SERVICE AGREEMENT
THIS SERVICE AGREEMENT (the "Agreement"), dated as of August 11, 1998, is
entered into by and between RYDEX VARIABLE TRUST, a Delaware business trust (the
"Trust"), and PADCO SERVICE COMPANY, INC., a Maryland corporation (the
"Servicer").
W I T N E S S E T H:
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "'1940 Act");
WHEREAS, the Servicer is registered as a transfer agent under the
Securities Exchange Act of 1934, as amended; and
WHEREAS, the Trust wishes to have the Servicer perform general
administrative, shareholder, dividend disbursement, transfer agent, and
registrar and other services for the Trust and to act in such capacity in the
manner set forth in this Agreement, and the Servicer is willing to act in such
capacity in accordance with the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt,
sufficiency, and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree and promise as follows:
1. SERVICES TO BE PROVIDED.
In consideration of the compensation to be paid by the Trust to the
Servicer pursuant to Section 4 of this Agreement, the Servicer will:
a. Manage, supervise, and conduct the affairs and business of the Trust
and matters incidental thereto. In the performance of its duties, the Servicer
will comply with the Trust's
Prospectus and its Statement of Additional Information, as the same may be
amended from time to time, all as delivered to the Servicer (collectively, the
"Controlling Documents"). The Servicer will also use its best efforts to
safeguard and promote the welfare of the Trust, and to comply with other
policies which the Board of Trustees of the Trust (the "Board") may from time to
time specify. The Servicer will furnish or provide to the Trust general
administrative services as the Trust may reasonably require in the conduct of
its affairs and business, including, without limitation, the services described
on Schedule I attached hereto.
b. Provide the Trust with all required shareholder and dividend
disbursement services, including, without limitation, those services described
on Schedule II, attached hereto. The Servicer will maintain sufficient trained
personnel and equipment and supplies to perform such services in conformity with
the Controlling Documents and such other reasonable standards of performance as
the Trust may from time to time specify, and otherwise in an accurate, timely,
and efficient manner.
c. Provide the Trust with all required stock transfer agent and registrar
services, including, without limitation, those services described on
Schedule III attached hereto. The Servicer will maintain sufficient trained
personnel and equipment and supplies to perform such services in conformity with
the Controlling Documents and such other reasonable standards of performance as
the Trust may from time to time specify, and otherwise in an accurate, timely,
and efficient manner.
2. OBLIGATIONS OF THE TRUST.
The Trust will have the following obligations under this Agreement:
a. The Trust shall keep the Servicer continuously and fully informed as
to the composition of the Trust's investment portfolio and the nature of all of
the Trust's assets and liabilities,
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and shall cause the investment managers of the Trust's series to cooperate with
the Servicer in all matters so as to enable the Servicer to perform the
Servicer's functions under this Agreement.
b. The Trust shall furnish the Servicer with any materials or information
which the Servicer may reasonably request to enable the Servicer to perform the
Servicer's functions under this Agreement.
c. The Trust shall turn over to the Servicer the accounts and records
previously maintained by or for the Trust. The Servicer shall be entitled to
rely exclusively on the completeness and correctness of the accounts and records
turned over to the Servicer by the Trust; provided, that such reliance is made
in good faith, and the Trust shall indemnify and hold the Servicer harmless of
and from any and all expenses (including, without limitation, attorneys' and
accountants' fees), damages, claims, suits, liabilities, actions, demands, and
losses whatsoever arising out of or in connection with any error, omission,
inaccuracy, or other deficiency of such accounts and records or in connection
with the failure of the Trust to provide any portion of such accounts and
records or to provide any information to the Servicer necessary or appropriate
to perform the Servicer's functions hereunder; and provided, further, that such
accounts, records, and other information shall belong to the Trust and be
considered confidential, and shall not be disclosed to other than Federal and
state regulators without permission from the Trust.
3. PAYMENT OF FEES AND EXPENSES.
a. The Servicer will pay all of the fees and expenses incurred by the
Servicer in providing the Trust with the services and facilities described in
this Agreement, except as otherwise provided herein.
