PARTICIPATION AGREEMENT
AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
RYDEX SERIES FUNDS
AND
RYDEX DISTRIBUTORS, INC.
THIS AGREEMENT, dated as of the 1st day of July, 2003, by and among
Security Benefit Life Insurance Company, (the "Company"), a stock life insurance
company organized under the laws of the State of Kansas, on its own behalf and
on behalf of each segregated asset account of the Company set forth on Schedule
A hereto, as may be amended from time to time (each an "Account"), _Rydex Series
Funds(the "Trust"), a Delaware Business Trust, and Rydex Distributors, Inc. (the
"Underwriter"), a Maryland corporation.
WHEREAS, the shares of beneficial interest/common stock of theTrust are
divided into several series of shares, each representing the interest in a
particular managed portfolio of securities and other assets, any one or more of
which may be made available under this Agreement, as may be amended from time to
time by mutual agreement of the parties hereto (each such series is hereinafter
referred to as a "Portfolio"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and shares of
the Portfolios are registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the Underwriter is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (hereinafter "1934 Act"), is a
member in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD") and serves as principal underwriter of the shares of the
Trust; and
WHEREAS, the Company has issued or will issue certain variable annuity
contracts supported wholly or partially by the Account (the "Contracts"), and
said Contracts are listed in Schedule A hereto, as it may be amended from time
to time by mutual written agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts; and
WHEREAS, the Company intends to purchase shares in the Portfolios
listed in Schedule A hereto, as it may be amended from time to time by mutual
written agreement (the "Designated Portfolios"), on behalf of the Account to
fund the aforesaid Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust and the Underwriter agree as follows:
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ARTICLE I. Sale of TrustTrust Shares
1.1. Subject to Article IX hereof, the Trust agrees to make available
to the Company for purchase on behalf of the Account, shares of the Designated
Portfolios, such purchases to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Portfolios
(other than those listed on Schedule A) in existence now or that may be
established in the future will be made available to the Company only as the
Trust may so provide, and (ii) the Board of Trustees of the Trust (the "Board")
may suspend or terminate the offering of shares of any Designated Portfolio or
class thereof, if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Board acting in good
faith and in light of its fiduciary duties under federal and any applicable
state laws, suspension or termination is necessary and in the best interests of
the shareholders of such Designated Portfolio.
1.2. The Trust shall redeem, at the Company's request, any full or
fractional Designated Portfolio shares held by the Company on behalf of the
Account, such redemptions to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, the Trust may
delay redemption of Trust shares of any Designated Portfolio to the extent
permitted by the 1940 Act, and any rules, regulations or orders thereunder.
1.3. Purchase and Redemption Procedures
(a) The Trust hereby appoints the Company as an agent of the Trust
for the limited purpose of receiving and accepting purchase and redemption
requests on behalf of the Account (but not with respect to any Trust shares that
may be held in the general account of the Company) for shares of those
Designated Portfolios made available hereunder, based on allocations of amounts
to the Account or subaccounts thereof under the Contracts and other transactions
relating to the Contracts or the Account. Receipt and acceptance of any such
request (or relevant transactional information therefor) on any day the New York
Stock Exchange is open for trading and on which a Designated Portfolio
calculates its net asset value (a "Business Day") pursuant to the rules of the
Securities and Exchange Commission ("SEC"), by the Company as such limited agent
of the Trust prior to the time that the Trust ordinarily calculates its net
asset value as described from time to time in the Trust's prospectus shall
constitute receipt and acceptance by the Designated Portfolio on that same
Business Day, provided that the Trust receives notice of such request by 9:30
a.m. Eastern Time on the next following Business Day.
