CUSTODY AGREEMENT
This Agreement is made as of this 15th day of February, 2006, between U.S.
BANK NATIONAL ASSOCIATION, a national banking association (the "Custodian");
RYDEX FUND SERVICES CO., INC., a_Maryland corporation, (the "Transfer Agent")
and RYDEX SERIES FUNDS, RYDEX DYNAMIC FUNDS AND RYDEX ETF TRUST , a Delaware
statutory trust, (the "Funds").
WHEREAS, the Custodian has agreed to act and shall serve as custodian of
record for certain accounts established by account clients ("Clients") including
but not limited to, Traditional IRAs, Xxxx IRAs, SEP-IRAs, SIMPLE IRAs, Section
457 plans, Section 403(b) plan accounts and Xxxxxxxxx ESAs ("Accounts"); and
WHEREAS, the Accounts shall hold shares of certain mutual funds listed in
EXHIBIT A hereto and owned and operated by the Fund, as may be amended from time
to time upon written notice to the Custodian; and
WHEREAS, the Transfer Agent has agreed to provide for the Accounts, and is
in the business of providing, certain retirement plan accounting and
administration services as agent for the Custodian; and
WHEREAS, the Transfer Agent has agreed to provide, and is in the business
of providing, certain shareholder services on behalf of the Fund; and
IN CONSIDERATION OF THE AGREEMENTS CONTAINED HEREIN, and for other good
and valuable consideration hereby acknowledged by the Custodian, Transfer Agent
and the Fund,
NOW, THEREFORE, in order to clarify the respective duties, the Fund, the
Custodian and the Transfer Agent agree as follows:
I. DUTIES AND RESPONSIBILITIES OF CUSTODIAN:
A. Custodian shall act as custodian of record for the Accounts.
B. Custodian hereby appoints Transfer Agent, and Transfer Agent accepts
such appointment, to take sole responsibility to perform the
functions with regard to the Accounts as set forth in Article II, A.
below.
II. DUTIES AND RESPONSIBILITIES OF TRANSFER AGENT:
A. Transfer Agent accepts appointment by Custodian to take sole
responsibility to perform the following functions with regard to the
Accounts:
1. Draft, maintain and update all documents necessary or relevant
to establishing and maintaining Accounts in compliance with
applicable law, including but not
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limited to Account applications, custodial agreements,
rollover forms and certifications, beneficiary designation
forms and state and federal tax forms.
2. Receive, process, maintain and update all Account
applications, custodial agreements, beneficiary designation
forms, federal and state tax forms and all other relevant
documents for each Account as necessary to satisfy all
applicable legal or reasonable administrative requirements.
3. Execute as agent on behalf of Custodian, all Account documents
under whose terms the Custodian undertakes custodial
responsibilities.
4. Maintain each Client's records pertinent to each Account,
including but not limited to the Client's current mailing
address, as required by applicable law or reasonable
administration.
5. Receive Account contributions directly from the Clients (the
"Clients") or their agents, or receive transfers of assets
directly from predecessor custodians/trustees, for investment
in accordance with instructions received from the Client or
his agent. All such investments shall be registered in the
name of Custodian as custodian.
7. Allocate contributions between or among each Account as
directed by the appropriate Client.
8. Provide at least annual statements to the Client setting forth
the market value of the Client's account during the year.
9. As necessary, forward to and provide Clients with such notices
of annual meetings, corporate actions, proxies and any other
materials required by applicable law to be provided to the
Clients.
10. Provide to each Client such information or notifications as
may be required to be furnished in accordance with applicable
law, including without limitation tax withholding election
forms.
11. Follow the written instructions of the Client directing
redemption, reinvestment of assets, distribution of assets for
the purposes of benefit payments, return of excess
contributions or deferrals, transfers to successor
custodians/trustees, transfers from predecessor
custodians/trustees and any other action, provided that such
directions and actions are in conformity with the terms of
applicable law. On behalf of the Custodian, Transfer Agent
shall prepare, file and distribute all necessary tax forms for
each Account, including, but not limited to 1099Rs and 5498s,
which may be required by applicable law. Transfer Agent shall
maintain a copy of all such forms in its files as required by
applicable law.
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12. Process and report redemptions, including making the
appropriate tax withholding and promptly transmitting of
amounts withheld to the appropriate revenue agency in
accordance with applicable law.
