ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of this 18th day of January, 2008 by and between
RYDEX DYNAMIC FUNDS (the "Trust"), a Delaware statutory trust registered as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and PADCO ADVISORS, INC., a Maryland corporation with its principal
place of business at 0000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000
(the "Adviser").
W I T N E S S E T H
WHEREAS, the Board of Trustees (the "Board") of the Trust has selected the
Adviser to act as investment adviser to the Trust on behalf of the series set
forth on Schedule A to this Agreement (each a "Fund" and, collectively, the
"Funds"), as such Schedule may be amended from time to time upon mutual
agreement of the parties, and to provide certain related services, as more fully
set forth below, and to perform such services under the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, the Trust and the Adviser do hereby agree as follows:
1. THE ADVISER'S SERVICES.
(a) DISCRETIONARY INVESTMENT MANAGEMENT SERVICES. The Adviser shall
act as investment adviser with respect to the Funds. In such capacity, the
Adviser shall, subject to the supervision of the Board, regularly provide
the Funds with investment research, advice and supervision and shall
furnish continuously an investment program for the Funds, consistent with
the respective investment objectives and policies of each Fund. The Adviser
shall determine, from time to time, what securities shall be purchased for
the Funds, what securities shall be held or sold by the Funds and what
portion of the Funds' assets shall be held uninvested in cash, subject
always to the provisions of the Trust's Declaration of Trust, By-Laws and
its registration statement on Form N-1A (the "Registration Statement")
under the 1940 Act, and under the Securities Act of 1933, as amended (the
"1933 Act"), covering Fund shares, as filed with the U.S. Securities and
Exchange Commission (the "Commission"), and to the investment objectives,
policies and restrictions of the Funds, as each of the same shall be from
time to time in effect. To carry out such obligations, the Adviser shall
exercise full discretion and act for the Funds in the same manner and with
the same force and effect as the Funds themselves might or could do with
respect to purchases, sales or other transactions, as well as with respect
to all other such things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions. No reference in
this Agreement to the Adviser having full discretionary authority over each
Fund's investments shall in any way limit the right of the Board, in its
sole discretion, to establish or revise policies in connection with the
management of a Fund's assets or to otherwise exercise its right to control
the overall management of a Fund.
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(b) COMPLIANCE. The Adviser agrees to comply with the requirements of
the 1940 Act, the Investment Advisers Act of 1940 (the "Advisers Act"), the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the Commodity Exchange Act and the respective rules and regulations
thereunder, as applicable, as well as with all other applicable federal and
state laws, rules, regulations and case law that relate to the services and
relationships described hereunder and to the conduct of its business as a
registered investment adviser. The Adviser also agrees to comply with the
objectives, policies and restrictions set forth in the Registration
Statement, as amended or supplemented, of the Funds, and with any policies,
guidelines, instructions and procedures approved by the Board and provided
to the Adviser. In selecting each Fund's portfolio securities and
performing the Adviser's obligations hereunder, the Adviser shall cause the
Fund to comply with the diversification and source of income requirements
of Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company. The Adviser
shall maintain compliance procedures that it reasonably believes are
adequate to ensure its compliance with the foregoing. No supervisory
activity undertaken by the Board shall limit the Adviser's full
responsibility for any of the foregoing.
(c) PROXY VOTING. The Board has the authority to determine how proxies
with respect to securities that are held by the Funds shall be voted, and
the Board has initially determined to delegate the authority and
responsibility to vote proxies for the Funds' securities to the Adviser. So
long as proxy voting authority for the Funds has been delegated to the
Adviser, the Adviser shall exercise its proxy voting responsibilities. The
Adviser shall carry out such responsibility in accordance with any
instructions that the Board shall provide from time to time, and at all
times in a manner consistent with Rule 206(4)-6 under the Advisers Act and
its fiduciary responsibilities to the Trust. The Adviser shall provide
periodic reports and keep records relating to proxy voting as the Board may
reasonably request or as may be necessary for the Funds to comply with the
1940 Act and other applicable law. Any such delegation of proxy voting
responsibility to the Adviser may be revoked or modified by the Board at
any time.
