Market Fund (the "Money Market Fund"). All payments received by the Trust for
shares of any Fund belong to that Fund. Each Fund has its own assets and
liabilities.

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS

GENERAL
Each Fund's investment objective and permitted investments are described in the
Prospectus. The following information supplements, and should be read in
conjunction with, those sections of the Prospectus.

Neither of the Funds will invest 25% or more of the value of the Fund's total
assets in the securities of one or more issuers conducting their principal
business activities in the same industry; EXCEPT THAT, to the extent a Fund's
benchmark is concentrated in a particular industry, the Funds will necessarily
be concentrated in that industry. Currently, neither Fund's benchmark is
concentrated in any particular industry. The risk of concentrating Fund
investments in a limited number of issuers conducting business in the same
industry is that those issuers (or that industry) will perform poorly, and the
Fund will be negatively impacted by that poor performance.

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

BORROWING
The Europe Fund and the Japan Fund may borrow money, including borrowing for
investment purposes. Borrowing for investment is known as leveraging. Leveraging
investments, by purchasing securities with borrowed money, is a speculative
technique which increases investment risk, but also increases investment
opportunity. Since substantially all of a Fund's assets will fluctuate in value,
whereas the interest obligations on

3
<PAGE>

borrowings may be fixed, the net asset value per share of the Fund will increase
more when the Fund's portfolio assets increase in value and decrease more when
the Fund's portfolio assets decrease in value than would otherwise be the case.
Moreover, interest costs on borrowings may fluctuate with changing market rates
of interest and may partially offset or exceed the returns on the borrowed
funds. Under adverse conditions, the Europe Fund and the Japan Fund might have
to sell portfolio securities to meet interest or principal payments at a time
investment considerations would not favor such sales. The Europe Fund and the
Japan Fund intend to use leverage during periods when the Advisor believes that
the respective Fund's investment objective would be furthered.

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

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

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

CURRENCY TRANSACTIONS
Although the Funds do not currently expect to engage in currency hedging,
currency transactions may be used in order to hedge the value of portfolio
holdings denominated in particular currencies against fluctuations in relative
value. Currency transactions include forward currency contracts, exchange listed
currency futures and options thereon, exchange listed and OTC options on
currencies, and currency swaps. A forward currency contract involves a privately
negotiated obligation to purchase or sell (with delivery generally required) a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large, commercial banks) and their
customers. A forward foreign currency contract generally has no deposit
requirement, and no commissions are charged at any stage for trades. A currency
swap is an agreement to exchange cash flows based on the notional difference
among two or more currencies and operates similarly to an interest rate swap,
which is described below. A Fund may enter into currency transactions with
counterparties which have received (or the guarantors of the obligations of
which have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
currency options) are determined to be of equivalent credit quality by the
Advisor.

A Fund's dealings in forward currency contracts and other currency transactions
such as futures, options on futures, options on currencies and swaps will be
limited to hedging involving either specific transactions ("Transaction
Hedging") or portfolio positions ("Position Hedging"). Transaction Hedging is
entering into a currency transaction with respect to specific assets or
liabilities of a Fund, which will generally arise in connection with the
purchase or sale of its portfolio securities or the receipt of income therefrom.
A Fund may enter into Transaction Hedging out of a desire to preserve the U.S.
dollar price of a security when it enters into a contract for the purchase or
sale of a security denominated in a foreign currency. A Fund will be able to
protect itself against possible losses resulting from changes in the
relationship between the U.S. dollar and foreign currencies during the period
between the date the security is purchased or sold and the date on which payment
is made or received by entering into a forward contract for the purchase or
sale, for a fixed amount of dollars, of the amount of the foreign currency
involved in the underlying security transactions.

4
<PAGE>

Position Hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency. A
Fund may use Position Hedging when the Advisor, believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar. A Fund may enter into a forward foreign currency contract to sell, for a
fixed amount of dollars, the amount of foreign currency approximating the value
of some or all of its portfolio securities denominated in such foreign currency.
The precise matching of the forward foreign currency contract amount and the
value of the portfolio securities involved may not have a perfect correlation
since the future value of the securities hedged will change as a consequence of
market between the date the forward contract is entered into and the date its
matures. The projection of short-term currency market movement is difficult, and
the successful execution of this short-term hedging strategy is uncertain.

A Fund will not enter into a transaction to hedge currency exposure to an extent
greater, after netting all transactions intended wholly or partially to offset
other transactions, than the aggregate market value (at the time of entering
into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.

A Fund may also cross-hedge currencies by entering into transactions to purchase
or sell one or more currencies that are expected to decline in value relative to
other currencies to which that Fund has or in which that Fund expects to have
portfolio exposure.

To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, a Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which a Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and to buy U.S. dollars. The amount of the contract
would not exceed the value of the Fund's securities denominated in linked
currencies. For example, if the Advisor considers that the Swedish krone is
linked to the Euro, the Fund holds securities dominated in krone and the Advisor
believes that the value of the krone will decline against the U.S. dollar, the
Advisor may enter into a contract to sell Euros and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to a Fund
if the currency being hedged fluctuates in value to a degree in a direction that
is not anticipated. Furthermore, there is risk that the perceived linkage
between various currencies may not by present or may not be present during the
particular time that a Fund is engaging in proxy hedging. If a Fund enters into
a currency hedging transaction, the Fund will "cover" its position so as not to
create a "senior security" as defined in Section 18 of the 1940 Act.

Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchase and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transaction costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy. Although forward foreign currency contracts and currency futures tend
to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential gain which might
result should the value of such currency increase.

5
<PAGE>

FOREIGN ISSUERS
The Europe Fund and the Japan Fund may invest in issuers located outside the
United States. The Funds may purchase American Depositary Receipts ("ADRs"),
"ordinary shares," or "New York shares" in the United States. ADRs are
dollar-denominated receipts representing interests in the securities of a
foreign issuer, which securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by United States banks and trust companies which evidence
ownership of underlying securities issued by a foreign corporation. Generally,
ADRs in registered form are designed for use in domestic securities markets and
are traded on exchanges or over-the-counter in the United States. Ordinary
shares are shares of foreign issuers that are traded abroad and on a United
States exchange. New York shares are shares that a foreign issuer has allocated
for trading in the United States. ADRs, ordinary shares, and New York shares all
may be purchased with and sold for U.S. dollars, which protect the Funds from
the foreign settlement risks described below.

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

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

ILLIQUID SECURITIES
Each Fund may purchase illiquid securities, including securities that are not
readily marketable and securities that are not registered ("restricted
securities") under the Securities Act of 1933, as amended (the "1933 Act"), but
which can be offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. A Fund will not invest more than 15% of the Fund's net
assets in illiquid securities. Each Fund will adhere to a more restrictive
limitation on the Fund's investment in illiquid securities as required by the
securities laws of those jurisdictions where shares of the Fund are registered
for sale. The term "illiquid securities" for this purpose means securities that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the securities. Under the
current guidelines of the staff of the Securities and Exchange Commission (the
"Commission"), illiquid securities also are considered to include, among other
securities, purchased over-the-counter options, certain cover for
over-the-counter options, repurchase agreements with maturities in excess of
seven days, and certain securities whose disposition is restricted under the
Federal securities laws. The Fund may not be able to sell illiquid securities
when the Advisor considers it desirable to do so or may have to sell such
securities at a price that is lower than the price that could be obtained if the
securities were more liquid. In addition, the sale of illiquid securities also
may require more time and may result in higher dealer discounts and other
selling expenses than does the sale of securities that are not illiquid.
Illiquid securities also may be more difficult to value due to the
unavailability of reliable market quotations for such securities, and investment
in illiquid securities may have an adverse impact on net asset value.

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Institutional markets for restricted securities have developed as a result of
the promulgation of Rule 144A under the 1933 Act, which provides a "safe harbor"
from 1933 Act registration requirements for qualifying sales to institutional
investors. When Rule 144A restricted securities present an attractive investment
opportunity and meet other selection criteria, a Fund may make such investments
whether or not such securities are "illiquid" depends on the market that exists
for the particular security. The trustees of the Trust (the "Trustees") have
delegated the responsibility for determining the liquidity of Rule 144A
restricted securities which may be invested in by a Fund to the Advisor.

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

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

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

OPTIONS TRANSACTIONS

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

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

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

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

OPTIONS ON FUTURES CONTRACTS. Under Commodities Futures Trading Commission
("CFTC") Regulations, a Fund may engage in futures transactions, either for
"bona fide hedging" purposes, as this term is defined in the CFTC Regulations,
or for non-hedging purposes to the extent that the aggregate initial margins and
option premiums required to establish such non-hedging positions do not exceed
5% of the liquidation value of the Fund's portfolio. In the case of an option on
futures contracts that is "in-the-money" at the time of purchase (I.E., the
amount by which the exercise price of the put option exceeds the current market
value of the underlying security, or the amount by which the current market
value of the underlying security exceeds the exercise price of the call option),
the in-the-money amount may be excluded in calculating this 5% limitation.

When a Fund purchases or sells a stock index futures contract, or sells an
option thereon, the Fund "covers" its position. To cover its position, a Fund
may maintain with its custodian bank (and marked-to-market on a daily basis), a
segregated account consisting of cash or liquid securities that, when added to
any amounts deposited with a futures commission merchant as margin, are equal to
the market value of the futures contract or otherwise "cover" its position. If
the Fund continues to engage in the described securities trading practices and
properly segregates assets, the segregated account will function as a practical
limit on the amount of leverage which the Fund may undertake and on the
potential increase in the speculative character of the Fund's outstanding
portfolio securities. Additionally, such segregated accounts will generally
assure the availability of adequate funds to meet the obligations of the Fund
arising from such investment activities.

A Fund may cover its long position in a futures contract by purchasing a put
option on the same futures contract with a strike price (I.E., an exercise
price) as high or higher than the price of the futures contract. In the
alternative, if the strike price of the put is less than the price of the
futures contract, the Fund will maintain in a segregated account cash or liquid
securities equal in value to the difference between the strike price of the put
and the price of the futures contract. A Fund may also cover its long position
in a futures contract by taking a short position in the instruments underlying
the futures contract, or by taking positions in instruments with prices which
are expected to move relatively consistently with the futures contract. A Fund
may cover its short position in a futures contract by taking a long position in
the instruments underlying the futures contracts, or by taking positions in
instruments with prices which are expected to move relatively consistently with
the futures contract.

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A Fund may cover its sale of a call option on a futures contract by taking a
long position in the underlying futures contract at a price less than or equal
to the strike price of the call option. In the alternative, if the long position
in the underlying futures contracts is established at a price greater than the
strike price of the written (sold) call, the Fund will maintain in a segregated
account cash or liquid securities equal in value to the difference between the
strike price of the call and the price of the futures contract. A Fund may also
cover its sale of a call option by taking positions in instruments with prices
which are expected to move relatively consistently with the call option. A Fund
may cover its sale of a put option on a futures contract by taking a short
position in the underlying futures contract at a price greater than or equal to
the strike price of the put option, or, if the short position in the underlying
futures contract is established at a price less than the strike price of the
written put, the Fund will maintain in a segregated account cash or liquid
securities equal in value to the difference between the strike price of the put
and the price of the futures contract. A Fund may also cover its sale of a put
option by taking positions in instruments with prices which are expected to move
relatively consistently with the put option.

SWAPS
Each Fund may enter into various types of privately negotiated or
over-the-counter derivatives transactions, including swap transactions
("Swaps"). A Swap is a privately-negotiated derivatives contract in which two
parties agree, on specified payment dates, to make or exchange payments
calculated by reference to a specified rate, index or asset and an agreed
"notional amount." Some common examples of underlying rates, indices and assets
include: the market value of a single equity or debt security, a group or
"basket" of securities or a stock or fixed-income index; fixed and floating
interest rates; foreign currency exchange rates; and various commodity prices or
indices. For example, a Fund may enter into an equity Swap on the value of a
single common stock. The Swap is a separate contract that does not require
ownership of the underlying stock. In the Swap, the Fund will agree with a swap
dealer to make payments based upon changes in the value of the stock. For
example, on a specified payment date, if the value of the stock has increased,
one party (such as the Fund) will receive a payment equal to the amount of that
increase for the time period involved and the notional number of shares, as well
as receiving equivalent payments after any distribution of a dividend on the
security and perhaps making certain interest-like payments on specified dates.
If the value of the stock has decreased, then rather than receiving a payment,
the first party (such as the Fund, in this example) would be obligated to make a
payment to the other party to the Swap. The Fund can take either position in the
Swap; that is, the Fund may be the party that receives a payment following an
increase in value and pays following a decrease or vice versa. In some cases,
the Fund may also make or receive additional payments on the effective date
and/or termination date of the Swap. Swaps are very flexible financing tools
whose terms can be negotiated between the parties.

The Funds may enter into various Swaps that may be based upon the value of
various single debt and equity securities, baskets or indices. One example of a
situation is which a Fund may use an equity swap is to mimic some of the
benefits of ownership of "local shares" in a country in which the Fund, as a
foreigner, is prohibited from owning local shares. The terms of the Swaps
actually entered by the Fund may vary from the typical example described here.
In addition, the Funds may also enter into interest-rate and currency Swaps.
Both interest rate and currency Swaps involve exchanges of payment streams. In
the case of interest rate Swaps, the notional amount is used to calculate the
size of the payments, but generally is not exchanged; in certain currency Swaps,
payment of the entire notional amount in the two applicable currencies may be
exchanged by the parties on the effective date of the Swap and in some cases a
reverse exchange may be made on the termination date.

The Funds may enter into these over-the-counter derivative transactions with
a number of dealers, generally using standard forms of master agreement
documentation customized to suit the needs and circumstances of the Funds and
the dealers. These instruments are not traded on an organized exchange or,
generally speaking, through a clearinghouse. Because they are privately
negotiated bilateral contracts, in each case, the Fund and the dealer are
each exposed to the credit risk that the other party will not meet its
obligations. This risk will be greater with some derivative transactions than
others, depending upon the nature, size and terms of the transaction, as well
as the creditworthiness of the dealer. The size of a Fund's potential loss
upon default by the dealer or by the Fund itself is primarily related to the
market value of the transactions at the time of the default; since markets
move both up and down, it is also possible that the Fund could realize a
gain. Consistent with market practices, the Funds will generally make and
receive payments on a net basis and will, to the extent feasible, document
Swaps with a single dealer under a single master agreement to obtain the
risk-reduction and other benefits, where permitted by applicable law, of
netting upon default or other early termination. Events of default, other
termination events, damage calculations and remidies are among the legal
terms specified in the documentation.

A Fund's obligations will be accrued daily (offset against any amounts owing
to the Fund) and any accrued but unpaid net amounts owed to a Swap
Counterparty will be covered by the maintenance of a segregated account
consisting of cash or liquid securities to avoid any unintended leveraging of
the Fund. To the extent that these Swaps are entered into for hedging
purposes, the Adviser believes such obligations do not constitute "senior
securities" under the 1940 Act and, accordingly, will not treat them as being
subject to a Fund's borrowing restrictions.

