CUSTODY AGREEMENT
Agreement made as of the day of , 1999, between Rydex
Dynamic Funds, (the "Trust"), a business trust organized under the laws
of Delaware and having its office at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxxx, 00000 acting for and on behalf of all mutual fund
portfolios as are currently authorized and issued by the Trust or may be
authorized and issued by the Trust subsequent to the date of this Agreement
(the "Funds"), which are operated and maintained by the Trust for the benefit
of the holders of shares of the Funds, and Firstar Bank, N.A. (the
"Custodian"), a national banking association having its principal office and
place of business at Firstar Bank Center, 000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx
00000, which Agreement provides for the furnishing of custodian services to
the Funds.
WITNESSETH:
that for and in consideration of the mutual promises hereinafter set forth the
Trust, on behalf of the Funds, and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Authorized Person" shall be deemed to include the controller,
Assistant Controller, Senior Portfolio Accountant, and Portfolio Accountant, or
any other person, whether or not any such person is an officer or employee of
the trust, duly authorized by the Board of Trustees of the Trust to give Oral
Instructions on behalf of the funds and listed in the Certificate annexed hereto
as Appendix A or such other Certificate as may be received by the Custodian from
time to time, subject in each case to any limitations on the authority of such
person as set forth in appendix A or any such Certificate.
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2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees, provided the Custodian has received a
certified copy of a resolution of Board of Trustees of the Trust specifically
approving deposits in the Book-Entry System.
3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is signed on behalf of the funds by an Officer of the Trust
and is actually received by the Custodian.
4. "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person or clearing agency authorized to act
as a depository under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, provided that the Custodian has received
a certified copy of a resolution of the board of /Trustees of the Trust
specifically approving such other person or clearing agency as a depository.
5. "Dividend and Transfer Agent" shall mean the dividend and
transfer agent active, from time to time, in such capacity pursuant to a written
agreement with the Fund, changes in which the Trust shall immediately report to
the Custodian writing.
6. "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to principal and/or
interest by the government of the United States or agencies or instrumentalities
thereof, commercial paper, obligations (including certificates of deposit,
bankers' acceptances, repurchase and reverse repurchase agreements with respect
to the same) and bank time deposits of domestic banks that are members of
Federal Deposit Insurance Trust, and short-term corporate obligations where the
purchase and sale of such securities normally require settlement in federal
funds or their equivalent on the same day or such purchase or sale.
7. "Officers" shall be deemed to include the controller,
Assistant controller, Senior Portfolio Accountant, and Portfolio Accountant of
the Trust listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian form time to time.
8. "Oral Instructions" shall mean oral instructions actually
received by the Custodian from an Authorized Person (or from a person which the
Custodian reasonably believes in good faith to be an Authorized Person) and
confirmed by Written Instructions from Authorized Persons in such manner so that
such Written Instructions are received by the Custodian on the next business
day.
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9. "Prospectus" or "Prospectuses" shall mean the Fund's currently
effective prospectuses and statements of additional information, as filed with
and declared effective by the Securities and Exchange Commission.
10. "Security or Securities" shall mean Money Market Securities,
common or preferred stocks, options, futures, gold, silver, bonds, debentures,
corporate debt securities, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase or subscribe for the same, or evidencing or representing any
other rights or interest therein, or any property assets.
11. "Written Instructions" shall mean communication actually
received by the custodian from one Authorized Person or from one person which
the Custodian reasonably believes in good faith to be an Authorized Person in
writing, telex or any other data transmission system whereby the receiver of
such communication is able to verify by codes or otherwise with a reasonable
degree of certainty the authenticity of the senders of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Trust, acting for and on behalf of the funds, hereby
constitutes and appoints the Custodian as custodian of all the Securities and
monies at any time owned by the Funds during the period this Agreement ("Fund
Assets").
2. The Custodian hereby accepts appointment as such Custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
DOCUMENTS TO BE FURNISHED BY THE TRUST
The Trust hereby agrees to furnish to the Custodian the following
documents:
1. A copy of its Declaration of Trust (the "Declaration of
Trust") certified by its Secretary.
2. A copy of its By-Laws certified by its Secretary.
3. A copy of the resolution of its Board of Trustees appointing
the custodian certified by its Secretary.
4. A copy of the most recent Prospectuses of the Trust.
5. A Certificate of the President and Secretary setting forth the
names and signatures of the present Officers of the Trust.
