--------------------------------------------------------------------------------
Securities Act File No. ___
As filed with the Securities and Exchange Commission on March 27, 2009
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
RYDEX SERIES FUNDS
(Exact Name of Registrant as Specified in Charter)
9601 Blackwell Road, Suite 500, Rockville, Maryland 20850
(Address of Principal Executive Offices) (Zip Code)
(301)296-5100
(Registrant's Area Code and Telephone Number)
Carl G. Verboncoeur
9601 Blackwell Road, Suite 500
Rockville, Maryland 20850
(Name and Address of Agent for Service of Process)
Copies to:
Amy J. Lee
Security Investors, LLC
One Security Benefit Place
Topeka, Kansas 66636-0001
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
It is proposed that this filing will become effective on May 8, 2009 pursuant to
Rule 488 under the Securities Act of 1933, as amended.
Title of securities being registered: Investor2 Class shares of beneficial
interest in the series of the Registrant named U.S. Government Money Market
Fund.
No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
SECURITY CASH FUND
One Security Benefit Place
Topeka, KS 66636-0001
(Toll Free) (800) 888-2461
May 11, 2009
Dear Shareholder:
The Board of Directors ("Board") has called a special meeting of shareholders of
Security Cash Fund (the "Acquired Fund") to be held on June 19, 2009 at 1:00
p.m. Central time, or any adjournment(s) or postponement(s) thereof (the
"Special Meeting"), at the executive offices of Security Cash Fund, One Security
Benefit Place, Topeka, Kansas 66636-0001. The Board has called the Special
Meeting so that shareholders can vote on a proposed Agreement and Plan of
Reorganization ("Reorganization Plan") regarding the Acquired Fund, as discussed
below.
Management of the Acquired Fund has recommended that the Board approve the
Reorganization Plan relating to the reorganization of the Acquired Fund into
U.S. Government Money Market Fund (the "Acquiring Fund"), a series of Rydex
Series Funds (the "Reorganization"). The Reorganization will permit Acquired
Fund shareholders to become shareholders of the Acquiring Fund and to pursue
similar investment goals in a substantially larger fund that has a similar
investment objective and comparable performance record as the Acquired Fund. The
Acquiring Fund, like the Acquired Fund, is a money market fund that seeks to
maintain a stable share price of $1.00 such that the value of your shares in the
Acquired Fund prior to the Reorganization will be the same as the value of your
shares in the Acquiring Fund after the Reorganization. Also, the Acquiring Fund
is part of the Rydex family of funds, which is managed by an investment adviser
affiliated with the investment adviser managing the Security Funds. After the
Reorganization, shareholders of the Acquired Fund will be able to exchange their
new shares of the Acquiring Fund for shares of any Security Fund as they have
been able to do as shareholders of the Acquired Fund, and it is expected that
some time after the Reorganization, they will also be able to exchange their
shares for shares of other mutual funds distributed by Rydex Distributors, Inc.
(the "Rydex Funds").
Management believes that the Reorganization should enable Acquired Fund
shareholders to benefit from more efficient portfolio management and will
eliminate the duplication of resources and costs associated with servicing the
Acquired Fund and the Acquiring Fund separately within related families of
mutual funds.
After careful consideration, the Board has unanimously approved this proposal
with respect to the Acquired Fund and recommends that shareholders of the
Acquired Fund vote "FOR" the proposal. Accordingly, you are asked to authorize
the Reorganization.
A Proxy Statement/Prospectus that describes the Reorganization is enclosed. We
urge you to vote your shares by completing and returning the enclosed proxy in
the envelope provided, or vote by Internet or telephone, at your earliest
convenience.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IN ORDER TO
AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT/PROSPECTUS AND CAST YOUR
VOTE. IT IS IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN 11:59 P.M.
CENTRAL TIME ON JUNE 18, 2009.
We appreciate your participation and prompt response in this matter and thank
you for your continued support.
Sincerely,
/s/ Richard M. Goldman
Richard M. Goldman
President
SECURITY CASH FUND
One Security Benefit Place
Topeka, KS 66636-0001
(Toll Free) (800) 888-2461
PROPOSED REORGANIZATION OF SECURITY CASH FUND INTO
U.S. GOVERNMENT MONEY MARKET FUND, A SERIES OF RYDEX SERIES FUNDS
QUESTIONS AND ANSWERS
The enclosed materials include a Proxy Statement/Prospectus containing
information you need to make an informed decision about the proposed
reorganization. However, we thought it also would be helpful to begin by
answering some of the important questions you might have about the proposal. The
matters discussed below are also discussed in more detail in the enclosed Proxy
Statement/Prospectus.
WHAT ISSUE AM I BEING ASKED TO VOTE ON AT THE UPCOMING SPECIAL MEETING ON JUNE
19, 2009?
Shareholders of Security Cash Fund (the "Acquired Fund") are being asked to
approve an Agreement and Plan of Reorganization that provides for the
reorganization (the "Reorganization" ) of the Acquired Fund into U.S. Government
Money Market Fund (the "Acquiring Fund" and together with the Acquired Fund, the
"Funds"), a series of Rydex Series Funds.
WHAT WILL HAPPEN TO MY SECURITY CASH FUND INVESTMENT IF THE PROPOSED
REORGANIZATION IS APPROVED? WHAT ARE THE RYDEX FUNDS?
You will become a shareholder of the Acquiring Fund on or about July 10, 2009
(the "Closing Date"), and will no longer be a shareholder of the Acquired Fund.
The Acquiring Fund currently issues four classes of shares: A Class, C Class,
Investor Class and Advisor Class and will start issuing and offering Investor2
Class shares in connection with the Reorganization. Investor2 Class is a class
of shares with characteristics very similar to the shares of the Acquired Fund
that you currently own, and that permit exchanges within the Security Funds. You
will receive Investor2 Class shares of the Acquiring Fund with a value equal to
the value of your investment in the Acquired Fund as of the Closing Date. The
Acquired Fund will then cease operations and be liquidated.
The Acquiring Fund is part of a fund complex managed by PADCO Advisors, Inc.,
which operates as Rydex Investments, which is controlled by Security Benefit
Corporation ("Security Benefit") which also controls the Acquired Fund's
investment adviser, Security Investors, LLC ("Security Investors"). As a result,
both the Acquired Fund and the Acquiring Fund are part of related families of
mutual funds. If the Reorganization is consummated, shareholders of the Acquired
Fund will continue to enjoy the same quality of support services that they have
enjoyed in the past as shareholders of Security Benefit funds and will continue
to be able to exchange their new shares of the Acquiring Fund for shares of any
Security Fund as they have been able to do as shareholders of the Acquired Fund.
Furthermore, it is expected that some time after the Reorganization, they will
also be able to exchange their shares for shares of other mutual funds
distributed by Rydex Distributors, Inc. (the "Rydex Funds").
WHAT HAPPENS IF THE REORGANIZATION IS NOT APPROVED?
If shareholders of the Acquired Fund do not approve the proposed reorganization,
the reorganization will not take effect and the Acquired Fund's Board of
Directors (the "Board") will determine what, if any, additional action should be
taken with respect to the Acquired Fund. Such action could include liquidation
of the Acquired Fund.
WHAT ARE THE BENEFITS OF THE PROPOSED REORGANIZATION FOR ME?
Both Funds are "money market funds" that seek to maintain a stable share price
of $1.00 and both Funds are managed by affiliated managers. The Board believes
that the reorganization will permit the Acquired Fund's shareholders to continue
to invest in a substantially larger money market fund with a similar investment
objective and policies. By combining the Acquired Fund with the Acquiring Fund,
which has substantially more assets than the Acquired Fund, the Acquired Fund's
shareholders could benefit from more efficient portfolio management and
i
the Acquiring Fund's gross and net operating expense ratios, which have
historically been lower than those of the Acquired Fund (although there is no
guarantee that this trend will continue in the future).
DO THE FUNDS HAVE SIMILAR INVESTMENT OBJECTIVES AND STRATEGIES?
The Funds have similar investment objectives, although the Funds somewhat differ
in their principal investment strategies. The Acquired Fund seeks as high a
level of current income as is consistent with preservation of capital and
liquidity, and the Acquiring Fund seeks to provide security of principal, high
current income, and liquidity. Both Funds invest in money market instruments in
accordance with the terms of the U.S. Securities and Exchange Commission rules
for money market funds. As money market funds, the Funds are each subject to
maturity, quality and diversification requirements to help maintain a $1.00
share price. However, the Acquiring Fund invests primarily in money market
instruments issued or guaranteed as to principal and interest by the U.S.
government, its agencies or instrumentalities, and enters into repurchase
agreements fully collateralized by U.S. government securities while the Acquired
Fund invests primarily in money market instruments of non-governmental issuers
rated in the two highest credit rating categories.
WHAT ARE THE DIFFERENCES IN THE MANAGEMENT OF THE FUNDS?
The Acquired Fund is managed by Security Investors and the Acquiring Fund is
managed by Rydex Investments. Security Investors and Rydex Investments are
affiliated with each other. The Funds are managed by different portfolio
managers and have different board members.
WILL THE PROPOSED REORGANIZATION RESULT IN A HIGHER MANAGEMENT FEE OR HIGHER
FUND EXPENSES?
The Acquired Fund and the Acquiring Fund each pay Security Investors and Rydex
Investments, respectively, a management fee at the annual rate of 0.50% of the
value of the respective Fund's average daily net assets. The Acquiring Fund's
historical gross and net operating expense ratios were lower than those of the
Acquired Fund, although there is no guarantee that this trend will continue in
the future.
WHAT ARE THE TAX CONSEQUENCES OF THE PROPOSED REORGANIZATION?
The reorganization is not expected to be a taxable event for federal income tax
purposes. Shareholders are not expected to recognize any capital gain or loss as
a direct result of the reorganization. A shareholder's tax basis in Acquired
Fund shares will carry over to the shareholder's Acquiring Fund Investor2 Class
shares. As a condition to the closing of the reorganization, the Acquired Fund
and the Acquiring Fund will receive an opinion of counsel to the effect that,
for federal income tax purposes, the reorganization will qualify as a tax-free
reorganization and, thus, no gain or loss will be recognized by the Acquired
Fund, the Acquired Fund's shareholders, or the Acquiring Fund as a result of the
reorganization. The Acquired Fund will distribute any undistributed net
investment income and net realized capital gains prior to the reorganization,
and such distribution would be taxable to shareholders.
WHO WILL PAY THE EXPENSES OF THE PROPOSED REORGANIZATION?
Security Investors, or its affiliates, and not the Acquired Fund or the
Acquiring Fund, will pay the expenses directly related to the proposed
reorganization.
HOW DOES THE BOARD RECOMMEND I VOTE?
After considering, among other factors, the terms and conditions of the
reorganization, the investment management policies of, as well as shareholder
services offered by, the Acquired Fund and the Acquiring Fund, the historical
expense ratios of the Acquired Fund and the Acquiring Fund, and the relative
performance of the Acquired Fund and the Acquiring Fund, the Board of Directors
of the Acquired Fund and the Board of Trustees of the Acquiring Fund believe
that reorganizing the Acquired Fund into the Acquiring Fund is in the best
interests of the Funds and their shareholders. In reaching this conclusion, the
boards determined that reorganizing the Acquired Fund into the Acquiring Fund,
which, compared to the Acquired Fund, has a similar investment objective,
comparable investment policies and the same management fee ratio, offers
potential benefits to the Acquired Fund's shareholders. Therefore, the Board of
Directors of the Acquired Fund recommends that you vote FOR the reorganization.
ii
HOW CAN I VOTE MY SHARES?
You can vote in any one of the following ways:
o By mail, with the enclosed proxy card and postage-paid envelope;
o By telephone, with a toll-free call to the number listed on your proxy
card;
o Through the Internet, at the website address listed on your proxy
card; or
o In person at the meeting.
We encourage you to vote through the Internet or by telephone using the number
that appears on your proxy card. Whichever voting method you choose, please take
the time to read the Proxy Statement/Prospectus before you vote.
Please note: if you sign and date your proxy card, but do not provide voting
instructions, your shares will be voted "FOR" the proposal. Thank you in advance
for your vote.
iii
SECURITY CASH FUND
One Security Benefit Place
Topeka, KS 66636-0001
(Toll Free) (800) 888-2461
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
SECURITY CASH FUND
TO BE HELD JUNE 19, 2009
To the Shareholders:
The Board of Directors of Security Cash Fund has called a special meeting of
shareholders of Security Cash Fund (the "Acquired Fund") to be held on June 19,
2009 at 1:00 p.m. Central time or any adjournment(s) or postponement(s) thereof
(the "Special Meeting"), at the executive offices of Security Cash Fund, One
Security Benefit Place, Topeka, Kansas 66636-0001.
At the Special Meeting you will be asked:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets and liabilities of the Acquired Fund by
U.S. Government Money Market Fund (the "Acquiring Fund"), a series of Rydex
Series Funds, solely in exchange for Investor2 Class shares of the
Acquiring Fund, followed by the complete liquidation of the Acquired Fund;
and
2. To transact such other business as may properly come before the Special
Meeting or any adjournments thereof.
Shareholders of record at the close of business on April 20, 2009 are entitled
to notice of, and to vote at, the Special Meeting. Your attention is called to
the accompanying Proxy Statement/Prospectus. You are requested to complete,
date, and sign the enclosed proxy card and return it promptly in the envelope
provided for that purpose. Your proxy card also provides instructions for voting
via telephone or the Internet, if you wish to take advantage of these voting
options. Proxies may be revoked at any time by executing and submitting a
revised proxy, by giving written notice of revocation to the Acquired Fund, or
by voting in person at the Special Meeting.
By Order of the Board of Directors
/s/ Amy J. Lee
Amy J. Lee
Secretary
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IN ORDER TO
AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT/PROSPECTUS AND CAST YOUR
VOTE. IT IS IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN 11:59 P.M.
CENTRAL TIME ON JUNE 18, 2009.
May 11, 2009
4
TABLE OF CONTENTS
INTRODUCTION..............................................................................................................6
SUMMARY...................................................................................................................7
The Proposed Reorganization..........................................................................................7
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RISKS OF THE FUNDS...............................8
Principal Risks of Investing in the Funds............................................................................9
COMPARISON OF FEES AND EXPENSES FOR THE ACQUIRED AND ACQUIRING FUNDS.....................................................10
Shareholder Fees....................................................................................................10
Annual Fund Operating Expenses......................................................................................11
Examples............................................................................................................11
COMPARISON OF FUND PERFORMANCE...........................................................................................12
ADDITIONAL INFORMATION ABOUT THE FUNDS...................................................................................13
Investment Manager, Administrator, Transfer Agent and Principal Underwriter of the Acquired Fund....................13
Investment Manager, Administrator, Transfer Agent and Principal Underwriter of the Acquiring Fund...................14
Portfolio Managers of the Funds.....................................................................................14
Form of Organization and Board Members..............................................................................14
Investment Restrictions of the Funds................................................................................14
Temporary Guarantee Program for Money Market Funds..................................................................14
Financial Highlights for the Acquired Fund..........................................................................15
INFORMATION ABOUT THE REORGANIZATION.....................................................................................15
The Reorganization Plan.............................................................................................15
Reasons for the Reorganization and Board Considerations.............................................................15
Tax Considerations..................................................................................................16
Expenses of the Reorganization......................................................................................16
Dividends and Other Distributions...................................................................................16
Capitalization of the Funds.........................................................................................17
GENERAL INFORMATION......................................................................................................17
Other Business......................................................................................................17
Proxy Solicitation..................................................................................................17
Shareholder Voting..................................................................................................18
Vote Required.......................................................................................................18
Shareholder Reports.................................................................................................18
APPENDIX A - AGREEMENT AND PLAN OF REORGANIZATION.......................................................................A-1
APPENDIX B - ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND............................................................B-1
APPENDIX C - THE ACQUIRING FUND'S BOARD MEMBERS.........................................................................C-1
APPENDIX D - THE COMPARISON OF THE FUNDS' INVESTMENT RESTRICTIONS.......................................................D-1
APPENDIX E - THE ACQUIRED FUND'S FINANCIAL HIGHLIGHTS...................................................................E-1
APPENDIX F - OWNERSHIP INFORMATION......................................................................................F-1
5
PROXY STATEMENT
FOR
SECURITY CASH FUND
PROSPECTUS
FOR
U.S. GOVERNMENT MONEY MARKET FUND
(a series of Rydex Series Funds)
9601 Blackwell Road, Suite 500
Rockville, Maryland 20850
(Toll Free) (800) 820-0888
INTRODUCTION
At a meeting held on February 26, 2009, the Board of Directors of Security Cash
Fund (the "Acquired Fund") approved an Agreement and Plan of Reorganization (the
"Reorganization Plan") relating to the proposed reorganization of the Acquired
Fund into U.S. Government Money Market Fund (the "Acquiring Fund" and together
with the Acquired Fund, the "Funds"), a series of Rydex Series Funds. This Proxy
Statement/Prospectus provides you with information about this proposed
reorganization.
If shareholders of the Acquired Fund approve the proposed reorganization, the
Acquired Fund will transfer all of its assets and liabilities to the Acquiring
Fund in exchange solely for shares of Investor2 Class of the Acquiring Fund (the
"Reorganization"). The Acquiring Fund currently does not offer Investor2 Class
shares; however, the Acquiring Fund will start issuing and offering Investor2
Class shares in connection with the Reorganization. Following the transfer of
its assets and liabilities to the Acquiring Fund in exchange for shares of the
Acquiring Fund, the Acquired Fund will distribute to you your pro rata portion
of the shares of the Acquiring Fund that it receives in the Reorganization. You
will receive Investor2 Class shares of the Acquiring Fund having an aggregate
value equal to the aggregate value of shares of the Acquired Fund held by you
immediately prior to the Reorganization. Following the Reorganization, the
Acquired Fund will liquidate.
This Proxy Statement/Prospectus solicits your vote in connection with a special
meeting ("Special Meeting") of shareholders of the Acquired Fund, to be held on
June 19, 2009, at which shareholders of the Acquired Fund will vote on the
Reorganization Plan upon which the Reorganization will be based. Because you, as
a shareholder of the Acquired Fund, are being asked to approve a transaction
that will result in your holding shares of the Acquiring Fund, this document
also serves as a prospectus for the Acquiring Fund, whose investment objective
is to seek to provide security of principal, high current income, and liquidity.
Both the Acquired Fund and the Acquiring Fund are open-end management investment
companies operated as money market funds. AN INVESTMENT IN THE FUNDS IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. ALTHOUGH EACH FUND SEEKS TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE
FUNDS.
This Proxy Statement/Prospectus, which you should retain for future reference,
contains important information about the Acquiring Fund that you should know
before voting on the proposal or investing in the Acquiring Fund. A Statement of
Additional Information ("SAI") dated May 8, 2009 relating to this Proxy
Statement/Prospectus, and containing additional information about the
Reorganization and the parties thereto, has been filed with the U.S. Securities
and Exchange Commission ("SEC") and is incorporated herein by reference. A more
detailed discussion of the investment objectives, policies, restrictions, risks
and performance of the Acquired Fund can be found in the following documents,
which have been filed with the SEC:
o The Acquired Fund's Prospectus and Statement of Additional Information,
dated May 1, 2009 (File No. 002-68387); and
o The Acquired Fund's annual report for the fiscal year ended December 31,
2008 (File No. 811-03073).
The Acquiring Fund currently issues four classes of shares: A Class, C Class,
Investor Class and Advisor Class and will start issuing and offering Investor2
Class shares in connection with the Reorganization. For a more detailed
discussion of the investment objectives, policies, restrictions, risks and
performance of the Acquiring Fund, please see the following documents, which
have been filed with the SEC:
o The Acquiring Fund's Investor2 Class share Statement of Additional
Information, filed March 6, 2009 (File No. 033-59692);" and
6
o The Acquiring Fund's annual report for the fiscal year ended March 31,
2008 and semi-annual report for the period ended September 30, 2008 (File
No. 811-07584).