The over-the-counter derivatives markets have grown substantially in recent
years with a large number of banks and investment banking firms acting both
as principals and as agents utilizing standardized documentation. As a
result, these markets have become increasingly liquid. Different product and
geographic segments of these markets have developed at different rates and
are subject to different risks. As a result, both the liquidity and the risks
associated with individual derivative transactions will vary greatly.

The use of over-the-counter derivatives is a highly specialized activity
which involves investment techniques and risks different from those
associated with ordinary Fund securities transactions. If the Adviser is
incorrect in its forecasts of market values, interest rates, and currency
exchange rates, the investment performance of the Funds would be less
favorable than it would have been if this investment technique were not used.

PORTFOLIO TURNOVER
As discussed in the Trust's prospectus, the Trust anticipates that investors in
the Funds, as part of an asset allocation investment strategy, will frequently
purchase and/or redeem shares of the Funds . The nature of the Funds as asset
allocation tools will cause the Funds to experience substantial portfolio
turnover. (See "More Information About Fund Investments and Risk" in the Trust's
Prospectus). Because each Fund's portfolio turnover rate, to a great extent,
will depend on the purchase, redemption, and exchange activity of the Fund's
investors, it

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is very difficult to estimate what the Fund's actual turnover rate will be in
the future. However, the Trust expects that the portfolio turnover experienced
by the Funds will be substantial.

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

SPECIAL CONSIDERATIONS REGARDING EUROPE
The Europe Fund seeks to provide investment results which match the performance
of a specific benchmark on a daily basis. The Fund's current benchmark is 125%
of the performance of the Dow Jones Stoxx 50-SM- Index (the "Stoxx 50"). The
Stoxx 50-SM- Index is a capitalization-weighted index composed of 50 European
blue chip stocks. Index members are chosen by Stoxx Ltd. from 16 countries under
criteria designed to identify highly liquid companies that are market leaders in
their sectors. The 16 countries include the 15 western European countries which
comprise the European Union (EU) and Switzerland.

The EU consists of 15 countries of western Europe: Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands,
Portugal, Spain, Sweden and the United Kingdom. The EU's primary goal is the
creation of a single, unified market through which goods, people and capital
could move freely.

A second component of the EU is the establishment of a single currency - the
Euro, to replace each member country's domestic currencies. On May 3, 1998 the
European Council of Ministers formally announced the "first wave" of European
Economic Monetary Union (the "EMU") participants. They are: Austria, Belgium,
Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal
and Spain. On January 1, 1999, the Euro became a currency, while the bank notes
used by EMU's eleven members remain legal tender. After a three year transition
period, the Euro will begin circulating on January 1, 2002. Six months later,
the currency used by EMU's eleven members will cease to exist.

Europe may experience difficulty with the transition to the Euro. For example,
different national economies must adjust to a unified monetary system, the
absence of exchange rate flexibility and the loss of economic sovereignty. The
Continent's economies are diverse, its governments are decentralized and its
cultures differ widely. Unemployment is relatively high from a historical
perspective and could pose a political risk that one or more countries might
exit the union placing the currency and banking system in jeopardy.

SPECIAL CONSIDERATIONS REGARDING JAPAN
The Japan Fund seeks to provide investment results which match the performance
of a specific benchmark on a daily basis. The Fund's current benchmark is 125%
of the performance of Japan's Nikkei-225 Index (the "NKY"). The NKY is a
price-weighted index of the 225 top-rated Japanese companies listed in the First
Section of the Tokyo Stock Exchange.

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The Japanese stock market was established in 1878 as the Tokyo Stock Exchange
Company Ltd. Japanese stock exchanges are located in eight cities in Tokyo,
Osaka, Nagoya, Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo. The Tokyo Stock
Exchange (TSE) is the largest of the eight exchanges in Japan. There are three
distinct sections on the main Japanese stock exchanges. The First Section trades
in over 1,100 of the largest and most active stocks, which account for over 95%
of total market capitalization. The Second Section consists of over 400 issues
with lower turnover than the First Section, which are newly quoted on the
exchange or which are not listed and would otherwise be traded over-the-counter.
The Third Section consists of foreign stocks which are traded over-the-counter.
Securities are denominated in the official unit of currency, the Japanese Yen.

Although some Japanese reporting, accounting and auditing practices are based
substantially on U.S. principles, they are not identical to U.S. standards in
some important respects, particularly with regard to unconsolidated subsidiaries
and related structures. In general, Japanese corporations are not required to
provide all of the disclosure required by U.S. law and accounting practice, and
such disclosure may be less timely and less frequent than that required of U.S.
corporations.

The Japanese agricultural industry is small and largely protected. Japan
subsidizes its agricultural industry and is only 50% self-sufficient in food
production. Accordingly, it is highly dependent on agricultural imports. Japan
has developed a strong heavy industrial sector and is highly dependent on
international trade for commodities. Strong domestic industries are automotive,
electronics, and metals. Needed imports revolve around raw materials such as
oil, forest products, and iron ore. Subsequently, Japan is sensitive to
fluctuations in commodity prices.

While the United States is Japan's largest single trading partner, close to half
of Japan's trade is conducted with developing nations, almost all of which are
in southeast Asia. As the largest economy in southeast Asia, external events
such as the economic trials of Japan's neighbors continue to raise concerns over
profit levels for the big Japanese exporters. As many of the governments of
Southeast Asia frequently face domestic discontent, and as many of these
countries are Japanese trading partners and investment recipients, their
internal stability and its impact on regional security are of importance to
Japan.

Japanese unemployment levels are high and have been an area of increasing
concern. The Japanese financial sector is in need of reform involving
overhauling the nation's financial institutions and securing public support for
taxpayer-funded bailouts. Banks, in particular, must dispose of bad loans and
trim their balance sheets in preparation for greater competition from foreign
financial institutions as more areas of the financial sector are opened.
Successful financial sector reform could allow Japan's financial institutions to
act as a catalyst for economic recovery at home and across the troubled Asian
region. A large factor in determining the pace and scope of recovery is the
government's handling of deregulation programs.

Also of concern are Japan's trade surpluses. As a trade-dependent nation long
used to high levels of government protection, it is unclear how the Japanese
economy will react to the potential adoption of the trade liberalization
measures which are constantly promoted by their trading partners. Japan's heavy
dependence on international trade has been adversely affected by trade tariffs
and other protectionist measures, as well as the economic condition of its
trading partners. Japan's high volume of exports, such as automobiles, machine
tools and semiconductors, has caused trade tensions, particularly with the
United States. The relaxing of official and de facto barriers to imports, or
hardships created by any pressures brought by trading partners, could adversely
affect Japan's economy. Additionally, the strength of the yen itself may prove
an impediment to strong continued exports and economic recovery, because it
makes Japanese goods sold in other countries more expensive and reduces the
value of foreign earnings repatriated to Japan. Since the Japanese economy is so
dependent on exports, any fall off in exports may be seen as a sign of economic
weakness, which may adversely affect the market.

STOCK INDEX FUTURES CONTRACTS
A Fund may buy and sell stock index futures contracts with respect to any stock
index traded on a recognized stock exchange, board of trade, or in the over the
counter market. A stock index futures contract is a contract to buy

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or sell units of an index at a specified future date at a price agreed upon when
the contract is made. The stock index futures contract specifies that no
delivery of the actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract, with the
settlement being the difference between the contract price and the actual level
of the stock index at the expiration of the contract.

At the time a Fund purchases a futures contract, an amount of cash, U.S.
Government securities or other liquid securities equal to the market value of
the futures contract will be deposited in a segregated account with the Fund's
custodian. When writing a futures contract, the Fund will maintain with its
custodian liquid assets that, when added to the amounts deposited with a futures
commission merchant or broker as margin, are equal to the market value of the
instruments underlying the contract. Alternatively, a Fund may "cover" its
position by owning the instruments underlying the contract (or, in the case of
an index futures contract, a portfolio with a volatility substantially similar
to that of the index on which the futures contract is based), or holding a call
option permitting the Fund to purchase the same futures contract at a price no
higher than the price of the contract written by the Fund (or at a higher price
if the difference is maintained in liquid assets with the Fund's custodian).

TRACKING ERROR
While Funds which seek to duplicate the performance of their respective
benchmarks on a daily basis, as discussed in the Prospectuses, do not expect
that the aggregate returns over a year will deviate adversely from their
respective benchmarks by more than ten percent, several factors may affect their
ability to achieve this correlation. Among these are: (1) fluctuations in
currency exchange rates; (2) Fund expenses, including brokerage (which may be
increased by high portfolio turnover); (3) less than all of the securities in
the benchmark being held by a Fund and securities not included in the benchmark
being held by a Fund; (4) an imperfect correlation between the performance of
instruments held by a Fund, such as futures contracts and options, and the
performance of the underlying securities in the market; (5) bid-ask spreads (the
effect of which may be increased by portfolio turnover); (6) a Fund holds
instruments traded in a market that has become illiquid or disrupted; (7) Fund
share prices being rounded to the nearest cent; (8) changes to the benchmark
index that are not disseminated in advance; (9) the need to conform a Fund's
portfolio holdings to comply with investment restrictions or policies or
regulatory or tax law requirements; or (10) market movements that run counter to
a leveraged Fund's investments (which will cause divergence between the Fund and
its benchmark over time due to the mathematical effects of leveraging). Market
movements that run counter to a leveraged Fund's investments will cause some
divergence between the Fund and its benchmark over time due to the mathematical
effects of leveraging. The magnitude of the divergence is dependent upon the
magnitude of the market movement, its duration, and the degree to which the Fund
is leveraged. The tracking error of a leveraged Fund is generally small during a
well-defined uptrend or downtrend in the market when measured from price peak to
price peak, access a market decline and subsequent recovery, however, the
deviation of the Fund from its benchmark may be significant.

U.S. GOVERNMENT SECURITIES
The Europe Fund and the Japan Fund may invest in U.S. Government Securities.
Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities include U.S. Treasury securities, which are backed by the full
faith and credit of the U.S. Treasury and which differ only in their interest
rates, maturities, and times of issuance. U.S. Treasury bills have initial
maturities of one year or less; U.S. Treasury notes have initial maturities of
one to ten years; and U.S. Treasury bonds generally have initial maturities of
greater than ten years. Certain U.S. Government Securities are issued or
guaranteed by agencies or instrumentalities of the U.S. Government including,
but not limited to, obligations of U.S. Government agencies or instrumentalities
such as Fannie Mae, the Government National Mortgage Association, the Small
Business Administration, the Federal Farm Credit Administration, the Federal
Home Loan Banks, Banks for Cooperatives (including the Central Bank for
Cooperatives), the Federal Land Banks, the Federal Intermediate Credit Banks,
the Tennessee Valley Authority, the Export-Import Bank of the United States, the
Commodity Credit Corporation, the Federal Financing Bank, the Student Loan
Marketing Association, and the National Credit Union Administration.

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

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

INVESTMENT RESTRICTIONS

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

An International Fund shall not:

1. Borrow money in an amount exceeding 33 1/3% of the value of its
total assets, provided that, for purposes of this limitation,
investment strategies which either obligate the Fund to purchase
securities or require that Fund to segregate assets are not
considered to be borrowing. Asset coverage of a least 300% is
required for all borrowing, except where the Fund has borrowed
money for temporary purposes in amounts not exceeding 5% of its
total assets. The Fund will not purchase securities while its
borrowing exceeds 5% of its total assets.

2. Make loans if, as a result, more than 33 1/3% of its total
assets would be lent to other parties, except that the Fund may
(i) purchase or hold debt instruments in accordance with its
investment objective and policies; (ii) enter into repurchase
agreements; and (iii) lend its securities.

13
<PAGE>

3. Purchase or sell real estate, physical commodities, or
commodities contracts, except that the Fund may purchase (i)
marketable securities issued by companies which own or invest in
real estate (including real estate investment trusts),
commodities, or commodities contracts; and (ii) commodities
contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.

4. Issue senior securities (as defined in the 1940 Act) except as
permitted by rule, regulation or order of the SEC.

5. Act as an underwriter of securities of other issuers except as
it may be deemed an underwriter in selling a portfolio security.

6. Invest in interests in oil, gas, or other mineral exploration
or development programs and oil, gas or mineral leases.

7. Invest 25% or more of the value of the Fund's total assets in
the securities of one or more issuers conducting their principal
business activities in the same industry; except that, to the
extent the benchmark selected for a particular Fund is
concentrated in a particular industry, the Fund will necessarily
be concentrated in that industry. This limitation does not apply
to investments or obligations of the U.S. Government or any of
its agencies or instrumentalities.

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

Each Fund may not:

1. Pledge, mortgage or hypothecate assets except to secure
borrowing permitted by the Fund's fundamental limitation on
borrowing.

2. Invest in companies for the purpose of exercising control.

3. Purchase securities on margin or effect short sales, except that
a Fund may (i) obtain short-term credits as necessary for the
clearance of security transactions; (ii) provide initial and
variation margin payments in connection with transactions
involving futures contracts and options on such contracts; and
(iii) make short sales "against the box" or in compliance with
the SEC's position regarding the asset segregation requirements
imposed by Section 18 of the 1940 Act.

4. Invest its assets in securities of any investment company,
except as permitted by the 1940 Act or any rule, regulation or
order of the SEC.

5. Purchase or hold illiquid securities, I.E., securities that
cannot be disposed of for their approximate carrying value in
seven days or less (which term includes repurchase agreements
and time deposits maturing in more than seven days) if, in the
aggregate, more than 15% of its net assets would be invested in
illiquid securities.

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

14
<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

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

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

In managing the investment portfolios of the Funds, the Advisor effects
transactions with those brokers and dealers who the Advisor believes provide the
most favorable prices and are capable of providing efficient executions. If the
Advisor believes such prices and executions are obtainable from more than one
broker or dealer, the Advisor may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Advisor. In addition, Section 28(e) of the
Securities Exchange Act of 1934 permits the Advisor to cause a Fund to pay
commission rates in excess of those another dealer or broker would have charged
for effecting the same transaction, if the Advisor determines, in good faith,
that the commission paid is reasonable in relation to the value of brokerage and
research services provided. While the Advisor currently does not intend to pay
higher commissions to dealers and brokers who supply it with brokerage and
research services, in the event such higher payments would be made or are deemed
to have been made, such higher payments would be in accordance with Section
28(e).