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ARTICLE IV
CUSTODY OF CASH AND SECURITIES
1. The Trust will deliver or cause to be delivered to the
Custodian all Funds Assets, including cash received for the issuance of its
shares, at any time during the period of this Agreement. The Custodian will not
be responsible for such fund Assets until actually received by it. Upon such
receipt, the Custodian shall hold in safekeeping and physically segregate at all
times from the property of any other persons, firms or corporations all Fund
Assets received by it from or for the account of the Funds. Any credits from
third parties that are made to the Funds' account by the Custodian may be
reversed if the monies for them is not finally collected within 90 days from the
day the credits are made. The Custodian is hereby authorized by the Trust,
acting on behalf of the Funds, to actually deposit any fund Assets in the
Book-Entry System or in a Depository, provided, however, that the custodian
shall always be accountable to the Trust for the Fund Assets so deposited. Funds
Assets deposited in the Book-Entry System or the Depository will be represented
in accounts which include only assets held by the custodian for customers,
including but not limited to accounts in which the Custodian acts in a fiduciary
or representative capacity.
2. The Custodian shall credit to a separate account or accounts
in the name of each respective Fund all monies received by it for the account of
such Fund, and such disburse the same only:
(a) In payment for Securities purchases for the account of such
Fund, as provided in Article V;
(b) In payment of dividends or distributions, as provided in
Article VI hereof;
(c) In payment of original issue or other taxes, as provided in
Article VII hereof;
(d) In payment for shares of such Fund redeemed by it, as provided
in Article VII hereof;
(e) Pursuant to Certificates (i) directing payment and setting
forth the name and address of the person to whom the payment
is to be made, the amount of such payment and the purpose for
which payment is to be made (the Custodian not being required
to question such direction) or (ii) if reserve requirements
are established for the Fund by law or by valid regulation,
directing the custodian to deposit a specified amount of
collected funds in the form of U.S. dollars at a specified
Federal Reserve bank and stating the purpose of such deposit;
or
(f) In reimbursement of the expenses and liabilities of the
Custodian, as provided in paragraph 10 of Article IV hereof.
3. Promptly after the close of business on each day the funds are
open and valuing their portfolios, the Custodian shall furnish the Trust with a
detailed statement of monies held for the Fund under this Agreement and with
confirmations and a summary of all transfers to or from the account of the Funds
during said day. Where Securities are transferred to the account of the
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Fund without physical delivery, the Custodian shall also identify as belonging
to the Funds a quantity of Securities in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry system or the Depository. At
least monthly and form time to time, the Custodian shall furnish the Trust with
a detailed statement of the Securities held for the Funds under this Agreement.
4. All securities held for the Funds, which are issued or
issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held for the Funds may be registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or their nominee or
nominees. The Trust agrees to furnish to the Custodian appropriate instruments
to enable the Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of the Book-Entry
System or the Depository, any Securities which it may hold for the account of
the Funds and which may from time to time be registered in the name of the
Funds. The Custodian shall hold all such Securities which are not held in the
Book-Entry System by the Depository or a Sub-Custodian in a separate account or
accounts in the name of the Funds segregated at all times from those of any
other fund maintained and operated by the Trust and from those of any other
person or persons.
5. Unless otherwise instructed to the contrary by a Certificate,
the Custodian shall with respect to all Securities held for the Funds in
accordance with this Agreement:
(a) Collect all income due or payable to the Funds with
respect to each fund's Assets;
(b) Present for payment and collect the amount payable
upon all Securities which may mature or be called,
redeemed, or retired, or otherwise become payable;
(c) Surrender Securities in temporary form for definitive
Securities;
(d) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income
tax laws or the laws or regulations of any other
taxing authority, including any foreign taxing
authority, now or hereafter in effect; and
(e) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein
deposited, for the account of the Funds all rights
and similar securities issued with respect to any
Securities held by the Custodian hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian
directly or through the use of the Book-Entry System or the Depository shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents,
authorizations, and any other instruments
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whereby the authority or the fund as owner of any
Securities may be exercised;
(b) Deliver any Securities held for the funds in exchange
for other Securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise
of any conversion privilege;
(c) Deliver any Securities held for the account of the
Funds to any protective committee, reorganization,
refinancing, merger, consolidation, recapitalization
or sale of assets of any corporation, and received
and hold under the terms of this Agreement such
certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to
evidence such delivery; and
(d) Make such transfers or exchanges of the assets of the
Funds and take such other steps as shall be stated in
said Certificate to be for the purpose of
effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Funds.
