UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [SEC]240.14a-12
(Name of Registrant as Specified In Its Charter)
RYDEX SERIES FUNDS
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
RYDEX SERIES FUNDS
RYDEX DYNAMIC FUNDS
Dear Shareholder:
I am writing you on an important matter relating to the Rydex family of
funds (the "Funds"). On February 16, 2010, Security Benefit Mutual Holding
Company ("SBHC"), the parent company of PADCO Advisors, Inc., the Funds'
investment adviser that operates under the name Rydex Investments (the
"Investment Adviser"), and Security Global Investors, LLC, the sub-adviser to
certain Funds ("SGI"), and certain of SBHC's affiliates entered into agreements
with an investor group led by Guggenheim Partners, LLC (the "Purchaser"). Under
the agreements, the Purchaser will acquire control of the Investment Adviser,
SGI and affiliates. Guggenheim Partners, LLC is a global, independent,
privately-held, diversified financial services firm with more than $100 billion
in assets under supervision.
This transaction should not result in material changes to the day-to-day
management and operations of the Funds or any increase in fees. For example, the
portfolio managers of the Funds are expected to remain the same and your daily
experience in dealing with the Funds should remain unchanged. However, for legal
reasons, this transaction will have the effect of terminating the Funds'
investment advisory agreements with the Investment Adviser and the sub-advisory
agreement between the Investment Adviser and SGI.
Accordingly, by this joint proxy statement, we are requesting that you vote
to approve substantially identical investment advisory agreements and, as
applicable, sub-advisory agreements to take the place of the current agreements,
so that the Investment Adviser and, as applicable, SGI may continue to manage
the Funds.
In addition, we are requesting that you vote to approve a change to each
Fund's "fundamental investment policy" on borrowing money, which currently is
more prohibitive than necessary.
A Special Joint Meeting of Shareholders (the "Meeting") of each of the
Funds, which are listed in an attachment to the Notice of Special Joint Meeting
of Shareholders, has been scheduled for April 23, 2010 to vote on these matters.
If you are a shareholder of record of any of the Funds as of the close of
business on February 24, 2010, you are entitled to vote at the Meeting and any
adjournment of the Meeting, even if you no longer own Fund shares.
Pursuant to these materials, you are being asked to approve proposals for
the Funds, as listed above. Please note that you may receive similar materials
if you own shares of other funds in the Rydex|SGI fund complex asking you to
approve proposals for the other funds.
You can vote in one of four ways:
o By mail with the enclosed proxy card -- be sure to sign, date and return
it in the enclosed postage-paid envelope,
i
o Through the web site listed in the proxy voting instructions,
o By telephone using the toll-free number listed in the proxy voting
instructions, or
o In person at the shareholder meeting on April 23, 2010.
We encourage you to vote over the Internet or by telephone, using the voting
control number that appears on your proxy card. Your vote is extremely
important. Shareholder meetings of the Funds do not generally occur with great
frequency, so we ask that you take the time to carefully consider these
proposals and vote on these important proposals. Please read the enclosed
information carefully before voting. If you have questions, please call The
Altman Group at 1-877-864-5058.
Proxies may be revoked prior to the Meeting by timely executing and
submitting a revised proxy (following the methods noted above), by giving
written notice of revocation to the Fund(s) prior to the Meeting, or by voting
in person at the Meeting.
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
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG
WITH INSTRUCTIONS ON HOW TO VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU
PREFER TO VOTE BY ONE OF THOSE METHODS.
ii
VERY IMPORTANT NEWS FOR SHAREHOLDERS
By its very nature, the following "Questions and Answers" section is a
summary and is not intended to be as detailed as the discussion found later in
the proxy materials. For that reason, the information is qualified in its
entirety by reference to the enclosed joint proxy statement to shareholders
("Joint Proxy Statement").
QUESTIONS AND ANSWERS
Q. WHY AM I RECEIVING THIS JOINT PROXY STATEMENT?
A. You are receiving these proxy materials -- a booklet that includes the
Joint Proxy Statement and your proxy card -- because you have the right to
vote on important proposals concerning your investment in the Rydex family
of funds (the "Funds").
The first two proposals relate to actions that need to be taken in response
to an impending change in control of PADCO Advisors, Inc., which operates
under the name Rydex Investments, the investment adviser to each of the
Funds (the "Investment Adviser"), and Security Global Investors, LLC, the
sub-adviser to certain Funds ("SGI"). This change in control affects the
Funds' advisory agreement with the Investment Adviser and the Investment
Adviser's sub-advisory agreement with SGI.
The third proposal relates to a proposed change in each Fund's ability to
borrow money. Each Fund has a "fundamental investment policy" on borrowing
that is more prohibitive than necessary and than applicable law requires.
Thus, the third proposal seeks to amend the current fundamental investment
policy on borrowing money in order to provide the Funds with the maximum
possible amount of flexibility to engage in borrowing activity, including
borrowing for investment purposes (a certain type of leverage), consistent
with current law and with the Funds' investment strategies and objectives.
Q. WHY AM I BEING ASKED TO VOTE?
A. The Investment Company Act of 1940 (the "1940 Act"), the law that regulates
mutual funds, including the Funds, requires that a fund's investment
advisory agreement terminate whenever there is deemed to be a change in
control of the investment adviser. (In this context, the term "investment
adviser" applies to both an investment adviser and a sub-adviser.) Before
an investment advisory agreement terminates, a new investment advisory
agreement must be in effect in order for the investment adviser to continue
to manage the fund's investments. For that reason, we are seeking
shareholder approval of new investment advisory agreements for the Funds.
Security Benefit Mutual Holding Company ("SBHC"), the parent company of the
Investment Adviser and SGI, and certain of SBHC's affiliates have entered
into agreements with an investor group led by Guggenheim Partners, LLC (the
"Purchaser"). Guggenheim Partners, LLC is a global, independent,
iii
privately-held, diversified financial services firm with more than $100
billion in assets under supervision. Under the agreements, the Purchaser
will acquire control of the Investment Adviser, SGI and affiliates (the
"Transaction").
The Transaction should not result in material changes to the day-to-day
management and operations of the Funds or any increase in fees. However, the
Transaction will result in a change in control of the Investment Adviser and
SGI within the meaning of the 1940 Act. This will, in turn, result in the
termination of the current investment advisory agreements between the
Investment Adviser and each of the Funds (the "Current Investment Advisory
Agreements"). In addition, the transaction will result in the termination of
each of the current sub-advisory agreements between the Investment Adviser
and SGI, with respect to certain Funds (the "Current Sub-Advisory
Agreements" and, together with the Current Investment Advisory Agreements,
the "Current Agreements").
At a Special Meeting of the Boards of Trustees of Rydex Series Funds and
Rydex Dynamic Funds (collectively, the "Board") held on January 28, 2010,
the Board considered and voted in favor of new investment advisory
agreements between the Investment Adviser and each of the Funds (the "New
Investment Advisory Agreements"), as well as new sub-advisory agreements
between the Investment Adviser and SGI, with respect to certain Funds (the
"New Sub-Advisory Agreements" and, together with the New Investment
Advisory Agreements, the "New Agreements"), pursuant to which, subject to
their approval by each Fund's shareholders, as applicable, the Investment
Adviser will continue to serve as investment adviser to each Fund and SGI
will continue to serve as sub-adviser to certain Funds after the completion
of the Transaction. The fees charged by each of the Investment Adviser and
SGI (collectively, the "Advisers") for their services to the Funds under
each New Agreement will be the same as their fees under the corresponding
Current Agreement. The other terms of the New Agreements will also be the
same in all material respects to those of the Current Agreements.
With respect to the third proposal, the 1940 Act requires shareholder
approval to amend "fundamental investment policies" adopted by the Funds.
Each Fund currently has in place a fundamental investment policy on its
ability to borrow money. Borrowed money can be used to cover large and
unexpected redemption orders or to leverage a Fund's portfolio, thereby
potentially amplifying its gains and losses. Each Fund's current
fundamental investment policy on borrowing money, however, is more
prohibitive than the 1940 Act requires, unnecessarily limiting investment
strategies. Upon a request from management of the Funds, the Board has
reviewed each Fund's fundamental investment policy on borrowing money and
has recommended a change intended to simplify and modernize the policy. In
general, the proposed change provides the Funds the maximum flexibility to
engage in borrowing activity, including borrowing for investment purposes,
consistent with current applicable law and with the Funds'
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investment strategies and objectives. The proposal to amend each Fund's
fundamental investment policy on borrowing money is unrelated to the
Transaction.
Q. WILL THE PROPOSED TRANSACTION AFFECT ME?
A. No. The operations of the Advisers, the fees payable to the Advisers and
the persons responsible for the day-to-day investment management of the
Funds are expected to remain unchanged. The Board has been assured that
there will be no reduction in the nature or quality of the investment
advisory and sub-advisory services provided to each Fund, as applicable,
due to the change in control.
Q. WILL THERE BE ANY CHANGES TO THE FUNDS' OTHER SERVICE PROVIDERS?
A. The Purchaser will also acquire control of certain of the Funds' other
service providers ("Affiliated Service Providers") as a result of the
Transaction. The Affiliated Service Providers include Rydex Distributors,
Inc., which serves as the principal underwriter/distributor to the Funds,
and Rydex Fund Services, Inc., which provides general administrative,
shareholder, dividend disbursement, transfer agent and registrar services
to the Funds. Under the 1940 Act, shareholder approval is not required in
order for such Affiliated Service Providers to continue providing services
to the Funds after the closing of the Transaction. The Board has been
assured that there will be no material change in the nature or quality of
the services provided by the Affiliated Service Providers to each Fund due
to the change in control.
Q. WILL MY FUND'S FEES FOR INVESTMENT ADVISORY AND SUB-ADVISORY SERVICES
INCREASE?
A. No. The fee rates under the New Agreements are identical to those under the
Current Agreements.
Q. WHAT EFFECT WILL THE PROPOSED CHANGE TO EACH FUND'S FUNDAMENTAL INVESTMENT
POLICY ON BORROWING MONEY HAVE ON THE FUNDS?
A. While this proposal is intended to provide the Investment Adviser and SGI,
as applicable, with greater flexibility in managing each Fund's borrowing
activity, a Fund would continue to be managed subject to limitations
imposed by the 1940 Act and the rules and interpretive guidance provided
thereunder, as well as the investment objectives, strategies, and policies
expressed in the Fund's registration statement.
Although the change would expand the ability of the Funds to borrow for
investment purposes, the Advisers do not intend to materially increase the
borrowing level of any Fund in the near future, and therefore believe that
the proposed changes will not materially affect the investment risks
currently associated with any Fund. To the extent a Fund expands its level
of borrowing for investment purposes, which could be done without
additional shareholder
v
approval if the proposal is approved, the value of the Fund's shares may be
more volatile than if the Fund did not borrow.
Should a Fund's shareholders not approve the proposal to amend the Fund's
fundamental investment policy on borrowing money, the Fund's current
fundamental investment policy on borrowing money would continue to apply
unchanged.
Q. I OWN SHARES OF OTHER FUNDS IN THE RYDEX|SGI FUND COMPLEX AND RECEIVED
SIMILAR SOLICITATION MATERIALS REGARDING THOSE FUNDS. AM I ALSO BEING ASKED
TO APPROVE THE PROPOSALS CONTAINED IN THIS PROXY STATEMENT?
A. Yes. You are being asked to approve the proposals contained in this Proxy
Statement, in addition to any other proposals contained in other proxy
statements that you may receive for funds in the Rydex|SGI fund complex.
Q. WHO IS ASKING FOR MY VOTE?
A. The enclosed proxy is being solicited by the Board of your Fund for use at
the Special Joint Meeting of Shareholders to be held on April 23, 2010 (the
"Meeting"), and, if the Meeting is adjourned or postponed, at any later
meetings, for the purposes stated in the Notice of Meeting.
Q. HOW DOES THE BOARD SUGGEST THAT I VOTE?
A. After careful consideration, the Board unanimously recommends that you vote
"FOR" all of the proposals contained in the Joint Proxy Statement. Please
see the section entitled "Board Recommendation" with respect to each
proposal for a discussion of the Board's considerations in making such
recommendations.
Q. WHY AM I RECEIVING INFORMATION ABOUT FUNDS I DO NOT OWN?
A. The proposals are similar for each Fund, and management of the Funds has
concluded that it is cost-effective to hold the Meeting for all of the
Funds. You will be asked to vote separately on the proposals with respect
to the Fund(s) that you own. An unfavorable vote on a proposal by the
shareholders of one Fund will not affect the implementation of a comparable
proposal by another Fund if such proposal is approved by shareholders of
that Fund assuming that the Transaction is completed.
Q. WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
A. To be approved with respect to a particular Fund, each proposal must be
approved by a vote of a majority of the outstanding voting securities of
that Fund. The "vote of a majority of the outstanding voting securities"
is defined in the 1940 Act as the lesser of the vote of (i) 67% or more of
the voting securities of a Fund entitled to vote thereon present at the
Meeting or represented by proxy, if more than 50% of the Fund's outstanding
voting securities are present or represented by proxy; or (ii) more than
50% of the outstanding voting securities of the Fund entitled to vote
thereon.
vi
Q. WILL MY VOTE MAKE A DIFFERENCE?
A. Yes! Your vote is needed to ensure that the proposals can be acted upon.
We encourage all shareholders to participate in the governance of their
Fund(s). Additionally, your immediate response on the enclosed proxy card,
on the Internet or over the phone will help save the costs of any further
solicitations.
Q. IF I AM A SMALL INVESTOR, WHY SHOULD I BOTHER TO VOTE?
A. You should vote because every vote is important. If numerous shareholders
just like you fail to vote, the Funds may not receive enough votes to go
forward with the Meeting. If this happens, the Funds will need to solicit
votes again. This may delay the Meeting and the approval of each proposal.
Q. HOW DO I PLACE MY VOTE?
A. You may provide a Fund with your vote by mail with the enclosed proxy card,
by Internet by following the instructions in the proxy voting instructions,
by telephone using the toll-free number listed in the proxy voting
instructions, or in person at the Meeting. You may use the enclosed
postage-paid envelope to mail your proxy card. Please follow the enclosed
instructions to utilize any of these voting methods. If you need more
information on how to vote, or if you have any questions, please call the
Funds' proxy solicitation agent at the telephone number below.
Q. WHOM DO I CALL IF I HAVE QUESTIONS?
A. We will be happy to answer your questions about this proxy solicitation. If
you have questions, please call The Altman Group at 1-877-864-5058.
Proxies may be revoked prior to the Meeting by timely executing and
submitting a revised proxy (following the methods noted above), by giving
written notice of revocation to the Fund(s) prior to the Meeting, or by
voting in person at the Meeting.
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG
WITH INSTRUCTIONS ON HOW TO VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU
PREFER TO VOTE BY ONE OF THOSE METHODS.
vii
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viii
RYDEX SERIES FUNDS
RYDEX DYNAMIC FUNDS
9601 Blackwell Road, Suite 500
Rockville, Maryland 20850
1-800-820-0888
NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2010
Notice is hereby given that a Special Joint Meeting of Shareholders (the
"Meeting") of Rydex Series Funds and Rydex Dynamic Funds (each, a "Trust" and
collectively, the "Trusts") and each of their respective series listed on the
attached list (each, a "Fund" and collectively, the "Funds") will be held at the
Trusts' offices at 9601 Blackwell Road, Suite 500, Rockville, Maryland 20850 on
April 23, 2010 at 1:00 p.m. ET for the purposes listed below:
PROPOSAL SHAREHOLDERS SOLICITED TO VOTE
1. THE APPROVAL OF A NEW INVESTMENT ALL FUNDS
ADVISORY AGREEMENT BETWEEN EACH
TRUST AND PADCO ADVISORS, INC., WITH
RESPECT TO EACH FUND
2. THE APPROVAL OF A NEW SUB-ADVISORY RYDEX|SGI GLOBAL 130/30
AGREEMENT BETWEEN PADCO ADVISORS, STRATEGY FUND
INC. AND SECURITY GLOBAL INVESTORS, RYDEX|SGI GLOBAL MARKET
LLC, WITH RESPECT TO CERTAIN FUNDS NEUTRAL FUND
3. THE APPROVAL OF A CHANGE TO THE ALL FUNDS
FUNDAMENTAL INVESTMENT POLICY ON
BORROWING MONEY, WITH RESPECT TO
EACH FUND
4. TO TRANSACT SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING
After careful consideration, the Board of Trustees of each Trust unanimously
recommends that shareholders vote "FOR" Proposal 1, "FOR" Proposal 2, and "FOR"
Proposal 3.
Shareholders of record at the close of business on February 24, 2010 are
entitled to notice of, and to vote at, the Meeting, even if such shareholders no
longer own such shares.
We call your attention to the accompanying Joint Proxy Statement. 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 prior to the
Meeting by timely executing and
ix
submitting a revised proxy (following the methods noted above), by giving
written notice of revocation to the Fund(s) prior to the Meeting, or by voting
in person at the Meeting.
By Order of the Boards of Trustees,
/s/ Richard M. Goldman
Richard M. Goldman
President
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE NUMBER OF VOTES YOU HOLD.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT YOUR
PROXY CARD BE RETURNED PROMPTLY.
FOR YOUR CONVENIENCE, YOU MAY ALSO VOTE BY TELEPHONE OR INTERNET BY FOLLOWING
THE ENCLOSED INSTRUCTIONS. IF YOU VOTE BY TELEPHONE OR VIA THE INTERNET, PLEASE
DO NOT RETURN YOUR PROXY CARD UNLESS YOU ELECT TO CHANGE YOUR VOTE.
x
FUNDS PARTICIPATING IN THE MEETING
ON APRIL 23, 2010
RYDEX SERIES FUNDS
Rydex|SGI All-Asset Aggressive Rydex High Yield Strategy Fund Rydex Retailing Fund
Strategy Fund
Rydex|SGI All-Asset Conservative Rydex Internet Fund Rydex Russell 2000(R) 1.5x
Strategy Fund Strategy Fund
Rydex|SGI All-Asset Moderate Rydex Inverse Government Rydex Russell 2000(R) Fund
Strategy Fund Long Bond Strategy Fund Rydex S&P 500 Fund
Rydex|SGI All-Cap Opportunity Fund Rydex Inverse High Yield Rydex S&P 500 Pure Growth Fund
Strategy Fund
Rydex|SGI Alternative Strategies Rydex Inverse Mid-Cap Rydex S&P 500 Pure Value Fund
Allocation Fund Strategy Fund
Rydex Banking Fund Rydex Inverse NASDAQ-100(R) Rydex S&P MidCap 400 Pure
Strategy Fund Growth Fund
Rydex Basic Materials Fund Rydex Inverse Russell 2000(R) Rydex S&P MidCap 400 Pure
Strategy Fund Value Fund
Rydex Biotechnology Fund Rydex Inverse S&P 500 Rydex S&P SmallCap 600 Pure
Strategy Fund Growth Fund
Rydex Commodities Strategy Fund Rydex Japan 2x Strategy Fund Rydex S&P SmallCap 600 Pure
Value Fund
Rydex Consumer Products Fund Rydex Leisure Fund Rydex Strengthening Dollar 2x
Strategy Fund
Rydex Electronics Fund Rydex|SGI Long/Short Commodities Rydex Technology Fund
Strategy Fund
Rydex Energy Fund Rydex|SGI Managed Futures Rydex Telecommunications Fund
Strategy Fund
Rydex Energy Services Fund Rydex Mid-Cap 1.5x Rydex Transportation Fund
Strategy Fund
Rydex Europe 1.25x Strategy Fund Rydex|SGI Multi-Hedge Rydex U.S. Government Money
Strategies Fund Market Fund
Rydex Financial Services Fund Rydex NASDAQ-100(R) Fund Rydex Utilities Fund
Rydex|SGI Global 130/30 Rydex Nova Fund Rydex Weakening Dollar 2x
Strategy Fund Strategy Fund
Rydex|SGI Global Market Rydex Precious Metals Fund
Neutral Fund
Rydex Government Long Bond 1.2x Rydex Real Estate Fund
Strategy Fund
Rydex Health Care Fund
RYDEX DYNAMIC FUNDS
Dow 2x Strategy Fund Inverse Russell 2000(R) 2x NASDAQ-100(R) 2x Strategy Fund
Strategy Fund
Inverse Dow 2x Strategy Fund Russell 2000(R) 2x Strategy Fund
Inverse S&P 500 2x
Inverse NASDAQ-100(R) 2x Strategy Fund S&P 500 2x Strategy Fund
Strategy Fund
xi
TABLE OF CONTENTS
OVERVIEW OF THE PROPOSALS ................................................... 3
Approval of New Investment Advisory and Sub-Advisory Agreements
(Proposals 1 - 2) ....................................................... 3
Approval of a Change to the Funds' Fundamental Investment Policy on
Borrowing (Proposal 3) .................................................. 3
Information Regarding the Change in Control of the Investment Adviser
and SGI ................................................................. 4
Section 15(f) of the 1940 Act ........................................... 6
Approval of the New Agreements by the Board ............................. 6
Board Considerations in Approving the New Agreements .................... 7
New Investment Advisory Agreements ...................................... 8
New Sub-Advisory Agreements ............................................. 11
PROPOSAL 1 - THE APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS ............. 14
The Investment Adviser .................................................. 15
Material Terms of the New Investment Advisory Agreements ................ 15
BOARD RECOMMENDATION ON PROPOSAL 1 .......................................... 17
PROPOSAL 2 - THE APPROVAL OF NEW SUB-ADVISORY AGREEMENTS .................... 18
Information About SGI ................................................... 19
Material Terms of the SGI Sub-Advisory Agreement ........................ 19
BOARD RECOMMENDATION ON PROPOSAL 2 .......................................... 20
PROPOSAL 3 - THE APPROVAL OF A CHANGE TO THE FUNDAMENTAL INVESTMENT
POLICY ON BORROWING MONEY ................................................... 21
Proposed New Fundamental Investment Policy .............................. 21
Discussion of Proposed Modification ..................................... 23
BOARD RECOMMENDATION ON PROPOSAL 3 .......................................... 24
OTHER BUSINESS .............................................................. 25
ADDITIONAL INFORMATION ...................................................... 25
Administrator, Principal Underwriter and Transfer Agent ................. 25
Affiliations and Affiliated Brokerage ................................... 25
Other Information ....................................................... 25
Voting Information ...................................................... 25
Shareholder Proposals ................................................... 28
xii
APPENDICES
Appendix A FORMS OF INVESTMENT ADVISORY AGREEMENTS ....................... A-1
Appendix B INFORMATION REGARDING THE INVESTMENT ADVISORY AGREEMENTS
AND FEES PAID TO THE INVESTMENT ADVISER AND AFFILIATES ........ B-1
Appendix C DIRECTORS/TRUSTEES/MANAGERS AND OFFICERS ...................... C-1
Appendix D-1 ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT OBJECTIVES
ADVISED BY PADCO ADVISORS, INC. AND PADCO ADVISORS II, INC. ... D-1-1
Appendix D-2 ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES SUB-ADVISED BY SECURITY GLOBAL INVESTORS, LLC ...... D-2-1
Appendix E FORM OF SUB-ADVISORY AGREEMENT WITH SECURITY GLOBAL
INVESTORS, LLC ................................................ E-1
Appendix F INFORMATION REGARDING THE SUB-ADVISORY AGREEMENT WITH SECURITY
GLOBAL INVESTORS, LLC AND FEES PAID TO THE SUB-ADVISER ........ F-1
Appendix G OUTSTANDING SHARES ............................................ G-1
Appendix H BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF EACH FUND ..... H-1
xiii
RYDEX SERIES FUNDS
RYDEX DYNAMIC FUNDS
9601 Blackwell Road, Suite 500
Rockville, Maryland 20850
1-800-820-0888
JOINT PROXY STATEMENT
SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2010
This joint proxy statement ("Joint Proxy Statement") and enclosed notice and
proxy card are being furnished in connection with the solicitation of proxies by
the Boards of Trustees (collectively, the "Board") of Rydex Series Funds and
Rydex Dynamic Funds (each, a "Trust" and collectively, the "Trusts"). The
proxies are being solicited for use at a special joint meeting of shareholders
of the Trusts to be held at the Trusts' offices at 9601 Blackwell Road, Suite
500, Rockville, Maryland 20850 on April 23, 2010 at 1:00 p.m. ET, and at any and
all adjournments or postponements thereof (the "Meeting").
The Board has called the Meeting and is soliciting proxies from shareholders
of each series of the Trusts listed in the accompanying notice to this Joint
Proxy Statement (each, a "Fund" and collectively, the "Funds") with respect to
the following proposals (the "Proposals") as follows:
PROPOSAL SHAREHOLDERS SOLICITED TO VOTE
1. THE APPROVAL OF A NEW INVESTMENT ALL FUNDS
ADVISORY AGREEMENT BETWEEN EACH
TRUST AND PADCO ADVISORS, INC.,
WITH RESPECT TO EACH FUND
2. THE APPROVAL OF A NEW SUB-ADVISORY RYDEX|SGI GLOBAL 130/30
AGREEMENT BETWEEN PADCO ADVISORS, STRATEGY FUND
INC. AND SECURITY GLOBAL INVESTORS, RYDEX|SGI GLOBAL
LLC, WITH RESPECT TO CERTAIN FUNDS MARKET NEUTRAL FUND
3. THE APPROVAL OF A CHANGE TO THE ALL FUNDS
FUNDAMENTAL INVESTMENT POLICY ON
BORROWING MONEY, WITH RESPECT TO
EACH FUND
4. TO TRANSACT SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING
This Joint Proxy Statement and the accompanying notice and the proxy card
are being first mailed to shareholders on or about March 22, 2010.
1
The Board has determined that the use of this Joint Proxy Statement for the
Meeting is in the best interests of each Fund and its shareholders in light of
the similar matters being considered and voted on by the shareholders of the
other Funds.
You are entitled to vote at the Meeting of each Fund of which you are a
shareholder as of the close of business on February 24, 2010 (the "Record
Date").
If you have any questions about the Proposals or about voting, please call
The Altman Group, the Funds' proxy solicitor, at 1-877-864-5058.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE MEETING TO BE HELD ON APRIL 23, 2010
This Joint Proxy Statement is available at www.proxyonline.com/docs/
rydexSGI1.pdf. In addition, with respect to Rydex Dynamic Funds, shareholders
can find important information about each Fund in the Fund's annual report,
dated December 31, 2009, including financial reports for the fiscal year ended
December 31, 2009, and in any recent semi-annual report succeeding such annual
report, if any. With respect to Rydex Series Funds, shareholders can find
important information about each Fund in the Fund's annual report, dated March
31, 2009, including financial reports for the fiscal year ended March 31, 2009,
and in any recent semiannual report succeeding such annual report, if any. You
may obtain copies of these reports without charge by writing to the Trusts, or
by calling the telephone number shown on the front page of this Joint Proxy
Statement.
2
OVERVIEW OF THE PROPOSALS
APPROVAL OF NEW INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS
(PROPOSALS 1 - 2)
Proposals 1 and 2 relate to actions that need to be taken in response to an
impending change in control of PADCO Advisors, Inc., which operates under the
name Rydex Investments, the investment adviser to each of the Funds (the
"Investment Adviser"), and Security Global Investors, LLC, the sub-adviser to
certain Funds ("SGI"). For purposes of this Joint Proxy Statement, the term
"Advisers" collectively refers to the Investment Adviser and SGI.
The Investment Company Act of 1940, as amended (the "1940 Act"), the law
that regulates mutual funds, such as the Funds, requires that a fund's
investment advisory agreement terminate whenever there is deemed to be a change
in control of the investment adviser. (In this context, the term "investment
adviser" applies to both an investment adviser and a sub-adviser.) Before an
investment advisory agreement terminates, a new investment advisory agreement
must be in effect in order for the investment adviser to continue to manage the
fund's investments. For that reason, we are seeking shareholder approval of new
investment advisory agreements for the Funds.
Upon completion of a transaction involving the Investment Adviser and SGI,
which is discussed in more detail below, the Funds' current investment advisory
agreements with the Investment Adviser will be terminated. In addition, the
transaction will result in the termination of the current sub-advisory
agreements between the Investment Adviser and SGI, with respect to Rydex|SGI
Global 130/30 Strategy Fund and Rydex|SGI Global Market Neutral Fund (the
"Sub-Advised Funds"). Accordingly, Proposal 1 relates to the approval by
shareholders of new investment advisory agreements between the Investment
Adviser and the Funds (the "New Investment Advisory Agreements"). Similarly,
Proposal 2 relates to the approval by shareholders of new sub-advisory
agreements between the Investment Adviser and SGI, with respect to the
Sub-Advised Funds (the "New Sub-Advisory Agreements" and, together with the New
Investment Advisory Agreements, the "New Agreements").
APPROVAL OF A CHANGE TO THE FUNDS' FUNDAMENTAL INVESTMENT POLICY ON
BORROWING (PROPOSAL 3)
In addition to considering the New Agreements in Proposals 1 and 2,
shareholders of the Funds also are being asked to consider the approval of a
change to each Fund's current fundamental investment policy on borrowing money.
The 1940 Act requires that a fund adopt a fundamental investment policy on
borrowing. Under the 1940 Act, any change to a fundamental investment policy
must be approved by shareholders of the fund. Each Fund's current fundamental
investment policy on borrowing money is more restrictive than the 1940 Act
requires, unnecessarily limiting investment strategies. Accordingly, Proposal 3
seeks approval of a change to
3
each Fund's fundamental investment policy on borrowing money in order to permit
a Fund to engage in borrowing money consistent with applicable law. Proposal 3
is unrelated to Proposals 1 and 2.
FOR THE REASONS DISCUSSED BELOW, THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE NEW AGREEMENTS AND CHANGE TO THE FUNDAMENTAL
INVESTMENT POLICY ON BORROWING MONEY.
INFORMATION REGARDING THE CHANGE IN CONTROL OF THE INVESTMENT ADVISER
AND SGI
On February 16, 2010, Security Benefit Mutual Holding Company ("SBHC"), the
parent company of the Investment Adviser and SGI, and certain of SBHC's
affiliates (collectively, "SecBen") entered into agreements with Guggenheim SBC
Holdings LLC ("Purchaser"), a special purpose entity managed by Guggenheim
Partners, LLC ("Guggenheim"), which is a global, independent, privately-held,
diversified financial services firm with more than $100 billion in assets under
supervision and 800 dedicated professionals. Headquartered in Chicago and New
York, the firm operates through offices in 20 cities in the U.S., Europe and
Asia. Guggenheim operates businesses in investment management, capital markets,
wealth management and merchant banking. Within the investment and wealth
management businesses, Guggenheim specializes in fixed income and alternative
investments, and in providing sophisticated wealth advisory and family office
services. Within capital markets, it specializes in providing debt financing and
structured finance solutions to clients. Merchant banking activities include its
portfolio of investments in funds managed by it, joint venture business
investments, and new business launch activities not integrated into other
primary operating businesses. Guggenheim is a wholly-owned subsidiary of
Guggenheim Capital, LLC, 227 West Monroe Street, 48th Floor, Chicago, Illinois
60606. Sage Assets, Inc., 5949 Sherry Lane, Suite 1900, Dallas, Texas 75225, a
wholly-owned subsidiary of Sammons Enterprises, Inc., 5949 Sherry Lane, Suite
1900, Dallas, Texas 75225, is a control person of Guggenheim as a result of its
equity ownership in excess of 25% (but less than 50%) of Guggenheim Capital,
LLC. Under the agreements, the Purchaser will acquire control of the Investment
Adviser, SGI and affiliates (the "Transaction").
The final form of the Purchaser's controlling stake in the Investment
Adviser, SGI and affiliates will depend upon whether certain conditions are
satisfied. In the Transaction, the Purchaser will either receive: (a) a 100%
ownership stake in Security Benefit Corporation ("SBC"), a wholly-owned
subsidiary of SBHC and the parent company of the Investment Adviser, SGI and
affiliates (the "Purchase Transaction"); or, (b) if the Purchase Transaction is
terminated for any reason other than a breach of the related agreement by the
Purchaser or the failure to meet a specific closing condition relating to
execution of employment agreements by certain employees of the SBC group of
companies, a 100% ownership stake in SBC's asset management business, which
includes the Investment Adviser, SGI and certain affiliates (the "Contingent
Asset Management Purchase and Sale").