15
<PAGE>

access to various computer-generated data, computer hardware and software. Such
research may be provided by brokers and dealers in the form of written reports,
telephone contacts and personal meetings with security analysts, corporate and
industry spokespersons, economists, academicians, and government
representatives. Brokerage services and equipment may facilitate the execution
and monitoring of securities transactions, for example, by providing rapid
communications with financial markets and brokers or dealers, or by providing
real-time tracking of orders, settlements, investment positions and relevant
investment criteria and restrictions applicable to the execution of securities
transactions. In some cases, brokerage and research services are generated by
third parties but are provided to the Advisor by or through brokers and dealers.
The Advisor may allocate brokerage for research services that are also available
for cash, where appropriate and permitted by law. The Advisor may also pay cash
for certain research services received from external sources.

In addition, the information and services received by the Advisor from brokers
and dealers may not in all cases benefit a Fund directly. For example, such
information and services received by the Advisor as a result of the brokerage
allocation of one of the Funds may be of benefit to the Advisor in the
management of other accounts of the Advisor, including other Funds of the Trust
and other investment companies advised by the Advisor. While the receipt of such
information and services is useful in varying degrees and would generally reduce
the amount of research or services otherwise performed by the Advisor and
thereby reduce the Advisor's expenses, this information and these services are
of indeterminable value and the management fee paid to the Advisor is not
reduced by any amount that may be attributable to the value of such information
and services.

MANAGEMENT OF THE TRUST

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

TRUSTEES

*/ALBERT P. VIRAGH, JR. (58)

Chairman of the Board of Trustees and President of Rydex Series Trust,
Rydex Variable Trust, and Rydex Dynamic Funds; Chairman of the Board,
President, and Treasurer of PADCO Advisors, Inc., investment adviser to
the Trust, 1993 to present; Chairman of the Board, President, and
Treasurer of PADCO Service Company, Inc., shareholder and transfer agent
servicer to the Trust, 1993 to present; Chairman of the Board,
President, and Treasurer of PADCO Advisors II, Inc., investment adviser
to Rydex Variable Trust, 1998 to present; Chairman of the Board,
President, and Treasurer of PADCO Financial Services, Inc., a registered
broker-dealer firm, 1996 to present; Vice President of Rushmore
Investment Advisors Ltd., a registered investment adviser, 1985 to 1993.
Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

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

16
<PAGE>

COREY A. COLEHOUR (53)

Trustee of Rydex Series Trust, 1996 to present; Trustee of Rydex
Variable Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to
present; Senior Vice President of Schield Management Company, a
registered investment adviser, 1985 to present. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

J. KENNETH DALTON (58)

Trustee of Rydex Series Trust, 1996 to present; Trustee of Rydex
Variable Trust, 1998 to present; and Trustee of Rydex Dynamic Funds,
1999 to present; The Dalton Group (Real Estate), April 1995 to present.
Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

JOHN O. DEMARET (59)

Trustee of Rydex Series Trust, 1996 to present; Trustee of Rydex
Variable Trust, 1998 to present; and Trustee of Rydex Dynamic Funds,
1999 to present; Founder and Chief Executive Officer, Health Cost
Controls America, Chicago, Illinois, 1987 to 1996 (retired). Address:
6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

PATRICK T. MCCARVILLE (57)

Trustee of Rydex Series Trust, 1997 to present; Trustee of Rydex
Variable Trust, 1998 to present; and Trustee of Rydex Dynamic Funds,
1999 to present; Founder and Chief Executive Officer, Par Industries,
Inc., Northbrook, Illinois, 1977 to present. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

ROGER SOMERS (55)

Trustee of Rydex Series Trust, 1996 to present, Trustee of Rydex
variable Trust, 1998 to present; and Trustee of Rydex Dynamic Funds,
1999 to present; President, Arrow Limousine, 1965 to present. Address:
6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

OFFICERS

ROBERT M. STEELE (41)

Secretary and Vice President of Rydex Series Trust, Rydex Variable
Trust, and Rydex Dynamic Funds; Vice President of The Boston Company,
Inc., an institutional money management firm, 1987 to 1994. Address:
6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

CARL G. VERBONCOEUR (47)

Vice President and Treasurer of Rydex Series Trust, Vice President of
PADCO Financial Services, Inc., 1997 to present; Senior Vice President,
Crestar Bank, 1995 to 1997; Senior Vice President, Crestar Asset
Management Company, a registered investment adviser, 1993 to 1995; Vice
President Perpetual Savings Bank, 1987 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

17
<PAGE>

MICHAEL P. BYRUM (29)

Assistant Secretary and Vice President of Rydex Series Trust, Rydex
Variable Trust, and Rydex Dynamic Funds; Senior portfolio manager and
employee of PADCO Advisors, Inc., since 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

JOHN FRANGOS (42)

Vice President of Operations of Rydex Series Trust, Rydex Variable
Trust, and Rydex Dynamic Funds from 1999 to present; Employee of PADCO
Services, Inc. since 1998, Manager and Assistant Vice President, PFPC
(Mutual Fund series) from 1994 to 1998.

The aggregate compensation paid by the Trust to each of its Trustees serving
during the fiscal year ended March 31, 1999, is set forth in the table below:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------

AGGREGATE PENSION OR ESTIMATED TOTAL
NAME OF PERSON, COMPENSATION RETIREMENT ANNUAL BENEFITS COMPENSATION
POSITION FROM TRUST BENEFITS ACCRUED UPON FROM FUND
AS PART OF TRUST'S RETIREMENT COMPLEX FOR
EXPENSES SERVICE ON
THREE
BOARDS**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert P. Viragh, Jr.*, $ 0 $0 $0 $ 0
CHAIRMAN AND PRESIDENT

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

Corey A. Colehour, $ 20,000 $0 $0 $ 27,500
TRUSTEE

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

J. Kenneth Dalton, $ 20,000 $0 $0 $ 27,500
TRUSTEE

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

Roger Somers, $ 20,000 $0 $0 $ 27,500
TRUSTEE

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

John O. Demaret, $ 20,000 $0 $0 $ 27,500
TRUSTEE

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

Patrick T. McCarville, $ 20,000 $0 $0 $ 27,500
TRUSTEE

- ---------------------------------------------------------------------------------------------------------------
</TABLE>

*Denotes an "interested person" of the Trust.
**Each member of the Board of Trustees also serves as a Trustee to the Rydex
Variable Trust and Rydex Dynamic Funds.

As of the date of this Statement of Additional Information, the Trustees and the
officers of the Trust, as a group, owned, of record and beneficially, less than
1% of the outstanding shares of each Fund.

18
<PAGE>

THE ADVISORY AGREEMENT
Under an investment advisory agreement the Advisor serves as the investment
adviser for each series of the Trust and provides investment advice to the Funds
and oversees the day-to-day operations of the Funds, subject to direction and
control by the Trustees and the officers of the Trust. As of June 30, 1999, net
assets under management of the Advisor were approximately $ 4 billion. Pursuant
to the advisory agreement with the Advisor, the Funds pay the Advisor the
following fees at an annual rate based on the average daily net assets for each
respective Fund, as set forth below:

<TABLE>
<CAPTION>
FUND ADVISORY FEE
---- ------------
<S> <C>
Europe Fund .90%
Japan Fund .90%
</TABLE>

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

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

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

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

DISTRIBUTION
Pursuant to the Distribution Agreement adopted by the Trust, PADCO Financial
Services, Inc. (the Distributor), 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852, acts as distributor for the Advisor Class Shares of
the Trust under the general supervision and control of the Trustees and the
officers of the Trust.

19
<PAGE>

Under the Distribution Plan, the Distributor may use its fees for: (i)
compensation for its services in connection with distribution assistance; or
(ii) payments to financial institutions and intermediaries such as banks,
savings and loan associations, insurance companies and investment counselors,
broker-dealers, mutual fund supermarkets and the Distributors affiliates and
subsidiaries as compensation for services or reimbursement of expenses incurred
in connection with distribution assistance. The Distributor may, at its
discretion, retain a portion of such payments to compensate itself for
distribution services and distribution related expenses such as the costs of
preparation, printing, mailing or otherwise disseminating sales literature,
advertising, and prospectuses (other than those furnished to current
shareholders of the Fund), promotional and incentive programs, and such other
marketing expenses that the Distributor may incur.

COSTS AND EXPENSES

Each Fund bears all expenses of its operations other than those assumed by the
Advisor or the Servicer. Fund expenses include: the management fee; the
servicing fee (including administrative, transfer agent, and shareholder
servicing fees); custodian and accounting fees and expenses; legal and auditing
fees; securities valuation expenses; fidelity bonds and other insurance
premiums; expenses of preparing and printing prospectuses, confirmations, proxy
statements, and shareholder reports and notices; registration fees and expenses;
proxy and annual meeting expenses, if any; all Federal, state, and local taxes
(including, without limitation, stamp, excise, income, and franchise taxes);
organizational costs; non-interested Trustees' fees and expenses; the costs and
expenses of redeeming shares of the Fund; fees and expenses paid to any
securities pricing organization; dues and expenses associated with membership in
any mutual fund organization; and costs for incoming telephone WATTS lines. In
addition, each of the Funds pays an equal portion of the Trustee fees and
expenses for attendance at Trustee meetings for the Trustees of the Trust who
are not affiliated with or interested persons of the Advisor.

DETERMINATION OF NET ASSET VALUE

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

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

For valuation purposes, all assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values at the mean
between the bid and the offered quotations of such currencies against U.S.
dollars as last quoted by any recognized dealer at the time NAV is determined.
If such quotations are not available, the rate of exchange will be determined
in good faith by the Advisor based on guidelines adopted by

20
<PAGE>

the Trustees. Dividend income and other distributions are recorded on the
ex-dividend date, except for certain dividends from foreign securities which are
recorded as soon as the Trust is informed after the ex-dividend date.

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

PERFORMANCE INFORMATION

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

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

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

CALCULATION OF RETURN QUOTATIONS

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

M
P(1+T) = ERV

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

T = average annual total return;

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

21
<PAGE>

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

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

PURCHASE AND REDEMPTION OF SHARES

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

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

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

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

The national Japanese holidays affecting the relevant securities markets in
Japan are as follows: New Year's Day; Coming-of-Age Day; National Foundation
Day; Vernal Equinox Day; Greenery Day; Constitution Memorial Day;

22
<PAGE>

Children's Day; Marine Day; Respect-of-the-Aged Day; Autumnal Equinox Day;
Health-Sports Day; Culture Day; Labor Thanksgiving Day; and Emperor's Birthday.
Although the Trust expects this same holiday schedule to be observed in the
future, the Japanese exchange may modify its holiday schedule at any time.

National holidays in the various European countries will also affect the
relevant European securities markets. Due to the variety of holidays in each EU
country as well as Switzerland, those holidays are not listed here.

REDEMPTIONS IN-KIND
The Trust intends to pay redemption proceeds in cash. However, under unusual
conditions that make the payment in cash unwise (and for the protection of the
remaining shareholders of the Fund) the Trust reserves the right to pay all, or
part, of your redemption proceeds in liquid securities with a market value equal
to the redemption price (redemption in-kind). The Trust has elected to be
governed by Rule 18f-1 of the 1940 Act under which the Trust is obligated to
redeem shares for any one shareholder in cash only up to the lesser of $250,000
or 1% of a Fund's net asset value during any 90-day period. Although it is
highly unlikely that your shares would ever actually be redeemed in kind, you
would probably have to pay brokerage costs to sell the securities distributed to
you.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

DIVIDENDS AND DISTRIBUTIONS

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

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

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

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

23
<PAGE>

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

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

SPECIAL TAX CONSIDERATIONS

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

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

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

OPTIONS TRANSACTIONS BY THE FUNDS
If a call option written by a Fund expires, the amount of the premium received
by the Fund for the option will be short-term capital gain to the Fund. If such
an option is closed by a Fund, any gain or loss realized by the Fund as a result
of the closing purchase transaction will be short-term capital gain or loss. If
the holder of a call option exercises the holder's right under the option, any
gain or loss realized by the Fund upon the sale of the underlying security or
underlying futures contract pursuant to such exercise will be short-term or
long-term capital gain or loss to the Fund depending on the Fund's holding
period for the underlying security or underlying futures contract.

With respect to call options purchased by a Fund, the Fund will realize
short-term or long-term capital gain or loss if such option is sold and will
realize short-term or long-term capital loss if the option is allowed to expire
depending on the Fund's holding period for the call option. If such a call
option is exercised, the amount paid by the Fund for the option will be added to
the basis of the stock or futures contract so acquired.

24
<PAGE>

The Europe Fund and the Japan Fund will utilize options on stock indexes in
their operations. Options on "broad based" stock indexes are classified as
"nonequity options" under the Code. Gains and losses resulting from the
expiration, exercise, or closing of such nonequity options, as well as gains and
losses resulting from futures contract transactions, will be treated as
long-term capital gain or loss to the extent of 60% thereof and short-term
capital gain or loss to the extent of 40% thereof (hereinafter, "blended gain or
loss"). In addition, any nonequity option and futures contract held by a Fund on
the last day of a fiscal year will be treated as sold for market value on that
date, and gain or loss recognized as a result of such deemed sale will be
blended gain or loss.

The trading strategies of the Europe Fund and the Japan Fund involving nonequity
options on stock indexes may constitute "straddle" transactions. "Straddles" may
affect the taxation of such instruments and may cause the postponement of
recognition of losses incurred in certain closing transactions. Each of these
Funds will also have available to the Fund a number of elections under the Code
concerning the treatment of option transactions for tax purposes. Each such Fund
will utilize the tax treatment that, in the Fund's judgment, will be most
favorable to a majority of investors in the Fund. Taxation of these transactions
will vary according to the elections made by the Fund. These tax considerations
may have an impact on investment decisions made by the Fund.

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

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

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

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

OTHER INFORMATION

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

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

25
<PAGE>

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

SHAREHOLDER INQUIRIES
You may visit the Trust's Web site at www.rydexfunds.com or call 1-800-820-0888
or 301-468-8520 to obtain information on account statements, procedures, and
other related information.

COUNSEL

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

AUDITORS AND CUSTODIAN

, are the auditors and the independent certified public accountants
of the Trust and each of the Funds. Firstar (the "Custodian"), Star Bank Center,
425 Walnut Street, Cincinnati, Ohio 45202, serves as custodian for the Trust and
the Funds under a custody agreement between the Trust and the Custodian. Under
the custody agreement, the Custodian holds the portfolio securities of each Fund
and keeps all necessary related accounts and records.