7. The Custodian shall promptly deliver to the Trust all notices,
proxy material and executed but unvoted proxies pertaining to shareholder
meetings of Securities held by the Funds. The Custodian shall not vote or
authorize the voting of any Securities or give any consent, waiver or approval
with respect thereto unless so directed by a Certificate or Written Instruction.
8. The Custodian shall promptly deliver to the Trust all material
received by the Custodian and pertaining to Securities held by the Funds with
respect to tender or exchange offers, calls for redemption or purchase,
expiration of rights, name changes, stock splits and stock dividends, or any
other activity involving rights in such Securities.
ARTICLE V
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
1. Promptly after each purchase of Securities by the Funds, the
Trust shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate or Written
Instructions, and (ii) with respect to each purchase of Money Market Securities,
Written Instructions, a Certificate or Oral Instructions, specifying with
respect to each such purchase: (a) the name of the issuer and the title of the
Securities, (b) the principal amount purchased and accrued interest, if any, (c)
the date of purchase and settlement, (d) the purchase price per unit, (e) the
total amount payable upon such purchase and (f) the name of the person from whom
or the broker through whom the purchase was made. The Custodian shall upon
receipt of Securities purchased by or for the funds, pay out of the monies held
for the account of the Funds the total amount payable to the person from whom or
the broker through
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whom the purchase was made, provided that the same conforms to the total amount
payable as set forth in such Certificate, Written Instructions or Oral
Instructions.
2. Promptly after each sale of Securities by the Trust for the
account of the Fund, the Trust shall deliver to the Custodian (i) with
respect to each sale of Securities which are not Money Market Securities, a
Certificate or Written Instructions, and (ii) with respect to each sale of
Money Market Securities, Written Instructions, a Certificate or Oral
Instructions, specifying with respect to each such sale: (a) the name of the
issuer and the title of the Security, (b) the principal amount sold, and
accrued interest, if any, (c) the date of sale, (d) the sale price per unit,
(e) the total amount payable to the Funds upon such sale and (f) the name of
the broker through whom or the person to whom the sale was made. The
Custodian shall deliver the Securities upon receipt of the total amount
payable to the Funds upon such sale, provided that the same conforms to the
total amount payable as set forth in such Certificate, Written Instructions
or Oral Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
3. Promptly after the time as of which the Trust, on behalf of a
Fund, either -
(a) writes an option on Securities or writes a covered
put option in respect of a Security, or
(b) notifies the Custodian that its obligations in
respect of any put or call option, as described in
the Trust's Prospectus, require that the Fund deposit
Securities or additional Securities with the
Custodian, specifying the type and value of
Securities required to be so deposited, or
(c) notifies the Custodian that its obligations in
respect of any other Security, as described in each
Fund's respective Prospectus, require that the Fund
deposit Securities or additional Securities with the
Custodian, specifying the type and value of
Securities required to be so deposited, the Custodian
will cause to be segregated or identified as
deposited, pursuant to the Fund's obligations as set
forth in such Prospectus, Securities of such kinds
and having such aggregate values as are required to
meet the Fund's obligations in respect thereof. The
Trust will provide to the Custodian, as of the end of
each trading day, the market value of each Fund's
option liability if any and the market value of its
portfolio of common stocks.
4. On contractual settlement date, the account of each respective
Fund will be charged for all purchases settling on that day, regardless of
whether or not delivery is made. On contractual settlement date, sale proceeds
will likewise be credited to the account of such fund irrespective of delivery.
In the case of "sale fails", the Custodian may request the assistance
of the Funds in making delivery of the failed Security.
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ARTICLE VI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Trust shall furnish to the Custodian a copy of the
resolution of the Board of Trustees, certified by the Secretary, either (i)
setting forth the date of the declaration of any dividend or distribution in
respect of shares of the Funds, the date of payment thereof, the record date as
of which Funds shareholders entitled to payment shall be determined, the amount
payable per share to Funds shareholders of record as of that date and the total
amount to be paid by the Dividend and Transfer Agent of the Funds on the payment
date, or (ii) authorizing the declaration of dividends and distributions in
respect of shares of the Funds on a daily basis and authorizing the Custodian to
rely on Written Instructions or a Certificate setting forth the date of the
declaration of any such dividend or distribution, the date of payment thereof,
the record date as of which Funds shareholders entitled to payment shall be
determined, the amount payable per share to Funds shareholders of record as of
that date and the total amount to be paid by the Dividend and Transfer Agent on
the payment date.