13. Maintain age records of the Clients and notify each Client as
required by U.S. Treasury Regulations and other applicable law
relating to required minimum distributions ("RMD"). Calculate
the amount of the RMD based on the method elected by the
Client and collect the information concerning a 70 1/2
election of payment method.
14. Respond promptly to all Client inquiries and maintain records
of such responses for no less than the term of this Agreement
or as otherwise required by applicable law.
15. Provide Custodian a monthly statement, in a format reasonably
required by Custodian, reflecting the current number of
Accounts for which the Custodian acts as custodian of record,
noting with accuracy the fair market value of each Account as
of the last business day of the month.
16. Collect all fees payable by the Fund relating to the Account
investments and pay compensation due and payable in accordance
with Article V below.
B. If Transfer Agent is unable to perform or has failed to perform any
of the services it has agreed to perform herein at any time,
Transfer Agent promptly shall notify Custodian in writing detailing:
(i) the nature of the omissions or failures, (ii) the number and/or
duration of such omissions or failures, (iii) the reason for each
omission or failure, (iv) the proposed solution to correct each
omission or failure, and (v) a procedure for preventing such
omissions or failures going forward.
III. SAFEKEEPING OF ASSETS. Transfer Agent shall assume sole responsibility for
the investment and the safekeeping of all Account assets. Transfer Agent
shall perform all recordkeeping and accounting functions (including but
not limited to purchases and redemptions and earnings and loss
calculations) for each Account, and shall provide a detailed report
regarding such recordkeeping and accounting to the Custodian at least
annually or more frequently upon Custodian's reasonable request.
IV. INDEMNIFICATION. Transfer Agent hereby agrees to indemnify, defend and
hold Custodian harmless against any and all claims, demands, actions,
suits, judgments, IRS or other governmental penalties or fees of any
nature, losses, damages, costs, charges and other expenses of every nature
(including legal counsel and other professional fees and expenses) arising
out of the Transfer Agent's responsibilities under this Agreement; and for
any error, omission, grossly negligent act or willful misconduct by
Transfer Agent in the performance of this Agreement. Each party shall act
with reasonable care in the performance of its duties under this
Agreement. The indemnity and defense provisions set forth in this
paragraph shall indefinitely survive the termination or assignment of this
Agreement.
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Funds hereby agree to indemnify, defend and hold Custodian harmless
against any and all claims, demands, actions, suits, judgments, IRS or
other governmental penalties or fees of any nature, losses, damages,
costs, charges and other expenses of every nature (including legal counsel
and other professional fees and expenses) arising out of the Funds'
responsibilities under this Agreement; and for any error, omission,
grossly negligent act or willful misconduct by Funds in the performance of
this Agreement. Each party shall act with reasonable care in the
performance of its duties under this Agreement. The indemnity and defense
provisions set forth in this paragraph shall indefinitely survive the
termination or assignment of this Agreement.
V. COMPENSATION
A. Transfer Agent shall be compensated for providing the services set
forth in this Agreement in accordance with the fee schedule set
forth on EXHIBIT B hereto, as amended from time to time.
B. The Custodian shall be compensated for providing the custodial
services set forth in this Agreement in accordance with the fee
schedule set forth on EXHIBIT B hereto, as amended from time to
time. All compensation and reimbursable expenses owed to the
Custodian shall be paid within thirty (30) calendar days following
invoice, except for any fee or expense subject to a good faith
dispute. Such disputed amount shall be paid within ten (10) calendar
days of the day on which the parties agree to the amount to be paid.
With the exception of any fee or expense disputed in good faith as
set forth above, unpaid invoices shall accrue a finance charge of 1
1/2% per month after the due date.
VI. COMPLIANCE WITH LAWS
Transfer Agent and the Funds shall be legally and contractually
responsible for ensuring that, in providing services or agreeing to the
provision of such services under this Agreement, they have not exposed
Custodian to any regulatory or legal noncompliance with regard to any
applicable law. If Transfer Agent or the Funds do expose Custodian to such
regulatory or legal noncompliance, they shall indemnify, defend, hold
harmless and make the Custodian whole with regard to such exposure.
Further, Funds, Custodian and Transfer Agent hereby agree to the terms and
requirements as set forth in EXHIBIT C which are hereby incorporated by
reference.
VII. PRIVACY OF CLIENT AND ACCOUNT INFORMATION
A. "CONFIDENTIAL INFORMATION" shall mean all information however
collected, compiled, or received, including without limitation,
through non-electronic or electronic means pertaining to or
identifiable in any way to any Client or Account, including but not
limited to, first and last names, home addresses, telephone numbers,
account numbers, account balances, account positions, account
statements, account activity, social security numbers, driver's
license numbers,
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account access codes, pass words, account lists, and any other
information that may be compiled or derived therefrom.