(d) RECORDKEEPING. The Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the
Funds, except as otherwise provided herein or as may be necessary for the
Adviser to supply to the Trust or its Board the information required to be
supplied under this Agreement.
The Adviser shall maintain separate books and detailed records of all
matters pertaining to Fund assets advised by the Adviser required by Rule
31a-1 under the 1940 Act (other than those records being maintained by any
administrator, custodian or transfer agent appointed by the Funds) relating
to its responsibilities provided hereunder with respect to the Funds, and
shall preserve such records for the periods and in a manner prescribed
therefore by Rule 31a-2 under the 1940 Act (the "Fund Books and Records").
The Fund Books and Records shall be available to the Board at any time upon
request, shall be delivered to the Trust upon the termination of this
Agreement and shall be available without delay during any day the Trust is
open for business.
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(e) HOLDINGS INFORMATION AND PRICING. The Adviser shall provide
regular reports regarding Fund holdings, and shall, on its own initiative,
furnish the Trust and its Board from time to time with whatever information
the Adviser believes is appropriate for this purpose. The Adviser agrees to
immediately notify the Trust if the Adviser reasonably believes that the
value of any security held by a Fund may not reflect fair value. The
Adviser agrees to provide any pricing information of which the Adviser is
aware to the Trust, its Board and/or any Fund pricing agent to assist in
the determination of the fair value of any Fund holdings for which market
quotations are not readily available or as otherwise required in accordance
with the 1940 Act or the Trust's valuation procedures for the purpose of
calculating the Fund net asset value in accordance with procedures and
methods established by the Board.
(f) COOPERATION WITH AGENTS OF THE TRUST. The Adviser agrees to
cooperate with and provide reasonable assistance to the Trust, any Trust
custodian or foreign sub-custodians, any Trust pricing agents and all other
agents and representatives of the Trust, such information with respect to
the Funds as they may reasonably request from time to time in the
performance of their obligations, provide prompt responses to reasonable
requests made by such persons and establish appropriate interfaces with
each so as to promote the efficient exchange of information and compliance
with applicable laws and regulations.
2. CODE OF ETHICS. The Adviser has adopted a written code of ethics that
it reasonably believes complies with the requirements of Rule 17j-1 under the
1940 Act, which it will provide to the Trust. The Adviser shall ensure that its
Access Persons (as defined in the Adviser's Code of Ethics) comply in all
material respects with the Adviser's Code of Ethics, as in effect from time to
time. Upon request, the Adviser shall provide the Trust with a (i) a copy of the
Adviser's current Code of Ethics, as in effect from time to time, and (ii)
certification that it has adopted procedures reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by the Adviser's Code of
Ethics. Annually, the Adviser shall furnish a written report, which complies
with the requirements of Rule 17j-1, concerning the Adviser's Code of Ethics to
the Trust. The Adviser shall respond to requests for information from the Trust
as to violations of the Code of Ethics by Access Persons and the sanctions
imposed by the Adviser. The Adviser shall immediately notify the Trust of any
material violation of the Code of Ethics, whether or not such violation relates
to a security held by any Fund.
3. INFORMATION AND REPORTING. The Adviser shall provide the Trust and its
respective officers with such periodic reports concerning the obligations the
Adviser has assumed under this Agreement as the Trust may from time to time
reasonably request.
(a) NOTIFICATION OF BREACH / COMPLIANCE REPORTS. The Adviser shall
notify the Trust immediately upon detection of (i) any material failure to
manage any Fund in accordance with its investment objectives and policies
or any applicable law; or (ii) any material breach of the Funds' or the
Adviser's policies, guidelines or procedures. In addition, the Adviser
shall provide a quarterly report regarding each Fund's compliance with its
investment objectives and policies, applicable law, including, but not
limited to the 1940 Act and Subchapter M of the Code, and the Fund's
policies, guidelines or
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procedures as applicable to the Adviser's obligations under this Agreement.