2. Upon the payment date specified in such resolution, Written
Instructions or Certificate, as the case may be, the Custodian shall arrange for
such payments to be made by the Dividend and Transfer Agent out of monies held
for the account of the Funds.
ARTICLE VII
SALE AND REDEMPTION OF SHARES OF THE FUND
1. The Custodian shall receive and credit to the account of each
Fund such payments for shares of such Fund issued or sold from time to time as
are received from the distributor for the Fund's shares, from the Dividend and
Transfer Agent of the Fund, or from the Trust.
2. Upon receipt of Written Instructions, the Custodian shall
arrange for payment of redemption proceeds to be made by the Dividend and
Transfer Agent out of the monies held fro the account of the respective Fund in
the total amount specified in the Written Instructions.
3. Notwithstanding the above provisions regarding the redemption
of any shares of the Fund, whenever shares of the Funds are redeemed pursuant to
any check redemption privilege which may from time to time be offered by the
Funds, the Custodian, unless otherwise subsequently instructed by Written
Instructions shall, upon receipt of any Written Instructions setting forth that
the redemption is in good form for redemption in accordance with the check
redemption procedure, honor the check presented as part of such check redemption
privilege out of the money held in the account of the Funds for such purposes.
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ARTICLE VII
INDEBTEDNESS
In connection with any borrowings, the Trust, on behalf of the Funds,
will cause to be delivered to the Custodian by a bank or broker (including the
Custodian, if the borrowing is from the Custodian), requiring Securities as
collateral for such borrowings, a notice or undertaking in the form currently
employed by any such bank or broker setting forth the amount which such bank or
broker will loan to the Funds against delivery of a stated amount of collateral.
The Trust shall promptly deliver to the Custodian a Certificate specifying with
respect to each such borrowing: (a) the name of the bank or broker, (b) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Trust, acting on
behalf of the Fund, or other loan agreement, (c) the date and time, if known, on
which is to be entered into, (d) the date on which the loan becomes due and
payable, (e) the total amount payable to the Fund on the borrowing date, (f) the
market value of Securities collateralizing the loan, including the name of the
issuer, the title and the number of shares or the principal amount of any
particular Securities and (g) a statement that such loan is in conformance with
the Investment Company of 1940 and the Fund's then current Prospectus. The
Custodian shall deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any, against delivery
by the lending bank or broker of the total amount of the loan payable provided
that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank or broker,
keep such collateral in its possession, but such collateral shall be subject to
all rights therein given the lending bank or broker, by virtue of any promissory
note or loan agreement. The Custodian shall deliver in the manner directed by
the Trust from time to time such Securities as additional collateral as may be
specified in a Certificate to collateralized further any transaction described
in this paragraph. The Trust shall cause all Securities released from collateral
status to be returned directly to the Custodian and the Custodian shall receive
from time to time such return of collateral as may be tendered to it. In the
event that the Trust fails to specify in a Certificate or Written Instructions
the name of the issuer, the title and number of shares or the principal amount
of any particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities. The
Custodian may require such reasonable conditions with respect to such collateral
and its dealings with third-partly lenders as it may deem appropriate.