4
In anticipation of the Transaction, the parties have entered into an interim
recapitalization transaction in which the Purchaser has made a secured loan to
SBC. Upon the closing of the Purchase Transaction, the Purchaser will make a
capital contribution to SBC and the secured loan will convert into equity in SBC
and SBHC will transfer all of the issued and outstanding shares of capital stock
of SBC to the Purchaser. The Purchase Transaction is conditioned on the approval
of a corporate restructuring called a demutualization pursuant to which the
insurance policyholders who presently own SBHC are expected to receive cash
payments or policy credits in connection with the cancellation of their
ownership interests. In the event that the Contingent Asset Management Purchase
and Sale occurs following termination of the Purchase Transaction, SBC will
receive a senior unsecured note from the Purchaser and have certain debt
extinguished, and the Purchaser will receive all of the issued and outstanding
membership interests of each entity in SBC's asset management business, which
includes the Investment Adviser, SGI and certain affiliates.
The Transaction should not result in material changes to the day-to-day
management and operations of the Funds. For example, the portfolio managers of
the Funds are expected to remain the same and your daily experience in dealing
with the Funds should remain unchanged. However, the Transaction will result in
a "change in control" of the Investment Adviser and SGI within the meaning of
the 1940 Act. This will automatically terminate each of the current investment
advisory agreements between the Investment Adviser and the Funds (each, a
"Current Investment Advisory Agreement" and collectively, the "Current
Investment Advisory Agreements") and the current sub-advisory agreements between
the Investment Adviser and SGI, with respect to the Sub-Advised Funds (each, a
"Current Sub-Advisory Agreement" and collectively, the "Current Sub-Advisory
Agreements") (together, the Current Investment Advisory and Current Sub-Advisory
Agreements are referred to as the "Current Agreements").
In addition, the Purchaser will acquire control of certain of the Funds'
other service providers ("Affiliated Service Providers") as a result of the
Transaction. The Affiliated Service Providers include Rydex Distributors, Inc.,
which serves as the principal underwriter/distributor to the Funds, and Rydex
Fund Services, Inc., which provides general administrative, shareholder,
dividend disbursement, transfer agent and registrar services to the Funds. Under
the 1940 Act, shareholder approval is not required in order for such Affiliated
Service Providers to continue providing services to the Funds after the closing
of the Transaction.
Completion of the Transaction will be subject to certain closing conditions,
including: (a) the receipt of approvals required for the assignment or
replacement of investment advisory contracts relating to 80% or more of the
total net assets under management by the Investment Adviser and certain
affiliates that will be controlled by the Purchaser; and, (b) with respect to
the Purchase Transaction only, the approval of the members of SBHC to the extent
required by applicable law in order to effect the demutualization transaction
described above.
5
While the parties expect the Transaction to be completed by May 31, 2010, it
is subject to various conditions, and may be delayed or even terminated due to
unforeseen circumstances. If for some reason the Transaction does not occur, the
Current Agreements will not automatically terminate and will remain in effect,
and the New Agreements will not be entered into, even if they have been approved
by Fund shareholders. If Proposal 1 is not approved by shareholders of any Fund,
the Board will evaluate other short- and long-term options permitted by law,
which include interim investment advisory agreements with the Investment Adviser
and reorganization or liquidation of the Fund(s).
SECTION 15(f) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that, when a change in control of an
investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection with the change in
control as long as two conditions are met. The first condition specifies that no
"unfair burden" may be imposed on the fund as a result of a transaction relating
to the change in control, or any express or implied terms, conditions or
understandings. The term "unfair burden," as defined in the 1940 Act, includes
any arrangement during the two-year period after the change in control
transaction whereby the investment adviser (or predecessor or successor
adviser), or any "interested person" (as defined in the 1940 Act) of any such
investment adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or other services), or from
any person in connection with the purchase or sale of securities or other
property to, from, or on behalf of the fund (other than fees for bona fide
principal underwriting services), which could limit the ability of the Funds to
engage in brokerage transactions with certain broker-dealers, although such
limits are not expected to cause any Fund to change its brokerage relationships.
The second condition specifies that, during the three-year period immediately
following consummation of the change in control transaction, at least 75% of the
fund's board of trustees must not be "interested persons" (as defined in the
1940 Act) of the investment adviser or predecessor adviser.
Consistent with the conditions of Section 15(f), SecBen and the Purchaser
have agreed that they will not take any action that would have the effect,
directly or indirectly, of causing any requirement of the provisions of Section
15(f) to be violated with respect to the Transaction. The Investment Adviser and
SGI represented to the Board that no unfair burden would be imposed on the Funds
as a result of the Transaction.
APPROVAL OF THE NEW AGREEMENTS BY THE BOARD
At a Special Meeting of the Board held on January 28, 2010 (the "January
2010 Meeting"), at which a majority of the members of the Board (the
"Trustees"), including a majority of the Trustees who are not "interested
persons" (as defined under the 1940 Act) of the Trusts and who are not
interested persons of any party to
6
the New Agreements (the "Independent Trustees"), were present, the Board
considered and voted in favor of the New Agreements, pursuant to which, subject
to their approval by each Fund's shareholders, as applicable, the Advisers will
continue to serve each Fund, as applicable, after the completion of the
Transaction. Each Adviser's rate of fees for its services to each Fund under a
New Agreement, as applicable, will be the same as its fees under the Current
Agreement. The other terms of the New Agreements will also be the same in all
material respects to those of the Current Agreements. As a result, in reviewing
the New Agreements at the January 2010 Meeting, the Board also considered its
review of relevant materials relating to the Current Agreements at the annual
renewal meeting on August 25, 2009 (the "2009 Renewal Meeting").
BOARD CONSIDERATIONS IN APPROVING THE NEW AGREEMENTS
Prior to the January 2010 Meeting, representatives of SecBen informed the
Board that it was in discussions with Guggenheim regarding a potential
arrangement pursuant to which an investor group led by Guggenheim would acquire
control of the Investment Adviser, SGI and affiliates. With respect to the
Transaction, the Board reviewed materials received from SecBen and Guggenheim,
including information relating to the terms of the Transaction. The Board also
reviewed information regarding Guggenheim, including, but not limited to: (a)
certain representations concerning Guggenheim's financial condition, (b)
information regarding Guggenheim's affiliated investment advisers, (c)
information regarding Guggenheim's litigation and regulatory matters, including
representations that there were no material matters, and (d) potential conflicts
of interest. SecBen and Guggenheim also provided the Board with presentations
that discussed the Transaction and intentions for the business, operations and
personnel of the Investment Adviser and SGI after the closing of the
Transaction.
In considering the New Agreements at the January 2010 Meeting, the Board
determined that the New Agreements would enable shareholders of the Funds to
continue to obtain high quality services at a cost that is appropriate,
reasonable, and in the best interests of their shareholders. The Board,
including the Independent Trustees, unanimously approved the New Agreements. In
reaching their decision, the Trustees carefully considered information that they
had received throughout the year as part of their regular oversight of the
Funds, including, in particular, information from the Investment Adviser and SGI
that was provided in connection with the 2009 Renewal Meeting. The Trustees
noted that, at the 2009 Renewal Meeting, they had obtained and reviewed a wide
variety of information, including certain comparative information regarding
performance of the Funds relative to performance of other comparable mutual
funds.
At the 2009 Renewal Meeting, the Trustees, including the Independent
Trustees, evaluated a number of considerations, including among others: (a) the
quality of the Advisers' investment advisory and other services; (b) the
Advisers' investment management personnel; (c) the Advisers' operations and
financial condition; (d) the
7
Advisers' brokerage practices (including any soft dollar arrangements) and
investment strategies; (e) the level of the fees that the Advisers charge
compared with the fees charged to comparable mutual funds or accounts; (f) each
Fund's overall fees and operating expenses compared with similar mutual funds;
(g) the level of the Advisers' profitability from their Fund-related operations;
(h) the Advisers' compliance systems; (i) the Advisers' policies on and
compliance procedures for personal securities transactions; (j) the Advisers'
reputation, expertise and resources in the financial markets; and (k) Fund
performance compared with similar mutual funds. Certain of these considerations
are discussed in more detail below. In its deliberations at the 2009 Renewal
Meeting, the Board did not identify any single piece of information that was
all-important or controlling. Based on the Board's deliberations and its
evaluation of the information referenced above and described in more detail
below, the Board, including all of the Independent Trustees, unanimously: (a)
concluded that terms of the New Agreements are fair and reasonable; (b)
concluded that the Advisers' fees were reasonable in light of the services that
they provide to the Funds; and (c) agreed to approve the New Agreements, subject
to shareholder approval.
In approving the New Agreements, the Trustees also considered information
and representations made about the Guggenheim organization and its personnel and
the ongoing role that Guggenheim would play with the Purchaser and its other
non-managing members. The Trustees considered these representations and the
financial stability the Transaction was expected to bring to the Advisers and
the Affiliated Service Providers in the context of the current financial
challenges facing certain SBHC affiliates. The Trustees also considered
representations by Guggenheim regarding additional resources that could be made
available to the Advisers and the Affiliated Service Providers if beneficial to
their operations.
NEW INVESTMENT ADVISORY AGREEMENTS
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE INVESTMENT ADVISER.
At the 2009 Renewal Meeting, the Board reviewed the scope of services to be
provided by the Investment Adviser under the Current Investment Advisory
Agreements. At the January 2010 Meeting, the Board noted that there would be no
significant differences between the scope of services required to be provided by
the Investment Adviser under the Current Investment Advisory Agreements and the
scope of services required to be provided by the Investment Adviser under the
New Investment Advisory Agreements. In reviewing the scope of services provided
to the Funds by the Investment Adviser, the Board reviewed and discussed at the
2009 Renewal Meeting the Investment Adviser's investment experience, noting that
the Investment Adviser and its affiliates have committed significant resources
over time to the support of the Funds. The Board also considered the Investment
Adviser's compliance programs and its compliance record with respect to the
Funds. In that regard, the Board noted that the Investment Adviser provides
information regarding the portfolio management and compliance to the Board on a
periodic basis in connection with regularly scheduled meetings of the Board. In
addition to the above
8
considerations, the Board reviewed and considered the Investment Adviser's
investment processes and strategies, and matters related to the Investment
Adviser's portfolio transaction policies and procedures. The Board further noted
that, with respect to the series of Rydex Series Funds, the Funds have
consistently met their investment objectives since their respective inception
dates. Based on this review, the Board concluded at the 2009 Renewal Meeting
that the nature, extent, and quality of services to be provided by the
Investment Adviser to the Funds under the Current Investment Advisory Agreements
were appropriate and continued to support the Board's original selection of the
Investment Adviser as the investment adviser to the Funds.
At the January 2010 Meeting, the Board noted that most of the key investment
and management personnel of the Investment Adviser servicing the Funds are
expected to remain with the Investment Adviser following the Transaction and
that the services provided to the Funds by the Investment Adviser are not
expected to materially change. The Trustees also considered SecBen's and
Guggenheim's representations to the Board that the Investment Adviser would
continue to provide investment and related services that were of materially the
same quality and quantity as services provided to the Funds in the past, and
that these services are appropriate in scope and extent in light of the Funds'
operations, the competitive landscape of the investment company business and
investor needs. Based on this review, the Board concluded that the range and
quality of services provided by the Investment Adviser to the Funds were
expected to continue under the New Investment Advisory Agreements at comparable
levels.
FUND EXPENSES AND PERFORMANCE OF THE FUNDS AND THE INVESTMENT ADVISER. At
the 2009 Renewal Meeting, the Board reviewed statistical information prepared by
the Investment Adviser regarding the expense ratio components, including actual
advisory fees, waivers/reimbursements, and gross and net total expenses of each
Fund in comparison with the same information for other funds registered under
the 1940 Act determined by the Investment Adviser to comprise each Fund's
applicable peer group. Because few funds seek to provide unlimited exchange
privileges similar to those of the majority of the Funds, certain of the Funds'
applicable peer groups are generally limited to the funds of two unaffiliated
mutual fund families. In addition, at the 2009 Renewal Meeting, the Board
reviewed statistical information prepared by the Investment Adviser relating to
the performance of each Fund, as well as each Fund's ability to successfully
track its benchmark over time (as applicable to those Funds which track a
benchmark), and a comparison of each Fund's performance to funds with similar
investment objectives for the same periods and to appropriate
indices/benchmarks, in light of total return, yield and market trends. The Board
further noted that despite the unique nature of the Funds (or, with respect to
the series of Rydex Dynamic Funds, the lack of a sizable peer group), the peer
fund information presented to the Board was meaningful because the peer funds'
investment objectives and strategies were closely aligned with those of the
Funds. The Board noted that, with respect to the series of Rydex Series Funds,
most of the Funds either
9
outperformed their peer funds or performed in line with them over relevant
periods. The Board also noted that the investment advisory fees for the Funds
were equivalent to those of their peers and that the overall expenses for the
Funds were only slightly higher than the total expenses of the peer funds, due
in part to differing share classes and distribution fees. Based on the review at
the 2009 Renewal Meeting, the Board concluded that the investment advisory fees
and expense levels and the historical performance of the Funds, as compared to
the investment advisory fees and expense levels and performance of the peer
funds, were satisfactory for the purposes of approving the continuance of the
Current Investment Advisory Agreements. Based on the representations made by
SecBen and Guggenheim at the January 2010 Meeting that the Investment Adviser
would continue to operate following the closing of the Transaction in much the
same manner as it operates today, the Board concluded that the investment
performance of the Investment Adviser was not expected to be affected by the
Transaction.
COSTS OF SERVICES PROVIDED TO THE FUNDS AND PROFITS REALIZED BY THE
INVESTMENT ADVISER AND ITS AFFILIATES. At the 2009 Renewal Meeting, the Board
reviewed information about the profitability of the Funds to the Investment
Adviser based on the advisory fees payable under the Current Investment Advisory
Agreements for the last calendar year. The Investment Adviser also presented the
Board with material discussing its methodology for determining the level of
advisory fees assessable to the Funds. The Board analyzed the Funds' expenses,
including the investment advisory fees paid to the Investment Adviser. The Board
also reviewed information regarding direct revenue received by the Investment
Adviser and ancillary revenue received by the Investment Adviser and/or its
affiliates in connection with the services provided to the Funds by the
Investment Adviser (as discussed below) and/or its affiliates. The Board also
discussed the Investment Adviser's profit margin as reflected in the Investment
Adviser's profitability analysis and reviewed information regarding economies of
scale (as discussed below). Based on this review at the 2009 Renewal Meeting,
the Board concluded that the profits to be realized by the Investment Adviser
and its affiliates under the Current Investment Advisory Agreements and from
other relationships between the Funds and the Investment Adviser and/or its
affiliates, if any, were within the range the Board considered reasonable and
appropriate.
At the January 2010 Meeting, the Board considered the fact that the fee
rates payable to the Investment Adviser would be the same under each Fund's New
Investment Advisory Agreement as they are under such Fund's Current Investment
Advisory Agreement. The Board also noted that the Funds' applicable fee
waiver/expense limitations agreements with the Investment Adviser would remain
in effect, if the New Investment Advisory Agreements are approved by
shareholders and the Transaction is completed. With respect to anticipated
profitability, the Board noted that it was too early to predict how the
Transaction would affect the Investment Adviser's profitability with respect to
the Funds, but noted that this matter would be given further consideration on an
ongoing basis. Overall, the Board concluded that
10
the fees to be paid under the Current Investment Advisory Agreements and under
the New Investment Advisory Agreements are reasonable.
ECONOMIES OF SCALE. In connection with its review of the Funds'
profitability analysis at the 2009 Renewal Meeting, the Board reviewed
information regarding economies of scale or other efficiencies that may result
from increases in the Funds' asset levels. The Board noted that the Current
Investment Advisory Agreements did not provide for any breakpoints in the
investment advisory fees as a result of increases in the asset levels of the
Funds. The Board also noted that, though the Investment Adviser's assets under
management were significant, the amount is spread among many Funds. Further
limiting the realization of economies of scale, is the ability of shareholders
of many of the Funds to engage in unlimited trading. The Board also reviewed and
considered the Investment Adviser's historic profitability as investment adviser
to the Funds and determined that reductions in advisory fees or additions of
breakpoints were not warranted at the time of the 2009 Renewal Meeting. At the
January 2010 Meeting, the Trustees noted that the fees would not change under
the New Investment Advisory Agreements, and they will have the opportunity to
again review the appropriateness of the fee payable to the Investment Adviser
under the Agreements when the next renewal of these Agreements comes before the
Board.
OTHER BENEFITS TO THE INVESTMENT ADVISER AND/OR ITS AFFILIATES. At the 2009
Renewal Meeting, in addition to evaluating the services provided by the
Investment Adviser, the Board considered the nature, extent, quality and cost of
the administrative, distribution, and shareholder services performed by the
Affiliated Service Providers under separate agreements. The Board noted that the
Investment Adviser reports its use of soft dollars to the Board on a quarterly
basis, as well as any portfolio transactions on behalf of the Funds placed
through an affiliate of the Funds or the Investment Adviser pursuant to Rule
17e-1 under the 1940 Act. Based on its review at its 2009 Renewal Meeting, the
Board concluded that the nature and quality of the services provided by the
Investment Adviser's affiliates to each Fund will benefit the Funds'
shareholders, and that any ancillary benefits would not be disadvantageous to
the Funds' shareholders, particularly in light of the Board's view that the
Funds' shareholders benefit from investing in a fund that is part of a large
family of funds offering a variety of investment strategies and services. The
Board also considered the terms of the Transaction and the financial benefits
that it brings to the parent company of the Investment Adviser and noted that
those financial benefits are available, in part, because of the involvement of
the Investment Adviser in the Transaction. The Board also noted that the
Transaction is expected to put the Investment Adviser on strong financial
footing, enhancing its ability to provide continuous services to the Funds.
NEW SUB-ADVISORY AGREEMENTS
NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY SGI. At the 2009
Renewal Meeting, the Board reviewed the scope of services to be provided by SGI
11
under the Current Sub-Advisory Agreements. At the January 2010 Meeting, the
Board noted that there would be no significant differences between the scope of
services required to be provided by SGI under the Current Sub-Advisory
Agreements and the scope of services required to be provided by SGI under the
New Sub-Advisory Agreements. In reviewing the scope of services provided by SGI,
the Board reviewed and discussed SGI's investment experience, noting that SGI
and its affiliates have committed significant resources over time to the support
of the Sub-Advised Funds. At the 2009 Renewal Meeting, the Board also
considered SGI's compliance program and its compliance record with respect to
each Sub-Advised Fund. In that regard, the Board noted that SGI provides
information regarding the portfolio management and compliance to the Board on a
periodic basis in connection with regularly scheduled meetings of the Board. In
addition to the above considerations, the Board reviewed and considered SGI's
investment processes and strategies, and matters related to SGI's portfolio
transaction policies and procedures. The Board further noted that each
Sub-Advised Fund has met its investment objectives consistently since SGI began
sub-advising the Fund.
At the January 2010 Meeting, the Board noted that key investment and
management personnel of SGI servicing the Sub-Advised Funds and services
provided to the Sub-Advised Funds are not expected change as a result of the
Transaction. Based on this review, the Board concluded that the nature, extent
and quality of services to be provided by SGI to the Sub-Advised Funds under the
New Sub-Advisory Agreements were appropriate and continued to support the
Board's original selection of SGI as investment sub-adviser to the Sub-Advised
Funds.
FUND EXPENSES AND PERFORMANCE OF THE SUB-ADVISED FUNDS AND SGI. At the 2009
Renewal Meeting, the Board reviewed statistical information prepared by SGI and
the Investment Adviser regarding the expense ratio components, including actual
sub-advisory fees, waivers/reimbursements, and gross and net total expenses to
each Sub-Advised Fund. In addition, the Board reviewed statistical information
prepared by SGI relating to the performance of each Sub-Advised Fund and a
comparison of each Sub-Advised Fund's performance to appropriate
indices/benchmarks, in light of total return, yield and market trends. Based on
this review at the 2009 Renewal Meeting, the Board concluded that the investment
sub-advisory fees and expense levels and the historical performance of the
Sub-Advised Funds were satisfactory for the purposes of approving the Current
Sub-Advisory Agreements. At the January 2010 Meeting, the Board concluded that
SGI would continue to operate following the closing of the Transaction in much
the same manner as it operates today and, as a result, the Board concluded that
the investment performance of SGI was not expected to be affected by the
Transaction.
COST OF SERVICES PROVIDED TO THE SUB-ADVISED FUNDS, PROFITS REALIZED BY SGI
AND ITS AFFILIATES AND ECONOMIES OF SCALE. At the 2009 Renewal Meeting, the
Trustees reviewed reports comparing the expense ratios and sub-advisory fees to
those of other comparable mutual funds and concluded that the sub-advisory fees
12
were reasonable and the result of arm's length negotiations, and the
sub-advisory fees were comparable to those of peer funds. At its January 2010
Meeting, the Board concluded that, in the near future, the profits to be
realized by SGI and its affiliates under the New Sub-Advisory Agreements and
from other relationships between the Funds and SGI and its affiliates, if any,
should remain within the range the Board previously considered reasonable and
appropriate. The Board further noted at the January 2010 Meeting that it is not
possible to predict with accuracy how the Transaction may affect SGI's future
profitability with the Funds, but that this matter would be given further
consideration on an ongoing basis.
OTHER BENEFITS TO SGI. At the 2009 Renewal Meeting, the Board received and
considered information regarding the character and amount of other incidental
benefits SGI might receive as a result of its relationship with the Sub-Advised
Funds, including SGI's soft dollar practices, if any. The Board concluded that,
taking into account any incidental benefits SGI might receive, the terms of the
Current Sub-Advisory Agreements, including the compensation to be paid
thereunder, were reasonable. At its January 2010 Meeting, the Board considered
other benefits to SGI and its affiliates expected to be derived from its
relationships with the Funds as a result of the Transaction. The Board also
considered the terms of the Transaction and the financial benefits that it
brings to the parent company of SGI and noted that those financial benefits are
available, in part, because of the involvement of SGI in the Transaction. The
Board also noted that the Transaction is expected to put SGI on strong financial
footing, enhancing its ability to provide continuous services to the Funds.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE NEW AGREEMENTS AND CHANGE TO THE
FUNDAMENTAL INVESTMENT POLICY ON BORROWING MONEY. UNMARKED, PROPERLY SIGNED AND
DATED PROXIES WILL BE SO VOTED.
13
PROPOSAL 1
THE APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS
WITH RESPECT TO ALL FUNDS
As discussed above, Proposal 1 relates to the approval by shareholders of
the New Investment Advisory Agreements between the Investment Adviser and each
of the Funds. Rydex Series Funds, on behalf of its underlying Funds, has
executed an investment advisory agreement with the Investment Adviser in
connection with advisory services to such Funds. Rydex Dynamic Funds, on behalf
of its underlying Funds, has executed an investment advisory agreement with the
Investment Adviser in connection with advisory services to such Funds.
Therefore, this Joint Proxy Statement solicits proxies with respect to two
separate investment advisory agreements. You are being asked to vote separately
on Proposal 1 solely with respect to the Fund(s) that you own. Forms of the New
Investment Advisory Agreements are attached in Appendix A.
The terms of each New Investment Advisory Agreement are identical to those
of the corresponding Current Investment Advisory Agreement, except with respect
to the date of execution. Consequently, upon shareholder approval, the
Investment Adviser will continue to render substantially the same services to
the Funds under the New Investment Advisory Agreements that it currently renders
to the Funds under the Current Investment Advisory Agreements.
As discussed above, the Board unanimously approved the New Investment
Advisory Agreements and recommends the approval of the New Investment Advisory
Agreements to shareholders. For information regarding the Board's considerations
in approving the New Investment Advisory Agreements, please see the section
above entitled "Board Considerations in Approving the New Agreements."
The Current Investment Advisory Agreements will remain in place until the
completion of the Transaction, at which time, as a result of the change in the
control of the Investment Adviser, the Current Investment Advisory Agreements
will terminate. However, completion of the Transaction will be subject to
certain closing conditions, including: (a) the receipt of approvals required for
the assignment or replacement of investment advisory contracts relating to 80%
or more of the total net assets under management by the Investment Adviser and
certain affiliates that will be controlled by the Purchaser; and, (b) with
respect to the Purchase Transaction only, the approval of a corporate
restructuring called a demutualization by the insurance policyholders who
presently own SBHC, to the extent required by applicable law. If for some reason
the Transaction does not occur, the Current Investment Advisory Agreements will
not automatically terminate and will remain in effect, and the New Investment
Advisory Agreements will not be entered into, even if they have been approved by
Fund shareholders.
14
THE INVESTMENT ADVISER
PADCO Advisors, Inc., which operates under the name Rydex Investments, is
located at 9601 Blackwell Road, Suite 500, Rockville, Maryland 20850 and
currently serves as investment adviser to the Funds pursuant to the Current
Investment Advisory Agreements. Information regarding the Current Investment
Advisory Agreements, including (a) the date of the agreement, (b) the date on
which it was last approved by shareholders and (c) the rate of compensation to
the Investment Adviser, is provided in Appendix B. If the New Investment
Advisory Agreements are approved by shareholders, they will continue for an
initial term of two years and for subsequent one-year terms so long as they are
renewed annually in accordance with their terms (see discussion under "Term and
Continuance" below).
Information regarding the name(s), address(es) and principal occupation(s)
of the principal executive officer(s) and director(s) of the Investment Adviser
is set forth in Appendix C. A list of the Trustees and officers of the Trusts
who hold positions with the Investment Adviser also is set forth in Appendix C.
In addition, set forth in Appendix D-1 is a list of other registered investment
companies with similar investment objectives as each Fund, for which the
Investment Adviser acts as investment manager, adviser or sub-adviser.
Currently, the Investment Adviser is a wholly-owned subsidiary of Rydex
Holdings, LLC, which is a wholly-owned subsidiary of SBC. SBC is wholly owned by
SBHC, One Security Benefit Place, Topeka, Kansas 66636-0001. Upon completion of
the Transaction, the Purchaser will either receive: (a) a 100% ownership stake
in SBC, the parent company of the Investment Adviser, SGI and affiliates; or (b)
a 100% ownership stake in SBC's asset management business, which includes the
Investment Adviser, SGI and certain affiliates. For more information on the
Transaction, please see the section above entitled "Information Regarding the
Change in Control of the Investment Adviser and SGI."
MATERIAL TERMS OF THE NEW INVESTMENT ADVISORY AGREEMENTS
The following summary of the New Investment Advisory Agreements summarizes
the material terms of the New Investment Advisory Agreements and is qualified in
its entirety by reference to the New Investment Advisory Agreements, forms of
which are attached in Appendix A.
DUTIES OF THE INVESTMENT ADVISER. Under the Current Investment Advisory
Agreements and the New Investment Advisory Agreements (each, an "Advisory
Agreement" and collectively, the "Advisory Agreements"), the Investment Adviser
is required to:
o provide the Funds with investment research, advice and supervision and
shall furnish continuously an investment program for the Funds,
consistent with the respective investment objectives and policies of each
Fund;
15
o determine, in its discretion and without prior consultation, what
securities shall be purchased for the Funds, what securities shall be
held or sold by the Funds and what portion of the Funds' assets shall be
held uninvested in cash, subject always to the provisions of each Trust's
Declaration of Trust, By-Laws and registration statement on file with the
U.S. Securities and Exchange Commission (the "SEC");
o discharge its responsibilities subject to the control of the officers and
the Board, and in compliance with the objectives, policies, and
limitations set forth in the Funds' prospectus(es) and applicable laws
and regulations;
o vote any proxies for Fund securities;
o provide the Trusts, and any other agent designated by the Trusts, with
records concerning the Investment Adviser's activities which each Fund is
required to maintain; and
o provide other reports reasonably requested by the Trusts' officers and
Board concerning the Investment Adviser's discharge of the foregoing
responsibilities.
INDEMNITY OBLIGATION. Under the Advisory Agreements, the Investment Adviser
shall indemnify and hold harmless the Trusts and all affiliated persons thereof
(within the meaning of Section 2(a)(3) of the 1940 Act) and all controlling
persons (as described in Section 15 of the Securities Act of 1933) against any
and all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses) by reason of or arising out of: (a) the Investment
Adviser being in material violation of any applicable federal or state law, rule
or regulation or any investment policy or restriction set forth in the Funds'
registration statements or any written guidelines or instruction provided in
writing by the Board; (b) a Fund's failure to satisfy the diversification or
source of income requirements of Subchapter M of the Internal Revenue Code; or
(c) the Investment Adviser's willful misfeasance, bad faith or gross negligence
generally in the performance of its duties or its reckless disregard of its
obligations and duties under the Advisory Agreements.
TERM AND CONTINUANCE. Each Advisory Agreement provides that unless
terminated as provided therein, the Advisory Agreement shall continue for an
initial term of two years. Thereafter, the Advisory Agreement shall continue in
effect for successive annual periods provided such continuance is specifically
approved at least annually (a) by the vote of the Trustees or by a vote of the
shareholders; and (b) by the vote of a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
Each Advisory Agreement may be terminated with respect to a Fund at any time
without payment of any penalty, by a Fund upon the vote of either the Board or
by a majority of the outstanding voting securities of the Fund. The Investment
Adviser
16
may also, by not more than sixty (60) days' nor less than thirty (30) days'
written notice, terminate the Advisory Agreements. Each Advisory Agreement will
terminate automatically in the event of its "assignment" (as that term is
defined under the 1940 Act).
BOARD RECOMMENDATION ON PROPOSAL 1
At its January 2010 Meeting, based on its deliberations on and evaluation of
the information described above, the Board, including all of the Independent
Trustees, unanimously: (a) concluded that the terms of the New Investment
Advisory Agreements are fair and reasonable; (b) concluded that the Investment
Adviser's fees are reasonable in light of the services that the Investment
Adviser will provide to the Funds; and (c) agreed to approve the New Investment
Advisory Agreements for an initial term of two years and to recommend the
approval of the New Investment Advisory Agreements to shareholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE FUNDS VOTE "FOR" PROPOSAL 1
17
PROPOSAL 2
THE APPROVAL OF NEW SUB-ADVISORY AGREEMENTS
WITH RESPECT TO:
RYDEX|SGI GLOBAL 130/30 STRATEGY FUND
RYDEX|SGI GLOBAL MARKET NEUTRAL FUND
As discussed above, Proposal 2 relates to the approval by shareholders of
the New Sub-Advisory Agreements between the Investment Adviser and SGI with
respect to Rydex|SGI Global 130/30 Strategy Fund and Rydex|SGI Global Market
Neutral Fund. You are being asked to vote separately on Proposal 2 solely with
respect to the Sub-Advised Fund(s) that you own. A form of the New Sub-Advisory
Agreements is attached in Appendix E.
The terms of each New Sub-Advisory Agreement are identical to those of the
corresponding Current Sub-Advisory Agreement, except with respect to the date of
execution. Consequently, upon shareholder approval, SGI will continue to render
substantially the same services to the Sub-Advised Funds under the New
Sub-Advisory Agreements that it currently renders to the Sub-Advised Funds under
the Current Sub-Advisory Agreements.
As discussed above, the Board unanimously approved the New Sub-Advisory
Agreements and recommends the approval of the New Sub-Advisory Agreements to
shareholders. For information regarding the Board's considerations in approving
the New Sub-Advisory Agreements, please see the section above entitled "Board
Considerations in Approving the New Agreements."
The Current Sub-Advisory Agreements will remain in place until the
completion of the Transaction, at which time, as a result of the change in the
control of the Investment Adviser and SGI, the Current Sub-Advisory Agreements
will terminate. Thereafter, subject to shareholder approval, the New
Sub-Advisory Agreements will go into effect.
