Code of Ethics 2005.doc Procedure Number: IC02.2.2
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CODE OF ETHICS
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PROCEDURE CREATION DATE: Adopted December 11, 1998
Effective January 1, 1999
PROCEDURE REVIEWED AS OF: September 2004
PROCEDURE REVISED AS OF: February 11, 2002
January 30, 2003
August 25, 2003
February 1, 2005
REGULATORY RULE: Rule 17j-1 of the Investment
Company Act of 1940 and Rule
204A-1 under the Investment
Advisers Act of 1940
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BUSINESS UNIT: Compliance Department
RESPONSIBILITY: Compliance Administrator
MANAGER RESPONSIBLE: Compliance Manager
COVERED ENTITIES:
This Combined Code of Ethics adopted under Rule 17j-1 under the Investment
Company Act of 1940 (the "1940 Act") and Rule 204A-1 under the Investment
Advisers Act of 1940 (the "Advisers Act") covers the following companies:
o RYDEX DYNAMIC FUNDS
o RYDEX SERIES FUNDS
o RYDEX VARIABLE TRUST
o RYDEX ETF TRUST
o PADCO ADVISORS, INC.
o PADCO ADVISORS II, INC.
o RYDEX FUND SERVICES, INC.
o RYDEX DISTRIBUTORS, INC.
PROCEDURE:
Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, and Rydex
ETF Trust (each a "Trust" and jointly the "Trusts"), and PADCO Advisors, Inc.,
PADCO Advisors II, Inc., Rydex Fund Services, Inc. and Rydex Distributors, Inc.
(each a "Company, jointly the "Companies," and together with the Trusts,
"Rydex") are confident that their officers, trustees, directors and employees
act with integrity and good faith. Rydex recognizes, however, that personal
interests may conflict with a Trust's or Company's interests where trustees,
directors, officers or employees:
o Know about present or future portfolio transactions or
o Have the power to influence portfolio transactions; and
o Engage in personal transactions in securities.
In an effort to prevent these conflicts from arising and in accordance with
Rule 17j-1(b)(1) under the 1940 Act and Rule 204A-1 under the Advisers Act,
Rydex has adopted this Code of Ethics and all amendments thereto (together, the
"Code") to prohibit transactions that create, may create, or appear to create
conflicts of interest, and to establish reporting requirements and enforcement
procedures. Each trustee, director, officer and employee of the Companies should
carefully read and review this Code.
1. ABOUT RYDEX
Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, and Rydex
ETF Trust are separately registered open-end management investment companies.
Each Trust may consist of multiple investment portfolios (the "Rydex Funds").
The Rydex Funds may be grouped primarily into three broad categories: (1)
Benchmark Funds (one of which is exchange-traded), (2) Sector Funds, and (3)
Strategic Funds. In addition, there is a Money Market Fund.
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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PADCO Advisors, Inc. and PADCO Advisors II, Inc. (the "Advisors") are each
investment advisers. PADCO Advisors, Inc. is the investment adviser for Rydex
Dynamic Funds and Rydex Series Funds and PADCO Advisors II, Inc. is the
investment adviser for Rydex Variable Trust and Rydex ETF Trust.
Rydex Distributors, Inc. serves as the distributor to the Rydex Funds.
Rydex Financial Services, Inc. provides general administrative services and
serves as the transfer agent to the Rydex Dynamic Funds, Rydex Series Funds and
Rydex Variable Trust.
2. ABOUT THIS CODE OF ETHICS
2.1. TRANSACTION-RELATED AND REPORTING PROVISIONS
This Code sets forth specific prohibitions relating to SECURITIES
transactions and also sets out certain reporting requirements. They cover the
persons identified below:
o All Company officers and directors;
o Employees who have access to nonpublic information regarding
the portfolio holdings of any reportable fund, E.G. portfolio
management and fund accounting personnel, are involved in
making securities recommendations to clients, or have access
to such recommendations that are nonpublic;
o All Trustees of the Trusts, both INTERESTED and INDEPENDENT;
and
o Natural persons in a CONTROL relationship with a Company who
obtain information concerning recommendations made to a Fund
about the PURCHASE OR SALE of a SECURITY AND ARE NOT
SPECIFICALLY COVERED BY ANY OTHER SECTION OF THE CODE.
