After careful consideration, the Board of Trustees of the Trust unanimously recommendapproved the Plan of Liquidation and recommends that shareholders vote "FOR" Proposals 1, 2, 3, 4, 5
and 6.
Variable annuity contract or variable life insurance policy ("insurance
products") owners or shareholders“FOR” the Proposals.
Shareholders of record at the close of business on October
3, 2011June 26, 2013 are entitled to notice of, and to vote at, the Meeting, even if such
shareholders or insurance product owners no longer own such shares or products.
You are invested in a Fund through the insurance products that you own.
We call yourSpecial Meeting. Your attention is called to the accompanying Joint Proxy Statement. You are requested to complete, date, and sign the enclosed proxy card and return it promptly in the envelope provided for that purpose. Your proxy card also provides instructions for voting via telephone or the Internet if you wish to take advantage of these voting options. Proxies may be revoked prior to the
Meetingat any time by timely executing and submitting a revised proxy, (following the
methods noted above), by giving written notice of revocation to the Fund(s)
prior to the Meeting,Trust, or by voting in person at the Special Meeting.
By Order of the Board of Trustees,
Richard M. Goldman
President
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS
/s/ Amy J. Lee |
| Amy J. Lee |
| Secretary |
DWA Flexible Allocation Fund
DWA Sector Rotation Fund
All-Asset Conservative Strategy Fund
All-Asset Moderate Strategy Fund
All-Asset Aggressive Strategy Fund
Each a Series of
Rydex Variable Trust
805 King Farm Boulevard, Suite 600
Rockville, Maryland 20850
(800) 820-0888
PROXY STATEMENT
SPECIAL MEETING OF THE NUMBER OF VOTES YOU HOLD.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT YOUR
PROXY CARD BE RETURNED PROMPTLY.
FOR YOUR CONVENIENCE, YOU MAY ALSO VOTE BY TELEPHONE OR INTERNET BY FOLLOWING
THE ENCLOSED INSTRUCTIONS. IF YOU VOTE BY TELEPHONE OR VIA THE INTERNET, PLEASE
DO NOT RETURN YOUR PROXY CARD UNLESS YOU ELECT TO CHANGE YOUR VOTE.
ix
FUNDS PARTICIPATING IN THE MEETING
ON NOVEMBER
To be held August 22, 2011
RYDEX VARIABLE TRUST
2013
This Proxy Statement is furnished by the Board of Trustees of Rydex Variable Trust (the “Trust”), on behalf of the DWA Flexible Allocation Fund, DWA Sector Rotation Fund, All-Asset Conservative Strategy Fund, All-Asset Moderate Strategy Fund, and
All-Asset Aggressive Strategy Fund (each, a “Fund” and, collectively, the “Funds”), each a separate series of the Trust, with respect to the following proposals (each, a “Proposal” and, collectively, the “Proposals”):
| Proposal 1: | To approve a Plan of Liquidation, providing for the liquidation and dissolution of the DWA Flexible Allocation Fund. | |
| Proposal 2: | To approve a Plan of Liquidation, providing for the liquidation and dissolution of the DWA Sector Rotation Fund. | |
| Proposal 3: | To approve a Plan of Liquidation, providing for the liquidation and dissolution of the All-Asset Conservative Strategy Fund. | |
| Proposal 4: | To approve a Plan of Liquidation, providing for the liquidation and dissolution of the All-Asset Moderate Strategy Fund. | |
| Proposal 5: | To approve a Plan of Liquidation, providing for the liquidation and dissolution of the All-Asset Aggressive Strategy | |
It is expected that this Proxy Statement, the Notice of Special Meeting of Shareholders, and the enclosed proxy card will be sent to shareholders on or about July 12, 2013.
INTRODUCTION
Why is the Special Meeting Being Held?
At the Special Meeting of Shareholders (the “Special Meeting”), shareholders of each Fund
x
TABLE OF CONTENTS
OVERVIEW OF THE PROPOSALS ......................................................................... 3
PROPOSALS 1-3: Approval of the New Agreements ................................................. 3
Information Regarding the Transaction .................................................... 3
Section 15(f) of the 1940 Act ............................................................ 5
Approval of the New Agreements by the Board .............................................. 5
Board Considerations in Approving the New Agreements ..................................... 6
New Agreements ........................................................................... 7
PROPOSAL 4: Approval of the Election of Trustees............................................... 9
PROPOSAL 5: Approval of a "Manager of Managers" Arrangement ................................... 9
PROPOSAL 6: Money Market Fund only--Approval of the Elimination of the
Fund's Fundamental Investment Policy on Investing in Other Investment Companies .......... 10
PROPOSAL 1--THE APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS WITH RESPECT TO ALL FUNDS .......... 11
The Investment Adviser ........................................................................ 11
Material Terms of the New Investment Advisory Agreements ...................................... 11
BOARD RECOMMENDATION ON PROPOSAL 1 ................................................................ 13
PROPOSAL 2--THE APPROVAL OF NEW SUB-ADVISORY AGREEMENTS ........................................... 14
Information About CLS ......................................................................... 14
Material Terms of the CLS Sub-Advisory Agreements ............................................. 15
BOARD RECOMMENDATION ON PROPOSAL 2 ................................................................ 15
PROPOSAL 3--THE APPROVAL OF NEW SUB-ADVISORY AGREEMENTS ........................................... 16
Information About DWA ......................................................................... 16
Material Terms of the DWA Sub-Advisory Agreements ............................................. 17
BOARD RECOMMENDATION ON PROPOSAL 3 ................................................................ 17
PROPOSAL 4--THE APPROVAL OF THE ELECTION OF TRUSTEES FOR THE TRUST ................................ 18
Information Regarding the Nominees ............................................................ 18
Board's Consideration of Each Nominee's Qualifications, Experience, Attributes or Skills ...... 22
Principal Officers of the Funds ............................................................... 25
Nominee Ownership of Portfolio Shares ......................................................... 27
Board Compensation ............................................................................ 28
Committees and Meetings of the Board .......................................................... 30
Independent Registered Public Accounting Firm ................................................. 32
BOARD RECOMMENDATION ON PROPOSAL 4 ................................................................ 33
PROPOSAL 5--THE APPROVAL OF A "MANAGER OF MANAGERS" ARRANGEMENT WITH RESPECT TO ALL FUNDS ......... 34
"Manager of Managers" Arrangement ............................................................. 34
Conditions of the Exemptive Relief ............................................................ 35
Board Considerations in Approving the "Manager of Managers" Arrangement ....................... 35
BOARD RECOMMENDATION ON PROPOSAL 5 ................................................................ 36
xi
PROPOSAL 6 -- THE APPROVAL OF A CHANGE TO THE FUNDAMENTAL INVESTMENT POLICY ON INVESTING
IN OTHER INVESTMENT COMPANIES WITH RESPECT TO THE MONEY MARKET FUND ........................... 37
Proposed Fundamental Investment Policy......................................................... 37
Current Fundamental Investment Policy ......................................................... 37
Discussion of Proposed Modification ........................................................... 37
BOARD RECOMMENDATION ON PROPOSAL 6 ................................................................ 38
OTHER BUSINESS .................................................................................... 39
ADDITIONAL INFORMATION ............................................................................ 39
Administrator, Principal Underwriter and Transfer Agent ....................................... 39
Affiliations and Affiliated Brokerage ......................................................... 39
Other Information ............................................................................. 39
Voting Information ............................................................................ 39
Shareholder Proposals ......................................................................... 42
xii
APPENDICES
Appendix A CORPORATE STRUCTURE OF THE INVESTMENT ADVISER ................................... A-1
Appendix B FORMS OF NEW INVESTMENT ADVISORY AGREEMENTS ..................................... B-1
Appendix C INFORMATION REGARDING THE INVESTMENT ADVISORY AGREEMENTS AND
FEES PAID TO THE INVESTMENT ADVISER AND AFFILIATES .............................. C-1
Appendix D TRUSTEES/MANAGERS AND OFFICERS OF THE INVESTMENT ADVISER ........................ D-1
Appendix E ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES ADVISED BY SECURITY INVESTORS, LLC ................................... E-1
Appendix F FORM OF NEW SUB-ADVISORY AGREEMENT WITH CLS INVESTMENTS, LLC .................... F-1
Appendix G INFORMATION REGARDING THE SUB-ADVISORY AGREEMENT WITH CLS
INVESTMENTS, LLC AND FEES PAID TO THE SUB-ADVISER ............................... G-1
Appendix H DIRECTORS/TRUSTEES/MANAGERS AND OFFICERS OF CLS INVESTMENTS, LLC ................ H-1
Appendix I ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES ADVISED BY CLS INVESTMENTS, LLC.. .................................... I-1
Appendix J FORM OF NEW SUB-ADVISORY AGREEMENT WITH DORSEY, WRIGHT & ASSOCIATES, INC. ....... J-1
Appendix K INFORMATION REGARDING THE SUB-ADVISORY AGREEMENT WITH DORSEY, WRIGHT &
ASSOCIATES, INC. AND FEES PAID TO THE SUB-ADVISER ............................... K-1
Appendix L DIRECTORS/TRUSTEES/MANAGERS AND OFFICERS OF DORSEY, WRIGHT & ASSOCIATES, INC. ... L-1
Appendix M ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT OBJECTIVES ADVISED BY
DORSEY, WRIGHT & ASSOCIATES, INC. ............................................... M-1
Appendix N OUTSTANDING SHARES .............................................................. N-1
xiii
Appendix O BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF EACH FUND ....................... O-1
Appendix P NOMINATING COMMITTEE CHARTER .................................................... P-1
xiv
RYDEX VARIABLE TRUSTwill be asked to approve a Plan of Liquidation (the “Plan”), providing for the liquidation and dissolution of the Fund. In addition, such other business, not currently contemplated, that may properly come before the Special Meeting or any adjournment(s) thereof may be transacted in the discretion of the proxies or their substitutes.
