ACCOUNTING SERVICES AGREEMENT
BETWEEN
THE RYDEX VARIABLE TRUST
AND
PADCO SERVICE COMPANY, INC.
This Agreement, dated the 11th day of August, 1998, made by and between the
RYDEX VARIABLE TRUST (the "Trust"), a business trust established under the laws
of the State of Delaware on June 11, 1998, and organized as an open-end
management investment company, and PADCO SERVICE COMPANY, INC. (the "Agent"),
a company incorporated under the laws of the State of Maryland on October 6,
1993.
W I T N E S S E T H:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company
pursuant to the provisions of the Investment Company Act of 1940, as amended
(the "1940 Act");
WHEREAS, the Agent is registered with the Commission as a transfer agent
under the Securities Exchange Act of 1934, as amended;
WHEREAS, the Agreement and Declaration of Trust of the Trust (the "Trust
Declaration") authorizes the Trustees of the Trust to create an unlimited number
of series of shares of the Trust.
WHEREAS, the board of trustees of the Trust (the "Trustees") have created
the following Funds of the Trust: The Nova Fund, The Ursa Fund, The OTC Fund,
The Arktos Fund, The Precious Metals Fund, The Juno Fund, The U.S. Government
Bond Fund, The U.S. Government Money Market Fund, Banking Fund, Basic Materials
Fund, Biotechnology Fund, Consumer Products Fund, Electronics Fund, Energy Fund,
Energy Services Fund, Financial Services Fund, Health Care Fund, Leisure Fund,
Retailing Fund, Technology Fund, Telecommunications Fund, and Transportation
Fund (collectively, the "Funds");
WHEREAS, the Trust desires to appoint the Agent as the Trust's Accounting
Services Agent and the Accounting Services Agent for each of the Funds and
desires to have the Agent, as said Accounting Services Agent, to perform certain
accounting and recordkeeping functions required of a duly-registered investment
company; to file certain financial reports; to maintain and preserve certain
books, accounts, and records as the basis for such reports; and to perform
certain daily functions in connection with such accounts and records; and
WHEREAS, the Agent is willing to perform such functions upon the terms and
conditions herein set forth.
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:
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1. ACCOUNTS AND RECORDS OF THE TRUST
a. The Trust shall provide to the Agent the necessary and appropriate
documents, information, instructions, accounts, and records maintained or to be
maintained by or for the Trust. The Agent shall be entitled to rely exclusively
on the completeness and correctness of the accounts and records provided to the
Agent by the Trust; provided, that such reliance is made in good faith, and the
Trust shall indemnify and hold the Agent 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 Agent necessary or appropriate to perform the Agent's
functions hereunder.
b. Accounts, records, and other information shall belong to the Trust and
shall be considered confidential. Accounts, records, and other information will
not be disclosed to other than Federal and state regulators without permission
from the Trust.
2. MAINTENANCE OF ACCOUNTS AND RECORDS OF THE TRUST
a. The Agent shall examine and review the Trust's existing accounts,
records, pertinent documents, and systems in order to determine or recommend how
such accounts, records, documents, and systems shall be maintained.
b. Upon receipt of necessary and appropriate information, instructions,
accounts, records, and documents from the Trust, the Agent shall maintain and
keep current and accurate the following books, accounts, records, journals, or
other records of original entry, relating to the business of the Trust and each
of the Funds and necessary or appropriate for compliance with applicable
regulations, including Rule 31a-a and Rule 31a-2 of the 1940 Act, and as may be
mutually agreed to between the Trust and the Agent:
(1) Cash Receipts
(2) Cash Disbursements
(3) Dividend Record
(4) Purchase and sales of Portfolio Securities
(5) Subscription and Redemption Journals
(6) Security Ledger
(7) Broker Ledger
(8) General Ledger
(9) Daily Expense Accruals
(10) Daily Interest Accruals
(11) Securities and Monies borrowed or loaned and collateral
therefor
(12) Trial Balances.
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c. Unless appropriate information necessary to perform the above
functions is furnished to the Agent in a timely manner, the Agent shall incur no
liability to the Trust or any other person. The Agent shall promptly notify the
Trust in writing of any discrepancy, error or non-compliance in items (1)
through (12) in Section 2 b., above, of which the Agent has knowledge.
d. It shall be the responsibility of the Trust promptly to furnish the
Agent with the declaration, record and payment dates and amounts of any
dividends or income and any other special actions taken concerning the portfolio
securities of each of the Funds.
e. The Agent shall maintain all accounts and records mentioned above as
required by regulation and as agreed upon between the Trust and the Agent.
3. ACCOUNTING ENTRIES AND CONFIRMATIONS
Upon receipt by the Agent of written or oral instructions from the Trust,
the Agent shall make proper accounting entries in accordance with Generally
Accepted Accounting Principles and regulations of the Commission. The Trust
shall direct that each broker-dealer, or other person through whom a transaction
has occurred, shall send a confirmation thereof to the Agent. The Agent shall
verify this confirmation against the written or oral instructions when received
from the Trust and forward the confirmation to the Trust's custodian (the
"Custodian"). The Agent shall promptly notify the Trust of any discrepancy
between the confirmation and the Trust's written instructions when received from
the Trust but shall incur no responsibility or liability for such discrepancy.