For the prohibitions and reporting requirements that apply to you, please
refer to Parts A-D, as indicated below. (Definitions of UNDERLINED terms are
included in Appendix A.)
o Independent Trustees of the Trusts Part A
o Interested Trustees of the Trusts Part B
o ACCESS PERSONS Part C
o Natural CONTROL Persons Part D
2.2. OTHER PROVISIONS
The remainder of this Code sets forth general principles, required course
of conduct, reporting obligations, the Companies' review, enforcement and
recordkeeping responsibilities and miscellaneous information.
3. STATEMENT OF GENERAL PRINCIPLES
In recognition of the trust and confidence placed in Rydex by shareholders
of the Trusts, and because Rydex believes that their operations should benefit
shareholders, Rydex has adopted the following universally applicable principles.
1. Shareholders' interests are paramount. You must place
shareholder interests before your own.
2. You must accomplish all personal SECURITIES transactions in a
manner that avoids even the appearance of a conflict of your
personal interests with those of a Trust and its shareholders.
3. You must avoid actions or activities that allow (or appear to
allow) you or your family to profit or benefit from your
position with a Company, or that bring into question your
independence or judgment.
4. You must comply with all applicable federal securities laws,
including the prohibitions against the misuse of material
nonpublic information, in conducting yourself and the
operations of the Companies.
4. REQUIRED COURSES OF CONDUCT
4.1. PROHIBITION AGAINST FRAUD, DECEIT AND MANIPULATION
You cannot, in connection with the PURCHASE OR SALE, directly or
indirectly, of a SECURITY HELD OR TO BE ACQUIRED by any Fund:
a. employ any device, scheme or artifice to defraud the Fund;
b. make to the Fund any untrue statement of a material fact or
omit to state to the Fund a material fact necessary in order
to make the statements made, in light of the circumstances
under which they are made, not misleading;
c. engage in any act, practice or course of business which would
operate as a fraud or deceit upon the Fund; or
d. engage in any manipulative practice with respect to the Fund.
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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Two of the most common risks associated with personal SECURITIES
transactions are front-running and trading opposite a fund. For example,
front-running would include the purchase of a SECURITY any time within seven
days ahead of when a fund purchases the same SECURITY or the sale of a SECURITY
any time within seven days ahead of when a fund sells the same SECURITY. An
example of trading opposite a fund would include the sale of a SECURITY any time
within seven days after a fund purchases the same SECURITY or the purchase of a
security any time within seven days after a fund sells the same SECURITY.
4.2. LIMITS ON ACCEPTING OR RECEIVING GIFTS
Access Persons cannot accept or receive any gift of more than DE MINIMIS
value from any person or entity that does business with or on behalf of a
Company. THIS PROVISION DOES NOT INCLUDE:
o occasional meals, tickets to a sporting event or the theater,
or normal business entertainment; and
o any payment or reimbursement for professional training or
educational meetings.
5. CONFIDENTIALITY
All personal SECURITIES transactions reports and any other information
filed with Rydex under this Code will be treated as confidential, provided that
such reports and related information may be produced to the Securities and
Exchange Commission (the "SEC") and other regulatory agencies.
6. INTERPRETATION OF PROVISIONS
The Board of Trustees of the Trusts may from time to time adopt such
interpretations of this Code as it deems appropriate.