ARTICLE IX
CONCERNING THE CUSTODIAN
1. Except as otherwise provided herein, the Custodian shall not
be liable for any loss or damage, including counsel fees, resulting from its
action or omission to act or otherwise, except for any such loss or damage
arising out of its negligence or willful misconduct. The Trust, on behalf of the
Funds and only from Fund Assets (or insurance purchased by the Trust
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with respect to its liabilities on behalf of the Fund hereunder), shall defend,
indemnify and hold harmless the Custodian and its Trustees, Officers, Employees
and Agents with respect to any loss, claim, liability or cost (including
reasonable attorneys' fees) arising or alleged to arise from or relating to the
Trust's duties with respect to the Funds hereunder or any other action or
inaction of the Trust or its Trustees, Officers, Employees or Agents as to the
Funds, except such as may arise from the negligent action, omission or willful
misconduct of the Custodian, its Trustees, Officers, Employees or Agents. The
Custodian shall defend, indemnify and hold harmless the Trust and its Trustees,
Officers, Employees or Agents with respect to any loss, claim, liability or cost
(including reasonable attorneys' fees) arising or alleged to arise from or
relating to the Custodian's duties with respect to the Funds hereunder or any
other action of inaction of the Custodian or its Trustees, Officers, Employees,
Agents, nominees or Sub-Custodians as to the Funds, except such as may arise
from the negligent action, omission or willful misconduct of the Trust, its
Trustees, Officers, Employees or Agents. The Custodian may, with respect to
questions of law apply for and obtain the advice and opinion of counsel to the
Trust at the expense of the Funds, or of its own counsel at its own expense, and
shall be fully protected with respect to anything done or omitted by it in good
faith in conformity with the advice or opinion of counsel to the Trust, and
shall be similarly protected with respect to anything done or omitted by it in
good faith in conformity with advice or opinion of its counsel, unless counsel
to the Funds shall, within a reasonable time after being notified of legal
advice received by the Custodian, have a differing interpretation of such
question of law. The Custodian shall be liable to the Trust for any proximate
loss or damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence, misfeasance or misconduct on the part of
the Custodian or any of its employees, agents, nominees or Sub-Custodians but
not for any special, incidental, consequential, or punitive damages; provided,
however, that nothing contained herein shall preclude recovery by the Trust, on
behalf of the Funds, of principal and of interest to the date of recovery on,
Securities incorrectly omitted from the Fund's account or penalties imposed on
the Trust, in connection with the Funds, for any failures to deliver Securities.
In any case in which one party hereto may be asked to indemnify the
other or hold the other harmless, the party from whom indemnification is sought
(the "Indemnification Party") shall be advised of all pertinent facts concerning
the situation in question, and the party claiming a right to indemnification
(the "Indemnified Party") will use reasonable care to identify and notify the
Indemnifying Party promptly concerning any situation which presents or appears
to present a claim for indemnification against the Indemnifying Party. The
Indemnifying Party shall have the option to defend the Indemnified Party against
any claim which may be the subject of the indemnification, and in the event the
Indemnifying Party so elects, such defense shall be conducted by counsel chosen
by the Indemnifying Party and satisfactory to the Indemnified Party and the
Indemnifying Party will so notify the Indemnified Party and thereupon such
Indemnifying Party shall take over the complete defense of the claim and the
Indemnifying Party shall sustain no further legal or other expenses in such
situation for which indemnification has been sought under this paragraph, except
the expenses of any additional counsel retained by the Indemnified Party. In no
case shall any party claiming the right to indemnification confess any
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claim or make any compromise in any case in which the other party has been asked
to indemnify such party (unless such confession or compromise is made with such
other party's prior written consent).
The obligations of the parties hereto under this paragraph shall
survive the termination of this Agreement.
2. Without limiting the generality of the foregoing, the
Custodian, acting in the capacity of Custodian hereunder, shall be under no
obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased
by or for the account of the Funds, the legality of
the purchase thereof, or the propriety of the amount
paid therefor;
(b) The legality of the sale of any Securities by or for
the account of the Funds, or the propriety of the
amount for which the same are sold;
(c) The legality of the issue or sale of any shares of
the Funds, or the sufficiency of the amount to be
received therefor;
(d) The legality of the redemption of any shares of the
Funds, or the propriety of the amount to be paid,
therefor;
(e) The legality of the declaration or payment of any
dividend by the Trust in respect of shares of the
Funds;
(f) The legality of any borrowing by the Trust, on behalf
of the Funds, using Securities as collateral;
(g) The sufficiency of any deposit made pursuant to a
Certificate described in clause (ii) of paragraph
2(e) of Article IV hereof.
3. The Custodian shall not be liable for any money or collected
funds in U.S. dollars deposited in a Federal Reserve Bank in accordance with a
Certificate described in clause (ii) of paragraph 2(e) of Article IV hereof, nor
be liable for or considered to be the Custodian of any money, whether or not
represented by any check, draft, or other instrument for the payment of money,
received by it on behalf of the Funds until the Custodian actually receives and
collects such money directly or by the final crediting of the account
representing the Fund's interest at the Book-Entry System or Depository.
4. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Funds from the
Dividend and Transfer Agent of the Funds nor take any action to effect payment
or distribution by the Dividend and Transfer Agent of the Funds of any amount
paid by the Custodian to the Dividend and Transfer Agent of the Funds in
accordance with this Agreement.