However, completion of the Transaction will be subject to certain closing
conditions, including: (a) the receipt of approvals required for the assignment
or replacement of investment advisory contracts relating to 80% or more of the
total net assets under management by the Investment Adviser and certain
affiliates that will be controlled by the Purchaser; and, (b) with respect to
the Purchase Transaction only, the approval of a corporate restructuring called
a demutualization by the insurance policyholders who presently own SBHC, to the
extent required by applicable law. If for some reason the Transaction does not
occur, the Current Sub-Advisory Agreements will not automatically terminate and
will remain in effect, and the New Sub-Advisory Agreements will not be entered
into, even if they have been approved by Fund shareholders.
The effectiveness of Proposal 2 is also contingent on the approval of
Proposal 1 by shareholders of the corresponding Sub-Advised Funds.
18
INFORMATION ABOUT SGI
Security Global Investors, LLC, located at 801 Montgomery Street, 2nd Floor,
San Francisco, CA 94133-5164, currently serves as sub-adviser to Rydex|SGI
Global 130/30 Strategy Fund and Rydex|SGI Global Market Neutral Fund pursuant to
the Current Sub-Advisory Agreement. Information regarding the Current
Sub-Advisory Agreement, including (a) the date of the agreement, (b) the date on
which it was last approved by shareholders and (c) the rate of compensation to
SGI, is provided in Appendix F. If the New Sub-Advisory Agreement is approved by
shareholders, it will continue for an initial term of two years and for
subsequent one-year terms so long as it is renewed annually in accordance with
its terms (see discussion under "Term and Continuance" below).
Information regarding the name(s), address(es) and principal occupation(s)
of the principal executive officer(s) and managing member(s) of SGI is set forth
in Appendix C. A list of the Trustees and officers of the Trusts who hold
positions with SGI also is set forth in Appendix C. In addition, set forth in
Appendix D-2 is a list of other registered investment companies with similar
investment objectives as the Sub-Advised Funds, for which SGI acts as investment
manager, adviser or sub-adviser.
Currently, SGI is a wholly-owned subsidiary of SBC. SBC is a wholly-owned
subsidiary of SBHC, located at One Security Benefit Place, Topeka, Kansas
66636-0001. Upon completion of the Transaction, the Purchaser will either
receive: (a) a 100% ownership stake in SBC, the parent company of the Investment
Adviser, SGI and affiliates; or (b) a 100% ownership stake in SBC's asset
management business, which includes the Investment Adviser, SGI and certain
affiliates. For more information on the Transaction, please see the section
above entitled "Information Regarding the Change in Control of the Investment
Adviser and SGI."
MATERIAL TERMS OF THE SGI SUB-ADVISORY AGREEMENT
The following summary of the New Sub-Advisory Agreement between the
Investment Adviser and SGI summarizes its material terms and is qualified in its
entirety by reference to such New Sub-Advisory Agreement, a form of which is
attached in Appendix E.
DUTIES OF SGI. Under the Current Sub-Advisory Agreement and the New
Sub-Advisory Agreement, each between the Investment Adviser and SGI
(collectively, the "SGI Sub-Advisory Agreements"), SGI, subject to the
supervision of the Investment Adviser and the Board, is responsible for managing
the assets of each of the Sub-Advised Funds, including making investment
decisions and placing orders to purchase and sell securities for such Funds, all
in accordance with the investment objective and policies of such Funds as
reflected in their current prospectuses and statement of additional information
and as may be adopted from time to time by the Board. In accordance with
applicable requirements, SGI will also maintain, and provide the Investment
Adviser with, all books and records relating to the transactions it executes or
that are otherwise required, and render to each of the Sub-Advised Funds and the
Investment Adviser such periodic and special reports at any time upon reasonable
request.
19
INDEMNITY OBLIGATION. Under the SGI Sub-Advisory Agreements, SGI shall
indemnify and hold harmless Rydex Series Funds and all affiliated persons
thereof (within the meaning of Section 2(a)(3) of the 1940 Act) and all their
respective controlling persons (as described in Section 15 of the Securities Act
of 1933) against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) by reason of or arising out of:
(a) SGI being in material violation of any applicable federal or state law, rule
or regulation or any investment policy or restriction set forth in registration
statement of a Sub-Advised Fund or any written guidelines or instruction
provided in writing by the Board; (b) a Sub-Advised Fund's failure to satisfy
the diversification or source of income requirements of Subchapter M of the
Internal Revenue Code; or (c) SGI's misfeasance or negligence generally in the
performance of its duties thereunder or its negligent disregard of its
obligations and duties thereunder.
TERM AND CONTINUANCE. Under their terms, the SGI Sub-Advisory Agreements
will remain in full force and effect for a period of up to two years from the
date of their execution, and will continue thereafter as long as their
continuance is approved at least annually by the Board or by vote of a majority
of the outstanding shares of a Sub-Advised Fund, as well as by a majority of the
Independent Trustees by vote cast in person at a meeting called for that
purpose. However, the SGI Sub-Advisory Agreements may be terminated at any time
upon 60 days' written notice without the payment of any penalty, either by vote
of a majority of the Board, by vote of a majority of the outstanding shares of a
Sub-Advised Fund, or by the Investment Adviser. The Investment Adviser may
terminate an SGI Sub-Advisory Agreement upon breach by SGI of its
representations or warranties, which shall not have been cured within 20 days of
receipt of written notice of such breach, or SGI becoming unable to discharge
its duties and obligations under such SGI Sub-Advisory Agreement. Additionally,
each SGI Sub-Advisory Agreement will terminate immediately in the event of its
assignment or upon the termination of the corresponding Investment Advisory
Agreement. SGI may terminate an SGI Sub-Advisory Agreement with respect to a
Sub-Advised Fund, on 120 days' written notice to the Investment Adviser and the
corresponding Fund.
BOARD RECOMMENDATION ON PROPOSAL 2
At its January 2010 Meeting, based on its deliberations on and evaluation of
the information described above, the Board, including all of the Independent
Trustees, unanimously: (a) concluded that the terms of the New Sub-Advisory
Agreements are fair and reasonable; (b) concluded that SGI's fees are reasonable
in light of the services that it will provide to the Sub-Advised Funds; and (c)
agreed to approve the New Sub-Advisory Agreements for an initial term of two
years and to recommend the approval of the New Sub-Advisory Agreements to
shareholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND
THAT SHAREHOLDERS OF THE SUB-ADVISED FUNDS
VOTE "FOR" PROPOSAL 2
20
PROPOSAL 3
THE APPROVAL OF A CHANGE TO THE FUNDAMENTAL INVESTMENT
POLICY ON BORROWING MONEY WITH RESPECT TO ALL FUNDS
Proposal 3 relates to a change to the "fundamental investment policy" on
borrowing for the Funds. The 1940 Act requires that each Fund adopt a
"fundamental" investment policy with respect to several types of activities,
including borrowing money. Borrowed money can be used to cover large and
unexpected redemption orders or to leverage a Fund's portfolio, thereby
potentially amplifying its gains and losses. Under the 1940 Act, an investment
policy that is "fundamental" may only be modified with the approval of
shareholders. Each Fund currently has in place a fundamental investment policy
on its ability to borrow money that is more prohibitive than the 1940 Act
requires, unnecessarily limiting investment strategies. In general, Proposal 3
is intended to provide the Funds the maximum possible amount of flexibility to
engage in borrowing activity, including borrowing for investment purposes,
consistent with current law and with the Funds' investment strategies and
objectives.
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY
If Proposal 3 is approved by shareholders, the fundamental investment policy
regarding borrowing for each Fund would read:
[The Fund] shall not borrow money, except as permitted under the Investment
Company Act of 1940, and as interpreted or modified by regulatory authority
having jurisdiction from time to time.
CURRENT FUNDAMENTAL INVESTMENT POLICY FOR ALL SERIES OF THE RYDEX SERIES
FUNDS (EXCEPT INVERSE NASDAQ-100(R) STRATEGY, INVERSE S&P 500 STRATEGY,
NOVA, NASDAQ-100(R), PRECIOUS METALS, GLOBAL MARKET NEUTRAL, GOVERNMENT
LONG BOND 1.2X STRATEGY, INVERSE GOVERNMENT LONG BOND STRATEGY AND
U.S. GOVERNMENT MONEY MARKET FUNDS)
The current fundamental investment policy regarding borrowing money for all
series of the Rydex Series Funds (except Inverse NASDAQ-100(R) Strategy, Inverse
S&P 500 Strategy, Nova, NASDAQ-100(R), Precious Metals, Global Market Neutral,
Government Long Bond 1.2x Strategy, Inverse Government Long Bond Strategy and
U.S. Government Money Market Funds) reads:
[Each Fund shall not] borrow money in an amount exceeding 33 1/3% of the
value of its total assets, provided that, for the purposes of this
limitation, investment strategies which either obligate the Fund to
purchase securities or require the Fund to segregate assets are not
considered to be borrowing (such investment strategies are only limited by
the Fund's ability to purchase securities or segregate assets equal to the
Fund's investment). Asset coverage of at least 300% is required for all
borrowing, except where the Fund has borrowed money for temporary purposes
in amounts not exceeding 5% of its
21
total assets. The Fund will not purchase securities while its borrowing
exceeds 5% of its total assets.
CURRENT FUNDAMENTAL INVESTMENT POLICY FOR THE INVERSE NASDAQ-100(R)
STRATEGY, INVERSE S&P 500 STRATEGY, NOVA, NASDAQ-100(R), PRECIOUS METALS,
GOVERNMENT LONG BOND 1.2X STRATEGY AND INVERSE GOVERNMENT LONG BOND
STRATEGY FUNDS, EACH A SERIES OF RYDEX SERIES FUNDS
The current fundamental investment policy regarding borrowing money for the
Inverse NASDAQ-100(R) Strategy, Inverse S&P 500 Strategy, Nova, NASDAQ-100(R),
Precious Metals, Government Long Bond 1.2x Strategy and Inverse Government Long
Bond Strategy Funds, each a series of Rydex Series Funds, reads:
[Each Fund shall not] borrow money, except (i) as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess
of 5% of the value of the Fund's total assets from a bank or (ii) in an
amount up to one-third of the value of the Fund's total assets, including
the amount borrowed, in order to meet redemption requests without
immediately selling portfolio instruments. This provision is not for
investment leverage but solely to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio instruments would be inconvenient or disadvantageous.
The Nova Fund and the Government Long Bond 1.2x Strategy Fund may
borrow money, subject to the conditions of [the paragraph above], for
the purpose of investment leverage.
The Inverse Government Long Bond Strategy Fund may borrow money,
subject to the conditions of [the paragraph above], but shall not make
purchases while borrowing in excess of 5% of the value of its assets.
For purposes of this subparagraph, Fund assets invested in reverse
repurchase agreements are included in the amounts borrowed.
CURRENT FUNDAMENTAL INVESTMENT POLICY FOR THE GLOBAL MARKET
NEUTRAL FUND, A SERIES OF RYDEX SERIES FUNDS
The current fundamental investment policy regarding borrowing money for the
Global Market Neutral Fund, a series of Rydex Series Funds, reads:
[The Fund shall not] borrow money in an amount exceeding 33 1/3% of the
value of its total assets, provided that, for the purposes of this
limitation, investment strategies which either obligate the Fund to
purchase securities or require the Fund to segregate assets are not
considered to be borrowing (such investment strategies are only limited by
the Fund's ability to purchase securities or segregate assets equal to the
Fund's investment). Asset coverage of at least 300% is required for all
borrowing, except where the Fund has borrowed money for temporary purposes
in amounts not exceeding 5% of its total assets.
22
CURRENT FUNDAMENTAL INVESTMENT POLICY FOR THE U.S. GOVERNMENT
MONEY MARKET FUND, A SERIES OF RYDEX SERIES FUNDS
The current fundamental investment policy regarding borrowing money for the
U.S. Government Money Market Fund, a series of Rydex Series Funds, reads:
[The Fund may borrow] money to facilitate management of the Fund's
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments would be inconvenient or
disadvantageous. Such borrowing is not for investment purposes and will be
repaid by [the Fund] promptly.
As required by the [1940 Act], [the] Fund must maintain continuous asset
coverage (total assets, including assets acquired with borrowed funds, less
liabilities exclusive of borrowings) of 300% of all amounts borrowed. If,
at any time, the value of [the] Fund's assets should fail to meet this 300%
coverage test, the Fund, within three days (not including Sundays and
holidays), will reduce the amount of the Fund's borrowings to the extent
necessary to meet this 300% coverage requirement. Maintenance of this
percentage limitation may result in the sale of portfolio securities at a
time when investment considerations otherwise indicate that it would be
disadvantageous to do so.
In addition to the foregoing, the [Fund is] authorized to borrow money as a
temporary measure for extraordinary or emergency purposes in amounts not in
excess of 5% of the value of [the] Fund's total assets. Borrowings for
extraordinary or emergency purposes are not subject to the foregoing 300%
asset coverage requirement. The [Fund is] authorized to pledge portfolio
securities as the [Investment Adviser] deems appropriate in connection with
any borrowings for extraordinary or emergency purposes.
CURRENT FUNDAMENTAL INVESTMENT POLICY FOR ALL SERIES OF THE
RYDEX DYNAMIC FUNDS
The current fundamental investment policy regarding borrowing money for all
series of the Rydex Dynamic Funds reads:
[Each Fund shall not] borrow money in an amount exceeding 33 1/3% of the
value of its total assets, provided that, for the purposes of this
limitation, investment strategies which either obligate the Fund to
purchase securities or require the Fund to segregate assets are not
considered to be borrowing. Asset coverage of at least 300% is required for
all borrowing, except where the Fund has borrowed money for temporary
purposes in amounts not exceeding 5% of its total assets. The Fund will
not purchase securities while its borrowing exceeds 5% of its total assets.
DISCUSSION OF PROPOSED MODIFICATION
The proposed modification to each Fund's fundamental investment policy
on borrowing money (including any interpretation provided in the Fund's
registration
23
statement) would allow the Funds to borrow to the extent permitted by the 1940
Act. The 1940 Act currently permits a fund to borrow from banks for any
purpose, in an amount up to 33 1/3% of the fund's assets, including the amount
borrowed. Under the 1940 Act, a fund may also issue a note evidencing a
temporary loan (i.e., one that must be repaid within 60 days), as long as it
does not exceed 5% of the fund's total assets.
The proposed modification would also allow each Fund's borrowing policy to
conform to future changes in the 1940 Act -- and interpretations thereunder --
without further Board or shareholder action. The modification would therefore
ensure that the Funds maintain the maximum possible amount of flexibility to
engage in borrowing activity, without incurring the additional expenses
necessary to further amend the Funds' fundamental investment policies.
The proposed modification would expand the ability of the Funds to borrow
for investment purposes. Currently, each Fund's fundamental investment policy
limits the ability of the Fund to borrow except subject to certain restrictions
(e.g., limitation on purchasing securities when borrowing exceeds 5% of total
assets) or under certain circumstances (e.g., to meet redemption requests). If
approved, the change would permit each Fund to borrow for any purpose. However,
borrowing by a Fund would occur only if consistent with the Fund's disclosure in
its registration statement.
The Investment Adviser and SGI, as applicable, do not presently intend to
materially increase the borrowing level of any Fund, and believe that the
proposed change will not materially affect the investment risks currently
associated with any Fund. To the extent that any borrowing by a Fund involves
leveraging, however, the Fund's net asset value may be subject to increased
volatility. This is because borrowing can magnify the effect of an increase or
decrease in the value of a Fund's holdings. In addition, any money borrowed will
be subject to interest and other costs, which may exceed the gain on securities
purchased with borrowed money.
Should a Fund's shareholders not approve the proposal to amend the Fund's
fundamental investment policy on borrowing money, the Fund's current fundamental
investment policy on borrowing money (including any interpretation provided in
the Fund's registration statement) would continue to apply unchanged.
BOARD RECOMMENDATION ON PROPOSAL 3
At its January 2010 Meeting, based on its deliberations on and evaluation of
the information described above and such other information deemed relevant, the
Board, including all of the Independent Trustees, unanimously agreed to approve
the proposed new fundamental investment policy on borrowing money and to
recommend the approval of the proposed new fundamental investment policy on
borrowing money to shareholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE FUNDS VOTE "FOR" PROPOSAL 3
24
OTHER BUSINESS
The Trustees do not know of any matters to be presented at the Meeting other
than those set forth in this Joint Proxy Statement. If other business should
properly come before the Meeting, proxies will be voted in accordance with the
judgment of the persons named in the accompanying proxy.
ADDITIONAL INFORMATION
ADMINISTRATOR, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
The principal underwriter/distributor of the Trusts is Rydex Distributors,
Inc. ("Rydex Distributors"), located at 9601 Blackwell Road, Suite 500,
Rockville, Maryland 20850, an affiliate of the Investment Adviser and SGI. Rydex
Fund Services, Inc. ("Rydex Fund Services"), also an affiliate of the Investment
Adviser and SGI, is located at 9601 Blackwell Road, Suite 500, Rockville,
Maryland 20850 and provides general administrative, shareholder, dividend
disbursement, transfer agent and registrar services to the Funds. Information
regarding the fees paid by each Fund to each of Rydex Distributors and Rydex
Fund Services during the previous fiscal year is provided in Appendix B.
Although the Purchaser will acquire control of the Affiliated Service
Providers as a result of the Transaction, shareholder approval is not required
in order for the Affiliated Service Providers to continue providing services to
the Funds after the closing of the Transaction. The Board has been assured that
there will be no material change in the nature or quality of the services
provided by the Affiliated Service Providers to each Fund due to the changes in
control.
AFFILIATIONS AND AFFILIATED BROKERAGE
During the Funds' most recent fiscal years, the Funds paid no commissions on
portfolio brokerage transactions to brokers who may be deemed to be affiliated
persons of the Funds, the Investment Adviser or SGI, or affiliated persons of
such persons ("Affiliated Brokers").
OTHER INFORMATION
Proxy materials, reports and other information filed by the Funds can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
100 F Street, NE, Washington, DC 20549. The SEC maintains an Internet web site
(at http://www.sec.gov) which contains other information about the Funds.
VOTING INFORMATION
PROXY SOLICITATION. The principal solicitation of proxies will be by the
mailing of this Joint Proxy Statement on or about March 22, 2010, but proxies
may also be solicited by telephone and/or in person by representatives of the
Trusts, regular employees of the Investment Adviser or SGI or their
affiliate(s), or The Altman Group, a private proxy services firm. If we have not
received your vote as the date of the Meeting approaches, you may receive a
telephone call from these parties to ask
25
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.
COST OF THE MEETING. The cost of the Meeting, including the costs of
retaining The Altman Group, preparing and mailing of the notice, proxy statement
and proxy, and the solicitation of proxies, including reimbursement to
broker-dealers and others who forwarded proxy materials to their clients, will
be borne by SecBen. The estimated cost of retaining The Altman Group is
approximately $456,817.
SHAREHOLDER VOTING. Shareholders of the Funds who own shares at the close of
business on the Record Date will be entitled to notice of, and vote at, the
Meeting. Each whole share is entitled to one vote, and each fractional share is
entitled to a proportionate fractional vote on each matter as to which such
shares are to be voted at the Meeting. One-third (33 1/3%) of a Fund's shares
entitled to vote on a Proposal constitutes a quorum. Abstentions and broker
non-votes will not be counted for or against a Proposal, but will be counted for
purposes of determining whether a quorum is present. Because the affirmative
vote of a majority of the outstanding voting securities of each Fund, as defined
below, is required to approve Proposal 1, Proposal 2, and Proposal 3,
abstentions and broker non-votes will effectively be a vote against Proposal 1,
Proposal 2, and Proposal 3. "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.
If a quorum is not present at the Meeting, or if a quorum is present at the
Meeting but sufficient votes to approve one or more of the proposals are not
received, or if other matters arise requiring shareholder attention, the persons
named as proxy agents may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares present at the Meeting or
represented by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote "FOR" such proposal in favor of such an adjournment,
and will vote those proxies required to be voted "AGAINST" such proposal,
against such an adjournment.
Information regarding the number of issued and outstanding shares of each
Fund as of the Record Date is provided in Appendix G, representing the same
number of votes for each of such Funds. The persons who are known to have owned
beneficially 5% or more of each Fund's outstanding shares as of the Record Date
are listed in Appendix H. As of the Record Date, the Trustees and officers, as a
group, owned less than 1% of the outstanding shares of each Fund. As of the
Record Date, there were no persons who were known to control each Fund.
The person(s) named as proxies on the enclosed proxy card will vote in
accordance with your directions, if your proxy is received properly executed. If
we receive your proxy, and it is executed properly, but you give no voting
instructions
26
with respect to any proposal, your shares will be voted "FOR" Proposal 1, "FOR"
Proposal 2, and "FOR" Proposal 3. The duly appointed proxies may, in their
discretion, vote upon such other matters as may properly come before the
Meeting.
In order that your shares may be represented at the Meeting, you are
requested to vote your shares by mail, Internet or telephone by following the
enclosed instructions. IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT
RETURN YOUR PROXY CARD, UNLESS YOU LATER ELECT TO CHANGE YOUR VOTE. You may
revoke your proxy: (a) at any time prior to its exercise by written notice of
its revocation to the secretary of the Trusts prior to the Meeting; (b) by the
subsequent execution and timely return of another proxy prior to the Meeting
(following the methods noted above); or (c) by being present and voting in
person at the Meeting and giving oral notice of revocation to the chair of the
Meeting. However, attendance in-person at the Meeting, by itself, will not
revoke a previously-tendered proxy.
REQUIRED VOTE. Approval of each Proposal requires the vote of a "majority of
the outstanding voting securities" of a Fund, which means the vote of 67% or
more of the shares that are present at the Meeting, if the holders of more than
50% of the outstanding shares are present or represented by proxy, or the vote
of more than 50% of the Fund's outstanding shares, whichever is less.
The Current Agreements will remain in place until the completion of the
Transaction, at which time, as a result of the change in the control of the
Investment Adviser and SGI, the Current Agreements will terminate and, subject
to shareholder approval, the New Agreements will go into effect. As discussed in
the section above entitled "Information Regarding the Change in Control of the
Investment Adviser and SGI," completion of the Transaction will be subject to
certain closing conditions. As a result, if for some reason the Transaction does
not occur, the Current Agreements will not automatically terminate and will
remain in effect, and the New Agreements will not be entered into, even if they
have been approved by Fund shareholders. If Proposal 1 and/or Proposal 2 are not
approved by shareholders of any Fund, the Board will evaluate other short- and
long-term options.
With respect to Proposal 3, should a Fund's shareholders not approve the
proposal to amend the Fund's fundamental investment policy on borrowing money,
the Fund's current fundamental investment policy on borrowing money would
continue to apply unchanged.
SHAREHOLDERS SHARING THE SAME ADDRESS. As permitted by law, only one copy of
this Joint Proxy Statement may be delivered to shareholders residing at the same
address, unless such shareholders have notified the Trusts of their desire to
receive multiple copies of the shareholder reports and proxy statements that
each Trust sends. If you would like to receive an additional copy, please
contact the Trusts by writing to the Trusts' address, or by calling the
telephone number shown on the front page of this Joint Proxy Statement. The
Trusts will then promptly deliver, upon request, a separate copy of this Joint
Proxy Statement to any shareholder residing at
27
an address to which only one copy was mailed. Shareholders wishing to receive
separate copies of the Trusts' shareholder reports and proxy statements in the
future, and shareholders sharing an address that wish to receive a single copy
if they are receiving multiple copies, should also send a request as indicated.
SHAREHOLDER PROPOSALS
The Trusts are organized as statutory trusts under the laws of Delaware. As
such, the Trusts are not required to, and do not, hold annual shareholder
meetings. Nonetheless, the Board may call a special meeting of shareholders for
action by shareholder vote as may be required by the 1940 Act or as required or
permitted by each Trust's Declaration of Trust and By-Laws. Shareholders who
wish to present a proposal for action at a future meeting should submit a
written proposal to the Secretary of the Trust, c/o Rydex Series Funds or Rydex
Dynamic Funds, 9601 Blackwell Road, Suite 500, Rockville, Maryland 20850 for
inclusion in a future proxy statement. Shareholder proposals to be presented at
any future meeting of a Trust must be received by the Trust in writing within a
reasonable amount of time before the Trust solicits proxies for that meeting, in
order to be considered for inclusion in the proxy materials for that meeting.
Whether a proposal is included in a proxy statement will be determined in
accordance with applicable federal and state laws. Shareholders retain the right
to request that a meeting of the shareholders be held for the purpose of
considering matters requiring shareholder approval.
TO ENSURE THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING, PROMPT EXECUTION AND
RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG WITH INSTRUCTIONS ON HOW TO
VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU PREFER TO VOTE BY ONE OF THOSE
METHODS.
By Order of the Boards of Trustees,
Sincerely,
/s/ Richard M. Goldman
Richard M. Goldman
President
28
APPENDIX A
FORMS OF INVESTMENT ADVISORY AGREEMENTS
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of this [ ] day of [ ], 2010 by and between
RYDEX SERIES FUNDS (the "Trust"), a Delaware statutory trust registered as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and PADCO ADVISORS, INC., a Maryland corporation with its principal
place of business at 9601 Blackwell Road, Suite 500, Rockville, Maryland 20850
(the "Adviser").
W I T N E S S E T H
WHEREAS, the Board of Trustees (the "Board") of the Trust has selected the
Adviser to act as investment adviser to the Trust on behalf of the series set
forth on Schedule A to this Agreement (each a "Fund" and, collectively, the
"Funds"), as such Schedule may be amended from time to time upon mutual
agreement of the parties, and to provide certain related services, as more fully
set forth below, and to perform such services under the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, the Trust and the Adviser do hereby agree as follows:
1. THE ADVISER'S SERVICES.
(a) Discretionary Investment Management Services. The Adviser shall act
as investment adviser with respect to the Funds. In such capacity, the
Adviser shall, subject to the supervision of the Board, regularly provide
the Funds with investment research, advice and supervision and shall furnish
continuously an investment program for the Funds, consistent with the
respective investment objectives and policies of each Fund. The Adviser
shall determine, from time to time, what securities shall be purchased for
the Funds, what securities shall be held or sold by the Funds and what
portion of the Funds' assets shall be held uninvested in cash, subject
always to the provisions of the Trust's Declaration of Trust, By-Laws and
its registration statement on Form N-1A (the "Registration Statement") under
the 1940 Act, and under the Securities Act of 1933, as amended (the "1933
Act"), covering Fund shares, as filed with the Securities and Exchange
Commission (the "Commission"), and to the investment objectives, policies
and restrictions of the Funds, as each of the same shall be from time to
time in effect. To carry out such obligations, the Adviser shall exercise
full discretion and act for the Funds in the same manner and with the same
force and effect as the Funds themselves might or could do with respect to
purchases, sales or other transactions, as well as with respect to all other
such things necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions. No reference in this Agreement to
the Adviser having full discretionary authority over each Fund's investments
shall in any way limit the
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right of the Board, in its sole discretion, to establish or revise policies
in connection with the management of a Fund's assets or to otherwise
exercise its right to control the overall management of a Fund.
(b) Compliance. The Adviser agrees to comply with the requirements of
the 1940 Act, the Investment Advisers Act of 1940 (the "Advisers Act"), the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the Commodity Exchange Act and the respective rules and regulations
thereunder, as applicable, as well as with all other applicable federal and
state laws, rules, regulations and case law that relate to the services and
relationships described hereunder and to the conduct of its business as a
registered investment adviser. The Adviser also agrees to comply with the
objectives, policies and restrictions set forth in the Registration
Statement, as amended or supplemented, of the Funds, and with any policies,
guidelines, instructions and procedures approved by the Board and provided
to the Adviser. In selecting each Fund's portfolio securities and performing
the Adviser's obligations hereunder, the Adviser shall cause the Fund to
comply with the diversification and source of income requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
for qualification as a regulated investment company. The Adviser shall
maintain compliance procedures that it reasonably believes are adequate to
ensure its compliance with the foregoing. No supervisory activity undertaken
by the Board shall limit the Adviser's full responsibility for any of the
foregoing.
(c) Proxy Voting. The Board has the authority to determine how proxies
with respect to securities that are held by the Funds shall be voted, and
the Board has initially determined to delegate the authority and
responsibility to vote proxies for the Funds' securities to the Adviser. So
long as proxy voting authority for the Funds has been delegated to the
Adviser, the Adviser shall exercise its proxy voting responsibilities. The
Adviser shall carry out such responsibility in accordance with any
instructions that the Board shall provide from time to time, and at all
times in a manner consistent with Rule 206(4)-6 under the Advisers Act and
its fiduciary responsibilities to the Trust. The Adviser shall provide
periodic reports and keep records relating to proxy voting as the Board may
reasonably request or as may be necessary for the Funds to comply with the
1940 Act and other applicable law. Any such delegation of proxy voting
responsibility to the Adviser may be revoked or modified by the Board at any
time.
(d) Recordkeeping. The Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the
Funds, except as otherwise provided herein or as may be necessary for the
Adviser to supply to the Trust or its Board the information required to be
supplied under this Agreement.
The Adviser shall maintain separate books and detailed records of all
matters pertaining to Fund assets advised by the Adviser required by Rule
31a-1 under the 1940 Act (other than those records being maintained by any
A-2
administrator, custodian or transfer agent appointed by the Funds) relating
to its responsibilities provided hereunder with respect to the Funds, and
shall preserve such records for the periods and in a manner prescribed
therefore by Rule 31a-2 under the 1940 Act (the "Fund Books and Records").
The Fund Books and Records shall be available to the Board at any time upon
request, shall be delivered to the Trust upon the termination of this
Agreement and shall be available without delay during any day the Trust is
open for business.
(e) Holdings Information and Pricing. The Adviser shall provide regular
reports regarding Fund holdings, and shall, on its own initiative, furnish
the Trust and its Board from time to time with whatever information the
Adviser believes is appropriate for this purpose. The Adviser agrees to
immediately notify the Trust if the Adviser reasonably believes that the
value of any security held by a Fund may not reflect fair value. The Adviser
agrees to provide any pricing information of which the Adviser is aware to
the Trust, its Board and/or any Fund pricing agent to assist in the
determination of the fair value of any Fund holdings for which market
quotations are not readily available or as otherwise required in accordance
with the 1940 Act or the Trust's valuation procedures for the purpose of
calculating the Fund net asset value in accordance with procedures and
methods established by the Board.
(f) Cooperation with Agents of the Trust. The Adviser agrees to
cooperate with and provide reasonable assistance to the Trust, any Trust
custodian or foreign subcustodians, any Trust pricing agents and all other
agents and representatives of the Trust, such information with respect to
the Funds as they may reasonably request from time to time in the
performance of their obligations, provide prompt responses to reasonable
requests made by such persons and establish appropriate interfaces with each
so as to promote the efficient exchange of information and compliance with
applicable laws and regulations.
2. CODE OF ETHICS. The Adviser has adopted a written code of ethics that it
reasonably believes complies with the requirements of Rule 17j-1 under the 1940
Act, which it will provide to the Trust. The Adviser shall ensure that its
Access Persons (as defined in the Adviser's Code of Ethics) comply in all
material respects with the Adviser's Code of Ethics, as in effect from time to
time. Upon request, the Adviser shall provide the Trust with a (i) a copy of the
Adviser's current Code of Ethics, as in effect from time to time, and (ii)
certification that it has adopted procedures reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by the Adviser's Code of
Ethics. Annually, the Adviser shall furnish a written report, which complies
with the requirements of Rule 17j-1, concerning the Adviser's Code of Ethics to
the Trust. The Adviser shall respond to requests for information from the Trust
as to violations of the Code of Ethics by Access Persons and the sanctions
imposed by the Adviser. The Adviser shall immediately notify the Trust of any
material violation of the Code of Ethics, whether or not such violation relates
to a security held by any Fund.
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3. INFORMATION AND REPORTING. The Adviser shall provide the Trust and its
respective officers with such periodic reports concerning the obligations the
Adviser has assumed under this Agreement as the Trust may from time to time
reasonably request.