Why did you send me this booklet?
Shares of the Funds are not offered directly to the public but are sold only to insurance companies and their separate accounts as the underlying investment medium for owners of variable annuity contracts and variable life insurance policies (together, “Variable Contracts”). As such, First Security Benefit Life Insurance and Annuity Company of New York, Security Benefit Life Insurance Company, Jefferson National Life Insurance Company, Nationwide Life Insurance Company and Midland National Life Insurance Company (collectively, the “Insurance Companies”) are the only shareholders of record of the Funds. The Trust is soliciting voting instructions from variable annuity contract holders and variable life insurance policy owners (together, “Contract Holders”) invested in the Funds in connection with the Proposals. As such, and for ease of reference throughout the Proxy Statement, Contract Holders may be referred to as “shareholders” of the Funds.
You have received this Proxy Statement because you have a Variable Contract issued by of one of the Insurance Companies and you are invested in one or more of the Funds. As such, you have the right to give voting instructions on shares of the Fund(s) that are attributable to your Variable Contract, if your voting instructions are properly submitted and received prior to the Special Meeting.
This booklet also includes certain information about the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), and Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2), as provided inAppendix A. If the Proposal(s) relating to the Fund(s) in which you own shares is approved by shareholders and you have not elected to move your contract value to a new investment option prior to the liquidation of the Fund(s), upon the liquidation of the Fund(s), your contract value will be reinvested in either the Rydex Variable Trust - U.S. Government Money Market Fund or the SBL Fund - Series C (Money Market) if you have a variable annuity issued by First Security Benefit Life Insurance and Annuity Company of New York or by Security Benefit Life Insurance Company; the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares) if you have a variable annuity issued by Jefferson National Life Insurance Company; the Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares) if you have a variable annuity issued by Nationwide Life Insurance Company; or the Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) if you have a variable annuity issued by Midland National Life Insurance Company. Please see “How are the proposed Plan and related transactions to be effected if the Funds’ shareholders approve the Proposals?” below for more information.
2
Who is asking for my vote?
The Board is soliciting your vote for a special meeting of the Funds’ shareholders.
Who is eligible to vote?
Contract Holders with an investment in shares of the Funds as of the close of business on June 26, 2013 (the “Record Date”) are eligible to vote or instruct the Insurance Companies as to how to vote their shares.
How do I vote?
Shares of each Fund are sold to insurance companies and their separate accounts and are used as investment options under Variable Contracts. Contract Holders who select a Fund for investment through a Variable Contract have a beneficial interest in that Fund, but do not invest directly in or hold shares of the Fund. An insurance company that uses a Fund as a funding vehicle, is, in most cases, the legal shareholder of the Fund and, as such, has sole voting power with respect to the shares, but generally will pass through any voting rights to Contract Holders. Therefore, for separate accounts that are registered with the Securities and Exchange Commission (the “SEC”), an insurance company will request voting instructions from the Contract Holder and will vote shares or other interests in the separate account as directed by the Contract Holder. In the event that any Contract Holders fail to provide voting instructions with respect to separate accounts registered with the SEC, the Insurance Companies will vote the shares attributable to those Contract Holders for, against, or abstain, in the same proportion as the shares for which voting instructions were received from Contract Holders investing through the same separate account, even if only a small number of Contract Holders provide voting instructions. The effect of proportional voting is that if a large number of Contract Holders fail to give voting instructions, a small number of Contract Holders may determine the outcome of the vote.
Contract Holders permitted to give instructions to an Insurance Company and the number of shares for which such instructions may be given for purposes of voting at the Special Meeting, and any adjournment or postponement thereof, will be determined as of the Record Date. In connection with the solicitation of such instructions from Contract Holders, it is expected that the Insurance Companies will furnish a copy of this Proxy Statement to Contract Holders.
If a shareholder wishes to participate in the Special Meeting, he or she may submit the proxy card that accompanies this Proxy Statement or attend the Special Meeting in person. All persons entitled to direct the voting of shares, whether they are Contract Holders or Insurance Companies are described as shareholders for purposes of this Proxy Statement. Shareholders can vote in one of four ways:
By mail with the enclosed proxy card – be sure to sign, date and return it in the enclosed postage-paid envelope;
Through the website listed in the proxy voting instructions;
By telephone using the toll-free number listed in the proxy voting instructions; or
In person at the shareholder meeting on August 22, 2013.
3
When and where will the Special Meeting be held?
The Special Meeting is scheduled to be held at the offices of Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850 (800) 820-0888
JOINT PROXY STATEMENT
SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBERon August 22, 20112013 at 1:00 p.m., Eastern Time, and, if the Special Meeting is adjourned or postponed, at any adjournment(s) or postponement(s) of the Special Meeting.
How can I obtain more information about the Funds?
Additional information about each Fund is available in that Fund’s prospectus, statement of additional information, semi-annual report, and annual report to shareholders. Copies of the Funds’ annual and semi-annual reports have previously been mailed to shareholders. This joint proxy statement ("Joint Proxy Statement") and enclosed notice
and proxy card are being furnishedStatement should be read in connectionconjunction with the solicitationannual and semi-annual reports. You can obtain copies of proxiesthose reports, without charge, by the Board of Trustees (the "Board") of Rydex Variable Trust (the
"Trust"). The proxies are being solicited for use at a special joint meeting of
shareholders ofwriting to the Trust, to be held at the Trust's offices at 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850, or by calling 888.820.0888.
How does the Board recommend that I vote?
The Board recommends that shareholders vote“FOR”the Proposals.
THE PROPOSALS
APPROVAL OF THE PLAN OF LIQUIDATION
What are the Proposals?
At a regular meeting of the Board held on November 22, 2011 at 1:00
p.m. Eastern Time,June 5, 2013, the Board, including those trustees who are not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”), unanimously approved the Plan and directed that the Plan be submitted to each Fund’s shareholders for approval. A copy of the form of the Plan, which provides for the complete liquidation of all assets of each Fund, is attached to this Proxy Statement asAppendix C.
What are the reasons for the proposed liquidation and dissolution of the Funds?