26
<PAGE>

APPENDIX A

BOND RATINGS

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

STANDARD & POOR'S RATINGS
GROUP CORPORATE BOND RATINGS

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

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

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

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

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

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

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

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

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

27
<PAGE>

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

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

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

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

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

<PAGE>
PROSPECTUS

<TABLE>
<C> <S>
2 URSA MASTER FUND
---

4 ARKTOS MASTER FUND
---

6 JUNO MASTER FUND
---

8 UTILITIES MASTER FUND
---

10 MORE INFORMATION ABOUT FUND INVESTMENTS
--- AND RISK

14 PURCHASING AND REDEEMING SHARES
---

14 MANAGEMENT
---

15 DIVIDENDS, DISTRIBUTIONS AND TAXES
---

17 BENCHMARK INFORMATION
---

BC ADDITIONAL INFORMATION
---
</TABLE>

MARCH 1, 2000

RYDEX SERIES TRUST

URSA MASTER FUND
ARKTOS MASTER FUND
JUNO MASTER FUND
UTILITIES MASTER 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 thirty
separate investment portfolios (the "Rydex Funds"), four of which are described
in this Prospectus (the "Funds"). Shares of the Funds are available solely
through "master-feeder arrangements" with feeder funds of the Trust.

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>
- ------
2 PROSPECTUS

FUND INFORMATION -- URSA MASTER FUND

FUND OBJECTIVE

[ICON]
The Ursa Master 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 Master 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. Equity market volatility may also negatively
affect the Fund's short sales of securities. This volatility may cause the
value of your investment in the Fund to decrease.

- 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 3
--------

FUND PERFORMANCE AND FEE INFORMATION

URSA MASTER FUND PERFORMANCE

[ICON]
The bar chart and table below show the performance of the Ursa Master
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 MASTER FUND
<S> <C>
1998 -19.01%
1997 -20.99%
1996 -12.17%
1995 -20.14%
</TABLE>

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>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
INVESTOR CLASS S&P 500
SHARES INDEX(2)
------------------------------------
<S> <C> <C>
Past One Year % %
Past Five Years % %
Since Inception (01/07/94) % %
</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 Master Fund.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
SHAREHOLDER FEES* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees .90%
Distribution (12b-1) Fees None
Other Expenses %
-----
Total Annual Fund Operating Expenses %
</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 Master 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>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$ $
</TABLE>
<PAGE>
- ------
4 PROSPECTUS

FUND INFORMATION -- ARKTOS MASTER FUND

FUND OBJECTIVE

[ICON]
The Arktos Master 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 Master Fund is subject to a number of risks that will affect
the value of its shares, including:

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 5
--------

FUND PERFORMANCE AND FEE INFORMATION

ARKTOS MASTER FUND PERFORMANCE

[ICON]
The bar chart and table below show the performance of the Arktos Master
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>
ARKTOS MASTER FUND
<S> <C>
1998
1997
1996
1995
</TABLE>

<TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)

INVESTOR CLASS
SHARES NASDAQ 100 INDEX(2)
-----------------------------------------
<S> <C> <C>
Past One Year % %
Since Inception (09/03/98) % %
</TABLE>

(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.

(2) THE NASDAQ 100 INDEX 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 Arktos Master Fund.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
SHAREHOLDER FEES* None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees .90%
Distribution (12b-1) Fees None
Other Expenses** %
-----
Total Annual Fund Operating Expenses %
</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 Master 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>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$ $
</TABLE>
<PAGE>
- ------
6 PROSPECTUS

FUND INFORMATION -- JUNO MASTER FUND

FUND OBJECTIVE

[ICON]
The Juno Master 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 Master 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.

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 7
--------

FUND PERFORMANCE AND FEE INFORMATION

JUNO MASTER FUND PERFORMANCE

[ICON]
The bar chart and table below show the performance of Juno Master 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 MASTER FUND
<S> <C>
1999
1998 -4.58%
1997 -5.56%
1996 8%
</TABLE>

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>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
INVESTOR CLASS LEHMAN LONG TREASURY
SHARES INDEX(2)
<S> <C> <C>
-------------------------------------------------
Past One Year
Since Inception (03/03/95)
</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 Master Fund.
- --------------------------------------------------------------------------------

* 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 Master 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>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$ $
</TABLE>
<PAGE>
- ------
8 PROSPECTUS

FUND INFORMATION -- UTILITIES MASTER FUND

FUND OBJECTIVE

[ICON]
The Utilities Master Fund seeks capital appreciation by investing in
companies that operate public utilities ("Utilities Companies").

PORTFOLIO INVESTMENTS

[ICON]
The Fund invests substantially all of its assets in equity securities
of Utilities Companies that are traded in the United States. Utilities
Companies may include companies involved in the manufacturing, production,
generation, transmission, distribution or sales of gas or electric energy; water
supply, waste and sewage disposal; and companies that receive a majority of
their revenues from their public utility operations. 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 Utilities Master 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 option contracts and other securities may fluctuate
significantly from day to day. This volatility may cause the value of your
investment in the Fund to decrease.

- UTILITIES SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the Utilities 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 Utilities Companies may fluctuate widely
due to government regulation; the effect of interest rates on capital
financing; competitive pressures due to deregulation in the utilities
industry; supply and demand for services; increased sensitivity to the
cost of natural resources required for energy production; and
environmental factors such as conservation of natural resources.
<PAGE>
PROSPECTUS 9
--------

FUND PERFORMANCE AND FEE INFORMATION

UTILITIES MASTER FUND PERFORMANCE

[ICON]
Utilities Master Fund commenced operations on , 2000,
and therefore did not have a performance history for a full calendar
year.

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Utilities Fund.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
SHAREHOLDER FEES* NONE

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees .25%
Other Expenses** 1.00%
-----
Total Annual Fund Operating Expenses 2.10%
</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
Utilities Master Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's estimated operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your cost would be:

<TABLE>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$ $
</TABLE>
<PAGE>
- ------
10 PROSPECTUS

MORE INFORMATION ABOUT FUND INVESTMENTS AND RISK

THE BENCHMARK FUND'S INVESTMENT OBJECTIVES

The Funds 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>
FUND (TICKER SYMBOL) BENCHMARK
<S> <C>
Ursa Master Fund (RYURX) Inverse (opposite) of the performance of S&P 500 Composite
Stock Price Index-TM- (SPX)
Arktos Master Fund (RYAIX) Inverse (opposite) of the performance of NASDAQ 100
Index-TM- (NDX)
Juno Master 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 ADVISOR'S INVESTMENT METHODOLOGY

In managing the Ursa, Arktos, and Juno Master 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, the Funds may require short selling techniques designed
to inversely correlate to the performance of an index or benchmark.

"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' portfolio 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

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 JUNO MASTER 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.

FIXED INCOME RISK (JUNO MASTER FUND) -- 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.

INDUSTRY CONCENTRATION RISK -- Only the Utilities Master Fund will invest 25% or
more of the value of the Fund's total assets in the securities of one or more
issuers conducting their principal business activities in the same industry;
EXCEPT THAT, to the extent the industry underlying a Fund's benchmark is
concentrated in a particular industry, a Fund will necessarily be concentrated
in that industry. The risk of concentrating
<PAGE>
- ------
12 PROSPECTUS

Fund investments in a limited number of issuers conducting business in the same
industry is that the Fund will be more susceptible to the risks that are
associated with of those issuers (or that industry) than a fund that does not
concentrate its investments. Currently, the index underlying the Arktos Master
Fund's benchmark -- the NASDAQ 100 Index-TM- -- is concentrated in technology
companies. Each of the Sector Funds will concentrate its investments in its
respective sector.

NON-DIVERSIFICATION RISK (ALL FUNDS) -- Since each Fund is non-diversified, each
Fund may invest in the securities of a limited number of issuers. To the extent
that a Fund invests a significant percentage of its assets in a limited number
of issuers, the Fund is subject to the risks of investing in these few issuers,
and may be more susceptible to a single adverse economic of regulatory
occurrence.

TRACKING ERROR RISK (ALL FUNDS) -- 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) -- 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 RISK (ALL FUNDS) -- 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.
<PAGE>
PROSPECTUS 13
--------

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.

SHORT SALES RISK (URSA MASTER AND ARKTOS MASTER FUNDS) -- 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.

EARLY CLOSING RISK (ARKTOS MASTER 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.
<PAGE>
- ------
14 PROSPECTUS

PURCHASING AND REDEEMING SHARES

Shares are offered continuously, and may be purchased on any day that the
NYSE is open for business (a "Business Day"). 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 Securities and
Exchange Commission ("SEC"), the right is reserved to advance the time on that
day by which purchase and redemption orders must be received.

Shares of each Fund can be purchased only by feeder funds of the Trust. All
orders for the purchase of shares are subject to acceptance or rejection by the
Trust. A feeder fund purchases and redeems shares of each Fund based on, among
other things, the amount of its net purchases or redemptions at the Fund's net
asset value per share calculated as of that same day.

All redemption requests will be processed and payment with respect thereto
will be made within seven days after tender. The Trust may suspend redemptions,
if permitted by the Investment Company Act of 1940 (the "1940 Act"), for any
period during which the NYSE, NASDAQ, CME, the Chicago Board Options Exchange
("CBOE") or the Chicago Board of Trade ("CBOT"), as appropriate, is closed or
during which trading is restricted by the SEC, or the SEC declares that an
emergency exists. Redemptions may also be suspended during other periods
permitted by the SEC for the protection of the Trust's investors.

NET ASSET VALUE

The price per share (the offering price) will be the net asset value per
share ("NAV") next determined after your purchase order is received by the
Trust. 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 each Fund (except the Juno
Master Fund) the NAV is calculated once each Business Day after the close of the
NYSE (currently, 4:00 p.m., Eastern Time). The NAV of the Juno Master 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 in accordance with the policies set forth in the Fund's
SAI.

TO RECEIVE THE CURRENT BUSINESS DAY'S NAV, THE TRUST MUST RECEIVE PURCHASE
OR REDEMPTION ORDERS BEFORE 3:45 P.M., EASTERN TIME FOR THE URSA MASTER AND
ARKTOS MASTER FUNDS, BEFORE 3:30 P.M., EASTERN TIME FOR THE UTILITIES MASTER
FUND AND BEFORE 2:45 P.M., EASTERN TIME FOR THE JUNO MASTER FUND.

MANAGEMENT

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
<PAGE>
PROSPECTUS 15
--------

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.

<TABLE>
<CAPTION>
FUND ADVISORY FEE
- ---- ------------
<S> <C>
Ursa Master .90%
Arktos Master .90%
Juno Master .90%
Utilities Master .85%
</TABLE>

The Advisor bears all of its own costs associated with providing these
advisory services and the expenses of the Trustee 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.

PORTFOLIO MANAGEMENT

The portfolio manager of the Arktos Master 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 Ursa Master Fund and the Juno Master 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.

The Utilities Master Fund is managed by a team and no one person is
responsible for making investment decisions for the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

Income dividends and capital gain distributions are paid to the feeder funds
at least annually by each of the Funds. The Trust may declare a special capital
gains distribution if Trustees believe that such a distribution would be in the
best interest of the shareholders of a Fund.
<PAGE>
- ------
16 PROSPECTUS

TAXES

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. 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.

In addition to qualifying for special tax treatment as a regulated
investment company, the Funds intend to meet special diversification
requirements of the Internal Revenue Code (the "Code") in order to assure
insurance companies that their variable annuity and variable life contracts
qualify as insurance under the Code.
<PAGE>
PROSPECTUS 17
--------

BENCHMARK INFORMATION.

THE URSA MASTER FUND IS NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY
STANDARD & POOR'S CORP. (S&P); THE ARKTOS MASTER 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
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 March 1, 2000 (the "SAI"), which contains more detailed
information about the Funds. The SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus and, therefore, legally forms a part of this Prospectus. The SEC
maintains 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. 20549-0102. You may also obtain this information, upon
payment of a duplicating fee, by e-mailing the SEC at the following address:
[email protected].

You may obtain a copy of the SAI or the annual or semi-annual reports, without
charge by calling 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.

The Fund's SEC registration number is 811-07584.
<PAGE>
PROSPECTUS -- INVESTOR CLASS

<TABLE>
<C> <S>
2 RISK/RETURN INFORMATION COMMON TO THE
--- FUNDS

3 URSA FUND II
---

5 ARKTOS FUND II
---

7 JUNO FUND II
---

9 INTERNET FUND
---

11 UTILITIES FUND
---

13 MORE INFORMATION ABOUT FUND INVESTMENTS
--- AND RISK

17 SHAREHOLDER INFORMATION
---

22 MANAGEMENT
---

23 DIVIDENDS, DISTRIBUTIONS AND TAXES
---

29 BENCHMARK INFORMATION
---

BC ADDITIONAL INFORMATION
---
</TABLE>

MARCH 1, 2000

RYDEX SERIES TRUST

BENCHMARK FUNDS
URSA FUND II
ARKTOS FUND II
JUNO FUND II

SECTOR FUNDS
INTERNET FUND
UTILITIES 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 thirty
separate investment portfolios (the "Rydex Funds"), five 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.

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>
- ------
2 PROSPECTUS

RISK/RETURN INFORMATION COMMON TO THE FUNDS

THE FUNDS' INVESTMENT OBJECTIVES

Each Fund has a separate investment objective. THE INVESTMENT OBJECTIVE OF
EACH FUND IS NON-FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.

RISKS OF INVESTING IN THE FUNDS

- The value of the Funds may fluctuate in value from day to day.

- Fund shares may decline in value, and you may lose money.
<PAGE>
PROSPECTUS 3
--------

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]
The Fund pursues its investment objective through what is sometimes
referred to as a "master-feeder arrangement". The Fund invests all of its assets
in the Ursa Master Fund, a separate series of the Trust with an identical
investment objective.

Unlike a traditional index fund, the Ursa Master Fund's benchmark is to
perform exactly opposite the S&P 500 Index, and the Ursa Master Fund will not
own the securities included in the index. Instead, as its primary investment
strategy, the Ursa Master 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 Ursa Master Fund holds U.S. Government securities or cash
equivalents to collateralize these futures and options contracts. The Ursa
Master Fund also may enter into repurchase agreements and sell securities short.

RISK CONSIDERATIONS

[ICON]
The Ursa Master Fund is subject to a number of risks that will affect
the value of its shares, including:

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. The performance shown for the periods
prior to March 1, 2000 represents the performance of the Ursa Master
Fund adjusted for the expenses of 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

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).

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.
** THIS TABLE AND THE EXAMPLE INCLUDE BOTH THE FEES PAID BY THE FUND AND ITS
SHARE OF THE FEES OF THE URSA MASTER FUND.
*** OTHER EXPENSES ARE ESTIMATED.

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>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$141 $437
</TABLE>
<PAGE>
PROSPECTUS 5
--------

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]
The Fund pursues its investment objective through what is sometimes
referred to as a "master-feeder arrangement". The Fund invests all of its assets
in the Arktos Master Fund, a separate series of the Trust with an identical
investment objective.

Unlike a traditional index fund, the Arktos Master Fund's benchmark is to
perform exactly opposite the NASDAQ 100 Index-TM-, and the Arktos Master Fund
will not own the securities included in the Index. Instead, as its primary
investment strategy, the Arktos Master 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 Arktos Master Fund
holds U.S. Government securities or cash equivalents to collateralize these
futures and options contracts. The Arktos Master Fund also may enter into
repurchase agreements.