(a) Notification of Breach/Compliance Reports. The Adviser shall notify
the Trust immediately upon detection of (i) any material failure to manage
any Fund in accordance with its investment objectives and policies or any
applicable law; or (ii) any material breach of the Funds' or the Adviser's
policies, guidelines or procedures. In addition, the Adviser shall provide a
quarterly report regarding each Fund's compliance with its investment
objectives and policies, applicable law, including, but not limited to the
1940 Act and Subchapter M of the Code, and the Fund's policies, guidelines
or procedures as applicable to the Adviser's obligations under this
Agreement. The Adviser agrees to correct any such failure promptly and to
take any action that the Board may reasonably request in connection with any
such breach. Upon request, the Adviser shall also provide the officers of
the Trust with supporting certifications in connection with such
certifications of Fund financial statements and disclosure controls pursuant
to the Sarbanes-Oxley Act. The Adviser will promptly notify the Trust in the
event (i) the Adviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before or
by any court, public board, or body, involving the affairs of the Trust
(excluding class action suits in which a Fund is a member of the plaintiff
class by reason of the Fund's ownership of shares in the defendant) or the
compliance by the Adviser with the federal or state securities laws or (ii)
an actual change in control of the Adviser resulting in an "assignment" (as
defined in the 1940 Act) has occurred or is otherwise proposed to occur.
(b) Board and Filings Information. The Adviser will also provide the
Trust with any information reasonably requested regarding its management of
the Funds required for any meeting of the Board, or for any shareholder
report, amended registration statement, proxy statement, or prospectus
supplement to be filed by the Trust with the Commission. The Adviser will
make its officers and employees available to meet with the Board from time
to time on due notice to review its investment management services to the
Funds in light of current and prospective economic and market conditions and
shall furnish to the Board such information as may reasonably be necessary
in order for the Board to evaluate this Agreement or any proposed amendments
thereto.
(c) Transaction Information. The Adviser shall furnish to the Trust
such information concerning portfolio transactions as may be necessary to
enable the Trust or its designated agent to perform such compliance testing
on the Funds and the Adviser's services as the Trust may, in its sole
discretion, determine to be appropriate. The provision of such information
by the Adviser to the Trust or its designated agent in no way relieves the
Adviser of its own responsibilities under this Agreement.
A-4
4. BROKERAGE.
(a) Principal Transactions. In connection with purchases or sales of
securities for the account of a Fund, neither the Adviser nor any of its
directors, officers or employees will act as a principal or agent or receive
any commission except as permitted by the 1940 Act.
(b) Placement of Orders. The Adviser shall arrange for the placing of
all orders for the purchase and sale of securities for a Fund's account with
brokers or dealers selected by the Adviser. In the selection of such brokers
or dealers and the placing of such orders, the Adviser is directed at all
times to seek for the Fund the most favorable execution and net price
available under the circumstances. It is also understood that it is
desirable for the Fund that the Adviser have access to brokerage and
research services provided by brokers who may execute brokerage transactions
at a higher cost to the Fund than may result when allocating brokerage to
other brokers, consistent with section 28(e) of the 1934 Act and any
Commission staff interpretations thereof. Therefore, the Adviser is
authorized to place orders for the purchase and sale of securities for a
Fund with such brokers, subject to review by the Board from time to time
with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to the
Adviser in connection with its or its affiliates' services to other clients.
(c) Aggregated Transactions. On occasions when the Adviser deems the
purchase or sale of a security to be in the best interest of a Fund as well
as other clients of the Adviser, the Adviser may, to the extent permitted by
applicable law and regulations, aggregate the order for securities to be
sold or purchased. In such event, the Adviser will allocate securities or
futures contracts so purchased or sold, as well as the expenses incurred in
the transaction, in the manner the Adviser reasonably considers to be
equitable and consistent with its fiduciary obligations to the Fund and to
such other clients under the circumstances.
(d) Affiliated Brokers. The Adviser or any of its affiliates may act as
broker in connection with the purchase or sale of securities or other
investments for a Fund, subject to: (a) the requirement that the Adviser
seek to obtain best execution and price within the policy guidelines
determined by the Board and set forth in the Fund's current prospectus and
SAI; (b) the provisions of the 1940 Act; (c) the provisions of the Advisers
Act; (d) the provisions of the 1934 Act; and (e) other provisions of
applicable law. These brokerage services are not within the scope of the
duties of the Adviser under this Agreement. Subject to the requirements of
applicable law and any procedures adopted by the Board, the Adviser or its
affiliates may receive brokerage commissions, fees or other remuneration
from a Fund for these services in addition to the Adviser's fees for
services under this Agreement.
A-5
5. CUSTODY. Nothing in this Agreement shall permit the Adviser to take or
receive physical possession of cash, securities or other investments of a Fund.
6. ALLOCATION OF CHARGES AND EXPENSES. The Adviser will bear its own costs
of providing services hereunder. Other than as herein specifically indicated,
the Adviser shall not be responsible for a Fund's expenses, including brokerage
and other expenses incurred in placing orders for the purchase and sale of
securities and other investment instruments.
Notwithstanding the foregoing paragraph, with respect to the All Asset
Conservative, All Asset Moderate, All Asset Aggressive, and Alternative
Strategies Allocation Funds, the Adviser will bear its own costs of providing
services hereunder. In addition, the Adviser agrees to pay all expenses
incurred by the foregoing Funds, except for acquired fund fees and expenses,
interest, taxes, brokerage and other expenses incurred in placing orders for the
purchase and sale of securities and other investment instruments, extraordinary
expenses, and distribution fees and expenses paid by the Funds under any
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act.
Notwithstanding the foregoing paragraphs, with respect to the Multi-Hedge
Strategies Fund, the Adviser will bear its own costs of providing services
hereunder. The Adviser agrees to pay all expenses incurred by the foregoing
Fund, except for interest, taxes, brokerage and other expenses incurred in
placing orders for the purchase and sale of securities and other investment
instruments, extraordinary expenses, and distribution fees and expenses paid by
the Fund under any distribution plan adopted pursuant to Rule 12b-1 under the
1940 Act.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Properly Registered. The Adviser is registered as an investment
adviser under the Advisers Act, and will remain so registered for the
duration of this Agreement. The Adviser is not prohibited by the Advisers
Act or the 1940 Act from performing the services contemplated by this
Agreement, and to the best knowledge of the Adviser, there is no proceeding
or investigation that is reasonably likely to result in the Adviser being
prohibited from performing the services contemplated by this Agreement. The
Adviser agrees to promptly notify the Trust of the occurrence of any event
that would disqualify the Adviser from serving as an investment adviser to
an investment company. The Adviser is in compliance in all material respects
with all applicable federal and state law in connection with its investment
management operations.
(b) ADV Disclosure. The Adviser has provided the Trust with a copy of
its Form ADV as most recently filed with the Commission and will, promptly
after filing any amendment to its Form ADV with the Commission, furnish a
copy of such amendment(s) to the Trust. The information contained in the
Adviser's Form ADV is accurate and complete in all material respects and
does not omit to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made,
not misleading.
A-6
(c) Fund Disclosure Documents. The Adviser has reviewed and will in the
future review, the Registration Statement, and any amendments or supplements
thereto, the annual or semi-annual reports to shareholders, other reports
filed with the Commission and any marketing material of the Funds
(collectively the "Disclosure Documents") and represents and warrants that
with respect to disclosure about the Adviser, the manner in which the
Adviser manages the Funds or information relating directly or indirectly to
the Adviser, such Disclosure Documents contain or will contain, as of the
date thereof, no untrue statement of any material fact and does not omit any
statement of material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading.
(d) Use of The Name "Rydex". The Adviser has the right to use the name
"Rydex" in connection with its services to the Trust and that, subject to
the terms set forth in Section 8 of this Agreement, the Trust shall have the
right to use the name "Rydex" in connection with the management and
operation of the Funds. The Adviser is not aware of any threatened or
existing actions, claims, litigation or proceedings that would adversely
effect or prejudice the rights of the Adviser or the Trust to use the name
"Rydex".
(e) Insurance. The Adviser maintains errors and omissions insurance
coverage in an appropriate amount and shall provide prior written notice to
the Trust (i) of any material changes in its insurance policies or insurance
coverage; or (ii) if any material claims will be made on its insurance
policies. Furthermore, the Adviser shall upon reasonable request provide the
Trust with any information it may reasonably require concerning the amount
of or scope of such insurance.
(f) No Detrimental Agreement. The Adviser represents and warrants that
it has no arrangement or understanding with any party, other than the Trust,
that would influence the decision of the Adviser with respect to its
selection of securities for a Fund, and that all selections shall be done in
accordance with what is in the best interest of the Fund.
(g) Conflicts. The Adviser shall act honestly, in good faith and in the
best interests of the Trust including requiring any of its personnel with
knowledge of Fund activities to place the interest of the Funds first, ahead
of their own interests, in all personal trading scenarios that may involve a
conflict of interest with the Funds, consistent with its fiduciary duties
under applicable law.
(h) Representations. The representations and warranties in this
Section 7 shall be deemed to be made on the date this Agreement is executed
and at the time of delivery of the quarterly compliance report required by
Section 3(a), whether or not specifically referenced in such report.
8. THE NAME "RYDEX". The Adviser grants to the Trust a license to use the
name "Rydex" (the "Name") as part of the name of any Fund. The foregoing
authorization by the Adviser to the Trust to use the Name as part of the name of
any
A-7
Fund is not exclusive of the right of the Adviser itself to use, or to authorize
others to use, the Name; the Trust acknowledges and agrees that, as between the
Trust and the Adviser, the Adviser has the right to use, or authorize others to
use, the Name. The Trust shall (1) only use the Name in a manner consistent with
uses approved by the Adviser; (2) use its best efforts to maintain the quality
of the services offered using the Name; (3) adhere to such other specific
quality control standards as the Adviser may from time to time promulgate. At
the request of the Adviser, the Trust will (a) submit to Adviser representative
samples of any promotional materials using the Name; and (b) change the name of
any Fund within three months of its receipt of the Adviser's request, or such
other shorter time period as may be required under the terms of a settlement
agreement or court order, so as to eliminate all reference to the Name and will
not thereafter transact any business using the Name in the name of any Fund;
provided, however, that the Trust may continue to use beyond such date any
supplies of prospectuses, marketing materials and similar documents that the
Trust had at the date of such name change in quantities not exceeding those
historically produced and used in connection with such Fund.
9. ADVISER'S COMPENSATION. The Funds shall pay to the Adviser, as
compensation for the Adviser's services hereunder, a fee, determined as
described in Schedule A that is attached hereto and made a part hereof. Such fee
shall be computed daily and paid not less than monthly in arrears by the Funds.
The method for determining net assets of a Fund for purposes hereof shall be
the same as the method for determining net assets for purposes of establishing
the offering and redemption prices of Fund shares as described in the Funds'
prospectus(es). In the event of termination of this Agreement, the fee provided
in this Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
10. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Adviser is and shall be an independent contractor and, unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Trust or any Fund in any way or otherwise
be deemed to be an agent of the Trust or any Fund. If any occasion should arise
in which the Adviser gives any advice to its clients concerning the shares of a
Fund, the Adviser will act solely as investment counsel for such clients and not
in any way on behalf of the Fund.
11. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically terminate,
without the payment of any penalty, in the event of its assignment (as defined
in section 2(a)(4) of the 1940 Act); provided that such termination shall not
relieve the Adviser of any liability incurred hereunder.
This Agreement may not be added to or changed orally and may not be modified
or rescinded except by a writing signed by the parties hereto and in accordance
with the 1940 Act, when applicable.
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12. DURATION AND TERMINATION.
(a) This Agreement shall become effective as of the date executed and
shall remain in full force and effect continually thereafter, subject to
renewal as provided in Section 12(d) and unless terminated automatically as
set forth in Section 11 hereof or until terminated as follows:
(b) The Trust may cause this Agreement to terminate either (i) by vote
of its Board or (ii) with respect to any Fund, upon the affirmative vote of
a majority of the outstanding voting securities of the Fund; or
(c) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Trust; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Trustees, including a
majority vote of such Trustees who are not interested persons of the Trust
or the Adviser, at a meeting called for the purpose of voting on such
approval; or (ii) the vote of a majority of the outstanding voting
securities of each Fund; provided, however, that if the continuance of this
Agreement is submitted to the shareholders of the Funds for their approval
and such shareholders fail to approve such continuance of this Agreement as
provided herein, the Adviser may continue to serve hereunder as to the Funds
in a manner consistent with the 1940 Act and the rules and regulations
thereunder; and
Termination of this Agreement pursuant to this Section shall be without
payment of any penalty.
In the event of termination of this Agreement for any reason, the Adviser
shall, immediately upon notice of termination or on such later date as may be
specified in such notice, cease all activity on behalf of the Funds and with
respect to any of their assets, except as otherwise required by any fiduciary
duties of the Adviser under applicable law. In addition, the Adviser shall
deliver the Fund Books and Records to the Trust by such means and in accordance
with such schedule as the Trust shall direct and shall otherwise cooperate, as
reasonably directed by the Trust, in the transition of portfolio asset
management to any successor of the Adviser.
13. CERTAIN DEFINITIONS. FOR THE PURPOSES OF THIS AGREEMENT:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940 Act,
subject, however, to such exemptions as may be granted by the Commission
under the 1940 Act or any interpretations of the Commission staff.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions
as
A-9
may be granted by the Commission under the 1940 Act or any interpretations
of the Commission staff.
14. LIABILITY OF THE ADVISER. The Adviser shall indemnify and hold harmless
the Trust and all affiliated persons thereof (within the meaning of Section
2(a)(3) of the 1940 Act) and all controlling persons (as described in Section 15
of the 1933 Act) (collectively, the "Adviser Indemnitees") against any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses) by reason of or arising out of: (a) the Adviser being in
material violation of any applicable federal or state law, rule or regulation or
any investment policy or restriction set forth in the Funds' Registration
Statement or any written guidelines or instruction provided in writing by the
Board, (b) a Fund's failure to satisfy the diversification or source of income
requirements of Subchapter M of the Code, or (c) the Adviser's willful
misfeasance, bad faith or gross negligence generally in the performance of its
duties hereunder or its reckless disregard of its obligations and duties under
this Agreement.
15. ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
16. LIMITATION OF LIABILITY. The parties to this Agreement acknowledge and
agree that all litigation arising hereunder, whether direct or indirect, and of
any and every nature whatsoever shall be satisfied solely out of the assets of
the affected Fund and that no Trustee, officer or holder of shares of beneficial
interest of the Fund shall be personally liable for any of the foregoing
liabilities. The Trust's Certificate of Trust, as amended from time to time, is
on file in the Office of the Secretary of State of the State of Delaware. Such
Certificate of Trust and the Trust's Declaration of Trust describe in detail the
respective responsibilities and limitations on liability of the Trustees,
officers, and holders of shares of beneficial interest.
17. JURISDICTION. This Agreement shall be governed by and construed in
accordance with the substantive laws of state of Delaware and the Adviser
consents to the jurisdiction of courts, both state or federal, in Delaware, with
respect to any dispute under this Agreement.
18. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their duly authorized officers as of the date first
above written.
RYDEX SERIES FUNDS, on behalf of each Fund
listed on Schedule A
By: ________________________________________
Name: Richard M. Goldman
Title: President
PADCO ADVISORS, INC.
By: ________________________________________
Name: Richard M. Goldman
Title: Chief Executive Officer
A-11
SCHEDULE A
TO THE
ADVISORY AGREEMENT
DATED [ ], 2010 BETWEEN
RYDEX SERIES FUNDS
AND
PADCO ADVISORS, INC.
The Trust will pay to the Adviser as compensation for the Adviser's services
rendered, a fee, computed daily at an annual rate based on the average daily net
assets of the respective Fund in accordance the following fee schedule:
FUND RATE
-------------------------------------------------------------------------------
Nova Fund* ............................................................. 0.75%
Inverse S&P 500 Strategy* .............................................. 0.90%
NASDAQ-100(R)* ......................................................... 0.75%
Inverse NASDAQ-100(R)Strategy .......................................... 0.90%
Mid-Cap 1.5x Strategy* ................................................. 0.90%
Russell 2000(R)1.5x Strategy ........................................... 0.90%
Government Long Bond 1.2x Strategy ..................................... 0.50%
Inverse Government Long Bond Strategy* ................................. 0.90%
Europe 1.25x Strategy .................................................. 0.90%
Japan 2x Strategy ...................................................... 0.75%
S&P 500 Pure Value (formerly Large-Cap Value) .......................... 0.75%
S&P 500 Pure Growth (formerly Large-Cap Growth) ........................ 0.75%
S&P Mid Cap 400 Pure Value (formerly Mid-Cap Value) .................... 0.75%
S&P Mid-Cap 400 Pure Growth (formerly Mid-Cap Growth) .................. 0.75%
Inverse Mid-Cap Strategy* .............................................. 0.90%
S&P Small-Cap 600 Pure Value (formerly Small-Cap Value) ................ 0.75%
S&P Small-Cap 600 Pure Growth (formerly Small-Cap Growth) .............. 0.75%
Inverse Russell 2000(R)Strategy ........................................ 0.90%
Strengthening Dollar 2x Strategy ....................................... 0.90%
Weakening Dollar 2x Strategy ........................................... 0.90%
U.S. Government Money Market ........................................... 0.50%
High Yield Strategy .................................................... 0.75%
Global Market Neutral .................................................. 1.20%
Long/Short Commodities Strategy ........................................ 0.90%
Multi-Hedge Strategies Fund ............................................ 1.15%
Banking ................................................................ 0.85%
Basic Materials ........................................................ 0.85%
Biotechnology .......................................................... 0.85%
Consumer Products ...................................................... 0.85%
Electronics ............................................................ 0.85%
Energy ................................................................. 0.85%
Energy Services ........................................................ 0.85%
Financial Services ..................................................... 0.85%
Health Care ............................................................ 0.85%
Internet ............................................................... 0.85%
Leisure ................................................................ 0.85%
Precious Metals ........................................................ 0.75%
Real Estate ............................................................ 0.85%
Retailing .............................................................. 0.85%
Technology ............................................................. 0.85%
Telecommunications ..................................................... 0.85%
Transportation ......................................................... 0.85%
Utilities .............................................................. 0.85%
Commodities Strategy ................................................... 0.75%
All-Cap Opportunity (formerly Sector Rotation) ......................... 0.90%
Global 130/30 Strategy (formerly Multi-Cap Core Equity)................. 0.70%
S&P 500 ................................................................ 0.75%
Russell 2000(R) ........................................................ 0.75%
Managed Futures Strategy ............................................... 0.90%
Inverse High Yield Strategy ............................................ 0.75%
All-Asset Moderate Strategy (formerly Essential Portfolio Moderate) .... 0.00%
All-Asset Conservative Strategy
(formerly Essential Portfolio Conservative) ............................ 0.00%
All-Asset Aggressive Strategy
(formerly Essential Portfolio Aggressive) .............................. 0.00%
Alternative Strategies Allocation ...................................... 0.00%
* The fee will be reduced to 0.00% for any period during which the Fund invests
through a master-feeder structure.
A-12
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of this [ ] day of [ ], 2010 by and between RYDEX
DYNAMIC FUNDS (the "Trust"), a Delaware statutory trust registered as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and PADCO ADVISORS, INC., a Maryland corporation with its principal
place of business at 9601 Blackwell Road, Suite 500, Rockville, Maryland 20850
(the "Adviser").
W I T N E S S E T H
WHEREAS, the Board of Trustees (the "Board") of the Trust has selected the
Adviser to act as investment adviser to the Trust on behalf of the series set
forth on Schedule A to this Agreement (each a "Fund" and, collectively, the
"Funds"), as such Schedule may be amended from time to time upon mutual
agreement of the parties, and to provide certain related services, as more fully
set forth below, and to perform such services under the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, the Trust and the Adviser do hereby agree as follows:
1. THE ADVISER'S SERVICES.
(a) Discretionary Investment Management Services. The Adviser shall act
as investment adviser with respect to the Funds. In such capacity, the
Adviser shall, subject to the supervision of the Board, regularly provide
the Funds with investment research, advice and supervision and shall furnish
continuously an investment program for the Funds, consistent with the
respective investment objectives and policies of each Fund. The Adviser
shall determine, from time to time, what securities shall be purchased for
the Funds, what securities shall be held or sold by the Funds and what
portion of the Funds' assets shall be held uninvested in cash, subject
always to the provisions of the Trust's Declaration of Trust, By-Laws and
its registration statement on Form N-1A (the "Registration Statement") under
the 1940 Act, and under the Securities Act of 1933, as amended (the "1933
Act"), covering Fund shares, as filed with the U.S. Securities and Exchange
Commission (the "Commission"), and to the investment objectives, policies
and restrictions of the Funds, as each of the same shall be from time to
time in effect. To carry out such obligations, the Adviser shall exercise
full discretion and act for the Funds in the same manner and with the same
force and effect as the Funds themselves might or could do with respect to
purchases, sales or other transactions, as well as with respect to all other
such things necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions. No reference in this Agreement to
the Adviser having full discretionary authority over each Fund's investments
shall in any way limit the right of the Board, in its sole discretion, to
establish or revise policies in connection with the management of a Fund's
assets or to otherwise exercise its right to control the overall management
of a Fund.
A-13
(b) Compliance. The Adviser agrees to comply with the requirements of
the 1940 Act, the Investment Advisers Act of 1940 (the "Advisers Act"), the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the Commodity Exchange Act and the respective rules and regulations
thereunder, as applicable, as well as with all other applicable federal and
state laws, rules, regulations and case law that relate to the services and
relationships described hereunder and to the conduct of its business as a
registered investment adviser. The Adviser also agrees to comply with the
objectives, policies and restrictions set forth in the Registration
Statement, as amended or supplemented, of the Funds, and with any policies,
guidelines, instructions and procedures approved by the Board and provided
to the Adviser. In selecting each Fund's portfolio securities and performing
the Adviser's obligations hereunder, the Adviser shall cause the Fund to
comply with the diversification and source of income requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
for qualification as a regulated investment company. The Adviser shall
maintain compliance procedures that it reasonably believes are adequate to
ensure its compliance with the foregoing. No supervisory activity undertaken
by the Board shall limit the Adviser's full responsibility for any of the
foregoing.
(c) Proxy Voting. The Board has the authority to determine how proxies
with respect to securities that are held by the Funds shall be voted, and
the Board has initially determined to delegate the authority and
responsibility to vote proxies for the Funds' securities to the Adviser. So
long as proxy voting authority for the Funds has been delegated to the
Adviser, the Adviser shall exercise its proxy voting responsibilities. The
Adviser shall carry out such responsibility in accordance with any
instructions that the Board shall provide from time to time, and at all
times in a manner consistent with Rule 206(4)-6 under the Advisers Act and
its fiduciary responsibilities to the Trust. The Adviser shall provide
periodic reports and keep records relating to proxy voting as the Board may
reasonably request or as may be necessary for the Funds to comply with the
1940 Act and other applicable law. Any such delegation of proxy voting
responsibility to the Adviser may be revoked or modified by the Board at any
time.
(d) Recordkeeping. The Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the
Funds, except as otherwise provided herein or as may be necessary for the
Adviser to supply to the Trust or its Board the information required to be
supplied under this Agreement.
The Adviser shall maintain separate books and detailed records of all
matters pertaining to Fund assets advised by the Adviser required by Rule
31a-1 under the 1940 Act (other than those records being maintained by any
administrator, custodian or transfer agent appointed by the Funds) relating
to its responsibilities provided hereunder with respect to the Funds, and
shall preserve such records for the periods and in a manner prescribed
therefore by Rule 31a-2 under the 1940 Act (the "Fund Books and Records").
The Fund Books and
A-14
Records shall be available to the Board at any time upon request, shall be
delivered to the Trust upon the termination of this Agreement and shall be
available without delay during any day the Trust is open for business.
(e) Holdings Information and Pricing. The Adviser shall provide regular
reports regarding Fund holdings, and shall, on its own initiative, furnish
the Trust and its Board from time to time with whatever information the
Adviser believes is appropriate for this purpose. The Adviser agrees to
immediately notify the Trust if the Adviser reasonably believes that the
value of any security held by a Fund may not reflect fair value. The Adviser
agrees to provide any pricing information of which the Adviser is aware to
the Trust, its Board and/or any Fund pricing agent to assist in the
determination of the fair value of any Fund holdings for which market
quotations are not readily available or as otherwise required in accordance
with the 1940 Act or the Trust's valuation procedures for the purpose of
calculating the Fund net asset value in accordance with procedures and
methods established by the Board.
(f) Cooperation with Agents of the Trust. The Adviser agrees to
cooperate with and provide reasonable assistance to the Trust, any Trust
custodian or foreign sub- custodians, any Trust pricing agents and all other
agents and representatives of the Trust, such information with respect to
the Funds as they may reasonably request from time to time in the
performance of their obligations, provide prompt responses to reasonable
requests made by such persons and establish appropriate interfaces with each
so as to promote the efficient exchange of information and compliance with
applicable laws and regulations.
2. CODE OF ETHICS. The Adviser has adopted a written code of ethics that it
reasonably believes complies with the requirements of Rule 17j-1 under the 1940
Act, which it will provide to the Trust. The Adviser shall ensure that its
Access Persons (as defined in the Adviser's Code of Ethics) comply in all
material respects with the Adviser's Code of Ethics, as in effect from time to
time. Upon request, the Adviser shall provide the Trust with a (i) a copy of the
Adviser's current Code of Ethics, as in effect from time to time, and (ii)
certification that it has adopted procedures reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by the Adviser's Code of
Ethics. Annually, the Adviser shall furnish a written report, which complies
with the requirements of Rule 17j-1, concerning the Adviser's Code of Ethics to
the Trust. The Adviser shall respond to requests for information from the Trust
as to violations of the Code of Ethics by Access Persons and the sanctions
imposed by the Adviser. The Adviser shall immediately notify the Trust of any
material violation of the Code of Ethics, whether or not such violation relates
to a security held by any Fund.
3. INFORMATION AND REPORTING. The Adviser shall provide the Trust and its
respective officers with such periodic reports concerning the obligations the
Adviser has assumed under this Agreement as the Trust may from time to time
reasonably request.
A-15
(a) Notification of Breach/Compliance Reports. The Adviser shall notify
the Trust immediately upon detection of (i) any material failure to manage
any Fund in accordance with its investment objectives and policies or any
applicable law; or (ii) any material breach of the Funds' or the Adviser's
policies, guidelines or procedures. In addition, the Adviser shall provide a
quarterly report regarding each Fund's compliance with its investment
objectives and policies, applicable law, including, but not limited to the
1940 Act and Subchapter M of the Code, and the Fund's policies, guidelines
or procedures as applicable to the Adviser's obligations under this
Agreement. The Adviser agrees to correct any such failure promptly and to
take any action that the Board may reasonably request in connection with any
such breach. Upon request, the Adviser shall also provide the officers of
the Trust with supporting certifications in connection with such
certifications of Fund financial statements and disclosure controls pursuant
to the Sarbanes-Oxley Act. The Adviser will promptly notify the Trust in the
event (i) the Adviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before or
by any court, public board, or body, involving the affairs of the Trust
(excluding class action suits in which a Fund is a member of the plaintiff
class by reason of the Fund's ownership of shares in the defendant) or the
compliance by the Adviser with the federal or state securities laws or (ii)
an actual change in control of the Adviser resulting in an "assignment" (as
defined in the 1940 Act) has occurred or is otherwise proposed to occur.
(b) Board and Filings Information. The Adviser will also provide the
Trust with any information reasonably requested regarding its management of
the Funds required for any meeting of the Board, or for any shareholder
report, amended registration statement, proxy statement, or prospectus
supplement to be filed by the Trust with the Commission. The Adviser will
make its officers and employees available to meet with the Board from time
to time on due notice to review its investment management services to the
Funds in light of current and prospective economic and market conditions and
shall furnish to the Board such information as may reasonably be necessary
in order for the Board to evaluate this Agreement or any proposed amendments
thereto.
(c) Transaction Information. The Adviser shall furnish to the Trust
such information concerning portfolio transactions as may be necessary to
enable the Trust or its designated agent to perform such compliance testing
on the Funds and the Adviser's services as the Trust may, in its sole
discretion, determine to be appropriate. The provision of such information
by the Adviser to the Trust or its designated agent in no way relieves the
Adviser of its own responsibilities under this Agreement.
4. BROKERAGE.
(a) Principal Transactions. In connection with purchases or sales of
securities for the account of a Fund, neither the Adviser nor any of its
directors,
A-16
officers or employees will act as a principal or agent or receive any
commission except as permitted by the 1940 Act.
(b) Placement of Orders. The Adviser shall arrange for the placing of
all orders for the purchase and sale of securities for a Fund's account with
brokers or dealers selected by the Adviser. In the selection of such brokers
or dealers and the placing of such orders, the Adviser is directed at all
times to seek for the Fund the most favorable execution and net price
available under the circumstances. It is also understood that it is
desirable for the Fund that the Adviser have access to brokerage and
research services provided by brokers who may execute brokerage transactions
at a higher cost to the Fund than may result when allocating brokerage to
other brokers, consistent with section 28(e) of the 1934 Act and any
Commission staff interpretations thereof. Therefore, the Adviser is
authorized to place orders for the purchase and sale of securities for a
Fund with such brokers, subject to review by the Board from time to time
with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to the
Adviser in connection with its or its affiliates' services to other clients.
(c) Aggregated Transactions. On occasions when the Adviser deems the
purchase or sale of a security to be in the best interest of a Fund as well
as other clients of the Adviser, the Adviser may, to the extent permitted by
applicable law and regulations, aggregate the order for securities to be
sold or purchased. In such event, the Adviser will allocate securities or
futures contracts so purchased or sold, as well as the expenses incurred in
the transaction, in the manner the Adviser reasonably considers to be
equitable and consistent with its fiduciary obligations to the Fund and to
such other clients under the circumstances.
(d) Affiliated Brokers. The Adviser or any of its affiliates may act as
broker in connection with the purchase or sale of securities or other
investments for a Fund, subject to: (a) the requirement that the Adviser
seek to obtain best execution and price within the policy guidelines
determined by the Board and set forth in the Fund's current prospectus and
SAI; (b) the provisions of the 1940 Act; (c) the provisions of the Advisers
Act; (d) the provisions of the 1934 Act; and (e) other provisions of
applicable law. These brokerage services are not within the scope of the
duties of the Adviser under this Agreement. Subject to the requirements of
applicable law and any procedures adopted by the Board, the Adviser or its
affiliates may receive brokerage commissions, fees or other remuneration
from a Fund for these services in addition to the Adviser's fees for
services under this Agreement.
5. CUSTODY. Nothing in this Agreement shall permit the Adviser to take or
receive physical possession of cash, securities or other investments of a Fund.
6. ALLOCATION OF CHARGES AND EXPENSES. The Adviser will bear its own costs
of providing services hereunder. Other than as herein specifically indicated,
the Adviser shall not be responsible for a Fund's expenses, including brokerage
and other
A-17
expenses incurred in placing orders for the purchase and sale of securities and
other investment instruments.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Properly Registered. The Adviser is registered as an investment
adviser under the Advisers Act, and will remain so registered for the
duration of this Agreement. The Adviser is not prohibited by the Advisers
Act or the 1940 Act from performing the services contemplated by this
Agreement, and to the best knowledge of the Adviser, there is no proceeding
or investigation that is reasonably likely to result in the Adviser being
prohibited from performing the services contemplated by this Agreement. The
Adviser agrees to promptly notify the Trust of the occurrence of any event
that would disqualify the Adviser from serving as an investment adviser to
an investment company. The Adviser is in compliance in all material respects
with all applicable federal and state law in connection with its investment
management operations.