The Trust shall cause any necessary corrections to be made and shall advise the
Agent and the Custodian accordingly.
4. CALCULATION OF NET ASSET VALUE
a. The Agent shall calculate the Trust's net assets value for each of the
Funds in accordance with the Trust's currently-effective prospectuses, once
daily.
b. The Agent shall prepare and maintain a daily evaluation of securities
for which market quotations are available by the Agent's use of Bloomberg and
ILX quotation services; all other securities shall be evaluated in accordance
with the Trust's written instructions, and the Agent shall be no responsibility
or liability for the accuracy of the information supplied by the Trust or
provided in the written instructions.
c. The Trust assumes all responsibility for computation of "amortized
cost," valuation of securities, and all valuations not ascertainable solely by
mechanical procedures.
5. STATEMENTS FROM CUSTODIAN
At the end of each month, the Agent shall obtain from the Custodian a
monthly statement of cash and portfolio transactions, which shall be reconciled
with the Agent's accounts and records
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maintained for the Trust. The Agent shall report any discrepancies to the
Custodian, and shall report any unreconciled items to the Trust.
6. DAILY AND PERIODIC REPORTS
The Agent shall supply daily and periodic reports to the Trust, as required
by law or regulation, and as requested by the Trust and agreed upon the Agent.
7. REPORTS AND CONFIRMATIONS TO THE TRUST'S TRANSFER AGENT
a. The Trust shall report and confirm to the Trust's transfer agent (the
"Transfer Agent") the purchases and redemptions for each of the Funds of which
the Trust is aware. The Agent shall obtain from the Transfer Agent daily
reports of Share purchases, redemptions, and total Shares outstanding for each
of the Funds.
b. The Agent shall reconcile outstanding Shares for each of the Funds
with the Transfer Agent periodically and certify at least monthly to the Trust
the reconciled Share balance outstanding for each of the Funds.
8. REVIEW OF ACCOUNTS AND RECORDS OF THE TRUST
The accounts and records of the Trust maintained by the Agent shall be the
property of the Trust, and shall be made available to the Trust, within a
reasonable period of time, upon demand. The Agent shall assist the Trust's
independent auditors, and, upon approval of the Trust, or upon demand by any
governmental or quasi-governmental entity, assist any such entity in any
requested review of the Trust's accounts and records, but shall be reimbursed
for all expenses and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from the Trust of the
necessary information, the Agent shall supply the necessary data for the Trust's
completion of any necessary tax returns, questionnaires, periodic reports to
shareholders, and such other reports and information requests as the Trust and
the Agent shall agree upon from time to time.
9. UNIFORM PROCEDURES
The Agent and the Trust, from time to time, may adopt uniform or standard
procedures, and the Agent may conclusively assume that any procedure approved by
the Trust, or directed by the trust, does not conflict with or violate any
requirements of the Trust's prospectuses, the Trust By-Laws, or other governing
documents of the Trust, or any rule or regulation of any regulatory body or
governmental agency. The Trust shall be responsible to notify the Agent of any
changes in the Trust's By-Laws or in regulations or rules which might
necessitate changes in the Agent's procedures.
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10. RELIANCE
The Agent may rely upon the advice of the Trust and upon statements of the
Trust's accountants and other persons believed by the Agent in good faith to be
expert in matters upon which such persons are consulted, and the Agent shall not
be liable for any actions taken in good faith upon such statements.
11. INDEMNIFICATION AND LIABILITY
a. The Agent shall not be liable for any action taken in good faith
reliance upon any authorized oral instructions, any written instructions, any
certified copy of any resolution of the Trustees of the Trust, or any other
document reasonably believed by the Agent to be genuine and to have been
executed or signed by the proper person or persons. The Trust will send written
instructions to confirm oral instructions, and the Agent will compare the
written instructions against the oral instructions previously furnished. The
Agent will inform the Trust promptly of any noted discrepancy.
b. The Agent shall not be held to have notice of any change or lack of
authority of any officer, employee, or Agent of the Trust until receipt of
written notification thereof by the Trust.
c. The Trust shall indemnify the Agent and hold the Agent harmless from
and against all actions, suits, and claims whether groundless or otherwise,
arising directly or indirectly out of or in connection with the Agent's
performance under this Agreement and from and against any and all losses,
damages, costs, charges, attorneys' and accountants' fees, payments, expenses,
and liabilities incurred by the Agent in connection with any such action, suit,
or claim unless caused by the Agent's breach of this Agreement, negligence, or
willful misconduct. The Trust shall not be liable under this indemnification
provision with respect to any claim made against the Agent unless the Agent
shall have notified the Trust in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Agent (or after the Agent shall have
received notice of such service on any designated Agent), but failure to notify
the Trust of any such claim shall not relieve the Trust from any liability which
the Trust may have to the Agent against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Agent, the Trust shall be entitled to participate, at its
own expense, in the defense of such action. The Trust also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Trust to such party of the Trust's election to
assume the defense thereof, the Agent shall bear the fees and expenses of any
additional counsel retained by the Agent, and the Agent will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation. The Agent will promptly notify
the Trust of the commencement of any litigation or proceedings against the Agent
in connection with the Shares or the operations of the Funds.