RISK CONSIDERATIONS

[ICON]
The Arktos Master Fund is subject to a number of risks that will affect
the value of its shares, including:

FUND PERFORMANCE AND FEE INFORMATION

ARKTOS FUND PERFORMANCE

[ICON]
The bar chart and table below show the performance of Arktos 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>
ARKTOS FUND
<S> <C>
1999
</TABLE>

<TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDING DECEMBER 31, 1999)(1)
INVESTOR CLASS
SHARES NASDAQ 100 INDEX(2)
-----------------------------------------
<S> <C> <C>
Past One Year % %
Since Inception (09/03/98) % %
</TABLE>

(1) THESE FIGURES ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.
(2) THE NASDAQ 100 INDEX 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 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.
** THIS TABLE AND THE EXAMPLE INCLUDE BOTH THE FEES PAID BY THE FUND AND ITS
SHARE OF THE FEES OF THE ARKTOS MASTER FUND.
*** 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>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$139 $434
</TABLE>
<PAGE>
PROSPECTUS 7
--------

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]
The Fund pursues its investment objective through what is sometimes
referred to as a "master-feeder arrangement". The Fund invests all of its assets
in the Juno Master Fund, a separate series of the Trust with an identical
investment objective.

Unlike a traditional fund, the Juno Master Fund's benchmark is to perform
exactly opposite the Long Treasury Bond. As its primary investment strategy, the
Juno Master Fund enters into short sales and engages in futures and options
transactions. On a day-to-day basis, the Juno Master Fund holds U.S. Government
securities or cash equivalents to collateralize these obligations. The Juno
Master Fund also may enter into repurchase agreements.

RISK CONSIDERATIONS

[ICON]
The Juno Master Fund is subject to a number of risks that will affect
the value of its shares, including:

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. The performance shown for the periods
prior to March 1, 2000 represents the performance of the Juno Master
Fund adjusted for the expenses of 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

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).

(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.
** THIS TABLE AND THE EXAMPLE INCLUDE BOTH THE FEES PAID BY THE FUND AND ITS
SHARE OF THE FEES OF THE JUNO MASTER FUND.
*** OTHER EXPENSES ARE ESTIMATED.

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>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$159 $493
</TABLE>

<PAGE>
PROSPECTUS 9
--------

FUND INFORMATION -- INTERNET FUND

FUND OBJECTIVE

[ICON]
The Internet Fund seeks capital appreciation by investing in companies
that provide products or services designed for or related to the Internet
("Internet Companies").

PORTFOLIO INVESTMENTS

[ICON]
The Fund invests substantially all of its assets in equity securities
of Internet Companies that are traded in the United States. Internet
Companies are involved in all aspects of research, design development,
manufacturing or distribution of products or services for use with the Internet
or Internet-related businesses. Such companies may provide information or
entertainment services over the Internet; sell or distribute goods and services
over the Internet; provide infrastructure systems or otherwise provide hardware,
software or support which impacts Internet commerce; or provide Internet access
to consumers and businesses. Internet companies may also include companies that
provide intranet or extranet services. The Fund will maintain an adequate
representation of the various industries in the Internet sector. 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 Internet Fund is subject to a number of risks that will affect the
value of its shares, including:

- EQUITY RISK -- The equity markets are volatile, and the value of the
Fund's futures and options contracts and other securities may fluctuate
significantly from day to day. This volatility may cause the value of your
investment in the Fund to decrease.

- INTERNET SECTOR CONCENTRATION RISK -- The risk that the securities of
issuers in the Internet 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 Internet 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 and rapid obsolescence of products.

- SMALLER COMPANY RISK -- Although securities of large and well-established
companies in the Internet sector will be held in the Fund's portfolio, the
Fund also will invest in medium, small and/or newly-public companies which
may be subject to greater share price fluctuations and declining growth,
particularly in the event of rapid changes in technology and/or increased
competition. Securities of those smaller and/or less seasoned companies
may therefore expose shareholders of the Fund to above-average risk.
<PAGE>
- ------
10 PROSPECTUS

FUND PERFORMANCE AND FEE INFORMATION

INTERNET FUND PERFORMANCE

Internet Fund commenced operations on , 2000, and therefore did
not have a performance history for a full calendar year.

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Internet Fund.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
SHAREHOLDER FEES* NONE

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses** 1.00%
-----
Total Annual Fund Operating Expenses 1.85%
</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
Internet Fund with the cost of investing in other mutual funds.

<TABLE>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$ $
</TABLE>

<PAGE>
PROSPECTUS 11
--------

FUND INFORMATION -- UTILITIES FUND

FUND OBJECTIVE

[ICON]
The Utilities Fund seeks capital appreciation by investing in a
portfolio of securities of companies that operate public utilities
("Utilities Companies").

PORTFOLIO INVESTMENTS

RISK CONSIDERATIONS

[ICON]
The Utilities Fund is subject to a number of risks that will affect the
value of its shares, including:

FUND PERFORMANCE AND FEE INFORMATION

UTILITIES FUND PERFORMANCE

Utilities Fund commenced operations on , 2000, and therefore did
not have a performance history for a full calendar year.

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and
hold Investor Class Shares of the Utilities Fund.

<TABLE>
<S> <C>
SHAREHOLDER FEES* NONE
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM NET ASSETS)
Management Fees .85%
Distribution (12b-1) Fees None
Other Expenses** 1.00%
-----
Total Annual Fund Operating Expenses 1.85%
</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
Utilities Fund with the cost of investing in other mutual funds.

<TABLE>
1 YEAR 3 YEARS
- ----------------
<S> <C>
$ $
</TABLE>
<PAGE>
PROSPECTUS 13
--------

MORE INFORMATION ABOUT FUND INVESTMENTS AND RISK

THE BENCHMARK FUNDS' INVESTMENT OBJECTIVES

The Funds 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>
FUND (TICKER SYMBOL) BENCHMARK
<S> <C>
Ursa Fund (RYURX) Inverse (opposite) of the performance of S&P 500 Composite
Stock Price Index-TM- (SPX)
Arktos Fund (RYAIX) Inverse (opposite) of the performance of NASDAQ 100
Index-TM- (NDX)
Juno Fund (RYJUX) Inverse (opposite) of the price movement of the Long
Treasury Bond
</TABLE>

A BRIEF GUIDE TO THE BENCHMARKS.

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 ADVISOR'S INVESTMENT METHODOLOGY

In managing the Ursa, Arktos, and Juno Master Funds, PADCO Advisors, Inc.'s
(the "Advisor") 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, the Funds may require short selling
techniques designed to inversely correlate to the performance of an index or
benchmark.

In managing the Sector Funds, the Advisor's 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.
<PAGE>
- ------
14 PROSPECTUS

The Advisor monitors the Funds' portfolios on an ongoing basis, and adds or
deletes stocks from the portfolios as needed.

After constructing a portfolio for each 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.

MASTER-FEEDER INVESTMENT STRUCTURE

Each Benchmark Fund pursues its respective investment objective indirectly
by investing through what is sometimes referred to as a "master-feeder
arrangement." Under a master-feeder arrangement, a Fund's investment portfolio
is composed solely of shares of a "master fund," a separate mutual fund that has
an identical investment objective, e.g., the Ursa Fund would act as a "feeder
fund," holding shares of its master fund as its only investment. As a result,
the Fund has an indirect interest in all of the securities owned by the master
fund. Because of this indirect interest, the Fund's investment returns should be
the same as those of the master fund, adjusted for Fund expenses.

The Advisor may choose to discontinue investing through a master-feeder
arrangement and manage the Fund directly if the Trust determines that doing so
would be in the best interests of shareholders.

The Utilities Fund anticipates that it will pursue its investment objective
directly by following the investment strategy previously described in its "Fund
Information" section. However, the Utilities Fund reserves the right to pursue
its investment objective indirectly by investing through a "master-feeder
arrangement," as described above for the Benchmark Funds. A Fund is permitted to
change its investment strategy to pursue its investment objective through a
master-feeder arrangement without shareholder approval if the Trust determines
that doing so would be in the best interests of shareholders.
<PAGE>
PROSPECTUS 15
--------

RISKS OF INVESTING IN THE FUNDS

As indicated below, the Funds (which includes their respective "master
fund") are subject to a number of risks that may affect the value of Fund
shares.

EQUITY RISK (ALL FUNDS EXCEPT JUNO 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.

FIXED INCOME RISK (URSA, ARKTOS, 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.

INDUSTRY CONCENTRATION RISK (INTERNET AND UTILITY FUNDS) -- None of the
Benchmark Funds will invest 25% or more of the value of the Fund's total assets
in the securities of one or more issuers conducting their principal business
activities in the same industry; EXCEPT THAT, to the extent the industry
underlying a Fund's benchmark is concentrated in a particular industry, a Fund
will necessarily be concentrated in that industry. The risk of concentrating
Fund investments in a limited number of issuers conducting business in the same
industry is that the Fund will be more susceptible to the risks that are
associated with those issuers (or that industry) than a fund that does not
concentrate its investments. Currently, the index underlying the Arktos Fund's
benchmark -- the NASDAQ 100 Index-TM--- is concentrated in technology companies.
Each of the Sector Funds will concentrate its investments in its respective
sector.

TRACKING ERROR RISK (URSA, ARKTOS, AND JUNO FUNDS) -- While the Funds do not
expect returns to deviate significantly from their respective benchmarks on a
daily basis, factors such as Fund
<PAGE>
- ------
16 PROSPECTUS

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.

The risks associated with the Funds' use of futures and options contracts
include:
<PAGE>
PROSPECTUS 17
--------

- 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.

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

SHORT SALES RISK (URSA AND ARKTOS FUNDS) -- Short sales are transactions in
which a Fund sells a security it does not own. To complete the transaction, the
Fund must borrow the security to make delivery to the buyer. The Fund is then
obligated to replace the security borrowed by purchasing the security at the
market price at the time of replacement. The price at such time may be higher or
lower than the price at which the security was sold by the Fund. If the
underlying security goes down in price between the time the Fund sells the
security and buys it back, the Fund will realize a gain on the transaction.
Conversely, if the underlying security goes up in price during the period, the
Fund will realize a loss on the transaction. The risk of such price increases is
the principal risk of engaging in short sales.

EARLY CLOSING RISK (ARKTOS 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.

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>
- ------
18 PROSPECTUS

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>
PROSPECTUS 19
--------

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

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>
- ------
20 PROSPECTUS

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

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>
PROSPECTUS 21
--------

INVOLUNTARY REDEMPTIONS

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-seven separate Funds. Investor Class Shares of 15 Sector Funds and
Advisor Class Shares of certain Funds are offered in separate prospectuses.
Exchanges may be made by letter or by telephone subject to the procedures set
forth below.

<TABLE>
FUND(S) CUT OFF TIME
- --------------------------------------------------------------------------
<S> <C>
Ursa 3:45 p.m.
Arktos
- --------------------------------------------------------------------------
Rydex Sector Funds 3:30 p.m.
- --------------------------------------------------------------------------
Juno 2:45 p.m.
</TABLE>

Intermediaries may have earlier cutoff times.

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

PROCEDURES FOR REDEMPTIONS AND EXCHANGES

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.

MANAGEMENT

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
<PAGE>
PROSPECTUS 23
--------

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>
FUND ADVISORY FEE
- --------------------------------------------------------------------------
<S> <C>
Ursa .90%
Arktos .90%
Juno .90%
Internet .85%
Utilities .85%
</TABLE>

The portfolio manager of 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 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.

Each Sector Fund is managed by a team and no one person is responsible for
making investment decisions for a Sector Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

Income dividends, if any, are paid at least annually by each of the Funds.
If you own Fund shares on a Fund's record date, you will be entitled to receive
the dividend. The Funds may declare and pay dividends on the same date. The
Funds make distributions of capital gains, if any, at least
<PAGE>
- ------
24 PROSPECTUS

annually. The Trust, however, may declare a special capital gains distribution
if the Trustees believe that such a distribution would be in the best interest
of the shareholders of a Fund.

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

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

TAX INFORMATION

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

TAX STATUS OF EACH FUND

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 25
--------

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>
- -------
26 PROSPECTUS

BENCHMARK INFORMATION.

THE URSA FUND IS NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY STANDARD & POOR'S
CORP. (S&P); THE ARKTOS 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 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.

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

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.

The Fund's SEC registration number is 811-07584.
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

RYDEX SERIES TRUST

6116 EXECUTIVE BOULEVARD, SUITE 400
ROCKVILLE, MARYLAND 20852

1-800-820-0888
301-468-8520

WWW.RYDEXFUNDS.COM

URSA FUND
ARKTOS FUND
JUNO FUND
UTILITIES FUND
INTERNET FUND
URSA MASTER FUND
ARKTOS MASTER FUND
JUNO MASTER FUND
UTILITIES MASTER FUND

This SAI is not a prospectus. It should be read in conjunction with the Trust's
Prospectus, dated March 1, 2000. A copy of the Trust's Prospectus is available,
without charge, upon request to the Trust at the address above or by telephoning
the Trust at the telephone number above.

The date of this SAI is March 1, 2000.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

PAGE
GENERAL INFORMATION ABOUT THE TRUST 3

ADDITIONAL INFORMATION ABOUT THE SECTOR FUNDS 3

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS 4

INVESTMENT RESTRICTIONS 12

PORTFOLIO TRANSACTIONS AND BROKERAGE 15

MANAGEMENT OF THE TRUST 16

DETERMINATION OF NET ASSET VALUE 21

PERFORMANCE INFORMATION 22

CALCULATION OF RETURN QUOTATIONS 23

PURCHASE AND REDEMPTION OF SHARES 23

DIVIDENDS, DISTRIBUTIONS, AND TAXES 24

OTHER INFORMATION 27

COUNSEL 27

AUDITORS AND CUSTODIAN 27

APPENDIX A

2
<PAGE>

GENERAL INFORMATION ABOUT THE TRUST

Currently, the Trust has thirty separate series. The Nova, Ursa, OTC, Arktos,
Precious Metals, U.S. Government Bond, and Juno Funds (collectively, the
"Benchmark Funds") are designed to provide investment results which match the
performance of a specific benchmark. The Europe and Japan Funds
(collectively, the "International Funds") are also designed to provide
investment results which match the performance of a specific benchmark. The
Banking, Basic Materials, Biotechnology, Consumer Products, Electronics,
Energy, Energy Services, Financial Services, Health Care, Internet, Leisure,
Retailing, Technology, Telecommunications, Transportation, and Utilities
Funds (collectively, the "Sector Funds") are designed to provide exposure to
specific economic sectors. The Ursa Master, Arktos Master, Juno Master, and
Utilities Master Funds (collectively, the "Master Funds") serve as master
funds in a master-feeder arrangement with other series of the Trust. The
Trust also offers shares of the U.S. Government Money Market Fund (the "Money
Market Fund"). All payments received by the Trust for shares of any Fund
belong to that Fund. Each Fund has its own assets and liabilities.