(b) ADV Disclosure. The Adviser has provided the Trust with a copy of
its Form ADV as most recently filed with the Commission and will, promptly
after filing any amendment to its Form ADV with the Commission, furnish a
copy of such amendment(s) to the Trust. The information contained in the
Adviser's Form ADV is accurate and complete in all material respects and
does not omit to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made,
not misleading.
(c) Fund Disclosure Documents. The Adviser has reviewed and will in the
future review, the Registration Statement, and any amendments or supplements
thereto, the annual or semi-annual reports to shareholders, other reports
filed with the Commission and any marketing material of the Funds
(collectively the "Disclosure Documents") and represents and warrants that
with respect to disclosure about the Adviser, the manner in which the
Adviser manages the Funds or information relating directly or indirectly to
the Adviser, such Disclosure Documents contain or will contain, as of the
date thereof, no untrue statement of any material fact and does not omit any
statement of material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading.
(d) Use of The Name "Rydex". The Adviser has the right to use the name
"Rydex" in connection with its services to the Trust and that, subject to
the terms set forth in Section 8 of this Agreement, the Trust shall have the
right to use the name "Rydex" in connection with the management and
operation of the Funds. The Adviser is not aware of any threatened or
existing actions, claims, litigation or proceedings that would adversely
effect or prejudice the rights of the Adviser or the Trust to use the name
"Rydex".
(e) Insurance. The Adviser maintains errors and omissions insurance
coverage in an appropriate amount and shall provide prior written notice to
the
A-18
Trust (i) of any material changes in its insurance policies or insurance
coverage; or (ii) if any material claims will be made on its insurance
policies. Furthermore, the Adviser shall upon reasonable request provide the
Trust with any information it may reasonably require concerning the amount
of or scope of such insurance.
(f) No Detrimental Agreement. The Adviser represents and warrants that
it has no arrangement or understanding with any party, other than the Trust,
that would influence the decision of the Adviser with respect to its
selection of securities for a Fund, and that all selections shall be done in
accordance with what is in the best interest of the Fund.
(g) Conflicts. The Adviser shall act honestly, in good faith and in the
best interests of the Trust including requiring any of its personnel with
knowledge of Fund activities to place the interest of the Funds first, ahead
of their own interests, in all personal trading scenarios that may involve a
conflict of interest with the Funds, consistent with its fiduciary duties
under applicable law.
(h) Representations. The representations and warranties in this
Section 7 shall be deemed to be made on the date this Agreement is executed
and at the time of delivery of the quarterly compliance report required by
Section 3(a), whether or not specifically referenced in such report.
8. THE NAME "RYDEX". The Adviser grants to the Trust a license to use the
name "Rydex" (the "Name") as part of the name of any Fund. The foregoing
authorization by the Adviser to the Trust to use the Name as part of the name of
any Fund is not exclusive of the right of the Adviser itself to use, or to
authorize others to use, the Name; the Trust acknowledges and agrees that, as
between the Trust and the Adviser, the Adviser has the right to use, or
authorize others to use, the Name. The Trust shall (1) only use the Name in a
manner consistent with uses approved by the Adviser; (2) use its best efforts to
maintain the quality of the services offered using the Name; (3) adhere to such
other specific quality control standards as the Adviser may from time to time
promulgate. At the request of the Adviser, the Trust will (a) submit to Adviser
representative samples of any promotional materials using the Name; and (b)
change the name of any Fund within three months of its receipt of the Adviser's
request, or such other shorter time period as may be required under the terms of
a settlement agreement or court order, so as to eliminate all reference to the
Name and will not thereafter transact any business using the Name in the name of
any Fund; provided, however, that the Trust may continue to use beyond such date
any supplies of prospectuses, marketing materials and similar documents that the
Trust had at the date of such name change in quantities not exceeding those
historically produced and used in connection with such Fund.
9. ADVISER'S COMPENSATION. The Funds shall pay to the Adviser, as
compensation for the Adviser's services hereunder, a fee, determined as
described in Schedule A that is attached hereto and made a part hereof. Such fee
shall be computed daily and paid not less than monthly in arrears by the Funds.
A-19
The method for determining net assets of a Fund for purposes hereof shall be
the same as the method for determining net assets for purposes of establishing
the offering and redemption prices of Fund shares as described in the Funds'
prospectus(es). In the event of termination of this Agreement, the fee provided
in this Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
10. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Adviser is and shall be an independent contractor and, unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Trust or any Fund in any way or otherwise
be deemed to be an agent of the Trust or any Fund. If any occasion should arise
in which the Adviser gives any advice to its clients concerning the shares of a
Fund, the Adviser will act solely as investment counsel for such clients and not
in any way on behalf of the Fund.
11. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically terminate,
without the payment of any penalty, in the event of its assignment (as defined
in section 2(a)(4) of the 1940 Act); provided that such termination shall not
relieve the Adviser of any liability incurred hereunder.
This Agreement may not be added to or changed orally and may not be modified
or rescinded except by a writing signed by the parties hereto and in accordance
with the 1940 Act, when applicable.
12. DURATION AND TERMINATION.
(a) This Agreement shall become effective as of the date executed and
shall remain in full force and effect continually thereafter, subject to
renewal as provided in Section 12(d) and unless terminated automatically as
set forth in Section 11 hereof or until terminated as follows:
(b) The Trust may cause this Agreement to terminate either (i) by vote
of its Board or (ii) with respect to any Fund, upon the affirmative vote of
a majority of the outstanding voting securities of the Fund; or
(c) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Trust; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Trustees, including a
majority vote of such Trustees who are not interested persons of the Trust
or the Adviser, at a meeting called for the purpose of voting on such
approval; or (ii) the vote of a majority of the outstanding voting
securities of each Fund; provided, however, that if the continuance of this
Agreement is submitted to the shareholders of the Funds for their approval
and such shareholders fail to approve such continuance of this
A-20
Agreement as provided herein, the Adviser may continue to serve hereunder as
to the Funds in a manner consistent with the 1940 Act and the rules and
regulations thereunder; and
Termination of this Agreement pursuant to this Section shall be without
payment of any penalty.
In the event of termination of this Agreement for any reason, the Adviser
shall, immediately upon notice of termination or on such later date as may be
specified in such notice, cease all activity on behalf of the Funds and with
respect to any of their assets, except as otherwise required by any fiduciary
duties of the Adviser under applicable law. In addition, the Adviser shall
deliver the Fund Books and Records to the Trust by such means and in accordance
with such schedule as the Trust shall direct and shall otherwise cooperate, as
reasonably directed by the Trust, in the transition of portfolio asset
management to any successor of the Adviser.
13. CERTAIN DEFINITIONS. For the purposes of this Agreement:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940 Act,
subject, however, to such exemptions as may be granted by the Commission
under the 1940 Act or any interpretations of the Commission staff.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions
as may be granted by the Commission under the 1940 Act or any
interpretations of the Commission staff.
14. LIABILITY OF THE ADVISER. The Adviser shall indemnify and hold harmless
the Trust and all affiliated persons thereof (within the meaning of Section
2(a)(3) of the 1940 Act) and all controlling persons (as described in Section 15
of the 1933 Act) (collectively, the "Adviser Indemnitees") against any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses) by reason of or arising out of: (a) the Adviser being in
material violation of any applicable federal or state law, rule or regulation or
any investment policy or restriction set forth in the Funds' Registration
Statement or any written guidelines or instruction provided in writing by the
Board, (b) a Fund's failure to satisfy the diversification or source of income
requirements of Subchapter M of the Code, or (c) the Adviser's willful
misfeasance, bad faith or gross negligence generally in the performance of its
duties hereunder or its reckless disregard of its obligations and duties under
this Agreement.
15. ENFORCEABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
A-21
16. LIMITATION OF LIABILITY. The parties to this Agreement acknowledge and
agree that all litigation arising hereunder, whether direct or indirect, and of
any and every nature whatsoever shall be satisfied solely out of the assets of
the affected Fund and that no Trustee, officer or holder of shares of beneficial
interest of the Fund shall be personally liable for any of the foregoing
liabilities. The Trust's Certificate of Trust, as amended from time to time, is
on file in the Office of the Secretary of State of the State of Delaware. Such
Certificate of Trust and the Trust's Declaration of Trust describe in detail the
respective responsibilities and limitations on liability of the Trustees,
officers, and holders of shares of beneficial interest.
17. JURISDICTION. This Agreement shall be governed by and construed in
accordance with the substantive laws of state of Delaware and the Adviser
consents to the jurisdiction of courts, both state and/or federal, in Delaware,
with respect to any dispute under this Agreement.
18. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their duly authorized officers as of the date first
above written.
RYDEX DYNAMIC FUNDS, on behalf of each Fund
listed on Schedule A
By: ________________________________________
Name: Richard M. Goldman
Title: President
PADCO ADVISORS, INC.
By: ________________________________________
Name: Richard M. Goldman
Title: Chief Executive Officer
A-22
SCHEDULE A
TO THE
ADVISORY AGREEMENT
DATED [ ], 2010 BETWEEN
RYDEX DYNAMIC FUNDS
AND
PADCO ADVISORS, INC.
The Trust will pay to the Adviser as compensation for the Adviser's services
rendered, a fee, computed daily at an annual rate based on the average daily net
assets of the respective Fund in accordance the following fee schedule:
FUND RATE
-------------------------------------------------------------------------------
S&P 500 2x Strategy* ................................................... 0.90%
Inverse S&P 500 2x Strategy* ........................................... 0.90%
NASDAQ-100(R) 2x Strategy* ............................................. 0.90%
Inverse NASDAQ-100(R) 2x Strategy* ..................................... 0.90%
Dow 2x Strategy* ....................................................... 0.90%
Inverse Dow 2x Strategy* ............................................... 0.90%
Russell 2000(R) 2x Strategy ............................................ 0.90%
Inverse Russell 2000(R) 2x Strategy .................................... 0.90%
* The fee will be reduced to 0.00% for any period during which the Fund invests
through a master-feeder structure.
A-23
APPENDIX B
INFORMATION REGARDING THE INVESTMENT ADVISORY
AGREEMENTS AND FEES PAID TO THE INVESTMENT ADVISER
AND AFFILIATES
PADCO Advisors, Inc. (the "Investment Adviser") currently serves as
investment adviser to all series (collectively, the "Funds") of Rydex Series
Funds ("RSF") and Rydex Dynamic Funds ("RDF") pursuant to (i) an investment
advisory agreement between RSF, on behalf of all RSF series, and the Investment
Adviser, made January 18, 2008, as amended; and (ii) an investment advisory
agreement between RDF, on behalf of all RDF series, and the Investment Adviser,
made January 18, 2008, as amended. Rydex Fund Services, Inc. ("RFS") serves as
the administrator, transfer agent and accounting services agent for the Funds.
Rydex Distributors, Inc. ("RDI") serves as principal underwriter to the Funds.
RFS and RDI are affiliates of the Investment Adviser. The tables below provide
the following information:
(i) the date on which a Fund's shareholders last approved the Fund's
investment advisory agreement;
(ii) the annual rate of management fees paid by each Fund to the
Investment Adviser, stated as a percentage of that Fund's average
daily net assets;
(iii) the aggregate amount of management fees paid by each Fund to the
Investment Adviser for the Fund's fiscal year ended March 31, 2009
for RSF and December 31, 2009 for RDF;
(iv) the amount of fees paid by each Fund to RFS for RFS' administrative
and transfer agent services for the Fund during the Fund's fiscal
year ended March 31, 2009 for RSF and December 31, 2009 for RDF;
(v) the amount of accounting service fees paid by each Fund to RFS for
RFS' services as the accounting services agent for the Fund during
the Fund's fiscal year ended March 31, 2009 for RSF and December 31,
2009 for RDF; and
(vi) the amount of distribution fees paid by each Fund to RDI for RDI's
services as principal underwriter to the Fund pursuant to the Fund's
distribution and shareholder services plans during the Fund's fiscal
year ended March 31, 2009 for RSF and December 31, 2009 for RDF.
Each Fund did not pay any brokerage commissions to RDI or its affiliates
during the Fund's fiscal year ended March 31, 2009 for RSF and December 31, 2009
for RDF.
B-1
MANAGEMENT, ADMINISTRATIVE, AND ACCOUNTING FEES PAID BY SERIES OF RYDEX DYNAMIC
FUNDS:
-------------------------------------------------------------------------------
RYDEX DYNAMIC FUNDS DATE OF LAST MANAGEMENT FEES ADMINISTRATIVE
SHAREHOLDER MANAGEMENT PAID TO INVESTMENT SERVICE FEES PAID TO ACCOUNTING SERVICE
SERIES NAME APPROVAL FEES ADVISER RFS FEES PAID TO RFS
-----------------------------------------------------------------------------------------------------------------------------
Dow 2x Strategy Fund 12/20/2007 0.90% $ 328,615 $ 91,282 $ 54,769
Inverse Dow 2x Strategy Fund 12/20/2007 0.90% $ 460,068 $127,797 $ 76,678
Inverse NASDAQ-100(R) 2x
Strategy Fund 12/20/2007 0.90% $ 976,080 $271,133 $162,681
Inverse Russell 2000(R) 2x
Strategy Fund 12/20/2007 0.90% $ 453,261 $125,906 $ 75,544
Inverse S&P 500 2x Strategy Fund 12/20/2007 0.90% $1,957,699 $543,805 $326,284
NASDAQ-100(R) 2x Strategy Fund 12/20/2007 0.90% $1,734,086 $481,690 $289,015
Russell 2000(R) 2x Strategy Fund 11/1/2007 0.90% $ 299,266 $ 83,129 $ 49,872
S&P 500 2x Strategy Fund 11/1/2007 0.90% $1,657,951 $460,452 $276,326
DISTRIBUTION FEES PAID BY SERIES OF RYDEX DYNAMIC FUNDS:
--------------------------------------------------------
A-CLASS C-CLASS H-CLASS
SERIES NAME (0.25% 12B-1 FEE) (1.00% 12B-1 FEE) (0.25% 12B-1 FEE)
----------------------------------------------------------------------------------------------------
Dow 2x Strategy Fund $15,857 $ 45,682 $ 64,005
Inverse Dow 2x Strategy Fund $ 6,839 $ 38,510 $111,330
Inverse NASDAQ-100(R) 2x Strategy Fund $ 6,072 $ 73,991 $246,563
Inverse Russell 2000(R) 2x Strategy Fund $ 4,688 $ 42,521 $110,588
Inverse S&P 500 2x Strategy Fund $28,403 $200,880 $465,182
NASDAQ-100(R) 2x Strategy Fund $20,015 $175,644 $417,764
Russell 2000(R) 2x Strategy Fund $ 3,750 $ 30,086 $ 71,859
S&P 500 2x Strategy Fund $34,616 $241,178 $365,631
B-2
MANAGEMENT, ADMINISTRATIVE, AND ACCOUNTING FEES PAID BY SERIES OF RYDEX SERIES
FUNDS:
------------------------------------------------------------------------------
RYDEX SERIES FUNDS DATE OF LAST MANAGEMENT FEES ADMINISTRATIVE
SHAREHOLDER MANAGEMENT PAID TO INVESTMENT SERVICE FEES PAID TO ACCOUNTING SERVICE
SERIES NAME APPROVAL FEES ADVISER RFS FEES PAID TO RFS
-----------------------------------------------------------------------------------------------------------------------------
Rydex|SGI All-Asset Aggressive
Strategy Fund 12/20/2007 0.00%(1) $ 0(1) $ 0(2) $ 0(2)
Rydex|SGI All-Asset Conservative
Strategy Fund 12/20/2007 0.00%(1) $ 0(1) $ 0(2) $ 0(2)
Rydex|SGI All-Asset Moderate
Strategy Fund 12/20/2007 0.00%(1) $ 0(1) $ 0(2) $ 0(2)
Rydex|SGI All-Cap
Opportunity Fund 12/20/2007 0.90% $2,786,051 $ 773,903 $288,527
Rydex|SGI Alternative Strategies
Allocation Fund 3/7/2008 0.00%(1) $ 0(1) $ 0(2) $ 0(2)
Rydex Banking Fund 12/20/2007 0.85% $ 152,561 $ 44,871 $ 17,948
Rydex Basic Materials Fund 12/20/2007 0.85% $ 836,050 $ 245,897 $ 98,359
Rydex Biotechnology Fund 12/20/2007 0.85% $ 811,452 $ 238,662 $ 95,465
Rydex Commodities Strategy Fund 12/20/2007 0.75%(3) $ 392,420(8) $ 127,025(8) $ 50,810(8)
Rydex Consumer Products Fund 10/4/2007 0.85% $ 291,418 $ 85,711 $ 34,284
Rydex Electronics Fund 12/20/2007 0.85% $ 117,178 $ 34,464 $ 13,786
Rydex Energy Fund 12/20/2007 0.85% $ 845,391 $ 248,644 $ 99,458
Rydex Energy Services Fund 12/20/2007 0.85% $1,090,979 $ 320,876 $128,275
Rydex Europe 1.25x Strategy Fund 11/1/2007 0.90% $ 155,457 $ 43,182 $ 17,273
Rydex Financial Services Fund 11/1/2007 0.85% $ 98,718 $ 29,035 $ 11,614
Rydex|SGI Global 130/30
Strategy Fund 12/20/2007 1.05%(4) $ 67,805 $ 52,496 $ 20,999
Rydex|SGI Global Market
Neutral Fund 3/30/2009 1.20% $ 488(7) $ 101(7) $ 41(7)
Rydex Government Long Bond 1.2x
Strategy Fund 12/20/2007 0.50% $ 563,994 $ 144,850 $ 72,425
B-3
RYDEX SERIES FUNDS DATE OF LAST MANAGEMENT FEES ADMINISTRATIVE
SHAREHOLDER MANAGEMENT PAID TO INVESTMENT SERVICE FEES PAID TO ACCOUNTING SERVICE
SERIES NAME APPROVAL FEES ADVISER RFS FEES PAID TO RFS
-----------------------------------------------------------------------------------------------------------------------------
Rydex Health Care Fund 11/1/2007 0.85% $ 391,222 $ 115,066 $ 46,026
Rydex High Yield Strategy Fund 10/4/2007 0.75% $ 516,174 $ 172,058 $ 68,520
Rydex Internet Fund 11/1/2007 0.85% $ 82,817 $ 24,358 $ 9,743
Rydex Inverse Government
Long Bond Strategy Fund 12/20/2007 0.90% $4,242,582 $1,178,495 $413,469
Rydex Inverse High Yield
Strategy Fund 12/20/2007 0.75% $ 123,742 $ 41,247 $ 16,499
Rydex Inverse Mid-Cap
Strategy Fund 12/20/2007 0.90% $ 105,433 $ 29,287 $ 11,715
Rydex Inverse NASDAQ-100(R)
Strategy Fund 12/20/2007 0.90% $ 516,935 $ 143,593 $ 57,437
Rydex Inverse Russell 2000(R)
Strategy Fund 12/20/2007 0.90% $ 389,342 $ 108,150 $ 43,260
Rydex Inverse S&P 500
Strategy Fund 12/20/2007 0.90% $2,531,099 $ 703,083 $272,127
Rydex Japan 2x Strategy Fund 2/22/2008 0.75% $ 38,396 $ 12,799 $ 5,119
Rydex Leisure Fund 12/20/2007 0.85% $ 28,960 $ 8,518 $ 3,407
Rydex|SGI Long/Short Commodities
Strategy Fund 6/25/2009 0.90%(3) $ 198,953(5) $ 49,304(5) $ 19,721(5)
Rydex|SGI Managed Futures
Strategy Fund 12/20/2007 0.90%(3) $5,915,510 $1,643,197 $447,226
Rydex Mid-Cap 1.5x Strategy Fund 12/20/2007 0.90% $ 195,882 $ 54,412 $ 21,765
Rydex|SGI Multi-Hedge
Strategies Fund 12/20/2007 1.15%(3) $ 1,200,685(6) $ 0(6) $ 0(6)
Rydex NASDAQ-100(R) Fund 12/20/2007 0.75% $ 4,082,452 $1,360,817 $446,976
Rydex Nova Fund 12/20/2007 0.75% $ 719,954 $ 239,985 $ 95,994
Rydex Precious Metals Fund 12/20/2007 0.75% $ 1,244,276 $ 414,759 $165,904
B-4
RYDEX SERIES FUNDS DATE OF LAST MANAGEMENT FEES ADMINISTRATIVE
SHAREHOLDER MANAGEMENT PAID TO INVESTMENT SERVICE FEES PAID TO ACCOUNTING SERVICE
SERIES NAME APPROVAL FEES ADVISER RFS FEES PAID TO RFS
-----------------------------------------------------------------------------------------------------------------------------
Rydex Real Estate Fund 10/4/2007 0.85% $ 182,400 $ 53,647 $ 21,459
Rydex Retailing Fund 12/20/2007 0.85% $ 67,185 $ 19,760 $ 7,904
Rydex Russell 2000(R) 1.5x
Strategy Fund 12/20/2007 0.90% $ 223,092 $ 61,970 $ 24,788
Rydex Russell 2000(R) Fund 11/1/2007 0.75% $ 128,075 $ 42,692 $ 17,048
Rydex S&P 500 Fund 11/1/2007 0.75% $ 884,588 $ 294,863 $117,971
Rydex S&P 500 Pure Growth Fund 2/12/2008 0.75% $ 154,390 $ 51,464 $ 20,585
Rydex S&P 500 Pure Value Fund 12/20/2007 0.75% $ 162,604 $ 54,201 $ 21,681
Rydex S&P MidCap 400 Pure
Growth Fund 11/1/2007 0.75% $ 238,346 $ 79,449 $ 31,779
Rydex S&P MidCap 400 Pure
Value Fund 1/31/2008 0.75% $ 57,855 $ 19,285 $ 7,714
Rydex S&P SmallCap 600 Pure
Growth Fund 11/1/2007 0.75% $ 70,579 $ 23,527 $ 9,411
Rydex S&P SmallCap 600 Pure
Value Fund 11/1/2007 0.75% $ 102,427 $ 34,143 $ 13,657
Rydex Strengthening Dollar 2x
Strategy Fund 12/20/2007 0.90% $ 197,221 $ 270,058 $108,023
Rydex Technology Fund 12/20/2007 0.85% $ 141,470 $ 41,609 $ 16,643
Rydex Telecommunications Fund 11/1/2007 0.85% $ 85,239 $ 25,070 $ 10,028
Rydex Transportation Fund 1/31/2008 0.85% $ 196,438 $ 57,776 $ 23,110
Rydex U.S. Government Money
Market Fund 11/1/2007 0.50% $7,213,212 $2,885,285 $770,294
Rydex Utilities Fund 12/20/2007 0.85% $ 271,807 $ 79,943 $ 31,978
Rydex Weakening Dollar 2x
Strategy Fund 12/20/2007 0.90% $ 812,462 $ 225,684 $ 90,274
B-5
(1) The Fund invests primarily in underlying funds (the "Underlying Funds"). The
Investment Adviser receives an investment advisory fee for managing the
Underlying Funds. The Underlying Funds pay a monthly investment advisory fee
to the Investment Adviser for its services. The fee is based on the average
net daily assets of each Underlying Fund and calculated at an annual rate
for each Underlying Fund. For more information regarding the Underlying
funds' investment advisory fees and expense limitations, please see the
Prospectus and applicable sections of the Statement of Additional
Information. The Funds benefit from the investment advisory services
provided to the Underlying Funds and, as shareholders of those Underlying
Funds, indirectly bear a proportionate share of those Underlying Funds'
advisory fees.
(2) The Investment Adviser has contractually agreed to pay all other expenses of
the Fund, excluding Acquired Fund fees and expenses, interest expense and
taxes (expected to be de minimis), brokerage commissions and other expenses
connected with the execution of portfolio transactions and extraordinary
expenses.
(3) The Fund may invest up to 25% of its total assets in a wholly-owned and
controlled Cayman Islands subsidiary (the "Subsidiary"). The Subsidiary has
entered into a separate advisory agreement with the Investment Adviser for
the management of the Subsidiary's portfolio pursuant to which the
Subsidiary pays the Investment Adviser a management fee at the same rate
that the Fund pays the Investment Adviser for services provided to the Fund.
The Investment Adviser has contractually agreed to waive the management fee
it receives from the Fund in an amount equal to the management fee paid to
the Investment Adviser by the Subsidiary. This undertaking will continue in
effect for so long as the Fund invests in the Subsidiary, and may not be
terminated by the Investment Adviser unless the Investment Adviser first
obtains the prior approval of the Fund's Board of Trustees for such
termination. The management fees included in the table reflect the net
management fees paid to the Investment Adviser by the Fund after the fee
waiver.
(4) The Fund's management fee of 1.05% was effective April 1, 2009. Prior to
April 1, 2009, the Fund paid the Investment Adviser a management fee that
was comprised of two components: the first component was an annual basic fee
equal to 0.70% of the Fund's average daily net assets, and the second
component was a performance fee adjustment, resulting in a minimum fee of
0.50% and a maximum fee of 0.90%.
(5) From commencement of operation June 25, 2009 through fiscal year end
December 31, 2009.
(6) The Fund changed its fiscal year to December 31 in 2009. Investment advisory
fees are provided for the period April 1, 2009 through December 31, 2009.
The Investment Adviser has contractually agreed to pay all operating
expenses of the fund, excluding interest expense and taxes (expected to be
de minimis), brokerage commissions and other expenses connected with the
execution of portfolio transactions, short dividend expenses, and
extraordinary expenses.
(7) From commencement of operations on March 30, 2009.
(8) The Fund changed its fiscal year to December 31 in 2009. Fees are provided
for the period April 1, 2009 through December 31, 2009.
B-6
DISTRIBUTION FEES PAID BY SERIES OF RYDEX SERIES FUND*:
-------------------------------------------------------
(*For A-Class, C-Class, H-Class and Advisor Class shares. Investor Class shares
and Investor 2 Class shares were not subject to distribution fees.)
RYDEX SERIES FUNDS
SERIES NAME A-CLASS C-CLASS H-CLASS ADVISOR CLASS
----------------------------------------------------------------------------------------------------------------
Rydex|SGI All-Asset Aggressive Strategy Fund $ 0 $ 41,708 $ 0 N/A
Rydex|SGI All-Asset Conservative Strategy Fund $ 0 $ 37,526 $ 0 N/A
Rydex|SGI All-Asset Moderate Strategy Fund $ 0 $ 192,074 $ 0 N/A
Rydex|SGI All-Cap Opportunity Fund $111,339 $ 936,299 $428,489 N/A
Rydex|SGI Alternative Strategies Allocation Fund $ 0 $ 43,815 $ 0 N/A
Rydex Banking Fund $ 2,406 $ 28,923 N/A $ 11,895
Rydex Basic Materials Fund $ 11,994 $ 78,533 N/A $ 40,655
Rydex Biotechnology Fund $ 10,880 $ 47,497 N/A $ 37,423
Rydex Commodities Strategy Fund* $ 15,922 $ 44,455 $ 99,990 N/A
Rydex Consumer Products Fund $ 7,260 $ 34,234 N/A $ 54,150
Rydex Electronics Fund $ 202 $ 8,878 N/A $ 4,390
Rydex Energy Fund $ 14,686 $ 157,310 N/A $ 51,897
Rydex Energy Services Fund $ 25,769 $ 191,456 N/A $ 63,928
Rydex Europe 1.25x Strategy Fund $ 2,395 $ 34,845 $ 32,077 N/A
Rydex Financial Services Fund $ 3,379 $ 26,486 N/A $ 7,905
Rydex|SGI Global 130/30 Strategy Fund $ 3,898 $ 106,585 $ 21,951 N/A
Rydex|SGI Global Market Neutral Fund $ 76 $ 0 $ 26 N/A
Rydex Government Long Bond 1.2x Strategy Fund $ 38,020 $ 66,700 N/A $ 84,224
Rydex Health Care Fund $ 2,869 $ 63,105 N/A $ 36,386
Rydex High Yield Strategy Fund $ 40,877 $ 11,464 $128,315 N/A
Rydex Internet Fund $ 373 $ 9,455 N/A $ 6,558
Rydex Inverse Government Long Bond Strategy Fund $139,264 $1,258,593 N/A $148,094
Rydex Inverse High Yield Strategy Fund $ 3,947 $ 26,583 $ 30,655 N/A
Rydex Inverse Mid-Cap Strategy Fund $ 1,593 $ 9,838 $ 25,234 N/A
B-7
RYDEX SERIES FUNDS
SERIES NAME A-CLASS C-CLASS H-CLASS ADVISOR CLASS
----------------------------------------------------------------------------------------------------------------
Rydex Inverse NASDAQ-100(R) Strategy Fund $ 8,876 $ 59,467 N/A $ 8,429
Rydex Inverse Russell 2000(R) Strategy Fund $ 12,526 $ 50,281 $ 83,054 N/A
Rydex Inverse S&P 500 Strategy Fund $ 41,365 $ 222,265 N/A $71,824
Rydex Japan 2x Strategy Fund $ 1,932 $ 4,375 $ 9,773 N/A
Rydex Leisure Fund $ 236 $ 2,467 N/A $ 4,913
Rydex|SGI Long/Short Commodities Strategy Fund* $ 7,540 $ 8,664 $ 39,599 N/A
Rydex|SGI Managed Futures Strategy Fund* $1,264,652 $1,925,778 $3,083,709 N/A
Rydex Mid-Cap 1.5x Strategy Fund $ 3,070 $ 64,152 $ 35,304 N/A
Rydex|SGI Multi-Hedge Strategies Fund* $ 63,391 $ 212,860 $ 136,681 N/A
Rydex NASDAQ-100(R) Fund $ 9,783 $ 106,465 N/A $67,504
Rydex Nova Fund $ 16,382 $ 197,887 N/A $77,968
Rydex Precious Metals Fund $ 18,347 $ 191,374 N/A $44,668
Rydex Real Estate Fund $ 13,497 $ 15,684 $ 36,229 N/A
Rydex Retailing Fund $ 226 $ 11,201 N/A $ 4,250
Rydex Russell 2000(R) 1.5x Strategy Fund $ 6,138 $ 85,188 $ 34,535 N/A
Rydex Russell 2000(R) Fund $ 9,644 $ 10,180 $ 30,502 N/A
Rydex S&P 500 Fund $ 22,091 $ 89,619 $ 250,365 N/A
Rydex S&P 500 Pure Growth Fund $ 10,318 $ 37,930 $ 31,663 N/A
Rydex S&P 500 Pure Value Fund $ 3,918 $ 33,519 $ 41,904 N/A
Rydex S&P MidCap 400 Pure Growth Fund $ 5,382 $ 39,175 $ 64,272 N/A
Rydex S&P MidCap 400 Pure Value Fund $ 2,036 $ 19,701 $ 12,324 N/A
Rydex S&P SmallCap 600 Pure Growth Fund $ 1,526 $ 20,769 $ 16,808 N/A
Rydex S&P SmallCap 600 Pure Value Fund $ 2,192 $ 27,645 $ 25,040 N/A
Rydex Strengthening Dollar 2x Strategy Fund $ 34,972 $ 131,758 $ 202,145 N/A
Rydex Technology Fund $ 1,308 $ 23,955 N/A $14,926
Rydex Telecommunications Fund $ 719 $ 21,870 N/A $14,299
B-8
RYDEX SERIES FUNDS
SERIES NAME A-CLASS C-CLASS H-CLASS ADVISOR CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Transportation Fund $ 1,448 $ 18,108 N/A $ 14,512
Rydex U.S. Government Money Market Fund $95,062 $1,326,559 N/A $1,121,423
Rydex Utilities Fund $ 6,127 $ 57,961 N/A $ 26,947
Rydex Weakening Dollar 2x Strategy Fund $37,179 $ 113,959 $160,015 N/A
-----------------
* These funds have a fiscal year end of December 31. For the Long Short
Commodities Strategy Fund, information is provided for the period of June 25,
2009 through December 31, 2009 and for the Multi-Hedge Strategies and
Commodities Strategy Funds, which changed their fiscal year during 2009,
information is provided for the period of April 1, 2009 through December 31,
2009.