(b) The Company shall pay for shares of each Designated Portfolio
on the same Business Day that it notifies the Trust of a purchase request for
such shares. Payment for Designated Portfolio shares shall be made in federal
funds transmitted to the Trust or other designated person by wire to be received
by 3:00 p.m. Eastern Time on the Business Day the Trust is notified of the
purchase request for Designated Portfolio shares (unless the Trust determines
and so advises the Company that sufficient proceeds are available from
redemption of shares of other Designated Portfolios effected pursuant to
redemption requests tendered by the Company on behalf of the Account, or unless
the Trust otherwise determines and so advises the Company to delay the date of
payment, to the extent the Trust may do so under the 1940 Act). If federal funds
are not received on time, such funds will be invested, and Designated Portfolio
shares purchased thereby will be issued, as soon as practicable and the Company
shall promptly, upon the Trust's request, reimburse the Trust for any charges,
costs, fees, interest or other expenses incurred by the Trust in connection with
any advances to, or borrowing or overdrafts by, the Trust, or any similar
expenses incurred by the Trust, as a result of portfolio transactions effected
by the Trust based upon such purchase request. Upon receipt of federal funds so
wired, such funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Trust.
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(c) Payment for Designated Portfolio shares redeemed by the
Account or the Company shall be made by the Trust in federal funds transmitted
by wire to the Company or any other designated person by 3 p.m. Eastern Time on
the same Business Day the Trust is properly notified of the redemption order of
such shares (unless redemption proceeds are to be applied to the purchase of
shares of other Designated Portfolios in accordance with Section 1.3(b) of this
Agreement), except that the Trust reserves the right to delay payment of
redemption proceeds to the extent permitted under Section 22(e) of the 1940 Act
and any rules thereunder, and in accordance with the procedures and policies of
the Trust as described in the then-current prospectus.
(d) Any purchase or redemption request for Designated Portfolio
shares held or to be held in the Company's general account shall be effected at
the net asset value per share next determined after the Trust's receipt and
acceptance of such request, provided that, in the case of a purchase request,
payment for Trust shares so requested is received by the Trust in federal funds
prior to close of business for determination of such value, as defined from time
to time in the Trust's prospectus.
(e) All purchase or redemption requests shall be in accordance
with the terms of the Trust's prospectus.
1.4. The Trust shall use its best efforts to make the net asset value
per share for each Designated Portfolio available to the Company by 6:30 p.m.
Eastern Time each Business Day, and in any event, as soon as reasonably
practicable after the net asset value per share for such Designated Portfolio is
calculated, and shall calculate such net asset value in accordance with the
Trust's prospectus. If the Trust provides the Company with materially incorrect
share net asset value information, the Company on behalf of the Account, shall
be entitled to an adjustment to the number of shares purchased or redeemed to
reflect the correct share net asset value. Any material error in the calculation
of the net asset value per share, dividend or capital gain information shall be
reported promptly to the Company upon discovery. In the event that any such
material error is the result of the gross negligence of the Trust, or its
designated agent for calculating the net asset value, any administrative or
other costs or losses incurred for correcting underlying Contract owner accounts
shall be at theUnderwriter's expense.
1.5. The Trust shall use its best efforts to furnish notice (by wire or
telephone followed by written confirmation) to the Company of any income
dividends or capital gain distributions payable on any Designated Portfolio
shares by the record date, but in no event later than 6:30 p.m. Eastern Time on
the ex-dividend date. The Company, on its behalf and on behalf of the Account,
hereby elects to receive all such dividends and distributions as are payable on
any Designated Portfolio shares in the form of additional shares of that
Designated Portfolio. The Company reserves the right, on its behalf and on
behalf of the Account, to revoke this election and to receive all such dividends
and capital gain distributions in cash. The Trust shall notify the Company
promptly of the number of Designated Portfolio shares so issued as payment of
such dividends and distributions.
1.6. Issuance and transfer of Trust shares shall be by book entry only.
Share certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Trust shares shall be recorded in an appropriate
ledger for the Account or the appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Trust's shares may be sold
to other insurance companies and the cash value of the Contracts may be invested
in other investment companies.
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(b) The Company shall not, without prior notice to the Trust
(unless otherwise required by applicable law), take any action to operate the
Account as a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the Trust
(unless otherwise required by applicable law), induce Contract owners to change
or modify the Trust or change the Trust's investment adviser.
(d) The Company shall not, without prior notice to the Trust,
induce Contract owners to vote on any matter submitted for consideration by the
shareholders of the Trust in a manner other than as recommended by the Board.