The Adviser agrees to correct any such failure promptly and to take any
action that the Board may reasonably request in connection with any such
breach. Upon request, the Adviser shall also provide the officers of the
Trust with supporting certifications in connection with such certifications
of Fund financial statements and disclosure controls pursuant to the
Xxxxxxxx-Xxxxx Act. The Adviser will promptly notify the Trust in the event
(i) the Adviser is served or otherwise receives notice 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 Trust (excluding
class action suits in which a Fund is a member of the plaintiff class by
reason of the Fund's ownership of shares in the defendant) or the
compliance by the Adviser with the federal or state securities laws or (ii)
an actual change in control of the Adviser resulting in an "assignment" (as
defined in the 1940 Act) has occurred or is otherwise proposed to occur.
(b) BOARD AND FILINGS INFORMATION. The Adviser will also provide the
Trust with any information reasonably requested regarding its management of
the Funds required for any meeting of the Board, or for any shareholder
report, amended registration statement, proxy statement, or prospectus
supplement to be filed by the Trust with the Commission. The Adviser will
make its officers and employees available to meet with the Board from time
to time on due notice to review its investment management services to the
Funds in light of current and prospective economic and market conditions
and shall furnish to the Board such information as may reasonably be
necessary in order for the Board to evaluate this Agreement or any proposed
amendments thereto.
(c) TRANSACTION INFORMATION. The Adviser shall furnish to the Trust
such information concerning portfolio transactions as may be necessary to
enable the Trust or its designated agent to perform such compliance testing
on the Funds and the Adviser's services as the Trust may, in its sole
discretion, determine to be appropriate. The provision of such information
by the Adviser to the Trust or its designated agent in no way relieves the
Adviser of its own responsibilities under this Agreement.
4. BROKERAGE.
(a) PRINCIPAL TRANSACTIONS. In connection with purchases or sales of
securities for the account of a Fund, neither the Adviser nor any of its
directors, officers or employees will act as a principal or agent or
receive any commission except as permitted by the 1940 Act.
(b) PLACEMENT OF ORDERS. The Adviser shall arrange for the placing of
all orders for the purchase and sale of securities for a Fund's account
with brokers or dealers selected by the Adviser. In the selection of such
brokers or dealers and the placing of such orders, the Adviser is directed
at all times to seek for the Fund the most favorable execution and net
price available under the circumstances. It is also understood that it is
desirable for the Fund that the Adviser have access to brokerage and
research services provided by brokers who may execute brokerage
transactions at a higher cost to the Fund
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than may result when allocating brokerage to other brokers, consistent with
section 28(e) of the 1934 Act and any Commission staff interpretations
thereof. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for a Fund with such brokers, subject to
review by the Board from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Adviser in connection with its or its
affiliates' services to other clients.
(c) AGGREGATED TRANSACTIONS. On occasions when the Adviser deems the
purchase or sale of a security to be in the best interest of a Fund as well
as other clients of the Adviser, the Adviser may, to the extent permitted
by applicable law and regulations, aggregate the order for securities to be
sold or purchased. In such event, the Adviser will allocate securities or
futures contracts so purchased or sold, as well as the expenses incurred in
the transaction, in the manner the Adviser reasonably considers to be
equitable and consistent with its fiduciary obligations to the Fund and to
such other clients under the circumstances.
(d) AFFILIATED BROKERS. The Adviser or any of its affiliates may act
as broker in connection with the purchase or sale of securities or other
investments for a Fund, subject to: (a) the requirement that the Adviser
seek to obtain best execution and price within the policy guidelines
determined by the Board and set forth in the Fund's current prospectus and
SAI; (b) the provisions of the 1940 Act; (c) the provisions of the Advisers
Act; (d) the provisions of the 1934 Act; and (e) other provisions of
applicable law. These brokerage services are not within the scope of the
duties of the Adviser under this Agreement. Subject to the requirements of
applicable law and any procedures adopted by the Board, the Adviser or its
affiliates may receive brokerage commissions, fees or other remuneration
from a Fund for these services in addition to the Adviser's fees for
services under this Agreement.
5. CUSTODY. Nothing in this Agreement shall permit the Adviser to take
or receive physical possession of cash, securities or other investments of a
Fund.