B-9
APPENDIX C
DIRECTORS/TRUSTEES/MANAGERS AND OFFICERS
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF PADCO ADVISORS, INC. The
business address of the directors and principal executive officers is 9601
Blackwell Road, Suite 500, Rockville, Maryland 20850.
POSITION HELD WITH
NAME PADCO ADVISORS, INC. OTHER PRINCIPAL OCCUPATION/POSITION
-----------------------------------------------------------------------------------------------------
Richard M. Goldman Director and Chief Senior Vice President, Security
Executive Officer Benefit Corporation; Director, First
Security Benefit Life Insurance and
Annuity Company of New York;
President, Security Investors, LLC;
CEO, President, & Director, Rydex
Distributors, Inc.; President & CEO,
Rydex Holdings, LLC; CEO &
Director, PADCO Advisors II, Inc.;
Director, Rydex Fund Services, Inc.;
President and Manager, Security
Global Investors, LLC
Michael P. Byrum Director, Chief Investment Director, Chief Investment Officer,
Officer, President, President, and Secretary, PADCO
and Secretary Advisors II, Inc.; Secretary, Rydex
Funds Services, Inc.; Chief
Investment Officer, Rydex Holdings,
LLC; Manager, Rydex Specialized
Products, LLC
MANAGERS AND PRINCIPAL EXECUTIVE OFFICERS OF SECURITY GLOBAL INVESTORS, LLC.
The business address of the managers and principal executive officers is 801
Montgomery Street, 2nd Floor, San Francisco, California 94133.
POSITION HELD WITH
SECURITY GLOBAL
NAME INVESTORS, LLC OTHER PRINCIPAL OCCUPATION/POSITION
-----------------------------------------------------------------------------------------------------
Richard M. Goldman President and Manager Senior Vice President, Security Benefit
Corporation; Director, First Security Benefit
Life Insurance and Annuity Company of New
York; President and Manager Representative,
Security Investors, LLC; CEO, President, &
Director, Rydex Distributors, Inc.;
President & CEO, Rydex Holdings, LLC;
CEO & Director, PADCO Advisors, Inc.;
CEO & Director, PADCO Advisors II, Inc.;
Director, Rydex Fund Services, Inc.
C-1
TRUSTEES/OFFICERS OF THE FUNDS WHO HOLD POSITION(S) WITH PADCO ADVISORS, INC.
OR SECURITY GLOBAL INVESTORS, LLC. The business address of each of the following
persons is 9601 Blackwell Road, Suite 500, Rockville, Maryland 20850.
POSITION HELD WITH POSITION HELD WITH INVESTMENT ADVISER
NAME THE FUNDS OR SUB-ADVISER
-----------------------------------------------------------------------------------------------------
Richard M. Goldman Trustee and President Director and Chief Executive Officer,
PADCO Advisors, Inc.
President and Manager, Security Global
Investors, LLC
Michael P. Byrum Vice President Director, Chief Investment Officer, President,
and Secretary, PADCO Advisors, Inc.
Joanna M. Haigney Chief Compliance Officer Chief Compliance Officer and Secretary,
PADCO Advisors, Inc.
Keith Fletcher Vice President Vice President, PADCO Advisors, Inc.
C-2
APPENDIX D-1
ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES ADVISED BY PADCO ADVISORS, INC. AND PADCO
ADVISORS II, INC.
Each of the tables below lists the names of other mutual funds advised by
PADCO Advisors, Inc. or PADCO Advisors II, Inc. (collectively, the "Investment
Adviser") with similar investment objectives as the Funds, and information
concerning the Funds' and such other funds' net assets as of December 31, 2009
and the rate of compensation for the Investment Adviser for its services to the
Funds and such other funds.
SERIES OF RYDEX DYNAMIC FUNDS:
------------------------------
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
DOW 2X STRATEGY FUND, A SERIES OF 0.90% $ 51.87
RYDEX DYNAMIC FUNDS
Dow 2x Strategy Fund, a series of Rydex 0.90% $ 19.86
Variable Trust
INVERSE DOW 2X STRATEGY FUND, A SERIES 0.90% $ 39.51
OF RYDEX DYNAMIC FUNDS
Inverse Dow 2x Strategy Fund, a series 0.90% $ 18.02
of Rydex Variable Trust
INVERSE NASDAQ-100 2X STRATEGY FUND, 0.90% $ 69.57
A SERIES OF RYDEX DYNAMIC FUNDS
None N/A N/A
RUSSELL 2000 2X STRATEGY FUND, A SERIES 0.90% $ 45.30
OF RYDEX DYNAMIC FUNDS
Rydex Inverse 2x Russell 2000 ETF, a 0.70% $ 14.57
series of Rydex Variable Trust
S&P 500 2X STRATEGY FUND, A SERIES OF 0.90% $ 143.74
RYDEX DYNAMIC FUNDS
Rydex Inverse 2x S&P 500 ETF, a series 0.70% $ 87.75
of Rydex Variable Trust
NASDAQ-100 2X STRATEGY FUND, A SERIES 0.90% $ 228.51
OF RYDEX DYNAMIC FUNDS
NASDAQ-100 2x Strategy Fund, a series 0.90% $ 36.12
of Rydex Variable Trust
D-1-1
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
RUSSELL 2000 2X STRATEGY FUND, A SERIES 0.90% $ 28.69
OF RYDEX DYNAMIC FUNDS
Russell 2000 2x Strategy Fund, a series 0.90% $ 3.65
of Rydex Variable Trust
Rydex 2x Russell 2000 ETF, a series 0.70% $ 26.73
of Rydex ETF Trust
S&P 500 2X STRATEGY FUND, A SERIES OF 0.90% $ 326.21
RYDEX DYNAMIC FUNDS
S&P 500 2x Strategy Fund, a series of 0.90% $ 28.88
Rydex Variable Trust
Rydex 2x S&P 500 ETF, a series of 0.70% $ 104.67
Rydex ETF Trust
SERIES OF RYDEX SERIES FUNDS:
-----------------------------
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
RYDEX|SGI ALL-ASSET AGGRESSIVE 0.00%(1) $ 7.97
STRATEGY FUND, A SERIES OF RYDEX
SERIES FUNDS
All-Asset Aggressive Strategy Fund 0.00%(1) $ 16.25
(formerly, Essential Portfolio Aggressive
Fund), a series of Rydex Variable Trust
RYDEX|SGI ALL-ASSET CONSERVATIVE 0.00%(1) $ 15.76
STRATEGY FUND, A SERIES OF RYDEX
SERIES FUNDS
All-Asset Conservative Strategy Fund 0.00%(1) $ 8.17
(formerly, Essential Portfolio Conservative
Fund), a series of Rydex Variable Trust
$ 37.19
RYDEX|SGI ALL-ASSET MODERATE STRATEGY 0.00%(1)
FUND, A SERIES OF RYDEX SERIES FUNDS
All-Asset Moderate Strategy Fund (formerly, 0.00%(1) $ 18.68
Essential Portfolio Moderate Fund), a series
of Rydex Variable Trust
RYDEX|SGI ALL-CAP OPPORTUNITY FUND, A 0.90% $ 200.23
SERIES OF RYDEX SERIES FUNDS
All-Cap Opportunity Fund, a series of 0.90% $ 68.36
Rydex Variable Trust
D-1-2
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
RYDEX|SGI ALTERNATIVE STRATEGIES 0.00%(1) $ 38.43
ALLOCATION FUND, A SERIES OF RYDEX
SERIES FUNDS
Alternative Strategies Allocation Fund, a 0.00%(1) $ 5.12
series of Rydex Variable Trust
RYDEX BANKING FUND, A SERIES OF RYDEX 0.85% $ 7.21
SERIES FUNDS
Banking Fund, a series of Rydex 0.85% $ 4.64
Variable Trust
RYDEX BASIC MATERIALS FUND, A SERIES OF 0.85% $ 85.79
RYDEX SERIES FUNDS
Basic Materials Fund, a series of Rydex 0.85% $ 46.53
Variable Trust
RYDEX BIOTECHNOLOGY FUND, A SERIES OF 0.85% $ 58.30
RYDEX SERIES FUNDS
Biotechnology Fund, a series of Rydex 0.85% $ 13.15
Variable Trust
RYDEX COMMODITIES STRATEGY FUND, A 0.75%(2) $ 46.76
SERIES OF RYDEX SERIES FUNDS
Commodities Strategy Fund, a series of 0.75%(2) $ 21.39
Rydex Variable Trust
RYDEX CONSUMER PRODUCTS FUND, A SERIES 0.85% $ 182.58
OF RYDEX SERIES FUNDS
Consumer Products Fund, a series of Rydex 0.85% $ 21.26
Variable Trust
RYDEX ELECTRONICS FUND, A SERIES OF RYDEX 0.85% $ 95.78
SERIES FUNDS
Electronics Fund, a series of Rydex 0.85% $ 25.03
Variable Trust
RYDEX ENERGY FUND, A SERIES OF RYDEX 0.85% $ 65.87
SERIES FUNDS
Energy Fund, a series of Rydex 0.85% $ 39.36
Variable Trust
RYDEX ENERGY SERVICES FUND, A SERIES OF 0.85% $ 87.15
RYDEX SERIES FUNDS
Energy Services Fund, a series of Rydex 0.85% $ 41.51
Variable Trust
RYDEX EUROPE 1.25X STRATEGY FUND, A 0.90% $ 18.99
SERIES OF RYDEX SERIES FUNDS
Europe 1.25x Strategy Fund, a series of 0.90% $ 22.46
Rydex Variable Trust
D-1-3
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
RYDEX FINANCIAL SERVICES FUND, A SERIES 0.85% $ 26.44
OF RYDEX SERIES FUNDS
Financial Services Fund, a series of Rydex 0.85% $ 17.17
Variable Trust
RYDEX|SGI GLOBAL 130/30 STRATEGY FUND, 1.05%(3) $ 14.06
A SERIES OF RYDEX SERIES FUNDS
None N/A N/A
RYDEX|SGI GLOBAL MARKET NEUTRAL FUND, 1.20% $ 18.75
A SERIES OF RYDEX SERIES FUNDS
None N/A N/A
RYDEX GOVERNMENT LONG BOND 1.2X 0.50% $ 75.45
STRATEGY FUND, A SERIES OF RYDEX
SERIES FUNDS
Government Long Bond 1.2x Strategy 0.50% $ 24.09
Fund, a series of Rydex Variable Trust
RYDEX HEALTH CARE FUND, A SERIES OF 0.85% $ 192.12
RYDEX SERIES FUNDS
Health Care Fund, a series of Rydex 0.85% $ 26.90
Variable Trust
RYDEX HIGH YIELD STRATEGY FUND, A SERIES 0.75% $ 20.61
OF RYDEX SERIES FUNDS
None N/A N/A
RYDEX INTERNET FUND, A SERIES OF RYDEX 0.85% $ 26.46
SERIES FUNDS
Internet Fund, a series of Rydex 0.85% $ 30.36
Variable Trust
RYDEX INVERSE GOVERNMENT LONG BOND 0.90% $ 595.79
STRATEGY FUND, A SERIES OF RYDEX
SERIES FUNDS
Inverse Government Long Bond Strategy 0.90% $ 27.96
Fund, a series of Rydex Variable Trust
RYDEX INVERSE HIGH YIELD STRATEGY FUND, 0.75% $ 7.24
A SERIES OF RYDEX SERIES FUNDS
None N/A N/A
RYDEX INVERSE MID-CAP STRATEGY FUND, 0.90% $ 4.55
A SERIES OF RYDEX SERIES FUNDS
Inverse Mid-Cap Strategy Fund, a series 0.90% $ 4.68
of Rydex Variable Trust
RYDEX INVERSE NASDAQ-100 STRATEGY 0.90% $ 22.32
FUND, A SERIES OF RYDEX SERIES FUNDS
Inverse NASDAQ-100 Strategy Fund, a 0.90% $ 14.31
series of Rydex Variable Trust
D-1-4
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
RYDEX INVERSE RUSSELL 2000 STRATEGY 0.90% $ 21.41
FUND, A SERIES OF RYDEX SERIES FUNDS
Inverse Russell 2000 Strategy Fund, a 0.90% $ 11.43
series of Rydex Variable Trust
RYDEX INVERSE S&P 500 STRATEGY FUND, 0.90% $ 243.51
A SERIES OF RYDEX SERIES FUNDS
Inverse S&P 500 Strategy Fund, a series 0.90% $ 22.97
of Rydex Variable Trust
RYDEX JAPAN 2X STRATEGY FUND, A SERIES 0.75% $ 5.54
OF RYDEX SERIES FUNDS
Japan 2x Strategy Fund, a series of Rydex 0.75% $ 8.41
Variable Trust
RYDEX LEISURE FUND, A SERIES OF RYDEX 0.85% $ 3.93
SERIES FUNDS
Leisure Fund, a series of Rydex 0.85% $ 11.72
Variable Trust
RYDEX|SGI LONG/SHORT COMODITIES 0.90%(2) $ 7.24
STRATEGY FUND, A SERIES OF RYDEX
SERIES FUNDS
None N/A N/A
RYDEX|SGI MANAGED FUTURES STRATEGY 0.90%(2) $ 2,330.56
FUND, A SERIES OF RYDEX SERIES FUNDS
Managed Futures Strategy Fund, a series 0.90%(2) $ 28.64
of Rydex Variable Trust
RYDEX MID-CAP 1.5X STRATEGY FUND, A 0.90% $ 27.71
SERIES OF RYDEX SERIES FUNDS
Mid-Cap 1.5x Strategy Fund, a series of 0.90% $ 14.38
Rydex Variable Trust
RYDEX|SGI MULTI-HEDGE STRATEGIES FUND, 1.15% $ 117.87
A SERIES OF RYDEX SERIES FUNDS
Multi-Hedge Strategies Fund, a series of 1.15%(2) $ 25.56
Rydex Variable Trust
RYDEX NASDAQ-100 FUND, A SERIES OF 0.75% $ 589.36
RYDEX SERIES FUNDS
NASDAQ-100 Fund, a series of Rydex 0.75% $ 57.55
Variable Trust
RYDEX NOVA FUND, A SERIES OF RYDEX 0.75% $ 77.74
SERIES FUNDS
Nova Fund, a series of Rydex Variable Trust 0.75% $ 50.57
D-1-5
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
RYDEX PRECIOUS METALS FUND, A SERIES OF 0.75% $ 313.27
RYDEX SERIES FUNDS
Precious Metals Fund, a series of Rydex 0.75% $ 86.29
Variable Trust
RYDEX REAL ESTATE FUND, A SERIES OF 0.85% $ 35.66
RYDEX SERIES FUNDS
Real Estate Fund, a series of Rydex 0.85% $ 33.88
Variable Trust
RYDEX RETAILING FUND, A SERIES OF RYDEX 0.85% $ 7.61
SERIES FUNDS
Rydex Retailing Fund, a series of Rydex 0.85% $ 15.49
Variable Trust
RYDEX RUSSELL 2000 1.5X STRATEGY FUND, 0.90% $ 21.28
A SERIES OF RYDEX SERIES FUNDS
Russell 2000 1.5x Strategy Fund, a series 0.90% $ 10.59
of Rydex Variable Trust
RYDEX RUSSELL 2000 FUND, A SERIES OF 0.75% $ 13.62
RYDEX SERIES FUNDS
None N/A N/A
RYDEX S&P 500 FUND, A SERIES OF RYDEX 0.75% $ 140.36
SERIES FUNDS
None N/A N/A
RYDEX S&P 500 PURE GROWTH FUND, A 0.75% $ 54.32
SERIES OF RYDEX SERIES FUNDS
S&P 500 Pure Growth Fund, a series of 0.75% $ 34.48
Rydex Variable Trust
S&P MidCap 500 Pure Growth ETF, a 0.35% $ 58.16
series of Rydex ETF Trust
RYDEX S&P 500 PURE VALUE FUND, A SERIES 0.75% $ 25.14
OF RYDEX SERIES FUNDS
S&P 500 Pure Value Fund, a series of 0.75% $ 27.85
Rydex Variable Trust
S&P MidCap 500 Pure Value ETF, a series 0.35% $ 34.31
of Rydex ETF Trust
RYDEX S&P MIDCAP 400 PURE GROWTH 0.75% $ 48.37
FUND, A SERIES OF RYDEX SERIES FUNDS
S&P MidCap 400 Pure Growth Fund, a 0.75% $ 44.92
series of Rydex Variable Trust
Rydex S&P MidCap 400 Pure Growth ETF, 0.35% $ 101.76
a series of Rydex ETF Trust
D-1-6
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
RYDEX S&P MIDCAP 400 PURE VALUE 0.75% $ 36.50
FUND, A SERIES OF RYDEX SERIES FUNDS
S&P MidCap 400 Pure Value Fund, a series 0.75% $ 29.51
of Rydex Variable Trust
Rydex S&P MidCap 400 Pure Value ETF, a 0.35% $ 25.24
series of Rydex ETF Trust
RYDEX S&P SMALLCAP 600 PURE GROWTH 0.75% $ 22.73
FUND, A SERIES OF RYDEX SERIES FUNDS
S&P SmallCap 600 Pure Growth Fund, a 0.75% $ 13.56
series of Rydex Variable Trust
Rydex S&P SmallCap 600 Pure Growth ETF, 0.35% $ 13.10
a series of Rydex ETF Trust
RYDEX S&P SMALLCAP 600 PURE VALUE 0.75% $ 26.56
FUND, A SERIES OF RYDEX SERIES FUNDS
S&P SmallCap 600 Pure Value Fund, a 0.75% $ 13.56
series of Rydex Variable Trust
Rydex S&P SmallCap 600 Pure Value ETF, 0.35% $ 84.91
a series of Rydex ETF Trust
RYDEX STRENGTHENING DOLLAR 2X STRATEGY 0.90% $ 71.00
FUND, A SERIES OF RYDEX SERIES FUNDS
Strengthening Dollar 2x Strategy Fund, a 0.90% $ 7.53
series of Rydex Variable Trust
RYDEX TECHNOLOGY FUND, A SERIES OF RYDEX 0.85% $ 39.97
SERIES FUNDS
Technology Fund, a series of Rydex 0.85% $ 15.49
Variable Trust
RYDEX TELECOMMUNICATIONS FUND 0.85% $ 70.49
Telecommunications Fund, a series of Rydex 0.85% $ 5.75
Variable Trust
RYDEX TRANSPORTATION FUND, A SERIES OF 0.85% $ 76.79
RYDEX SERIES FUNDS
Transportation Fund, a series of Rydex 0.85% $ 8.46
Variable Trust
RYDEX U.S.GOVERNMENT MONEY MARKET 0.50% $ 1,341.27
FUND, A SERIES OF RYDEX SERIES FUNDS
U.S. Government Money Market Fund, a 0.50% $ 231.44
series of Rydex Variable Trust
RYDEX UTILITIES FUND, A SERIES OF RYDEX 0.85% $ 55.62
SERIES FUNDS
Utilities Fund, a series of Rydex 0.85% $ 15.82
Variable Trust
D-1-7
ANNUAL COMPENSATION TO
NAME OF FUND THE INVESTMENT ADVISER
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS
STATEMENT DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s)
with Similar Objectives
----------------------------------------------------------------------------------------------
RYDEX WEAKENING DOLLAR 2X STRATEGY 0.90% $ 63.15
FUND, A SERIES OF RYDEX SERIES FUNDS
Weakening Dollar 2x Strategy Fund, a 0.90% $ 4.91
series of Rydex Variable Trust
The Investment Adviser did not reduce or waive its investment advisory
fees for the period indicated, except as provided below.
_______________________
(1) The Fund invests primarily in underlying funds (the "Underlying Funds").
The Investment Adviser receives an investment advisory fee for managing the
Underlying Funds. The Underlying Funds pay a monthly investment advisory
fee to the Investment Adviser for its services. The fee is based on the
average net daily assets of each Underlying Fund and calculated at an
annual rate for each Underlying Fund. For more information regarding the
Underlying funds' investment advisory fees and expense limitations, please
see the Prospectus and applicable sections of the Statement of Additional
Information. The Funds benefit from the investment advisory services
provided to the Underlying Funds and, as shareholders of those Underlying
Funds, indirectly bear a proportionate share of those Underlying Funds'
advisory fees.
(2) The Fund may invest in a wholly-owned and controlled Cayman Islands
subsidiary (the "Subsidiary"). The Subsidiary has entered into a separate
advisory agreement with the Investment Adviser for the management of the
Subsidiary's portfolio pursuant to which the Subsidiary pays the Investment
Adviser a management fee at the same rate that the Fund pays the Investment
Adviser for services provided to the Fund. The Investment Adviser has
contractually agreed to waive the management fee it receives from the Fund
in an amount equal to the management fee paid to the Investment Adviser by
the Subsidiary. This undertaking will continue in effect for so long as the
Fund invests in the Subsidiary, and may not be terminated by the Investment
Adviser unless the Investment Adviser first obtains the prior approval of
the Fund's Board of Trustees for such termination. The management fees
included in the table reflect the net management fees paid to the Investment
Adviser by the Fund after the fee waiver.
D-1-8
APPENDIX D-2
ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
SUB-ADVISED BY OF SECURITY GLOBAL INVESTORS, LLC
The table below lists the names of other mutual funds sub-advised by
Security Global Investors, LLC (the "Sub-Adviser") with similar investment
objectives as the Fund, and information concerning the Fund's and such
other funds' net assets as of December 31, 2009 and the rate of
compensation for the Sub-Adviser for its services to the Fund and such
other funds.
ANNUAL COMPENSATION TO THE
NAME OF FUND SUBJECT TO THIS SUB-ADVISER (AS A PERCENTAGE NET ASSETS
PROXY STATEMENT OF AVERAGE DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s) with
Similar Objectives
-------------------------------------------------------------------------------------------------------
RYDEX|SGI GLOBAL 130/30 STRATEGY FUND, 0.65% $14.06
A SERIES OF RYDEX SERIES FUNDS
RYDEX|SGI GLOBAL MARKET NEUTRAL FUND, 0.80% $18.75
A SERIES OF RYDEX SERIES FUNDS
Rydex|SGI Global Fund, a series of 0.35% on the first $300 million; $112,385,525
Security Equity Fund 0.30% on the next $450 million;
and 0.25% thereafter(1)
Rydex|SGI Global Institutional Fund, a 0.35% on the first $300 million; $4,542,055
series of Security Equity Fund 0.30% on the next $450 million;
and 0.25% thereafter(1)
Series D (Global Series), a series of 0.35% on the first $300 million; $270,193,342
SBL Fund 0.30% on the next $450 million;
and 0.25% thereafter(1)
International Equity Fund, a series of 0.40% $96,747,876*
American Independence Funds Trust
The Sub-Adviser did not reduce or waive its investment advisory fees for the
period indicated.
-----------------
(1) These annual fees are stated as a percentage of the combined average daily
net assets of the portion of Rydex|SGI Global Fund, Rydex|SGI Global
Institutional Fund and Series D (Global Series) managed by the Sub-Adviser.
* As of October 31, 2009.
D-2-1
APPENDIX E
FORM OF SUB-ADVISORY AGREEMENT WITH SECURITY GLOBAL
INVESTORS, LLC
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of the [ ] day of [ ], 2010
between PADCO Advisors, Inc. (the "Adviser"), a Maryland corporation, registered
under the Investment Advisers Act of 1940, as amended (the "Investment Advisers
Act"), and Security Global Investors, LLC (the "Subadviser"), a Kansas limited
liability company registered under the Investment Advisers Act.
W I T N E S S E T H
WHEREAS, Rydex Series Funds, a Delaware statutory trust (the "Trust"), is
registered with the Securities and Exchange Commission (the "Commission") as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "Investment Company Act");
WHEREAS, the Trust is authorized to issue shares of (a) the Global 130/30
Strategy Fund and (b) the Global Market Neutral Fund (individually a "Fund" and
together the "Funds"), each a separate series of the Trust;
WHEREAS, each Fund has, pursuant to an Advisory Agreement with the Adviser
(the "Advisory Agreement"), retained the Adviser to act as investment adviser
for and to manage its assets;
WHEREAS, the Adviser, with the approval of the Trust, desires to retain the
Subadviser as subadviser to act as investment adviser for and to manage each
Fund's Investments (as defined below) and the Subadviser desires to render such
services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. APPOINTMENT AS SUBADVISER. The Adviser hereby retains the Subadviser to
act as investment adviser for and to manage the assets of each Fund, subject to
the supervision of the Adviser and the Board of Trustees of the Funds and
subject to the terms of this Agreement. The Subadviser hereby accepts such
employment. In such capacity, the Subadviser shall be responsible for the Fund's
Investments (as defined below).
2. DUTIES OF SUBADVISER.
(a) Investments. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated investment policies and restrictions
of each Fund as set forth in the Fund's prospectus and statement of
additional information as currently in effect and as supplemented or
amended from time to time (collectively referred to hereinafter as the
"Prospectus") and subject to the directions of the Adviser and each Fund's
Board of Trustees to purchase, hold
E-1
and sell investments for the Funds (hereinafter "Investments") and to
monitor on a continuous basis the performance of such Investments. The
Subadviser shall give the Fund the benefit of its best efforts in rendering
its services as Subadviser. The Subadviser may contract with or consult
with such banks, other securities firms, brokers or other parties, without
additional expense to the Fund, as it may deem appropriate regarding
investment advice, research and statistical data, clerical assistance or
otherwise.
The Subadviser acknowledges that the Fund may engage in certain
transactions in reliance on exemptions under Rule 10f-3, Rule 12d3-1, Rule
17a-10 and Rule 17e-1 under the Investment Company Act. Accordingly, the
Subadviser hereby agrees that it will not consult with any other subadviser
of a Fund, or an affiliated person of such other subadviser, concerning
transactions for the Fund in securities or other fund assets. The
Subadviser shall be limited to providing investment advice with respect to
only the discrete portion of each Fund's portfolio as may be determined
from time-to-time by the Adviser, and shall not consult with any other
subadviser (if any) as to any other portion of such Fund's portfolio
concerning transactions for the Fund in securities or other assets.
(b) Brokerage. The Subadviser is authorized, subject to the supervision
of the Adviser and each Fund's Board to establish and maintain accounts on
behalf of each Fund with, and place orders for the purchase and sale of
each Fund's Investments with or through, such persons, brokers or dealers
as Subadviser may select which may include, to the extent permitted by the
Adviser and the Fund's Board, brokers or dealers affiliated with the
Subadviser or Adviser, and negotiate commissions to be paid on such
transactions. The Subadviser agrees that in placing such orders for the
Funds it shall attempt to obtain best execution, provided that, the
Subadviser may, on behalf of each Fund, pay brokerage commissions to a
broker which provides brokerage and research services to the Subadviser in
excess of the amount another broker would have charged for effecting the
transaction, provided (i) the Subadviser determines in good faith that the
amount is reasonable in relation to the value of the brokerage and research
services provided by the executing broker in terms of the particular
transaction or in terms of the Subadviser's overall responsibilities with
respect to that particular Fund and the accounts as to which the Subadviser
exercises investment discretion, (ii) such payment is made in compliance
with Section 28(e) of the Securities Exchange Act of 1934, as amended, and
any other applicable laws and regulations, and (iii) in the opinion of the
Subadviser, the total commissions paid by such Fund will be reasonable in
relation to the benefits to the Fund over the long term. In reaching such
determination, the Subadviser will not be required to place or attempt to
place a specific dollar value on the brokerage and/or research services
provided or being provided by such broker. It is recognized that the
services provided by such brokers may be useful to the Subadviser in
connection with the Subadviser's services to other clients. On
E-2
occasions when the Subadviser deems the purchase or sale of a security to
be in the best interests of a Fund as well as other clients of the
Subadviser, the Subadviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities to be sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such
event, allocation of securities so sold or purchased, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients. The
Subadviser will report on such allocations at the request of the Adviser,
or the Fund's Board, providing such information as the number of aggregated
trades to which such Fund was a party, the broker(s) to whom such trades
were directed and the basis of the allocation for the aggregated trades.
(c) Securities Transactions. The Subadviser and any affiliated person
of the Subadviser will not purchase securities or other instruments from or
sell securities or other instruments to a Fund ("Principal Transactions");
provided, however, the Subadviser or an affiliated person of the Subadviser
may enter into a Principal Transaction with the Fund if (i) the transaction
is permissible under applicable laws and regulations, including, without
limitation, the Investment Company Act and the Investment Advisers Act and
the rules and regulations promulgated thereunder, and (ii) the transaction
or category of transactions receives the express written approval of the
Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under
the Investment Company Act and its Code of Ethics, as the same may be
amended from time to time. The Subadviser agrees to provide the Adviser and
the Fund with a copy of such Code of Ethics.
(d) Books and Records. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company Act
and the rules and regulations promulgated thereunder solely with respect to
transactions made by it on behalf of a Fund including, without limitation,
the books and records required by Subsections (b)(1), (5), (6), (7), (9),
(10) and (11) and Subsection (f) of Rule 31a-1 under the Investment Company
Act and shall timely furnish to the Adviser all information relating to the
Subadviser's services hereunder needed by the Adviser to keep such other
books and records of the Funds required by Rule 31a-1 under the Investment
Company Act. The Subadviser will also preserve all such books and records
for the periods prescribed in part (e) of Rule 31a-2 under the Investment
Company Act, and agrees that such books and records shall remain the sole
property of the Funds and shall be immediately surrendered to the
appropriate Fund upon request. The Subadviser further agrees that all books
and records maintained hereunder shall be made available to the Funds or
the Adviser at any time upon reasonable request and notice, including
telecopy, during any business day.
E-3
(e) Information Concerning Investments and Subadviser. From time to
time as the Adviser or the Funds may request, the Subadviser will furnish
the requesting party reports on portfolio transactions and reports on
Investments held in the portfolios, all in such detail as the Adviser or
the Funds may reasonably request. The Subadviser will make available its
officers and employees to meet with the Board of Directors of the Funds at
the principal place of business of the Funds on due notice to review the
Investments of the Fund.
The Subadviser will also provide such information as is customarily
provided by a subadviser and may be required for the Funds or the Adviser
to comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of 1986, as
amended (the "Code"), the Investment Company Act, the Investment Advisers
Act, the Securities Act of 1933, as amended (the "Securities Act") and any
state securities laws, and any rule or regulation thereunder.
During the term of this Agreement, the Adviser agrees to furnish the
Subadviser at its principal office all registration statements, proxy
statements, reports to stockholders, sales literature or other materials
prepared for distribution to stockholders of the Funds, or the public that
refer to the Subadviser for Subadviser's review and approval. The
Subadviser shall be deemed to have approved all such materials unless the
Subadviser reasonably objects by giving notice to the Adviser in writing
within five business days (or such other period as may be mutually agreed)
after receipt thereof. The Subadviser's right to object to such materials
is limited to the portions of such materials that expressly relate to the
Subadviser, its services and its clients. The Adviser agrees to use its
best efforts to ensure that materials prepared by its employees or agents
or its affiliates that refer to the Subadviser or its clients in any way
are consistent with those materials previously approved by the Subadviser
as referenced in this paragraph. Sales literature may be furnished to the
Subadviser by first class or overnight mail, facsimile transmission
equipment or hand delivery.
(f) Custody Arrangements. The Subadviser shall provide the Funds'
custodian, on each business day with information relating to all
transactions concerning each Fund's assets.
(g) Compliance with Applicable Laws and Governing Documents. In all
matters relating to the performance of this Agreement, the Subadviser and
its directors, officers, partners, employees and interested persons shall
act in conformity with the Trust's Agreement and Declaration of Trust,
By-Laws, and currently effective registration statement and with the
written instructions and directions of the Funds' Board and the Adviser,
after receipt of such documents, from the Fund(s), and shall comply with
the requirements of the Investment Company Act, the Investment Advisers
Act, the Commodity Exchange Act (the "CEA"), the rules thereunder, and all
other applicable federal and state laws and regulations.
E-4
In carrying out its obligations under this Agreement, the Subadviser
shall ensure that the Fund complies with all applicable statutes and
regulations necessary to qualify the Fund as a Regulated Investment Company
under Subchapter M of the Code (or any successor provision), and shall
notify the Adviser immediately upon having a reasonable basis for believing
that either Fund has ceased to so qualify or that it might not so qualify
in the future.