1.8 The parties may agree, in lieu of the procedures set forth above in
this Article 1, to place and settle trades for Trust shares through a clearing
corporation. In the event that such a clearing corporation is used, the parties
agree to abide by the rules of the clearing corporation.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts (a) are, or
prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law, that
it has legally and validly established the Account as a segregated asset account
under Kansas insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 0000 Xxx.
2.2. The Trust represents and warrants that Designated Portfolio shares
sold pursuant to this Agreement shall be registered under the 1933 Act, shall be
duly authorized for issuance and sold in compliance with applicable state and
federal securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its shares. The Trust shall register and
qualify the shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
2.3. The Trust represents that it is lawfully organized and validly
existing under the laws of the State of Deleware and that it does and will
comply in all material respects with the 1940 Act.
2.4. The Underwriter represents and warrants that it is registered as a
broker/dealer under the 1934 Act with the SEC and is a member in good standing
with the NASD.
2.5. The Trust and the Underwriter represent and warrant that all of
their trustees/directors, officers, employees, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust in an amount not less than the minimum coverage as required
currently by Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time.
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The aforesaid bond shall include coverage for larceny and embezzlement and shall
be issued by a reputable bonding company.
2.6. The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Account are covered
by a blanket fidelity bond or similar coverage for the benefit of the Account,
in an amount not less than $5 million. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Trust shall provide the Company with as many printed copies of
the current prospectus, current Statement of Additional Information ("SAI"),
supplements, proxy statements, and annual or semi-annual reports of each
Designated Portfolio (for distribution to Contract owners with value allocated
to such Designated Portfolios) as the Company may reasonably request to deliver
to existing Contract owners. If requested by the Company in lieu thereof, the
Trust shall provide such documents (including a "camera-ready" copy of such
documents as set in type, a diskette in the form sent to the financial printer,
or an electronic copy of the documents in a format suitable for posting on the
Company's website, all as the Company may reasonably request) and such other
assistance as is reasonably necessary in order for the Company to have
prospectuses, SAIs, supplements and annual or semi-annual reports for the
Contracts and the Trust printed together in a single document or posted on the
Company's web-site or printed individually by the Company if it so chooses. The
expenses associated with printing and providing such documentation shall be as
set forth in Article V.
3.2. The Trust's prospectus shall state that the current SAI for the
Trust is available.
3.3. The Trust shall provide the Company with information regarding the
Trust's expenses, which information may include a table of fees and related
narrative disclosure for use in any prospectus or other descriptive document
relating to a Contract. The Company agrees that it will use such information
substantially in the form provided. The Company shall provide prior written
notice of any proposed modification of such information, which notice will
describe the manner in which the Company proposes to modify the information, and
agrees that it may not modify such information in any way without the prior
consent of the Trust, which consent shall not be unreasonably withheld.
3.4. The Trust will pay or cause to be paid the expenses associated
with text composition, printing, mailing, distributing, and tabulation of proxy
statements and voting instruction solicitation materials to Contract owners with
respect to proxies related to the Trust, consistent with applicable provisions
of the 1940 Act.
3.5. So long as, and to the extent the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable contract owners,
or to the extent otherwise required by law, the Company shall provide a list of
Contract owners with value allocated to a Designated Portfolio as of the record
date to the Trust or its agent in order to facilitate the Trust's solicitation
of voting instructions from Contract owners on behalf of the Company. The
Company shall also provide such other information to the Trust as is reasonably
necessary in order for the Trust to properly tabulate votes for Trust initiated
proxies. The Company reserves the right to vote Trust shares held in its general
account in its own right, to the extent permitted by applicable laws.
ARTICLE IV. Sales Material and Information
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4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material that the Company develops and in which the Trust (or a Designated
Portfolio thereof) or the Underwriter is named. No such material shall be used
until approved by the Trust or its designee, and the Trust will use its best
efforts for it or its designee to review such sales literature or promotional
material within five (5) Business Days after receipt of such material. Materials
not approved or disapproved within (5) Business Days shall be deemed approved.