X. XXXXX-XXXXX-XXXXXX. Because Custodian is a federally-regulated
financial institution that must comply with the safeguards for
Confidential Information contained in the Xxxxx-Xxxxx-Xxxxxx Act
("GLBA") and regulations promulgated pursuant to GLBA, Transfer
Agent must establish, as an entity that maintains, processes, or
otherwise is permitted access to Confidential Information,
appropriate measures designed to safeguard Confidential Information.
Specifically, Transfer Agent must establish and maintain data
security policies and procedures designed to ensure the following:
1. Security and confidentiality of Confidential Information;
2. Protection against anticipated threats or hazards to the security
or integrity of Confidential Information;
3. Protection against the unauthorized access or use of Confidential
Information.
C. MONITORING. Transfer Agent must permit Custodian to monitor and/or
audit Transfer Agent's compliance with this Section during regular
business hours upon not less than 48 hours' notice to Transfer Agent
and to provide to Custodian copies of audits and system test results
acquired by Transfer Agent in relation to the data security policies
and procedures designed to meet the requirements set forth above.
VIII. DISPOSITION OF CONFIDENTIAL INFORMATION.
Transfer Agent is required to develop appropriate security measures for
the proper disposal and destruction of Confidential Information. Upon
termination of this Agreement, Transfer Agent must forward all
Confidential Information to Custodian or, with Custodian's permission,
Transfer Agent may provide Confidential Information to a successor
custodian or destroy the Confidential Information. Transfer Agent shall
provide written certification to Custodian that Transfer Agent has
forwarded or destroyed, all such Confidential Information in Transfer
Agent's possession. Notwithstanding the foregoing, Transfer Agent may
retain one archival copy of Confidential Information, to demonstrate
compliance with the provisions of this Section and to meet any regulatory
retention requirements of Transfer Agent.
IX. RIGHT TO AUDIT; ACCESS.
A. The Custodian's business operations are regularly audited by (i)
various government agencies having supervisory and regulatory
authority over Custodian (the "Regulatory Authorities") and (ii)
Custodian's own internal auditors. Transfer Agent agrees to fully
cooperate with Custodian's efforts to meet its regulatory
obligations and will comply in a timely manner with Custodian's
reasonable requests for documentation and information.
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B. The following are deemed reasonable requests of Custodian, with
which Transfer Agent shall comply:
1. Transfer Agent shall make its books, records, and operations
relating to all products and services provided to Custodian or
Custodian's customers available for audit or inspection by the
Regulatory Authorities, by Custodian, or by Custodian's
independent auditors with at least 48 hours' advance notice
from Custodian.
2. Within five (5) business days of Custodian's written request,
Transfer Agent shall provide all applicable audit reports,
including but not limited to: performance, financial, internal
control and security reviews; penetration testing; intrusion
detection; and firewall configuration. This provision shall
not apply to SAS 70 reports.
3. If a deficiency is noted or determined in any such audit
report, Transfer Agent must also provide to Custodian any and
all documentation related to resolution of the audit
deficiencies and the corrective actions implemented to prevent
recurrence of such deficiency.
X. FOREIGN BASED SUPPLIERS.
Transfer Agent shall not use any subcontractors that are based outside the
United States of America who will have access to Confidential Information
without Custodian's prior written consent.
XI. TERM OF AGREEMENT; AMENDMENT
This Agreement shall become effective as of the date first written above
and will continue in effect for a period of three (3) years. This
Agreement may be terminated by any party upon giving ninety (90) days
prior written notice to the other parties. This Agreement may not be
amended or modified in any manner except by written agreement executed by
the parties.
XII. DUTIES IN THE EVENT OF TERMINATION
In the event that, in connection with termination, a successor to any of
the Custodian's duties or responsibilities hereunder is designated by the
Funds by written notice to the Custodian, the Custodian will promptly,
upon such termination and at the expense of the Funds, transfer to such
successor all relevant books, records, correspondence, and other data
established or maintained by the Custodian under this Agreement in a form
reasonably acceptable to the Funds (if such form differs from the form in
which the Custodian has maintained the same, the Funds shall pay any
expenses associated with transferring the data to such form), and will
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from the Custodian's personnel in the
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establishment of books, records, and other data by such successor. If no
such successor is designated, then such books, records and other data
shall be returned to the Funds.
