AMENDED AND RESTATED
SERVICE AGREEMENT
THIS SERVICE AGREEMENT (the "Agreement"), dated as of May 1, 2000, and
amended and restated as of November 15, 2004, is entered into by and between
Rydex Dynamic Funds, a Delaware business trust (the "Trust"), and RYDEX FUND
SERVICES, INC., a Maryland corporation (the "Servicer").
W I T N E S S E T H:
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Servicer is registered as a transfer agent under the
Securities Exchange Act of 1934, as amended; and
WHEREAS, the Trust wishes to have the Servicer perform general
administrative, shareholder, dividend disbursement, transfer agent, and
registrar and other services for the Trust and to act in such capacity in the
manner set forth in this Agreement, and the Servicer is willing to act in such
capacity in accordance with the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt,
sufficiency, and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree and promise as follows:
1. SERVICES TO BE PROVIDED.
In consideration of the compensation to be paid by the Trust to the
Servicer pursuant to Section 4 of this Agreement, the Servicer will:
a. Manage, supervise, and conduct the affairs and business of the Trust
and matters incidental thereto. In the performance of its duties,
the Servicer will comply with the Trust's Prospectus and its
Statement of Additional Information, as the same may be amended from
time to time, all as delivered to the Servicer (collectively, the
"Controlling Documents"). The Servicer will also use its best
efforts to safeguard and promote the welfare of the Trust, and to
comply with other policies which the Board of Trustees of the Trust
(the "Board") may from
time to time specify. The Servicer will furnish or provide to the
Trust general administrative services as the Trust may reasonably
require in the conduct of its affairs and business, including,
without limitation, the services described on Schedule I attached
hereto.
b. Provide the Trust with all required shareholder and dividend
disbursement services, including, without limitation, those services
described on Schedule II, attached hereto. The Servicer will
maintain sufficient trained personnel and equipment and supplies to
perform such services in conformity with the Controlling Documents
and such other reasonable standards of performance as the Trust may
from time to time specify, and otherwise in an accurate, timely, and
efficient manner.
c. Provide the Trust with all required stock transfer agent and
registrar services, including, without limitation, those services
described on Schedule III attached hereto. The Servicer will
maintain sufficient trained personnel and equipment and supplies to
perform such services in conformity with the Controlling Documents
and such other reasonable standards of performance as the Trust may
from time to time specify, and otherwise in an accurate, timely, and
efficient manner.
2. OBLIGATIONS OF THE TRUST.
The Trust will have the following obligations under this Agreement:
a. The Trust shall keep the Servicer continuously and fully informed as
to the composition of the Trust's investment portfolio and the
nature of all of the Trust's assets and liabilities, and shall cause
the investment managers of the Trust's series to cooperate with the
Servicer in all matters so as to enable the Servicer to perform the
Servicer's functions under this Agreement.
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b. The Trust shall furnish the Servicer with any materials or
information which the Servicer may reasonably request to enable the
Servicer to perform the Servicer's functions under this Agreement.
c. The Trust shall turn over to the Servicer the accounts and records
previously maintained by or for the Trust. The Servicer shall be
entitled to rely exclusively on the completeness and correctness of
the accounts and records turned over to the Servicer by the Trust;
provided, that such reliance is made in good faith, and the Trust
shall indemnify and hold the Servicer harmless of and from any and
all expenses (including, without limitation, attorneys' and
accountants' fees), damages, claims, suits, liabilities, actions,
demands, and losses whatsoever arising out of or in connection with
any error, omission, inaccuracy, or other deficiency of such
accounts and records or in connection with the failure of the Trust
to provide any portion of such accounts and records or to provide
any information to the Servicer necessary or appropriate to perform
the Servicer's functions hereunder; and provided, further, that such
accounts, records, and other information shall belong to the Trust
and be considered confidential, and shall not be disclosed to other
than Federal and state regulators without permission from the Trust.
3. PAYMENT OF FEES AND EXPENSES.
a. The Servicer will pay all of the fees and expenses incurred by the
Servicer in providing the Trust with the services and facilities
described in this Agreement, except as otherwise provided herein.