Each Fund's Prospectus(es), Statement of Additional Information, annual and
semi-annual reports, and a copy of the Statement of Additional Information
relating to this Proxy Statement/Prospectus are available, without charge, by
calling (Toll Free) (800) 888-2461 or writing to One Security Benefit Place,
Topeka, Kansas 66636-0001.
You may obtain proxy materials, reports and other information filed by the Funds
from the SEC's Public Reference Section (1-202-551-8090) in Washington, D.C., or
from the SEC's internet website at www.sec.gov. Copies of materials also may be
obtained, after paying a duplicating fee, by electronic request at the following
e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, D.C. 20549-0102.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED THAT
THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY
You should read this entire Proxy Statement/Prospectus and accompanying
materials carefully. For additional information, you should consult the Funds'
Prospectuses and the Reorganization Plan, which is attached hereto as Appendix
A.
THE PROPOSED REORGANIZATION -- On February 26, 2009, the Board of Directors of
the Acquired Fund and the Board of Trustees of the Acquiring Fund (the "Boards"
or the "Directors" or "Trustees," as applicable) approved the Reorganization
Plan. Subject to the approval of shareholders of the Acquired Fund, the
Reorganization Plan provides for:
o the transfer of all of the assets of the Acquired Fund to the Acquiring
Fund, in exchange for shares of the Investor2 Class of the Acquiring Fund;
o the assumption by the Acquiring Fund of all of the stated liabilities of
the Acquired Fund;
o the distribution of Investor2 Class shares of the Acquiring Fund to the
shareholders of the Acquired Fund; and
o the complete liquidation of the Acquired Fund.
The Reorganization is expected to be effective immediately after the close of
business on July 10, 2009, or on a later date as the parties may agree (the
"Closing"). As a result of the Reorganization, each shareholder of the Acquired
Fund will become an Investor2 Class shareholder of the Acquiring Fund. Each
shareholder of the Acquired Fund will hold, immediately after the Closing,
shares of Investor2 Class of the Acquiring Fund having an aggregate value equal
to the aggregate value of the shares of the Acquired Fund held by that
shareholder as of the close of business on the date of the Closing. For purposes
of the Reorganization, the Acquired Fund's assets will be valued based on the
amortized cost valuation procedures of the Acquiring Fund and the shares of the
Acquiring Fund to be issued and exchanged also will be based on the Acquiring
Fund's amortized cost valuation procedures. As a result, shareholders of the
Acquired Fund will exchange shares with an amortized cost price of $1.00 for
Investor2 Class shares of the Acquiring Fund with an amortized cost price of
$1.00.
Security Investors, LLC ("Security Investors"), the Acquired Fund's investment
adviser, or its affiliates, will bear all expenses relating to the
Reorganization.
Approval of the Reorganization Plan requires the affirmative vote of a majority
of the outstanding shares of the Acquired Fund. In the event that the
shareholders of the Acquired Fund do not approve the Reorganization, the
Acquired Fund will continue to operate as a separate entity, and the Board will
determine what further action, if any, to take, which could include liquidation
of the Acquired Fund.
AFTER CAREFUL CONSIDERATION, THE BOARD UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
REORGANIZATION.
In considering whether to approve the Reorganization, you should note that:
o Both the Acquired Fund and the Acquiring Fund are money market funds.
Pursuant to the rules for money market funds, each Fund is managed to
maintain a stable price per share of $1.00, although there is no guarantee
that the price will be constantly maintained and it is possible to lose
money by investing in the Fund.
7
o The Acquired Fund and the Acquiring Fund have a similar investment
objective. The Acquired Fund seeks as high a level of current income as is
consistent with preservation of capital and liquidity, and the Acquiring
Fund seeks to provide security of principal, high current income, and
liquidity.
o Both Funds invest in money market instruments. However, the Acquiring Fund
invests primarily in money market instruments issued or guaranteed as to
principal and interest by the U.S. Government, its agencies or
instrumentalities, and enters into repurchase agreements fully
collateralized by U.S. Government securities, while the Acquired Fund
invests in high-quality money market instruments of non-government issuers
rated in the highest credit rating categories.
o Shareholders of the Acquired Fund will hold, immediately after the Closing
of the Reorganization, shares of Investor2 Class of the Acquiring Fund,
which have substantially the same purchase, redemption and exchange
policies as shares of the Acquired Fund. Investor2 Class shares of the
Acquiring Fund will permit shareholders of the Acquired Fund to continue to
exchange their shares for shares of other Security Funds and it is expected
that some time after the Reorganization, they will also be able to exchange
their shares for shares of the Rydex Funds.
o Security Investors serves as investment adviser for the Acquired Fund, and
Rydex Investments serves as investment adviser for the Acquiring Fund. Both
advisers are under common control and are owned by Security Benefit.
o Both Funds have the same management fee at the annual rate of 0.50% of the
value of the respective Fund's average daily net assets. The Acquiring
Fund's historical gross and net operating expense ratios were lower than
those of the Acquired Fund. However, there is no guarantee that this trend
will continue in the future.
o The Funds have similar dividend and distribution policies; however, there
are some minor differences with respect to when an investment made in, or
redeemed from, the Funds would be entitled to receive dividends. (See the
section titled "Information About the Reorganization - Dividends and Other
Distributions" below for more information.)
o The Funds expect that the Reorganization will be considered a tax-free
reorganization within the meaning of section 368(a)(1) of the Internal
Revenue Code of 1986 (the "Code"). As such, shareholders of the Funds will
not recognize gain or loss as a result of the Reorganization.
o The Reorganization is not expected to require a transition of the Funds'
portfolios (i.e., the Acquired Fund portfolio will not be re-aligned to
resemble the portfolio of the Acquiring Fund prior to the Reorganization
and the Acquiring Fund is not expected to liquidate a substantial portion
of the portfolio of the Acquired Fund immediately after the
Reorganization), which will limit costs.
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RISKS
OF THE FUNDS
This section compares the investment objectives, principal investment strategies
and risks of the Funds.
THE INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES OF THE FUNDS - The
Funds have similar investment objectives and differ somewhat in their principal
investment strategies. The chart below describes the primary similarities and
differences between the Funds' investment objectives and principal investment
strategies. There can be no assurance that a Fund will achieve its stated
objective.
--------------------------- ------------------------------------------- -------------------------------------------
THE ACQUIRED FUND THE ACQUIRING FUND
--------------------------- ------------------------------------------- -------------------------------------------
--------------------------- ------------------------------------------- -------------------------------------------
INVESTMENT OBJECTIVE To seek as high a level of
current income as is consistent with To seek to provide security of principal,
preservation of capital and liquidity. high current income, and liquidity.
--------------------------- ------------------------------------------- -------------------------------------------
8
--------------------------- ------------------------------------------- --------------------------------------------
THE ACQUIRED FUND THE ACQUIRING FUND
--------------------------- ------------------------------------------- --------------------------------------------
PRINCIPAL INVESTMENT The Acquired Fund pursues its objective The Acquiring Fund invests primarily in
STRATEGIES by investing in a diversified and liquid money market instruments issued or
portfolio of high-quality money market guaranteed as to principal and interest
instruments, which may include certain by the U.S. government, its agencies or
restricted securities. Generally, the instrumentalities, and enters into
Acquired Fund is required to invest at repurchase agreements fully
least 95% of its assets in the securities collateralized by U.S. government
of issuers with the highest credit rating, securities. The Acquiring Fund may also
and the remaining assets may be invested invest in Eurodollar Time Deposits,
in securities with the second-highest securities issued by the International
credit rating. Bank for Reconstruction and Development
(the World Bank), and high-quality
commercial paper and short-term corporate
bonds.
------------- ------------- ------------------------------------------- --------------------------------------------
COMPARISON SIMILAR o Each Fund pursues its investment objective by investing in money market fund
OF PRINCIPAL PRINCIPAL instruments.
INVESTMENT INVESTMENT
STRATEGIES STRATEGIES o As a money market fund, each Fund operates under strict SEC rules, which impose
certain liquidity, maturity, and diversification requirements on all money
market funds.
o Each Fund is designed to maintain a constant net asset value of $1.00 per share.
o A money market instrument is a short-term debt instrument issued by banks or other
U.S. corporations, or the U.S. government or state or local governments. Money market
instruments have maturity dates of 13 months or less. Money market instruments may
include certificates of deposit, bankers' acceptances, variable rate demand notes,
fixed-term obligations, commercial paper, asset-backed commercial paper and
repurchase agreements.
------------- ------------- ------------------------------------------- --------------------------------------------
DIFFERENCES o The Acquired Fund is generally is o The Acquiring Fund invests primarily in
IN PRINCIPAL required to invest at least 95% of money market instruments issued or
INVESTMENT its assets in the securities of issuers guaranteed as to principal and
STRATEGIES with the highest credit rating, and the interest by the U.S. government, its
remaining assets may be invested in agencies or instrumentalities, and
securities with the second-highest enters into repurchase agreements
credit rating. fully collateralized by U.S.
government securities.
o The Acquired Fund's investment manager
attempts to increase return and manage o The Acquiring Fund may also invest in
risk by (1) maintaining an average Eurodollar Time Deposits, securities
dollar-weighted portfolio maturity issued by the International Bank for
within 10 days of the Acquired Fund's Reconstruction and Development (the
benchmark, the Money Fund Report World Bank), and high-quality
published by iMoneyNet, Inc.; (2) commercial paper and short-term
selecting securities that mature at corporate bonds.
regular intervals over the life of the
portfolio; (3) purchasing only o All securities purchased by the
commercial paper in the top two tiers; Acquiring Fund must be found by its
and (4) constantly evaluating investment adviser to represent
alternative investment opportunities minimal credit risk and be of eligible
for diversification without additional quality.
risk.
------------------------------------------------------------------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUNDS - Because both Funds are money market
funds with similar investment objectives and some comparable investment
strategies, certain principal risks associated with an investment in the Funds
are similar, although they may be described differently in the Funds'
Prospectuses. As a money market fund, each Fund's yield will fluctuate as the
short-term securities in its portfolio mature and the proceeds are reinvested in
securities with different interest rates. Although each Fund is managed to
maintain a stable price per share of $1.00, there is no guarantee that the price
will be constantly maintained. Also, as with any other mutual fund, there can be
no assurance that the Acquired Fund or the Acquiring Fund will achieve its
investment objective.
As discussed above, the Acquiring Fund invests primarily in money market
instruments issued or guaranteed as to principal and interest by the U.S.
government, its agencies or instrumentalities, and enters into repurchase
agreements fully collateralized by U.S. government securities while the Acquired
Fund invests in different types of money market instruments such as commercial
paper, notes and obligations of non-governmental issuers within the two highest
credit ratings. As a result, the Acquired Fund may be exposed to somewhat higher
investment risks than the Acquiring Fund. The following summarizes principal
risks of investing in the Funds. The fact that a particular risk is not
identified means only that it is not a principal risk
9
of investing in the particular Fund, but it does not mean that the Fund is
prohibited from investing its assets in securities or other assets that give
rise to that risk or that is not subject (to a lesser extent) to that risk.
STABLE PRICE PER SHARE RISK -- Both Funds are subject to stable price per share
risk. Although each Fund seeks to preserve the value of a shareholder's
investment at $1.00 per share, it is possible to lose money by investing in
either Fund. An investment in the Acquiring Fund, as in the Acquired Fund, is
not is not a bank deposit and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
INTEREST RATE RISK -- Both Funds are subject to interest rate risk. Investments
in fixed-income securities are subject to the possibility that interest rates
could rise, causing the value of a Fund's securities, and share price, to
decline. Interest rate risk also involves the potential for decline in a Fund's
yield (the rate of dividends the Fund pays) in the event of declining interest
rates.
CREDIT RISK -- Both Funds are subject to credit risk. It is possible that some
issuers of fixed-income securities will not make payments on debt securities
held by a Fund, or there could be defaults on repurchase agreements held by the
Fund. Also, an issuer may suffer adverse changes in financial condition that
could lower the credit quality of a security, leading to greater volatility in
the price of the security and in shares of a Fund. A change in the credit
quality rating of a security can affect its liquidity and make it more difficult
for a Fund to sell. Because the Acquiring Fund invests primarily in U.S.
government securities, credit risk is generally higher for the Acquired Fund.
PREPAYMENT RISK -- Both Funds are subject to prepayment risk, although this risk
is generally higher for the Acquired Fund. The issuers of securities held by a
Fund may be able to prepay principal due on the securities, particularly during
periods of declining interest rates. Securities subject to prepayment risk
generally offer less potential for gains when interest rates decline, and may
offer a greater potential for loss when interest rates rise. In addition, rising
interest rates may cause prepayments to occur at a slower than expected rate,
thereby effectively lengthening the maturity of the security and making the
security more sensitive to interest rate changes. Prepayment risk is a major
risk of mortgage-backed securities and certain asset-backed securities.
MARKET RISK -- Both Funds are subject to market risk. Most securities fluctuate
in price, sometimes dramatically. These movements may result from factors
affecting individual issuers, or from broader influences like changes in
interest rates, market conditions, investor confidence or changes in economic,
political or financial market conditions.
COMPARISON OF FEES AND EXPENSES FOR THE ACQUIRED AND ACQUIRING FUNDS
The following tables describe and compare the fees and expenses that you may pay
if you buy and hold shares of each Fund. The expenses of the Acquired Fund and
the Acquiring Fund's Investor2 Class and estimated pro forma expenses after
giving effect to the proposed Reorganization are shown in the table titled
"Annual Fund Operating Expenses" below. Pro forma numbers are estimated in good
faith and are hypothetical.
SHAREHOLDER FEES
---------------------------- -------------------------------------------- --------------------------------------------
THE ACQUIRED FUND(1) THE ACQUIRING FUND - INVESTOR2 CLASS(2)
---------------------------- -------------------------------------------- --------------------------------------------
Shareholder Fees None None(3)
----------------------------------------------------------------------------------------------------------------------
<FN>
(1) The Acquired Fund has only classified its shares into one class.
(2) The Acquiring Fund currently issues four classes of shares: A Class, C
Class, Investor Class and Advisor Class, which are not offered in this
Proxy Statement/Prospectus. The Acquiring Fund will start issuing and
offering Investor2 Class shares in connection with the Reorganization.
(3) The Acquiring Fund may impose certain fees on its shareholders. For more
information, see "Rydex Account Policies - Service and Other Fees" section
in Appendix B.
</FN>
10
ANNUAL FUND OPERATING EXPENSES(1)
---------------------------------------------------------------------------------------------------------------------
THE ACQUIRED FUND(2) THE ACQUIRING FUND - THE ACQUIRING FUND -
INVESTOR2 CLASS(3) INVESTOR2 CLASS(3) - PRO FORMA
---------------------------------------------------------------------------------------------------------------------
Management Fees 0.50% 0.50% 0.50%
---------------------------------------------------------------------------------------------------------------------
Distribution (12b-1) Fees None None None
---------------------------------------------------------------------------------------------------------------------
Other expenses 0.51% 0.44% 0.44%
---------------------------------------------------------------------------------------------------------------------
Total annual fund operating 1.01% 0.94% 0.94%
expenses
---------------------------------------------------------------------------------------------------------------------
Fee reduction (0.01)%(4) None None
---------------------------------------------------------------------------------------------------------------------
Total annual fund operating 1.00%(5) 0.94% 0.94%
expenses (after fee waivers)
---------------------------------------------------------------------------------------------------------------------
<FN>
(1) The expenses of the Acquired Fund are based upon fees and expenses incurred
by the Fund for the fiscal year ended December 31, 2008. The fees and
expenses of the Acquiring Fund's Investor2 Class shares are estimates for
the current fiscal year. The pro forma fees and expenses show estimated
fees and expenses of the Acquiring Fund's Investor2 Class for the current
fiscal year after giving effect to the proposed Reorganization.
(2) The Acquired Fund has only classified its shares into one class, Class A.
(3) The Acquiring Fund currently issues four classes of shares: A Class, C
Class, Investor Class and Advisor Class, which are not offered in this
Proxy Statement/Prospectus. The Acquiring Fund will start issuing and
offering Investor2 Class shares in connection with the Reorganization.
(4) The Acquired Fund's total annual operating expenses for the most recent
fiscal year ended December 31, 2008 were reduced due to a contractual cap
of fees by Security Investors, the Acquired Fund's investment adviser.
Under the investment management agreement between the Acquired Fund and
Security Investors, Security Investors guarantees that the aggregate annual
expenses of the Acquired Fund, exclusive of interest and taxes,
extraordinary expenses (such as litigation), but inclusive of Security
Investors' compensation, shall not exceed an amount equal to 1% of the
average daily net assets of the Acquired Fund for the year. Brokerage fees
and commissions incurred in connection with the purchase or sale of any
securities by the Acquired Fund are not deemed to be expenses. This
agreement is renewable annually and may be terminated upon sixty days
notice to Security Investors.
(5) Security Investors may also voluntarily waive its fees or reimburse Fund
operating expenses in an attempt to maintain a positive yield for the
Acquired Fund. This voluntary waiver is in addition to any contractual
waivers already in place and it may be discontinued at any time. There is
no guarantee that the Acquired Fund will be able to able to maintain a
positive yield.
</FN>
---------------------------------------------------------------------------------------------------------------------
EXAMPLES- The examples below are intended to help you compare the cost of
investing in the Acquired Fund's shares and the Acquiring Fund's Investor2 Class
shares, and in the Acquiring Fund's Investor2 Class shares after the
Reorganization on a pro forma basis. Your actual costs may be higher or lower.
The example assumes that you invest $10,000 in each Fund and in the Acquiring
Fund after the Reorganization for the time periods indicated and assumes total
annual fund operating expenses before any fee reduction. The example also
assumes that your investment has a 5% return each year and that each Fund's
operating expenses remain the same. The 5% return is an assumption and is not
intended to portray past or future investment results. Based on the above
assumptions, you would pay the following expenses.
------------------------------------------------------------------------------------------
THE ACQUIRING FUND -
THE ACQUIRED FUND THE ACQUIRING FUND - INVESTOR2 CLASS - PRO
INVESTOR2 CLASS FORMA
------------------------------------------------------------------------------------------
1 YEAR $102 $96 $96
------------------------------------------------------------------------------------------
3 YEARS $322 $300 $300
------------------------------------------------------------------------------------------
5 YEARS $558 $520 $520
------------------------------------------------------------------------------------------
10 YEARS $1,236 $1,155 $1,155
------------------------------------------------------------------------------------------
11
COMPARISON OF FUND PERFORMANCE
The charts and tables below provide some indication of the risks of investing in
the Acquired and the Acquiring Funds by showing changes in the Acquired Fund's
share performance and the Funds' performance from year to year. Fee waivers
and/or expense reimbursements may have reduced the expenses of the Acquired
Fund. In the absence of such waiver or reimbursements, the performance quoted
would be reduced. As with all mutual funds, past performance is not a prediction
of future results.
THE ACQUIRED FUND
HIGHEST AND LOWEST RETURNS
(Quarterly 1999-2008)
----------------------------------- ------------
HIGHEST QUARTER
Q3 ended September 30, 2000 1.46%
LOWEST QUARTER
Q4 ended December 31, 2003 0.03%
Bar Chart:
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
4.40% 5.56% 3.20% 0.85% 0.20% 0.40% 2.30% 4.13% 4.34% 1.72%
-----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS & YIELD
(through December 31, 2008)
-----------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
Security Cash Fund 1.72% 2.57% 2.69%
7-Day Yield (as of December 31, 2008) 0.42%
-----------------------------------------------------------------------------------------------------------------------
12
THE ACQUIRING FUND - INVESTOR CLASS
The past performance shown below is for Investor Class shares of the Acquiring
Fund (which are offered in a different prospectus), not Investor2 Class shares
which have no operating history. Investor2 Class shares would have similar
annual returns as Investor Class shares because both share classes are invested
in the same portfolio of securities. The return for Investor Class shares will
vary from Investor2 Class shares to the extent that the classes do not have the
same expenses. The Investor Class and Investor2 Class shares have substantially
similar expense structures.