(h) Information Concerning the Funds. The Adviser has furnished the
Subadviser with copies of each of the following documents and will furnish
the Subadviser at its principal office all future amendments and
supplements to such documents, if any, as soon as practicable after such
documents become available: (i) the Trust's Agreement and Declaration of
Trust, (ii) the By-Laws of the Funds, (iii) each Fund's registration
statement under the Investment Company Act and the Securities Act of 1933,
as amended, as filed with the Commission, and (iv) any written instructions
of the Funds' Board and the Adviser.
(i) Voting of Proxies. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders of Investments held by
the Funds.
(j) Informational Material. The Subadviser shall provide the Adviser
for its review, prior to their use, copies of all informational materials
prepared by or on behalf of the Subadvsier, mentioning either Fund,
including, but not limited to, advertisements, brochures, and promotional
and any other similar materials (the "Informational Materials"), and that
such Informational Materials shall conform with, and be disseminated in
accordance with, applicable laws.
3. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent either Fund or the Adviser in any way or
otherwise be deemed an agent of either Fund or the Adviser.
4. COMPENSATION. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fee set forth in Exhibit A to this Agreement.
5. EXPENSES. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties hereunder.
However, the Subadviser shall not assign or delegate any of its investment
management duties under this Agreement without the approval of the Adviser and
the applicable Fund's Board.
6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser represents
and warrants to the Adviser and the Funds as follows:
(a) The Subadviser is registered as an investment adviser under the
Investment Advisers Act;
E-5
(b) The Subadviser will immediately notify the Adviser of the
occurrence of any event that would disqualify the Subadviser from serving
as an investment adviser of an investment company pursuant to Section 9(a)
of the Investment Company Act;
(c) The Subadviser has filed a notice of exemption pursuant to Rule
4.14 under the CEA with the Commodity Futures Trading Commission (the
"CFTC") and the National Futures Association;
(d) The Subadviser is fully authorized under all applicable law to
serve as Subadviser to the Funds and to perform the services described
under this Agreement;
(e) The Subadviser is a limited liability company duly organized and
validly existing under the laws of the state of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(f) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized
by all necessary action on the part of its members, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution,
delivery and performance by the Subadviser of this Agreement do not
contravene or constitute a default under (i) any provision of applicable
law, rule or regulation, (ii) the Subadviser's governing instruments, or
(iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Subadviser;
(g) This Agreement is a valid and binding agreement of the Subadviser;
(h) The Form ADV of the Subadviser previously provided to the Adviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date, and does not omit to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(i) The Subadviser has adopted compliance policies and procedures
reasonably designed to prevent violations of the Investment Advisers Act
and the rules thereunder, has provided the Adviser with a copy of such
compliance policies and procedures (and will provide them with any
amendments thereto), and agrees to assist the Fund in complying with the
Funds' compliance program adopted pursuant to Rule 38a-1 under the
Investment Company Act, to the extent applicable. The Subadviser
understands that the Boards of Trustees of the Funds are required to
approve the Subadviser's compliance policies and procedures and
acknowledges that this Agreement is conditioned upon such Board approval;
and
(j) The Subadviser shall not divert any Funds' portfolio securities
transactions to a broker or dealer in consideration of such broker or
dealer's
E-6
promotion or sales of shares of such Fund, any other series of the Trust, or
any other registered investment company.
7. NON-EXCLUSIVITY. The services of the Subadviser with respect to the Funds
are not deemed to be exclusive, and the Subadviser and its officers shall be
free to render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other activities
so long as its duties hereunder are not impaired thereby.
8. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents and
warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Adviser is a Maryland corporation duly organized and validly
existing under the laws of the State of Maryland with the power to own and
possess its assets and carry on its business as it is now being conducted;
(c) The execution, delivery and performance by the Adviser of this
Agreement and the Advisory Agreement are within the Adviser's powers and
have been duly authorized by all necessary action on the part of its
directors, and no action by or in respect of, or filing with, any
governmental body, agency or official is required on the part of the
Adviser for the execution, delivery and performance by the Adviser of this
Agreement, and the execution, delivery and performance by the Adviser of
this Agreement do not contravene or constitute a default under (i) any
provision of applicable law, rule or regulation, (ii) the Adviser's
governing instruments, or (iii) any agreement, judgment, injunction, order,
decree or other instrument binding upon the Adviser;
(d) This Agreement and the Advisory Agreement are valid and binding
agreements of the Adviser;
(e) The Form ADV of the Adviser previously provided to the Subadviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(f) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV at least 48 hours prior to the execution of this
Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 8 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
E-7
10. LIABILITY AND INDEMNIFICATION. The Subadviser shall indemnify and hold
harmless the Trust and all affiliated persons thereof (within the meaning of
Section 2(a)(3) of the 1940 Act) and all their respective controlling persons
(as described in Section 15 of the 1933 Act) against any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) by reason of or arising out of: (a) the Subadviser being in material
violation of any applicable federal or state law, rule or regulation or any
investment policy or restriction set forth in the Funds' Registration Statement
or any written guidelines or instruction provided in writing by the Board, (b) a
Fund's failure to satisfy the diversification or source of income requirements
of Subchapter M of the Code, or (c) the Subadviser's misfeasance or negligence
generally in the performance of its duties hereunder or its negligent disregard
of its obligations and duties under this Agreement.
11. DURATION AND TERMINATION.
(a) Duration. This Agreement shall become effective upon the date first
above written, provided that this Agreement shall not take effect with
respect to a Fund unless it has first been approved by a vote of a majority
of those Trustees of the Trust, who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval. This Agreement shall continue
in effect for a period of two years from the date hereof, subject
thereafter to being continued in force and effect from year to year if
specifically approved each year by the Board of Trustees or by the vote of
a majority of the applicable Fund's outstanding voting securities. In
addition to the foregoing, each renewal of this Agreement must be approved
by the vote of a majority of the Fund's Trustees who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. Prior to voting
on the renewal of this Agreement, the Board of Trustees of the Funds may
request and evaluate, and the Subadviser shall furnish, such information as
may reasonably be necessary to enable the Fund's Board to evaluate the
terms of this Agreement.
(b) Termination. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of
any penalty:
(i) By vote of a majority of the Board of Trustees of a Fund, or by
vote of a majority of the outstanding voting securities of the Fund,
or by the Adviser, in each case, upon sixty (60) days' written notice
to the Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof, which shall
not have been cured within twenty (20) days of the Subadviser's
receipt of written notice of such breach;
E-8
(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its duties
and obligations under this Agreement; or
(iv) By the Subadviser upon 120 days written notice to the Adviser
and the applicable Fund.
This Agreement shall not be assigned (as such term is defined in the
Investment Company Act) without the prior written consent of the parties hereto.
This Agreement shall terminate automatically in the event of its assignment
without such consent or upon the termination of the Advisory Agreement.
12. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Funds pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement.
13. Amendment. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with shall be approved
by the Board of Trustees of the applicable Fund or by a vote of a majority of
the outstanding voting securities of the applicable Fund.
14. NOTICE. Any notice that is required to be given by the parties to each
other (or to the Fund) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Security Global Investors, LLC
801 Montgomery Street, 2nd Floor
San Francisco, CA 94133-5164
Attention: John Boich, Vice President and Head of Global Equity
Facsimile: (415) 274-7720
With a copy to:
Security Benefit Corporation
One Security Benefit Place
Topeka, KS 66636
Attention: General Counsel
Facsimile: (785) 438-3080
(b) If to the Adviser:
PADCO Advisors, Inc.
9601 Blackwell Road, Suite 500
Rockville, MD 20850
Attention: President
Facsimile: (301) 296-5106
E-9
With a copy to:
Security Benefit Corporation
One Security Benefit Place
Topeka, KS 66636
Attention: General Counsel
Facsimile: (785) 438-3080
(c) If to the Trust:
Rydex Series Funds
9601 Blackwell Road, Suite 500
Rockville, MD 20850
Attention: Secretary
Facsimile: (301) 296-5108
15. GOVERNING LAW; JURISDICTION. Except as indicated in Section 19(b) of
this Agreement, this Agreement shall be governed by and construed in accordance
with the laws of the State of Kansas, without regard to its conflicts of law
provisions.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
17. CAPTIONS. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
19. CERTAIN DEFINITIONS.
(a) "Business Day." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) Miscellaneous. As used herein, "investment company," "affiliated
person," "interested person," "assignment," "broker," "dealer" and
"affirmative vote of the majority of the Fund's outstanding voting
securities" shall all have such meaning as such terms have in the
Investment Company Act. The term "investment adviser" shall have such
meaning as such term has in the Investment Advisers Act and the Investment
Company Act, and in the event of a conflict between such Acts, the most
expansive definition shall control. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of
this Agreement is relaxed by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
E-10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
PADCO ADVISORS, INC.
By: ____________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name:
Title:
SECURITY GLOBAL INVESTORS, LLC
By: ____________________________________
Name: Richard M. Goldman
Title:
ATTEST:
____________________________________
Name:
Title:
E-11
EXHIBIT A
Compensation
For all services rendered by the Subadviser hereunder to the Global 130/30
Strategy Fund, Adviser shall pay to Subadviser a fee (the "Subadvisory Fee") at
an annual rate of 0.65% (65 basis points) of the Fund's average daily net
assets.
For all services rendered by the Subadviser hereunder to the Global Market
Neutral Fund, Adviser shall pay to Subadviser a fee (the "Subadvisory Fee") at
an annual rate of 0.80% (80 basis points) of the Fund's average daily net
assets.
For purposes of calculating the compensation to be paid hereunder, each
Fund's assets shall be computed in the same manner at the end of the business
day as the value of such net assets is computed in connection with the
determination of the net asset value of such Fund's shares as described in the
then current prospectus for the Fund.
The Subadvisory Fee shall be accrued for each calendar day the Subadviser
renders subadvisory services hereunder and the sum of the daily fee accruals
shall be paid monthly to the Subadviser as soon as practicable following the
last day of each month, by wire transfer if so requested by the Subadviser, but
no later than ten (10) business days thereafter. If this Agreement shall be
effective for only a portion of a year, then the Subadviser's fee for said year
shall be prorated for such portion.
E-12
APPENDIX F
INFORMATION REGARDING THE SUB-ADVISORY AGREEMENT
WITH SECURITY GLOBAL INVESTORS, LLC AND FEES PAID TO THE
SUB-ADVISER
Security Global Investors, LLC (the "Sub-Adviser") currently serves as
sub-adviser to the Rydex|SGI Global 130/30 Strategy Fund and the Rydex|SGI
Global Market Neutral Fund, each a series of Rydex Series Funds (collectively,
the "SGI Funds"), pursuant to the investment sub-advisory agreement between
PADCO Advisors, Inc., the SGI Funds' investment adviser (the "Investment
Adviser"), and the Sub-Adviser. The table below provides the following
information:
(i) the date of the Sub-Advisory Agreement;
(ii) the date on which the SGI Funds' shareholders last approved the Funds'
Sub-Advisory Agreement;
(iii) the annual rate of sub-advisory fees paid by the Investment Adviser
to the Sub-Adviser for the Sub-Adviser's sub-advisory services to the
SGI Funds; and
(iv) the aggregate amount of advisory fees paid by the Investment Adviser
to the Sub-Adviser for the Sub-Adviser's sub-advisory services to the
SGI Funds during the SGI Funds' most recently completed fiscal year
(ended March 31, 2009).
DATE OF DATE OF LAST SUB-ADVISORY FEES
SUB-ADVISORY SHAREHOLDER PAID TO
FUND AGREEMENT APPROVAL SUB-ADVISORY FEES SUB-ADVISER
---------------------------------------------------------------------------------------------
Rydex|SGI Global 130/30 4/1/2009 11/7/2008 0.65% $0*
Strategy Fund
Rydex|SGI Global Market 4/1/2009 11/7/2008 0.80% $0*
Neutral Fund
* There were no sub-advisory fees paid to the Sub-Adviser for the fiscal year
ended March 31, 2009, because the Sub-Adviser did not begin sub-advising each
of the Funds until April 1, 2009.
F-1
APPENDIX G
OUTSTANDING SHARES
As of February 24, 2010, the total number of shares outstanding for each
Fund is set forth in the table below:
RYDEX DYNAMIC FUNDS:
------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
-------------------------------------------------------------------
FUND A-CLASS C-CLASS H-CLASS TOTAL
------------------------------------------------------------------------------------------------
Dow 2x Strategy Fund 268,825.685 240,715.723 1,314,163.185 1,823,704.593
Inverse Dow 2x 90,688.260 89,736.830 2,066,900.981 2,247,326.071
Strategy Fund
Inverse NASDAQ-100(R) 2x 224,261.539 828,985.000 11,216,853.750 12,270,100.290
Strategy Fund
Inverse Russell 2000(R) 2x 92,556.159 306,808.909 3,382,424.213 3,781,789.281
Strategy Fund
Inverse S&P 500 2x 395,619.136 614,430.392 8,729,597.481 9,739,647.009
Strategy Fund
NASDAQ-100(R) 2x 93,625.974 234,886.862 2,184,892.121 2,513,404.957
Strategy Fund
Russell 2000(R) 2x 15,398.627 18,210.354 176,510.301 210,119.282
Strategy Fund
S&P 500 2x 577,130.893 1,004,971.139 4,475,641.919 6,057,743.951
Strategy Fund
G-1
RYDEX SERIES FUNDS (FOR ALL SERIES EXCEPT RYDEX U.S.GOVERNMENT MONEY MARKET FUND):
----------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
------------------------------------------------------------------------------------------------
FUND A-CLASS C-CLASS H-CLASS ADVISOR CLASS INVESTOR CLASS TOTAL
----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI All-Asset Aggressive 718,683.808 782,314.720 382,796.029 0.000 0.000 1,883,794.557
Strategy Fund
Rydex|SGI All-Asset Conservative 275,813.273 961,713.925 477,755.719 0.000 0.000 1,715,282.917
Strategy Fund
Rydex|SGI All-Asset Moderate 997,366.379 22,079,280.210 794,357.660 0.000 0.000 3,871,004.249
Strategy Fund
Rydex|SGI All-Cap 3,053,617.763 5,467,588.381 7,896,840.346 0.000 0.000 16,418,046.490
Opportunity Fund
Rydex|SGI Alternative 226,311.113 386,185.224 1,127,471.035 0.000 0.000 1,739,967.372
Strategies Allocation Fund
Rydex Banking Fund 25,900.157 111,203.945 0.000 13,577.889 152,490.307 303,172.298
Rydex Basic Materials Fund 199,774.206 280,798.190 0.000 147,150.380 899,731.107 1,527,453.883
Rydex Biotechnology Fund 106,054.863 188,974.555 0.000 371,352.331 5,264,418.289 5,930,800.038
Rydex Commodities Strategy Fund 424,860.724 376,744.592 1,304,814.511 0.000 0.000 2,106,419.827
Rydex Consumer Products Fund 84,846.423 112,478.346 0.000 134,545.736 5,011,502.437 5,343,372.942
Rydex Electronics Fund 174,910.357 44,673.357 0.000 22,007.328 451,953.565 693,544.607
Rydex Energy Fund 189,736.867 725,486.331 0.000 348,783.984 1,859,425.412 3,123,432.594
Rydex Energy Services Fund 214,012.613 292,095.035 0.000 236,608.021 1,061,007.566 1,803,723.235
Rydex Europe 1.25x Strategy Fund 33,071.684 72,772.082 656,531.469 0.000 0.000 762,375.235
Rydex Financial Services Fund 18,756.527 25,726.642 0.000 19,105.933 210,488.276 274,077.378
Rydex|SGI Global 130/30 445,250.908 562,677.005 528,033.394 0.000 0.000 1,535,961.307
Strategy Fund
Rydex|SGI Global Market 540,010.671 29,267.952 200,692.541 0.000 0.000 769,971.164
Neutral Fund
Rydex Government Long Bond 1.2x 443,226.142 1,519,528.947 0.000 5,472,468.359 15,623,884.150 23,059,107.600
Strategy Fund
Rydex Health Care Fund 259,826.421 475,430.385 0.000 359,134.176 12,491,813.550 13,586,204.540
Rydex High Yield Strategy Fund 656,279.211 224,056.968 557,109.662 0.000 0.000 1,437,445.841
G-2
SHARES OUTSTANDING
------------------------------------------------------------------------------------------------
FUND A-CLASS C-CLASS H-CLASS ADVISOR CLASS INVESTOR CLASS TOTAL
----------------------------------------------------------------------------------------------------------------------------------
Rydex Internet Fund 23,175.294 14,900.236 0.000 31,871.081 453,745.839 523,692.450
Rydex Inverse Government 5,163,122.048 10,631,475.310 0.000 2,464,603.136 23,922,392.590 42,181,593.080
Long Bond Strategy Fund
Rydex Inverse High Yield 63,289.985 54,837.077 780,344.431 0.000 0.000 898,471.493
Strategy Fund
Rydex Inverse Mid-Cap 23,157.784 13,356.163 101,764.583 0.000 0.000 138,278.530
Strategy Fund
Rydex Inverse NASDAQ-100(R) 119,531.458 154,531.997 0.000 77,258.525 1,721,143.878 2,072,465.858
Strategy Fund
Rydex Inverse Russell 2000(R) 65,666.743 57,556.144 693,277.121 0.000 0.000 816,500.008
Strategy Fund
Rydex Inverse S&P 500 961,789.732 539,657.435 0.000 358,127.901 5,631,172.862 7,490,747.930
Strategy Fund
Rydex Japan 2x Strategy Fund 10,203.462 21,152.411 345,185.708 0.000 0.000 376,541.581
Rydex Leisure Fund 15,049.944 13,722.883 0.000 38,038.118 390,593.780 457,404.725
Rydex|SGI Long/Short Commodities 641,668.438 254,634.161 3,268,665.026 0.000 0.000 4,164,967.625
Strategy Fund
Rydex|SGI Managed Futures 24,801,999.710 8,557,901.101 54,518,235.770 0.000 0.000 87,878,136.580
Strategy Fund
Rydex Mid-Cap 1.5x Strategy Fund 58,203.147 135,059.925 913,906.608 0.000 0.000 1,107,169.680
Rydex|SGI Multi-Hedge 1,057,406.672 1,095,644.826 3,139,631.329 0.000 0.000 5,292,682.827
Strategy Fund
Rydex NASDAQ-100(R) Fund 749,346.416 980,267.153 0.000 3,202,513.107 43,821,810.600 48,753,937.280
Rydex Nova Fund 198,114.086 623,169.014 0.000 588,003.804 2,627,204.950 4,036,491.854
Rydex Precious Metals Fund 163,269.469 434,622.383 0.000 193,352.883 1,918,730.279 2,709,975.014
Rydex Real Estate Fund 274,514.045 73,819.694 1,002,316.906 0.000 0.000 1,350,650.645
Rydex Retailing Fund 19,275.110 103,397.839 0.000 89,407.636 617,125.335 829,205.920
Rydex Russell 2000(R) 1.5x 21,706.636 120,330.722 1,098,220.653 0.000 0.000 1,240,258.011
Strategy Fund
Rydex Russell 2000(R) Fund 48,337.968 141,359.996 518,110.540 0.000 0.000 707,808.504
G-3
SHARES OUTSTANDING
------------------------------------------------------------------------------------------------
FUND A-CLASS C-CLASS H-CLASS ADVISOR CLASS INVESTOR CLASS TOTAL
----------------------------------------------------------------------------------------------------------------------------------
Rydex S&P 500 Fund 1,870,979.505 417,841.251 2,781,419.154 0.000 0.000 5,070,239.910
Rydex S&P 500 Pure Growth Fund 59,226.784 259,271.908 655,805.738 0.000 0.000 974,304.430
Rydex S&P 500 Pure Value Fund 9,345.921 56,557.653 1,718,364.767 0.000 0.000 1,784,268.341
Rydex S&P MidCap 400 Pure 56,168.838 107,562.642 1,204,468.506 0.000 0.000 1,368,199.986
Growth Fund
Rydex S&P MidCap 400 Pure 387,574.485 95,964.017 6,841,171.160 0.000 0.000 7,324,709.662
Value Fund
Rydex S&P SmallCap 600 Pure 18,281.112 45,928.178 1,107,625.959 0.000 0.000 1,171,835.249
Growth Fund
Rydex S&P SmallCap 600 Pure 402,223.939 166,406.601 10,119,837.350 0.000 0.000 10,688,467.890
Value Fund
Rydex Strengthening Dollar 2x 887,253.431 801,291.601 5,058,307.126 0.000 0.000 6,746,852.158
Strategy Fund
Rydex Technology Fund 562,594.600 453,008.221 0.000 1,654,506.110 3,336,364.924 6,006,473.855
Rydex Telecommunications Fund 93,824.495 83,195.785 0.000 31,188.191 258,156.810 466,365.281
Rydex Transportation Fund 86,935.823 72,542.588 0.000 45,381.256 864,352.407 1,069,212.074
Rydex Utilities Fund 188,201.600 304,293.778 0.000 63,398.948 482,352.869 1,038,247.195
Rydex Weakening Dollar 2x 417,259.044 320,762.981 1,866,963.680 0.000 0.000 2,604,985.705
Strategy Fund
RYDEX SERIES FUNDS - RYDEX U.S.GOVERNMENT MONEY MARKET FUND SERIES:
----------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
----------------------------------------------------------------------------------------------------------------------------------
A-CLASS C-CLASS H-CLASS ADVISOR CLASS INVESTOR CLASS INVESTOR 2 CLASS TOTAL
----------------------------------------------------------------------------------------------------------------------------------
36989522.730 85,112,099.510 0.000 202,516,034.400 988,520,972.700 55,001,078.231 1,368,139,708.000
----------------------------------------------------------------------------------------------------------------------------------
G-4
APPENDIX H
BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF
EACH FUND
As of February 24, 2010, the following persons owned, of record and
beneficially (unless otherwise indicated), 5% or more* of a class of each Fund's
outstanding securities:
RYDEX DYNAMIC FUNDS
A-CLASS
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Inverse S&P 500 First Clearing, LLC 30,057.11 5.21%
2x Strategy Fund FBO Gerhard Schopen
5395 S Robb Way
Littleton, CO 80127-1613
WTC Trustees 41,174.63 7.13%
FBO Detrol Corporation
P.O. Box 8971
Wilmington, DE 19899-8971
Schwab Special Custody Account 39,882.70 6.91%
101 Montgomery Street
San Francisco, CA 94104-4122
NASDAQ-100(R) Stifel Nicolaus & Co Inc 5,245.02 5.60%
2x Strategy Fund FBO Terry M Johnson
501 North Broadway
St Louis MO 63102
Russell 2000(R) First Clearing, LLC 994.83 6.46%
2x Strategy Fund 2801 Market Street
Saint Louis, MO 63103
C-CLASS
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Inverse Dow 2x Schwab Special Custody Account 5,134.99 6%
Strategy Fund 101 Montgomery Street
San Francisco, CA 94104-4122
Oppenheimer & Co. Inc. 7,000.00 8%
FBO Downey Radiation Oncology
18908 Mt Cimarron St
Fountain Valley, CA 92705
Inverse NASDAQ-100(R) First Clearing, LLC 60,000.00 7%
2x Strategy Fund FBO Robert Striler
400 S Woods Mill Rd Ste 250
Chesterfield, MO 63017-3481
Inverse S&P 500 Schwab Special Custody Account 41,536.25 7%
2x Strategy Fund 101 Montgomery Street
San Francisco, CA 94104-4122
H-1
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Russell 2000(R) First Clearing, LLC 1,332.67 7%
2x Strategy Fund 2801 Market Street
Saint Louis, MO 63103
S&P 500 Schwab Special Custody Account 129,432.91 13%
2x Strategy Fund 101 Montgomery Street
San Francisco, CA 94104-4122
H-CLASS
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Dow 2x Strategy Fund National Financial Services 198,717.03 15%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 136,581.16 10%
P.O. Box 2226
Omaha, NE 68103-2226
Trust Company Of America 150,475.48 11%
P.O. Box 6503
Englewood, CO 80155
Schwab Special Custody Account 102,318.35 8%
101 Montgomery Street
San Francisco, CA 94104-4122
Inverse Dow National Financial Services 355,115.04 17%
2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 163,901.65 8%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 572,336.11 28%
101 Montgomery Street
San Francisco, CA 94104-4122
Inverse NASDAQ-100(R) National Financial Services 1,715,467.96 15%
2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 1,941,419.09 17%
101 Montgomery Street
San Francisco, CA 94104-4122
Inverse Russell 2000(R) National Financial Services 696,484.53 21%
2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 187,234.94 6%
101 Montgomery Street
San Francisco, CA 94104-4122
H-2
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Inverse S&P 500 National Financial Services 2,081,562.80 24%
2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 2,861,568.31 33%
101 Montgomery Street
San Francisco, CA 94104-4122
NASDAQ-100(R) National Financial Services 501,868.52 23%
2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Citicorp Usa, Inc 121,153.38 6%
FBO General Welfare Group
227 West Monroe Street, 4th Fl
Chicago, IL 60606
Ameritrade Inc 154,411.99 7%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 226,363.05 10%
101 Montgomery Street
San Francisco, CA 94104-4122
Russell 2000(R) National Financial Services 32,381.43 18%
2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 19,076.87 11%
P.O. Box 2226
Omaha, NE 68103-2226
S&P 500 National Financial Services 947,363.35 21%
2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 433,712.76 10%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 607,270.76 14%
101 Montgomery Street
San Francisco, CA 94104-4122
RYDEX SERIES FUNDS
A-CLASS
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Rydex|SGI All-Asset Counsel Trust Co 130,729.61 13.11%
Aggressive Strategy Fund 235 St Charles Way Suite 100
York, PA 17402
Rydex|SGI All-Cap Rydex Ept Aggressive 276,370.85 9.05%
Opportunity Fund 9601 Blackwell Rd, Ste 500
Rockville, MD 20850
H-3
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Rydex Ept Moderate 595,489.23 19.50%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Conservative 211,993.73 6.94%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex|SGI Alternative Pershing LLC 11,768.28 5.20%
Strategies Allocation Fund P.O. Box 2052
Jersey City, NJ 07303-9998
Wells Fargo Investments LLC 19,898.58 8.79%
P.O. Box 2052
Jersey City, NJ 07303-9998
Rydex Banking Fund Pershing LLC 1,766.34 6.82%
Account 1
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 1,815.40 7.01%
Account 2
P.O. Box 2052
Jersey City, NJ 07303-9998
Rydex Commodities Rydex Ept Moderate 23,090.63 5.43%
Strategy Fund 9601 Blackwell Rd, Ste 500
Rockville, MD 20850
MG Trust Company 55,845.20 13.14%
FBO Greenbrook Ima
700 17th Street Suite 300
Denver, CO 80202
Rydex Electronics Fund Pershing LLC 16,376.66 9.36%
P.O. Box 2052
Jersey City, NJ 07303-9998
Rydex Energy First Clearing, LLC 33,724.74 15.76%
Services Fund FBO Sheehan Family LLC
2431 E 61st St Ste 700
Tulsa OK 74136-1234
First Clearing, LLC 25,608.20 11.97%
2801 Market Street
Saint Louis, MO 63103
Rydex Europe National Financial Services 13,604.91 41.14%
1.25x Strategy Fund FBO David G Myers Trust
P.O. Box 327
Turnerville, GA 30580
Pershing LLC 1,741.14 5.26%
P.O. Box 2052
Jersey City, NJ 07303-9998
Rydex Financial UBS Financial Services Inc. 1,863.06 9.93%
Services Fund FBO Ohara Corporation
50 Columbia Rd
Branchburg, NJ 08876-3519
H-4
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Rydex|SGI Global 130/30 Rydex Ept Conservative 92,792.99 20.84%
Strategy Fund 9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Moderate 201,837.66 45.33%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Aggressive 91,349.10 20.52%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex|SGI Global Rydex Ept Conservative 92,792.99 20.84%
Market Neutral Fund 9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Moderate 201,837.66 45.33%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Aggressive 91,349.10 20.52%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Government Long Merrill Lynch, Pierce, Fenner & 26,601.96 6.00%
Bond 1.2x Strategy Fund Smith, Inc.