b. Notwithstanding any other provision of this Agreement, the Trust
will pay, or reimburse the Servicer for the payment of, all fees and
expenses incurred by the Servicer not directly related to the
Servicer's providing the Trust with the services and facilities
described in this Agreement, including, but not limited to,
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the following described fees and expenses of the Trust (hereinafter
called "Direct Expenses") whether or not billed to the Trust, the
Servicer, or any related entity:
i. fees and expenses of custodian and depositories and
banking services fees and costs;
ii. fees and expenses of outside legal counsel and any legal
counsel directly employed by the Trust;
iii. fees and expenses of independent auditors and income tax
preparation and expenses of obtaining quotations for the
purpose of calculating the value of the Trust's assets;
iv. all Federal, state, and local taxes (including, without
limitation, stamp, excise, income, and franchise taxes);
v. costs of stock certificates and other expenses of
issuing and redeeming shares of the Trust ("Shares");
vi. costs incidental to or associated with shareholder
meetings;
vii. fees and expenses of registering or qualifying shares
for sale under Federal and state securities laws;
viii. costs (including postage) of printing and mailing
prospectuses, confirmations, proxy statements, and other
reports and notices to shareholders and to governmental
agencies;
ix. premiums on all insurance and bonds and other expenses
of fidelity and liability insurance and bonding covering
the Trust;
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x. fees and expenses of the disinterested Trustees and
expenses incidental to the meetings of the Board; and
xi. dues and expenses associated with membership in the
Investment Company Institute and the Mutual Fund
Education Alliance; costs (including postage) of
printing and mailing prospectuses, confirmations, proxy
statements, annual, semi-annual and quarterly reports,
and other reports and notices to shareholders and to
governmental agencies;
4. COMPENSATION.
As consideration for the services provided hereunder, the Trust will pay
the Servicer a fee on the last day of each month in which this Agreement is in
effect, at the following annual rates based on the average daily net assets (the
"Assets") of each of the Trust 's series (a "Fund") for such month:
TITAN 500 FUND
--------------
0.25% of Assets
TEMPEST 500 FUND
----------------
0.25% of Assets
VENTURE 100 FUND
----------------
0.25% of Assets
VELOCITY 100 FUND
-----------------
0.25% of Assets
LONG DYNAMIC DOW 30 FUND
------------------------
0.25% of Assets
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INVERSE DYNAMIC DOW 30 FUND
---------------------------
0.25% of Assets
In the event that this Agreement commences on a date other than on the
beginning of any calendar month, or if this Agreement terminates on a date other
than the end of any calendar month, the fees payable hereunder by the Trust
shall be proportionately reduced according to the number of days during such
month that services were not rendered hereunder by the Servicer.
5. REPORTS TO THE BOARD OF TRUSTEES.
The Servicer will consult with the Board at such times as the Board
reasonably requests with respect to the services provided hereunder, and the
Servicer will cause its officers to attend such meetings with the Board, and to
furnish such oral or written reports to the Board, as the Board may reasonably
request. In addition, the Servicer agrees to provide to the Board such reports
and other information as the Board may reasonably request in order to enable the
Board to perform a review of the Servicer's performance under this Agreement.
6. TERM OF AGREEMENT.
This Agreement is effective as on the date hereof. This Agreement will
remain in full force and effect until AUGUST ___, 200__, unless terminated
earlier in accordance with its terms, and thereafter from year to year;
PROVIDED, that: (a) such continuance is approved by (i) either a vote of the
majority of the Trustees or a vote of a "majority of the outstanding voting
securities" (as defined in the 0000 Xxx) of the Trust and (ii) a majority of the
Trustees who are not "interested persons" (as defined at Section 2(a)(19) of the
0000 Xxx); and (b) the following findings are made by a majority of the Trustees
who are not "interested persons" (as defined at Section 2(a)(19) of the 1940
Act): (i) that this Agreement is in the best interests of the Trust; (ii) that
the services to be performed pursuant to this Agreement are services required
for the operation of the Trust; (iii) that the Servicer can provide services the
nature and quality of which are at least equal to those provided by others
offering the same or similar services; and (iv) that the fees for such services
are fair and reasonable in light of the usual and customary charges made by
others for services of the same nature and quality.
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7. TERMINATION.
This Agreement may be terminated, without the payment of any penalty, by
either party hereto upon at least sixty (60) days' written notice to the other
party. Any termination by the Trust will be pursuant to a vote of a majority of
the Trustees.
8. STANDARD OF CARE.
a. Except as provided by law, the Servicer will be under no liability
or obligation to anyone with respect to any failure on the part of
the Board or any investment manager to perform any of their
obligations under the Controlling Documents, or for any error or
omission whatsoever on the part of the Board or any investment
manager.
b. The Servicer will not be liable for any error of judgment or mistake
of law or for any loss caused by the Trust in connection with the
matters to which this Agreement relates; provided, however, that the
Servicer has acted in the premises with the care, skill, prudence,
and diligence under the circumstances then prevailing that a prudent
man acting in like capacity and familiar with such matters would use
in the conduct of any enterprise of a like character and with like
aims, and in accordance with such other requirements of law;
provided, further, however, that nothing in this Agreement will
protect the Servicer against any liability to the Trust to which the
Servicer would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of
the Servicer's duties hereunder or by reason of the Servicer's
reckless disregard of the Servicer's obligations and duties
hereunder.