HIGHEST AND LOWEST RETURNS
(Quarterly 1999-2008)
----------------------------------- ------------
HIGHEST QUARTER
Q4 ended December 31, 2000 1.45%
LOWEST QUARTER
Q1 ended March 31, 2004 0.03%
Bar Chart:
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
4.28% 5.41% 3.33% 0.86% 0.24% 0.44% 2.31% 4.04% 4.21% 1.65%
------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS & YIELD
(through December 31, 2008)
------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
U.S. Government Money Market 1.65% 2.53% 2.67%
7-Day Yield (as of December 31, 2008) 1.05%
------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT THE FUNDS
INVESTMENT MANAGER, ADMINISTRATOR, TRANSFER AGENT AND PRINCIPAL UNDERWRITER OF
THE ACQUIRED FUND- Security Investors, located at One Security Benefit Place,
Topeka, Kansas 66636-0001, serves as investment adviser, administrator and
transfer agent for the Acquired Fund. Security Investors is a wholly-owned
subsidiary of Security Benefit and is controlled by Security Benefit. Security
Benefit is wholly-owned by Security Benefit Mutual Holding Company, which is
controlled by the policyholders of Security Benefit Life Insurance Company
("SBL"). The principal underwriter/distributor of the Acquired Fund, Security
Distributors, Inc., is located at One Security Benefit Place, Topeka, Kansas
66636-0001. Security Investors and Security Distributors, Inc. are affiliates of
each other.
Security Investors, subject to the control and supervision of the Board,
furnishes investment advisory, statistical and research services to the Acquired
Fund, supervises and arranges for the purchase and sale of securities on behalf
of the Acquired Fund, provides for the maintenance and compilation of records
pertaining to the investment advisory functions, and also makes certain
undertakings with respect to the Acquired Fund's annual expenses. For its
services for the Acquired Fund, Security Investors is entitled to receive
compensation on an annual basis equal to
13
0.50% of the average net assets of the Acquired Fund, computed on a daily basis
and payable monthly. A discussion regarding the basis for the Board of Directors
approving the Acquired Fund's investment advisory contract with Security
Investors is available in the Acquired Fund's annual report for the fiscal year
ended December 31, 2008.
INVESTMENT MANAGER, ADMINISTRATOR, TRANSFER AGENT AND PRINCIPAL UNDERWRITER OF
THE ACQUIRING FUND- PADCO Advisors, Inc., which operates under the name Rydex
Investments, is located at 9601 Blackwell Road, Suite 500, Rockville, Maryland
20850, and serves as investment adviser of the Acquiring Fund. Rydex Fund
Services, Inc., located at 9601 Blackwell Road, Suite 500, Rockville, Maryland
20850, serves as the Acquiring Fund's administrator and transfer agent. Rydex
Distributors, Inc., also located at 9601 Blackwell Road, Suite 500, Rockville,
Maryland 20850, is the Acquiring Fund's underwriter/distributor. On January 18,
2008, SBL and Security Benefit acquired Rydex Holdings, Inc., Rydex Investments'
parent company, together with several other Rydex entities. As a result, Rydex
Investments, Rydex Fund Services, Inc., and Rydex Distributors, Inc. are
affiliates of the Acquired Fund's service providers listed above.
Rydex Investments makes investment decisions for the assets of the Acquiring
Fund and continuously reviews, supervises, and administers the Acquiring Fund's
investment program. The Trustees of Rydex Series Funds supervises Rydex
Investments and establishes policies that Rydex Investments must follow in its
day-to-day management activities. Pursuant to an investment advisory agreement
between Rydex Series Funds and Rydex Investments, Rydex Investments is entitled
to receive compensation on an annual basis equal to 0.50% of the average net
assets of the Acquiring Fund, computed on a daily basis and payable not less
than monthly in arrears. A discussion regarding the basis for the Board of
Trustees of Rydex Series Funds approving the Acquiring Fund's investment
advisory contract with Rydex Investments is available in the Acquiring Fund's
semi-annual report for the fiscal period ended September 30, 2008.
PORTFOLIO MANAGERS OF THE FUNDS - The Funds are managed by different portfolio
managers. The Acquired Fund is managed by a single portfolio manager, Christina
Fletcher, of Security Investors. The Acquiring Fund is co-managed by three
portfolio managers of Rydex Investments: Michael P. Byrum, Michael J. Dellapa
and Ryan A. Harder. For additional information about the portfolio managers of
the Acquiring Fund, please refer to the section titled "Portfolio Managers" in
Appendix B.
FORM OF ORGANIZATION AND BOARD MEMBERS - The Acquired Fund is a Kansas
corporation registered as an open-end management investment company and governed
by a Board of Directors which currently consists of six directors. The Acquiring
Fund is a series of Rydex Series Funds, a Delaware statutory trust registered as
an open-end management investment company. Rydex Series Funds is governed by a
Board of Trustees which currently consists of eight trustees. The Acquired Fund
and Rydex Series Funds have different board members. For a description of the
board members of Rydex Series Fund, see Appendix C.
INVESTMENT RESTRICTIONS OF THE FUNDS - The Funds' investment restrictions are
generally similar and consistent, although there are some differences. For a
comparison of the Funds' fundamental and non-fundamental investment
restrictions, see Appendix D.
[TEMPORARY GUARANTEE PROGRAM FOR MONEY MARKET FUNDS - Each Fund currently
participates in the U.S. Department of the Treasury's Temporary Guarantee
Program for Money Market Funds (the "Program"), which is scheduled to expire on
[April 30, 2009]. The Program may be extended at the sole discretion of the U.S.
Treasury Department ("Treasury"), but, in any event, will terminate no later
than September 18, 2009. If the Program is extended by Treasury, in order to
continue participating in each extension of the Program (the "Program
Extension"), each Fund would have to renew its participation under the terms
proposed by the Treasury, including paying an additional participation fee.
Under the Program, Treasury will guarantee the share price of shares of a Fund
outstanding as of September 19, 2008 at $1.00 per share if the Fund's net asset
value falls below $0.995 (a "Guarantee Event"). The Program provides a guarantee
to shareholders as of the close of business on September 19, 2008 ("Eligible
Shareholders") up to the lesser of (i) the number of shares owned by an Eligible
Shareholder on September 19, 2008 and (ii) the number of shares owned by an
Eligible Shareholder upon the occurrence of the Guarantee Event. In case the
Program is extended for a period beyond the Closing Date of the Reorganization,
any guarantee in effect at that time for the Acquired Fund's Eligible
Shareholders would likely be assumed by the Acquiring Fund, subject to certain
conditions. The Program does not protect investors who were not shareholders of
the Funds as of September 19, 2008.
Shareholders of the Acquired Fund should note that the costs for participating
in the Program for the Acquired Fund have been borne by Security Investors or
its affiliates and not the Acquired Fund and its shareholders. The Acquiring
Fund's costs for participating in the Program, however, have been borne by the
Acquiring Fund (and,
14
ultimately, its shareholders). If the Reorganization is consummated, Eligible
Shareholders of the Acquired Fund could thus have to bear some costs to
participate in Program Extension(s) (such costs are unknown as of the time this
document is prepared).]
FINANCIAL HIGHLIGHTS FOR THE ACQUIRED FUND - The financial highlights providing
information about the financial performance of the Acquired Fund is set forth in
Appendix E.
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION PLAN -- The Reorganization Plan provides for the transfer of
all of the assets and stated liabilities of the Acquired Fund to the Acquiring
Fund solely in exchange for shares of Investor2 Class of the Acquiring Fund
having an amortized cost price equal to the amortized cost price of the Acquired
Fund's shares, the Acquired Fund's only class of shares. The Acquired Fund will
distribute the shares of the Acquiring Fund received in the exchange to its
shareholders, and then the Acquired Fund will be liquidated. After the
Reorganization, each shareholder of the Acquired Fund will own shares of
Investor2 Class of the Acquiring Fund having an aggregate value equal to the
aggregate value of shares of the Acquired Fund held by that shareholder prior to
the Closing. As a result, it is expected that shareholders of the Acquired Fund
will exchange shares with an amortized cost price of $1.00 for Investor2 Class
shares of the Acquiring Fund with an amortized cost price of $1.00.
Until the Closing, shareholders of the Acquired Fund will continue to be able to
redeem their shares. Redemption requests received after the Closing will be
treated as requests received for the redemption of Acquiring Fund shares
received by the shareholder in the Reorganization.
The obligations of the Funds under the Reorganization Plan are subject to
various conditions, including approval of the shareholders of the Acquired Fund.
The Reorganization Plan also requires that the Funds take, or cause to be taken,
all actions, and do or cause to be done, all things reasonably necessary, proper
or advisable to consummate and make effective the transactions contemplated by
the Reorganization Plan. The Reorganization Plan may be terminated by mutual
agreement of the parties or on certain other grounds.
The foregoing summarizes the material aspects of the Reorganization Plan. For a
complete description of the terms and conditions of the Reorganization, see the
Reorganization Plan at Appendix A, which qualifies in its entirety the summary
of the Reorganization Plan.
REASONS FOR THE REORGANIZATION AND BOARD CONSIDERATIONS -- The proposed
Reorganization was presented to the Board of Directors of the Acquired Fund and
the Board of Trustees of Rydex Series Funds for consideration and approval at
meetings held on February 26, 2009. The Acquired Fund and the Acquiring Fund are
part of two different fund complexes managed by Security Investors and Rydex
Investments, which are affiliated with each other. As management is integrating
the asset management businesses of Security Investors and Rydex Investments, it
is also in the process of consolidating the Funds' distribution and transfer
agency platforms into a single platform. Accordingly, management proposed to
consolidate two money market fund options by reorganizing the Acquired Fund into
the Acquiring Fund. Furthermore, as the current economic environment lowers the
Funds' yields and performance and thus leads to the increase of management's
waivers of the Funds' expenses, such Reorganization would also help management
to reduce costs of managing the Funds.
The Directors/Trustees of the Funds, including all of the Directors/Trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940),
determined that the interests of the shareholders of the respective Funds would
not be diluted as a result of the proposed Reorganization, and that the proposed
Reorganization was in the best interests of each of the Funds and its
shareholders. The Board, in recommending the Reorganization, considered a number
of factors, including the following:
1. The Reorganization would not dilute the interests of either Fund's current
shareholders.
2. The Funds have similar investment objectives and comparable performance
records, and as a result, the Reorganization would permit Acquired Fund
shareholders to pursue the same investment goals in a substantially larger
fund, which is in a better position to achieve economies of scale (although
there is no guarantee that the economies of scale will, in fact, be
achieved);
15
3. The similarities and differences between the Acquired Fund's and the
Acquiring Fund's investment strategies and restrictions, and whether the
Reorganization will allow shareholders of the Acquired Fund to continue to
participate in a professionally managed portfolio within the same group of
mutual funds.
4. The relative sizes of the Acquired Fund and the Acquiring Fund, including
that the Acquiring Fund has a larger asset base and thus is in a better
position to achieve increased investment opportunities, enhanced portfolio
diversification and/or liquidity, and economies of scale.
5. The alternatives to the Reorganization, which include liquidating the
Acquired Fund.
6. The expense ratios and information regarding fees and expenses of the
Acquired Fund and the Acquiring Fund (and fee waivers, expense
reimbursements maintained by the Funds' investment advisers), which
indicate that both Funds have the same management fee ratio and the
historical gross and net operating expense ratios of the Acquiring Fund
have been lower that those of the Acquired Fund.
7. Costs of the Reorganization (which are likely to include, accounting,
custodian, transfer agency, solicitation, mailing and legal fees) will be
borne by Security Investors or its affiliates, and not the Funds.
8. As Investor2 Class shareholders of the combined Acquiring Fund will be able
to continue to exchange their shares for shares of Security Funds, and it
is expected that they will later be able to also exchange their shares for
shares of other Rydex Funds, which is thus expected to result in enhanced
shareholder services for Fund shareholders.
9. The future potential benefits that may be realized by Security Investors
and Rydex Investments, which are affiliates, following the Reorganization,
including the costs to manage the combined Fund.
10. The tax-free nature of the Reorganization to each Fund and its
shareholders.
THE BOARD RECOMMENDS THAT SHAREHOLDERS OF THE ACQUIRED FUND VOTE "FOR" THE
REORGANIZATION. If the shareholders of the Acquired Fund do not approve the
Reorganization, the Board will determine what, if any, additional action should
be taken. Such action could even include liquidation of the Acquired Fund.
TAX CONSIDERATIONS -- The Reorganization is intended to qualify for federal
income tax purposes as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, pursuant to
this treatment, neither the Acquired Fund, the Acquiring Fund, nor the
shareholders will recognize any gain or loss for federal income tax purposes
from the transactions contemplated by the Reorganization Plan. As a condition to
the closing of the Reorganization, the Funds will receive an opinion from the
law firm of Dechert LLP to the effect that the Reorganization will qualify as a
tax-free reorganization for federal income tax purposes. That opinion will be
based in part upon certain assumptions and upon certain representations made by
the Funds.
Immediately prior to the Reorganization, the Acquired Fund will pay a dividend
or dividends which, together with all previous dividends, will have the effect
of distributing to the shareholders all of the Acquired Fund's investment
company taxable income for taxable years ending on or prior to the
Reorganization (computed without regard to any deduction for dividends paid) and
all of its net capital gains, if any, realized in taxable years ending on or
prior to the Reorganization (after reduction for any available capital loss
carryforward). The distributed amounts will include any net gains realized as a
result of portfolio transitioning. Such dividends will be included in the
taxable income of the Acquired Fund's shareholders.
EXPENSES OF THE REORGANIZATION -- Security Investors, LLC ("Security
Investors"), the Acquired Fund's investment adviser, or its affiliates, will
bear all expenses relating to the Reorganization. The costs of the
Reorganization include, but are not limited to, costs associated with
preparation of the Acquiring Fund's registration statement, printing and
distributing the Acquiring Fund's prospectus and the Acquired Fund's proxy
materials, proxy solicitation expenses, legal fees, accounting fees, securities
registration fees, and expenses of holding the Special Meeting. The estimated
cost of the Reorganization is approximately $85,000.
DIVIDENDS AND OTHER DISTRIBUTIONS - Each Fund declares dividends from its income
daily and pays them monthly or upon redemption. Each Fund distributes any net
capital gains, if any, that it has realized at least annually. The Funds'
dividends and distributions will be reinvested in shares of the Funds, unless
shareholders elect to receive payment in cash. With respect to the rights to
receive dividends, shareholders should note differences between the Funds,
including, without limitation:
16
o An investment made on a business day in the Acquired Fund would receive the
following business day's dividend, while such an investment in the
Acquiring Fund would receive the same business day's dividend. For the
Acquired Fund, an investment is considered to be made on a business day if
it is received prior to 3:00 p.m. Central time. For the Acquiring Fund, an
investment is considered to be made on a business day only if it is
received prior to 1:00 p.m. Eastern time
o An investment redeemed from the Acquired Fund on a business day would
receive any undistributed dividends, including any dividend declared on the
day of the redemption as its final dividend. An investment redeemed from
the Acquiring Fund after 1:00 p.m. Eastern time on a business day would
receive that day's dividend as its final dividend, while such an investment
would not be entitled to receive that day's dividend if withdrawn prior to
1:00 p.m. Eastern time.
If the Reorganization Plan is approved by shareholders of the Acquired Fund,
then as soon as practicable before the Closing, the Acquired Fund will pay its
shareholders a cash distribution of all undistributed net investment income and
undistributed realized net capital gains.
CAPITALIZATION OF THE FUNDS - The Acquired Fund has only classified its shares
into one class of shares and the Acquiring Fund currently has four classes of
shares: A Class, C Class, Investor Class and Advisor Class, which are not
offered in this Proxy Statement/Prospectus. The Acquiring Fund will start
issuing and offering Investor2 Class shares in connection with the
Reorganization.
The following table shows on an unaudited basis the capitalization of the each
Fund as of December 31, 2008 and on a pro forma basis as of December 31, 2008,
after giving effect to the Reorganization.
------------------------------- --------------------- ------------------------ -------------------------
FUND NET ASSETS NET ASSETS PER SHARE SHARES OUTSTANDING
------------------------------- --------------------- ------------------------ -------------------------
Acquired Fund $72,675,585 $1.00 72,675,585
------------------------------- --------------------- ------------------------ -------------------------
Acquiring Fund - Investor2 $0 $1.00 0
Class
------------------------------- --------------------- ------------------------ -------------------------
Acquiring Fund - Investor $1,107,601,239 $1.00 1,107,995,201
Class
------------------------------- --------------------- ------------------------ -------------------------
Acquiring Fund - Advisor Class $312,580,812 $1.00 312,824,988
------------------------------- --------------------- ------------------------ -------------------------
Acquiring Fund - A Class $46,048,244 $1.00 46,045,660
------------------------------- --------------------- ------------------------ -------------------------
Acquiring Fund - C Class $146,319,763 $1.00 146,314,054
------------------------------- --------------------- ------------------------ -------------------------
Acquiring Fund - Total $1,612,550,058 $1.00 1,613,179,903
------------------------------- --------------------- ------------------------ -------------------------
Pro Forma Combined $1,685,225,643 $1.00 1,685,855,488
------------------------------- --------------------- ------------------------ -------------------------
As of December 31, 2008, the Acquiring Fund had not offered Investor2 Class
shares. Each share has one vote and shares have no preemptive or subscription
rights and are freely transferable. All share classes of the Acquiring Fund
invest in the same portfolio of securities, but the classes are subject to
different charges and expenses.
GENERAL INFORMATION
OTHER BUSINESS - The Directors do not know of any matters to be presented at the
Special Meeting other than those set forth in this proxy statement. If other
business should properly come before the Special Meeting, proxies will be voted
in accordance with the judgment of the persons named in the accompanying proxy.
PROXY SOLICITATION - The Board is soliciting Acquired Fund shareholders'
proxies. The principal solicitation of proxies will be by the mailing of this
Proxy Statement/Prospectus commencing on or about May 16, 2009, but proxies may
also be solicited by telephone and/or in person by representatives of Security
Investors or its affiliate(s), or The Altman Group, a private proxy services
firm. If we have not received your vote as the date of the Special
17
Meeting approaches, you may receive a call from these parties to ask for your
vote. Arrangements will be made with brokerage houses and other custodians,
nominees, and fiduciaries to forward proxies and proxy materials to their
principals.
As previously discussed, the costs of the Special Meeting, including the costs
of retaining The Altman Group, preparation and mailing of the Notice, Proxy
Statement/Prospectus and proxy, and the solicitation of proxies, including
reimbursements to broker-dealers and others who forwarded proxy materials to
their clients, will be borne by Security Investors. The estimated cost of
retaining The Altman Group is approximately $20,000.
SHAREHOLDER VOTING - Shareholders of record at the close of business on April
20, 2009 (the "Record Date") are entitled to notice of, and to vote at, the
Special Meeting. As of the Record Date, there were issued and outstanding [___]
shares of the Acquired Fund.
The persons owning of record or beneficially 5% or more of the outstanding
shares of the each Fund as of the Record Date, are set forth in Appendix F.
Shareholders are entitled to one vote for each share held and fractional votes
for fractional shares. The presence in person or by proxy of the holders of a
majority of the Acquired Fund's shares that are issued and outstanding and
entitled to vote on the Record Date is required to constitute a quorum at the
Special Meeting, and therefore must be present for the transaction of business
at the Special Meeting. Shares held by shareholders present in person or
represented by proxy at the Special Meeting will be counted both for the
purposes of determining the presence of a quorum and for calculating the votes
cast on the issues before the Special Meeting.
Abstentions are counted as shares eligible to vote at the Special Meeting in
determining whether a quorum is present, but do not represent votes cast with
respect to the proposal. "Broker non-votes" are counted as shares eligible to
vote at the Special Meeting in determining whether a quorum is present but do
not represent votes cast with respect to the proposal. "Broker non-votes" are
shares held by a broker or nominee as to which instructions have not been
received from the beneficial owners or persons entitled to vote, and the broker
or nominee does not have discretionary voting power.