The Trust or its designee reserves the right to reasonably object to the
continued use of any such sales literature or other promotional material in
which the Trust (or a Designated Portfolio thereof) or the Underwriter is named,
and no such material shall be used if the Trust or its designee so objects.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
the Underwriter in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
prospectus or SAI for the Trust shares, as such registration statement and
prospectus or SAI may be amended or supplemented from time to time, or in
reports or proxy statements for the Trust, or in sales literature or other
promotional material approved by the Trust or its designee, except with the
permission of the Trust or its designee.
4.3. The Trust and theUnderwriter, or their designee, shall furnish, or
cause to be furnished, to the Company, each piece of sales literature or other
promotional material that it develops and in which the Company, and/or the
Account, is named. No such material shall be used until approved by the Company,
and the Company will use its best efforts to review such sales literature or
promotional material within five (5) Business Days after receipt of such
material. Materials not approved or disapproved within (5) Business Days shall
be deemed approved. The Company reserves the right to reasonably object to the
continued use of any such sales literature or other promotional material in
which the Company and/or its Account is named, and no such material shall be
used if the Company so objects.
4.4. The Trust shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account,
or the Contracts other than the information or representations contained in a
registration statement, prospectus (which shall include an offering memorandum,
if any, if the Contracts issued by the Company or interests therein are not
registered under the 1933 Act), or SAI for the Contracts, as such registration
statement, prospectus, or SAI may be amended or supplemented from time to time,
or in published reports for the Account which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company, except with
the permission of the Company.
4.5. The Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Designated Portfolios or their shares, promptly after the filing
of such document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Trust and the Underwriter any complaints received from the
Contract owners pertaining to the Trust or a Designated Portfolio.
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4.7. The Trust will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Designated Portfolio,
and of any material change in the Trust's registration statement, particularly
any change resulting in a change to the registration statement or prospectus for
any Account. The Trust will work with the Company to facilitate the solicitation
of proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Trust will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
ARTICLE V. Fees and Expenses
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Designated Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Trust may make payments to the Company or to the underwriter
for the Contracts if and in amounts agreed to by the Trust in writing.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares, preparation and filing of the Trust's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Trust's shares. The Trust shall
bear the expenses of distributing the Trust's proxy materials and reports to
existing Contract owners. The Trust shall also bear the expense of printing the
Trust's prospectus and annual and semi-annual reports which are delivered to
existing Contract owners with value allocated to one or more Designated
Portfolios (with respect to the expense of printing of prospectuses, the expense
shall be borne by the Trust regardless of whether such prospectuses are printed
by the Trust or the Company).
5.3. The Company shall bear the expense of distributing all
prospectuses and reports to shareholders (whether for existing Contract owners
or prospective Contract owners). The Company shall bear the expense of printing
copies of the prospectus for the Contracts for use with prospective Contract
owners. The Company shall bear the expenses incident to (including the costs of
printing) sales literature and other promotional material that the Company
develops and in which the Trust (or a Designated Portfolio thereof) is named.
ARTICLE VI. Qualification
The Trust represents and warrants that it is or will be qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code,") and that it will maintain such
qualification (under Subchapter M or any successor or similar provisions) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
ARTICLE VII. Indemnification
7.1. Indemnification by the Company
7.1(a). The Company agrees to indemnify and hold harmless each of
the Trust and the Underwriter and each of its trustees/directors and officers,
employees, and agents, and each
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person, if any, who controls the Trust or Underwriter within the meaning of
Section 15 of the 1933 Act or who is under common control with the Trust or the
Underwriter (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statements of any material fact contained in the
registration statement, prospectus (which shall include a written
description of a Contract that is not registered under the 1933 Act),
or SAI for the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Trust or
the Underwriter for use in the registration statement, prospectus or
SAI for the Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts, or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company (other than statements
or representations contained in the registration statement, prospectus,
SAI, or sales literature of the Trust not supplied by the Company or
persons under its control) or wrongful conduct of the Company or its
agents or persons under the Company's authorization or control, with
respect to the sale or distribution of the Contracts, or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, SAI, or sales literature of the Trust or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information furnished
to the Trust by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company
to provide the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company;
as limited by and in accordance with the provisions of Sections 7.1(b) and
7.1(c) hereof.