ADDITIONAL INFORMATION ABOUT THE SECTOR FUNDS

UTILITIES FUND
The Fund will invest primarily in companies in the public utilities industry
and companies deriving a majority of their revenues from their public utility
operations as described in the Fund's prospectus. Such companies may include
companies involved in the manufacturing, production, generation,
transmission, distribution or sales of gas or electric energy; water supply,
waste and sewage disposal; and companies involved in the public communication
field, including telephone, telegraph, satellite, microwave and other public
communication facilities.

INTERNET FUND
The Fund may invest in companies that are involved in the Internet sector
including companies which the Advisor believes should benefit from the
commercialization of technological advances, although they may not be directly
involved in research and development. Such companies may provide information or
entertainment services over the Internet; sell or distribute goods and services
over the Internet; provide infrastructure systems or otherwise provide hardware
or software which impacts Internet commerce; or provide Internet access to
consumers and businesses. The Fund's investment policy is not limited to any
minimum capitalization requirement and the Fund may hold securities without
regard to the capitalization of the issuer. The Advisor's overall stock
selection for the Fund is not based on the capitalization or size of the company
but rather on an assessment of the company's fundamental prospects.

3
<PAGE>

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS

GENERAL
Each Fund's investment objective and permitted investments are described in the
Prospectuses. The investment objective of each Benchmark Fund and its respective
Master Fund, including the benchmark of the Ursa Fund and Ursa Master Fund are
fundamental policies of the Funds which cannot be changed with respect to a Fund
without the consent of the holders of a majority of that Fund's outstanding
shares. The following information supplements, and should be read in conjunction
with, those sections of the Prospectuses.

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

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

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

4
<PAGE>

FOREIGN ISSUERS
The Sector Funds and the Utilities Master Fund may invest in issuers located
outside the United States. The Sector Funds and the Utilities Master Fund may
purchase American Depositary Receipts ("ADRs"), "ordinary shares," or "New York
shares" in the United States. ADRs are dollar-denominated receipts representing
interests in the securities of a foreign issuer, which securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by United States banks
and trust companies which evidence ownership of underlying securities issued by
a foreign corporation. Generally, ADRs in registered form are designed for use
in domestic securities markets and are traded on exchanges or over-the-counter
in the United States. Ordinary shares are shares of foreign issuers that are
traded abroad and on a United States exchange. New York shares are shares that a
foreign issuer has allocated for trading in the United States. ADRs, ordinary
shares, and New York shares all may be purchased with and sold for U.S. dollars,
which protect the Funds from the foreign settlement risks described below.

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

5
<PAGE>

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

INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Funds (other than the Master Funds and the Sector Funds) presently may
invest in the securities of other investment companies to the extent that
such an investment would be consistent with the requirements of Section
12(d)(1) of the 1940 Act. A Fund, therefore, may invest in the securities of
another investment company (the "acquired company") provided that the Fund,
immediately after such purchase or acquisition, does not own in the
aggregate: (i) more than 3% of the total outstanding voting stock of the
acquired company; (ii) securities issued by the acquired company having an
aggregate value in excess of 5% of the value of the total assets of the Fund;
or (iii) securities issued by the acquired company and all other investment
companies (other than Treasury stock of the Fund) having an aggregate value
in excess of 10% of the value of the total assets of the Fund. A Fund may
also invest in the securities of other investment companies if such
securities are the only investment securities held by the Fund, such as
through a master-feeder arrangement. The Ursa, Arktos and Juno Funds expect to
pursue their respective investment goals through a master-feeder arrangement.
The Master Funds and the Sector Funds may invest in the securities of other
investment companies only as part of a merger, reorganization, or
acquisition, subject to the requirements of the 1940 Act.

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

6
<PAGE>

OPTIONS TRANSACTIONS

OPTIONS ON SECURITIES. The Sector Funds and the Utilities Master Fund may buy
call options and write (sell) put options on securities, and the Ursa Fund, Ursa
Master Fund, Arktos Fund, and Arktos Master Fund may buy put options and write
call options on securities for the purpose of realizing the Fund's investment
objective. By writing a call option on securities, a Fund becomes obligated
during the term of the option to sell the securities underlying the option at
the exercise price if the option is exercised. By writing a put option, a Fund
becomes obligated during the term of the option to purchase the securities
underlying the option at the exercise price if the option is exercised.

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

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

7
<PAGE>

in the described securities trading practices and properly segregates assets,
the segregated account will function as a practical limit on the amount of
leverage which the Fund may undertake and on the potential increase in the
speculative character of the Fund's outstanding portfolio securities.
Additionally, such segregated accounts will generally assure the availability of
adequate funds to meet the obligations of the Fund arising from such investment
activities.

PORTFOLIO TURNOVER
As discussed in the Trust's prospectus, the Trust anticipates that investors in
the Funds, as part of an asset allocation investment strategy, will frequently
purchase and/or redeem shares of the Funds . The nature of the Funds as asset
allocation tools will cause the Funds to experience substantial portfolio
turnover. (See "More Information About Risk" in the Trust's Prospectuses).
Because each Fund's portfolio turnover rate to a great extent will depend on the
purchase, redemption, and exchange activity of the Fund's investors, it is very
difficult to estimate what the Fund's actual turnover rate will be in the
future. However, the Trust expects that the portfolio turnover experienced by
the Funds will be substantial.

8
<PAGE>

upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of each of the
Funds not to invest in repurchase agreements that do not mature within seven
days if any such investment, together with any other illiquid assets held by the
Fund, amounts to more than 15% of the Fund's total assets. The investments of
each of the Funds in repurchase agreements, at times, may be substantial when,
in the view of the Advisor, liquidity or other considerations so warrant.

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

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

Until the Ursa Fund, Arktos Fund, Juno Fund, Ursa Master Fund, Arktos Master
Fund, or Juno Master Fund closes its short position or replaces the borrowed
security, the Fund will: (a) maintain a segregated account containing cash or
liquid securities at such a level that (i) the amount deposited in the account
plus the amount deposited with the broker as collateral will equal the current
value of the security sold short and (ii) the amount deposited in the segregated
account plus the amount deposited with the broker as collateral will not be less
than the market value of the security at the time the security was sold short;
or (b) otherwise cover the Fund's short position. Each of the Funds may use up
to 100% of its portfolio to engage in short sales transactions and collateralize
its open short positions.

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

STOCK INDEX FUTURES CONTRACTS
A Fund may buy and sell stock index futures contracts with respect to any stock
index traded on a recognized stock exchange or board of trade. A stock index
futures contract is a contract to buy or

9
<PAGE>

sell units of an index at a specified future date at a price agreed upon when
the contract is made. The stock index futures contract specifies that no
delivery of the actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract, with the
settlement being the difference between the contract price and the actual level
of the stock index at the expiration of the contract.

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

U.S. GOVERNMENT SECURITIES
Each of the Funds may invest in U.S. Government Securities. The Juno Fund and
Juno Master Fund may enter into short transactions on U.S. Government
Securities. Securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities include U.S. Treasury securities, which are backed
by the full faith and credit of the U.S. Treasury and which differ only in their
interest rates, maturities, and times of issuance. U.S. Treasury bills have
initial maturities of one year or less; U.S. Treasury notes have initial
maturities of one to ten years; and U.S. Treasury bonds generally have initial
maturities of greater than ten years. Certain U.S. Government Securities are
issued or guaranteed by agencies or instrumentalities of the U.S. Government
including, but not limited to, obligations of U.S. Government agencies or
instrumentalities such as Fannie Mae, the Government National Mortgage
Association, the Small Business Administration, the Federal Farm Credit
Administration, the Federal Home Loan Banks, Banks for Cooperatives (including
the Central Bank

10
<PAGE>

for Cooperatives), the Federal Land Banks, the Federal Intermediate Credit
Banks, the Tennessee Valley Authority, the Export-Import Bank of the United
States, the Commodity Credit Corporation, the Federal Financing Bank, the
Student Loan Marketing Association, and the National Credit Union
Administration.

ZERO COUPON BONDS
The Juno Fund and Juno Master Fund may invest in U.S. Treasury zero-coupon
bonds. These securities are U.S. Treasury bonds which have been stripped of
their unmatured interest coupons, the coupons themselves, and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Interest is not paid in cash during the term of these securities, but
is accrued and paid at maturity. Such obligations have greater price volatility
than coupon obligations and other normal interest-paying securities, and the
value of zero coupon securities reacts more quickly to changes in interest rates
than do coupon bonds. Since dividend income is accrued throughout the term of
the zero coupon obligation, but is not actually received until maturity, the
Fund may have to sell other securities to pay said accrued dividends prior to
maturity of the zero coupon obligation. Unlike regular U.S. Treasury bonds which
pay semi-annual interest, U.S. Treasury zero coupon bonds do not generate
semi-annual coupon payments. Instead, zero coupon bonds are purchased at a
substantial discount from the maturity value of such securities, the discount
reflecting the current value of the deferred interest; this discount is
amortized as interest income over the life of the security, and is taxable even
though there is no cash return until maturity. Zero coupon U.S. Treasury issues
originally were created by government bond dealers who bought U.S. Treasury
bonds and issued receipts representing an ownership interest in the interest
coupons or in the principal portion of the bonds. Subsequently, the U.S.
Treasury began directly issuing zero coupon bonds with the introduction of
"Separate Trading of Registered Interest and Principal of Securities" (or
"STRIPS").

11
<PAGE>

While zero coupon bonds eliminate the reinvestment risk of regular coupon
issues, that is, the risk of subsequently investing the periodic interest
payments at a lower rate than that of the security held, zero coupon bonds
fluctuate much more sharply than regular coupon-bearing bonds. Thus, when
interest rates rise, the value of zero coupon bonds will decrease to a greater
extent than will the value of regular bonds having the same interest rate.

INVESTMENT RESTRICTIONS

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

A Benchmark Fund and its respective Master Fund shall not:

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

2. Underwrite securities of any other issuer.

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

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

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

6. Invest in commodities except that the Fund may purchase and
sell futures contracts, including those relating to
securities, currencies, indexes, and options on futures
contracts or indexes and currencies underlying or related to
any such futures contracts, and purchase and sell currencies
(and options thereon) or securities on a forward-commitment or
delayed-delivery basis.

12
<PAGE>

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

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

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

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

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

FUNDAMENTAL POLICIES OF THE SECTOR FUNDS AND THE UTILITIES MASTER FUND

A Sector Fund or the Utilities Master Fund may not:

10. Borrow money in an amount exceeding 33 1/3% of the value of
its total assets, provided that, for purposes of this
limitation, investment strategies which either obligate the
Fund to purchase securities or require that Fund to segregate
assets are not considered to be borrowing. Asset coverage of a
least 300% is required for all borrowing, except where the
Fund has borrowed money for temporary purposes in amounts not
exceeding 5% of its total assets. The Fund will not purchase
securities while its borrowing exceeds 5% of its total assets.

13
<PAGE>

11. Make loans if, as a result, more than 33 1/3% of its total
assets would be lent to other parties, except that the Fund
may (i) purchase or hold debt instruments in accordance with
its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) lend its securities.

12. Purchase or sell real estate, physical commodities, or
commodities contracts, except that the Fund may purchase (i)
marketable securities issued by companies which own or invest
in real estate (including real estate investment trusts),
commodities, or commodities contracts; and (ii) commodities
contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.

13. Issue senior securities (as defined in the 1940 Act) except as
permitted by rule, regulation or order of the SEC.

14. Act as an underwriter of securities of other issuers except as
it may be deemed an underwriter in selling a portfolio
security.

15. Invest in interests in oil, gas, or other mineral exploration
or development programs and oil, gas or mineral leases.

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

Each Fund may not:

1. Invest in warrants.

2. Invest in real estate limited partnerships.

3. Invest in mineral leases.

Each Sector Fund and the Utilities Master Fund may not:

4. Pledge, mortgage or hypothecate assets except to secure
borrowing permitted by the Fund's fundamental limitation on
borrowing.

5. Invest in companies for the purpose of exercising control.

6. Purchase securities on margin or effect short sales, except
that a Fund may (i) obtain short-term credits as necessary for
the clearance of security transactions; (ii) provide initial
and variation margin payments in connection with transactions
involving futures contracts and options on such contracts; and
(iii) make short sales "against the box" or in compliance with
the SEC's position regarding the asset segregation
requirements imposed by Section 18 of the 1940 Act.

7. Invest its assets in securities of any investment company,
except as permitted by the 1940 Act or any rule, regulation or
order of the SEC.

8. Purchase or hold illiquid securities, I.E., securities that
cannot be disposed of for their approximate carrying value in
seven days or less (which term includes repurchase agreements
and time deposits maturing in more than seven days) if, in the
aggregate, more than 15% of its net assets would be invested
in illiquid securities.

14
<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

15
<PAGE>

currently does not intend to pay higher commissions to dealers and brokers who
supply it with brokerage and research services, in the event such higher
payments would be made or are deemed to have been made, such higher payments
would be in accordance with Section 28(e).

Such research services may include information on the economy, industries,
groups of securities, individual companies, statistical information, accounting
and tax law interpretations, political developments, legal developments
affecting portfolio securities, technical market action, pricing and appraisal
services, credit analysis, risk measurement analysis, performance analysis,
analysis of corporate responsibility issues or in the form of access to various
computer-generated data, computer hardware and software. Such research may be
provided by brokers and dealers in the form of written reports, telephone
contacts and personal meetings with security analysts, corporate and industry
spokespersons, economists, academicians, and government representatives.
Brokerage services and equipment may facilitate the execution and monitoring of
securities transactions, for example, by providing rapid communications with
financial markets and brokers or dealers, or by providing real-time tracking of
orders, settlements, investment positions and relevant investment criteria and
restrictions applicable to the execution of securities transactions. In some
cases, brokerage and research services are generated by third parties but are
provided to the Advisor by or through brokers and dealers. The Advisor may
allocate brokerage for research services that are also available for cash, where
appropriate and permitted by law. The Advisor may also pay cash for certain
research services received from external sources.

For the fiscal period ended March 31, 1999, the Advisor paid no commissions on
brokerage transactions, pursuant to an agreement or understanding, to brokers in
consideration of research services.