In the event that a quorum is not present at the Special Meeting, or a quorum is
present but sufficient votes to approve a proposal are not received, the persons
named as proxies may propose one or more adjournments of the Special Meeting to
permit further solicitation of proxies or to obtain the vote required for
approval of one or more proposals. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Special
Meeting in person or by proxy. The persons named as proxies will vote those
proxies which they are entitled to vote FOR the proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST the
proposal against any such adjournment. A shareholder vote may be taken prior to
any adjournment of the Special Meeting on any proposal for which there are
sufficient votes for approval, even though the Special Meeting is adjourned as
to other proposals.
In order that your shares may be represented at the Special Meeting, you are
requested to vote your shares by mail, the Internet, or by telephone by
following the enclosed instructions. If you wish to participate in the Special
Meeting, please submit the proxy card originally sent with the Proxy
Statement/Prospectus or attend the Special Meeting in person. Any proxy given by
a shareholder, whether in writing, by telephone or via the Internet is
revocable. A shareholder may revoke the proxy at any time prior to its use by
filing with the Acquired Fund a written revocation or a duly executed proxy card
bearing a later date. In addition, any shareholder who attends the Special
Meeting in person may vote by ballot at the Special Meeting, thereby canceling
any proxy previously given. However, attendance in-person at the Special
Meeting, by itself, will not revoke a previously tendered proxy. If you vote by
telephone or the Internet, please do not return your proxy card, unless you
later elect to change your vote.
VOTE REQUIRED - Approval of the Reorganization Plan requires the affirmative
vote of a majority of the outstanding shares of the Acquired Fund. Assuming the
presence of a quorum, abstentions and broker non-votes have the effect of a
negative vote on the proposed Reorganization.
SHAREHOLDER REPORTS - Shareholders can find important information about the
Acquired Fund in the annual report for the fiscal year ended December 31, 2008
and about the Acquiring Fund in the annual report for the fiscal year ended
March 31, 2008 and the semi-annual report for the six month period ended
September 30, 2008.
SHAREHOLDER PROPOSALS - As a general matter, the Acquired Fund does not hold
annual meetings of shareholders. Shareholders wishing to submit proposals for
inclusion in a proxy statement for a subsequent meeting (if any)
18
should send their written proposals to the secretary of Security Cash Fund, One
Security Benefit Place, Topeka, KS 66636-0001.
Proposals must be received a reasonable time prior to the date of a meeting of
shareholders to be considered for inclusion in the proxy materials for a
meeting. Timely submission of a proposal does not, however, necessarily mean
that the proposal will be included. Persons named as proxies for any subsequent
shareholders' meeting will vote in their discretion with respect to proposals
that are not included herein and that may require a vote (such as proposals
submitted on an untimely basis).
TO ENSURE THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING, WE REQUEST PROMPT
EXECUTION AND RETURN OF THE ENCLOSED PROXY. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
19
APPENDIX A - AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization Plan") is
adopted as of this [ ] day of [ ], 2009, by and between Rydex Series Funds (the
"Trust"), a Delaware statutory trust with its principal place of business at
9601 Blackwell Road, Suite 500, Rockville, Maryland 20850, on behalf of its
series, U.S. Government Money Market Fund (the "Acquiring Fund"), and Security
Cash Fund (the "Acquired Fund") and, collectively with the Trust, the
"Parties"), a Kansas corporation with its principal place of business at One
Security Benefit Place, Topeka, Kansas 66636-0001.
This Reorganization Plan is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization to which this Reorganization Plan applies (the "Reorganization")
will consist of the transfer of all of the assets of the Acquired Fund to the
Acquiring Fund in exchange solely for Investor Class shares of the Acquiring
Fund (the "Acquiring Fund Shares"); the assumption by the Acquiring Fund of all
liabilities of the Acquired Fund; and the distribution of the Acquiring Fund
Shares to the shareholders of the Acquired Fund, the sole class of shareholders
of the Acquired Fund, in complete liquidation and termination of the Acquired
Fund as provided herein, all upon the terms and conditions hereinafter set forth
in this Reorganization Plan.
WHEREAS, the Trust and the Acquired Fund are open-end, registered
investment companies of the management type and the Acquired Fund owns
securities which are assets of the character in which the Acquiring Fund is
permitted to invest;
WHEREAS, the Trustees of the Trust have determined that the exchange of all
of the assets of the Acquired Fund for the Acquiring Fund Shares and the
assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in
the best interests of the Acquiring Fund and its shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Directors of the Acquired Fund also have determined, with
respect to the Acquired Fund, that the exchange of all of the assets of the
Acquired Fund for the Acquiring Fund Shares and the assumption of all
liabilities of the Acquired Fund by the Acquiring Fund is in the best interests
of the Acquired Fund and its shareholders and that the interests of the existing
shareholders of the Acquired Fund would not be diluted as a result of this
transaction;
NOW, THEREFORE, in consideration of the promises, covenants and agreements
hereinafter set forth, the Parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF STATED ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1. Subject to the requisite approvals of the shareholders of the Acquired
Fund and the other terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the
Acquired Fund will transfer all of the Acquired Fund's assets, as set
forth in paragraph 1.2, to the Acquiring Fund, and the Acquiring Fund
agrees in exchange therefor: (i) to deliver to the Acquired Fund the
number of full and fractional Acquiring Fund Shares determined by
dividing the value of the Acquired Fund's net assets, computed in the
manner and as of the time and date set forth in paragraph 2.2, by the
net asset value of one Acquiring Fund Share, computed in the manner
and as of the time and date set forth in paragraph 2.2; and (ii) to
assume the stated liabilities of the Acquired Fund, as set forth in
paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing"). In lieu of delivering
certificates for the Acquiring Fund Shares, the Acquiring Fund shall
credit the Acquiring Fund Shares to the Fund's account on the books of
the Acquiring Fund and shall deliver a confirmation thereof to the
Fund.
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all assets and property, including, without
limitation, all cash, securities, claims, commodities and futures
interests and dividends or interests receivable that are owned by the
Acquired Fund and any deferred or prepaid expenses shown as an asset
on the books of the Acquired Fund (the "Acquired Fund Assets") on the
closing date provided for in paragraph 3.1 (the "Closing Date").
A-1
1.3. The Acquired Fund will endeavor to identify and, to the extent
practicable, discharge all of its known liabilities and obligations
prior to the Closing Date. The Acquiring Fund shall assume the
liabilities, expenses, costs, charges and reserves reflected on the
books of the Acquired Fund, as of the Valuation Date, in accordance
with U.S. generally accepted accounting principles, consistently
applied ("GAAP") (the "Acquired Fund Liabilities"). The Acquiring Fund
shall not assume any other liabilities, whether absolute or
contingent. On or as soon as practicable prior to the Closing Date,
the Acquired Fund will declare and pay to its shareholders of record
one or more dividends and/or other distributions that, together with
all previous distributions, shall have the effect of distributing to
its shareholders (i) all of its investment company taxable income and
all of its net realized capital gains, if any, for the period from the
close of its last taxable year to the end of the business day on the
Closing; and (ii) any undistributed investment company taxable income
and net capital gain from any period to the extent not otherwise
distributed.
1.4. Delivery of the Acquired Fund Assets shall be made on the Closing Date
and shall be delivered to the Acquiring Fund's custodian (the
"Custodian"), for the account of the Acquiring Fund, with all
securities not in bearer or book-entry form duly endorsed, or
accompanied by duly executed separate assignments or stock powers, in
proper form for transfer, with signatures guaranteed, and with all
necessary stock transfer stamps, sufficient to transfer good and
marketable title thereto (including all accrued interest and dividends
and rights pertaining thereto) to the Custodian for the account of the
Acquiring Fund free and clear of all liens, encumbrances, rights,
restrictions and claims. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for
the account of the Acquiring Fund.
1.5. Immediately after the transfer and delivery of assets provided for in
paragraphs 1.1 and 1.4, the Acquired Fund will distribute to its
shareholders of record, determined as of immediately after the close
of business on the Closing Date (the "Acquired Fund Shareholders"), on
a pro rata basis, the Acquiring Fund Shares received by the Acquired
Fund pursuant to paragraph 1.1, and will, promptly thereafter,
terminate in accordance with the applicable laws of the State of
Kansas and the federal securities laws. Such distribution and
termination will be accomplished, with respect to the Acquired Fund's
shares, by the transfer of the Acquiring Fund Shares then credited to
the account of the Acquired Fund on the books of the Acquiring Fund to
open accounts on the share records of the Acquiring Fund in the names
of the Acquired Fund Shareholders. The aggregate value of Acquiring
Fund Shares to be so credited shall be equal to the aggregate value of
the Acquired Fund shares owned by such shareholders on the Closing
Date, each based on amortized cost prices. All issued and outstanding
shares of the Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund. The Acquiring Fund will not issue
certificates representing the Acquiring Fund Shares in connection with
such exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's then-current
prospectus and statement of additional information.
1.7. Any reporting responsibility of the Acquired Fund including, but not
limited to, the responsibility for filing of regulatory reports, tax
returns, or other documents with the Securities and Exchange
Commission (the "Commission"), any state securities commission, and
any federal, state or local tax authorities or any other relevant
regulatory authority, is and shall remain the responsibility of the
Acquired Fund up to and including the Closing Date and such later date
on which the Acquired Fund's existence is terminated pursuant to
paragraph 1.5.
2. VALUATION
2.1. The value of the Acquired Fund Assets and the amount of the Acquired
Fund Liabilities hereunder shall be computed as of the close of
business on the New York Stock Exchange ("NYSE") on the Closing Date
(such time and date being hereinafter called the "Valuation Date"),
using available market quotations (as provided in Rule 2a-7 under the
Investment Company Act of 1940) in accordance with the valuation
procedures currently in use by the Acquiring Fund.
2.2. The value of the Acquired Fund Assets and the amount of the Acquired
Fund Liabilities, and the value of the Acquiring Fund Shares shall be
computed as of the Valuation Date based on the amortized cost
valuation procedures that have been adopted by the Acquiring Fund. Any
provision in this Reorganization Plan to the contrary notwithstanding,
if the difference between (i) the net asset value per share of either
A-2
Fund computed using available market quotations in accordance with
paragraph 2.1 and (ii) the amortized cost price per share of that Fund
equals or exceeds $.0025 on the Valuation Date, then the Closing Date
shall be postponed until such time as the per share difference is less
than $.0025.
2.3. The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Fund Assets and the
assumption of the Acquired Fund Liabilities shall be determined by
dividing the value of the Acquired Fund Assets and the amount of the
Acquired Fund Liabilities computed using the same amortized cost
valuation procedures referred to in paragraph 2.2 by the amortized
cost price per share of one Acquiring Fund Share, also determined in
accordance with paragraph 2.2.
2.4. All computations of value shall be made by the Acquired Fund's
designated record keeping agent.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be July 10, 2009, or such other date as the
Parties may mutually agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of immediately
after the close of business on the Closing Date unless otherwise
agreed to by the parties. The close of business on the Closing Date
shall be as of 4:00 p.m., Eastern Time. The Closing shall be held at
the offices of the Acquired Fund or at such other time and/or place as
to which the Parties may mutually agree in writing.
3.2. The Acquired Fund shall direct the Custodian of the Acquired Fund (the
"Acquired Fund Custodian"), to deliver, at the Closing, a certificate
of an authorized officer stating that (i) the Acquired Fund's
portfolio securities, cash, and any other assets ("Assets") shall have
been delivered in proper form to the Acquiring Fund within two
business days prior to or on the Closing Date, and (ii) all necessary
taxes in connection with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have been
paid or provision for payment has been made. The Acquired Fund's
portfolio securities represented by a certificate or other written
instrument shall be transferred and delivered by the Acquired Fund as
of the Closing Date for the account of the Acquiring Fund duly
endorsed in proper form for transfer in such condition as to
constitute good delivery thereof. The Acquired Fund shall direct the
Custodian to deliver portfolio securities and instruments deposited
with a securities depository, as defined in Rule 17f-4 under the
Investment Company Act of 1940 (the "1940 Act"), as of the Closing
Date by book entry in accordance with the customary practices of such
depositories and the custodian for Acquiring Fund.
3.3. The Acquired Fund shall direct its transfer agent (the "Transfer
Agent") to deliver, on behalf of the Acquired Fund, at the Closing a
certificate of an authorized officer stating that its records contain
the names and addresses of the Acquired Fund Shareholders and the
number and percentage ownership of outstanding shares owned by each
such shareholder immediately prior to the Closing.
3.4. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereupon
shall be restricted, or (b) trading or the reporting of trading on the
NYSE or elsewhere shall be disrupted so that, in the judgment of the
Trustees of the Trust or the Board of Directors of the Acquired Fund,
accurate appraisal of the value of the net assets of the Acquiring
Fund or the Acquired Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Acquired Fund, on behalf of the Acquired Fund, represents and
warrants to the Acquiring Fund as follows:
(a) The Acquired Fund is a corporation duly organized and validly
existing under the laws of the State of Kansas, with power under
the Acquired Fund's Articles of Incorporation to own all of its
properties and assets and to carry on its business as it is now
being conducted;
(b) The Acquired Fund is a registered investment company classified
as a management company of the open-end type, and its
registration with the Commission as an investment company under
the 1940 Act, and the registration of its shares under the
Securities Act of 1933 ("1933 Act"), are in full force and
effect;
A-3
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the Securities
Exchange Act of 1934 (the "1934 Act"), and the 1940 Act, and such
as may be required by state securities laws;
(d) The current prospectus and statement of additional information of
the Acquired Fund and each prospectus and statement of additional
information of the Acquired Fund used during the three years
previous to the date of this Reorganization Plan conforms or
conformed at the time of its use in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations of the Commission thereunder and does not
or did not at the time of its use include any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred
to the Acquiring Fund pursuant to paragraph 1.2 and full right,
power, and authority to sell, assign, transfer and deliver such
assets hereunder free of any liens or other encumbrances, and
upon delivery and payment for such assets, the Acquiring Fund
will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including such
restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Fund;
(f) The Acquired Fund is not engaged currently, and the execution,
delivery and performance of this Reorganization Plan will not
result, in (i) a material violation of the Acquired Fund's
Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to
which the Acquired Fund is a party or by which it is bound, or
(ii) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract,
lease, judgment or decree to which the Acquired Fund is a party
or by which it is bound;
(g) The Acquired Fund has no material contracts or other commitments
(other than this Reorganization Plan) that will be terminated
with liability to it prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the
Acquired Fund or any of its properties or assets that, if
adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquired
Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject
to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein
contemplated;
(i) The financial statements and financial highlights of the Acquired
Fund as of and for the year ended December 31, 2008 have been
audited by Ernst & Young LLP, an independent registered public
accounting firm. Such statements are in accordance with GAAP, and
such statements (copies of which have been furnished to the
Acquiring Fund) present fairly, in all material respects, the
financial condition of the Acquired Fund as of such date in
accordance with GAAP, and there are no known contingent
liabilities of the Acquired Fund required to be reflected on the
balance sheet or in the notes thereto;
(j) Since December 31, 2008, there has not been any material adverse
change in the Acquired Fund's financial condition, assets,
liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by the Acquired
Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this
subparagraph (j), a decline in net asset value per share of the
Acquired Fund due to declines in market values of securities in
the Acquired Fund's portfolio, the discharge of Acquired Fund
liabilities, or the redemption of Acquired Fund shares by
shareholders of the Acquired Fund shall not constitute a material
adverse change, unless the conditions set forth in paragraph 2.2
are not satisfied;
A-4
(k) On the Closing Date, all Federal and other tax returns and
reports of the Acquired Fund required by law to have been filed
by such date (including any extensions) shall have been filed and
are or will be correct in all material respects, and all Federal
and other taxes shown as due or required to be shown as due on
said returns and reports shall have been paid or provision shall
have been made for the payment thereof, and to the best of the
Acquired Fund's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such
returns;
(l) For each taxable year of its operation (including the taxable
year ending on the Closing Date), the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as
such, has been eligible to and has computed its Federal income
tax under Section 852 of the Code, and will have distributed all
of its investment company taxable income and net capital gain (as
defined in the Code) that has accrued through the Closing Date,
and before the Closing Date will have declared dividends
sufficient to distribute all of its investment company taxable
income and net capital gain for the period ending on the Closing
Date;
(m) All issued and outstanding shares of the Acquired Fund are, and
on the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable by the Acquired Fund
and have been offered and sold in every state and the District of
Columbia in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities
laws. All of the issued and outstanding shares of the Acquired
Fund will, at the time of Closing, be held by the persons and in
the amounts set forth in the records of the Transfer Agent, on
behalf of the Acquired Fund, as provided in paragraph 3.3. The
Acquired Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of the shares of
the Acquired Fund, nor is there outstanding any security
convertible into any of the Acquired Fund shares;
(n) The adoption and performance of this Reorganization Plan will
have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Directors of the
Acquired Fund, and, subject to the approval of the shareholders
of the Acquired Fund, this Reorganization Plan will constitute a
valid and binding obligation of the Acquired Fund, enforceable in
accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity
principles;
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents
filed or to be filed with any federal, state or local regulatory
authority (including the Financial Industry Regulatory Authority,
or any successor organization thereto), which may be necessary in
connection with the transactions contemplated hereby, shall be
accurate and complete in all material respects and shall comply
in all material respects with Federal securities and other laws
and regulations thereunder applicable thereto.
4.2. The Trust, on behalf of the Acquiring Fund, represents and warrants to
the Acquired Fund as follows:
(a) The Acquiring Fund is duly organized as a series of the Trust,
which is a statutory trust duly organized and validly existing
under the laws of the State of Delaware, with power under the
Trust's Declaration of Trust to own all of its properties and
assets and to carry on its business as it is now being conducted;
(b) The Trust is a registered investment company classified as a
management company of the open-end type, and its registration
with the Commission as an investment company under the 1940 Act
and the registration of its shares under the 1933 Act, including
the shares of the Acquiring Fund, are in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act and
the 1940 Act and such as may be required by state securities
laws;
(d) The current prospectus and statement of additional information of
the Acquiring Fund and each prospectus and statement of
additional information of the Acquiring Fund used during the
three years previous to the date of this Reorganization Plan
conforms or conformed at the time of its use in all
A-5
material respects to the applicable requirements of the 1933 Act
and the 1940 Act and the rules and regulations of the Commission
thereunder and does not or did not at the time of its use include
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not materially misleading;
(e) On the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets, free of any
liens of other encumbrances, except those liens or encumbrances
as to which the Acquired Fund has received notice and necessary
documentation at or prior to the Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Reorganization Plan will not
result, in (i) a material violation of the Trust's Declaration of
Trust or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquiring Fund
is a party or by which it is bound, or (ii) the acceleration of
any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or
decree to which the Acquiring Fund is a party or by which it is
bound;
(g) Except as otherwise disclosed in writing to and accepted by the
Acquired Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the
Acquiring Fund or any of its properties or assets that, if
adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquiring
Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject
to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein
contemplated;
(h) The financial statements of the Acquiring Fund as of and for the
fiscal year ended March 31, 2008 have been audited by Ernst &
Young LLP, an independent registered public accounting firm. Such
statements are in accordance with GAAP consistently applied, and
such statements (copies of which have been furnished to the
Acquired Fund) present fairly, in all material respects, the
financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent
liabilities of the Acquiring Fund required to be reflected on the
balance sheet or in the notes thereto;
(i) Since December 31, 2008, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets,
liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by the Acquiring
Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquired Fund. For purposes of this
subparagraph (i), a decline in net asset value per share of the
Acquiring Fund due to declines in market values of securities in
the Acquiring Fund's portfolio, the discharge of Acquiring Fund
liabilities, or the redemption of Acquiring Fund Shares by
shareholders of the Acquiring Fund, shall not constitute a
material adverse change, unless the conditions set forth in
paragraph 2.2 are not satisfied;
(j) On the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law to have been filed
by such date (including any extensions) shall have been filed and
are or will be correct in all material respects, and all Federal
and other taxes shown as due or required to be shown as due on
said returns and reports shall have been paid or provision shall
have been made for the payment thereof, and to the best of the
Acquiring Fund's knowledge no such return is currently under
audit and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for
qualification as a regulated investment company and has elected
to be treated as such, has been eligible to and has computed its
Federal income tax under Section 852 of the Code, has distributed
all of its investment company taxable income and net capital gain
(as defined in the Code) for periods ending prior to the Closing
Date, and will do so for the taxable year including the Closing
Date;
A-6
(l) All issued and outstanding Acquiring Fund Shares are, and on the
Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable by the Trust and have been offered
and sold in every state and the District of Columbia in
compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws. The
Acquiring Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is there outstanding any security convertible into
any Acquiring Fund Shares;
(m) The adoption and performance of this Reorganization Plan will
have been fully authorized prior to the Closing Date by all
necessary action, if any, on the part of the Board of Trustees of
the Trust on behalf of the Acquiring Fund and this Reorganization
Plan will constitute a valid and binding obligation of the
Acquiring Fund, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(n) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders,
pursuant to the terms of this Reorganization Plan, will on the
Closing Date have been duly authorized and, when so issued and
delivered, will be duly and validly issued Acquiring Fund Shares,
and will be fully paid and non-assessable by the Trust;
(o) The information to be furnished by the Acquiring Fund for use in
the registration statements, proxy materials and other documents
that may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with
Federal securities and other laws and regulations applicable
thereto; and
(p) That insofar as it relates to Trust or the Acquiring Fund, the
Registration Statement relating to the Acquiring Fund Shares
issuable hereunder, and the proxy materials of the Acquired Fund
to be included in the Registration Statement, and any amendment
or supplement to the foregoing, will, from the effective date of
the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i) not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading
provided, however, that the representations and warranties in
this subparagraph (p) shall not apply to statements in or
omissions from the Registration Statement made in reliance upon
and in conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of
business will include the declaration and payment of customary
dividends and distributions, and any other distribution that may be
advisable.