XIII. ASSIGNMENT
This Agreement shall extend to and be binding upon the respective
successors and assigns; provided, however, that this Agreement shall not
be assignable by the Funds without the written consent of the Custodian,
or by the Custodian without the written consent of the Funds.
XIV. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Ohio, without regard to conflicts of law principles. To the extent that
the applicable laws of the State of Ohio, or any of the provisions herein,
conflict with the applicable federal law, the latter shall control, and
nothing herein shall be construed in a manner inconsistent with the
Investment Companies Act of 1940 or any rule or order of the Securities
and Exchange Commission promulgated thereunder.
XV. NO AGENCY RELATIONSHIP
Nothing herein contained shall be deemed to authorize or empower either
party to act as agent for the other party to this Agreement, except as
otherwise specifically provided in this Agreement.
XVI. SERVICES NOT EXCLUSIVE
Nothing in this Agreement shall limit or restrict the Custodian from
providing services to other parties that are similar or identical to some
or all of the services provided hereunder.
XVII. INVALIDITY
Any provision of this Agreement which may be determined by competent
authority to be prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the
parties.
XVIII.NOTICES
Any notice required or permitted to be given by either party to the other
shall be in writing and shall be deemed to have been given on the date
delivered personally or by courier service, or three days after sent by
registered or certified mail, postage prepaid, return receipt requested,
or on the date sent and confirmed received by facsimile transmission to
the other party's address set forth below:
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Notice to the Custodian shall be sent to:
U.S. Bank National Association
Attn: Mutual Fund Custody Services
000 Xxxxxx Xxxxxx, X.X. XX-XX-X0XX
Xxxxxxxxxx, XX 00000
Fax No.: 000-000-0000
and notice to the Funds shall be sent to:
Rydex Investments
Attn: Compliance
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
and notice to the Transfer Agent shall be sent to:
Rydex Fund Services Co., Inc.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
XIX. MULTIPLE ORIGINALS
This Agreement may be executed on two or more counterparts, each of which
when so executed shall be deemed to be an original, but such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by a duly authorized officer on one or more counterparts as of the date first
written above.
U.S. BANK NATIONAL ASSOCIATION, AS CUSTODIAN
By: /s/ XXX X. XXXXXXX
-------------------------------
Name: XXX X. XXXXXXX
-----------------------------
Title: SENIOR VICE PRESIDENT
----------------------------
Rydex Fund Services Co., Inc., TRANSFER AGENT
By: /s/ XXXX XXXXX
-------------------------------
Name: XXXX XXXXX
-----------------------------
Title: SENIOR VICE PRESIDENT
----------------------------
RYDEX SERIES FUNDS, RYDEX DYNAMIC FUNDS & RYDEX ETF TRUST, THE FUNDS
By: /s/ XXXX XXXXX
-------------------------------
Name: XXXX XXXXX
-----------------------------
Title: VP & TREASURER
----------------------------
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SCHEDULE A
LIST OF FUNDS
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SCHEDULE B
FEE SCHEDULE
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RELIANCE PROVISIONS
EXHIBIT C
1. RECITALS.
1.1 Custodian is a financial institution subject to the Bank Secrecy Act
and Section 326 of the USA PATRIOT Act requiring it to implement and
maintain a Customer Identification Program as part of its Anti-Money
Laundering Program and Bank Secrecy Act Policy.
1.2 Custodian provides custodial services to Accounts and, in connection
therewith, is obligated to comply with all laws, rules and
regulations relating to the provision of services to such Accounts.
The custodial services provided to Accounts by Custodian are
specified in a written custodial agreement between the Custodian and
each Account Client
1.3 Transfer Agent is a federally regulated ____________________ and has
implemented an Anti-Money Laundering Program that complies with
Section 326 of the USA Patriot ACT.
1.4 Funds are federally regulated registered investment companies and
have implemented an Anti-Money Laundering Program that complies with
Section 326 of the USA Patriot ACT.
1.5 Funds are in the business of providing mutual fund investments to
individuals and entities, and, in that capacity, provides services
to third parties that are or may be customers of Funds and/or
Transfer Agent, but are not otherwise customers of, or specifically
known to, the Custodian prior to becoming a custodial customer of
the Custodian as described in Section 1.2, above ("Third Parties").
1.6 Custodian, Funds and Transfer Agent desire to assure that the
services Funds and Transfer Agent provide to such Third Parties also
comply with such Laws, as that term is defined below.