The Funds, which are insurance dedicated funds offered through Variable Contracts issued by the Insurance Companies, commenced operations on the following dates:
Fund | Inception Date | |
DWA Flexible Allocation Fund | April 28, 2010 | |
DWA Sector Rotation Fund | April 28, 2010 | |
All-Asset Conservative Strategy Fund | October 27, 2006 | |
All-Asset Moderate Strategy Fund | October 27, 2006 | |
All-Asset Aggressive Strategy Fund | October 27, 2006 |
The liquidations are part of a larger initiative of Security Investors, LLC (the “Advisor” or “Guggenheim Investments”), the investment adviser to the Funds, to reposition, rationalize and streamline the Guggenheim family of funds in order to reduce duplication among funds and strengthen the fund lineup overall. In addition, Guggenheim Investments is requesting the closure and liquidation of the Funds for the following specific reasons:
| • | AUM Growth Affects Fund Expenses and Sustainability: For the DWA Flexible Allocation Fund and DWA Sector Rotation Fund, each Fund has a three-year plus track record, and in the case of the |
4
All-Asset Conservative Strategy Fund, All-Asset Moderate Strategy Fund, and All-Asset Aggressive Strategy Fund, each Fund has a six-year plus track record, during which time asset growth has been minimal and the potential for growth seems unlikely. Considering that the asset size of each Fund is small, management does not anticipate that any of the Funds will be able to attract sufficient additional assets in the foreseeable future to maintain viability, nor does management anticipate offering the Fund through new insurance or retirement products. Furthermore, management determined that maintaining the Funds at their current asset levels would not be beneficial in the long-term to shareholders. For example, the small asset base of the Funds makes it difficult for the Funds to take large positions in potentially attractive investment opportunities. Consequently, management determined that action should be taken to address the small asset size of the Funds. |
| • | Limited Advisor and Investor Appetite for the Funds:While each Fund, competing funds included in each Fund’s peer group, and the overall market environment, among other factors, were evaluated prior to launch, the demand for the Funds remains limited and below initial expectations. Since inception, each Fund has been less popular with the public than originally anticipated. Sales have been weak, and the Insurance Companies do not anticipate any future prospects for gathering substantial assets for the Funds. To illustrate, as of June 3, 2013, the Funds’ approximate assets under management were as follows: |
Fund | Assets Under Management | |||
DWA Flexible Allocation Fund | $ | 11,938,679 | ||
DWA Sector Rotation Fund | $ | 14,252,134 | ||
All-Asset Conservative Strategy Fund | $ | 11,443,325 | ||
All-Asset Moderate Strategy Fund | $ | 20,723,746 | ||
All-Asset Aggressive Strategy Fund | $ | 5,622,929 | ||
| • | Alternatives to Closure and Liquidation: In considering a recommendation to liquidate, Guggenheim Investments generally evaluates several alternatives, including but not limited to continuing to operate without any change, amending the principal investment strategies, merger into a fund that provides similar investment exposure, and closure and liquidation. The timing of any effort to “retool” or revise a Fund’s principal investment strategies must correspond with a desire and need to deliver a new strategy to the marketplace, which is not the case at this time. The consideration of a possible merger requires an in-depth analysis, including the regulatory implications of such a merger, the likelihood of obtaining shareholder approval, the length of time needed to obtain a shareholder quorum, and the costs associated with undertaking a proxy, among other elements. After consideration, management concluded that due to costs associated with a fund merger, which would be borne by both management and shareholders of the Funds, fund mergers were not an appropriate option. Following the consideration of all of these factors, Guggenheim Investments determined that the termination and liquidation of each Fund is the best alternative currently available, and is in the best interests of each Fund’s shareholders. Accordingly, management recommended and the Board agreed that liquidation and dissolution of the Funds represents the most favorable course of action. |
How are the proposed Plan and related transactions to be effected if the Funds’ shareholders approve the Proposals?
If the Plan is approved by shareholders, the Plan will be effective on or about August 23, 2013 (the “Effective Date”). As soon as practicable, but in no event later than September 6, 2013 (the “Liquidation Date”), the Funds will be liquidated in accordance with the terms of the Plan. All portfolio securities of the Funds not already converted to cash or cash equivalents will be converted to cash or cash equivalents.
5
Between the Effective Date and the Liquidation Date (the “Liquidation Period”), each Fund will pay, discharge, or otherwise provide for the payment or discharge of, any and all adjournmentsits liabilities and obligations of the Fund. If any Fund is unable to pay, discharge or postponements thereof (the
"Meeting").
Theotherwise provide for any of its liabilities during the Liquidation Period, the Fund may: (i) retain cash or cash equivalents in an amount that it estimates is necessary to discharge any unpaid liabilities and obligations of the Fund on the Fund’s books as of the Liquidation Date; and (ii) pay such contingent liabilities as the Board has calledshall reasonably deem to exist against the Meeting and is soliciting proxies fromassets of the Fund on the Fund’s books.
On the Liquidation Date, each Fund’s assets will be distributed ratably among its shareholders of each series of the Trust listedrecord in one or more cash payments which will immediately be reinvested in the accompanying notice to
this Joint Proxy Statement (each, a "Fund"AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market), and collectively, the "Funds") for
the purposes listed below:
As discussed above, the Funds are only available primarilyas an investment option for Variable Contracts issued by the Insurance Companies and to the trustees and custodians of certain Qualified Plans. Prior to the proposed liquidation, Contract Holders will be provided an opportunity to transfer their assets to the other portfolios available under their Variable Contracts. In the event that shareholders of the Fund(s) in which you own shares approve the Plan and you have not elected to move your contract value to a new investment option prior to the Funds’ Liquidation Date, upon the liquidation of the Fund(s) in which you own shares, your contract value will be reinvested in a default investment option as follows:
If you are a participant in a registered group annuity contract or you hold an individual variable annuity contract issued by First Security Benefit Life Insurance and Annuity Company of New York or by Security Benefit Life Insurance Company, your contract value will be reinvested in the Rydex Variable Trust - U.S. Government Money Market Fund or SBL Fund - Series C (Money Market), depending upon the investment options available to you under your Variable Contract.
If you are a participant in a registered group annuity contract or you hold an individual variable annuity contract issued by Jefferson National Life Insurance Company, your contract value will be reinvested in the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares).
If you are a participant in a registered group annuity contract or you hold an individual annuity contract issued by Nationwide Life Insurance Company, your contract value will be reinvested in the Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares).
If you are a participant in a registered group annuity contract or hold an individual annuity contract issued by Midland National Life Insurance Company, your contract value will be reinvested in the Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2).
6
A summary of each default investment option’s investment objective, principal investment strategies, risks, and expenses is included in Appendix A. Shareholders should read this information and each default investment option’s prospectus carefully before deciding to take advantage of the default investment options as some of the funds may have higher fees and expenses and different risks than others.
After the liquidation of the Funds, you will be provided a notice about this reinvestment and will be informed that you may request transfers of your contract value out of any of these funds pursuant to the terms under your Variable Contract.
Contract Holders may have other portfolio options through their variable annuity and life insurance products. The Trust is soliciting votingplatforms. If you are a Contract Holder whose Variable Contract includes one or more of the Funds as an investment option, please consult the current prospectus for your Variable Contract or call 1-800-355-4570 or 1-800-888-2461 if you are a First Security Benefit Life Insurance and Annuity Company of New York Contract holder, 1-800-888-2461 if you are a Security Benefit Life Insurance Company Contract Holder, 1-866-667-0561 if you are a Jefferson National Contract Holder, 1-800-848-6331 if you are a Nationwide Life Insurance Company Contract Holder or 1-866-747-3421 if you are a Midland National Life Insurance Company Contract Holder for more information on other investment options available to you and instructions from insurance product
ownerson how to transfer your contract value.