5.2. To the extent required by applicable law, the Acquired Fund will call
a meeting of the shareholders of the Acquired Fund to consider and act
upon this Reorganization Plan and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof, other than in accordance with the terms of this
Reorganization Plan.
5.4. The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of the Acquired Fund shares.
5.5. Subject to the provisions of this Reorganization Plan, the Acquiring
Fund and the Acquired Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Reorganization Plan.
A-7
5.6. As soon as is reasonably practicable after the Closing, the Acquired
Fund will make a liquidating distribution to its shareholders
consisting of the Acquiring Fund Shares received at the Closing.
5.7. The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions
precedent to effect the transactions contemplated by this
Reorganization Plan as promptly as practicable.
5.8. The Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver
or cause to be executed and delivered all such assignments and other
instruments, and will take or cause to be taken such further action as
the Acquiring Fund may reasonably deem necessary or desirable in order
to vest in and confirm the Acquiring Fund's title to and possession of
all the assets and otherwise to carry out the intent and purpose of
this Reorganization Plan.
5.9. The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state blue sky or securities laws as may be necessary
in order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at the Acquired Fund's election, to
the performance by the Trust, on behalf of the Acquiring Fund, of all the
obligations to be performed by it hereunder on or before the Closing Date,
and, in addition thereto, the following further conditions:
6.1. All representations and warranties of the Acquiring Fund and the Trust
contained in this Reorganization Plan shall be true and correct in all
material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Reorganization Plan,
as of the Closing Date, with the same force and effect as if made on
and as of the Closing Date;
6.2. The Trust and the Acquiring Fund shall have performed all of the
covenants and complied with all of the provisions required by this
Reorganization Plan to be performed or complied with by the Trust and
the Acquiring Fund on or before the Closing Date; and
6.3. The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares to be issued in
connection with the Reorganization after such number has been
calculated in accordance with paragraph 1.1.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at the Acquiring Fund's election, to the
performance by the Acquired Fund of all of the obligations to be performed
by it hereunder on or before the Closing Date and, in addition thereto, the
following conditions:
7.1. All representations and warranties of the Acquired Fund and the
Acquired Fund contained in this Reorganization Plan shall be true and
correct in all material respects as of the date hereof and, except as
they may be affected by the transactions contemplated by this
Reorganization Plan, as of the Closing Date, with the same force and
effect as if made on and as of the Closing Date;
7.2. The Acquired Fund and the Acquired Fund shall have performed all of
the covenants and complied with all of the provisions required by this
Reorganization Plan to be performed or complied with by the Acquired
Fund or the Acquired Fund on or before the Closing Date;
7.3. The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares to be issued in
connection with the Reorganization after such number has been
calculated in accordance with paragraph 1.1; and
7.4. The Acquired Fund shall have declared and paid a distribution or
distributions prior to the Closing that, together with all previous
distributions, shall have the effect of distributing to its
shareholders (i) all of its investment company taxable income and all
of its net realized capital gains, if any, for the period from the
close of its last taxable year to 4:00 p.m. Eastern Time on the
Closing; and (ii) any undistributed
A-8
investment company taxable income and net realized capital gains from
any period to the extent not otherwise already distributed.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Reorganization Plan shall, at its option, not be
required to consummate the transactions contemplated by this Reorganization
Plan:
8.1. The Reorganization Plan and the transactions contemplated herein shall
have been approved by the requisite vote, if any, of the holders of
the outstanding shares of the Acquired Fund in accordance with the
provisions of the Acquired Fund's Articles of Incorporation, By-Laws,
applicable Kansas law and the 1940 Act, and certified copies of the
resolutions evidencing such approval shall have been delivered to the
Acquiring Fund. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.1;
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending or, to its knowledge, threatened before any court or
governmental agency in which it is sought to restrain or prohibit, or
obtain damages or other relief in connection with, this Reorganization
Plan or the transactions contemplated herein;
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to
obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of the Acquiring
Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the 1933
Act; and
8.5. Dechert LLP shall deliver an opinion addressed to the Trust and the
Acquired Fund substantially to the effect that, based upon certain
facts, assumptions, and representations, the transaction contemplated
by this Reorganization Plan shall constitute a tax-free reorganization
for Federal income tax purposes, unless, based on the circumstances
existing at the time of the Closing, Dechert LLP determines that the
transaction contemplated by this Reorganization Plan does not qualify
as such. The delivery of such opinion is conditioned upon receipt by
Dechert LLP of representations it shall request of the Acquired Fund
and the Trust. Notwithstanding anything herein to the contrary, the
Parties may not waive the condition set forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1. The Acquiring Fund represents and warrants to the other that there are
no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
9.2. Security Investors, LLC, the investment adviser to the Acquired Fund
or its affiliates shall bear the expenses relating to the proposed
Reorganization. The expenses of the Reorganization shall include, but
not be limited to, preparation of the Registration Statement, printing
and distributing the Acquiring Fund's prospectus and the Acquired
Fund's proxy materials on Form N-14, legal fees, accounting fees,
securities registration fees, and expenses of holding the
shareholders' meeting.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
The representations, warranties and covenants contained in this
Reorganization Plan or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the transactions
contemplated hereunder. The covenants to be performed after the Closing
shall survive the Closing.
A-9
11. TERMINATION
This Reorganization Plan and the transactions contemplated hereby may be
terminated and abandoned either by resolution of the Board of Directors or
the Board of Trustees, at any time prior to the Closing Date, if
circumstances should develop that, in the opinion of the Board of Directors
or the Board of Trustees, make proceeding with the Reorganization Plan
inadvisable.
12. AMENDMENTS; WAIVER
This Reorganization Plan may be amended, modified or supplemented in such
manner as may be mutually agreed to in writing by the Parties; provided,
however, that following any meeting of the shareholders called by the
Acquired Fund pursuant to paragraph 5.2 of this Reorganization Plan, no
such amendment may have the effect of changing the provisions for
determining the number of the Acquiring Fund Shares to be issued to the
Acquired Fund Shareholders under this Reorganization Plan to the detriment
of such shareholders without their further approval.
At any time prior to the Closing Date, except as otherwise expressly
provided, any of the foregoing conditions may be waived by the Board of
Trustees of the Trust or the Board of Directors of the Acquired Fund if, in
the judgment of either and upon the advice of counsel, such waiver will not
have a material adverse effect on the benefits intended under this
Agreement to the shareholders of the Acquiring Fund or the Acquired Fund,
as the case may be.
13. HEADINGS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
13.1. The Article and paragraph headings contained in this Reorganization
Plan are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Reorganization Plan.
13.2. This Reorganization Plan shall be governed by and construed in
accordance with the laws of the State of Kansas without regard to its
principles of conflicts of laws.
13.3. This Reorganization Plan shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of
the other party. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of
this Reorganization Plan.
13.4. It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of the Directors, shareholders,
nominees, officers, agents, or employees of the Acquired Fund
personally, but shall bind only property of such party. The execution
and delivery by such officers shall not be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the property of each party.
A-10
IN WITNESS WHEREOF, the Board of Directors of the Acquired Fund and the
Board of Trustees of the Trust have caused this Reorganization Plan to be
approved on behalf of the Acquiring Fund and the Acquired Fund.
SECURITY CASH FUND
By:
------------------------------
Name: Richard M. Goldman
Title: President
RYDEX SERIES FUNDS
By:
------------------------------
Name: Carl G. Verboncoeur
Title: President
A-11
APPENDIX B - ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND
PORTFOLIO MANAGEMENT
The Acquiring Fund is managed by a team of investment professionals, and on a
day-to-day basis, the following three individuals are jointly and primarily
responsible for the management of the Fund.
MICHAEL P. BYRUM, CFA, President and Chief Investment Officer ("CIO") of Rydex
Investments - As the CIO, Mr. Byrum has ultimate responsibility for the
management of mutual funds distributed by Rydex Distributors, Inc. (the "Rydex
Funds"). In addition to generally overseeing all aspects of the management of
all of the Rydex Funds, Mr. Byrum reviews the activities of Messrs. Dellapa and
Harder. He has been associated with Rydex Investments since it was founded in
1993. Mr. Byrum was named the President of Rydex Investments in 2004 and has
served as Chief Investment Officer of Rydex Investments since 2003. During this
time, he has played a key role in the development of the firm's investment
strategies and product offerings. As Senior Portfolio Manager, Mr. Byrum was
instrumental in the launch of the NASDAQ-100(R), Precious Metals, Government
Long Bond 1.2x Strategy, Inverse Government Long Bond Strategy, Inverse S&P 500
Strategy and Inverse NASDAQ-100(R) Strategy Funds, and helped to create the
Sector Funds, all of which are offered in a separate prospectus. He was named
Vice President of Portfolio for Rydex Investments in 1998 and Executive Vice
President in 2000. Prior to joining Rydex Investments, Mr. Byrum worked for
Money Management Associates, the investment adviser for Rushmore Funds, Inc. He
holds a degree in finance from Miami University of Ohio and is a member of the
CFA Institute and the Washington Society of Investment Analysts. Mr. Byrum has
co-managed the Acquiring Fund since its inception.
MICHAEL J. DELLAPA, CFA, CAIA, Director of Alternative Investment Strategies -
Mr. Dellapa plays a key role in the development of new products and research
processes and systems that enhance the management of all of the Rydex Funds. In
particular, Mr. Dellapa focuses on the management of the Alternative Investment
Funds, including the Multi-Hedge Strategies Fund, which is offered in a separate
prospectus. Mr. Dellapa joined Rydex Investments in 2000 as a Research Analyst
and was promoted to portfolio manager in 2003. During his tenure as a portfolio
manager, he had direct oversight for the Russell 2000(R) 1.5x Strategy,
Healthcare, Biotechnology, and Consumer Products Funds, all of which are offered
in a separate prospectus. In 2005, Mr. Dellapa became Director of Investment
Research and in 2007 became the Director of Alternative Investment Strategies.
Prior to joining Rydex Investments, Mr. Dellapa worked as an equity analyst for
Invista Capital and systems analyst for Accenture. He holds an engineering
degree from the University of Maryland and MBA from the University of Chicago.
Previously, he was owner/consultant of Dellapa Consulting Inc. as well as a
senior consultant and an analyst at Andersen Consulting. Mr. Dellapa has
co-managed the Acquiring Fund since 2003.
RYAN A. HARDER, CFA, Senior Portfolio Manager - Mr. Harder is involved in the
management of all of the Rydex Funds, but focuses particularly on the management
of the Domestic Equity, Domestic Equity-Style, International Equity, Fixed
Income, and Alternative Investment Funds. Mr. Harder joined Rydex Investments in
2004 as an Assistant Portfolio Manager, was promoted to Portfolio Manager in
2005 and has served in his current capacity since 2008. He was instrumental in
the launch of the Multi-Hedge Strategies, High Yield Strategy and Inverse High
Yield Strategy Funds, all of which are offered in a separate prospectus. Prior
to joining Rydex Investments, Mr. Harder served in various capacities with
WestLB Asset Management, including as an Assistant Portfolio Manager, and worked
in risk management at CIBC World Markets. He holds a B.A. in Economics from
Brock University in Ontario, Canada and a Master of Science in International
Securities, Investment and Banking from the ICMA Centre at the University of
Reading in the U.K. Mr. Harder has co-managed the Acquiring Fund since March
2008.
The Statement of Additional Information of the Acquiring Fund filed with the SEC
on March 6, 2009 provides additional information about the portfolio managers'
compensation, other accounts managed, and ownership of fund shares.
SHAREHOLDER INFORMATION
The Acquiring Fund currently has four classes of shares: A Class, C Class,
Investor Class and Advisor Class, which are not offered in this Proxy
Statement/Prospectus. The Acquiring Fund will start issuing and offering
Investor2 Class shares in connection with the Reorganization. Investor2 Class
shares will be offered directly through Rydex Fund Services, Inc. and also
through authorized securities brokers and other financial intermediaries.
MINIMUM AMOUNTS FOR ESTABLISHING ACCOUNTS
B-1
The minimum initial investment amount is $100.
There is a minimum amount of $20 for subsequent investments in the Acquiring
Fund. For more information about investment minimums for subsequent investments
via Automated Clearing House ("ACH") please see "Purchase Procedures."
Rydex reserves the right to modify its minimum account balance requirements at
any rime, with or without prior notice to you.
TRANSACTION INFORMATION
This section provides important information about the procedures that you must
follow when you buy, sell or exchange shares of the Acquiring Fund. You may
submit transaction orders to buy, sell or exchange Acquiring Fund shares on any
day that the New York Stock Exchange (the "NYSE") is open for business (a
"Business Day"). On any day that the NYSE closes early - such as on days in
advance of holidays generally observed by the NYSE or as otherwise permitted by
the SEC - the Acquiring Fund reserves the right to advance the time that net
asset value ("NAV") is calculated and, correspondingly, the time by which
purchase and redemption orders must be received. The NYSE holiday schedule is
included in the Acquiring Fund's Statement of Additional Information and Rydex
will post advance notice of early closings at www.rydexinvestments.com.
Notwithstanding the foregoing, the Acquiring Fund reserves the right to accept
orders to purchase or redeem shares on any day that is not a Business Day and
the Federal Reserve Bank of New York or National Securities Clearing Corporation
remains open. In addition, the Acquiring Fund may designate special hours of
operation on any such day. In the event that the Acquiring Fund invokes the
right to accept orders to purchase or redeem shares on any day that is not a
Business Day and/or adopt special hours of operation, the Acquiring Fund will
post advance notice of these events at www.rydexinvestments.com.
TRANSACTION CUT-OFF TIMES
All shareholder transaction orders are processed at the NAV next determined
after your transaction order is received with all of the necessary information,
sometimes referred to as "good order," by the Acquiring Fund's transfer agent,
distributor, or authorized dealer. The following transaction cut-off times have
been established in order to allow the transfer agent appropriate time to report
the current day's trading activity to the Acquiring Fund's Advisor. Any
application that is sent to the transfer agent does not constitute a purchase
order until the transfer agent processes the application and receives correct
payment by check, wire transfer or ACH.
-----------------------------------------------------------------------------------------------------------------
METHOD CUT-OFF TIME
-----------------------------------------------------------------------------------------------------------------
By Mail or Phone Market Close
-----------------------------------------------------------------------------------------------------------------
By Financial Intermediary Market Close*
-----------------------------------------------------------------------------------------------------------------
* Each financial intermediary may have its own rules about share
transactions, and may have earlier cut-off times for processing your
transaction order.
EARLY TRANSACTION CUT-OFF TIMES
On any day that the Acquiring Fund calculates NAV earlier than normal, as
described below, the transfer agent reserves the right to advance the time on
that day by which shareholder transaction orders must be received by the
transfer agent.
CALCULATING NAV
The price at which you buy, sell and exchange shares is the net asset value per
share, which is also known as NAV.
The Acquiring Fund calculates its NAV by:
o Taking the current market value of its total assets
o Subtracting any liabilities
B-2
o Dividing that amount by the total number of shares owned by
shareholders
The Acquiring Fund calculates NAV once each Business Day as of the regularly
scheduled close of normal trading on the NYSE (normally, 4:00 p.m., Eastern
Time). If the NYSE closes early - such as on days in advance of holidays
generally observed by the NYSE - the Acquiring Fund will calculate NAV as of the
earlier closing time in accordance with the policies set forth in the Acquiring
Fund's Statement of Additional Information. These dates are listed in the
Acquiring Fund's Statement of Additional Information. For more information on
these early closings, please call 800.820.0888 or visit the Rydex web site -
www.rydexinvestments.com.
The Acquiring Fund values its assets using the amortized cost method of
valuation pursuant to procedures approved by the Acquiring Fund's Board of
Trustees.
More information about the valuation of the Acquiring Fund's holdings and the
amortized cost method can be found in the Acquiring Fund's Statement of
Additional Information.
TRANSACTIONS THROUGH YOUR FINANCIAL INTERMEDIARY
If you opened your account through a financial intermediary, you will ordinarily
submit your transaction orders through that financial intermediary. Your
financial intermediary is responsible for ensuring that your transaction order
is in good order, and promptly transmitting your order to the Acquiring Fund.
Transaction orders received in good order by your financial intermediary will be
processed at the Acquiring Fund's next determined NAV. Financial intermediaries
may charge fees for the services they provide to you in connection with
processing your transaction order or maintaining your account with them. Each
financial intermediary may also have its own rules about minimum initial
investment amounts, minimum account balances, share transactions, limits on the
number of share transactions you are permitted to make in a given time period,
and may have different cut-off times for processing your transaction order. For
more information about your financial intermediary's rules and procedures, you
should contact your financial intermediary directly.
BUYING FUND SHARES
The Acquiring Fund issues its shares continuously and investors may submit
purchase orders to buy shares on any Business Day. However, the transfer agent
reserves the right to reject or refuse, in whole or in part, any purchase order
for Acquiring Fund shares within 72 hours of the transfer agent receiving the
purchase order. Purchase orders, like any other share transaction, are subject
to the Acquiring Fund's transaction cut-off times and will be processed at the
NAV next determined after your purchase order is received in good order.
PURCHASE PROCEDURES
The Acquiring Fund offers you the option to submit purchase orders through your
financial intermediary or send purchase orders by mail, fax or internet and send
purchase proceeds by check, wire transfer or ACH. The Acquiring Fund does not
accept cash or cash equivalents (such as travelers' checks, money orders or
bearer bonds), government checks, third-party checks, starter checks or checks
drawn on a line of credit (including credit card convenience checks). Cashiers
checks, bank checks, official checks and treasurers' checks less than or equal
to $10,000 are also not accepted. The transfer agent reserves the right to
refuse other payment instruments if, in the sole discretion of fund management,
it is deemed to be in the best interests of the Acquiring Fund. Any payment
instrument refused will generally be returned to you within twenty-four (24)
hours of the transfer agent's refusal to accept such instrument, but in no event
later than seventy-two (72) hours after such refusal.
