Exhibit (5)(b)
Sub-Advisory Agreement
between PADCO Advisors, Inc.
and Xxxxxx, Xxxxxx & Company, L.P.
PAGE
SUB-ADVISORY AGREEMENT
between
PADCO ADVISORS, INC.
and
XXXXXX, XXXXXX & COMPANY, L.P.
This Agreement is made as of the twenty-fifth day of
September, 1996, by and between PADCO ADVISORS, INC., a
M a r y land corporation, with offices at 6116 Executive
B o u l xxxxx, Suite 400, Rockville, Maryland 20852 (the
"Advisor"), and XXXXXX, XXXXXX & COMPANY, L.P., a Delaware
limited partnership, with offices at 0000 Xxxxxxxxxxxx Xxxxxx,
X.X., Xxxxx 000, Xxxxxxxxxx, D. C. 20016 (the "Sub-Advisor").
WHEREAS, Rydex Series Trust (the "Trust"), is a Delaware
business trust that is registered under the Investment Company
Act of 1940, as amended (the "1940 Act");
WHEREAS, the trustees of the Trust (the "Trustees")
approved the creation of the Rydex High Yield Fund (the
"Fund") as a series of the Trust on September 25, 1996;
WHEREAS, the Advisor is a registered investment adviser
under the Investment Advisers Act of 1940, as amended (the
"Advisers Act");
WHEREAS, the Advisor has been appointed as the investment
adviser to the Fund in accordance with the 1940 Act and the
Advisers Act;
WHEREAS, the Sub-Advisor is registered as an investment
adviser under the Advisers Act and engages in the business of
providing investment advisory services; and
WHEREAS, the Trustees have authorized the Advisor to
appoint the Sub-Advisor, subject to the requirements of the
1940 Act and the Advisers Act, as a sub-adviser with respect
to that portion of the assets of the Trust designated as "The
Rydex High Yield Fund" on the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the promises and
mutual covenants herein contained, and for other good and
valuable consideration, the receipt, sufficiency, and adequacy
o f which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree and promise as follows:
Section 1. Investment Advisory Services
PAGE
(a) The Advisor hereby retains the Sub-Advisor, and
the Sub-Advisor hereby accepts engagement by the Advisor, to
supervise and manage on a fully-discretionary basis the cash,
securities and other assets of the Fund that the Advisor from
time to time shall place under the supervision of the Sub-
Advisor (such cash, securities, and other assets initially and
as same shall thereafter be increased or decreased by the
investment performance thereof and by additions thereto and
withdrawals therefrom by the Advisor shall hereinafter be
referred to as the "assets" of the Fund).
(b) All activities by the Sub-Advisor on behalf of the
Advisor and the Fund shall be in accordance with the
investment objectives, policies, and restrictions set forth in
the 1940 Act and in the Fund's prospectus and statement of
a d d itional information, as amended from time to time
(hereinafter collectively referred to as the "Prospectus") and
as interpreted from time to time by the Board of Trustees of
the Trust and by the Advisor. All activities of the Sub-
Advisor on behalf of the Advisor and the Fund shall also be
subject to the due diligence oversight and direction of the
Advisor.
(c) Subject to the supervision of the Advisor, the
Sub-Advisor shall have the sole and exclusive responsibility
to select members of securities exchanges, brokers, dealers,
a n d futures commission merchants for the execution of
transactions of the Fund and, when applicable, shall negotiate
commissions in connection therewith. All such selections
shall be made in accordance with the Fund's policies and
restrictions regarding brokerage allocation set forth in the
Prospectus.
(d) In carrying out its obligations to manage the
investments and reinvestments of the assets of the Fund, the
Sub-Advisor shall:
1. obtain and evaluate pertinent economic,
statistical, financial, and other
information affecting the economy
generally and individual companies or
industries the securities of which are
included in the assets of the Fund or
are under consideration for inclusion
therein;
2. formulate and implement a continuous
investment program for the Fund
consistent with the investment
objectives and related investment
policies and restrictions for such Fund
as set forth in the Prospectus; and
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3. take such steps as are necessary to
implement the aforementioned investment
x x xxxxx by placing orders for the
purchase and sale of securities by the
Fund.