7.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
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7.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company 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 such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company 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.
7.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Trust shares or the Contracts or the
operation of the Trust.
7.2. Indemnification by the Underwriter
7.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers, employees and agents and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 7.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of theUnderwriter) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature of the
Trust (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Underwriter or Trust by or on behalf of the Company for use in the
registration statement, prospectus or SAI for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Trust or the Underwriter (other
than statements or representations contained in the registration
statement, prospectus, SAI or sales literature for the Contracts not
supplied by the Trust or the Underwriter) or wrongful conduct of the
Underwriter or the Trust with respect to the sale or distribution of
the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, SAI or sales literature
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covering the Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or omission was
made in reliance upon information furnished to the Company by or on
behalf of the Underwriter or the Trust; or
(iv) arise as a result of any failure by the Trust or the
Underwriter to provide the services and furnish the materials under the
terms of this Agreement (including a failure of the Trust, whether
unintentional or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by or on behalf of the Underwriter
or the Trust in this Agreement or arise out of or result from any other
material breach of this Agreement by or on behalf of the Underwriter or
the Trust;
as limited by and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
7.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
7.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter 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 such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter 's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter 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.
7.2(d). The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
7.3. Indemnification by the Trust
7.3(a). The Trust agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.3)
10
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, expenses, damages, liabilities
or expenses (or actions in respect thereof) or settlements, are related to the
operations of the Trust and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature of the
Trust (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Underwriter or Trust by or on behalf of the Company for use in the
registration statement, prospectus or SAI for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Trust or the Underwriter (other
than statements or representations contained in the registration
statement, prospectus, SAI or sales literature for the Contracts not
supplied by the Trust or the Underwriter) or wrongful conduct of the
Underwriter or the Trust with respect to the sale or distribution of
the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, SAI or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Underwriter
or the Trust; or
(iv) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith
or otherwise, to comply with the diversification and other
qualification requirements specified in Article VI of this Agreement);
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by or on behalf of the Trust in
this Agreement or arise out of or result from any other material breach
of this Agreement by or on behalf of the Trust;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof. The parties acknowledge that the Trust's indemnification
obligations under this Section 7.3 are subject to applicable law. The Company
agrees that, in the event an obligation to indemnify exists pursuant to Section
7.3 as well as Section 7.2 hereof, it will seek satisfaction under the
indemnification provisions of Section 7.2 before seeking indemnification under
this Section 7.3.
7.3(b). The Trust shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's
11
reckless disregard of obligations and duties under this Agreement or to the
Company or the Account, whichever is applicable.
7.3(c). The Trust shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party 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 such
Indemnified Party (or after such Indemnified Party 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 it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be entitled to
assume the defense thereof, with counsel reasonably 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 Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Trust 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.
7.3(d). The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceeding against it or any of its respective
officers or directors in connection with the Agreement, the issuance or sale of
the Contracts, the operation of the Account, or the sale or acquisition of
shares of the Trust.
7.4 Section 7 shall survive the termination of this
Agreement.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of Kansas,
without regard to the conflict of laws provisions thereof.