Retirement contributions will be coded for the year in which they are received
unless otherwise instructed in writing at the time of the contribution.
B-3
You may buy shares and send your purchase proceeds by any of the following
methods:
-------------------------- -------------------------------------------- -------------------------------------------
INITIAL PURCHASE SUBSEQUENT PURCHASES
-------------------------------------------- -------------------------------------------
Complete the account application that Send written purchase instructions that
corresponds to the type of account you are include:
opening.
o Make sure to designate the Rydex o your name
Fund(s) you want to purchase. o your shareholder account number
o Make sure your investment meets the o the Rydex Fund(s) you want to
account minimum. purchase.
-------------------------------------------- -------------------------------------------
BY MAIL IRA Make your check payable to RYDEX INVESTMENTS.
and other ----------------------------------------------------------------------------------------
retirement Your check must be drawn on a U.S. bank and payable
accounts in U.S. Dollars.
require ----------------------------------------------------------------------------------------
additional Include the name of the Rydex Fund(s) you want to purchase
paperwork. on your check.
Call Rydex -------------------------------------------- -------------------------------------------
Client Services Mail your application and Mail your written purchase
to request a check to: instructions and check to:
Retirement -------------------------------------------- -------------------------------------------
Account Investor MAILING ADDRESS
application kit. -------------------------------------------- -------------------------------------------
STANDARD DELIVERY: OVERNIGHT DELIVERY:
-------------------------- -------------------------------------------- -------------------------------------------
Rydex Investments Rydex Investments
Attn: [__] Dept. Attn: [ __] Dept.
P.O. Box 758567 200 SW 6th Street
Topeka, KS 66675-8567 Topeka, KS 66603-3704
-------------------------- -------------------------------------------- -------------------------------------------
-------------------------- -------------------------------------------- -------------------------------------------
INITIAL PURCHASE SUBSEQUENT PURCHASES
-------------------------------------------- -------------------------------------------
Submit new account paperwork, and then
call Rydex to obtain your account number.
Be sure to designate in your wire
o Make sure to designate the Rydex instructions the Rydex Fund(s) you want
Fund(s) you want to purchase. to purchase.
o Make sure your investment meets the
account minimum.
-------------------------------------------- -------------------------------------------
----------------------------------------------------------------------------------------
You will receive a confirmation number to verify that your purchase order has been
accepted.
IF YOU DO NOT NOTIFY RYDEX CLIENT SERVICES OF THE INCOMING WIRE, YOUR PURCHASE ORDER
BY WIRE WILL NOT BE PROCESSED UNTIL THE BUSINESS DAY FOLLOWING THE RECEIPT OF THE WIRE.
Rydex Client
Services phone WIRE INSTRUCTIONS:
Number:
800.820.0888 ___________________
or ___________________
301.296.5406 Routing Number: ______________
For Account of: Rydex Investments
Account Number: ______________
[Your Name]
[Your shareholder account number]
----------------------------------------------------------------------------------------
--------------------------
B-4
INITIAL PURCHASE SUBSEQUENT PURCHASES
-------------------------------------------- -------------------------------------------
Not available for initial purchases. SUBSEQUENT PURCHASES MADE VIA ACH MUST BE
A MINIMUM OF $20. To make a subsequent
purchase send written purchase
instructions that include:
o your name
o your shareholder account number
BY ACH
(FAX) o the Rydex Fund(s) you want to purchase
Rydex fax
number: o ACH bank information (if not on
301.296.5103 record).
-------------------------- -------------------------------------------- -------------------------------------------
BY ACH Follow the directions on the [Rydex web site -
(INTERNET) www.rydexinvestments.com]
-------------------------- ----------------------------------------------------------------------------------------
CANCELLED PURCHASE ORDERS
Rydex will ordinarily cancel your purchase order under the following
circumstances:
o if your bank does not honor your check for any reason
o if the transfer agent does not receive your wire transfer
o if the transfer agent does not receive your ACH transfer
o if your bank does not honor your ACH transfer
If your purchase order is cancelled for any of these reasons, you will not be
entitled to benefit from any increase in NAV that the Acquiring Fund may have
experienced from the time of your order to the time of its cancellation. In
addition, if the Acquiring Fund's NAV decreases in value from the time of your
order to the time of its cancellation, the Acquiring Fund will hold you liable
for any losses that it incurs as a result of your cancelled order.
SELLING FUND SHARES
The Acquiring Fund redeems its shares continuously and investors may sell their
shares back to the Acquiring Fund on any Business Day. You may redeem all or any
portion of your Acquiring Fund shares at the Acquiring Fund's next determined
NAV calculated after your redemption order is received in good order by the
transfer agent. Redemption orders, like any other share transaction, are subject
to the Acquiring Fund's transaction cut-off times and will be processed at the
NAV next determined after your redemption order is received in good order by the
transfer agent or your financial intermediary.
The Acquiring Fund may suspend your right to redeem your shares during times
when trading on the NYSE is suspended or restricted, or otherwise as permitted
by the SEC. The Acquiring Fund reserves the right to pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price. If the Acquiring Fund redeems your shares in kind, you may
bear transaction costs and will bear marker risks until such time as such
securities are converted to cash.
REDEMPTION PROCEDURES
You will ordinarily submit your transaction order through your financial
intermediary or other securities dealers through which you opened your
shareholder account or through Rydex Investments directly. The Acquiring Fund
also offers you the option to send redemption orders to Rydex Investments by:
B-5
----------------------------- ------------------------------------------- -------------------------------
STANDARD DELIVERY OVERNIGHT DELIVERY
Rydex Investments Rydex Investments
MAIL Attn: _____ Dept. Attn: _____ Dept.
P.O. Box 758567 200 SW 6th Street
Topeka, KS 66675-8567 Topeka, KS 66603-3704
----------------------------- ------------------------------------------- -------------------------------
Whether you transmit your redemption order by mail, fax or telephone, you must
include the following information in your redemption order:
o your name
o your shareholder account number
o Fund name(s)
o dollar amount or number of shares you would like to sell
o whether you want your sale proceeds sent to you by check, wire or ACH
(a new alternate payee or new wire instructions may require a signature
guarantee)
o signature of account owner(s) (not required for telephone redemptions)
You may only place a redemption order if you are the registered owner of the
account or the registered owner has given Rydex written authorization to allow
you to make redemptions from the account. You will receive a confirmation number
for your redemption. Please retain it for your records.
DISTRIBUTIONS FROM QUALIFIED RETIREMENT ACCOUNTS
Distributions from your tax-qualified plan or individual retirement account
("IRA") may have adverse tax consequences to you. You should consult your tax
adviser before redeeming shares and making distributions from your tax-qualified
plan or IRA account. All requests for distributions of redemption proceeds from
tax-qualified plan and IRA accounts must be in writing. All distributions from
tax-qualified plans and IRAs are subject to tax withholding rules.
RECEIVING YOUR REDEMPTION PROCEEDS
Your redemption proceeds normally will be sent within seven days of the transfer
agent receiving your request. For redemption orders that settle on federal bank
holidays, your redemption proceeds will be sent on the next Business Day
following the holiday. For investments made by check or ACH (not wire
purchases), payment of redemption proceeds may be delayed until the transfer
agent is reasonably satisfied that your purchase has cleared. It may take up to
15 days for your purchase to clear.
All redemptions will be mailed to your address of record, sent electronically,
via ACH, or wired to your bank account of record. You may request overnight mail
service for an additional fee. If you request payment of redemption proceeds to
a third parry or to a location other than your address of record or bank account
of record, your redemption request must be in writing and must include a
signature guarantee and may not be faxed.
SIGNATURE GUARANTEES
Signature guarantees help protect you and your account against fraud. You can
obtain a signature guarantee at most banks and financial intermediaries. A
notary public cannot provide a signature guarantee. You may not use fax to
transmit a signature guarantee to the Acquiring Fund.
REDEEMING SHARES BY DRAFT WRITING
If you hold shares directly, you may redeem shares from the Acquiring Fund by
writing drafts for $100 or more on your existing account. The drafts may be made
payable to any person or entity and your account will continue to earn dividends
until the draft clears. Drafts may not be used for electronic funds transfers
(i.e., electronic bill
B-6
payments or ACH). If your balance in the Acquiring Fund is insufficient to cover
the amount of your draft, the transfer agent will return it as insufficient
funds.
You can obtain a draft writing application by calling [800.820.0888]. Because of
the difficulty of determining in advance the exact value of your Acquiring Fund
account, you may not use a draft to close your account. There is no fee for the
draft writing privilege, but if payment on a draft is stopped upon your request,
or if the draft cannot be honored because of insufficient funds or other valid
reasons, you may be charged a fee by the financial institution where you
presented your draft for payment. The transfer agent may also charge a $25 fee
for a draft than cannot be honored due to insufficient funds. The Acquiring Fund
may suspend the draft writing privilege at any time.
EXCHANGING FUND SHARES
As described herein, an exchange is when you sell shares of the Fund and use the
proceeds from that sale to purchase shares of a Security Fund. The Security
Funds include each share class of the Security Equity Fund (and each of its
series); the Security Income Fund (and each of its series); the Security Large
Cap Value Fund (and each of its series); and the Security Mid Cap Growth Fund.
Investors may make exchanges on any Business Day of the Fund for shares of any
Security Fund on the basis of the respective NAVs of the shares involved.
Exchange requests, like any other share transaction, will be processed at the
NAV next determined after your exchange order is received in good order. All
exchange requests must be received by the Fund's transfer agent or your
financial intermediary prior to the cut-off time of the Fund or the Security
Fund you are exchanging into, whichever is earlier, to be processed at that
Business Day's NAV. See "Exchanges with Security Funds" for additional
information. The exchange privilege may be modified or discontinued at any time.
If it is determined that a shareholders' transfer patterns among the Fund and
the Security Funds are disruptive or potentially disadvantageous to other
shareholders, the Fund will send the shareholder a letter notifying the
shareholder that the Fund is prohibiting the shareholder from making any
additionally purchases for a 90-day period that begins on the date of the
letter. This restriction will be applied after the shareholder makes four "round
trip transfers" during any 12-month period. A "round trip transfer" is a
transfer (1) from the Fund followed by a transfer to the Fund or (2) to the Fund
followed by a transfer from the Fund.
EXCHANGE PROCEDURES
You will ordinarily submit your transaction order through your financial
intermediary or other securities dealers through which you opened your
shareholder account or through Rydex Investments directly. The Acquiring Fund
also offers you the option to send exchange requests by:
B-7
----------------------------- -------------------------------------------- -------------------------------------------
STANDARD DELIVERY OVERNIGHT DELIVERY
Rydex Investments Rydex Investments
Attn: ______ Dept. Attn: _____ Dept.
MAIL P.O. Box 758567 200 SW 6th Street
Topeka, KS 66675-8567 Topeka, KS 66603-3704
----------------------------- ----------------------------------------------------------------------------------------
[301.296 5103]
FAX If you send your exchange request by fax, you must
call Rydex Client Services at [800.820.0888] to verify that
your fax was received and when it will be processed.
----------------------------- ----------------------------------------------------------------------------------------
TELEPHONE [800.820.0888] or [301.296.5406]
----------------------------- ----------------------------------------------------------------------------------------
INTERNET Follow the directions at - [www.rydexinvestments.com]
----------------------------- ----------------------------------------------------------------------------------------
Whether you transmit your exchange request by mail, fax, telephone or internet,
you must include the following information in your exchange request:
o your name
o your shareholder account number
o Fund name(s) you are exchanging out of (selling) and Fund name(s) you
are exchanging into (buying)
o dollar amount, number of shares or percentage of Fund position
involved in the exchange
o signature of account owner(s) (nor required for telephone or internet
exchanges)
You may only place exchange orders if you are the registered owner of the
account or the registered owner has given the transfer agent written
authorization to allow you to trade the account. You will receive a confirmation
number for your exchange. Please retain it for your records.
EXCHANGES WITH SECURITY FUNDS
On any Business Day, investors may make exchanges of the Fund for shares of any
Security Fund, which are offered in a separate prospectus. IF YOU ARE
CONTEMPLATING AN EXCHANGE FOR SHARES OF THE FUND FOR SHARES OF ANY SECURITY
FUND, YOU SHOULD OBTAIN AND REVIEW THAT SECURITY FUND'S CURRENT PROSPECTUS
BEFORE MAKING THE EXCHANGE. You may obtain a prospectus for any Security Fund by
calling xxx.xxx.xxxx or visiting the web at www.xxxxx.com.
RYDEX ACCOUNT POLICIES
SHAREHOLDER IDENTIFICATION AND VERIFICATION
Federal regulations may require the Acquiring Fund to obtain your name, your
date of birth (for a natural person), your residential street address or
principal place of business and your Social Security Number, Employer
Identification Number or other government issued identification when you open an
account. Additional information may be required in certain circumstances or to
open accounts for corporations or other entities. The Acquiring Fund may use
this information to attempt to verify your identity. The Acquiring Fund may not
be able to establish an account if the necessary information is not received.
The Acquiring Fund may also place limits on account transactions while it is in
the process of attempting to verify your identity. Additionally, if the
Acquiring Fund is unable to verify your identity after your account is
established, the Acquiring Fund may be required to redeem your shares and close
your account.
Rydex provides accounts for U.S. citizens and resident aliens. We will not open
a new account for any non-resident aliens (natural person or entity). If you are
unsure of your status please consult your tax adviser. Non-resident aliens may
hold Rydex Funds through a financial intermediary, subject to that financial
intermediary's requirements.
B-8
Customer identification and verification is part of the Acquiring Fund's overall
obligation to deter money laundering under applicable law. The Acquiring Fund
has adopted an anti-money laundering compliance program designed to prevent the
Acquiring Fund from being used for money laundering or the financing of
terrorist activities. In this regard, the Acquiring Fund reserves the right to
(i) refuse, cancel or rescind any purchase or exchange order, (ii) freeze any
account and/or suspend account services or (iii) involuntarily close your
account in cases of threatening conduct or suspected fraudulent or illegal
activity. These actions will be taken when, in the sole discretion of Fund
management, they are deemed to be in the best interests of the Acquiring Fund or
in cases when the Acquiring Fund is requested or compelled to do so by
governmental or law enforcement authority. If your account is closed at the
request of governmental or law enforcement authority, you may not receive
proceeds of the redemption if the Acquiring Fund is required to withhold such
proceeds.
CHANGES TO YOUR ACCOUNT
For information on what is required to make changes and/or additions to your
account, and to obtain the appropriate forms, please visit the Rydex web site at
www.rydexinvestments.com or call [800.820.0888] or [301.296.5406]. 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 on how to make
this change.
TRANSACTIONS OVER TELEPHONE OR INTERNET
Internet and telephone transactions are extremely convenient, but are not risk
free. To ensure that your internet and telephone transactions are safe, secure,
and as risk-free as possible, the Acquiring Fund has instituted certain
safeguards and procedures for determining the identity of web site users
(including the use of secure passwords and 128-bit encryption technology) and
telephone callers and authenticity of instructions. As a result, neither the
Acquiring Fund nor its transfer agent will be responsible for any loss,
liability, cost, or expense for following internet, telephone or wire
instructions they reasonably believe to be genuine. If you or your
intermediaries make exchange requests by telephone or internet, you will
generally bear the risk of any loss. Neither the Acquiring Fund, nor its
transfer agent, is responsible for internet transactions that are not received.
During periods of unusually high market activity or other times, it may be
difficult to reach Rydex by telephone or access our internet site. Rydex
Investments and its affiliates will not be liable for any losses resulting from
a cause over which Rydex Investments or its affiliates do nor have direct
control, including but not limited to the failure of electronic or mechanical
equipment or communication lines, telephone or other interconnect problems
(e.g., if you are unable to access your online service provider), input errors
on the internet, severe weather, facilities emergencies, earthquakes, floods and
strikes or other labor problems. If you are not able to reach Rydex Client
Services by your regular medium, consider sending written instructions.
STATEMENTS & CONFIRMATIONS
You will receive statements and trade confirmations of your investment
transactions.
RYDEX EXPRESS LINE - 1(800) 717-7776
You may access information about the Acquiring Funds and your account anytime
with the Rydex Express Line. This automated line gives you telephone access to
Rydex Fund information including NAVs, daily factors, fund assets and
distributions as well as balance and history information on your account.
SERVICE AND OTHER FEES
Rydex Investments may charge the following administrative fees on accounts held
directly through the Acquiring Fund's transfer agent for services associated
with the following:
o $20 for wire transfers of redemption proceeds
o $50 on purchase checks returned for insufficient funds
o $25 to stop payment of a redemption check within 10 Business Days of
the settlement date
o $20 for standard overnight packages (fee may be higher for special
delivery options)
B-9
o $25 for bounced drafts or ACH Transactions
o The Acquiring Fund reserves the right, upon notice, to charge you a
fee to cover the costs of special requests for information that
require extensive research or employee resources. Such requests could
include a request for historical account transcripts or the retrieval
of a significant number of documents.
Rydex reserves the right to change any of these fees or add additional service
fees at any time.
RETIREMENT ACCOUNT FEES
Certain retirement plans such as IRA, SEP, Roth IRA and 403(b) accounts, are
charged an annual $10 maintenance fee. You may pay the annual maintenance fee at
any time during the calendar year by sending Rydex Investments a check. If the
annual maintenance fee is not paid separately prior to December, it will be
deducted from your account.
RIGHTS RESERVED BY THE ACQUIRING FUND
The Acquiring Fund reserves the right to close your account in cases of
suspected fraudulent or illegal activity in accordance with applicable law. This
action may be taken when, in the sole discretion of Rydex Investments, it is
deemed to be in the best interests of the Acquiring Fund or in cases where the
Acquiring Fund is requested or compelled to do so by applicable law. If your
account is closed at the request of governmental or law enforcement authority or
pursuant to applicable law, you may not receive proceeds of the redemption if
the Acquiring Fund is required to withhold such proceeds.
DISTRIBUTION AND SHAREHOLDER SERVICES
COMPENSATION TO DEALERS
The Advisor, at its expense, may provide compensation to financial
intermediaries for the sale of Fund shares. These payments may be made, at the
discretion of the Advisor, to certain dealers who have sold shares of the Fund.
The level of payments made to dealers will generally vary, but may be
significant. These payments may provide an incentive for dealers to sell shares
of the Fund and promote the retention of their customer's assets in the Fund.
Any payments described above will not change the price paid by investors for the
purchase of the Fund's shares or the amount that any particular Fund will
receive as proceeds from such sales. The Advisor determines the extent of such
payments in its sole discretion in response to requests from dealer firms, based
on factors it deems relevant, such as the dealer's sales, assets, share class
utilized and the quality of the dealer's relationship with the Advisor. The
Advisor periodically determines the advisability of continuing these payments.
The Advisor may also pay expenses associated with meetings that facilitate
educating financial advisers and shareholders about the Fund that are conducted
by dealers.
DIVIDENDS AND DISTRIBUTIONS
TIMING OF PAYMENTS
The Acquiring Fund will declare dividends daily and pay them monthly or upon
redemption. If you own Acquiring Fund shares on the Acquiring Fund's record
date, you will be entitled to receive the dividend. The Acquiring Fund may
declare and pay dividends on the same date. The Acquiring Fund makes
distributions of capital gains, if any, at least annually. The Acquiring Fund,
however, may declare a special capital gains distribution if the Board of
Trustees believes that such a distribution would be in the best interests of the
shareholders of the Acquiring Fund.
DIVIDEND PAYMENT OPTIONS
Dividends and distributions will he paid in the form of additional Acquiring
Fund shares unless you have elected to receive payment in cash. If you did not
elect to receive cash payments of dividends and distributions on your
application, you must notify the Acquiring Fund in writing to change your
election prior to the date of the next distribution. Your election will become
effective for dividends paid after the Acquiring Fund receives your written
notice. To cancel your election, simply send written notice to the Acquiring
Fund. Dividends and distributions with values of $10 or less may be
automatically reinvested.