NOW THEREFORE, in consideration of the foregoing, the covenants set forth below,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
2. FUNDS AND TRANSFER AGENT OBLIGATIONS REGARDING LAWS AND COMPLIANCE RELATED
MATTERS
For so long as the Custodian provides custodial services to any Third
Parties, and Funds and Transfer Agent provide services to Third Parties,
the parties agree that Funds shall be legally and contractually
responsible for ensuring that the services provided to Third Parties fully
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comply with the Laws. In connection therewith, Funds agree to the
following additional responsibilities:
Funds will establish and maintain policies and procedures related to right
to financial privacy; know your customer; Customer Identification Program;
and any other program, policies, and procedures which may in the future be
required by law for the proper conduct of the services provided by Funds
and Transfer Agent in conformity with the Laws. Funds shall operate, and
shall cause the Transfer Agent to operate, in compliance with such
programs, policies and procedures. Custodian shall, upon request, have the
right to reviewall such policies.
Funds and Transfer Agent shall provide Custodian, at such time as
Custodian may request, with an attestation regarding policies and
procedures maintained to comply with the obligations described hereunder.
Funds and Transfer Agent shall also provide representatives of the
agencies which regulate Custodian reasonable access to their policies,
procedures, practices and records, including but not by way of limitation
those records made and retained in accordance with the USA PATRIOT ACT
Customer Identification Program, maintained by the Funds and/or Transfer
Agent for Custodian at such time as the requesting regulatory authority
may request for the purpose of auditing compliance with the obligations
described hereunder.
Funds and Transfer Agent will give Custodian notice and an opportunity to
attend any meetings that Transfer Agent may have with regulatory and other
governmental authorities that in any way relate to the Laws, or the
matters contemplated by this Agreement.
For purposes hereof, "Laws" shall mean all federal, state and local laws
and regulations applicable to the provision of banking, financial or
custodial services by Custodian under this Agreement. These include, but
are not limited to, the Bank Secrecy Act, the USA PATRIOT Act, those
relating to currency reporting, the prevention of money laundering, and
laws regarding the privacy of nonpublic consumer information.
3. FUNDS AND TRANSFER AGENT OBLIGATIONS REGARDING USA PATRIOT ACT CUSTOMER
IDENTIFICATION PROGRAM
Funds shall perform, or shall cause Transfer Agent to perform, with
respect to all Third Parties for which Custodian provides services,
certain duties of the Custodian's Customer Identification Program. Such
duties will conform, in all respects, with the requirements specified
under the USA PATRIOT Act and the implementing regulations applicable to
national banks in addition to the specific Customer Identification Program
of the Custodian.
Funds shall cause Transfer Agent to perform the following:
1. Collect all identifying information of the Third Parties as
applicable (name, physical address, date of birth and taxpayer
identification number);
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2. Verify the identity of the Third Parties upon the opening of
an account with Custodian for Third Parties;
3. Provide notice to the Third Parties that Funds and/or Transfer
Agent may request information to verify Third Parties'
identity in a format agreed upon by Fund, Transfer Agent and
Custodian;
4. Compare names of Third Parties against required lists of known
or suspected terrorists or terrorist organizations issued by
any Federal government agency and designated as such by the
U.S. Treasury and follow all Federal directions issued in
connection with such list;
5. Retain all identifying information of Third Parties for a
period of five years after the account maintained at Custodian
for Third Party is closed;
6. Retain all verifying information of Third Parties for a period
of five years after the verification of identity is made; and
7. Provide a written certification to Custodian, upon request,
that it has implemented an Anti-Money Laundering program and
that it will perform the specified requirements of the
Custodian's Customer Identification Program.
4. CUSTODIAN OBLIGATIONS REGARDING USA PATRIOT ACT CUSTOMER IDENTIFICATION
PROGRAM
Custodian shall, with respect to all Third Parties for which Custodian
provides services, retain all Fund and Transfer Agent certifications
described herein for a period of five years after the account is closed.
5. SAR AND CTR OBLIGATIONS
Each party to this contract shall remain obligated to file any and all
Suspicious Activity Reports (SARs) or Currency Transaction Reports (CTR)
that are required by law. In no way is Custodian agreeing to assume the
Funds' or the Transfer Agent's SAR or CTR filing requirements. Instead,
Custodian shall file any SARs or CTRs that it is required to file by law,
and the Funds and the Transfer Agent shall file any SARs or CTRs they are
required to file by law.
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