6. ALLOCATION OF CHARGES AND EXPENSES. The Adviser will bear its own
costs of providing services hereunder. Other than as herein specifically
indicated, the Adviser shall not be responsible for a Fund's expenses, including
brokerage and other expenses incurred in placing orders for the purchase and
sale of securities and other investment instruments.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) PROPERLY REGISTERED. The Adviser is registered as an investment
adviser under the Advisers Act, and will remain so registered for the
duration of this Agreement. The Adviser is not prohibited by the Advisers
Act or the 1940 Act from performing the services contemplated by this
Agreement, and to the best knowledge of the Adviser, there is no proceeding
or investigation that is reasonably likely to result in the Adviser being
prohibited from performing the services contemplated by this Agreement. The
Adviser agrees to promptly notify the Trust of the occurrence of any event
that would disqualify
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the Adviser from serving as an investment adviser to an investment company.
The Adviser is in compliance in all material respects with all applicable
federal and state law in connection with its investment management
operations.
(b) ADV DISCLOSURE. The Adviser has provided the Trust with a copy of
its Form ADV as most recently filed with the Commission and will, promptly
after filing any amendment to its Form ADV with the Commission, furnish a
copy of such amendment(s) to the Trust. The information contained in the
Adviser's Form ADV is accurate and complete in all material respects and
does not omit to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made,
not misleading.
(c) FUND DISCLOSURE DOCUMENTS. The Adviser has reviewed and will in
the future review, the Registration Statement, and any amendments or
supplements thereto, the annual or semi-annual reports to shareholders,
other reports filed with the Commission and any marketing material of the
Funds (collectively the "Disclosure Documents") and represents and warrants
that with respect to disclosure about the Adviser, the manner in which the
Adviser manages the Funds or information relating directly or indirectly to
the Adviser, such Disclosure Documents contain or will contain, as of the
date thereof, no untrue statement of any material fact and does not omit
any statement of material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading.
(d) USE OF THE NAME "RYDEX". The Adviser has the right to use the name
"Rydex" in connection with its services to the Trust and that, subject to
the terms set forth in Section 8 of this Agreement, the Trust shall have
the right to use the name "Rydex" in connection with the management and
operation of the Funds. The Adviser is not aware of any threatened or
existing actions, claims, litigation or proceedings that would adversely
effect or prejudice the rights of the Adviser or the Trust to use the name
"Rydex".
(e) INSURANCE. The Adviser maintains errors and omissions insurance
coverage in an appropriate amount and shall provide prior written notice to
the Trust (i) of any material changes in its insurance policies or
insurance coverage; or (ii) if any material claims will be made on its
insurance policies. Furthermore, the Adviser shall upon reasonable request
provide the Trust with any information it may reasonably require concerning
the amount of or scope of such insurance.
(f) NO DETRIMENTAL AGREEMENT. The Adviser represents and warrants that
it has no arrangement or understanding with any party, other than the
Trust, that would influence the decision of the Adviser with respect to its
selection of securities for a Fund, and that all selections shall be done
in accordance with what is in the best interest of the Fund.
(g) CONFLICTS. The Adviser shall act honestly, in good faith and in
the best interests of the Trust including requiring any of its personnel
with knowledge of Fund
6
activities to place the interest of the Funds first, ahead of their own
interests, in all personal trading scenarios that may involve a conflict of
interest with the Funds, consistent with its fiduciary duties under
applicable law.
(h) REPRESENTATIONS. The representations and warranties in this
Section 7 shall be deemed to be made on the date this Agreement is executed
and at the time of delivery of the quarterly compliance report required by
Section 3(a), whether or not specifically referenced in such report.