4800 Deer Lake Drive E, 3rd Floor
Jacksonville, FL 32246
Rydex Ept Moderate 127,075.95 28.67%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Conservative 88,699.16 20.01%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Aggressive 36,561.28 8.25%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Health Care Fund Pershing LLC 28,149.19 10.83%
P.O. Box 2052
Jersey City, NJ 07303-9998
Rydex High Yield Pershing LLC 3,643.08 5.76%
Strategy Fund P.O. Box 2052
Jersey City, NJ 07303-9998
Trust Company Of America 4,024.77 6.36%
P.O. Box 6503
Englewood, CO 80112
Rydex Internet Fund Ameritrade Inc 1,260.25 5.44%
Account 1
P.O. Box 2226
Omaha, NE 68103-2226
Ameritrade Inc 1,807.81 7.80%
Account 2
P.O. Box 2226
Omaha, NE 68103-2226
Ameritrade Inc 1,290.80 5.57%
Account 3
P.O. Box 2226
Omaha, NE 68103-2226
H-5
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Rydex Inverse Government Schwab Special Custody Account 700,755.29 13.57%
Long Bond Strategy Fund 101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Inverse High Pershing LLC 3,643.08 5.76%
Yield Strategy Fund P.O. Box 2052
Jersey City, NJ 07303-9998
Rydex Inverse Mid-Cap Pershing LLC 1,607.97 6.94%
Strategy Fund P.O. Box 2052
Jersey City, NJ 07303-9998
Citigroup Global Markets Inc. 3,003.04 12.97%
333 West 34th Street - 3rd Floor
New York, New York 10001
First Clearing, LLC 2,398.47 10.36%
FBO William R Lilliott
1171 Larksong Lane
Olivenhain, CA 92024-6826
Rydex Inverse Russell Trust Company Of America 7,872.63 8.51%
2000(R) Strategy Fund P.O. Box 6503
Englewood, CO 80112
Rydex Inverse S&P 500 National Financial Services 54,075.50 5.62%
Strategy Fund FBO Becker Ventures
17000 Kercheval Suite 200
Grosse Pointe, MI 48230
Rydex Japan 2x Pershing LLC 634.74 6.22%
Strategy Fund Account 1
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 1,545.12 15.14%
Account 2
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 618.05 6.06%
Account 3
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 1,354.85 13.28%
Account 4
P.O. Box 2052
Jersey City, NJ 07303-9998
Nationwide Trust Company, FSB 2,485.11 24.36%
P.O. Box 182029
Columbus, OH 43218-2029
Nationwide Insurance Co, Qpva 1,075.50 10.54%
P.O. Box 182029
Columbus, OH 43218-2029
LPL Financial 1,117.22 10.95%
9785 Towne Centre Drive
San Diego, CA 92121-1968
H-6
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Rydex Leisure Fund Pershing LLC 1,694.92 11.26%
Account 1
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 2,754.24 18.30%
Account 2
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 2,223.25 14.77%
Account 3
P.O. Box 2052
Jersey City, NJ 07303-9998
Ameritrade Inc 1,844.55 12.26%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex|SGI Long/Short Rydex Alternative Strategies 111,155.55 17.32%
Commodities Strategy Fund Allocation Fund
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Schwab Special Custody Account 80,483.78 12.54%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Mid-Cap 1.5x National Financial Services 3,023.00 5.19%
Strategy Fund FBO David G Myers Trust
P.O. Box 327
Turnerville, GA 30580
Rydex|SGI Multi-Hedge Rydex Alternative Strategies 316,579.26 29.94%
Strategies Fund Allocation Fund
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex NASDAQ-100(R) Morgan Stanley & Co 42,408.38 5.66%
Fund FBO Fouce Enterprises Ltd Partnership
16633 Ventura Blvd #1010
Encino, CA 91436-1857
Capital Bank & Trust Company FBO 56,975.60 7.60%
Vining Sparks Ibg, Lp 401k Plan
C/O Plan Premier/Fascorp
8515 E Orchard Road,
Englewood, CO 80111
Rydex Nova Fund Rydex Ept Aggressive 18,120.73 9.15%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Moderate 11,311.43 5.71%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Real Estate Fund Rydex Ept Moderate 19,305.83 7.03%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Aggressive 14,268.81 5.20%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
H-7
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Rydex Retailing Fund E Trade Clearing LLC 1,055.38 5.48%
P.O. Box 1542
Merrifield, VA 22116-1542
Pershing LLC 5,390.84 27.97%
Account 1
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 2,130.12 11.05%
Account 2
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 3,593.89 18.65%
Account 3
P.O. Box 2052
Jersey City, NJ 07303-9998
Rydex Russell 2000(R) 1.5x Pershing LLC 1,350.93 6.22%
Strategy Fund Account 1
P.O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 1,150.83 5.30%
Account 2
P.O. Box 2052
Jersey City, NJ 07303-9998
Schwab Special Custody Account 1,557.69 7.18%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex S&P 500 Pure First Clearing, LLC 30,057.11 5.21%
Growth Fund FBO Gerhard Schopen
5395 S Robb Way
Littleton, CO 80127-1613
WTC Trustees 41,174.63 7.13%
FBO Detrol Corporation
P.O. Box 8971
Wilmington, DE 19899-8971
Rydex S&P 500 Pure First Clearing, LLC 30,057.11 5.21%
Value Fund FBO Gerhard Schopen
5395 S Robb Way
Littleton, CO 80127-1613
WTC Trustees 41,174.63 7.13%
FBO Detrol Corporation
P.O. Box 8971
Wilmington, DE 19899-8971
Schwab Special Custody Account 39,882.70 6.91%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex S&P MidCap 400 Pershing LLC 27,827.33 7.18%
Pure Value Fund P.O. Box 2052
Jersey City, NJ 07303-9998
H-8
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Rydex S&P SmallCap 600 National Financial Services 945.29 5.17%
Pure Growth Fund FBO George G Smith and Judy L Smith
35 Shea Road
Cambridge, MA 02140
Rydex Strengthening Dollar Pershing LLC 46,521.65 5.24%
2x Strategy Fund P.O. Box 2052
Jersey City, NJ 07303-9998
Trust Company Of America 50,221.14 5.66%
Account 1
P.O. Box 6503
Englewood, CO 80155
Trust Company Of America 44,680.62 5.04%
Account 2
P.O. Box 6503
Englewood, CO 80155-6503
Rydex Technology Fund National Financial Services 60,009.77 10.67%
FBO R Dean Hoedl
P.O. Box 4208
Springfield, MO 65808
Rydex Telecommunications UBS Financial Services Inc. 8,365.78 8.92%
Fund FBO Ohara Corporation Defined
Benefit Plans
50 Columbia Rd
Branchburg, NJ 08876-3519
UBS Financial Services Inc. 10,224.84 10.90%
FBO Ohara Corporation Profit Sharing
50 Columbia Rd
Branchburg, NJ 08876-3519
First Clearing, LLC 5,454.83 5.81%
FBO Mary S Yearick
45646 Norris Road
Great Mills, MD 20634-2253
Ameritrade Inc 5,563.63 5.93%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex Transportation Fund UBS Financial Services Inc. 7,627.69 8.77%
FBO Ohara Corporation
50 Columbia Rd
Branchburg, NJ 08876-3519
Rydex U.S. Government UMB Bank N.A. 2,706,530.46 7.32%
Money Market Fund One Security Place
Topeka, KS 66636-0001
Rydex Weakening Dollar Pershing LLC 73,622.97 17.64%
2x Strategy Fund P.O. Box 2052
Jersey City, NJ 07303-9998
H-9
C-CLASS
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Consumer Products Pershing LLC 7,976.77 7%
Fund P.O. Box 2052
Jersey City, NJ 07303-9998
Rydex Europe 1.25x Pershing LLC 4,950.99 7%
Strategy Fund P.O. Box 2052
Jersey City, NJ 07303-9998
First Clearing, LLC 15,071.59 21%
FBO Stevan B Dana
P.O. Box 94796
Las Vegas, NV 89193-4796
Schwab Special Custody Account 4,557.88 6%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Financial Services Ameritrade Inc 1,860.98 7%
Fund P.O. Box 2226
Omaha, NE 68103-2226
Rydex|SGI Global 130/30 First Clearing, LLC 32,318.63 6%
Strategy Fund FBO Suzanne A Berkey
407 Webster
Pittsburg, KS 66762-5542
Rydex|SGI Global Market First Clearing, LLC 2,506.08 9%
Neutral Fund FBO Evan Floreani
605 Ocean Dr Apt 11M
Key Biscayne, FL 33149-2306
First Clearing, LLC 1,466.88 5%
FBO Maria J Floreani
605 Ocean Drive Apt 11M
Key Biscayne, FL 33149-2306
American Enterprise Investment Services 2,124.04 7%
707 2nd Avenue South
Minneapolis, MN 55402
Rydex Internet Fund Southwest Securities Inc 1,980.52 13%
FBO Donald Brandt
P.O. Box 509002
Dallas, TX 75250
Rydex Inverse High Yield National Financial Services 19,669.30 36%
Strategy Fund FBOBearing Fund LP
2828 Hood St Apt 902
Dallas, TX 75219-7808
Stifel Nicolaus & Co Inc 7,500.00 14%
FBO Stephen F Jusick
501 North Broadway
St Louis, MO 63102
H-10
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Inverse Mid-Cap First Clearing, LLC 866.54 6%
Strategy Fund FBO Thomas L. Bartelt
P.O. Box 508
Kewaskum, WI 53040-0508
First Clearing, LLC 1,232.70 9%
FBO Arlene Bussard
8072 N 53rd St
Brown Deer, WI 53223-3624
First Clearing, LLC 924.20 7%
FBO Preston M Pennybacker
3492 W 159th Ct
Lowell, IN 46356-1275
First Clearing, LLC 1,037.61 8%
FBO Russell G Pflieger
22031 N 55th St
Phoenix, AZ 85054-7151
Rydex Inverse Russell 2000(R) National Financial Services 3,000.00 5%
Strategy Fund FBO Bank Of America N.A.
P.O. Box 831575
Dallas, TX 75283
Rydex|SGI Long/Short Schwab Special Custody Account 14,418.24 6%
Commodities Strategy Fund 101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Mid-Cap 1.5x Schwab Special Custody Account 14,677.53 11%
Strategy Fund 101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Real Estate Fund Schwab Special Custody Account 10,563.73 14%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Retailing Fund National Financial Services 43,402.78 42%
FBO Jackson Family Trust
433 Ave T
Brooklyn, NY 11223
National Financial Services 6,504.77 6%
FBO Jack Chehebar
433 Ave T
Brooklyn, NY 11223
National Financial Services 6,504.77 6%
FBO Jack Chehebar and Reuben Chehebar
433 Ave T
Brooklyn, NY 11223
Rydex Russell 2000(R) 1.5x Schwab Special Custody Account 6,533.66 5%
Strategy Fund 101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Russell 2000(R) Fund First Clearing, LLC 7,385.37 5%
FBO RMC Insurance Trust
1625 N Stemmons Frwy
Dallas, TX 75207-3411
First Clearing, LLC 7,432.98 5%
FBO JKS Insurance Trust
1625 N Stemmons Frwy
Dallas, TX 75207-3411
H-11
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex S&P 500 Pure Southwest Securities Inc 3,720.19 7%
Value Fund FBO Craig Sheyon
P.O. Box 509002
Dallas, TX 75250
Rydex S&P SmallCap 600 First Clearing, LLC 2,625.01 6%
Pure Growth Fund FBO Phillip S Hoffspiegel
18512 W Verdin Rd
Goodyear, AZ 85338-5082
First Clearing, LLC 2,647.93 6%
FBO Theresa Cooper
8310 W 98th Terrace
Overland Park, KS 66212
Rydex Telecommunications First Clearing, LLC 8,844.89 11%
Fund FBO Thomas Tait & Patricia E Tait
6807 N Pepper Tree Ln
Paradise Valley, AZ 85253-3346
Rydex Weakening Dollar 2x Citigroup Global Markets Inc. 18,109.24 6%
Strategy Fund 333 West 34th Street - 3rd Floor
New York, New York 10001
H-CLASS
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex|SGI All-Asset National Financial Services 100,809.75 26%
Aggressive Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
UMB Bank N.A. 35,556.50 9%
One Security Place
Topeka, KS 66636-0001
Ameritrade Inc 23,949.03 6%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 33,974.51 9%
101 Montgomery Street
San Francisco, CA 94104-4122
LPL Financial 21,436.04 6%
9785 Towne Centre Drive
San Diego, CA 92121-1968
Rydex|SGI All-Asset National Financial Services 95,253.36 20%
Conservative Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 28,831.72 6%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 139,126.59 29%
101 Montgomery Street
San Francisco, CA 94104-4122
H-12
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex|SGI All-Asset National Financial Services 124,357.08 16%
Moderate Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
UMB Bank N.A. 56,991.35 7%
One Security Place
Topeka, KS 66636-0001
Schwab Special Custody Account 174,657.18 22%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex|SGI All-Cap National Financial Services 700,355.11 9%
Opportunity Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment Management 504,731.83 6%
Services
FBO Mutual Fund Clients
Mail Stop 194-201
194 Wood Avenue South Iselin,
NJ 08830
UMB Bank N.A. 519,524.66 7%
One Security Place
Topeka, KS 66636-0001
Schwab Special Custody Account 2,950,894.84 37%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex|SGI Alternative National Financial Services 201,457.47 18%
Strategies Allocation Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Reliance Trust 222,150.45 20%
FBO C.R. Landrum
PO Box 48529
Atlanta, GA 30362
Schwab Special Custody Account 363,452.79 32%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Commodities National Financial Services 497,739.86 38%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 357,076.19 27%
101 Montgomery Street
San Francisco, CA 94104-4122
H-13
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Europe 1.25x National Financial Services 217,378.55 33%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Nationwide Trust Company, FSB 36,638.42 6%
P.O. Box 182029
Columbus, OH 43218-2029
Trust Company Of America 67,987.05 10%
Account 1
P O Box 6503
Centennial, CO 80155
Trust Company Of America 35,805.72 5%
Account 2
P.O. Box 6503
Englewood, CO 80112
Schwab Special Custody Account 69,479.33 11%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex|SGI Global 130/30 National Financial Services 33,952.45 6%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment 49,364.14 9%
Management Services
FBO Mutual Fund Clients
Mail Stop 194-201 194 Wood Avenue
South Iselin, NJ 08830
Rydex Ept Moderate - VA 91,586.25 17%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Aggressive - VA 41,291.25 8%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Conservative - VA 55,682.77 11%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Schwab Special Custody Account 34,843.68 7%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex|SGI Global Market Rydex VA Alternative Strategies 46,343.23 23%
Neutral Fund Allocation Fund
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Moderate - VA 58,322.83 29%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Aggressive - VA 25,554.10 13%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
Rydex Ept Conservative - VA 36,257.16 18%
9601 Blackwell Rd, Ste 500
Rockville, MD 20850
H-14
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex High Yield National Financial Services 243,791.74 44%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 97,193.97 17%
P.O. Box 2226
Omaha, NE 68103-2226
Trust Company Of America 48,260.49 9%
P.O. Box 6503
Englewood, CO 801556503
Rydex Inverse High Yield National Financial Services 552,361.36 71%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 116,065.59 15%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Inverse Mid-Cap National Financial Services 11,285.56 11%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Counsel Trust Co 6,058.38 6%
235 St Charles Way, Suite 100
York, PA 17402
Schwab Special Custody Account 49,198.15 48%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Inverse Russell 2000(R) National Financial Services 167,564.65 24%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 77,606.69 11%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Japan 2x Strategy Trust Company Of America 48,886.19 14%
Fund P O Box 6503
Englewood, CO 80112
Rydex|SGI Long/Short National Financial Services 1,581,800.89 48%
Commodities Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 803,172.48 25%
101 Montgomery Street
San Francisco, CA 94104-4122
H-15
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex|SGI Managed National Financial Services 11,627,890.87 21%
Futures Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment 3,227,725.16 6%
Management Services
FBO Mutual Fund Clients
Mail Stop 194-201
194 Wood Avenue
South Iselin, NJ 08830
Schwab Special Custody Account 15,365,856.70 28%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Mid-Cap 1.5x National Financial Services 510,016.98 56%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Trust Company Of America 95,233.80 10%
P.O. Box 6503
Englewood, CO 80155
Schwab Special Custody Account 50,604.47 6%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex|SGI Multi-Hedge National Financial Services 508,062.17 16%
Strategies Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment 342,685.12 11%
Management Services
FBO Mutual Fund Clients
Mail Stop 194-201
194 Wood Avenue
South Iselin, NJ 08830
Schwab Special Custody Account 362,195.64 12%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Real Estate Fund National Financial Services 242,501.18 24%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Nationwide Trust Company, FSB 72,333.81 7%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 94,195.39 9%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 201,121.96 20%
101 Montgomery Street
San Francisco, CA 94104-4122
H-16
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Russell 2000(R) 1.5x National Financial Services 375,537.11 34%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 98,839.94 9%
P.O. Box 2226
Omaha, NE 68103-2226
Trust Company Of America 57,366.36 5%
Account 1
P.O. Box 6503
Englewood, CO 80112
Trust Company Of America 97,728.96 9%
Account 2
P.O. Box 6503
Englewood, CO 80155
Schwab Special Custody Account 188,343.15 17%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Russell 2000(R) Fund National Financial Services 297,682.38 57%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 58,546.61 11%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex S&P 500 Fund National Financial Services 1,133,223.96 41%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Genworth Financial Trust Company 318,627.84 11%
FBO Genworth Financial
Asset Mgmt, Inc.
3200 N Central, Suite 612
Phoenix, AZ 85012
Rydex S&P 500 Pure National Financial Services 288,520.39 44%
Growth Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Nationwide Trust Company, FSB 75,109.08 11%
P.O. Box 182029
Columbus, OH 43218-2029
Schwab Special Custody Account 100,023.72 15%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex S&P 500 Pure National Financial Services 1,422,959.79 83%
Value Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 152,175.71 9%
101 Montgomery Street
San Francisco, CA 94104-4122
H-17
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex S&P MidCap 400 National Financial Services 473,124.70 39%
Pure Growth Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Nationwide Trust Company, FSB 101,367.85 8%
P.O. Box 182029
Columbus, OH 43218-2029
Schwab Special Custody Account 233,106.27 19%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex S&P MidCap 400 National Financial Services 5,213,597.88 76%
Pure Value Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 855,495.78 13%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex S&P SmallCap 600 National Financial Services 340,873.14 31%
Pure Growth Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 87,709.27 8%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 158,075.95 14%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex S&P SmallCap 600 National Financial Services 7,998,635.94 79%
Pure Value Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 1,579,094.34 16%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Strengthening National Financial Services 1,616,779.90 32%
Dollar 2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 1,745,279.35 35%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Weakening Dollar 2x National Financial Services 359,436.32 19%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 746,731.78 40%
101 Montgomery Street
San Francisco, CA 94104-4122
H-18
ADVISOR-CLASS
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Banking Fund Pershing LLC 1,321.11 10%
P. O. Box 2052
Jersey City, NJ 07303-9998
Nationwide Trust Company, FSB 6,627.01 49%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 680.64 5%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex Basic Materials Counsel Trust Co 12,561.90 9%
Fund 235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 29,724.77 20%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 22,398.68 15%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex Biotechnology Fund National Financial Services 54,613.87 15%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Nationwide Trust Company, FSB 60,985.53 16%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 44,591.46 12%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex Consumer Products Nationwide Trust Company, FSB 7,707.10 6%
Fund P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 14,221.06 11%
P.O. Box 2226
Omaha, NE 68103-2226
Trust Company Of America 12,278.12 9%
P.O. Box 6503
Englewood, CO 80155-6503
Genworth Financial Trust Company FBO 7,676.69 6%
Genworth Financial Asset Mgmt, Inc.
3200 N Central, Suite 612
Phoenix, AZ 85012
H-19
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Electronics Fund Counsel Trust Co 2,955.26 13%
235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 6,071.22 28%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 2,307.04 10%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex Energy Fund Nationwide Trust Company, FSB 105,158.81 30%
P.O. Box 182029
Columbus, OH 43218-2029
Rydex Energy Services Counsel Trust Co 63,729.82 27%
Fund 235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 42,108.57 18%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 55,849.84 24%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex Financial Services Counsel Trust Co 1,008.11 5%
Fund 235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 6,543.04 34%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 1,632.95 9%
P.O. Box 2226
Omaha, NE 68103-2226
Genworth Financial Trust Company FBO 2,553.35 13%
Genworth Financial Asset Mgmt
3200 N Central, Suite 612
Phoenix, AZ 85012
Rydex Government Long Trust Company Of America 2,317,468.99 42%
Bond 1.2x Strategy Fund Account 1
P.O. Box 6503
Englewood, CO 80155
Trust Company Of America 320,680.47 6%
Account 2
P.O. Box 6503
Englewood, CO 80120
H-20
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Health Care Fund Counsel Trust Co 32,554.89 9%
235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 85,178.06 24%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 37,966.23 11%
P.O. Box 2226
Omaha, NE 68103-2226
Trust Company Of America 20,350.54 6%
P.O. Box 6503
Englewood, CO 80155
Genworth Financial Trust Company 22,199.70 6%
FBO Genworth Financial Asset Mgmt, Inc.
3200 N Central, Suite 612
Phoenix, AZ 85012
Rydex Internet Fund National Financial Services 2,299.59 7%
FBO Russ Lennon 200 Liberty Street
New York, NY 10281-9999
Counsel Trust Co 1,861.83 6%
235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 8,979.00 28%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 2,041.48 6%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 2,400.74 8%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Inverse Government National Financial Services 132,485.60 5%
Long Bond Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment 252,019.80 10%
Management Services
FBO Mutual Fund Clients
Mail Stop 194-201
194 Wood Avenue
South Iselin, NJ 08830
Nationwide Trust Company, FSB 133,023.98 5%
P.O. Box 182029
Columbus, OH 43218-2029
Piper Jaffray 167,311.70 7%
Account 1
800 Nicollet Mall 8th Street
Minneapolis, MN 55402
Piper Jaffray 166,401.74 7%
Account 2
800 Nicollet Mall 8th Street
Minneapolis, MN 55402
H-21
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Inverse National Financial Services FBO 6,010.02 8%
NASDAQ-100(R) Russ Lennon
Strategy Fund 200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 60,163.49 78%
P.O. Box 2226
Omaha, NE 68103-2226
Rydex Inverse S&P 500 Counsel Trust Co 73,945.04 21%
Strategy Fund Account 1
235 St Charles Way, Suite 100
York, PA 17402
Counsel Trust Co 31,052.87 9%
Account 2
1251 Waterfront Place Suite 525
Pittsburgh, PA 15222
Rydex Leisure Fund National Financial Services 15,961.37 42%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Counsel Trust Co 2,706.12 7%
235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 4,547.04 12%
P.O. Box 182029
Columbus, OH 43218-2029
Genworth Financial Trust Company 7,411.84 19%
FBO Genworth Financial Asset Mgmt, Inc.
3200 N Central, Suite 612
Phoenix, AZ 85012
Rydex NASDAQ-100(R) Fund Nationwide Trust Company, FSB 516,646.32 16%
P.O. Box 182029
Columbus, OH 43218-2029
Trust Company Of America 1,941,473.33 61%
P O Box 6503
Englewood, CO 80112
Rydex Nova Fund Nationwide Trust Company, FSB 110,492.22 19%
P.O. Box 182029
Columbus, OH 43218-2029
Rydex Precious Metals Fund National Financial Services 15,721.11 8%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Nationwide Trust Company, FSB 27,899.89 14%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 42,932.16 22%
P.O. Box 2226
Omaha, NE 68103-2226
Trust Company Of America 57,726.20 30%
P O Box 6503
Englewood, CO 80112
H-22
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Retailing Fund Counsel Trust Co 5,258.11 6%
235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 13,016.74 15%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 36,660.02 41%
P.O. Box 2226
Omaha, NE 68103-2226
Genworth Financial Trust Company 6,258.74 7%
FBO Genworth Financial Asset Mgmt, Inc.
3200 N Central, Suite 612
Phoenix, AZ 85012
Rydex Technology Fund National Financial Services 85,134.03 5%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Counsel Trust Co 371,771.15 22%
Account 1
1251 Waterfront Place Suite 525
Pittsburgh, PA 15222
Counsel Trust Co 902,884.11 55%
Account 2
235 St Charles Way, Suite 100
York, PA 17402
Rydex Telecommunications National Financial Services 2,281.35 7%
Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Pershing LLC 1,597.44 5%
Account 1
P. O. Box 2052
Jersey City, NJ 07303-9998
Pershing LLC 1,597.44 5%
Account 2
P. O. Box 2052
Jersey City, NJ 07303-9998
Counsel Trust Co 5,693.67 18%
235 St Charles Way, Suite 100
York, PA 17402
Rydex Transportation Fund Nationwide Trust Company, FSB 4,107.67 9%
P.O. Box 182029
Columbus, OH 43218-2029
Trust Company Of America 18,523.99 41%
P.O. Box 6503
Englewood, CO 80112
Genworth Financial Trust Company 5,691.23 13%
FBO Genworth Financial Asset Mgmt, Inc.
3200 N Central, Suite 612
Phoenix, AZ 85012
H-23
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex U.S. Government National Financial Services 39,994,727.79 20%
Money Market Fund Attn.: Mutual Fund Dept. (5th Flr)
200 Liberty Street
1 World Financial Center
New York, NY 10281
Rydex Utilities Fund Counsel Trust Co 3,339.84 5%
235 St Charles Way, Suite 100
York, PA 17402
Nationwide Trust Company, FSB 9,077.03 14%
P.O. Box 182029
Columbus, OH 43218-2029
Ameritrade Inc 4,390.37 7%
P.O. Box 2226
Omaha, NE 68103-2226
USAA Investment Management Co 3,693.14 6%
9800 Fredericksburg Road
San Antonio, TX 78288
Trust Company Of America 16,404.73 26%
P.O. Box 6503
Englewood, CO 80112
INVESTOR-CLASS
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Banking Fund National Financial Services 48,742.34 32%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Pershing LLC 20,770.83 14%
P. O. Box 2052
Jersey City, NJ 07303-9998
Trust Company Of America 10,401.04 7%
P O Box 6503
Englewood, CO 80112
Schwab Special Custody Account 13,380.97 9%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Basic Materials Fund National Financial Services 337,963.98 38%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment 47,085.69 5%
Management Services
FBO Mutual Fund Clients
Mail Stop 194-201
194 Wood Avenue South
Iselin, NJ 08830
Ameritrade Inc 58,925.92 7%
P.O. Box 2226
Omaha, NE 68103-2226
H-24
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Schwab Special Custody Account 219,845.53 24%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Biotechnology Fund National Financial Services 3,233,464.91 61%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 1,213,680.12 23%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Consumer Products National Financial Services 3,873,148.02 77%
Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 710,107.31 14%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Electronics Fund National Financial Services 118,139.83 26%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
FOLIOfn Investments Inc 64,088.37 14%
8180 Greensboro Dr 8th Floor
McLean, Va 22102
Schwab Special Custody Account 35,730.46 8%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Energy Fund National Financial Services 235,456.89 13%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 287,832.82 15%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 441,011.06 24%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Energy Services National Financial Services 246,793.82 23%
Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 282,276.37 27%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Financial Services National Financial Services 31,531.43 15%
Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
H-25
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Government Long National Financial Services 2,731,705.95 17%
Bond 1.2x Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Trust Company Of America 10,060,753.35 64%
P.O. Box 6503
Englewood, CO 80155
Rydex Health Care Fund National Financial Services 9,893,149.08 79%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 1,766,800.34 14%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Internet Fund National Financial Services 99,277.15 22%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment 78,965.25 17%
Management Services
FBO Mutual Fund Clients
Mail Stop 194-201
194 Wood Avenue
South Iselin, NJ 08830
Schwab Special Custody Account 237,900.57 52%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Inverse Government National Financial Services 6,820,913.72 29%
Long Bond Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment 1,228,879.30 5%
Management Services
FBO Mutual Fund Clients
Mail Stop 194-201
194 Wood Avenue
South Iselin, NJ 08830
Schwab Special Custody Account 7,603,086.01 32%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Inverse NASDAQ- National Financial Services 209,636.28 12%
100(R) Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Trust Company Of America 276,911.35 16%
P.O. Box 6503
Englewood, CO 80155
Schwab Special Custody Account 205,659.50 12%
101 Montgomery Street
San Francisco, CA 94104-4122
H-26
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Inverse S&P 500 National Financial Services 1,294,809.69 23%
Strategy Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Prudential Investment 376,742.67 7%
Management Services
FBO Mutual Fund Clients
Mail Stop 194-201
194 Wood Avenue
South Iselin, NJ 08830
Ameritrade Inc 458,245.13 8%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 1,949,674.64 35%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Leisure Fund National Financial Services 215,740.01 55%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Trust Company Of America 19,573.85 5%
P O Box 6503
Englewood, CO 80112
Schwab Special Custody Account 61,330.45 16%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex NASDAQ-100(R) National Financial Services 8,177,566.77 19%
Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 2,388,747.52 5%
P.O. Box 2226
Omaha, NE 68103-2226
Genworth Financial Trust Company 2,490,911.15 6%
FBO Genworth Financial Asset
Mgmt, Inc.
3200 N Central, Suite 612
Phoenix, AZ 85012
Schwab Special Custody Account 15,041,322.04 34%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Nova Fund National Financial Services 1,101,991.86 42%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 457,871.42 17%
101 Montgomery Street
San Francisco, CA 94104-4122
H-27
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex Precious Metals Fund National Financial Services 263,540.20 14%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 480,173.50 25%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Retailing Fund National Financial Services 249,153.27 40%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Schwab Special Custody Account 166,474.76 27%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Technology Fund National Financial Services 1,101,680.72 33%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 473,389.58 14%
P.O. Box 2226
Omaha, NE 68103-2226
Schwab Special Custody Account 1,144,067.18 34%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Telecommunications National Financial Services 15,025.44 6%
Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Ameritrade Inc 98,953.22 38%
P.O. Box 2226
Omaha, NE 68103-2226
MG Trust Company 40,635.40 16%
FBO Greenbrook Ima
700 17th Street
Denver, CO 80202
Schwab Special Custody Account 19,706.14 8%
101 Montgomery Street
San Francisco, CA 94104-4122
Rydex Transportation Fund National Financial Services 106,570.06 12%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
FOLIOfn Investments Inc 189,544.83 22%
8180 Greensboro Dr 8th Floor
McLean, VA 22102
Schwab Special Custody Account 155,168.35 18%
101 Montgomery Street
San Francisco, CA 94104-4122
H-28
NAME AND ADDRESS AMOUNT OF SHARES PERCENTAGE OF
NAME OF THE FUND OF THE BENEFICIAL OWNER OWNED THE CLASS
--------------------------------------------------------------------------------------------------------------
Rydex U.S. Government National Financial Services 299,129,248.30 30%
Money Market Fund FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Trust Company Of America 56,163,324.69 6%
P.O. Box 6503
Englewood, CO 80155
Rydex Utilities Fund National Financial Services 103,129.47 21%
FBO Russ Lennon
200 Liberty Street
New York, NY 10281-9999
Trust Company Of America 121,264.76 25%
P.O. Box 6503
Englewood, CO 80155
Schwab Special Custody Account 60,026.43 12%
101 Montgomery Street
San Francisco, CA 94104-4122
-----------------
* A party holding in excess of 25% of the outstanding voting securities of a
Fund is presumed to be a "control person" (as defined in the 1940 Act) of
such Fund, based on the substantial ownership interest held and the party's
resultant ability to influence voting on certain matters submitted for
shareholder consideration.
H-29
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[FORM OF PROXY CARD]
PROXY CARD FOR
[FUND NAME PRINTS HERE]
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS - APRIL 23, 2010
The undersigned hereby appoint(s) Joanna Haigney, Amy J. Lee 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 the above referenced
fund (the "Fund") which the undersigned is entitled to vote at the Special
Meeting of shareholders of the Fund to be held at 9601 Blackwell Road, Suite
500, Rockville, Maryland 20850 on April 23, 2010 at 1:00 p.m. ET, and at any
adjournment(s) or postponements thereof. THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF TRUSTEES. This proxy card will be voted as instructed. If no
specification is made, the proxy card will be voted "FOR" the Proposals. The
proxies are authorized, in their discretion, to vote upon such matters as may
come before the Special Meeting or any adjournments.
QUESTIONS ABOUT THIS PROXY? Should you have any questions about the proxy
materials or regarding how to vote your shares, please contact our proxy
information line toll-free at 1-877-864-5058. Representatives are available
Monday through Friday 9:00 a.m. to 11:00 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 or vote as the date of the special meeting
approaches, representatives from The Altman Group may call you to remind you to
exercise your vote.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THIS SPECIAL
MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2010
THE PROXY STATEMENT FOR THIS MEETING IS AVAILABLE AT:
WWW.PROXYONLINE.COM/DOCS/RYDEXSGI1.PDF.
--------------------------------------------------------------------------------
PLEASE FOLD HERE AND RETURN THE ENTIRE BALLOT - DO NOT DETACH
PLEASE SEE THE INSTRUCTIONS BELOW IF YOU WISH TO VOTE BY PHONE (live proxy
representative or touch-tone phone), BY MAIL OR VIA THE INTERNET. Please 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. Please vote today!
PHONE: To cast your vote by phone with a proxy voting representative, call
toll-free 1-877-864-5058 and provide the representative with the
control number found on the reverse side of this proxy card.
Representatives are available to take your voting instructions Monday
through Friday 9:00 a.m. to 10:00 p.m. Eastern Time.
MAIL: To vote your proxy by mail, check the appropriate voting box on the
reverse side of this proxy card, sign and date the card and return it
in the enclosed postage-paid envelope.
Options below are available 24 hours a day / 7 days a week
PHONE: To cast your vote via a touch-tone voting line, call toll-free
1-877-864-5058 and enter the control number found on the reverse side
of this proxy card.
INTERNET: To vote via the Internet, go to WWW.PROXYONLINE.COM and enter the
control number found on the reverse side of this proxy card.
NOTE: This proxy 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 titles as such. Joint owners must each
sign. By signing this proxy card, you acknowledge that you have received the
proxy statement that the proxy card accompanies.
Shareholder sign here Date Joint owner sign here Date
IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER'S VOTE IS
IMPORTANT.
IF YOU RECEIVED MORE THAN ONE BALLOT BECAUSE YOU HAVE MULTIPLE INVESTMENTS IN
THE FUNDS, PLEASE REMEMBER TO VOTE ALL OF YOUR BALLOTS!
Remember to SIGN AND DATE THE REVERSE SIDE before mailing in your vote. This
proxy card is valid only when signed and dated.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THIS PROXY CARD
WILL BE VOTED AS INSTRUCTED. IF NO SPECIFICATION IS MADE, THE PROXY CARD WILL
BE VOTED "FOR" THE PROPOSALS. THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION,
TO VOTE UPON SUCH MATTERS AS MAY COME BEFORE THE SPECIAL MEETING OR ANY
ADJOURNMENTS.
PLEASE FOLD HERE AND RETURN THE ENTIRE BALLOT - DO NOT DETACH
--------------------------------------------------------------------------------
TO VOTE, MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example: []
1. To approve a new investment advisory agreement between the Fund and PADCO
Advisors, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve a new investment sub-advisory agreement between PADCO Advisors,
Inc. and Security Global Investors, LLC for Rydex|SGI Global 130/30 Strategy
Fund and Rydex|SGI Global Market Neutral Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve a new fundamental investment policy on borrowing money.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]