7. ACKNOWLEDGMENT OF RECEIPT AND ANNUAL CERTIFICATION
Each interested Trustee, director, officer, employee and affiliated agent
of Rydex will receive a copy of the Code and any subsequent amendments to the
Code, and each such person must acknowledge receipt of the Code in writing. In
addition, each such person is required to certify annually that he/she (i) has
read and understands the Code, (ii) is aware that he/she is subject to the
provisions of this Code, (iii) has complied with the Code at all times during
the previous calendar year, and (iv) has, during the previous calendar year,
reported all holdings and transactions that he/she is required to report
pursuant to the Code. The acknowledgement of receipt and certification may be
made electronically via the rydex.starcompliance.com website.
EXCEPTION HANDLING:
The COMPLIANCE OFFICER, in his or her discretion, may exempt any person
from any specific provision of the Code, if the Compliance Officer determines
that (a) the services of the person are valuable to Rydex; (b) the failure to
grant this exemption will result in an undue burden on the person or prevent the
person from being able to render services to Rydex; and (c) granting the
exemption does not detrimentally affect the shareholders of the Rydex Funds. The
Compliance Officer will prepare a report documenting the nature of any exemption
granted, the persons involved and the reasons for granting such exemption.
Any person granted an exemption with respect to a particular transaction
must furnish the Compliance Officer with a written report concerning that
transaction within three (3) days of the transaction.
REPORTING REQUIREMENTS:
1. INDIVIDUAL REPORTING OBLIGATIONS
See Parts A, B, C or D as appropriate, for your specific reporting
obligations.
1.1. OBLIGATION TO REPORT VIOLATIONS OF THE CODE
In addition to the individual reporting requirements referenced above, any
violation of the Code must be promptly reported to the Compliance Officer.
2. ANNUAL WRITTEN REPORT TO THE BOARD
At least once a year, the Compliance Officer, on behalf of Rydex, will
provide the Board of Trustees of each Trust a WRITTEN report that includes:
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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2.1. ISSUES ARISING UNDER THE CODE
The Report will describe any issue(s) that arose during the previous year
under the Code, including any material Code violations, and any resulting
sanctions.
2.2. CERTIFICATION
The Report will certify to the Board of Trustees that each Company has
adopted measures reasonably necessary to prevent its personnel from violating
the Code currently and in the future.
3. PERIODIC REVIEW AND REPORTING
The Compliance Officer (or his or her designee) will report to the Board of
Trustees of the Trusts at least annually as to the operation of this Code and
will address in any such report the need (if any) for further changes or
modifications to this Code.
TESTING AND REVIEW:
Each Trust and Company shall appoint the Compliance Officer.
1. THE COMPLIANCE OFFICER WILL PERFORM THE FOLLOWING DUTIES:
a. The Compliance Officer will, on a quarterly basis, compare all
reported personal SECURITIES transactions with the Trusts'
completed portfolio transactions and a list of securities
being considered for purchase or sale by the Advisors to
determine whether a Code violation may have occurred. The
Compliance Officer may request additional information or take
any other appropriate measure that the Compliance Officer
decides is necessary to aid in this determination. Before
determining that a person has violated the Code, the
Compliance Officer must give the person an opportunity to
supply explanatory material.
b. If the Compliance Officer determines that a Code violation may
have occurred, the Compliance Officer must submit the
determination, together with the confidential quarterly report
and any explanatory material provided by the person, to the
President of the Trust or Company and legal counsel
("Counsel"). The President of the Trust or Company and Counsel
will independently determine whether the person violated the
Code.
c. No person is required to participate in a determination of
whether he or she has committed a Code violation or of the
imposition of any sanction against himself or herself. If a
securities transaction of the President is under
consideration, a Vice President will act for the President for
purposes of this Section.
2. SANCTIONS
If the President and Fund Counsel find that the person violated the Code,
the President will impose upon the person sanctions that the President deems
appropriate and will report the violation and the sanction imposed to the Board
of Trustees of the Rydex Funds at the next regularly scheduled board meeting
unless, in the sole discretion of the Trusts' President, circumstances warrant
an earlier report.