With respect to Contract Holders, after consulting with the Insurance Company that issued the pertinent Variable Contracts, management has advised that the liquidation of the Funds will not alter a Contract Holder’s rights or the obligations of the Insurance Company to that Contract Holder. In particular, the liquidation will not affect a Contract Holder’s right to transfer contract values among and shareholdersbetween other investment options offered under their Variable Contracts. A Contract Holder would be able to transfer contract values out of any sub-account invested in each Fund inthe Funds free of charge at any time. In connection with the Proposals,liquidation of the Funds, any such transfer out of a Fund or any of the default investment options described above within a period beginning 60 days before and ending 60 days after the Liquidation Date will not be counted for the purposes of applying any excessive trading policies. Contract Holders will continue to have the same rights they previously had to withdraw contract values allocated to the Funds under their Variable Contracts. Withdrawal of contract value may involve other charges (e.g., surrender charges) and other adverse consequences under the terms of the Variable Contracts, and Contract Holders should consult the prospectus for their Variable Contract.
Information About the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market) and Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2)
Appendix A contains certain information about the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market) and Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2), including a table comparing current operating expenses between each Fund and these funds. This information is summary in nature, and you should consult the prospectuses for the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market), or Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) for more complete information about these funds. In
7
connection with the liquidation of the Funds, you will receive a prospectus of the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market), or Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) if your contract value is reinvested in any of these funds, as applicable. For ease of reference, throughout this Joint Proxy Statement,
insurance product owners may be referred toThere is no assurance that the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market) or Variable Insurance Products Fund V (Fidelity Variable Insurance Products) -Money Market Portfolio (Service Class 2) will perform as "shareholders" of a Fund.
If you have any questionsexpected or achieve its investment objective.
More detailed information about the Proposals or about voting, please
call The Altman Group, the Funds' proxy solicitor, at 1-877-864-5058.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE MEETING TO BE HELD ON NOVEMBER 22, 2011
This Joint Proxy StatementAIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market), and Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) is available at
www.proxyonline.us/docs/rydexsgi. In addition, shareholders can find importantin each corresponding fund’s prospectus, statement of additional information, about each Fund in the Fund'ssemi-annual report, and annual report dated December 31,
2010, including financial reports for the fiscal year ended December 31, 2010,
and in any recent semi-annual report succeeding such annual report, if any. You
may obtainto shareholders. The copies of theseeach fund’s prospectus, statement of additional information, and semi-annual and annual reports can be obtained, without charge, by writing to a Trust, by
callingyour insurance carrier at the telephone number shown on the front page of this Joint Proxy
Statement or at www.rydex-sgi.com.
2
OVERVIEW OF THE PROPOSALS
PROPOSALS 1 - 3
APPROVAL OF THE NEW AGREEMENTS
Proposals 1 through 3 relate to actions that need to be taken in response
to an impending transaction (the "Transaction") involving Securities Investors,
LLC, which operates under the name Rydex Investments, the investment adviser to
each of the Funds (the "Investment Adviser").
The Investment Company Act of 1940 (the "1940 Act"), the law that
regulates mutual funds, such as the Funds, provides that a mutual fund's
investment advisory agreement terminates whenever there is a "change in control"
of the investment adviser. Pursuant to the Transaction, there will be a "change
in control" of the Investment Adviser. In order for the Investment Adviser to
continue to advise the Funds and manage their investments, a new investment
advisory agreement must be in effect upon the consummation of the Transaction.
For that reason, we are seeking shareholder approval of new investment advisory
agreements for the Funds.
In addition, the Transaction will result in the termination of the
current sub-advisory agreements between: (i) the Investment Adviser and CLS
Investments, LLC ("CLS") with respect to the Amerigo Fund, Clermont Fund and
Select Allocation Fund (the "CLS Funds"); and (ii) the Investment Adviser and
Dorsey, Wright & Associates, Inc. ("DWA") with respect to the DWA Flexible
Allocation Fund and DWA Sector Rotation Fund (the "DWA Funds"). Accordingly,
Proposal 1 relates to the approval by shareholders of new investment advisory
agreements between the Investment Adviser and the Funds (the "New Investment
Advisory Agreements"). Similarly, Proposal 2 relates to the approval by
shareholders of new sub-advisory agreements between the Investment Adviser and
CLS with respect to the CLS Funds (the "New CLS Agreements") and Proposal 3
relates to the approval by shareholders of new sub-advisory agreements between
the Investment Adviser and DWA with respect to the DWA Funds (the "New DWA
Agreements") (together with the New Investment Advisory Agreements, the "New
Agreements").
FOR THE REASONS DISCUSSED BELOW, THE BOARD RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE NEW
AGREEMENTS.
INFORMATION REGARDING THE TRANSACTION
Summary Discussion--Currently, the Investment Adviser is a part of a
large group of companies that also includes businesses such asfollowing addresses:
First Security Benefit Life Insurance Company. The Investment Adviser is managed by an indirect
wholly-owned subsidiaryand Annuity Company of Guggenheim Capital, LLC ("Guggenheim Capital").
Guggenheim Capital wishes to purchase the Investment Adviser and certain
affiliated businesses. This Transaction will be effected by Guggenheim Capital
buying 100%New York
PO Box 750497
Topeka, Kansas 66675-0497
Security Benefit Life Insurance Company
PO Box 750497
Topeka, Kansas 66675-0497
Jefferson National Life Insurance Company
P.O. Box 36840
Louisville, Kentucky 40233
Nationwide Financial
P.O. Box 182021
Columbus, Ohio 43218-2021
Midland National Life Insurance Company
P.O. Box 758547
Topeka, Kansas 66675-8547
Are there any federal income tax consequences?
Liquidation of the equity of the holding company that owns the Investment
Adviser. After the
3
Transaction, Guggenheim Capital will control the Investment Adviser (through one
or more of its subsidiaries), and it is expected that the services rendered to
the Funds by the Investment Adviser will not change.
Detailed Discussion--On September 20, 2011, Guggenheim Capital agreed to
purchase the indirect holding company of the Investment Adviser. Guggenheim
Capital's subsidiary, Guggenheim Partners, LLC ("Guggenheim") is a global,
independent, privately-held, diversified financial services firm with more than
1,500 dedicated professionals. Headquartered in Chicago and New York, the firm
operates through offices in 25 cities in the U.S., Europe and Asia. Guggenheim
operates businesses in investment management, capital markets, wealth management
and merchant banking. Within the investment and wealth management businesses,
Guggenheim specializes in fixed income and alternative investments, and in
providing sophisticated wealth advisory and family office services. Within
capital markets, it specializes in providing debt financing and structured
finance solutions to clients. Its merchant banking activities include a
portfolio of investments in funds managed by it, joint venture business
investments, and new business launch activities not integrated into other
primary operating businesses. Detailed information on the effect of the
Transaction on the ownership structure of the Investment Adviser is set forth in
Appendix A to this Joint Proxy Statement.
The Transaction will not result in material changes to the day-to-day
management and operations of the Funds. The personnel, officers and managers of
the Investment Adviser will remain the same. Guggenheim Capital will be the
parent company of the Investment Adviser.
In addition, as a result of the Transaction, Guggenheim Capital will
acquire control of the Funds' principal underwriter/distributor, Rydex
Distributors, LLC (the "Distributor"), an affiliate of the Investment Adviser.
Under the 1940 Act, shareholder approval is not required in order for the
Distributor to continue providing services to the Funds after the closing of the
Transaction.
While the parties expect the Transaction to be completed in late 2011 or
early 2012, it is subject to various conditions (including a condition that 80%
or more of the Funds' assets managed by the Investment Adviser approve the New
Investment Advisory Agreements), and may be delayed or even terminated due to
unforeseen circumstances. If for some reason the Transaction does not occur, the
current investment advisory agreements between the Investment Adviser and the
Funds (each, a "Current Investment Advisory Agreement" and collectively, the
"Current Investment Advisory Agreements"), the current sub-advisory agreements
between the Investment Adviser and CLS with respect to the CLS Funds (the
"Current CLS Agreements"), and the current sub-advisory agreements between the
Investment Adviser and DWA with respect to the DWA Funds (the "Current DWA
Agreements") (collectively, the "Current Agreements") will not terminate and
will remain in effect, and the New Agreements will not be entered into, even if
they have been approved by Fund shareholders. If Proposal 1 is not approved by
shareholders of any Fund, the Board will evaluate other short-and long-term
options permitted by law, which could include interim investment advisory
agreements of limited duration with the Investment Adviser, or maintaining the
current ownership structure pending further discussions.