9. OTHER ACTIVITIES OF THE SERVICER.
Subject to the provisions of Section 5 of this Agreement, with respect to
advance notice of the Servicer's taking on of new clients or ventures of
material significance, nothing herein contained will limit or restrict the right
of the Servicer to engage in any other business or to render services of any
kind to any other corporation, firm, individual, or association.
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10. SCOPE OF AUTHORITY.
a. Shares purchased by the Servicer on behalf of shareholders of the
Trust ("Shareholders") will be registered with the Servicer, as the
Trust's transfer agent, in the Servicer's name or in the name of the
Servicer's nominee. The Shareholder will be the beneficial owner of
Shares purchased and held by the Servicer in accordance with the
Shareholder's instructions and the Shareholder may exercise all
rights of a Shareholder of the Trust.
b. Neither the Servicer nor any of the Servicer's officers, employees,
agents, or assigns are authorized to make any representations
concerning the Trust or the Shares, except for those representations
contained in the Trust's then current prospectus for such Shares,
copies of which will be supplied by the Trust to the Servicer, or in
such supplemental literature or advertising as may be authorized by
the Trust in writing.
11. AUTHORITY TO ENGAGE SUB-SERVICERS.
In providing the services and assuming the obligations set forth herein,
the Servicer may, at the sole expense of the Servicer, employ one or more
sub-servicers, or may enter into such service agreements as the Servicer deems
appropriate in connection with the performance of the Servicer's duties and
obligations hereunder. Reference herein to the duties and responsibilities of
the Servicer shall include the duties and responsibilities of any sub-servicers
employed by the Servicer to the extent that the Servicer shall delegate such
duties and responsibilities to such sub-servicer.
12. INDEMNIFICATION.
a. The Trust shall indemnify the Servicer and hold the Servicer
harmless from and against all actions, suits, and claims, whether
groundless or otherwise, arising directly or indirectly out of or in
connection with the Servicer's
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performance under this Agreement and from and against any and all losses,
damages, costs, charges, attorneys' and accountant's fees, payments,
expenses, and liabilities incurred by the Servicer in connection with any
such action, suit, or claim unless caused by the Servicer's breach of this
Agreement, negligence, or willful misconduct. The Servicer shall not be
under any obligation to prosecute or to defend any action, suit, or claim
arising out of or in connection with the Servicer's performance under this
Agreement, which, in the opinion of the Servicer's counsel, may involve
the Servicer in expense or liability, and the Trust shall, so often as
reasonably requested, furnish the Servicer with satisfactory indemnity
against such expense or liability, and upon request of the Servicer, the
Trust shall assume the entire defense of any action, suit, or claim
subject to the foregoing indemnity; PROVIDED, HOWEVER, that the Servicer
shall give the Trust immediate notice of any such action, suit, or claim
brought against the Servicer.
b. The Servicer shall indemnify the Trust and hold the Trust harmless
from all claims and liabilities (including reasonable attorneys' and
accountants' expenses) incurred or assessed against the Trust
arising from the Servicer's negligence, wilful miscounduct, or
breach of this Agreement.
13. NOTICES.
a. Communications to the Servicer from the Trust or the Board shall be
addressed to:
Rydex Dynamic Funds or Rydex Fund Services, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: President
b. Communications from the Servicer to the Trust shall be addressed to:
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Rydex Fund Services, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: President
c. In the event of a change of address, communications will be
addressed to such new address as designated in a written notice from
the Trust or the Servicer, as the case may be. All communications
addressed in the above manner and by registered mail or delivered by
hand will be sufficient under this Agreement.
14. LAW GOVERNING.
This Agreement is governed by the laws of the State of Maryland (without
reference to such state's conflict of law rules).
15. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but which together shall constitute one and the same
instrument.
16. BINDING EFFECT AND ASSIGNMENT.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that this Agreement shall
not be assignable by the Trust without the written consent of the Servicer, or
by the Servicer without the written consent of the Trust, in each case
authorized or approved by a resolution of the Trust's Trustees.
17. AMENDMENT, MODIFICATION, AND WAIVER.
No term or provision of this Agreement may be amended, modified, or waived
without the affirmative vote or action by written consent of the Servicer and
the Trust effected in accordance with the 1940 Act and Section 6 of this
Agreement.
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IN WITNESS WHEREOF, the Servicer and the Trust have executed this
Agreement as of the date first written above.