RECORDKEEPING:
The Companies will maintain records as set forth below. These records will
be maintained in accordance with Rule 31a-2 under the 1940 Act and Rule
204-2(a)(12) under the Advisers Act and will be available for examination by
representatives of the SEC.
1. A copy of this Code and any other code which is, or at any
time within the past five years has been, in effect will be
preserved in an easily accessible place;
2. A list of all persons who are, or within the past five years
have been, required to submit reports under this Code will be
maintained in an easily accessible place;
3. A copy of each report made by a person under this Code will be
preserved for a period of not less than five years from the
end of the fiscal year in which it is made, the first two
years in an easily accessible place;
4. A record of any Code violation and of any sanctions taken will
be preserved in an easily accessible place for a period of not
less than five years following the end of the fiscal year in
which the violation occurred;
5. A copy of each annual report to the Board of Trustees will be
maintained for at least five years from the end of the fiscal
year in which it is made, the first two years in an easily
accessible place;
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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6. A copy of all Acknowledgements of Receipt and Annual
Certifications as required by this Code for each person who is
currently, or within the past five years was required to
provide such Acknowledgement of Receipt or Annual
Certification; and
7. The Companies will maintain a record of any decision, and the
reasons supporting the decision, to approve the acquisition of
SECURITIES in an INITIAL PUBLIC OFFERING ("IPO") or a PRIVATE
PLACEMENT, for at least five years after the end of the fiscal
year in which the approval is granted.
DISCLOSURE:
The Code of Ethics will be disclosed in accordance with the requirements of
Form ADV and N1-A.
REVISIONS:
These procedures shall remain in effect until amended, modified or
terminated. The Board must approve any material amendments to the Code within
six months of the amendment.
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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PART A PROCEDURES FOR INDEPENDENT TRUSTEES
GENERAL OBLIGATIONS.
1. REQUIRED TRANSACTION REPORTS
1.1. On a quarterly basis you must report any SECURITIES transactions, as well
as any SECURITIES accounts established. You must submit your report to the
Compliance Officer no later than 10 calendar days after the end of the calendar
quarter in which the transaction to which the report relates was effected.
Quarterly Personal Securities Transactions Reports will be made electronically,
via the rydex.starcompliance.com website. You will receive notification via
email when the Quarterly Transaction Report is due, including instructions on
how to access the information and complete the report.
1.2. If you had no reportable transactions or did not open any SECURITIES
accounts during the quarter, you are not required to submit a report.
1.3. Reports of individual SECURITIES transactions are required only if you KNEW
at the time of the transaction or, in the ordinary course of fulfilling your
official duties as a Trustee, SHOULD HAVE KNOWN, that during the 15-calendar day
period immediately preceding or following the date of your transaction, the same
SECURITY was PURCHASED OR SOLD, or was BEING CONSIDERED FOR PURCHASE OR SALE, by
a Fund.
NOTE: The "SHOULD HAVE KNOWN" standard does not:
----
o imply a duty of inquiry;
o presume you should have deduced or extrapolated from
discussions or memoranda dealing with the Fund's investment
strategies; or
o impute knowledge from your prior knowledge of the Fund's
portfolio holdings, market considerations, or investment
policies, objectives and restrictions.
2. WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING OBLIGATION?
If the transaction is reportable because it came within paragraph (1),
above, you must report all transactions in SECURITIES that: (i) you directly or
indirectly BENEFICIALLY OWN or (ii) because of the transaction, you acquire
direct or indirect BENEFICIAL OWNERSHIP. The report must also contain any
account you established in which any SECURITIES were held during the quarter.
3. WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR REPORT?
You are not required to detail or list the following SECURITIES or
transactions on your quarterly report:
a. PURCHASES OR SALES effected for any account over which you
have no direct or indirect influence or CONTROL.
b. Purchases you made solely with the dividend proceeds received
in a dividend reinvestment plan or that are part of an
automatic payroll deduction plan or other similar type of
plan, where you purchase SECURITIES issued by your employer.
c. Purchases arising from the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its SECURITIES,
as long as you acquired these rights from the issuer, and
sales of such rights so acquired.
d. Purchases of SECURITIES issued by the U.S. Government or its
agencies, bankers' acceptances, bank certificates of deposit,
commercial paper, high quality short-term debt instruments,
including repurchase agreements, and registered open-end
mutual funds, other than REPORTABLE FUNDS.
e. PURCHASES OR SALES which are non-volitional on your part,
including PURCHASES OR SALES upon exercise of puts or calls
written by you and sales from a margin account to a BONA FIDE
margin call.
You may include a statement in your report that the report shall not be
construed as your admission that you have any direct or indirect BENEFICIAL
OWNERSHIP in the SECURITY included in the report.
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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PART B INTERESTED TRUSTEES
GENERAL OBLIGATIONS.
1. PROVIDING A LIST OF SECURITIES
You must provide the Compliance Officer with a complete listing of all
securities you BENEFICIALLY OWN as of December 31 of the previous year. Each
following year, you must submit a revised list to the Compliance Officer showing
the SECURITIES you BENEFICIALLY OWN as of December 31. You must submit the
initial listing within 10 calendar days of the date you first become a Trustee,
and each update no later than 30 calendar days after the start of the year. The
Initial Holdings Report and Annual Holdings Report, as applicable, will be
delivered electronically, via the rydex.starcompliance.com website. You will
receive notification via email when the applicable report is due, including
instructions on how to access the information and complete the report.
You are NOT required to provide this list of securities if you are not
currently affiliated with or employed by a Trust's investment adviser(s) or
distributor.
2. REQUIRED TRANSACTION REPORTS
On a quarterly basis you must report any SECURITIES transactions, as well
as any SECURITIES accounts established. You must submit your report to the
Compliance Officer no later than 10 calendar days after the end of the calendar
quarter in which the transaction to which the report relates was effected.
Quarterly Personal Securities Transactions Reports will be made electronically,
via the rydex.starcompliance.com website. You will receive notification via
email when the Quarterly Transaction Report is due, including instructions on
how to access the information and complete the report.
If you had no reportable transactions or did not open any SECURITIES
accounts during the quarter, you are still required to submit a report. Please
sign in the space provided and submit the report with no transactions listed.
3. WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING OBLIGATION?
You must report all transactions in SECURITIES that: (i) you directly or
indirectly BENEFICIALLY OWN or (ii) because of the transaction, you acquire
direct or indirect BENEFICIAL OWNERSHIP. The report must also contain any
account you established in which any SECURITIES were held during the quarter.
4. PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS
You must obtain approval from the Compliance Officer before acquiring
BENEFICIAL OWNERSHIP of any SECURITIES offered in connection with an IPO or a
PRIVATE PLACEMENT.
5. WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR REPORT?
You are not required to detail or list the following SECURITIES or
transactions on your report:
a. PURCHASES OR SALES effected for any account over which you
have no direct or indirect influence or CONTROL.
b. Purchases you made solely with the dividend proceeds received
in a dividend reinvestment plan or that are part of an
automatic payroll deduction plan or other similar type of
plan, where you purchase SECURITIES issued by your employer.
c. Purchases arising from the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its SECURITIES,
as long as you acquired these rights from the issuer, and
sales of such rights so acquired.
d. Purchases of SECURITIES issued by the U.S. Government or its
agencies, bankers' acceptances, bank certificates of deposit,
commercial paper, high quality short-term debt instruments,
including repurchase agreements, and registered open-end
mutual funds, other than REPORTABLE FUNDS.
e. PURCHASES OR SALES which are non-volitional on your part,
including PURCHASES OR SALES upon exercise of puts or calls
written by you and sales from a margin account to a BONA FIDE
margin call.
You may include a statement in your report that the report shall not be
construed as your admission that you have any direct or indirect BENEFICIAL
OWNERSHIP in the SECURITY included in the report.