8.2. This Agreement shall be subject to the provisions of the
1933 and 1940 Acts as well as the Exchange Act of 1934, and the rules and
regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant, and the terms hereof shall
be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1. This Agreement shall continue in full force and
effect until the first to occur of:
(a) termination by any party, for any reason with respect
to some or all Designated Portfolios, by six (6)
months advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
other parties based upon the Company's determination
that shares of the Trust are not reasonably available
to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the
other parties in the event any of the Designated
Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal
law or such law precludes the use
12
of such shares as the underlying investment media of
the Contracts issued or to be issued by the Company;
or
(d) termination by the Trust or Underwriter in the event
that formal administrative proceedings are instituted
against the Company by the National Association of
Securities Dealers, Inc. (the "NASD"), the SEC, the
Insurance Commissioner or like official of any state
or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of
the Contracts, the operation of any Account, or the
purchase of the Designated Portfolios' shares;
provided, however, that the Trust or Underwriter
determines in its sole judgment exercised in good
faith, that any such administrative proceedings will
have a material adverse effect upon the ability of
the Company to perform its obligations under this
Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the
Trust or Underwriter by the SEC or any state
securities department or any other regulatory body;
provided, however, that the Company determines in its
sole judgment exercised in good faith, that any such
administrative proceedings will have a material
adverse effect upon the ability of the Trust or
Underwriter to perform its obligations under this
Agreement; or
(f) termination by the Company by written notice to the
other parties in the event that any Designated
Portfolio ceases to qualify as a regulated investment
company under Subchapter M of the Internal Revenue
Code of 1986, or if the Company reasonably believes
that any such Portfolio may fail to so qualify or
comply; or
(g) termination by either the Trust or the Underwriter by
written notice to the other parties, if either one or
both the Trust and the Underwriter, respectively,
shall determine, in their sole judgment exercised in
good faith, that the Company has suffered a material
adverse change in its business, operations, financial
condition, or prospects since the date of this
Agreement or is the subject of material adverse
publicity; or
(h) termination by the Company by written notice to the
other parties, if the Company shall determine, in its
sole judgment exercised in good faith, that the Trust
or the Underwriter has suffered a material adverse
change in its business, operations, financial
condition or prospects since the date of this
Agreement or is the subject of material adverse
publicity; or
(i) termination by the Company upon any substitution of
the shares of another investment company or series
thereof for shares of a Designated Portfolio of the
Trust in accordance with the terms of the Contracts,
provided that the Company has given at least 45 days
prior written notice to the Trust and Underwriter of
the date of substitution.
9.2. Notwithstanding any termination of this Agreement, the Trust and
the Underwriter shall, at the option of the Company, continue to make available
additional shares of the Trust pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Company seeks an order pursuant to Section 26(b) of the 1940 Act to permit the
substitution of other securities for the
13
shares of the Designated Portfolios. Specifically, the owners of the Existing
Contracts may be permitted to reallocate investments in the Trust, redeem
investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts (subject to any such
election by the Company).
9.3. Notwithstanding any termination of this Agreement, each party's
obligation under Article VII to indemnify the other parties shall survive.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Company: Security Benefit Life Insurance Company
Attention General Counsel
One Security Benefit Place
Topeka, Kansas 66636 - 0001
If to the Trust: Rydex Series Funds
Attention:
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
If to Underwriter: Rydex Distributors, Inc.
Attention:
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
ARTICLE XI. Miscellaneous
11.1. All persons dealing with the Trust must look solely to the
property of the respective Designated Portfolios listed on Schedule A hereto as
though each such Designated Portfolio had separately contracted with the Company
and the Underwriter for the enforcement of any claims against the Trust. The
parties agree that neither the Board, officers, agents or shareholders of the
Trust assume any personal liability or responsibility for obligations entered
into by or on behalf of the Trust.
11.2. Subject to the requirements of legal process and regulatory
authority, the Trust and the Underwriter shall treat as confidential the names
and addresses of the owners of the Contracts. Each party shall treat as
confidential all information reasonably identified as confidential in writing by
any other party hereto and, except as permitted by this Agreement, shall not
disclose, disseminate or utilize such information without the express written
consent of the affected party until such time as such information has come into
the public domain.
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
14
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Kansas Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable insurance
operations of the Company are being conducted in a manner consistent with the
Kansas insurance laws and regulations and any other applicable law or
regulations.
11.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
11.8 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
15
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative.
Security Benefit Life
Insurance Company By its authorized officer
By:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
Rydex Series Funds By its authorized officer
By:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
Rydex Distributors, Inc. By its authorized officer
By:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
16
July 1, 2003
SCHEDULE A
ACCOUNT(S) CONTRACT(S) DESIGNATED PORTFOLIO(S)
SBL VARIABLE ANNUITY SECURITY BENEFIT ADVISOR RYDEX SECTOR ROTATION FUND
ACCOUNT XIV VARIABLE ANNUITY
17
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT
This AMENDMENT is made and entered into as of the 14th day of
May, 2007, by and among SECURITY BENEFIT LIFE INSURANCE COMPANY (the "Company"),
a Kansas corporation, on its own behalf and on behalf of each separate account
of the Company identified in the Participation Agreement (as defined below),
RYDEX SERIES FUNDS (the "Trust"), a Delaware Business Trust and RYDEX
DISTRIBUTORS, INC. (the "Underwriter"), a Maryland corporation.