RYDEX DYNAMIC FUNDS
By: /S/ XXXX X. XXXXXXXXXXX
-----------------------
Name: Xxxx X. Xxxxxxxxxxx
Title: President
RYDEX FUND SERVICES, INC.
By: /S/ XXXX X. XXXXXXXXXXX
-----------------------
Name: Xxxx X. Xxxxxxxxxxx
Title: President
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SCHEDULE I
GENERAL ADMINISTRATIVE SERVICES
The Servicer agrees to provide the Trust with all required general
administrative services, including, without limitation, the following:
1. Office space, equipment, and personnel.
2. Clerical and general back office services.
3. Bookkeeping, internal accounting, secretarial, and other general
administrative services.
4. Preparation of all annual, semi-annual and quarterly reports,
prospectuses, statements of additional information, proxy statements, and
all other materials required to be filed or furnished by the Trust under
Federal and state securities laws.
5. Process payments of all fees and expenses of the Trust.
6. Perform appropriate IRS and SEC testing for the Trust.
7. Disseminate NAV and other relevant Fund information to external parties.
8. Calculate Fund distributions to ensure compliance with IRS rules.
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SCHEDULE II
SHAREHOLDER AND DIVIDEND, DISBURSEMENT SERVICES
The Servicer agrees to provide the Trust and the Shareholders with all
required shareholder and dividend disbursement services ("Services"), including,
without limitation, the following:
1. The Servicer shall provide the following services to the Shareholders of
the Trust:
a. Aggregating and processing purchases and redemption requests for
Trust Shares from Shareholders.
b. Processing dividend payments from the Trust on behalf of
Shareholders.
c. Providing information periodically to Shareholders showing their
positions in Shares.
d. Arranging for bank wires.
e. Responding to Shareholder inquiries relating to the services
performed by the Servicer.
f. Providing subaccounting with respect to Shares beneficially owned by
Shareholders.
g. As required by law, forwarding shareholder communications from the
Trust (such as proxies, shareholder reports, annual and semi-annual
financial statements, and dividend, disbursement, and tax notices)
to Shareholders.
h. Providing such other similar services as the Trust may reasonably
request to the extent the Servicer is permitted to do so under
applicable statutes, rules, or regulations.
i. Provide to Shareholders a schedule of any fees that the Servicer may
charge directly to the Shareholders for such Services.
2. The Servicer shall also provide the following additional Services:
a. Maintain all records required by law relating to transactions in
Shares and, upon request by the Trust, promptly make such of these
records available to the Trust as the Trust may reasonably request
in connection with the operations of the Trust.
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b. Promptly notify the Trust if the Servicer experiences any difficulty
in maintaining the records described in this Schedule II to the
Agreement in an accurate and complete manner.
c. Furnish the Trust or any designee of the Trust ("Designee") with
such information relating to the Servicer's performance under this
Agreement as the Trust or the Designee may reasonably request
(including, without limitation, periodic certifications confirming
the provision to Shareholders of the Services described herein), and
shall otherwise cooperate with the Trust and the Trust's Designees
(including, without limitation, any auditors designated by the
Trust), in connection with the preparation of reports to the Board
of Trustees concerning this Agreement and the monies paid or payable
by the Trust pursuant hereto, as well as any other reports or
filings that may be required by law.
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SCHEDULE III
TRANSFER AGENT AND REGISTRAR SERVICES
The Servicer agrees to provide the Trust with all required transfer agent
and registrar services, including, without limitation, the following:
1. Maintaining all shareholder accounts, including processing of new
accounts.
2. Posting address changes and other file maintenance for shareholder
accounts.
3. Posting all transactions to the shareholder file, including:
- Direct purchases
- Wire order purchases
- Direct redemptions
- Wire order redemptions
- Draft redemptions
- Direct exchanges
- Transfers
4. Quality control reviewing of transactions before the mailing of
confirmations, checks, and/or certificates to shareholders.
5. Issuing all checks and shipping and replacing lost checks.
6. Mailing confirmations, checks, and/or certificates resulting from
transaction requests of shareholders.
7. Performing other mailings, including:
- Semi-annual and annual reports
- I.R.S. Form 1099/year end shareholder reporting
- Systematic withdrawal plan payments
- Daily confirmations
8. Answering all service related telephone inquiries from shareholders,
including:
- General and policy inquiries (research and resolve problems)
- Trust yield inquiries
- Taking shareholder processing requests and account maintenance
changes by telephone
- Submitting pending requests to correspondence
- Developing reports on telephone activity
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9. Implementing the Trust's Anti Money Laundering Program and monitoring
compliance with the Anti Money Laundering and Foreign Asset Compliance
Policy and Procedures.
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