4
SECTION 15(f) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that, when a change in control of
an investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection with the change in
control as long as two conditions are met. The first condition specifies that no
"unfair burden" may be imposed on the fund as a result of a transaction relating
to the change in control, including any express or implied terms, conditions or
understandings. The term "unfair burden," as defined in the 1940 Act, includes
any arrangement during the two-year period after the change in control
transaction whereby the investment adviser (or predecessor or successor
adviser), or any "interested person" (as defined in the 1940 Act) of any such
investment adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or other services), or from
any person in connection with the purchase or sale of securities or other
property to, from, or on behalf of the fund (other than fees for bona fide
principal underwriting services), which could limit the ability of the fund to
engage in brokerage transactions with certain broker-dealers, although such
limits are not expected to cause any fund to change its brokerage relationships.
The second condition specifies that, during the three-year period immediately
following consummation of the change in control transaction, at least 75% of the
fund's board of trustees must not be "interested persons" (as defined in the
1940 Act) of the investment adviser or predecessor adviser.
Consistent with the conditions of Section 15(f), Guggenheim Capital has
agreed that it will not take any action that would have the effect, directly or
indirectly, of causing any requirement of the provisions of Section 15(f) to be
violated with respect to the Transaction. The Investment Adviser has represented
to the Board that no unfair burden would be imposed on the Funds as a result of
the Transaction.
APPROVAL OF THE NEW AGREEMENTS BY THE BOARD
At a Special Meeting of the Board held on August 16, 2011 (the "August
Special Board Meeting"), at which a majority of the members of the Board (the
"Trustees"), including a majority of the Trustees who are not "interested
persons" (as defined under the 1940 Act) of the Trust and who are not interested
persons of any party to the New Investment Advisory Agreements (the "Independent
Trustees"), were present, the Board considered the New Investment Advisory
Agreements, pursuant to which, subject to their approval by each Fund's
shareholders, the Investment Adviser will continue to serve each Fund as
investment adviser after the completion of the Transaction. At a Special Meeting
of the Board held on September 14, 2011 (the "September Special Board Meeting",
and together with the August Special Board Meeting, the "Special Board
Meetings") at which a majority of the Trustees, including a majority of the
Independent Trustees, were present, the Board considered further information
about the Transaction and voted in favor of the New Investment Advisory
Agreements.
The Investment Adviser's rate of fees for its services to each Fund under
each applicable New Investment Advisory Agreement will be the same as its fees
under the corresponding Current Investment Advisory Agreement. The other terms
of each New Investment Advisory Agreement will also be the same in all material
respects to those of the corresponding Current Investment Advisory Agreement. As
a result, in reviewing the New Investment Advisory
5
Agreements at the Special Board Meetings, the Board also considered its review
of relevant materials relating to the Current Investment Advisory Agreements at
the Board's contract review meeting on August 11, 2011 and contract renewal
meeting on August 17, 2011 (together, the "2011 Renewal Meeting").
BOARD CONSIDERATIONS IN APPROVING THE NEW AGREEMENTS
Prior to the Special Board Meetings, representatives of Guggenheim
Capital informed the Board of the Transaction. With respect to the Transaction,
the Board reviewed materials received from Guggenheim Capital, including
information relating to the terms of the Transaction. The Board also reviewed
information regarding Guggenheim Capital, including, but not limited to: (a)
certain representations concerning Guggenheim Capital's financial condition, (b)
information regarding the new proposed ownership structure and its possible
effect on shareholders, (c) information regarding the consideration to be paid
by Guggenheim Capital, and (d) potential conflicts of interest.
In considering the New Agreements, the Board determined that the New
Agreements would enable shareholders of the Funds to continue to obtain high
quality services at a cost that is appropriate, reasonable, and in the best
interests of their shareholders. The Board, including the Independent Trustees,
unanimously approved the New Agreements. In reaching their decision, the
Trustees carefully considered information that they had received throughout the
year as part of their regular oversight of the Funds, including, in particular,
information from the Investment Adviser, CLS and DWA (collectively, the
"Advisers") that the Board had received relating to the Current Agreements at
the Board's 2011 Renewal Meeting. The Trustees noted that, at the 2011 Renewal
Meeting, they had obtained and reviewed a wide variety of information, including
certain comparative information regarding performance of the Funds relative to
performance of other comparable mutual funds. They also considered the evolution
of the Rydex|SGI family of funds and the Investment Adviser since the change in
control of the Investment Adviser in 2010 and Guggenheim Capital's commitment to
the success of the Investment Adviser and the Funds.
In addition, as a part of their required consideration of the renewal of
the Current Agreements at the 2011 Renewal Meeting, the Trustees, including the
Independent Trustees, had evaluated a number of considerations, including among
others: (a) the quality of the Advisers' investment advisory and other services;
(b) the Advisers' investment management personnel; (c) the Advisers' operations
and financial condition; (d) the Advisers' brokerage practices (including any
soft dollar arrangements) and investment strategies; (e) the level of the fees
that the Advisers charge compared with the fees charged to comparable mutual
funds or accounts; (f) each Fund's overall fees and operating expenses compared
with similar mutual funds; (g) the level of the Advisers' profitability from its
Fund-related operations; (h) the Advisers' compliance systems; (i) the Advisers'
policies on and compliance procedures for personal securities transactions; (j)
the Advisers' reputation, expertise and resources in the financial markets; and
(k) Fund performance compared with similar mutual funds. Based on the Board's
deliberations at the 2011 Renewal Meeting, and its evaluation of the information
regarding the Transaction and the fact that the Transaction is not expected to
change the level and quality of services rendered by the Advisers to any of the
Funds, the Board, including all of the Independent Trustees, unanimously: (a)
concluded that terms of the New Agreements are fair and reasonable;
6
(b) concluded that the Advisers' fees were reasonable in light of the services
that they provide to the Funds; and (c) agreed to approve the New Agreements,
subject to shareholder approval.
NEW AGREEMENTS
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE ADVISERS. At the
2011 Renewal Meeting, the Board reviewed the scope of services to be provided by
the Investment Adviser under the Current Investment Advisory Agreements, by CLS
under the Current CLS Agreements, by DWA under the Current DWA Agreements and by
AIFS under the Current AIFS Agreement, and, at the Special Board Meetings, noted
that there would be no significant differences between the scope of services
required to be provided by the Advisers under the Current Agreements (which had
been recently approved by shareholders and renewed by the Board at the 2011
Renewal Meeting) and the scope of services required to be provided by the
Advisers under the New Agreements. The Board noted that the key investment and
management personnel of the Investment Adviser servicing the Funds, the
management personnel of CLS servicing the CLS Funds, the management personnel of
DWA servicing the DWA Funds and the management personnel of AIFS servicing the
AIFS Fund are expected to remain the same following the Transaction. The
Trustees also considered Guggenheim Capital's representations to the Board that
the Investment Adviser would continue to provide investment and related services
that were of materially the same quality and quantity as services provided to
the Funds in the past, and that these services are appropriate in scope and
extent in light of the Funds' operations, the competitive landscape of the
investment company business and investor needs. The Board also noted that CLS,
DWA and AIFS were not involved in the Transaction and that the approval of the
New CLS Agreements with CLS, the New DWA Agreements with DWA and the New AIFS
Agreement with AIFS was required due to the proposed assignment of the Current
Investment Advisory Agreements with the Investment Adviser.
FUND EXPENSES AND PERFORMANCE OF THE FUNDS AND THE ADVISERS. At the 2011
Renewal Meeting, the Board had reviewed statistical information prepared by the
Advisers regarding the expense ratio components and performance of each Fund.