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b. Notwithstanding any other provision of this Agreement, the Trust will
pay, or reimburse the Servicer for the payment of, all fees and expenses
incurred by the Servicer not directly related to the Servicer's providing the
Trust with the services and facilities described in this Agreement, including,
but not limited to, the following described fees and expenses of the Trust
(hereinafter called "Direct Expenses") whether or not billed to the Trust, the
Servicer, or any related entity:
(i) fees and expenses relating to investment advisory services;
(ii) fees and expenses of custodian and depositories and banking
services fees and costs;
(iii) fees and expenses of outside legal counsel and any legal
counsel directly employed by the Trust;
(iv) fees and expenses of independent auditors and income tax
preparation and expenses of obtaining quotations for the
purpose of calculating the value of the Trust's assets;
(v) fees and expenses of consultants;
(vi) interest charges;
(vii) all Federal, state, and local taxes (including, without
limitation, stamp, excise, income, and franchise taxes);
(viii)costs of stock certificates and other expenses of issuing
and redeeming shares of the Trust ("Shares");
(ix) costs incidental to or associated with shareholder
meetings;
(x) fees and expenses of registering or qualifying shares for
sale under Federal and state securities laws;
(xi) costs (including postage) of printing and mailing
prospectuses, confirmations, proxy statements, and other
reports and notices to shareholders and to governmental
agencies;
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(xii) premiums on all insurance and bonds and other expenses of
fidelity and liability insurance and bonding covering the
Trust;
(xiii)fees and expenses of the disinterested Trustees and
expenses incidental to the meetings of the Board;
(xiv) fees and expenses paid to any securities pricing
organization;
(xv) dues and expenses associated with membership in the
Investment Company Institute and the Mutual Fund Education
Alliance;
(xvi) costs for incoming telephone WATS lines; and
(xvii)organizational costs.
4. COMPENSATION.
As consideration for the services provided hereunder, the Trust will pay
the Servicer a fee on the last day of each month in which this Agreement is in
effect, at the following annual rates based on the average daily net assets (the
"Assets") of each of the Trust's series for such month:
Nova Fund . . . . . . . . . . . . . . 0.25%
Ursa Fund . . . . . . . . . . . . . . 0.25%
OTC Fund. . . . . . . . . . . . . . . 0.20%
Arktos Fund. . . . . . . . . . . . . . 0.25%
Precious Metals Fund . . . . . . . . . 0.20%
U.S. Government Bond Fund. . . . . . . 0.20%
Juno Fund . . . . . . . . . . . . . . 0.25%
U.S. Government Money Market Fund. . . 0.20%
Banking Fund . . . . . . . . . . . . . 0.25%
Basic Materials Fund . . . . . . . . . 0.25%
Biotechnology Fund . . . . . . . . . . 0.25%
Consumer Products Fund . . . . . . . . 0.25%
Electronics Fund . . . . . . . . . . . 0.25%
Energy Fund. . . . . . . . . . . . . . 0.25%
Energy Services Fund . . . . . . . . . 0.25%
Financial Services Fund. . . . . . . . 0.25%
Health Care Fund . . . . . . . . . . . 0.25%
Leisure Fund . . . . . . . . . . . . . 0.25%
Retailing Fund . . . . . . . . . . . . 0.25%
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Technology Fund. . . . . . . . . . . . 0.25%
Telecommunications Fund. . . . . . . . 0.25%
Transportation Fund. . . . . . . . . . 0.25%
In the event that this Agreement commences on a date other than on the
beginning of any calendar month, or if this Agreement terminates on a date other
than the end of any calendar month, the fees payable hereunder by the Trust
shall be proportionately reduced according to the number of days during such
month that services were not rendered hereunder by the Servicer.
5. REPORTS TO THE BOARD OF TRUSTEES.
The Servicer will consult with the Board at such times as the Board
reasonably requests with respect to the services provided hereunder, and the
Servicer will cause its officers to attend such meetings with the Board, and to
furnish such oral or written reports to the Board, as the Board may reasonably
request. In addition, the Servicer agrees to provide to the Board such reports
and other information as the Board may reasonably request in order to enable the
Board to perform a review of the Servicer's performance under this Agreement.
6. TERM OF AGREEMENT.
This Agreement shall become effective as of the date the Trust commences
its investment operations and shall continue for an initial two-year term and
shall continue automatically from year-to-year thereafter unless terminated in
accordance with the provisions of Section 7 of this Agreement.
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7. TERMINATION.
This Agreement may be terminated, without the payment of any penalty, by
either party hereto upon at least sixty (60) days' written notice to the other
party. Any termination by the Trust will be pursuant to a vote of a majority of
the Trustees.
