CUSTODY AGREEMENT
BETWEEN
THE RYDEX VARIABLE TRUST
AND
STAR BANK, N.A.
DATED AUGUST 11, 1998
CUSTODY AGREEMENT
Agreement made as of the 11th day of August, 1998, between Rydex Variable
Trust (the "Trust"), a business trust organized under the laws of Delaware and
having its offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ 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 is operated and
maintained by the Trust for the benefit of the holders of shares of the Funds,
and Star Bank, N.A. (the "Custodian"), a national banking association having its
principal office and place of business at Star Bank Center, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, which Agreement provides for the furnishing of custodian
services to the Funds.
W I T N E S S E T H:
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 Chairman,
President, Secretary, and the Vice President, 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
-2-
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.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury ▇▇▇▇-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 in 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
-3-
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
as such purchase or sale.
7. "Officers" shall be deemed to include the Chairman, the President, the
Secretary, and Vice President of the Trust listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from 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.
9. "Prospectus" or "Prospectuses" shall mean the Funds' 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 or 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
-4-
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 of 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-
5. A Certificate of the President and Secretary setting forth the names
and signatures of the present Officers of the Trust.
ARTICLE IV
CUSTODY OF CASH AND SECURITIES
1. The Trust will deliver or cause to be delivered to the Custodian all
Fund 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 reverse 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 shall disburse the same only:
-6-
(a) In payment for Securities purchased 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 payments 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 questions 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 IX 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 Fund
without physical delivery, the Custodian shall also identify as belonging to the
Funds a quantity of Securities in a rungible 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.
-7-
At least monthly and from 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;
-8-
(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 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
-9-
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 authorized 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 ownership 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
-10-
total amount payable to the person from whom or the broker through 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 of 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 is obligations in respect of any put
or call option, as described in the Trust's Prospectus, require
that the Fund deposit
-11-
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 is 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, sales proceeds will
likewise be credited to the account of such Fund irrespectively of delivery.
In the case of "sale fails," the Custodian may request the assistance of
the Funds in making delivery of the failed Security.
ARTICLE VI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
-12-
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 the 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.
-13-
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 for 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 form 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.
ARTICLE VIII
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 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,
-14-
(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 Act 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 form 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-party lenders as it may deem appropriate.
-15-
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 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 purchase by the Trust with respect to its
liabilities on behalf of the Funds 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 or 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
-16-
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, having differing
interpretation of such question of law. The Custodian shall be liable to the
Trust for any proximate loss or damage resulting from the ▇▇▇ 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
"Indemnifying 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
-17-
of any additional counsel retained by the Indemnified Party. In no case shall
any party claiming the right to indemnification confess any 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 propriety of the amount to be paid 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;
-18-
(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 my 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 to 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:
(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
-19-
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, banking institutions located in
foreign countries, of Securities and monies at any time owned by 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 By-Laws.
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
-20-
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, or
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 e 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 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 or 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, or 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
-21-
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 accounts 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 31a-1 and 31a-2 thereunder, and (b) preserve 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
-22-
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 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 of 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
-23-
not serve, the Trust shall upon the 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 or
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.
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
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
-24-
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 impled 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 the Fund Assets.
4. Such provisions of the Prospectuses of the Funds and any other
documents (including advertising material) specifically mentioning 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 Star
Bank Center, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, 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
-25-
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 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 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.
8. This Agreement shall extend 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 year first above written.
ATTEST: Rydex Variable Trust
By:
-------------------------- --------------------------
ATTEST: Star Bank, N.A.
By:
-------------------------- --------------------------
-26-
APPENDIX A
AUTHORIZED PERSONS SPECIMEN SIGNATURES
------------------ -------------------
Controller: ▇▇▇▇▇▇ ▇▇▇▇
-------------------
Assistant Controller: ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
Senior Portfolio Accountant: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------
Portfolio Accountant: ▇▇▇▇▇▇ ▇▇▇▇
-------------------
Portfolio Accountant: ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
-▇▇-
▇▇▇▇▇▇▇▇ ▇
The following Depository(s) and Sub-Custodian(s) are employed currently by
Star Bank, N.A., for securities processing and control:
The Depository Trust Company (New York)
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
-28-
APPENDIX C
STAR BANK, N.A.
CUSTODY TRANSACTION 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 11.00
through DTC or Federal Reserve
c) For each portfolio transaction processed 25.00
through our New York custodian
d) For each GNMA/Amortized Security Purchase 25.00
e) For each GNMA Prin/ Int Paydowns, GNMA Sales 8.00
f) For each option/future contract written, exercise 25.00
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
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. ▇▇▇ DOCUMENTS 8.00
Per shareholder/year to hold each ▇▇▇ document.
-29-
V. EARNINGS CREDITS
On a monthly basis any earnings credits generated from uninvested custody
balances will be first applied against any cash management service fees and
then to custody transaction fees (as referenced in item #1 above).
Earnings credits are based on the average yield of the 91 day U.S. Treasury
▇▇▇▇ for the preceding thirteen weeks less the 10% reserve.
-30-