5. Income due or payable to the Funds with respect to Funds
Assets will be credited to the account of the Funds as follows:
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(a) Dividends will be credited on the first business day
following payable date irrespective of collection.
(b) Interest on fixed rate municipal bonds and debt
securities issued or guaranteed as to principal
and/or interest by the government of the United
States or agencies or instrumentalities thereof
(excluding securities issued by the Government
National Mortgage Association) will be credited on
payable date irrespective of collection.
(c) Interest on fixed rate corporate debt securities will
be credited on the first business day following
payable date irrespective of collection.
6. Notwithstanding paragraph 5 of this Article IX, the Custodian
shall not be under any duty or obligation to take action to effect collection of
any amount, if the Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation, unless and until (i)
it shall be directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction of reimbursement of its costs and expenses in
connection with any such action or, at the Custodian's option, prepayment.
7. The Custodian may appoint one or more financial or banking
institutions, as Depository or Depositories or as Sub-Custodian or
Sub-Custodians, including, but not limited to, the Fund, upon terms and
conditions approved in a Certificate. Current Depository(s) and Sub-
Custodian(s) are noted in Appendix B The Custodian shall not be relieved of any
obligation or liability under this Agreement in connection with the appointment
or activities of such Depositories or Sub-Custodians.
8. The Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or held by it for the
account of the Funds are such as properly may be held by the Funds under the
provisions of the Declarations of Trust and the Trust's ByLaws.
9. The Custodian shall treat all records and other information
relating to the Trust, the Funds and the Funds' Assets as confidential and shall
not disclose any such records or information to any other person unless (a) the
Trust shall have consented thereto in writing or (b) such disclosure is
compelled by law.
10. The Custodian shall be entitled to receive and the Trust
agrees to pay to the Custodian, for the Fund's account from Fund Assets only,
such compensation as shall be determined pursuant to Appendix C attached hereto,
as shall be determined pursuant to amendments to such Appendix approved by the
Custodian and the Trust, on behalf of the Funds. The Custodian shall be entitled
to charge against any money held by it for the accounts of the Funds the amount
of any loss, damage, liability or expense, including counsel fees for which it
shall be entitled to reimbursement under the provisions of this Agreement as
determined by agreement of the Custodian and the Trust or by the final order of
any court or arbitrator having jurisdiction and as to which all rights of appeal
shall have expired. The expenses which the
12
custodian may charge against the accounts of the Funds include, but are not
limited to, the expenses of Sub-Custodians incurred in settling transactions
involving the purchase and sale of Securities of the Fund.
11. The Custodian shall be entitled to rely upon any Certificate
if such reliance is made in good faith. The Custodian shall be entitled to rely
upon any Oral Instructions and any Written Instructions actually received by the
Custodian pursuant to Article IV and V hereof. The Trust agrees to forward to
the Custodian Written Instructions from Authorized Persons confirming Oral
Instructions in such manner so that such Written Instructions are received by
the Custodian, whether by hand delivery, telex or otherwise, on the first
business day following the day on which such Oral Instructions are given to the
Custodian. The Trust agrees that the fact that such confirming instructions are
not received by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized by the
Trust. The Trust agrees that the Custodian shall incur no liability to the Funds
in acting upon Oral Instructions given to the Custodian hereunder concerning
such transactions.
12. The Custodian will (a) set up and maintain proper books of
account and complete records of all transactions in the amounts maintained by
the Custodian hereunder in such a manner as will meet the obligations of the
Funds under the Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31 a-1 and 31 a-2 thereunder, and (b) preserver for
the periods prescribed by applicable Federal statute or regulation all records
required to be so preserved. The books and records of the Custodian shall be
open to inspection and audit at reasonable times and with prior notice by
Officers and auditors employed by the Trust.
13. The Custodian and its Sub-Custodians shall promptly send to
the Trust, for the account of the Funds, any report received on the systems of
internal accounting control of the Book-Entry System or the Depository and with
such reports on their own systems of internal accounting control as the Trust
may reasonably request from time to time.
14. The Custodian performs only the services of a custodian and
shall have no responsibility for the management, investment or reinvestment of
the Securities from time to time owned by the Funds. The Custodian is not a
selling agent for shares of the Funds and performance of its duties as a
custodial agent shall not be deemed to be a recommendation to the Custodian's
depositors or others of shares of the Funds as an investment.