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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PART C ACCESS PERSONS
GENERAL OBLIGATIONS
1. THIRTY-DAY PROHIBITION ON SELLING SECURITIES
You cannot sell a SECURITY within 30 calendar days of acquiring that
SECURITY.
2. PROVIDING A LIST OF SECURITIES
You must provide the Compliance Officer with a complete listing of all
securities you BENEFICIALLY OWN as of December 31 of the previous year. Each
following year, you must submit a revised list to the Compliance Officer showing
the SECURITIES you BENEFICIALLY OWN as of December 31. You must submit the
initial listing within 10 calendar days of the date you first become an ACCESS
PERSON, and each update no later than 30 calendar days after the start of the
year. The Initial Holdings Report and Annual Holdings Report, as applicable,
will be delivered electronically, via the rydex.starcompliance.com website. You
will receive notification via email when the applicable report is due, including
instructions on how to access the information and complete the report.
You are NOT required to provide this list of securities if you are not
currently affiliated with or employed by a Trust's investment adviser(s) or
distributor.
3. REQUIRED TRANSACTION REPORTS
On a quarterly basis you must report transactions in SECURITIES, as well as
any SECURITIES accounts established. You must submit your report to the
Compliance Officer no later than 10 calendar days after the end of the calendar
quarter in which the transaction to which the report relates was effected.
Quarterly Personal Securities Transactions Reports will be made electronically,
via the rydex.starcompliance.com website. You will receive notification via
email when the Quarterly Transaction Report is due, including instructions on
how to access the information and complete the report.
If you had no reportable transactions or did not open any SECURITIES
accounts during the quarter, you are still required to submit a report. Please
sign in the space provided and submit the report with no transactions listed.
4. WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING OBLIGATION?
You must report all transactions in SECURITIES that: (i) you directly or
indirectly BENEFICIALLY OWN or (ii) because of the transaction, you acquire
direct or indirect BENEFICIAL OWNERSHIP. The report must contain any account you
established in which any SECURITIES were held during the quarter.
5. PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS
You must obtain approval from the Compliance Officer before acquiring
BENEFICIAL OWNERSHIP of any SECURITIES offered in connection with an IPO or a
PRIVATE PLACEMENT.
6. WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR REPORT?
You are not required to detail or list the following SECURITIES or
transactions on your report.
a. PURCHASES OR SALES effected for any account over which you
have no direct or indirect influence or CONTROL.
b. Purchases you made solely with the dividend proceeds received
in a dividend reinvestment plan or that are part of an
automatic payroll deduction plan or other similar type of
plan, where you purchase SECURITIES issued by your employer.
c. Purchases arising from the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its SECURITIES,
as long as you acquired these rights from the issuer, and
sales of such rights so acquired.
d. Purchases of SECURITIES issued by the U.S. Government or its
agencies, bankers' acceptances, bank certificates of deposit,
commercial paper, high quality short-term debt instruments,
including repurchase agreements, and registered open-end
mutual funds, other than REPORTABLE FUNDS.
e. PURCHASES OR SALES which are non-volitional on your part,
including PURCHASES OR SALES upon exercise of puts or calls
written by you and sales from a margin account to a BONA FIDE
margin call.
You may include a statement in your report that the report shall not be
construed as your admission that you have any direct or indirect BENEFICIAL
OWNERSHIP in the SECURITY included in the report.
7. SEVEN-DAY BLACKOUT PERIOD ON PERSONAL SECURITIES TRANSACTIONS
You cannot PURCHASE OR SELL, directly or indirectly, any SECURITY in which
you had (or by reason of such transaction acquire) any BENEFICIAL OWNERSHIP at
any time within seven calendar days before or after the time that the same (or a
related) SECURITY IS BEING PURCHASED OR SOLD by any Rydex Fund. This provision
will only apply if you obtain specific information regarding the PURCHASE OR
SALE of a SECURITY by a Rydex Fund.