(e) In connection with the purchase and sale of
securities by the Fund, the Sub-Advisor shall arrange for the
transmission to the Advisor and the Fund's custodian on a
daily basis such confirmation, trade tickets, and other
documents as may be necessary to enable the Advisor and the
F u n d 's custodian, respectively, to perform their
administrative responsibilities with respect to the Fund.
With respect to Fund securities to be purchased or sold
through the Depository Trust Company, the Sub-Advisor shall
arrange for the automatic transmission of the "identification"
or "I.D." confirmation of the trade to the Fund's custodian.
(f) In connection with the placement of orders for the
execution of the Fund's securities transactions, the Sub-
Advisor shall create and maintain all necessary records of the
Fund as are required of an investment adviser of a registered
investment company, including, but not limited to, records
required by the 1940 Act and the Advisers Act. All such
records pertaining to the Fund shall be the property of the
Fund and shall be available for inspection and use by the
Securities and Exchange Commission (the "Commission"), any
other regulatory authority having appropriate jurisdiction,
the Fund, the Advisor, or any person retained by the Fund or
t h e Advisor. When applicable, such records shall be
maintained by the Sub-Advisor for the period and in the place
required by Rule 3la-2 under the 1940 Act.
(g) The Sub-Advisor shall render such reports to the
Advisor and/or to the Board of Trustees of the Trust
concerning the investment activity and composition of the
assets of the Fund in such form and at such intervals as the
Advisor or the Board of Trustees from time to time reasonably
may require.
(h) In acting under this Agreement, the Sub-Advisor
shall be an independent contractor and not an agent of the
Advisor or the Fund.
Section 2. Expenses
(a) The Sub-Advisor shall assume and pay all of its
own costs and expenses, including those for furnishing such
office space, office equipment, office personnel, and office
services as the Sub-Advisor may require in the performance of
the Sub-Advisor's duties under this Agreement.
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(b) Pursuant to the terms of the Prospectus, the Fund
shall bear all expenses of the Fund's organization and
registration, and the Fund and Advisor shall bear all of their
respective expenses of their operations and businesses not
expressly assumed or agreed to be paid by the Sub-Advisor
under this Agreement. In particular, but without limiting the
generality of the foregoing, the Fund shall pay any fees due
to the Advisor, all interest, Federal, state, and local taxes,
x x x x x nmental charges or duties, fees, brokerage and
commissions of every kind arising hereunder or in connection
herewith, expenses of transactions with shareholders of the
Fund, expenses of offering interests in the Fund for sale,
i n surance, association membership dues, all charges of
custodians (including fees as custodian and for keeping books,
performing Fund valuations, and rendering other services to
the Fund), independent auditors, and legal counsel, expenses
of preparing, printing, and distributing all prospectuses,
proxy materials, reports and notices to shareholders of the
Fund, and all other costs incident to the Fund's existence.
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Section 3. Use of Services of Others
The Sub-Advisor, at the Sub-Advisor's expense, except
as set forth in Section 2 hereof, may employ, retain, or
otherwise avail itself of the services or facilities of other
persons or organizations for the purpose of providing the Sub-
Advisor with such statistical or factual information, such
advice regarding economic factors and trends, or such other
information, advice, or assistance as the Sub-Advisor may deem
necessary, appropriate, or convenient for the discharge of the
Sub-Advisor's obligations hereunder or otherwise helpful to
the Trust and the Fund.
Section 4. Sub-Advisory Fees
In consideration of the Sub-Advisor's services to the
Fund hereunder, the Sub-Advisor shall be entitled to a sub-
advisory fee, payable monthly, at the annual rate of 0.375% of
the average daily net assets of the Fund during the month (the
"Sub-Advisory Fee"). The Sub-Advisory Fee shall be accrued
for each calendar day and the sum of the daily Sub-Advisory
Fee accruals shall be paid monthly to the Sub-Advisor on or
before the fifth business day of the next succeeding month.