WHEREAS, the Company, the Trust and the Underwriter have entered into a
Participation Agreement dated as of July 1, 2003, as such agreement may be
amended from time to time (the "Participation Agreement"); and
WHEREAS, the Company, the Trust and the Underwriter wish to amend the
Participation Agreement in certain respects.
NOW, THEREFORE, in consideration of their mutual promises, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company, the Trust and the Underwriter agree to amend the
Participation Agreement as follows:
1. Schedule A of the Participation Agreement is deleted and
replaced in its entirety with the attached Schedule A.
2. Except as provided herein, the Participation Agreement
shall remain in full force and effect. This Amendment and the Participation
Agreement, as amended, constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and fully supersede any and all
prior agreements or understandings between the parties hereto pertaining to the
subject matter hereof. In the event of any conflict between the terms of this
Amendment and the Participation Agreement, the terms of this Amendment shall
control.
3. This Amendment may be amended only by written instrument
executed by each party hereto.
4. This Amendment shall be effective as of the date written
above.
[remainder of page intentionally left blank]
1
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative as of the date specified above.
SECURITY BENEFIT LIFE INSURANCE COMPANY
BY: /s/ Xxxxxx X. Xxxxx
-----------------------------------------------------
NAME: Xxxxxx X. Xxxxx
TITLE: Senior Vice President, Chief Marketing Officer
RYDEX SERIES FUNDS RYDEX DISTRIBUTORS, INC.
BY: /s/ Xxxx Xxxxxxxxxxx BY: /s/ Xxxx Xxxxxxxxxxx
------------------------------ ------------------------------
NAME: Xxxx Xxxxxxxxxxx NAME: Xxxx Xxxxxxxxxxx
TITLE: President TITLE: CEO
1
SCHEDULE A
ACCOUNTS - All Accounts of the Company, including, without limitation:
Variflex Separate Account
SBL Variable Annuity Account VIII
SBL Variable Annuity Account XIV
SBL Variable Annuity Account XVII
CONTRACTS - All Contracts of the Company, including without limitation:
Variflex Variable Annuity
VIVA Variable Annuity
PGA Variable Annuity
Variflex Extra Credit Variable Annuity
Variflex LS Variable Annuity
Variflex Signature Variable Annuity
AdvisorDesigns Variable Annuity
AdvanceDesigns Variable Annuity
SecureDesigns Variable Annuity
ClassicStrategies Variable Annuity
ThirdFed Variable Annuity
EliteDesigns Variable Annuity
FUNDS - All Funds of the Trust, including without limitation:
--------------------------------------------------------------------------------
FUND CUSIP #
--------------------------------------------------------------------------------
RVT CLS AdvisorOne Xxxxxxx 783555584
--------------------------------------------------------------------------------
RVT CLS AdvisorOne Berolina 783555378
--------------------------------------------------------------------------------
RVT CLS AdvisorOne Clermont 783555576
--------------------------------------------------------------------------------
Rydex VT Absolute Return Strategies 783555428
--------------------------------------------------------------------------------
Rydex VT Alternative Strategies Allocation 783555295
--------------------------------------------------------------------------------
Rydex VT Banking 783555881
--------------------------------------------------------------------------------
Rydex VT Basic Materials 783555873
--------------------------------------------------------------------------------
Rydex VT Biotechnology 783555865
--------------------------------------------------------------------------------
Rydex VT Commodities 783555436
--------------------------------------------------------------------------------
Rydex VT Consumer Products 783555857
--------------------------------------------------------------------------------
Rydex VT Dynamic Dow 783555477
--------------------------------------------------------------------------------
1
Rydex VT Dynamic OTC 783555659
--------------------------------------------------------------------------------
Rydex VT Dynamic Xxxxxxx 2000(R) 783555360
--------------------------------------------------------------------------------
Rydex VT Dynamic S&P 500 783555675
--------------------------------------------------------------------------------
Rydex VT Dynamic Strengthening Dollar 783555451
--------------------------------------------------------------------------------
Rydex VT Dynamic Weakening Dollar 783555444
--------------------------------------------------------------------------------
Rydex VT Electronics 783555840
--------------------------------------------------------------------------------
Rydex VT Energy 783555832
--------------------------------------------------------------------------------