B-10
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Acquiring Fund and its shareholders. The summary is based on current tax laws,
which may be changed by legislative, judicial or administrative action. You
should not consider this summary to he a detailed explanation of the tax
treatment of the Acquiring Fund, or the tax consequences of an investment in the
Acquiring Fund. MORE INFORMATION ABOUT TAXES IS LOCATED IN THE ACQUIRING FUND'S
STATEMENT OF ADDITIONAL INFORMATION. YOU ARE URGED TO CONSULT YOUR TAX ADVISER
REGARDING SPECIFIC QUESTIONS AS TO FEDERAL, STATE AND LOCAL INCOME TAXES.
TAX STATUS OF THE ACQUIRING FUND
The Acquiring Fund is treated as a separate entity for federal tax purposes, and
intends to qualify for the special tax treatment afforded to regulated
investment companies. As long as the Acquiring Fund qualifies as a regulated
investment company, it pays no federal income tax on the earnings it distributes
to shareholders.
TAX STATUS OF DISTRIBUTIONS
o The Acquiring Fund will, at least annually, distribute substantially
all of its net investment income and net capital gains income.
o The income dividends and short-term capital gains distributions you
receive from the Acquiring Fund will be taxed as either ordinary income
or qualified dividend income. Dividends that are qualified dividend
income are eligible for the reduced maximum rare to individuals of 15%
(lower rates apply to individuals in lower tax brackets) to the extent
that the Acquiring Fund receives qualified dividend income. The
Acquiring Fund does not expect to make distributions that will be
treated as qualified dividend income.
o Any long-term capital gains distributions you receive from the
Acquiring Fund are taxable as long-term capital gains regardless of how
long you have owned your shares. Long-term capital gains are currently
taxed at a maximum rate of 15%. The Acquiring Fund does not expect to
distribute any long-term capital gains.
o Absent further legislation, the maximum 15% tax rare on qualified
dividend income and long-term capital gains will cease to apply to
taxable years beginning after December 31, 2010.
o Dividends and distributions are generally taxable to you whether you
receive them in cash or in additional shares.
o Corporate shareholders may be entitled to a dividends-received
deduction for the portion of dividends they receive that are
attributable to dividends received by the Acquiring Fund from U.S.
corporations, subject to certain limitations.
o The Acquiring Fund does not expect to make any distributions of
dividends qualified for the dividends-received deduction.
o Distributions paid in January but declared by the Acquiring Fund in
October, November or December of the previous year may be taxable to
you in the previous year.
o The Acquiring Fund will inform you of the amount of distributions
shortly after the close of each calendar year. It is expected that all
distributions from the Acquiring Fund will be ordinary income.
o If you hold your shares in a tax-qualified retirement account, you
generally will not be subject to federal taxation on Fund distributions
until you begin receiving distributions from your retirement account.
You should consult your tax adviser regarding the tax rules that apply
to your retirement account.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE, OR REDEMPTION OF ACQUIRING FUND SHARES MAY BE A TAXABLE
EVENT TO YOU. There will be no gain or loss on a sale, exchange or redemption of
shares of the Acquiring Fund so long as the Acquiring Fund shares maintain a
stable price per share of $1.00. For tax purposes, an exchange of Acquiring Fund
shares for shares of a
B-11
Security Fund is treated the same as a sale. 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 Acquiring Fund
through a tax-qualified retirement plan.
STATE TAX CONSIDERATIONS
The Acquiring 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 federal taxes, distributions by the Acquiring Fund and
ownership of Acquiring Fund shares may be subject to state and local taxes. You
should consult your tax adviser regarding how share and local tax laws affect
your investment in Acquiring Fund shares.
B-12
APPENDIX C - THE ACQUIRING FUND'S BOARD MEMBERS AND OFFICERS
MEMBERS OF THE BOARD OF TRUSTEES AND OFFICERS OF RYDEX SERIES FUND (THE
"TRUST"). Set forth below are the names, ages, position with the Trust, term of
office, and the principal occupations for a minimum of the last five years of
each of the persons currently serving as members of the Board of the Trust. The
members of the Board of Trustees of the Trust serve as Trustees for the life of
the Trust or until retirement, removal, or their office is terminated pursuant
to the Trust's Declaration of Trust. Unless otherwise noted, the business
address of each Trustee is 9601 Blackwell Road, Suite 500, Rockville, Maryland
20850.
----------------- ------------------- ------------------------------------------------- -------------- ---------------
NAME, ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NUMBER OF OTHER
AND AGE OF WITH THE TRUST, PORTFOLIOS DIRECTORSHIPS
TRUSTEE TERM OF OFFICE IN FUND HELD BY
AND LENGTH OF COMPLEX TRUSTEE
TIME SERVED OVERSEEN BY
TRUSTEE
----------------- ------------------- ------------------------------------------------- -------------- ---------------
Michael P. Trustee from 2005 PADCO Advisors, Inc.: 158 None
Byrum (38) to present. --------------------
Director from January 2008 to present;
Chief Investment Officer from August 2006
to present; President from May 2004 to
present; Secretary from December 2002 to
present; Chief Operating Officer of PADCO
Advisors, Inc., from October 2003 to May
2004; and Executive Vice President from
December 2002 to May 2004
PADCO Advisors II, Inc.:
------------------------
Director from January 2008 to present;
Chief Investment Officer from August 2006
to present; President from May 2004 to
present; Secretary from December 2002 to
present; Chief Operating Officer of PADCO
Advisors II, Inc., from December 2003 to
May 2004; and Executive Vice President
from December 2002 to May 2004
Rydex Advisory Services:
------------------------
President from August 2004 to present
Rydex Capital Partners I, LLC:
------------------------------
President and Secretary from October 2003 to
April 2007
Rydex Capital Partners II, LLC:
-------------------------------
President and Secretary from October 2003 to
April 2007
C-1
Rydex Distributors, Inc.:
-------------------------
Secretary from December 2001 to May 2004;
Executive Vice President from December
2002 to May 2004; and Chief Operating
Officer from December 2003 to May 2004
Rydex Fund Services, Inc.:
--------------------------
Secretary from December 2002 to present;
Executive Vice President from December
2002 to August 2006; and Chief Operating
Officer from December 2003 to May 2004
Rydex Holdings, Inc.:
---------------------
Secretary from December 2005 to present and
Executive Vice President from December 2005 to
August 2006
Advisor Research Center, Inc.:
------------------------------
Secretary from May 2006 to present and
Executive Vice President from May 2006 to
August 2006
Rydex Specialized Products, LLC:
--------------------------------
Director and Secretary from September 2005 to
present
----------------- ------------------- ------------------------------------------------- -------------- ---------------
Carl G. Trustee from 2004 PADCO Advisors, Inc.: 158 None
Verboncoeur (56) to present; ---------------------
President from
2003 to present; Director from January 2008 to present; Chief
Vice President Executive Officer from October 2003 to January
from 1997 to 2009; Executive Vice President from December
present; and 2002 to October 2003; President from October
Treasurer from 2003 to May 2004; and Treasurer from
1997 to 2003. December 2002 to January 2009
PADCO Advisors II, Inc.
-----------------------
Director from January 2008 to present;
Chief Executive Officer from December 2003
to January 2009 Executive Vice President
from December 2002 to December 2003;
President from December 2002 to May 2004;
and Treasurer from December 2003 to
January 2009
C-2
Rydex Capital Partners I, LLC:
------------------------------
Treasurer from October 2003 to April 2007, and
Executive Vice President from October 2003 to
August 2006
Rydex Capital Partners II, LLC:
-------------------------------
Treasurer from October 2003 to April 2007, and
Executive Vice President from October 2003 to
August 2006
Rydex Advisory Services:
------------------------
Chief Executive Officer from August 2004 to
January 2009
Rydex Distributors, Inc.:
-------------------------
President and Chief Executive Officer from
December 2003 to January 2009; Treasurer
from December 2002 to January 2009;
Executive Vice President from December
2002 to December 2003; and Vice President
from December 2001 to December 2002
Rydex Fund Services, Inc.:
--------------------------
Chief Executive Officer from December 2003
to January 2009; President and Treasurer
from December 2002 to present; and
Executive Vice President from December
2001 to December 2002
Rydex Holdings, Inc.:
---------------------
Executive Advisor from January 2009 to present;
Chief Executive Officer, President and
Treasurer from December 2005 to January 2009
Advisor Research Center, Inc.:
------------------------------
Chief Executive Officer, President and Treasurer
from May 2006 to January 2009
----------------- ------------------- ------------------------------------------------- -------------- ---------------
C-3
Rydex Specialized Products, LLC:
--------------------------------
Chief Executive Officer, Director and Treasurer
from September 2005 to January 2009
----------------- ------------------- ------------------------------------------------- -------------- ---------------
Corey A. Trustee from 1993 Retired from August 2006 to present. President 158 None
Colehour (63) to present; and Senior Vice President of Schield Management
and Member of the Company (registered investment adviser) from
Audit and 2003 to 2006
Governance and
Nominating
Committees
from 1995 to
present.
----------------- ------------------- ------------------------------------------------- -------------- ---------------
J. Kenneth Trustee from 1995 Retired 158 None
Dalton (68) to present;
Member of the
Governance and
Nominating
Committee from
1995 to present;
and Chairman of the
Audit Committee
from 1997 to
present.
----------------- ------------------- ------------------------------------------------- -------------- ---------------
John O. Demaret Trustee from 1997 Retired 158 None
(69) to present;
Chairman of the
Board from 2006
to present; and
Member of the
Audit and
Governance and
Nominating
Committees from
1997 to present.
----------------- ------------------- ------------------------------------------------- -------------- ---------------
Werner E. Trustee and Founder and President of Keller Partners, LLC 158 None
Keller (68) Member of the (registered investment adviser) from 2005 to
Audit and present; and Retired from 2001 to 2005.
Governance and
Nominating
Committees from
2005 to present.
----------------- ------------------- ------------------------------------------------- -------------- ---------------
Thomas F. Lydon Trustee and President of Global Trends Investments 158 Board of
(49) Member of the (registered investment adviser) from 1996 to Directors of
Audit and present. US Global
Governance and Investors
Nominating since April
Committees from 1995
2005 to
C-4
present.
----------------- ------------------- ------------------------------------------------- -------------- ---------------
Patrick T. Trustee from 1997 Chief Executive Officer of Par Industries, 158 None
McCarville (66) to present; Inc., d/b/a Par Leasing from 1977 to present.
Chairman of the
Governance and
Nominating
Committee from
1997 to present;
and Member of
the Audit
Committee from
1997 to present.
----------------- ------------------- ------------------------------------------------- -------------- ---------------
Roger Somers Trustee from 1993 Founder and Chief Executive Officer of Arrow 158 None
(64) to present; and Limousine from 1965 to present.
Member of the Audit
and Governance and
Nominating
Committees from
1995 to present.
-----------------------------------------------------------------------------------------------------------------------
OFFICERS
----------------- ------------------- ------------------------------------------------- ------------- -----------------
Nick Bonos (45) Vice President Senior Vice President of Fund Services of PADCO 158 Not Applicable
and Treasurer Advisors, Inc. from August 2006 to present;
from 2003 to Senior Vice President of Rydex Fund Services,
present. Inc. from December 2003 to August 2006; Vice
President of Accounting, Rydex Fund Services,
Inc. from 2001 to 2003; and Chief Financial
Officer and Manager of Rydex Specialized
Products, LLC from September 2005 to present;
and Chief Executive Officer, President, and
Director of Rydex Fund Services, Inc. from
January 2009 to present
----------------- ------------------- ------------------------------------------------- ------------- -----------------
Joanna M. Chief Compliance Chief Compliance Officer of PADCO Advisors, 158 Not Applicable
Haigney (42) Officer from 2004 Inc. and PADCO Advisors II, Inc. from May 2005
to present; and to present and Rydex Capital Partners I, LLC
Secretary from and Rydex Capital Partners II, LLC from August
2000 to present. 2006 to April 2007; Vice President of
Compliance of PADCO Advisors, Inc., from August
2006 to present; Assistant Secretary of Rydex
Distributors, Inc. from December 2001 to
December 2003; and Vice President of Rydex
Distributors, Inc. from December 2003 to May
2004 and Rydex Fund Services, Inc. from
December 2001 to August 2006; and Director of
Rydex Distributors, Inc. from January 2009 to
present
----------------- ------------------- ------------------------------------------------- ------------- -----------------
Joseph Arruda Assistant Vice President of PADCO Advisors, Inc. and 158 Not Applicable
(41) Treasurer from PADCO Advisors II, Inc. from 2004 to present;
2006 to present. Director of Accounting of PADCO Advisors, Inc.
and PADCO Advisors II, Inc. from 2003 to 2004;
Vice President of Mutual Funds, State Street
Bank & Trust from 2000 to 2003
----------------- ------------------- ------------------------------------------------- ------------- -----------------
C-5
Paula Billos Controller from Director of Fund Administration of PADCO 158 Not Applicable
(33) 2006 to present. Advisors, Inc. and PADCO Advisors II, Inc. from
2001 to present
----------------- ------------------- ------------------------------------------------- ------------- -----------------
C-6
APPENDIX D - COMPARISON OF FUND INVESTMENT POLICIES
FUNDAMENTAL POLICIES
The following are fundamental policies of the Funds, and cannot be changed with
respect to the Acquired Fund or the Acquiring Fund without the consent of the
holders of a majority of the respective Fund's outstanding shares. The term
"majority of the outstanding shares" means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of the
Fund's outstanding shares, whichever is less.
------------------------- --------------------------------------------- --------------------------------------------
ACQUIRED FUND ACQUIRING FUND
------------------------- --------------------------------------------- --------------------------------------------
Loans Not lend any security or make any other Shall not make loans to others except
loan if, as a result, more than 33 1/3% of through the purchase of qualified debt
the Acquired Fund's total assets would be obligations, loans of portfolio securities
lent to other parties, except (i) through and entry into repurchase agreements.
the purchase of a portion of an issue of
debt securities in accordance with its
investment objective and policies, or (ii)
by engaging in repurchase agreements with
respect to portfolio securities.
------------------------- --------------------------------------------- --------------------------------------------
Securities Lending --------- Shall not lend its portfolio securities in
excess of 15% of the Acquiring Fund's
total assets. Any loans of the Acquiring
Fund's portfolio securities will be made
according to guidelines established by the
Board of Trustees, including maintenance
of cash collateral of the borrower equal
at all times to the current market value
of the securities loaned.
------------------------- --------------------------------------------- --------------------------------------------
Senior Securities Not to issue senior securities, except as Shall not issue senior securities, except
permitted under the 1940 Act. as permitted by the Acquiring Fund's
investment objectives and policies.
The term "as permitted under the 1940 Act"
indicates that, unless otherwise limited by
non-fundamental policies, the Funds can issue
senior securities to the extent permitted
by the 1940 Act and interpretations thereof,
and that no further action generally would be
needed to conform the senior securities policy
of the Funds to future change in the 1940 Act
and interpretations thereof.
------------------------- --------------------------------------------- --------------------------------------------
Options --------- Shall not write or purchase put or call
options.
------------------------- --------------------------------------------- --------------------------------------------
Other Investment --------- Shall not invest in securities of other
Companies investment companies, except as these
securities may be acquired as part of a
merger, consolidation, acquisition of
assets, or plan of reorganization.
------------------------- --------------------------------------------- --------------------------------------------
D-1
------------------------- -------------------------------------------- ----------------------------------------------
ACQUIRED FUND ACQUIRING FUND
------------------------- -------------------------------------------- ----------------------------------------------
Mortgage, Pledge, --------- Shall not mortgage, pledge, or hypothecate
Hypothecate the Acquiring Fund's assets except to
secure permitted borrowings. In those
cases, the Acquiring Fund may mortgage,
pledge, or hypothecate assets having a
market value not exceeding the lesser
of the dollar amounts borrowed or 15%
of the value of total assets of the
Acquiring Fund at the time of the
borrowing.
------------------------- --------------------------------------------- --------------------------------------------
Short Sales --------- May not 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.
------------------------- --------------------------------------------- --------------------------------------------
Investments in One Not to invest more than 5% of its total ---------
Issuer assets in the securities of any one issuer
(other than obligations of, or guaranteed
by, the U.S. government, its agencies or
instrumentalities), provided, that this
limitation applies only with respect to 75%
of a Fund's total assets
------------------------- --------------------------------------------- --------------------------------------------
Ownership of One Issuer Not to purchase a security if, as a result, ---------
with respect to 75% of the value of the
Fund's total assets, more than 10% of the
outstanding voting securities of any one
issuer would be held by the Fund (other
than obligations issued or guaranteed by
the U.S. government, its agencies or
instrumentalities)
------------------------- --------------------------------------------- --------------------------------------------
Underwriting Not to act as underwriter of securities ---------
issued by others, except to the extent that
the Acquired Fund may be considered an
underwriter within the meaning of the 1933
Act in the disposition of restricted
securities
------------------------- --------------------------------------------- --------------------------------------------
Concentration Not to invest in an amount equal to, or in ---------
excess of, 25% or more of the Acquired
Fund's total assets in a particular
industry (other than securities of the U.S.
government, its agencies or
instrumentalities)
------------------------- --------------------------------------------- --------------------------------------------
Real Estate Not to purchase or sell real estate unless ---------
acquired as a result of ownership of
securities or other instruments (but this
does not prevent the Acquired Fund from
investing in securities or other
instruments backed by real estate or
securities of companies engaged in the real
estate business).
------------------------- --------------------------------------------- --------------------------------------------
D-2
------------------------- -------------------------------------------- ----------------------------------------------
ACQUIRED FUND ACQUIRING FUND
------------------------- -------------------------------------------- ----------------------------------------------
Commodities Not to purchase or sell physical ---------
commodities, except that the Acquired Fund
may enter into futures contracts and
options thereon.
------------------------- --------------------------------------------- --------------------------------------------
Borrowing Not to borrow in excess of 33 1/3% of the ---------
Acquired Fund's total assets.
------------------------- --------------------------------------------- --------------------------------------------
NON FUNDAMENTAL ("OPERATING") POLICIES
The following investment limitations are non-fundamental policies of the Funds
and may be changed with respect to any Fund by the Board:
------------------------- -------------------------------------------- ----------------------------------------------
ACQUIRED FUND ACQUIRING FUND
------------------------- -------------------------------------------- ----------------------------------------------
Warrants --------- May not invest in warrants
------------------------- -------------------------------------------- ----------------------------------------------
Real Estate Limited --------- May not invest in real estate limited
Partnerships partnerships
------------------------- -------------------------------------------- ----------------------------------------------
Oil and Gas The fund may not invest in oil, gas, May not invest in mineral leases
Programs mineral leases or other mineral exploration
or development programs
------------------------- -------------------------------------------- ----------------------------------------------
Other Investment Except in connection with a merger, May not acquire any securities of registered
Companies consolidation, acquisition, or open-end investment companies or registered
reorganization, the Acquired Fund may not unit investment trusts in reliance on
invest in securities of other investment Section 12(d)(1)(G) or (F), if such Fund is
companies, except in compliance with the an Essential Portfolio Underlying Fund or an
Investment Company Act and the rules Alternative Strategies Allocation Underlying
thereunder. Fund (the Rydex Essential Portfolio Funds
and Rydex Alternative Strategies Allocation
Fund, which are funds of funds, are described
in a separate Rydex Series Funds Statement
of Additional Information dated August 1,
2008).
------------------------- -------------------------------------------- ----------------------------------------------
Fixed Income Securities --------- May not change its investment strategy to
invest at least 80% of its net assets, plus
any borrowings for investment purposes, in
fixed income securities issued by the U.S.
government (and derivatives thereof) without
60 days' prior notice to shareholders
------------------------- -------------------------------------------- ----------------------------------------------
Loans The Acquired Fund may not lend assets ---------
other than securities to other parties,
except as otherwise provided in the Fund's
fundamental policies.