8. STANDARD OF CARE.
a. Except as provided by law, the Servicer will be under no liability or
obligation to anyone with respect to any failure on the part of the Board or any
investment manager to perform any of their obligations under the Controlling
Documents, or for any error or omission whatsoever on the part of the Board or
any investment manager.
b. The Servicer will not be liable for any error of judgment or mistake
of law or for any loss caused by the Trust in connection with the matters to
which this Agreement relates; provided, however, that the Servicer has acted in
the premises with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in like capacity and
familiar with such matters would use in the conduct of any enterprise of a like
character and with like aims, and in accordance with such other requirements of
law; provided, further, however, that nothing in this Agreement will protect the
Servicer against any liability to the Trust to which the Servicer would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Servicer's duties hereunder or by reason of
the Servicer's reckless disregard of the Servicer's obligations and duties
hereunder.
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9. OTHER ACTIVITIES OF THE SERVICER.
Subject to the provisions of Section 5 of this Agreement, with respect to
advance notice of the Servicer's taking on of new clients or ventures of
material significance, nothing herein contained will limit or restrict the right
of the Servicer to engage in any other business or to render services of any
kind to any other corporation, firm, individual, or association.
10. SCOPE OF AUTHORITY.
a. Shares purchased by the Servicer on behalf of shareholders of the
Trust ("Shareholders") will be registered with the Servicer, as the Trust's
transfer agent, in the Servicer's name or in the name of the Servicer's nominee.
The Shareholder will be the beneficial owner of Shares purchased and held by the
Servicer in accordance with the Shareholder's instructions and the Shareholder
may exercise all rights of a Shareholder of the Trust.
b. Neither the Servicer nor any of the Servicer's officers, employees,
agents, or assigns are authorized to make any representations concerning the
Trust or the Shares, except for those representations contained in the Trust's
then-current prospectus for such Shares, copies of which will be supplied by the
Trust to the Servicer, or in such supplemental literature or advertising as may
be authorized by the Trust in writing.
11. AUTHORITY TO ENGAGE SUB-SERVICERS.
In providing the services and assuming the obligations set forth herein,
the Servicer may, at the sole expense of the Servicer, employ one or more
sub-servicers, or may enter into such service agreements as the Servicer deems
appropriate in connection with the performance of the Servicer's duties and
obligations hereunder. Reference herein to the duties and responsibilities of
the Servicer
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shall include the duties and responsibilities of any sub-servicers employed
by the Servicer to the extent that the Servicer shall delegate such duties
and responsibilities to such sub-servicer.
12. INDEMNIFICATION.
a. The Trust shall indemnify the Servicer and hold the Servicer harmless
from and against all actions, suits, and claims, whether groundless or
otherwise, arising directly or indirectly out of or in connection with the
Servicer's performance under this Agreement and from and against any and all
losses, damages, costs, charges, attorneys' and accountant's fees, payments,
expenses, and liabilities incurred by the Servicer in connection with any such
action, suit, or claim unless caused by the Servicer's breach of this Agreement,
negligence, or willful misconduct. The Servicer shall not be under any
obligation to prosecute or to defend any action, suit, or claim arising out of
or in connection with the Servicer's performance under this Agreement, which, in
the opinion of the Servicer's counsel, may involve the Servicer in expense or
liability, and the Trust shall, so often as reasonably requested, furnish the
Servicer with satisfactory indemnity against such expense or liability, and upon
request of the Servicer, the Trust shall assume the entire defense of any
action, suit, or claim subject to the foregoing indemnity; PROVIDED, HOWEVER,
that the Servicer shall give the Trust immediate notice of any such action,
suit, or claim brought against the Servicer.
b. The Servicer shall indemnify the Trust and hold the Trust harmless
from all claims and liabilities (including reasonable attorneys' and
accountants' expenses) incurred or assessed against the Trust arising from the
Servicer's negligence, wilful misconduct, or breach of this Agreement.
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13. NOTICES.
a. Communications to the Servicer from the Trust or the Board shall be
addressed to:
Rydex Variable Trust
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
b. Communications from the Servicer to the Trust shall be addressed to:
PADCO Service Company, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
c. In the event of a change of address, communications will be addressed
to such new address as designated in a written notice from the Trust or the
Servicer, as the case may be. All communications addressed in the above manner
and by registered mail or delivered by hand will be sufficient under this
Agreement.
14. LAW GOVERNING.
This Agreement is governed by the laws of the State of Maryland (without
reference to such state's conflict of law rules).
15. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but which together shall constitute one and the same
instrument.
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16. BINDING EFFECT AND ASSIGNMENT.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that this Agreement shall
not be assignable by the Trust without the written consent of the Servicer, or
by the Servicer without the written consent of the Trust, in each case
authorized or approved by a resolution of the Trust's Trustees.