ARTICLE X
TERMINATION
1. Either of the parties hereto may terminate this Agreement for
any reason by giving to the other party a notice in writing specifying the date
of such termination, which shall be not less than ninety (90) days after the
date of giving of such notice. If such notice is given by
13
the Trust, on behalf of the Fund, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Trust, certified by the Secretary or
any Assistant Secretary, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus and undivided
profits, or any other entity satisfying the requirements of the 1940 Act. In the
event such notice is given by the Custodian, the Trust shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of its Board
of Trustees, certified by the Secretary, designating a successor custodian or
custodians to act on behalf of the Funds. In the absence of such designation by
the Trust, the Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $2,000,000 aggregate capital,
surplus, and undivided profits, or any other entity satisfying the requirements
of the 1940 Act. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian, provided that it has received a notice of
acceptance by the successor custodian, shall deliver, on that date, directly to
the successor custodian all Securities and monies then owned by the Funds and
held by it as Custodian. Upon termination of this agreement, the Trust shall pay
to the Custodian on behalf of the Funds such compensation as may be due as of
the date as such termination. The Trust agrees on behalf of the Funds that the
Custodian shall be reimbursed for its reasonable costs in connection with the
termination of this Agreement.
2. If a successor custodian is not designated by the Trust, on
behalf of the Funds, or by the Custodian in accordance with the preceding
paragraph, or the designated successor cannot or will not serve, the Trust shall
upon delivery by the Custodian to the Trust of all Securities (other than
Securities held in the Book-Entry System which cannot be delivered to the Trust)
and monies then owned by the Funds, other than monies deposited with a Federal
Reserve Bank pursuant to a Certificate described in clause (ii) of paragraph
2(e) of Article IV, be deemed to be the custodian for the Funds, and the
Custodian shall thereby be relieved of all duties and responsibilities pursuant
to this Agreement, other than the duty with respect to Securities held in the
Book-Entry System which cannot be delivered to the Trust to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XI
MISCELLANEOUS
1. Appendix A sets forth the names and the signatures of all
Authorized Persons. The Trust agrees to furnish to the Custodian, on behalf of
the Funds, a new Appendix A in form similar to the attached Appendix A, if any
present Authorized Person ceases to be an Authorized Person or if any other
additional Authorized Persons are elected or appointed. Until such new Appendix
A shall be received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon Oral Instructions or signatures of the present
Authorized Persons as set forth in the last delivered Appendix A.
14
2. No recourse under any obligation of this Agreement or for any
claim based thereon shall be had against any organizer, shareholder, Officer,
Trustee, past, present or future as such, of the Trust or of any such
predecessor or successor, whether by virtue of any constitution, statute or rule
of law or equity, or by the enforcement of any assessment or penalty or
otherwise; it being expressly agreed and understood that this Agreement and the
obligations thereunder are enforceable solely against Fund Assets, and that no
such personal liability whatever shall attach to, or is or shall be incurred by,
the organizers, shareholders, Officers, Trustees of the Trust or of any
predecessor or successor, or any of them as such, because of the obligations
contained in this Agreement or implied therefrom and that any and all such
liability is hereby expressly waived and released by the Custodian as a
condition of, and as a consideration for, the execution of this Agreement.
3. The obligations set forth in this Agreement as having been
made by the Trust have been made by the Trustees of the Trust, acting as such
Trustees for and on behalf of the Funds, pursuant to the authority vested in
them under the laws of the State of Delaware, the Declaration of Trust and the
By-Laws of the Trust. This Agreement has been executed by Officers of the Trust
as Officers, and not individually, and the obligations contained herein are not
binding upon any of the Trustees, Officers, Agents or holders of shares,
personally, but bind only the Trust and then only to the extent of Fund Assets.
4. Such provisions of the Prospectuses of the Funds and any other
documents (including advertising material) specifically mention the Custodian
(other than merely by name and address) shall be reviewed with the Custodian by
the Trust.
5. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at its offices
at Firstar Bank Center, 000 Xxxxxx Xxxxxx, X.X. 0000, Xxxxxxxxxx, Xxxx 00000,
attention: Mutual Fund Custody Department, or at such other place as the
Custodian may from time to time designate in writing.
6. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust shall be sufficiently given
when delivered to the Trust or on the second business day following the time
such notice is deposited in the U.S. mail postage prepaid and addressed to the
Trust at its office at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx
00000 or at such other place as the Trust may from time to time designate in
writing.
7. This Agreement with the exception of Appendices A & B may not
be amended or modified in any manner except by a written agreement executed by
both parties with the same formality as this Agreement, and authorized and
approved by a resolution of the Board of Trustees of the Trust.
15
8. This Agreement shall extent to and 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 or by the Custodian,
and not attempted assignment by the Trust or the Custodian shall be effective
without the written consent of the other party hereto.
9. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized as of the day
and first year first above written.
ATTEST: The Rydex Dynamic Funds
BY:
-------------------------- ------------------------------
ATTEST: Firstar Bank, N.A.
BY:
-------------------------- ------------------------------
16
APPENDIX A
AUTHORIZED PERSONS SPECIMEN SIGNATURES
Assistant Controller - Fund Administration: Xxxxx Xxxxxx ___________________
Assistant Controller - Accounting Operations: Xxxxx Xxxxxx ___________________
Senior Portfolio Accountant: Xxxxx Xxxxxxxx ___________________
Portfolio Accountant: Xxxxxx Xxxxxxxx ___________________
Director of Shareholder Services: Xxxxx Xxxxxxx ___________________
Supervisor of Operations: Xxxx Xxxxx ___________________
Operations Specialist: Xxxxxx Xxxxxx ___________________
Operations Specialist: Xxxxx Xxxxxx ___________________
Operations Specialist: Xxxxxxxx Xxxxxxxx ___________________
00
XXXXXXXX X
The following Depository(s) and Sub-Custodians are employed currently by Star
Bank, N.A. for securities processing and control:
The Depository Trust Company (New York)
0 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bank of Xxx Xxxx
Xxx Xxxx, XX 00000
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APPENDIX C
RYDEX DYNAMIC FUNDS
STAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
(a) For each repurchase agreement transaction $ 7.00
(b) For each portfolio transaction processed through $ 8.00
DTC or Federal Reserve
(c) For each portfolio transaction processed through $ 25.00
Our New York custodian
(d) For each GNMA/Amortized Security Purchase $ 25.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $ 8.00
(f) For each option/future contract written, exercised $ 25.00
or expired
(g) For each Cedel/Euroclear transaction $ 100.00
(h) For each disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange.
II. MONTHLY BASE FEE PER FUND
First 4 months $100.00
Second 4 months $200.00
Third 4 months $300.00
First Year Anniversary and thereafter: $400.00
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III. OUT-OF-POCKET EXPENSES
Star Bank shall be reimbursed for all out-of-pocket expenses including, but
not limited to postage, insurance, and long distance telephone charges.
IV. XXX DOCUMENTS
Per Shareholder/year to hold each XXX Document $ 8.00
V. EARNINGS CREDITS
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees. Earnings
credits are based on a cost of funds tiered earnings credit rate.
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STAR BANK, N.A.
MANAGEMENT FEE SCHEDULE
BUSINESS CHECKING FEES UNIT COST MONTHLY COST
------------------------------------------------------------------------------
D.D.A. Account Maintenance $14.00
Deposits .399
Deposited Items .109
Checks Paid .159
Deposited Items Returned 6.00
International Returned Items 10.00
NSF Returned Check 25.00
Stop Payments 22.00
CASH MANAGEMENT FEES
Balance Reporting - P.C. Access $50.00 1st Acct
$35.00 each add.
ACH Transaction .095
ACH Maintenance $40.00
ACH Additions, Deletions, Changes 3.50
Issued Items .015
Deposited Items Returned 6.00
International Items Returned 10.00
NSF Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account $110.00
Data Capture* .10
Invoicing for Service Charge $15.00
Wires Incoming
Domestic: 10.00
International: 10.00
Wires Outgoing
Domestic:
Repetitive 12.00
Non Repetitive 13.00
International:
Repetitive 35.00
Non Repetitive 40.00
PC - Initiated Wires
Domestic:
Repetitive 9.00
Non Repetitive 9.00
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BUSINESS CHECKING FEES UNIT COST MONTHLY COST
------------------------------------------------------------------------------
International:
Repetitive 25.00
Non Repetitive 25.00
UNCOLLECTED CHARGE
Star Bank assesses a penalty of prime rate plus 4% on any combined relationship
with average uncollected balances for the month.
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