Based on the representations made by Guggenheim Partners at the August Special
Board Meeting that the Investment Adviser would continue to operate following
the closing of the Transaction in much the same manner as it currently operates,
the Board concluded that the investment performance of the Investment Adviser
was not expected to be affected by the Transaction. The Board also concluded
that CLS, DWA and AIFS would continue to operate following the closing of the
Transaction in much the same manner as they operate today and, as a result, the
Board concluded that the investment performance of CLS, DWA and AIFS were not
expected to be affected by the Transaction.
COSTS OF SERVICES PROVIDED TO THE FUNDS AND PROFITS REALIZED BY THE
ADVISERS AND THEIR AFFILIATES. At the 2011 Renewal Meeting, the Board had
reviewed information about the profitability of the Funds to the Investment
Adviser based on the advisory fees payable under the Current Investment Advisory
Agreements. At that meeting, the Board had also analyzed the Funds' expenses,
including the investment advisory fees paid to the Investment Adviser. The Board
also had reviewed reports comparing the expense ratios and sub-advisory fees to
those of other comparable mutual funds and concluded that CLS' and DWA's
sub-advisory fees were reasonable and the result of arm's length negotiation. At
the Special Board Meetings, the Board
7
considered the fact that the fee rates payable to each of the Advisers would be
the same under each Fund's New Agreements as they are under such Fund's Current
Agreements. At that meeting, the Board had also concluded that, in the near
future, the profits to be realized by CLS and its affiliates under the New CLS
Agreements and DWA and its affiliates under the DWA Agreements, and from other
relationships between the Funds and CLS and DWA and their affiliates, if any,
should remain within the range the Board previously considered reasonable and
appropriate. With respect to anticipated profitability, the Board noted that it
was too early to predict how the Transaction would affect the Advisers'
profitability with respect to the Funds, but noted that this matter would be
given further consideration on an ongoing basis.
ECONOMIES OF SCALE. In connection with its review of the Funds'
profitability analysis at the 2011 Renewal Meeting, the Board reviewed
information regarding economies of scale or other efficiencies that may result
from increases in the Funds' asset levels. The Trustees noted that the fees
would not change under the New Agreements, and that no additional economies of
scale would be directly realized as a result of the Transaction. They also noted
that they will have the opportunity to again review the appropriateness of the
fees payable to the Advisers under the New Agreements when the renewal of the
New Agreements comes before the Board.
OTHER BENEFITS TO THE ADVISERS AND/OR ITS AFFILIATES. In addition to
evaluating the services provided by the Investment Adviser, the Board had
considered the nature, extent, quality and cost of the distribution services
performed by the Distributor under a separate agreement at the 2011 Renewal
Meeting. At the Special Board Meetings, the Board reviewed information regarding
potential economies of scale arising from the integration of the asset
management businesses of Guggenheim Capital. The Board also considered the terms
of the Transaction and the changes to the corporate ownership structure of the
Investment Adviser, noting that the Investment Adviser would no longer be a
subsidiary of SBC. In this regard, the Board noted that, under the corporate
structure after the Transaction, the Investment Adviser would be more closely
controlled by Guggenheim Capital, which could benefit Guggenheim Capital. The
Board also noted that the costs associated with the Transaction would be borne
by Guggenheim Capital (or its affiliates) and not the Funds.
With respect to the New CLS Agreements and New DWA Agreements, at the
2011 Renewal Meeting, the Board received and considered information regarding
the character and amount of other incidental benefits CLS and DWA might receive
as a result of its relationship with the CLS Funds and DWA Funds, respectively,
including their soft dollar practices, if any. The Board concluded that, taking
into account any incidental benefits CLS and DWA might receive, the terms of the
Current CLS Agreements and the Current DWA Agreements, including the
compensation to be paid thereunder, were reasonable. At its Special Board
Meetings, the Board considered other benefits to CLS and DWA, and their
affiliates expected to be derived from their relationships with the Funds as a
result of the Transaction and noted that no additional benefits were expected
because CLS and DWA were not parties to the Transaction.
8
PROPOSAL 4
ELECTION OF TRUSTEES
Proposal 4 relates to the election of the following nine individuals to
the Board: Donald C. Cacciapaglia, Corey A. Colehour, J. Kenneth Dalton, John O.
Demaret, Richard M. Goldman, Werner E. Keller, Thomas F. Lydon, Patrick T.
McCarville and Roger Somers. All of the nominees, except for Mr. Cacciapaglia,
currently serve on the Board. If elected, the terms of the nominees will begin
shortly after the shareholder vote and each nominee will serve as Trustee for
the life of the Trust or until retirement, removal, or his office is terminated
pursuant to the Trust's Declaration of Trust. Unless and until such new terms
begin, the existing Trustees will continue to serve their current terms. In
connection with the Transaction, the Board believes that expanding the Board to
include Mr. Cacciapaglia, who is a member of senior management of Guggenheim's
investment management business, and who is proposed to serve on the other boards
in the Rydex|SGI family of funds would be appropriate. If elected by
shareholders, Mr. Cacciapaglia's term as Trustee would commence shortly after
the shareholder vote.
The Board believes that it is in shareholders' best interest to have a
Board that is composed entirely of elected trustees (and to comply with certain
legal requirements regarding the proportion of board members that need to have
been elected by shareholders). Because a shareholder vote is required to approve
the New Investment Advisory Agreements, the Board has proposed that shareholders
elect all of the nominees during the same shareholder meeting, which would avoid
the expense of preparing and mailing another proxy statement solely for the
election of Trustees.
PROPOSAL 5
APPROVAL OF A "MANAGER OF MANAGERS" ARRANGEMENT
Shareholders of the Funds also are being asked to consider the approval
of a "manager of mangers" arrangement for each of the Funds to permit the
Investment Adviser, subject to prior approval by the Board, to retain
sub-advisers or amend the terms of an existing sub-advisory agreement without
shareholder approval where the sub-adviser is not affiliated with the Investment
Adviser. The 1940 Act makes it unlawful for any person to act as an investment
adviser (including a sub-adviser) to a fund except pursuant to a written
contract that has been approved by the fund's board as well as shareholders.
Therefore, the Investment Adviser is generally required to obtain shareholder
approval prior to retaining a new sub-adviser, which can be costly.
The Investment Adviser and certain affiliated funds have previously
obtained an exemptive order from the U.S. Securities and Exchange Commission
("SEC"), pursuant to which the Investment Adviser may retain a new sub-adviser
to manage a fund, or amend the terms of an existing sub-advisory agreement
without prior shareholder approval, subject to certain conditions, including a
requirement to send information to shareholders with respect to the appointment
of a new sub-adviser (the "Manager of Managers Order"). In addition to the other
conditions imposed by the Manager of Managers Order, before the arrangement may
be relied upon for a Fund, shareholders of the Fund must approve the
arrangement. Although no sub-advisers currently serve the Funds, because
shareholder approval is being solicited for other proposals, you are being asked
to approve the reliance by the Investment Adviser and the Funds on the Manager
of Managers Order. If approved, the Manager of Managers Order would allow the
Investment Adviser, subject to Board review and approval, to retain or replace
sub-advisers
9
without the delay and expenses associated with soliciting shareholder approval.
Shareholders should note, however, that the Investment Adviser and the Board
have no intent to make an extensive use of this arrangementtax implications for the Funds inor the foreseeable future.
PROPOSAL 6
MONEY MARKET FUND ONLY--APPROVAL OF THE ELIMINATION OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICY ON INVESTING IN OTHER INVESTMENT COMPANIES
ShareholdersContract Holders because the Funds are held through Variable Contracts. However, withdrawals of contract value from a Variable Contract may have adverse tax consequences, and you should consult your tax adviser before making such withdrawals.
8
Who pays the costs of the U.S. Government Money Market Fund (the "Money Market
Fund") also are being asked to consider the approval of the elimination of the
Money Market Fund's current fundamental investment policy on investing in other
investment companies. Under the 1940 Act, any change to a fundamental investment
policy must be approved by shareholders of the fund. Funds’ liquidations?