MANAGEMENT OF THE TRUST

16
<PAGE>

TRUSTEES

*ALBERT P. VIRAGH, JR. (58)

Chairman of the Board of Trustees and President of the Trust, 1993 to
present; Chairman of the Board, President, and Treasurer of PADCO
Advisors, Inc., investment adviser to the Trust, 1993 to present;
Chairman of the Board, President, and Treasurer of PADCO Service
Company, Inc., shareholder and transfer agent servicer to the Trust,
1993 to present; Chairman of the Board of Trustees of Rydex Dynamic
Funds, a registered mutual fund, 1999 to present; Chairman of the Board
of Trustees of Rydex Variable Trust, a registered mutual fund, 1996 to
present; Chairman of the Board, President, and Treasurer of PADCO
Advisors II, Inc., investment adviser to Rydex Variable Trust, 1998 to
present; Chairman of the Board, President, and Treasurer of PADCO
Financial Services, Inc., a registered broker-dealer firm, 1996 to
present; Vice President of Rushmore Investment Advisors Ltd., a
registered investment adviser, 1985 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

COREY A. COLEHOUR (53)

Trustee of the Trust, 1993 to present; Trustee of Rydex Dynamic Funds,
1999 to present; Trustee of Rydex Variable Trust, 1998 to present;
Senior Vice President of Marketing of Schield Management Company, a
registered investment adviser, 1985 to present. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

J. KENNETH DALTON (58)

Trustee of the Trust, to present; Trustee of Rydex Variable Trust,
1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Mortgage Banking Consultant and Investor, The Dalton Group, April 1995
to present; President, CRAM Mortgage Group, Inc. 1966 to April 1995.
Address: 6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852.

JOHN O. DEMARET (59)

Trustee of the Trust, to present; Trustee of Rydex Variable Trust,
1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Founder and Chief Executive Officer, Health Cost Controls America,
Chicago, Illinois, 1987 to 1996; Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

PATRICK T. MCCARVILLE (57)

Trustee of the Trust, to present; Trustee of Rydex Variable Trust,
1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Founder and Chief Executive Officer, Par Industries, Inc., Northbrook,
Illinois, 1977 to present; Address: 6116 Executive Boulevard, Suite
400, Rockville, Maryland 20852.

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

17
<PAGE>

ROGER SOMERS (54)

Trustee of the Trust, 1993 to present; Trustee of Rydex Variable Trust,
1996 to the present Trustee of Rydex Dynamic Funds, 1999 to present;
President, Arrow Limousine, 1963 to present. Address:
6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.

OFFICERS

ROBERT M. STEELE (41)

Secretary and Vice President of the Trust, 1994 to present;
Secretary and Vice President of Rydex Variable Trust, 1998
to present; Secretary and Vice President of Rydex Dynamic Funds, 1999
to present; Vice President of The Boston Company, Inc., an
institutional money management firm, 1987 to 1994. Address: 6116
Executive Boulevard, Suite 400, Rockville, Maryland 20852.

CARL G. VERBONCOEUR (47)

Vice President and Treasurer of the Trust, 1997 to present; Vice
President and Treasurer of the Rydex Variable Trust, 1998 to
present; Vice President and Treasurer of Rydex Dynamic Funds,
1999 to present; Vice President of PADCO Financial Services, Inc.,
1997 to present; Senior Vice President, Crestar Bank, 1995 to 1997;
Senior Vice President, Crestar Asset Management Company, a
registered investment adviser, 1993 to 1995; Vice President
Perpetual Savings Bank, 1987 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.

MICHAEL P. BYRUM (29)

Assistant Secretary of the Trust, 1997 to present; Assistant Secretary
of the Rydex Variable Trust, 1998 to present; Assistant Secretary of
the Rydex Dynamic Funds, 1999 to present; Employee and senior portfolio
manager of PADCO Advisors, Inc., 1993 to present; portfolio manager of
The Rydex OTC Fund (since 1997) and The Rydex U.S. Government Bond Fund
(since 1997), each a series of the Trust; Assistant Secretary of the
Separate Account, 1996 to present; Employee of PADCO Advisors II Inc.,
investment adviser to the Separate Account; Investment Representative,
Money Management Associates, a registered investment adviser, 1992 to
1993; Student, Miami University of Oxford, Ohio (B.A., Business
Administration, 1992). Address: 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852.

JOHN FRANGOS (42)

Vice President - Operations of Rydex Series Trust, Rydex Variable Trust
and Rydex Dynamic Funds from 1999 to present; Employee of PADCO
Service Company, Inc.
since 1998; Manager and Assistant Vice President, PFPC (Mutual Fund
Series) from 1994 to 1998.

18
<PAGE>

The aggregate compensation paid by the Trust to each of its Trustees serving
during the fiscal year ended March 31, 1999, is set forth in the table below:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Aggregate Pension or Retirement Estimated Annual Total Compensation
Name of Person, Position Compensation From Benefits Accrued as Benefits Upon from Fund Complex
Trust Part of Trust's Retirement For Service on
Expenses Three Boards**
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert P. Viragh, Jr.*, $0 $0 $0 $0
CHAIRMAN AND PRESIDENT
- --------------------------------------------------------------------------------------------------------------------
Corey A. Colehour, $20,000 $0 $0 $27,500
TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
J. Kenneth Dalton, $20,000 $0 $0 $27,500
TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
Roger Somers, $20,000 $0 $0 $27,500
TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
John O. Demaret, $20,000 $0 $0 $27,500
TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
Patrick T. McCarville, $20,000 $0 $0 $27,500
TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

*Denotes an "interested person" of the Trust.
**Each member of the Board of Trustees also serves as a Trustee to the Rydex
Variable Trust and to Rydex Dynamic Funds.

THE ADVISORY AGREEMENT
Under an investment advisory agreement the Advisor serves as the investment
adviser for each series of the Trust and provides investment advice to the Funds
and oversees the day-to-day operations of the Funds, subject to direction and
control by the Trustees and the officers of the Trust. As of June 30, 1999, net
assets under management of the Advisor were approximately 4 billion. Pursuant to
the advisory agreement with the Advisor, the Funds pay the Advisor the following
fees at an annual rate based on the average daily net assets for each respective
Fund, as set forth below:

<TABLE>
<CAPTION>
FUND ADVISORY FEE
-----------------------------------------------------------------
<S> <C>
Ursa Fund .90%
Arktos Fund .90%
Juno Fund .90%
Utilities Fund .85%
Internet Fund .85%
Ursa Master Fund %
Arktos Master Fund %
Juno Master Fund %
Utilities Master Fund %
</TABLE>

19
<PAGE>

associated with providing these advisory services and the expenses of the
Trustees of the Trust who are affiliated with or interested persons of the
Advisor. The Advisor, from its own resources, including profits from advisory
fees received from the Funds, provided such fees are legitimate and not
excessive, may make payments to broker-dealers and other financial institutions
for their expenses in connection with the distribution of Fund shares, and
otherwise currently pay all distribution costs for Fund shares.

DISTRIBUTION
Pursuant to the Distribution Agreement adopted by the Trust, PADCO Financial
Services, Inc. (the "Distributor"), 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852, acts as distributor for the Advisor Class Shares of
the Trust under the general supervision and control of the Trustees and the
officers of the Trust.

Under a Distribution and Shareholder Services Plan, Service Providers may use
their fees for: (i) compensation for its services in connection with
distribution assistance; or (ii) payments to financial institutions and
intermediaries such as banks, savings and loan associations, insurance companies
and investment counselors, broker-dealers, mutual fund supermarkets and the
Distributor's affiliates and subsidiaries as compensation for services or
reimbursement of expenses incurred in connection with distribution assistance.
The Distributor may, at its discretion, retain a portion of such payments to
compensate itself for distribution services and distribution related expenses
such as the costs of preparation, printing, mailing or otherwise disseminating
sales literature, advertising, and prospectuses (other than those furnished to
current shareholders of the Fund), promotional and incentive programs, and such
other marketing expenses that the Distributor may incur.

20
<PAGE>

A Service Provider also may perform some or all of the following shareholder
services:

- - maintaining accounts relating to clients that invest in shares;
- - arranging for bank wires;
- - responding to client inquiries relating to the services performed by the
Services Provider;
- - responding to inquiries from clients concerning their investment in
shares;
- - assisting clients in changing dividend options, account designations and
addresses;
- - providing information periodically to clients showing their position in
shares;
- - forwarding shareholder communications from the Funds such as proxies,
shareholder reports, annual reports, and dividend distribution and tax
notices to clients; and
- - processing dividend payments from the Funds on behalf of clients.

These shareholder services are different from the distribution services
discussed above, and are not primarily intended to result in the sale of the
Advisor Class Shares of the Funds.

COSTS AND EXPENSES
Each Fund bears all expenses of its operations other than those assumed by the
Advisor or the Servicer. Fund expenses include: the management fee; the
servicing fee (including administrative, transfer agent, and shareholder
servicing fees); custodian and accounting fees and expenses; legal and auditing
fees; securities valuation expenses; fidelity bonds and other insurance
premiums; expenses of preparing and printing prospectuses, confirmations, proxy
statements, and shareholder reports and notices; registration fees and expenses;
proxy and annual meeting expenses, if any; all Federal, state, and local taxes
(including, without limitation, stamp, excise, income, and franchise taxes);
organizational costs; non-interested Trustees' fees and expenses; the costs and
expenses of redeeming shares of the Fund; fees and expenses paid to any
securities pricing organization; dues and expenses associated with membership in
any mutual fund organization; and costs for incoming telephone WATTS lines. In
addition, each of the Funds pays an equal portion of the Trustee fees and
expenses for attendance at Trustee meetings for the Trustees of the Trust who
are not affiliated with or interested persons of the Advisor.

DETERMINATION OF NET ASSET VALUE

On days when the CBOT is closed during its usual business hours, but the shares
of the Juno Fund and Juno Master Fund have been purchased, redeemed, and/or
exchanged, the portfolio securities held by the Juno Fund and the Juno Master
Fund which are traded on the CBOT are valued at the earlier of (i) the time of
the execution of the last trade of the day for the Juno Fund and Juno Master
Fund in those

21
<PAGE>

CBOT-traded portfolio securities and (ii) the time of the close of the CBOT
Evening Session. On days when the CBOT is closed during its usual business hours
and there is no need for the Juno Fund and the Juno Master Fund to execute
trades on the CBOT, the value of the CBOT-traded portfolio securities held by
the Juno Fund and the Juno Master Fund will be the mean of the bid and asked
prices for those CBOT-traded portfolio securities at the open of the CBOT
Evening Session.

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

PERFORMANCE INFORMATION

Performance information for each of the Funds contained in reports to
shareholders or prospective shareholders, advertisements, and other promotional
literature may be compared to the record of various unmanaged indexes.
Performance information for the Ursa Fund and the Ursa Master Fund may be
compared to various unmanaged indexes, including, but not limited to, the S&P
500 Index or the Dow Jones Industrial Average. Performance information for the
Juno Fund and Juno Master Fund may be compared to various unmanaged indexes,
including, but not limited to, the Shearson Lehman Government (LT) Index.

22
<PAGE>

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

CALCULATION OF RETURN QUOTATIONS

M
P(1+T) = ERV

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

T = average annual total return;

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

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

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

PURCHASE AND REDEMPTION OF SHARES

23
<PAGE>

REDEMPTIONS IN-KIND
The Trust intends to pay your redemption proceeds in cash. However, under
unusual conditions that make the payment in cash unwise (and for the protection
of the remaining shareholders of the Fund) the Trust reserves the right to pay
all, or part, of your redemption proceeds in liquid securities with a market
value equal to the redemption price (redemption in-kind). The Trust has elected
to be governed by Rule 18f-1 of the 1940 Act under which the Trust is obligated
to redeem shares for any one shareholder in cash only up to the lesser of
$250,000 or 1% of a Fund's net asset value during any 90-day period. Although it
is highly unlikely that your shares would ever actually be redeemed in kind, you
would probably have to pay brokerage costs to sell the securities distributed to
you.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

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

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

24
<PAGE>

long-term capital gains. One of several requirements for RIC qualification is
that the Fund must receive at least 90% of the Fund's gross income each year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of securities or foreign currencies, or other
income derived with respect to the Fund's investments in stock, securities, and
foreign currencies (the "90% Test").

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

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

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

The Sector Funds and the Utilities Master Fund may incur a liability for
dividend withholding tax as a result of investment in stock or securities of
foreign corporations. If, at any year end, more than 50% of the assets of a Fund
are comprised of stock or securities of foreign corporations, the Fund may elect
to "pass through" to shareholders the amount of foreign taxes paid by that Fund.
The Fund will make such an election only if that Fund deems this to be in the
best interests of its shareholders. If the Fund

25
<PAGE>

does not qualify to make this election or does qualify, but does not choose to
do so, the imposition of such taxes would directly reduce the return to an
investor from an investment in that Fund.

Each of the Ursa Fund, the Ursa Master Fund, the Arktos Fund, the Arktos Master
Fund, the Sector Funds, and the Utilities Master Fund in its operations also
will utilize options on stock indexes. Options on "broad based" stock indexes
are classified as "nonequity options" under the Code. Gains and losses resulting
from the expiration, exercise, or closing of such nonequity options, as well as
gains and losses resulting from futures contract transactions, will be treated
as long-term capital gain or loss to the extent of 60% thereof and short-term
capital gain or loss to the extent of 40% thereof (hereinafter, "blended gain or
loss"). In addition, any nonequity option and futures contract held by a Fund on
the last day of a fiscal year will be treated as sold for market value on that
date, and gain or loss recognized as a result of such deemed sale will be
blended gain or loss.

The trading strategies of each of the Ursa Fund, the Ursa Master Fund, the
Arktos Fund, the Arktos Master Fund, the Sector Funds, and the Utilities Master
Fund involving nonequity options on stock indexes may constitute "straddle"
transactions. "Straddles" may affect the taxation of such instruments and may
cause the postponement of recognition of losses incurred in certain closing
transactions. Each of these Funds will also have available to the Fund a number
of elections under the Code concerning the treatment of option transactions for
tax purposes. Each such Fund will utilize the tax treatment that, in the Fund's
judgment, will be most favorable to a majority of investors in the Fund.
Taxation of these transactions will vary according to the elections made by the
Fund. These tax considerations may have an impact on investment decisions made
by the Fund.

26
<PAGE>

OTHER INFORMATION

COUNSEL

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

AUDITORS AND CUSTODIAN

27
<PAGE>

28
<PAGE>

APPENDIX A

BOND RATINGS

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

STANDARD & POOR'S RATINGS
GROUP CORPORATE BOND RATINGS

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

A
<PAGE>

protective elements may be of greater amplitude or there may be other elements
present which make the long term risk appear somewhat larger than in "Aaa"
securities.