(This limitation does not apply to purchases
of debt securities or to repurchase
------------------------- -------------------------------------------- ----------------------------------------------
D-3
------------------------- -------------------------------------------- ----------------------------------------------
ACQUIRED FUND ACQUIRING FUND
------------------------- -------------------------------------------- ----------------------------------------------
agreements.)
------------------------- -------------------------------------------- ----------------------------------------------
Options The Acquired Fund may write only covered ---------
put and call options. The Acquired Fund
will not invest in puts, calls, or any
combination thereof.
------------------------- -------------------------------------------- ----------------------------------------------
Borrowing The Funds may not borrow money or ---------
securities for any purposes except that
borrowing up to 10% of the Acquired Fund's
total assets from commercial banks is
permitted for emergency or temporary
purposes. The Acquired Fund may not
purchase securities while borrowings equal
to 5% or more of its total assets are
outstanding.
The policy on borrowing is not intended to
limit the ability to pledge assets to the
extent permitted under the 1940 Act.
------------------------- -------------------------------------------- ----------------------------------------------
Short Sales The Acquired Fund may not sell securities ---------
short unless it owns or has the right to
obtain securities equivalent in kind and
amount to the securities sold short and
provided that transactions in futures
contracts and options are not deemed to
constitute selling securities short.
------------------------- -------------------------------------------- ----------------------------------------------
Margin The Acquired Fund does not intend to ---------
purchase securities on margin, except that
the Acquired Fund may obtain such
short-term credits as are necessary for
the clearance of transactions and provided
that margin payments in connection with
futures contracts and options on futures
contracts shall not constitute purchasing
securities on margin.
------------------------- -------------------------------------------- ----------------------------------------------
Permissible The Acquired Fund may not purchase ---------
Securities securities other than U.S. government
securities, bank obligations and corporate
obligations.
------------------------- -------------------------------------------- ----------------------------------------------
Futures The Acquired Fund may not purchase futures ---------
contracts or options thereon
------------------------- -------------------------------------------- ----------------------------------------------
Operating History The Acquired Fund may not invest in
securities of an issuer that, together with
any predecessor, has been in operation for
less than three years if, as a result, more
than 5% of the total assets of the Acquired
Fund would then be invested in such
------------------------- -------------------------------------------- ----------------------------------------------
D-4
------------------------- -------------------------------------------- ----------------------------------------------
ACQUIRED FUND ACQUIRING FUND
------------------------- -------------------------------------------- ----------------------------------------------
securities.
------------------------- -------------------------------------------- ----------------------------------------------
Control of Portfolio The Acquired Fund may not invest in
Companies companies for the purpose of exercising
management or control.
------------------------- -------------------------------------------- ----------------------------------------------
D-5
APPENDIX E -THE ACQUIRED FUND'S FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Acquired
Fund's financial performance for the past 5 years. Certain information reflects
financial results for a single share. The total returns in the table represent
the rate that an investor would have earned (or lost) on an investment in the
Acquired Fund (assuming reinvestment of all dividends and distributions). The
information provided below for each respective period has been audited by Ernst
& Young LLP, whose reports, along with the financial statements and related
notes, appear in the Fund's most recent annual report, which is available upon
request.
YEAR ENDED DECEMBER 31
2008 2007 2006 2005 2004
----------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income(a) 0.02 0.04 0.04 0.02 ---(b)
----------- ----------- ----------- ---------- ------------
Total from investment operations 0.02 0.04 0.04 0.02 ---
----------------------------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.02) (0.04) (0.04) (0.02) ---(c)
----------- ----------- ----------- ---------- ------------
Total distributions (0.02) (0.04) (0.04) (0.02) ---
----------- ----------- ----------- ---------- ------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
=========== =========== =========== ========== ============
----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.72% 4.34% 4.13% 2.30% 0.40%
----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $72,676 $91,682 $50,944 $43,659 $49,398
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.82% 4.22% 4.11% 2.26% 0.40%
Total expenses(d) 1.01% 1.15% 1.42% 1.38% 1.26%
Net expenses(e) 1.00% 0.99% 1.00% 1.00% 0.99%
Net expenses prior to custodian earnings credits and net 1.00% 0.99% 1.00% 1.00% 0.99%
of expense waivers
----------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Net investment income was computed using the average shares outstanding
throughout the period.
(b) Net investment income is less than $0.01 per share.
(c) Dividends from net investment income are less than $0.01 per share.
(d) Total expense information reflects expense ratios absent expense reductions
by the Investment Manager and custodian earnings credits, as applicable..
(e) Net expense information reflects the expense ratios after voluntary expense
waivers, reimbursements and custodian earnings credits, as applicable.
</FN>
E-1
APPENDIX F - OWNERSHIP INFORMATION
As of the Record Date, to the knowledge of each Fund, the name, address, and
share ownership of persons who owned of record or beneficially 5% or more of any
class of the Fund's outstanding shares are set forth below:
SECURITY CASH FUND
------------------------------------------- ----------------------- ------------------------ -----------------------
NAME AND ADDRESS OF SHAREHOLDER PERCENT OF CLASS OF PERCENTAGE OF FUND PERCENTAGE OF
SHARES AND TYPE OF COMBINED FUND AFTER
OWNERSHIP THE REORGANIZATION*
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
U.S. GOVERNMENT MONEY MARKET FUND
------------------------------------------- ----------------------- ------------------------ -----------------------
NAME AND ADDRESS OF SHAREHOLDER PERCENT OF CLASS OF PERCENTAGE OF FUND PERCENTAGE OF
SHARES AND TYPE OF COMBINED FUND AFTER
OWNERSHIP THE REORGANIZATION*
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
------------------------------------------- ----------------------- ------------------------ -----------------------
<FN>
---------------
* On a pro forma basis, assuming that the value of the shareholder's interest
in the Fund on the date of consummation of the Reorganization is the same
as on the Record Date.
</FN>
F-1
SECURITY CASH FUND
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0001
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
JUNE 19, 2009
The undersigned hereby appoint(s) Amy J. Lee, Donald A. Chubb, Jr. and Brenda M.
Harwood, or any one of them, proxies, each of them with full power of
substitution, to vote and act with respect to all shares of Security Cash Fund
(the "Acquired Fund") which the undersigned is entitled to vote at the Special
Meeting of Security Cash Fund shareholders to be held at the executive offices
of Security Cash Fund, One Security Benefit Place, Topeka, Kansas 66636, June
19, 2009 at 1:00 p.m. Central time and at any adjournment(s) or postponements
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card
will be voted as instructed. IF NO SPECIFICATION IS MADE, THE PROXY CARD WILL BE
VOTED "FOR" PROPOSAL 1. THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION, TO VOTE
UPON SUCH MATTERS AS MAY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENTS.
FOLD AND DETACH HERE
.................................................................................
SECURITY CASH FUND
(the "Acquired Fund")
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 19, 2009
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL
-------------------------------------------------------------------
Please vote, date and sign this proxy card and return it promptly in the
enclosed envelope. Please indicate your vote by an "x" in the appropriate box
below:
1. To approve an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets and liabilities of the Acquired Fund by
U.S. Government Money Market Fund (the "Acquiring Fund"), a series of Rydex
Series Fund, solely in exchange for shares of the Acquiring Fund, followed
by the complete liquidation of the Acquired Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE VOTE BY [X]
CHECKING THE
APPROPRIATE BOX
AS IN THIS EXAMPLE
Date: ___________________________
_________________________________
Signature
This proxy card must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add title(s) as such. Joint owners must each sign. By
signing this proxy card, you acknowledge that you have received the proxy
statement/prospectus that the proxy card accompanies.
PROXY VOTING INSTRUCTIONS
Your mailed proxy statement provides details on important issues relating to
your Fund. The Board of Directors of Security Cash Fund recommends that you vote
"FOR" the proposal.
To make voting faster and more convenient for you, we are offering a variety of
ways to vote your proxy. You may vote using the Internet or by telephone instead
of completing and mailing the enclosed proxy card. The Internet and telephone
are generally available 24 hours a day and your vote will be confirmed and
posted immediately. Use whichever method is most convenient for you! If you
choose to vote via the Internet or by phone, you should not mail your proxy
card.
WAYS TO VOTE YOUR SHARES
Your vote is important no matter how many shares you own. Voting your shares
early will avoid costly follow-up mail and telephone solicitation.
Online 1. Click on www.myproxyonline.com.
2. Enter the 12 digit control number.
3. Follow the instructions on the Web site.
4. Once you have voted, you do not need to mail your
proxy card.
By Phone 1. Call toll-free [______].
2. Enter the 12 digit control number.
3. Follow the recorded instructions.
4. Once you have voted, you do not need to mail your
proxy card.
By Mail Complete and sign your proxy card and mail it in
the postage-paid envelope received with your
shareholder mailing. To ensure your vote is validated
properly, please sign your proxy card as described in
the "Instructions for Signing Proxy Cards" section of
your proxy materials.
In Person The Shareholder Meeting will take place June
19, 2009, at 1:00 p.m., Central time, at the office of
Security Cash Fund, located at One Security Benefit
Place, Topeka, Kansas 66636.
FOLD AND DETACH HERE
--------------------------------------------------------------------------------
Questions?
We urge you to spend time reviewing your proxy statement and the proposal
included in the package. Should you have any questions, we encourage you to call
toll-free Monday through Friday from 9:30 a.m. to 10:00 p.m. Eastern time. We
have retained The Altman Group to assist our shareholders in the voting process.
If we have not received your proxy card as the date of the special meeting
approaches, representatives from The Altman Group may call you to remind you to
exercise your vote.
YOUR PROXY VOTE IS IMPORTANT! PLEASE VOTE TODAY
PART B
SECURITY CASH FUND
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
May 8, 2009
--------------------------------------------------------------------------------
Acquisition of the Assets and Liabilities of: By and in Exchange for Shares
Security Cash Fund of Investor2 Class Shares of:
One Security Benefit Place U.S. Government Money Market
Topeka, Kansas 66636-0001 Fund
(A Series of Rydex Series
Funds)
9601 Blackwell Road,
Suite 500
Rockville, Maryland 20850
This Statement of Additional Information is available to the shareholders of
Security Cash Fund in connection with a proposed transaction whereby all of the
assets and liabilities of Security Cash Fund (the "Acquired Fund") will be
transferred to U.S. Government Money Market Fund (the "Acquiring Fund"), a
series of Rydex Series Funds, in exchange for shares of Investor2 Class shares
of the Acquiring Fund.
This Statement of Additional Information consists of this cover page and the
following documents, each of which were filed electronically with the Securities
and Exchange Commission and are incorporated by reference herein:
1. The Acquired Fund's Statement of Additional Information, dated May 1, 2009
(File No. 002-68387);
2. The Acquiring Fund's Statement of Additional Information, filed March 6,
2009 (File No. 033-59692);
3. The Financial Statements of the Acquired Fund as included in the Acquired
Fund's annual report for the fiscal year ended December 31, 2008 (File No.
811-03073); and
4. The Financial Statements of the Acquiring Fund as included in the Acquiring
Fund's annual report for the fiscal year ended March 31, 2008 and
semi-annual report for the period ended September 30, 2008 (File No.
811-07584).
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated May 8, 2009 relating to the reorganization of
Security Cash Fund may be obtained, without charge, by writing to Security
Investors, LLC, at One Security Benefit Place, Topeka, Kansas 66636-0001 or
calling (800) 888-2461. This Statement of Additional Information should be read
in conjunction with the Proxy Statement/Prospectus.
PART C
OTHER INFORMATION
Item 15 Indemnification
------- ---------------
Rydex Series Funds (the "Registrant" or the "Trust") is organized as a Delaware
statutory trust and is operated pursuant to a Declaration of Trust, dated as of
March 13, 1993, as amended (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 Registrant's Declaration of Trust 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
(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 Registrant's Declaration of Trust 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 16 Exhibits
------- --------
(1) (a) Certificate of Trust dated February 10, 1993 of Rydex Series
Funds (the "Registrant" or the "Trust") is incorporated herein by
reference to Exhibit (1)(a) of Post-Effective Amendment No. 27 to
the Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the U.S. Securities and Exchange
Commission (the "SEC") on October 30, 1996.
(b) Registrant's Declaration of Trust dated March 13, 1993 is
incorporated herein by reference to Exhibit (1)(b) of
Post-Effective Amendment No. 27 to the Registrant's Registration
Statement on Form N-1A (File No. 033-59692), as filed with the
SEC on October 30, 1996.
(c) Amendment dated November 2, 1993 to the Registrant's Declaration
of Trust dated March 13, 1993 is incorporated herein by reference
to Exhibit (a)(3) of Post-Effective Amendment No. 40 to the
Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC on August 1, 2000.
(d) Amendment dated February 25, 2000 to the Registrant's Declaration
of Trust dated March 13, 1993 is incorporated herein by reference
to Exhibit (a)(4) of Post-Effective Amendment No. 40 to the
Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC via EDGAR Accession No.
0000912057-00-034316 on August 1, 2000.
(e) Amendment dated November 21, 2005 to the Registrant's Declaration
of Trust dated March 13, 1993 is incorporated herein by reference
to Exhibit (a)(5) of Post-Effective Amendment No. 61 to the
Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC via EDGAR Accession No.
0001169232-06-001381 on March 3, 2006.
(2) Registrant's Amended and Restated Bylaws are incorporated herein by
reference to Exhibit (b) of Post-Effective Amendment No. 61 to the
Registrant's Registration Statement on Form N-1A (File No. 033-59692),
as filed with the SEC via EDGAR Accession No. 0001169232-06-001381 on
March 3, 2006.
(3) Not applicable.
(4) Agreement and Plan of Reorganization between Security Cash Fund and
Rydex Series Funds, on behalf of U.S. Government Money Market Fund
series -- See Appendix A to the Proxy Statement/Prospectus.
(5) Not applicable.
(6) (a) Advisory Agreement dated January 18, 2008 between the Registrant
and PADCO Advisors, Inc. is incorporated herein by reference to
Exhibit (d)(1) of Post-Effective Amendment No. 75 to the
Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC via EDGAR Accession No.
0000935069-08-000948 on April 21, 2008.
(b) Schedule A as last amended August 27, 2008 to the Advisory
Agreement dated January 18, 2008 between the Registrant and PADCO
Advisors, Inc. is incorporated herein by reference to Exhibit
(d)(2) of Post-Effective Amendment No. 82 to the Registrant's
Registration Statement on Form N-1A (File No. 033-59692), as
filed with the SEC on December 17, 2008.
(7) Distribution Agreement dated January 18, 2008 between the Registrant
and Rydex Distributors, Inc. is incorporated herein by reference to
Exhibit (e)(1) of Post-Effective Amendment No. 75 to the Registrant's
Registration Statement on Form N-1A (File No. 033-59692), as filed with
the SEC via EDGAR Accession No. 0000935069-08-000948 on April 21, 2008.
(8) Not applicable.
(9) (a) Custody Agreement dated November 30, 1993 between the Registrant
and Star Bank, N.A. (now, U.S. Bank, N.A.) is incorporated herein
by reference to Exhibit 8 of Post-Effective Amendment No. 27 to
the Registrant's Registration Statement on Form N-1A(File No.
033-59692), as filed with the SEC on October 30, 1996.
(b) Amendment dated April 24, 2008 between the Registrant and U.S.
Bank, N.A. (formerly, Star Bank, N.A.) to the Custody Agreement
dated November 30, 1993 between the Registrant and Star Bank,
N.A. (now, U.S. Bank, N.A.) is incorporated herein by reference
to Exhibit (g)(2) of Post-Effective Amendment No. 76 to the
Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC via EDGAR Accession No.
0000935069-08-001345 on May 30, 2008.
(c) Amended and Restated Foreign Custody Manager Agreement dated
April 24, 2008 between the Registrant and U.S. Bank, N.A.
(formerly, Star Bank, N.A.) is incorporated herein by reference
to Exhibit (g)(3) of Post-Effective Amendment No. 76 to the
Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC via EDGAR Accession No.
0000935069-08-001345 on May 30, 2008.
(10) (a) Amendment dated August 27, 2008 to the Amended and Restated Rule
18f-3 Plan dated August 30, 2004 is incorporated herein by
reference to Exhibit (n)(2) of Post-Effective Amendment No. 82 to
the Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC on December 17, 2008.
(11) Opinion and Consent of Counsel -- Filed herewith.
(12) Form of Opinion and Consent of Counsel Supporting Tax Matters and
Consequences -- definitive to be filed by subsequent post-effective
amendment.
(13) (a) Amended and Restated Service Agreement dated November 15, 2004
between the Registrant and Rydex Fund Services, Inc. is
incorporated herein by reference to Exhibit (h)(1) of
Post-Effective Amendment No. 57 to the Registrant's Registration
Statement on Form N-1A (File No. 033-59692), as filed with the
SEC via EDGAR Accession No. 0000935069-05-001236 on May 24, 2005.
2
(b) Amendment dated August 27, 2008 to the Amended and Restated
Service Agreement dated November 15, 2004 between the Registrant
and Rydex Fund Services, Inc. is incorporated herein by reference
to Exhibit (h)(2) of Post-Effective Amendment No. 82 to the
Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC on December 17, 2008.
(c) Accounting Services Agreement dated September 25, 1996 between
the Registrant and Rydex Fund Services, Inc. is incorporated
herein by reference to Exhibit (9)(d) of Post-Effective Amendment
No. 27 to the Registrant's Registration Statement on Form N-1A
(File No. 033-59692), as filed with the SEC on October 30, 1996.
(d) Amendment dated August 27, 2008 to the Accounting Services
Agreement dated September 25, 1996 between the Registrant and
Rydex Fund Services, Inc. is incorporated herein by reference
to Exhibit (h)(4) of Post-Effective Amendment No. 82 to the
Registrant's Registration Statement on Form N-1A (File No.
033-59692), as filed with the SEC on December 17, 2008.
(14) Consents of independent registered public accounting firm -- Filed
herewith.
(15) Not applicable.
(16) Powers of attorney -- Filed herewith.
(17) Not applicable.
Item 17. Undertakings
-------- ------------
1. The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act (17
CFR 230.145(c)), the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
2. The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
3. The undersigned registrant undertakes to file a post-effective amendment
to this registration statement upon the closing of the Reorganization
described in this registration statement that contains an opinion of
counsel supporting the tax matters discussed in this registration
statement.
3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form N-14 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Rockville, State of Maryland on the 27th day of March, 2009.
RYDEX SERIES FUNDS
By: /s/ Carl G. Verboncoeur
---------------------------------
Carl G. Verboncoeur
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the 27th Day of March, 2009.
SIGNATURES
/s/ Carl G. Verboncoeur
--------------------------------------------
Carl G. Verboncoeur, President and Chief Corey A. Colehour*, Member of the Board of Trustees
Executive Officer
/s/ Michael P. Byrum
-----------------------------------------------------
J.Kenneth Dalton*, Member of the Board of Michael P. Byrum, Member of the Board of Trustees
Trustees
John O. Demaret*, Member of the Board of Werner E. Keller*, Member of the Board of Trustees
Trustees
Patrick T. McCarville*, Member of the Thomas F. Lydon*, Member of the Board of Trustees
Board of Trustees
/s/ Nick Bonos
-----------------------------------------------------
Roger Somers*, Member of the Board of Nick Bonos, Vice President and Treasurer
Trustees
*By: /s/Nick Bonos
-------------
Nick Bonos
Attorney-in-Fact**
** Attorney-in-Fact pursuant to powers of attorney for Werner E. Keller,
Thomas F. Lydon, Corey A. Colehour, J. Kenneth Dalton, John O. Demaret,
Patrick T. McCarville, and Roger Somers - Filed herewith.
EXHIBIT INDEX
(11) Opinion and Consent of Counsel
(12) Form of Tax Opinion
(14) Consents of Independent Registered Public Accounting Firm
(16) Powers of Attorney