The 1940 Act does not
require that a fund adopt a fundamental investment policy on investing in other
investment companies. Therefore, the Money Market Fund's current fundamental
investment policies on investing in other investment companies is unnecessary.
This proposal is motivated by the decision to change the Money Market Fund's
investment strategies in order to invest in other investment companies when the
Investment Adviser deems such an investment in the best interests of the Money
Market Fund. The Money Market Fund's current policies restrict unnecessarily the
Money Market Fund's ability to invest in other investment companies so the
Investment Adviser proposed, and the Board agreed, to eliminate the Fund's
policy on investing in other investment companies. Accordingly, Proposal 6 seeks
approval of the elimination of each Money Market Fund's fundamental investment
policy on investing in other investment companies in order to permit the Money
Market Fund to invest in other investment companies. Proposal 6 is unrelated to
Proposals 1 through 3. The Investment Adviser believes that it could be
appropriate, when market conditions warrant, for the Money Market Fund to invest
in other money market funds. The Investment Adviser also believes that this
change could improve yield and could permit the Fund to have exposure to new
attractive investment opportunities. The Money Market Fund will remain subject
to strict regulatory requirements that apply to money market funds.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE NEW AGREEMENTS, "FOR" THE ELECTION OF
EACH NOMINEE, "FOR" THE APPROVAL OF THE A MANAGER OF MANAGERS
ARRANGEMENT AND "FOR" THE ELIMINATION OF THE FUNDAMENTAL
INVESTMENT POLICY ON INVESTING IN OTHER INVESTMENT COMPANIES
FOR EACH MONEY MARKET FUND. UNMARKED, PROPERLY SIGNED AND
DATED PROXIES WILL BE SO VOTED.
10
PROPOSAL 1--THE APPROVAL OF NEW INVESTMENT ADVISORY
AGREEMENTS WITH RESPECT TO ALL FUNDS
As discussed above, Proposal 1 relates to the approval by shareholders of
the New Investment Advisory Agreements between the Investment Adviser and each
of the Funds. You are being asked to vote separately on Proposal 1 solely with
respect to the Fund(s) that you own. Forms of the New Investment Advisory
Agreements are attached in Appendix B.
The terms of the New Investment Advisory Agreements are substantially
identical to those of the Current Investment Advisory Agreements, which were
recently approved by shareholders, except with respect to the date of execution.
Consequently, upon shareholder approval, the Investment Adviser will continue to
render substantially the same services to the Funds under the New Investment
Advisory Agreements that it currently renders to the Funds under the Current
Investment Advisory Agreements.
The Current Investment Advisory Agreements will remain in place until the
completion of the Transaction, at which time, as a result of the change in the
control of the Investment Adviser, the Current Investment Advisory Agreements
will terminate. If for any reason the Transaction does not occur, the Current
Investment Advisory Agreements will not terminate and will remain in effect, and
the New Investment Advisory Agreements will not be entered into, even if they
have been approved by Fund shareholders.
THE INVESTMENT ADVISER
Security Investors, LLC, which operates under the name Rydex Investments,
isAdvisor, located at 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850, and
currently serves as investment adviser toor an affiliate, will bear the Funds pursuant to the Current
Investment Advisory Agreements. Information regarding the Current Investment
Advisory Agreements, including (a) the date of the agreements, (b) the date on
which they were last approved by shareholders and (c) the rate of compensation
to the Investment Adviser, is provided in Appendix C. If the New Investment
Advisory Agreements are approved by shareholders, they will continue for an
initial term of two years and for subsequent one-year terms so long as they are
renewed annually in accordance with their terms (see discussion under "Term and
Continuance" below).
Information regarding the name(s), address(es) and principal
occupation(s) of the principal executive officer(s) and director(s) of the
Investment Adviser is set forth in Appendix D. A list of the Trustees and
officers of the Trust who hold positions with the Investment Adviser also is set
forth in Appendix D. In addition, set forth in Appendix E is a list of other
registered investment companies with similar investment objectives as each Fund,
for which the Investment Adviser acts as investment manager, adviser or
sub-adviser. (As previously noted, the ownership structure of the Investment
Adviser is set forth in Appendix A.)
MATERIAL TERMS OF THE NEW INVESTMENT ADVISORY AGREEMENTS
The following summary of the New Investment Advisory Agreements
summarizes the material terms of the New Investment Advisory Agreements and is
qualified in its entirety by
11
reference to the New Investment Advisory Agreements, a form of which is attached
in Appendix B.
DUTIES OF THE INVESTMENT ADVISER. Under the Current Investment Advisory
Agreements and the New Investment Advisory Agreements (each, an "Advisory
Agreement" and collectively, the "Advisory Agreements"), the Investment Adviser
is required to:
o provide the Funds with investment research, advice and supervision
and furnish continuously an investment program for the Funds,
consistent with the respective investment objectives and policiescosts of each Fund;
o determine, in its discretion and without prior consultation, 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 each Trust's Declaration of Trust, By-Laws and registration
statement on file with the SEC;
o discharge its responsibilities subject to the control of the
officers and the Board, and in compliance with the objectives,
policies, and limitations set forth in the Funds' prospectus(es)
and applicable laws and regulations;
o vote any proxies for Fund securities;
o provide the Trust, and any other agent designated by the Trust,
with records concerning the Investment Adviser's activities which
each Fund is required to maintain; and
o provide other reports reasonably requested by the Trust's officers
and Board concerning the Investment Adviser's discharge of the
foregoing responsibilities.
INDEMNITY OBLIGATION. Under the Advisory Agreements, the Investment
Adviser shall indemnify and hold harmless the Trust and all affiliated persons
thereof (within the meaning of Section 2(a)(3) of the 1940 Act) and all
controlling persons (as described in Section 15 of the Securities Act of 1933)
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 Investment 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
Internal Revenue Code; or (c) the Investment Adviser's willful misfeasance, bad
faith or gross negligence generally in the performance of its duties or its
reckless disregard of its obligations and duties under the Advisory Agreements.
TERM AND CONTINUANCE. Each Advisory Agreement provides that unless
terminated as provided therein, the Advisory Agreement shall continue for an
initial term of two years. Thereafter, the Advisory Agreement shall continue in
effect for successive annual periods provided such continuance is specifically
approved at least annually (a) by the vote of the
12
Trustees or by a vote of the shareholders; and (b) by the vote of a majority of
the Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval.
Each Advisory Agreement may be terminated with respect to a Fund at any
time without payment of any penalty, by a Fund upon the vote of either the Board
or by a majority of the outstanding voting securities of the Fund. The
Investment Adviser may also, by not more than sixty (60) days' nor less than
thirty (30) days' written notice, terminate the Advisory Agreements. Each
Advisory Agreement will terminate automatically in the event of its "assignment"
(as that term is defined under the 1940 Act).
BOARD RECOMMENDATION ON PROPOSAL 1
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE FUNDS VOTE "FOR" PROPOSAL 1
13
PROPOSAL 2--THE APPROVAL OF NEW SUB-ADVISORY AGREEMENTS
WITH RESPECT TO:
AMERIGO FUND
CLERMONT FUND
SELECT ALLOCATION FUND
As discussed above, Proposal 2 relates to the approval by shareholders of
the New CLS Agreements between the Investment Adviser and CLS with respect to
Amerigo Fund, Clermont Fund and Select Allocation Fund. You are being asked to
vote separately on Proposal 2 solely with respect to the CLS Fund(s) that you
own. A form of the New CLS Agreements is attached in Appendix F.
The terms of the New CLS Agreements are identical to those of the
corresponding Current CLS Agreements, which were recently approved by
shareholders, except with respect to the date of execution. Consequently, upon
shareholder approval, CLS will continue to render substantially the same
services to the CLS Funds under the New CLS Agreements that it currently renders
to the CLS Funds under the Current CLS Agreements.