Rydex VT Energy Services 783555824
--------------------------------------------------------------------------------
Rydex VT EP Aggressive 783555329
--------------------------------------------------------------------------------
Rydex VT EP Conservative 783555345
--------------------------------------------------------------------------------
Rydex VT EP Moderate 783555337
--------------------------------------------------------------------------------
Rydex VT Europe Advantage 783555725
--------------------------------------------------------------------------------
Rydex VT Financial Services 783555816
--------------------------------------------------------------------------------
Rydex VT Government Long Bond Advantage 783555600
--------------------------------------------------------------------------------
Rydex VT Health Care 783555790
--------------------------------------------------------------------------------
Rydex VT Hedged Equity 783555410
--------------------------------------------------------------------------------
Rydex VT High Yield Strategy 783555287
--------------------------------------------------------------------------------
Rydex VT International Rotation 783555311
--------------------------------------------------------------------------------
Rydex VT Internet 783555691
--------------------------------------------------------------------------------
Rydex VT Inverse Dynamic Dow 783555469
--------------------------------------------------------------------------------
Rydex VT Inverse Government Long Bond 783555709
--------------------------------------------------------------------------------
Rydex VT Inverse High Yield Strategy 783555279
--------------------------------------------------------------------------------
Rydex VT Inverse Mid Cap 783555543
--------------------------------------------------------------------------------
Rydex VT Inverse OTC 783555402
--------------------------------------------------------------------------------
Rydex VT Inverse Xxxxxxx 2000(R) 783555550
--------------------------------------------------------------------------------
Rydex VT Inverse S&P 500 783555204
--------------------------------------------------------------------------------
Rydex VT Japan Advantage 783555717
--------------------------------------------------------------------------------
Rydex VT Large Cap Growth 783555493
--------------------------------------------------------------------------------
2
Rydex VT Large Cap Value 783555485
--------------------------------------------------------------------------------
Rydex VT Leisure 783555782
--------------------------------------------------------------------------------
Rydex VT Mid Cap Advantage 783555626
--------------------------------------------------------------------------------
Rydex VT Mid Cap Growth 783555568
--------------------------------------------------------------------------------
Rydex VT Mid Cap Value 783555519
--------------------------------------------------------------------------------
Rydex VT Multi-Cap Core Equity 783555386
--------------------------------------------------------------------------------
Rydex VT Nova 783555105
--------------------------------------------------------------------------------
Rydex VT OTC 783555303
--------------------------------------------------------------------------------
Rydex VT Precious Metals 783555501
--------------------------------------------------------------------------------
Rydex VT Real Estate 783555618
--------------------------------------------------------------------------------
Rydex VT Retailing 783555774
--------------------------------------------------------------------------------
Rydex VT Xxxxxxx 2000(R) Advantage 783555634
--------------------------------------------------------------------------------
Rydex VT Sector Rotation 783555592
--------------------------------------------------------------------------------
Rydex VT Small Cap Growth 783555535
--------------------------------------------------------------------------------
Rydex VT Small Cap Value 783555527
--------------------------------------------------------------------------------
Rydex VT Technology 783555766
--------------------------------------------------------------------------------
Rydex VT Telecommunications 783555758
--------------------------------------------------------------------------------
Rydex VT Transportation 783555741
--------------------------------------------------------------------------------
Rydex VT U.S. Government Money Market 783555808
--------------------------------------------------------------------------------
Rydex VT Utilities 783555683
--------------------------------------------------------------------------------
Date: March 20, 2008
3