8. THE NAME "RYDEX". The Adviser grants to the Trust a license to use the
name "Rydex" (the "Name") as part of the name of any Fund. The foregoing
authorization by the Adviser to the Trust to use the Name as part of the name of
any Fund is not exclusive of the right of the Adviser itself to use, or to
authorize others to use, the Name; the Trust acknowledges and agrees that, as
between the Trust and the Adviser, the Adviser has the right to use, or
authorize others to use, the Name. The Trust shall (1) only use the Name in a
manner consistent with uses approved by the Adviser; (2) use its best efforts to
maintain the quality of the services offered using the Name; (3) adhere to such
other specific quality control standards as the Adviser may from time to time
promulgate. At the request of the Adviser, the Trust will (a) submit to Adviser
representative samples of any promotional materials using the Name; and (b)
change the name of any Fund within three months of its receipt of the Adviser's
request, or such other shorter time period as may be required under the terms of
a settlement agreement or court order, so as to eliminate all reference to the
Name and will not thereafter transact any business using the Name in the name of
any Fund; provided, however, that the Trust may continue to use beyond such date
any supplies of prospectuses, marketing materials and similar documents that the
Trust had at the date of such name change in quantities not exceeding those
historically produced and used in connection with such Fund.
9. ADVISER'S COMPENSATION. The Funds shall pay to the Adviser, as
compensation for the Adviser's services hereunder, a fee, determined as
described in Schedule A that is attached hereto and made a part hereof. Such fee
shall be computed daily and paid not less than monthly in arrears by the Funds.
The method for determining net assets of a Fund for purposes hereof shall
be the same as the method for determining net assets for purposes of
establishing the offering and redemption prices of Fund shares as described in
the Funds' prospectus(es). In the event of termination of this Agreement, the
fee provided in this Section shall be computed on the basis of the period ending
on the last business day on which this Agreement is in effect subject to a pro
rata adjustment based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
10. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder,
the Adviser is and shall be an independent contractor and, unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Trust or any Fund in any way or otherwise
be deemed to be an agent of the Trust or any Fund. If any occasion should arise
in which the Adviser gives any advice to its clients concerning the shares
7
of a Fund, the Adviser will act solely as investment counsel for such clients
and not in any way on behalf of the Fund.
11. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically
terminate, without the payment of any penalty, in the event of its assignment
(as defined in section 2(a)(4) of the 1940 Act); provided that such termination
shall not relieve the Adviser of any liability incurred hereunder.
This Agreement may not be added to or changed orally and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act, when applicable.
12. DURATION AND TERMINATION.
(a) This Agreement shall become effective as of the date executed and
shall remain in full force and effect continually thereafter, subject to
renewal as provided in Section 12(d) and unless terminated automatically as
set forth in Section 11 hereof or until terminated as follows:
(b) The Trust may cause this Agreement to terminate either (i) by vote
of its Board or (ii) with respect to any Fund, upon the affirmative vote of
a majority of the outstanding voting securities of the Fund; or
(c) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Trust; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Trustees, including a
majority vote of such Trustees who are not interested persons of the Trust
or the Adviser, at a meeting called for the purpose of voting on such
approval; or (ii) the vote of a majority of the outstanding voting
securities of each Fund; provided, however, that if the continuance of this
Agreement is submitted to the shareholders of the Funds for their approval
and such shareholders fail to approve such continuance of this Agreement as
provided herein, the Adviser may continue to serve hereunder as to the
Funds in a manner consistent with the 1940 Act and the rules and
regulations thereunder; and
Termination of this Agreement pursuant to this Section shall be without
payment of any penalty.
In the event of termination of this Agreement for any reason, the Adviser
shall, immediately upon notice of termination or on such later date as may be
specified in such notice, cease all activity on behalf of the Funds and with
respect to any of their assets, except as otherwise required by any fiduciary
duties of the Adviser under applicable law. In addition, the Adviser shall
deliver the Fund Books and Records to the Trust by such means and in accordance
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with such schedule as the Trust shall direct and shall otherwise cooperate, as
reasonably directed by the Trust, in the transition of portfolio asset
management to any successor of the Adviser.
13. CERTAIN DEFINITIONS. For the purposes of this Agreement:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940
Act, subject, however, to such exemptions as may be granted by the
Commission under the 1940 Act or any interpretations of the Commission
staff.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions
as may be granted by the Commission under the 1940 Act or any
interpretations of the Commission staff.