17. AMENDMENT, MODIFICATION, AND WAIVER.
No term or provision of this Agreement may be amended, modified, or waived
without the affirmative vote or action by written consent of the Servicer and
the Trust.
IN WITNESS WHEREOF, the Servicer and the Trust have executed this Agreement
as of the date first written above.
RYDEX SERIES TRUST
By:
----------------------------
Name:
-----------------------
Title:
----------------------
PADCO SERVICE COMPANY, INC.
By:
----------------------------
Name:
-----------------------
Title:
----------------------
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SCHEDULE I
GENERAL ADMINISTRATIVE SERVICES
The Servicer agrees to provide the Trust with all required general
administrative services, including, without limitation, the following:
1. Office space, equipment, and personnel.
2. Clerical and general back office services.
3. Bookkeeping, internal accounting, secretarial, and other general
administrative services.
4. Preparation of all reports, prospectuses, statements of additional
information, proxy statements, and all other materials required to be
filed or furnished by the Trust under Federal and state securities
laws.
5. Maintaining ledgers and determining net asset values.
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SCHEDULE II
SHAREHOLDER AND DIVIDEND, DISBURSEMENT SERVICES
The Servicer agrees to provide the Trust and the Shareholders with all
required shareholder and dividend disbursement services ("Services"), including,
without limitation, the following:
1. The Servicer shall provide the following services to the Shareholders of
the Trust:
a. Aggregating and processing purchases and redemption requests for Trust
Shares from Shareholders.
b. Processing dividend payments from the Trust on behalf of Shareholders.
c. Providing information periodically to Shareholders showing their
positions in Shares.
d. Arranging for bank wires.
e. Responding to Shareholder inquiries relating to the services performed
by the Servicer.
f. Providing subaccounting with respect to Shares beneficially owned by
Shareholders.
g. As required by law, forwarding shareholder communications from the
Trust (such as proxies, shareholder reports, annual and semi-annual
financial statements, and dividend, disbursement, and tax notices) to
Shareholders.
h. Providing such other similar services as the Trust may reasonably
request to the extent the Servicer is permitted to do so under
applicable statues, rules, or regulations.
i. Provide to Shareholders a schedule of any fees that the Servicer may
charge directly to the Shareholders for such Services.
2. The Servicer shall also provide the following additional Services:
a. Maintain all records required by law relating to transactions in
Shares and, upon request by the Trust, promptly make such of these
records available to the Trust as the Trust may reasonably request in
connection with the operations of the Trust.
b. Promptly notify the Trust if the Servicer experiences any difficulty
in maintaining the records described in this Schedule II to the
Agreement in an accurate and complete manner.
c. Furnish the Trust or any designee of the Trust ("Designee") with such
information relating to the Servicer's performance under this
Agreement as the Trust or the Designee may reasonably request
(including, without limitation, periodic certifications confirming the
provision to Shareholders of the Services described herein), and shall
otherwise cooperate with the Trust and the Trust's Designees
(including, without limitation, any auditors designated by the Trust),
in connection with the preparation of reports to the Board of Trustees
concerning this Agreement and the monies paid or payable by the Trust
pursuant hereto, as well as any other reports or filings that may be
required by law.
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SCHEDULE III
TRANSFER AGENT AND REGISTRAR SERVICES
The Servicer agrees to provide the Trust with all required transfer agent
and registrar services, including, without limitation, the following:
1. Maintaining all shareholder accounts, including processing of new
accounts.
2. Posting address changes and other file maintenance for shareholder
accounts.
3. Posting all transactions to the shareholder file, including:
- Direct purchases
- Wire order purchases
- Direct redemptions
- Wire order redemptions
- Draft redemptions
- Direct exchanges
- Transfers
4. Quality control reviewing of every transaction before the mailing of
confirmations, checks, and/or certificates to shareholders.
5. Issuing all checks and shipping and replacing lost checks.
6. Mailing confirmations, checks, and/or certificates resulting from
transaction requests of shareholders.
7. Performing other mailings, including:
- Semi-annual and annual reports
- I.R.S. Form 1099/year-end shareholder reporting
- Systematic withdrawal plan payments
- Daily confirmations
8. Answering all service-related telephone inquiries from shareholders,
including:
- General and policy inquiries (research and resolve problems)
- Trust yield inquiries
- Taking shareholder processing requests and account maintenance
changes by telephone
- Submitting pending requests to correspondence
- Monitoring online statistical performance of shares
- Developing reports on telephone activity