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

B
<PAGE>

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

(b) Exhibits

(a)(1) Certificate of Trust of Rydex Series Trust (the "Registrant"
or the "Trust") incorporated herein by reference to Exhibit 1a
of Post-Effective Amendment No. 27 to this Registration
Statement, filed on October 30, 1996.
(a)(2) Declaration of Trust of the Registrant incorporated herein by
reference to Exhibit 1b of Post-Effective Amendment No. 27 to
this Registration Statement, filed on October 30, 1996.
(b) By-Laws of Registrant incorporated herein by reference to
Exhibit 2 of Post- Effective Amendment No. 27 to this
Registration Statement filed, on October 30, 1996.
(c) Not applicable.
(d)(1) Investment Advisory Agreement between Registrant and PADCO
Advisors, Inc. incorporated herein by reference to Exhibit 5a
of Post-Effective Amendment No. 27 to this Registration
Statement, filed on October 30, 1996.
(d)(2) Sub-Advisory Agreement between PADCO Advisors, Inc. and
Loomis, Sayles & Company, L.P. incorporated herein by
reference to Exhibit 5b of Post-Effective Amendment No. 27 to
this Registration Statement, filed on October 30, 1996.
(d)(3) Amendment to Advisory Agreement between the Registrant and
PADCO Advisors, Inc. dated March 16, 1998 incorporated herein
by reference to Exhibit 3d of Post-Effective Amendment No. 31
to this Registration Statement, filed on May 29, 1998.
(e) Distribution Agreement between the Registrant and PADCO
Financial Services, Inc. relating to the Adviser Class Shares
incorporated herein by reference to Exhibit (e) of
Post-Effective Amendment No. 31 to this Registration
Statement, filed on May 29, 1998.
(f) Not applicable.
(g) Custody Agreement between Registrant and Star Bank, N.A.
incorporated herein by reference to Exhibit 8 of
Post-Effective Amendment No. 27 to this Registration
Statement, filed on October 30, 1996.
(h)(1) Service Agreement between Registrant and PADCO Service
Company, Inc. incorporated herein by reference to Exhibit 9c
of Post-Effective Amendment No. 27 to this Registration
Statement, filed on October 30, 1996.
(h)(2) Portfolio Accounting Services Agreement between Registrant and
PADCO Service Company, Inc. incorporated herein by reference
to Exhibit 9d of Post- Effective Amendment No. 27 to this
Registration Statement, filed on October 30, 1996.

<PAGE>

ITEM 23. EXHIBITS (continued)

(h)(3) Amendment to Service Agreement between Registrant and PADCO
Service Company, Inc. dated March 16, 1998 incorporated herein
by reference to Exhibit 3h of Post-Effective Amendment No. 31
to this Registration Statement, filed on May 29, 1998.
(h)(4) Amendment to Accounting Services Agreement between Registrant
and PADCO Service Company, Inc. dated December 11, 1998
incorporated herein by reference to Exhibit 4h of
Post-Effective Amendment No. 35 to this Registration
Statement, filed on July 30, 1999.

(i) Legal Opinion of Morgan, Lewis & Bockius LLP incorporated
herein by reference to Exhibit (i) of Post-Effective Amendment
No. 35 to this Registration Statement, filed on July 30, 1999.

(j) Not applicable.

(k) Not applicable.
(l ) Not applicable.
(m)(1) Plan of Distribution for The Rydex Institutional Money Market
Fund incorporated herein by reference to Exhibit 15a of
Post-Effective Amendment No. 24 to this Registration
Statement, filed on October 27, 1995.
(m)(2) Plan of Distribution for The Rydex Institutional Money Market
Fund as revised, March 12, 1997 incorporated herein by
reference to Exhibit 15b of Post-Effective Amendment No. 24 to
this Registration Statement, filed on October 27, 1995.
(m)(3) Plan of Distribution for The Rydex Institutional Money Market
Fund as revised, June 23, 1997 incorporated herein by
reference to Exhibit 15c of Post-Effective Amendment No. 24 to
this Registration Statement, filed on October 27, 1995.
(m)(4) Plan of Distribution for The Rydex High Yield Fund
incorporated herein by reference to Exhibit 15d of
Post-Effective Amendment No. 26 to this Registration
Statement, filed on September 11, 1996.
(m)(5) Plan of Distribution for The Rydex High Yield Fund, as revised
March 12, 1995 incorporated herein by reference to Exhibit 15e
of Post-Effective Amendment No. 24 to this Registration
Statement, filed on October 27, 1995.
(m)(6) Plan of Distribution for The Rydex High Yield Fund, as revised
June 23, 1997 incorporated herein by reference to Exhibit 15f
of Post-Effective Amendment No. 24 to this Registration
Statement, filed on October 27, 1995.
(m)(7) Shareholder Servicing Support Agreements between PADCO
Financial Services, Inc. and Selling Recipients in connection
with the Plan of Distribution for The Rydex Institutional
Money Market Fund incorporated herein by reference to Exhibit
15g of Post-Effective Amendment No. 25 to this Registration
Statement, filed on March 1, 1996.
(m)(8) Shareholder Servicing Support Agreement between PADCO
Financial Services, Inc. and Selling Recipients in connection
with the Plan of Distribution for The Rydex High Yield Fund
incorporated herein by reference to Exhibit 15h of Post-
Effective Amendment No. 26 to this Registration Statement,
filed on September 11, 1996.

<PAGE>

(m)(9) Distribution Plan and Shareholder Servicing Agreement for
Advisor Class Shares is incorporated by reference to Exhibit
15i of Post-Effective Amendment No. 30 to this Registration
Statement, filed on March 2, 1998.
(n) Not applicable.
(o) Rule 18f-3 Plan is incorporated by reference to Exhibit 18 of
Post-Effective Amendment No. 30 to this Registration
Statement, filed on March 2, 1998.

(p) Powers of Attorney incorporated herein by reference to Exhibit
(p) of Post- Effective Amendment No. 35 to this Registration
Statement, filed on July 30, 1999.

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

The following persons may be deemed to be directly or indirectly controlled by
or under the common control with the Registrant, a Delaware business trust:
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
SECURITIES OWNED AND/OR
STATE OF ORGANIZATION AND CONTROLLED BY THE
RELATIONSHIP (IF ANY) TO THE CONTROLLING PERSON OR
COMPANY REGISTRANT OTHER BASIS OF COMMON
CONTROL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PADCO Advisors, Inc. (the a Maryland corporation, a 80% of the voting securities
"Advisor) registered investment adviser, of the Advisor are owned by
and the Registrant's Albert P. Viragh, Jr., the
investment adviser Chairman of the Board of
Directors, the President, and
the Treasurer of the Advisor,
and 100% of the voting
securities are controlled by
Albert P. Viragh, Jr.

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

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

<PAGE>

<CAPTION>
PERCENTAGE OF VOTING
SECURITIES OWNED AND/OR
STATE OF ORGANIZATION AND CONTROLLED BY THE
RELATIONSHIP (IF ANY) TO THE CONTROLLING PERSON OR
COMPANY REGISTRANT OTHER BASIS OF COMMON
CONTROL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PADCO Advisors II, Inc. a Maryland corporation and a 100% of the voting securities
registered investment adviser are owned by Albert P.
(PADCO II is not otherwise Viragh, Jr., the Chairman of
related to the Registrant) the Board of Directors, the
President, and the Treasurer
of PADCO II

Rydex Variable Trust an open-end investment the investment advisers for
company for use by insurance the Rydex Variable Trust
variable annuity products and the Registrant are under
which is organized under the the common control of Albert
laws of the State of Delaware P. Viragh, Jr., the Chairman
and is advised by PADCO of the Board of Trustees,
Advisors II, Inc. President of the Registrant

Rydex Dynamic Funds an open-end investment the investment advisers for
company which is organized the Rydex Dynamic Funds
under the laws of the State is the investement adviser of
of Delaware and is advised Registrant and is under the
by PADCO Advisors, Inc. common control of Albert P.
Viragh, Jr., the Chairman of
the Board of Trustees and
President of the Registrant
</TABLE>

ITEM 25. INDEMNIFICATION

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

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

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

<PAGE>

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

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

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

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

ITEM 27. PRINCIPAL UNDERWRITER

(a) PADCO Financial Services Inc. serves as the principal underwriter for
the securities to the Advisor Class of the Registrant, Rydex Variable
Trust, a registered investment company advised by PADCO Advisors II,
Inc., and Rydex Dynamic Funds, a registered investemtn company advised
by PADCO Advisors, Inc., but does not currently serve as the principal
underwriter for the securities of any other investment company.

(b) The following information is furnished with respect to the directors
and officers of PADCO Financial Services, Inc.

<PAGE>

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS* UNDERWRITER WITH REGISTRANT
<S> <C> <C>
Albert P. Viragh, Jr. Chairman of the Board of Directors, Chairman of the Board
President and Treasurer of Trustees and President

Amanda C. Viragh Director None

Carl G. Verboncoeur Vice President Vice President
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

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

ITEM 29. MANAGEMENT SERVICES

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

ITEM 30. UNDERTAKINGS

None

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 36 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rockville, State of Maryland on the 13th day of
December, 1999.

RYDEX SERIES TRUST

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

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been duly signed below by the following persons in the capacities
on December 13, 1999.

SIGNATURES TITLE

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

/s/ Carl G. Verboncoeur
- ---------------------- Treasurer
Carl G. Verboncoeur

*
- ---------------------- Trustee
Corey A. Colehour

*
- ---------------------- Trustee
J. Kenneth Dalton

*
- ---------------------- Trustee
Roger Somers

*
- ---------------------- Trustee
John O. Demaret

*
- ---------------------- Trustee
Patrick T. McCarville

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

<PAGE>

EXHIBIT INDEX

(a)(1) Certificate of Trust of Rydex Series Trust (the "Registrant"
or the "Trust") incorporated herein by reference to Exhibit 1a
of Post-Effective Amendment No. 27 to this Registration
Statement, filed on October 30, 1996.
(a)(2) Declaration of Trust of the Registrant incorporated herein by
reference to Exhibit 1b of Post-Effective Amendment No. 27 to
this Registration Statement, filed on October 30, 1996.
(b) By-Laws of Registrant incorporated herein by reference to
Exhibit 2 of Post- Effective Amendment No. 27 to this
Registration Statement, filed on October 30, 1996.
(c) Not applicable.
(d)(1) Investment Advisory Agreement between Registrant and PADCO
Advisors, Inc. incorporated herein by reference to Exhibit 5a
of Post-Effective Amendment No. 27 to this Registration
Statement, filed on October 30, 1996.
(d)(2) Sub-Advisory Agreement between PADCO Advisors, Inc. and
Loomis, Sayles & Company, L.P. incorporated herein by
reference to Exhibit 5b of Post-Effective Amendment No. 27 to
this Registration Statement, filed on October 30, 1996.
(d)(3) Amendment to Advisory Agreement between the Registrant and
PADCO Advisors, Inc. dated March 16, 1998 incorporated herein
by reference to Exhibit 3d of Post-Effective Amendment No. 31
to this Registration Statement, filed on May 29, 1998.
(e) Distribution Agreement between the Registrant and PADCO
Financial Services, Inc. relating to the Adviser Class Shares
incorporated herein by reference to Exhibit (e) of
Post-Effective Amendment No. 31 to this Registration
Statement, filed on May 29, 1998.
(f) Not applicable.
(g) Custody Agreement between Registrant and Star Bank, N.A.
incorporated herein by reference to Exhibit 8 of
Post-Effective Amendment No. 27 to this Registration
Statement, filed on October 30, 1996.
(h)(1) Service Agreement between Registrant and PADCO Service
Company, Inc. incorporated herein by reference to Exhibit 9c
of Post-Effective Amendment No. 27 to this Registration
Statement, filed on October 30, 1996.
(h)(2) Portfolio Accounting Services Agreement between Registrant and
PADCO Service Company, Inc. incorporated herein by reference
to Exhibit 9d of Post- Effective Amendment No. 27 to this
Registration Statement, filed on October 30, 1996.
(h)(3) Amendment to Service Agreement between Registrant and PADCO
Service Company dated March 16, 1998 incorporated herein by
reference to Exhibit 3h of Post-Effective Amendment No. 31 to
this Registration Statement, filed on May 29, 1998.
(h)(4) Amendment to Accounting Services Agreement between Registrant
and PADCO Service Company, Inc. dated December 11, 1998
incorporated herein by reference to Exhibit 4h of
Post-Effective Amendment No. 35 to this Registration
Statement, filed on July 30, 1999.

<PAGE>

(i) Legal Opinion of Morgan, Lewis & Bockius LLP incorporated
herein by reference to Exhibit (i) of Post-Effective Amendment
No. 35 to this Registration Statement, filed on July 30, 1999.

(j) Not applicable.

(k) Not applicable.
(l ) Not applicable.
(m)(1) Plan of Distribution for The Rydex Institutional Money Market
Fund incorporated herein by reference to Exhibit 15a of
Post-Effective Amendment No. 24 to this Registration
Statement, filed on October 27, 1995.
(m)(2) Plan of Distribution for The Rydex Institutional Money Market
Fund as revised, March 12, 1997 incorporated herein by
reference to Exhibit 15b of Post-Effective Amendment No. 24 to
this Registration Statement, filed on October 27, 1995.
(m)(3) Plan of Distribution for The Rydex Institutional Money Market
Fund as revised, June 23, 1997 incorporated herein by
reference to Exhibit 15c Post-Effective Amendment No. 24 to
this Registration Statement, filed on October 27, 1995.
(m)(4) Plan of Distribution for The Rydex High Yield Fund
incorporated herein by reference to Exhibit 15d of
Post-Effective Amendment No. 26 to this Registration
Statement, filed on September 11, 1996.
(m)(5) Plan of Distribution for The Rydex High Yield Fund, as revised
March 12, 1995 incorporated herein by reference to Exhibit 15e
of Post-Effective Amendment No. 24 to this Registration
Statement, filed on October 27, 1995.
(m)(6) Plan of Distribution for The Rydex High Yield Fund, as revised
June 23, 1997 incorporated herein by reference to Exhibit 15f
of Post-Effective Amendment No. 24 to this Registration
Statement, filed on October 27, 1995.
(m)(7) Shareholder Servicing Support Agreements between PADCO
Financial Services, Inc. and Selling Recipients in connection
with the Plan of Distribution for The Rydex Institutional
Money Market Fund incorporated herein by reference to Exhibit
15g of Post-Effective Amendment No. 25 to this Registration
Statement, filed on March 1, 1996.
(m)(8) Shareholder Servicing Support Agreement between PADCO
Financial Services, Inc. and Selling Recipients in connection
with the Plan of Distribution for The Rydex High Yield Fund
incorporated herein by reference to Exhibit 15h of Post-
Effective Amendment No. 26 to this Registration Statement,
filed on September 11, 1996.
(m)(9) Distribution Plan and Shareholder Servicing Agreement for
Advisor Class Shares is incorporated by reference to Exhibit
15i of Post-Effective Amendment No. 10 to this Registration
Statement, filed on March 2, 1998.
(n) Not applicable.
(o) Rule 18f-3 Plan is incorporated by reference to Exhibit 18 of
Post-Effective Amendment No. 30 to this Registration
Statement, filed on March 2, 1998.

(p) Powers of Attorney incorporated herein by reference to Exhibit
(p) of Post- Effective Amendment No. 35 to this Registration
Statement, filed on July 30, 1999.