The daily fee accruals will be computed on the basis of the
valuations of the total net assets of the Fund as of the close
of business each day. The Sub-Advisory Fee shall be payable
solely by the Advisor, and the Fund shall not be liable to the
Sub-Advisor for any unpaid Sub-Advisory Fee.
Section 5. Limitation of Liability of Sub-Advisor
(a) T h e Sub-Advisor shall be liable for losses
resulting from its own acts or omissions caused by the Sub-
Advisor's willful misfeasance, bad faith, or gross negligence
in the performance of the Sub-Advisor's duties hereunder or
the Sub-Advisor's reckless disregard of the Sub-Advisor's
duties under this Agreement, and nothing herein shall protect
the Sub-Advisor against any such liability to the shareholders
of the Fund or to the Advisor. The Sub-Advisor shall not be
liable to the Fund or to any shareholder of the Fund or to the
Advisor for any claim or loss arising out of any investment by
the Fund or other act or omission in the performance of the
Sub-Advisor s duties under this Agreement, or for any loss or
damage resulting from the imposition by any government of
exchange control restrictions which might affect the liquidity
of the Fund's assets maintained with custodians or securities
depositories in foreign countries, or from any political acts
of any foreign governments to which such assets might be
exposed, or for any tax of any kind, including, without
limitation, any statutory, governmental, state, provincial,
regional, local, or municipal imposition, duty, contribution,
or levy imposed by any government or governmental agency upon
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or with respect to such assets or income earned with respect
thereto (collectively, "Taxation"). Notwithstanding the
foregoing sentence, the Sub-Advisor shall be liable for taxes
or tax penalties incurred by the Fund for any failure of the
Fund to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended,
as a direct result of portfolio transactions effected by the
Sub-Advisor other than in accordance with information provided
by the Advisor in connection with the redemptions and
purchases of Fund shares; provided, however, that the Sub-
Advisor shall be liable only for such taxes and tax penalties
if and to the extent that these taxes and tax penalties arise
from the Sub-Advisor s willful malfeasance, bad faith, gross
negligence, or reckless disregard of the Sub-Advisor s
obligations and duties.
(b) In the event that the Sub-Advisor is assessed any
Taxation in respect of the assets, income, or activities of
the Fund, the Advisor and the Fund jointly will indemnify the
Sub-Advisor for all such amounts wherever imposed, together
with all penalties, charges, costs, and interest relating
thereto and all expenditures, including reasonable attorney's
fees, incurred by the Sub-Advisor in connection with the
defense or settlement of any such assessment. The Advisor
shall undertake and control the defense or settlement of any
such assessment, including the selection of counsel or other
professional advisers; provided, that the selection of such
counsel and advisers and the settlement of any assessment
shall be subject to the approval of the Advisor and the Fund,
which approvals shall not be unreasonably withheld. The
Advisor and the Fund shall have the right to retain separate
counsel and assume the defense or settlement on behalf of the
Advisor and the Fund, as the case may be, of any such
assessment if representation of the Advisor and the Fund by
counsel selected by the Sub-Advisor would be inappropriate due
to actual or potential conflicts of interest.
Section 6. Services to Other Clients and the Fund
(a) Subject to compliance with the 1940 Act, nothing
contained in this Agreement shall be deemed to prohibit the
Sub-Advisor or any of the Sub-Advisor's affiliated persons
from acting, and being separately compensated for acting, in
one or more capacities on behalf of the Fund. The Advisor and
the Fund understand that the Sub-Advisor may act as investment
manager or in other capacities on behalf of other customers,
including entities registered under the 1940 Act. While
information, recommendations, and actions which the Sub-
Advisor supplies to and does on behalf of the Fund shall, in
t h e Sub-Advisor's judgment, be appropriate under the
circumstances in light of the investment objectives and
policies of the Fund, as set forth in the Prospectus delivered
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to the Sub-Advisor from time to time, it is understood and
agreed that said information, recommendations, and actions may
be different from the information, recommendations, and
actions that the Sub-Advisor or the Sub-Advisor's affiliated
persons supply to or do on behalf of other clients. The Sub-
Advisor and the Sub-Advisor's affiliated persons shall supply
information, recommendations, and any other services to the
Fund and to any other client in an impartial and fair manner
in order to seek good results for all clients involved. As
used herein, the term "affiliated person" shall have the
meaning assigned to this term in the 1940 Act and the rules
thereunder.
