Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004
Tel: 202.739.3000
Fax: 202.739.3001
www.morganlewis.com
LAURA E. FLORES
202.739.5684
lflores@morganlewis.com
March 18, 2010
VIA EDGAR CORRESPONDENCE
Ms. Kimberly Browning
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: RYDEX SERIES FUNDS (THE "TRUST") - POST EFFECTIVE AMENDMENT NO. 94
------------------------------------------------------------------
(FILE NOS. 033-59692 AND 811-07584)
-----------------------------------
Dear Ms. Browning:
This letter responds to your comments conveyed to us during a telephone
conference on March 11, 2010 relating to the Trust's Post-Effective Amendment
No. 94 ("PEA No. 94"), filed on January 28, 2010 for the purpose of registering
a new share class, Y-Class Shares, of the Managed Futures Strategy Fund and the
Long/Short Commodities Strategy Fund. This letter also incorporates the
comments, to the extent they are applicable, conveyed to us during a telephone
conference on February 23, 2010 regarding Rydex ETF Trust Post-Effective
Amendment No. 12 filed on December 18, 2009. The following summarizes your
comments, and our responses to those comments. Unless otherwise noted,
capitalized terms have the same meaning as contained in the Fund's Prospectus
and/or Statement of Additional Information ("SAI").
PROSPECTUS COMMENTS:
--------------------
1. COMMENT. Unless permitted by Form N-1A, please remove all
cross-references in Items 1 through 6.
RESPONSE. We have revised Items 1 through 6 accordingly.
2. COMMENT. Please delete the excess language from the Redemption Fee line
item in each Fund's fees and expenses table consistent with Item 3 of
Form N-1A.
RESPONSE. We have revised each Fund's fees and expenses table
accordingly.
3. COMMENT. Please clarify in each Fund's "Principal Investment Strategy"
disclosure the types of equity securities the Fund invests in.
RESPONSE. We have revised each Fund's "Principal Investment Strategy"
disclosure accordingly.
3. COMMENT. Please revise each Fund's fees and expenses table to delete
the "Total Other Expenses" line item and instead disclose the total
amount of Other Expenses opposite the "Other Expenses" line item. In
addition, please conform the "Net Total Annual Operating Expenses" line
item description with Instruction 3(e) of Item 3.
RESPONSE. We have revised each Fund's fees and expenses table
accordingly.
4. COMMENT. Please revise the last sentence of the "Example" narrative to
replace "you" with "your."
RESPONSE. We have revised each Fund's "Example" narrative accordingly.
5. COMMENT. Please delete the last two sentences under the heading
"Portfolio Turnover."
RESPONSE. We respectfully decline to make the suggested revision
because our client believes that the disclosure in the last two
sentences is necessary to ensure that shareholders fully understand the
effect of each Fund's investments in cash instruments and derivatives
on the portfolio turnover experienced by each Fund.
6. COMMENT. In each Fund's "Principal Investment Strategy" section, please
refrain from using equivocal terms in the descriptions of the types of
financial instruments and securities each Fund may invest in as part of
its principal investment strategy.
RESPONSE. We have revised each Fund's "Principal Investment Strategy"
disclosure accordingly.
7. COMMENT. Please confirm whether each Fund is an index fund. If they are
not, please revise the Funds' fundamental investment policy concerning
industry concentration to clarify that the Funds' industry
concentration cannot float with an index. If the Funds are index funds,
please revise the last sentence of each Fund's "Principal Investment
Strategy" to reflect the substance of the Funds' fundamental policy
concerning issuer and industry concentration.
RESPONSE. We confirm that both Funds are index funds and have revised
the last sentence of each Fund's "Principal Investment Strategy" as
follows (new language is in brackets):
The Fund has adopted a [fundamental] investment policy to not invest
25% or more of the value of its assets in the securities of one or more
issuers conducting their principal business activities in the same
industry[; except that, to the extent the Fund's underlying index is
concentrated in a particular industry, the Fund will necessarily be
concentrated in that industry.]
8. COMMENT. For Item 5 information, please use the prescribed headings set
forth in Item 5.
RESPONSE. We have revised the headings for the Item 5 information
accordingly.
9. COMMENT. Under the heading "More Information About the Trust" and the
sub-heading "Investment Objectives," please confirm whether there is a
policy to provide shareholder notice of a change in a Fund's investment
objective. If so, please disclose such policy.
RESPONSE. Our client's practice, under normal circumstances, is to
provide 60 days' notice prior to any change of a Fund's investment
objective. However, in cases where a Fund is not subject to the
requirements of Rule 35d-1, our client has not adopted a formal policy
to provide such notice and, thus, is unable to disclose such a policy
in the Fund's prospectus.
10. COMMENT. Please confirm that all of the principal risks disclosed in
Item 9 are summarized in Item 4 and vice versa.
RESPONSE. We confirm that all of the principal risks disclosed in Item
9 are summarized in Item 4 and vice versa.
SAI COMMENTS:
-------------
11. COMMENT. Under the heading "Investment Policies, Techniques and Risk
Factors" in the Funds' SAI, please distinguish between principal and
non-principal investment strategies.
RESPONSE. We believe the Funds' current disclosure is consistent with
the requirements of Form N-1A and therefore, have not revised
disclosure. We, however, will consider the staff's suggestion for
future registration statements.
12. COMMENT. Please confirm that each of the principal investments
referenced under "Investment Policies, Techniques and Risk Factors" are
disclosed in the Funds' Prospectus.
RESPONSE. We confirm that each of the principal investments referenced
under "Investment Policies, Techniques and Risk Factors" are disclosed
in the Funds' Prospectus.
GENERAL COMMENT:
----------------
13. COMMENT. With respect to the Funds' fifth non-fundamental investment
policy concerning pledging assets to secure borrowings, please explain
to the staff whether there is a percentage limitation on the amount of
assets that may be pledged to secure borrowings in the absence of
having a segregated account.
RESPONSE. We have confirmed with our client that, as a matter of
practice, it does not pledge securities without posting the requisite
collateral in a segregated account. Therefore, it has not established a
specific percentage limitation that it would pledge without a
segregated account.
14. COMMENT. PEA No. 94 was filed only under the Securities Act of 1933 and
not the Investment Company Act of 1940. Please explain to the staff how
you will correct this filing error.
RESPONSE. PEA No. 94 was inadvertently not filed under the Investment
Company Act of 1940 due to an EDGAR submission error. Our client
intends to file another post-effective amendment pursuant to Rule
485(a) to rectify the submission error and to reflect the substance of
the comments and responses set forth above as applicable.
***
I hereby acknowledge on behalf of Rydex Series Funds (the "Trust") that: (i) the
Trust is responsible for the adequacy and accuracy of the disclosure in its
registration statement; (ii) SEC staff comments or
changes to disclosure in response to staff comments in the registration
statement reviewed by the staff do not foreclose the SEC from taking any action
with respect to the registration statement; and (iii) the Trust may not assert
SEC staff comments as a defense in any proceeding initiated by the SEC or any
person under the federal securities laws of the United States.
If you have any additional questions or comments, please do not hesitate to
contact me at 202.739.5684 or John McGuire at 202.739.5654.
Sincerely,
/s/ Laura E. Flores
-------------------
Laura E. Flores
c: John McGuire, Esq.
Amy Lee, Esq.
Joanna Haigney