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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7.1. EXCEPTION TO BLACKOUT PERIOD
The seven-day blackout period does not apply to the PURCHASE OR SALE of any
SECURITY (i) of a company with a market capitalization in excess of $500
million, (ii) included in either the S&P 500 Composite Index or the NASDAQ 100
Index, and (iii) made in dollar amounts less than $25,000.
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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PART D NATURAL CONTROL PERSONS
GENERAL OBLIGATIONS.
1. PROVIDING A LIST OF SECURITIES
You must provide the Compliance Officer with a complete listing of all
SECURITIES you BENEFICIALLY OWN as of December 31 of the previous year. Each
following year, you must submit a revised list to the Compliance Officer showing
the SECURITIES you BENEFICIALLY OWN as of December 31. You must submit the
initial listing within 10 calendar days of the date you first become a natural
CONTROL person, and each update no later than 30 calendar days after the start
of the year. The Initial Holdings Report and Annual Holdings Report, as
applicable, will be delivered electronically, via the rydex.starcompliance.com
website. You will receive notification via email when the applicable report is
due, including instructions on how to access the information and complete the
report.
You are NOT required to provide this list of securities if you are not
currently affiliated with or employed by the Trusts' investment adviser(s) or
distributor.
2. REQUIRED TRANSACTION REPORTS
On a quarterly basis you must report any SECURITIES transactions, as well
as any SECURITIES accounts established. You must submit your report to the
Compliance Officer no later than 10 calendar days after the end of the calendar
quarter in which the transaction to which the report relates was effected.
Quarterly Personal Securities Transactions Reports will be made electronically,
via the rydex.starcompliance.com website. You will receive notification via
email when the Quarterly Transaction Report is due, including instructions on
how to access the information and complete the report.
If you had no reportable transactions or did not open any SECURITIES
accounts during the quarter, you are still required to submit a report. Please
sign in the space provided and submit the report with no transactions listed.
3. WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY OBLIGATION?
You must report all transactions in SECURITIES that: (i) you directly or
indirectly BENEFICIALLY OWN or (ii) because of the transaction, you acquire
direct or indirect BENEFICIAL OWNERSHIP. The report must also include any
account you established in which SECURITIES were held during the quarter.
4. PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS
You must obtain approval from the Compliance Officer before acquiring
BENEFICIAL OWNERSHIP of any SECURITIES offered in connection with an IPO or a
PRIVATE PLACEMENT.
5. WHAT SECURITIES AND TRANSACTIONS ARE EXCLUDED FROM YOUR REPORTING
OBLIGATION?
You are not required to detail or list the following SECURITIES or
transactions on your report:
o PURCHASES OR SALES effected for any account over which you
have no direct or indirect influence or CONTROL.
o Purchases you made solely with the dividend proceeds received
in a dividend reinvestment plan or that are part of an
automatic payroll deduction plan, where you purchase
SECURITIES issued by your employer.
o Purchases arising from the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its SECURITIES,
as long as you acquired these rights from the issuer, and
sales of such rights so acquired.
o Purchases of SECURITIES issued by the U.S. Government or its
agencies, bankers' acceptances, bank certificates of deposit,
commercial paper, high quality short-term debt instruments,
including repurchase agreements, and registered open-end
mutual funds, other than REPORTABLE FUNDS.
o PURCHASES OR SALES which are non-volitional on your part,
including PURCHASES OR SALES upon exercise of puts or calls
written by you and sales from a margin account to a BONA FIDE
margin call.
You may include a statement in your report that the report shall not be
construed as your admission that you have any direct or indirect BENEFICIAL
OWNERSHIP in the SECURITY included in the report.
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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APPENDIX A DEFINITIONS
ACCESS PERSON includes: (a) any trustee, director or officer and (b) any
supervised person who has access to nonpublic information regarding any clients'
purchase or sale of securities or the portfolio holdings of any reportable fund,
E.G. portfolio management and fund accounting personnel, is involved in making
securities recommendations to clients, or has access to such recommendations
that are nonpublic.