(b) On occasions when the Sub-Advisor deems the
purchase or sale of a security to be in the best interest of
the Fund as well as other customers of the Sub-Advisor, the
Sub-Advisor, to the extent permitted by applicable law, may
aggregate the securities to be so sold or purchased in order
to obtain the best execution or lower brokerage commissions,
if any. The Sub-Advisor also on occasion may purchase or sell
a particular security for one or more customers in different
amounts. On either occasion, and to the extent permitted by
a p plicable law and regulations, the allocation of the
securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Sub-Advisor
in the manner that the Sub-Advisor considers to be the most
equitable and consistent with the Sub-Advisor's fiduciary
obligations to the Fund and to such other customers.
(c) The Sub-Advisor agrees to use the same skill and
care in providing services to the Fund as the Sub-Advisor uses
in providing services to other similar accounts for which the
Sub-Advisor has investment responsibility. The Sub-Advisor
will conform with all applicable rules and regulations of the
Commission.
Section 7. Reports to the Sub-Advisor
The Advisor shall furnish to the Sub-Advisor the
Prospectus, proxy statements, reports, and other information
relating to the business and affairs of the Fund as the Sub-
Advisor, at any time or from time to time, reasonably may
require in order to discharge the Sub-Advisor's duties under
this Agreement.
Section 8. Term of Agreement
Provided that this Agreement shall have first been
approved by the Board of Trustees of the Trust, including a
majority of the members thereof who are not "interested
persons" (as that term is defined at Section 2(a)(19) of the
0000 Xxx) of either party, by a vote cast in person at a
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meeting called for the purpose of voting such approval, then
this Agreement shall be effective on the date hereof. Unless
earlier terminated as hereinafter provided, this Agreement
shall continue in effect until approved by a majority vote of
the voting securities of the Fund, at a meeting to take place
not more than one year after the effective date of the Fund's
registration statement relating to the Fund. Thereafter, this
Agreement shall continue in effect from year to year, subject
to approval annually by the Board of Trustees of the Trust or
by vote of a majority of the voting securities of the Fund and
also, in either event, by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of
a majority of the Trustees of the Trust who are not parties to
this Agreement or "interested persons" (as that term is
defined at Section 2(a)(19) of the 0000 Xxx) of any such
person.
Section 9. Termination of Agreement; Assignment
(a) This Agreement may be terminated by either party
hereto without the payment of any penalty, upon ninety (90)
days' prior notice in writing to the other party and to the
Fund, or upon sixty (60) days' written notice by the Fund to
the two parties; provided, that, in the case of termination by
the Fund, such action shall have been authorized by resolution
of a majority of the Board of Trustees of the Trust or by vote
of a majority of the voting securities of the Fund. In
addition, this Agreement shall terminate upon the later of:
(i) the termination of the Advisor's agreement to provide
investment advisory services to the Fund; or (ii) notice to
the Sub-Advisor that the Advisor's agreement to provide
investment advisory services to the Fund has terminated.
(b) This Agreement shall automatically terminate in
the event of this Agreement's "assignment" (as that term is
defined at Section 2(a)(4) of the 1940 Act).
(c) Termination of this Agreement for any reason shall
not affect rights of the parties that have accrued prior
thereto.