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d. The Agent shall indemnify the Trust and hold the Trust harmless from
all actions, suits, damages, claims, demands, losses, and liabilities (including
reasonable attorneys' and accountants' fees and expenses) incurred or assessed
against the Trust arising directly or indirectly from the Agent's negligence,
wilful misconduct, or breach of this Agreement. The Agent shall not be liable
under this indemnification provision with respect to any claim made against the
Trust unless the Trust shall have notified the Agent in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Trust (or
after the Trust shall have received notice of such service on any designated
Agent), but failure to notify the Agent of any such claim shall not relieve the
Agent from any liability which it may have to the Trust against whom such action
is brought otherwise than on account of this indemnification provision. In case
any such action is brought against the Trust, the Agent shall be entitled to
participate, at its own expense, in the defense of such action. The Agent also
shall be entitled to assume the defense hereof, with counsel satisfactory to the
party named in the action. After notice from the Agent to such party of the
Agent's election to assume the defense thereof, the Trust shall bear the fees
and expenses of any additional counsel retained by the Trust, and the Agent will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation. The Trust will promptly
notify the Agent of the commencement of any litigation or proceedings against
the Trust in connection with the Shares or the operations of the Funds.
e. The shareholders, Trustees, officers, employees, and agents of the
Trust shall not be personally bound by or liable hereunder, nor shall resort be
had to such person's private property for the satisfaction of any obligation or
claim hereunder as provided for in the Trust's By-Laws.
12. COMPENSATION
The Trust agrees to pay the Agent compensation for its services and to
reimburse the Agent for expenses, as set forth in Schedule A attached hereto, or
as shall be set forth in amendments to such Schedule approved by the Trust and
the Agent.
13. DAYS OF BUSINESS
Nothing contained in this Agreement is intended to or shall require the
Agent, in any capacity hereunder, to perform any functions or duties on any
holiday or other day of special observance on which the New York Stock Exchange
is closed. Functions or duties normally scheduled to be performed on such days
shall be performed on, and as of, the next business day on which the New York
Stock Exchange is open for business.
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14. TERM OF AGREEMENT
This Agreement shall become effective as of the date the Trust commences
its investment operations and shall continue for an initial two-year term and
shall continue automatically from year-to-year thereafter unless terminated in
accordance with the provisions of Section 15 of this Agreement.
15. TERMINATION
This Agreement may be terminated, without the payment of any penalty, by
either party hereto upon at least ninety (90) days written notice to the other
party. Any termination by the Trust will be pursuant to a vote of a majority of
the Trustees.
16. NOTICES
a. Communications to the Agent shall be addressed to:
PADCO Service Company, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
b. Communications to the Trust shall be addressed to:
Rydex Variable Trust
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 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
Agent, 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.
17. GOVERNING LAW
This Agreement is governed by the laws of the State of Maryland (without
reference to such state's conflict of law rules).
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18. 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.
19. 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 Agent, or by
the Agent without the written consent of the Trust, in each case authorized or
approved by a resolution of the Trustees of the Trust.
20. 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 Agent and the
Trust.
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IN WITNESS WHEREOF, the Agent and the Trust have executed this Agreement as
of the date first written above.
RYDEX VARIABLE TRUST
By:
------------------------------------------
Xxxxxx X. Xxxxxx, Xx.
President
PADCO SERVICE COMPANY, INC.
By:
------------------------------------------
Xxxxxx X. Xxxxxx, Xx.
President
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SCHEDULE A
PADCO SERVICE COMPANY, INC.
FEE SCHEDULE FOR ACCOUNTING SERVICES
RYDEX VARIABLE TRUST - EACH SEPARATE FUND
A. ANNUAL FEE - (Based upon average net assets - payable monthly) shall be the
greater of:
FIXED FEE
$20,000
or
BASIS POINT FEE
10 Basis Points on first $30 million of assets
5 Basis Points on next $20 million of assets
3 Basis Points on next $50 million of assets
2 Basis Points on assets over $100 million
B. In addition, all out-of-pocket expenses shall be separately charged, shall
include but not be limited to: printed forms, postage, overnight mail and
telephone expense.
C. PADCO Service Company, Inc. Warrants that the above rates of compensation
are guaranteed for a two-year period. At that time, the Trust acknowledges
that the Agent has the right to revise the Agent's compensation schedule.
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