14. LIABILITY OF THE ADVISER. The Adviser shall indemnify and hold
harmless the Trust and all affiliated persons thereof (within the meaning of
Section 2(a)(3) of the 0000 Xxx) and all controlling persons (as described in
Section 15 of the 1933 Act) (collectively, the "Adviser Indemnitees") against
any and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) by reason of or arising out of: (a) the
Adviser being in material violation of any applicable federal or state law, rule
or regulation or any investment policy or restriction set forth in the Funds'
Registration Statement or any written guidelines or instruction provided in
writing by the Board, (b) a Fund's failure to satisfy the diversification or
source of income requirements of Subchapter M of the Code, or (c) the Adviser's
willful misfeasance, bad faith or gross negligence generally in the performance
of its duties hereunder or its reckless disregard of its obligations and duties
under this Agreement.
15. ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
16. LIMITATION OF LIABILITY. The parties to this Agreement acknowledge and
agree that all litigation arising hereunder, whether direct or indirect, and of
any and every nature whatsoever shall be satisfied solely out of the assets of
the affected Fund and that no Trustee, officer or holder of shares of beneficial
interest of the Fund shall be personally liable for any of the foregoing
liabilities. The Trust's Certificate of Trust, as amended from time to time, is
on file in the Office of the Secretary of State of the State of Delaware. Such
Certificate of Trust and the Trust's Declaration of Trust describe in detail the
respective responsibilities and limitations on liability of the Trustees,
officers, and holders of shares of beneficial interest.
17. JURISDICTION. This Agreement shall be governed by and construed in
accordance with the substantive laws of state of Delaware and the Adviser
consents to the jurisdiction of courts, both state and/or federal, in Delaware,
with respect to any dispute under this Agreement.
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18. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their duly authorized officers as of the date first
above written.
RYDEX DYNAMIC FUNDS, on behalf of each Fund
listed on Schedule A
By:/s/ Xxxx X. Xxxxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxxxx
Title: President
PADCO ADVISORS, INC.
By:/s/ Xxxx X. Xxxxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxxxx
Title: Chief Executive Officer
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SCHEDULE A
TO THE
ADVISORY AGREEMENT
DATED JANUARY 18, 2008 BETWEEN
RYDEX DYNAMIC FUNDS
AND
PADCO ADVISORS, INC.
The Trust will pay to the Adviser as compensation for the Adviser's services
rendered, a fee, computed daily at an annual rate based on the average daily net
assets of the respective Fund in accordance the following fee schedule:
FUND RATE
--------------------------------------------------------------------------------
S&P 500 2x Strategy* 0.90%
--------------------------------------------------------------------------------
S&P 500 2x Strategy Master 0.90%
--------------------------------------------------------------------------------
Inverse S&P 500 2x Strategy* 0.90%
--------------------------------------------------------------------------------
Inverse S&P 500 2x Strategy Master 0.90%
--------------------------------------------------------------------------------
OTC 2x Strategy* 0.90%
--------------------------------------------------------------------------------
OTC 2x Strategy Master 0.90%
--------------------------------------------------------------------------------
Inverse OTC 2x Strategy* 0.90%
--------------------------------------------------------------------------------
Inverse OTC 2x Strategy Master 0.90%
--------------------------------------------------------------------------------
Dow 2x Strategy* 0.90%
--------------------------------------------------------------------------------
Dow 2x Strategy Master 0.90%
--------------------------------------------------------------------------------
Inverse Dow 2x Strategy* 0.90%
--------------------------------------------------------------------------------
Inverse Dow 2x Strategy Master 0.90%
--------------------------------------------------------------------------------
Xxxxxxx 2000(R) 2x Strategy 0.90%
--------------------------------------------------------------------------------
Inverse Xxxxxxx 2000(R) 2x Strategy 0.90%
--------------------------------------------------------------------------------
Xxxxxxx 2000(R) 2x Strategy Master 0.90%
--------------------------------------------------------------------------------
Inverse Xxxxxxx 2000(R) 2x Strategy Master 0.90%
--------------------------------------------------------------------------------
* The fee will be reduced to 0.00% for any period during which the Fund
invests through a master-feeder structure.
A-1