Section 10. Notices
(a) The Sub-Advisor agrees promptly to notify the
Advisor of the occurrence of any of the following events:
1. any change in the Fund's portfolio
manager;
2. the Sub-Advisor fails to be registered
as an investment adviser under the
Advisers Act or under the laws of any
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jurisdiction in which the Sub-Advisor is
r e q u ired to be registered as an
investment adviser in order to perform
the Sub-Advisor's obligations under this
Agreement;
3. the Sub-Advisor is the subject of any
action, suit, proceeding, inquiry, or
investigation at law or in equity,
before or by any court, public board, or
body, involving the affairs of the Fund;
or
4. any change in control of the Sub-
Advisor.
(b) Any notice given hereunder shall be in writing and
may be served by being sent by telex, facsimile, or other
electronic transmission or sent by registered mail or by
courier to the address set forth below for the party for which
the notice is intended. A notice served by mail shall be
deemed to have been served seven (7) days after mailing and in
the case of telex, facsimile, or other electronic transmission
twelve (12) hours after dispatch thereof. Addresses for
notice may be changed by written notice to the other party.
If to the Advisor:
Xxxxxx X. Xxxxxx, Xx.
PADCO Advisors, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Tel. No. 000-000-0000
Fax No. 000-000-0000
With a copy to:
Xxxxxx X. Xxxxxx, Xx., President
Rydex Series Trust
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Tel. No. 000-000-0000
Fax No. 000-000-0000
If to the Sub-Advisor:
Xxxxxx X. Xxxxxxx, Vice President
Xxxxxx, Xxxxxx & Company, L.P.
Xxxxx 000
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
0
Xxxxxxxxxx, D. C. 20016
Tel. No. 000-000-0000
Fax No. 000-000-0000
10
Section 11. Governing Law
This Agreement shall be governed by and subject to the
requirements of the laws of the State of Maryland without
reference to the choice of law provisions thereof.
Section 12. Applicable Provisions of Law
This Agreement shall be subject to all applicable
p r o visions of law, including, without limitation, the
applicable provisions of the 1940 Act, and to the extent that
any provisions herein contained conflict with any such
applicable provisions of law, the latter shall control.
Section 13. Counterparts
This Agreement may be entered into in any number of
counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts shall
together constitute one and the same instrument.
Section 14. Entire Agreement
This Agreement contains the entire understanding and
agreement of the parties with respect to the Fund.
Section 15. Headings
The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not
constitute a part hereof.
Section 16. Severability
Should any portion of this Agreement for any reason be
held to be void in law or in equity, the Agreement shall be
construed insofar as is possible as if such portion had never
been contained herein.
Section 17. Limitation of Liability
The Declaration of Trust establishing the Trust, dated
March 13, 1993, as amended on November 2, 1993, and as further
amended on December 12, 1995 (the "Declaration"), a copy of
which Declaration, together with all amendments thereto, is on
file in the office of the Trust, provides that the name "Rydex
Series Trust" refers to the "Trustees" under the Declaration
c o llectively as "Trustees," but not as individuals or
personally; and no Trustee, shareholder, officer, employee, or
agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property for the
satisfaction of any obligation or claim, in connection with
11
the affairs of the Fund or any Fund thereof, but only the
assets belonging to the Fund, or to the particular portfolio
with which the obligee or claimant dealt, shall be liable.
IN WITNESS WHEREOF this Agreement has been executed by
the parties hereto as of the day and year first above written.
PADCO ADVISORS, INC.
By: /s/ Xxxxxx X. Xxxxxx.
Xxxxxx X. Xxxxxx, President
PADCO Advisors, Inc.
XXXXXX, XXXXXX & COMPANY, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, Vice
President
Xxxxxx, Xxxxxx & Company, L.P.
By: /s/ Xxxxxxxxx X. Xxxx
Xxxxxxxxx X. Xxxx, Vice
President
Xxxxxx, Xxxxxx & Company, L.P.
Accepted and Agreed:
RYDEX SERIES TRUST
on behalf of THE RYDEX
HIGH YIELD FUND
By: /s/ Xxxxxx X. Xxxxxx Xx.
Xxxxxx X. Xxxxxx, Xx., President
Rydex Series Trust
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