BENEFICIAL OWNERSHIP means the same as under Section 16 of the Securities
Exchange Act of 1934 and Rule 16a-1(a)(2) thereunder. You should generally
consider yourself the beneficial owner of any SECURITIES in which you have a
direct or indirect pecuniary interest. In addition, you should consider yourself
the beneficial owner of SECURITIES held by your spouse, your minor children, a
relative who shares your home, or other persons by reason of any contract,
arrangement, understanding or relationship that provides you with sole or shared
voting or investment power.
CONTROL means the same as that under Section 2(a)(9) of the 1940 Act. Section
2(a)(9) provides that "control" means the power to exercise a controlling
influence over the management or policies of a company, unless such power is
solely the result of an official position with such company. Ownership of 25% or
more of a company's outstanding voting SECURITIES is presumed to give the holder
of such SECURITIES control over the company. This presumption may be countered
by the facts and circumstances of a given situation.
INDEPENDENT TRUSTEE means a trustee of a Trust who is not an "interested person"
of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. As of
February 1, 2005, the Trusts' INDEPENDENT TRUSTEES are:
Corey A. Colehour
J. Kenneth Dalton
Roger Somers
John O. Demaret
Patrick T. McCarville
INITIAL PUBLIC OFFERING ("IPO") means an offering of SECURITIES registered under
the Securities Act of 1933, the issuer of which, immediately before
registration, was not subject to the reporting requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934.
INTERESTED TRUSTEE means a trustee of a Trust who is an "interested person" of
the Trust within the meaning of Section 2(a)(19) of the 1940 Act. As of February
1, 2005, the Trusts' only INTERESTED trustee is:
Carl Verboncoeur
PRIVATE PLACEMENT means an offering that is exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) in the
Securities Act of 1933.
PURCHASE OR SALE OF A SECURITY includes, among other things, the writing of an
option to purchase or sell a SECURITY.
REPORTABLE FUND means any fund for which you serve as investment adviser or any
fund whose investment adviser or principal underwriter controls you, is
controlled by you, or is under common control with you. For purposes of this
Code definition, control has the same meaning as it does above.
SECURITY means the same as that set forth in Section 2(a)(36) of the 1940 Act,
except that it does not include securities issued by the U.S. Government or its
agencies, bankers' acceptances, bank certificates of deposit, commercial paper,
shares of registered open-end mutual funds other than Rydex Funds or
exchange-traded funds and high quality short-term debt instruments, including
repurchase agreements. A SECURITY does not include index futures or other
commodities.
A SECURITY HELD OR TO BE ACQUIRED by the Trust (or any Fund) means any SECURITY
which, within the most recent 15 days, (i) is or has been held by the Trust (or
any Fund) or (ii) is being or has been considered by the Trust's adviser or
sub-adviser for purchase by the Trust (or any Fund), and any option to purchase
or sell, and any SECURITY convertible into or exchangeable for any SECURITY.
A SECURITY is BEING PURCHASED OR SOLD by the Trust from the time a PURCHASE OR
SALE program has been communicated to the person who places buy and sell orders
for the Trust until the program has been fully completed or terminated.
COMPLIANCE OFFICER means the chief compliance officer of Rydex Dynamic Funds,
Rydex Series Funds, Rydex Variable Trust, and Rydex ETF Trust pursuant to Rule
38a-1 under the 1940 Act and the chief compliance officer of PADCO Advisors,
Inc. and PADCO Advisors II, Inc. pursuant to Rule 206(4)-7 under the Advisers
Act, or any person designated
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Code of Ethics 2005.doc Procedure Number: IC02.2.2
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by such chief compliance officer to act in the chief compliance officer's
absence. As of February 1, 2005, the Compliance Officer is:
Joanna M. Haigney
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