The Current CLS Agreements will remain in place until the completion of
the Transaction, at which time, as a result of the change in the control of the
Investment Adviser, the Current CLS Agreements will terminate. Thereafter,
subject to shareholder approval, the New CLS Agreements will go into effect. If
for some reason the Transaction does not occur, the Current CLS Agreements will
not automatically terminate and will remain in effect, and the New CLS
Agreements will not be entered into, even if they have been approved by Fund
shareholders.
The effectiveness of Proposal 2 is also contingent on the approval of
Proposal 1 by shareholders of the corresponding CLS Funds.
INFORMATION ABOUT CLS
CLS Investments, LLC, located at 4020 South 147th Street, Omaha,
Nebraska, 68137, currently serves as sub-adviser to each of Amerigo Fund,
Clermont Fund and Select Allocation Fund pursuant to the Current CLS Agreement.
Information regarding the Current CLS Agreement,Fund’s liquidation including (a) the date of the
agreement, (b) the date on which it was last approved by shareholders and (c)
the rate of compensation to CLS, is provided in Appendix G. If the New CLS
Agreement is approved by shareholders, it will continue for an initial term of
two years and for subsequent one-year terms so long as it is renewed annually in
accordance with its terms (see discussion under "Term and Continuance" below).
Information regarding the name(s), address(es) and principal
occupation(s) of the principal executive officer(s) and managing member(s) of
CLS is set forth in Appendix H. A list of the Trustees and officers of the Trust
who hold positions with CLS also is set forth in Appendix H. In addition, set
forth in Appendix I is a list of other registered investment companies with
similar investment objectives as the CLS Funds, for which CLS acts as investment
manager, adviser or sub-adviser.
14
CLS is a wholly-owned subsidiary of Northstar Financial Services Group,
LLC ("Northstar"), a Nevada limited liability company. NorthStar is owned 50% by
W. Patrick Clarke and 50% by Michael Miola, both of whom serve as a manager of
CLS.
MATERIAL TERMS OF THE CLS SUB-ADVISORY AGREEMENT
The following summary of the New CLS Agreement between the Investment
Adviser and CLS summarizes its material terms and is qualified in its entirety
by reference to such New CLS Agreement, a form of which is attached in Appendix
F.
DUTIES OF CLS. Under the Current CLS Agreement and the New CLS Agreement,
each between the Investment Adviser and CLS (collectively, the "CLS Sub-Advisory
Agreements"), CLS, subject to the supervision of the Investment Adviser and the
Board, is responsible for managing the assets of each of the CLS Funds,
including making investment decisions and placing orders to purchase and sell
securities for such Funds, all in accordance with the investment objective and
policies of such Funds as reflected in their current prospectus and statement of
additional information and as may be adopted from time to time by the Board. In
accordance with applicable requirements, CLS will also maintain all books and
records relating to the transactions it executes or that are otherwise required,
and render to the Trust and the Investment Adviser such periodic and special
reports at any time upon reasonable request.
INDEMNITY OBLIGATION. The CLS Sub-Advisory Agreements provide that each
of the Investment Adviser and CLS agrees to indemnify each other against any
claim, loss or liability (including reasonable attorney's fees) arising as a
result of the failure to meet the standard of care (generally the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such matters would use) set
forth in the CLS Sub-Advisory Agreements. Furthermore, the Investment Adviser
and CLS each agrees to indemnify each other against any claim, loss or liability
(including reasonable attorney's fees) arising or as a result of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligation and duties thereunder.
TERM AND CONTINUANCE. Under their terms, the CLS Sub-Advisory Agreements
will remain in full force and effect for a period of up to two years from the
date of their execution, and will continue thereafter as long as their
continuance is approved at least annually by the Board or by vote of a majority
of the outstanding shares of a CLS Fund, as well as by a majority of the
Independent Trustees by vote cast in person at a meeting called for that
purpose. However, the CLS Sub-Advisory Agreements may be terminated with respect
to a CLS Fund, at any time upon 60 days' written notice without the payment of
any penalty, either by the Investment Adviser or CLS. Additionally, each CLS
Sub-Advisory Agreement will terminate immediately in the event of its assignment
or upon the termination of the corresponding Investment Advisory Agreement.
BOARD RECOMMENDATION ON PROPOSAL 2
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS
OF THE CLS FUNDS VOTE "FOR" PROPOSAL 2
15
PROPOSAL 3--THE APPROVAL OF NEW SUB-ADVISORY AGREEMENTS
WITH RESPECT TO:
DWA FLEXIBLE ALLOCATION FUND
DWA SECTOR ROTATION FUND
As discussed above, Proposal 3 relates to the approval by shareholders of
the New DWA Agreements between the Investment Adviser and DWA with respect to
DWA Flexible Allocation Fund and DWA Sector Rotation Fund. You are being asked
to vote separately on Proposal 3 solely with respect to the DWA Fund(s) that you
own. A form of the New DWA Agreements is attached in Appendix J.
The terms of the New DWA Agreements are identical to those of the
corresponding Current DWA Agreements except with respect to the date of
execution. Consequently, upon shareholder approval, DWA will continue to render
substantially the same services to the DWA Funds under the New DWA Agreements
that it currently renders to the DWA Funds under the Current DWA Agreements.
The Current DWA Agreements will remain in place until the completion of
the Transaction, at which time, as a result of the change in the control of the
Investment Adviser, the Current DWA Agreements will terminate. Thereafter,
subject to shareholder approval, the New DWA Agreements will go into effect. If
for some reason the Transaction does not occur, the Current DWA Agreements will
not automatically terminate and will remain in effect, and the New DWA
Agreements will not be entered into, even if they have been approved by Fund
shareholders. The effectiveness of Proposal 3 is also contingent on the approval
of Proposal 1 by shareholders of the corresponding DWA Funds.
INFORMATION ABOUT DWA
Dorsey, Wright & Associates, Inc., located at 9201 Forest Hill Avenue,
Suite 100, Richmond, VA 23235, currently serves as sub-adviser to each of DWA
Flexible Allocation Fund and DWA Sector Rotation Fund pursuant to the Current
DWA Agreement. Information regarding the Current DWA Agreement, including (a)
the date of the agreement, (b) the date on which it was last approved by
shareholders and (c) the rate of compensation to DWA, is provided in Appendix K.
If the New DWA Agreement is approved by shareholders, it will continue for an
initial term of two years and for subsequent one-year terms so long as it is
renewed annually in accordance with its terms (see discussion under "Term and
Continuance" below).
Information regarding the name(s), address(es) and principal
occupation(s) of the principal executive officer(s) and managing member(s) of
DWA is set forth in Appendix L. A list of the Trustees and officers of the Trust
who hold positions with DWA also is set forth in Appendix L. In addition, set
forth in Appendix M is a list of other registered investment companies with
similar investment objectives as the DWA Funds, for which DWA acts as investment
manager, adviser or sub-adviser. DWA has announced that they may undergo a
change of ownership in the upcoming months which is expected to result in a
"change of control" and thus would terminate the New DWA Agreements. It is
anticipated that if Proposal
16
6 of this proxy statement (i.e., the proposal to approve a manager of managers
arrangement) is approved by shareholders, the New DWA Agreements would be
renewed without shareholder approval, as permitted under the arrangement, in
order to avoid the expense of an additional solicitation.
MATERIAL TERMS OF THE DWA SUB-ADVISORY AGREEMENT
The following summarysoliciting the Fund’s shareholders for approval of the New DWA Agreements betweenPlan. However, each Fund will bear the Investment
Adviser and DWA summarizes its material terms and is qualified in its entirety
by reference to such New DWA Agreements, a form of which is attached in Appendix
J.
DUTIES OF DWA. Undertransaction costs (i.e., commissions) associated with the Current DWA Agreements and the New DWA
Agreements, each between the Investment Adviser and DWA (collectively, the "DWA
Sub-Advisory Agreements"), DWA, subject to the supervisionliquidation of the Investment
Adviser andFund’s securities. The estimated transaction costs for each Fund are as follows:
Fund | Estimated Transaction Costs | |||
DWA Flexible Allocation Fund | $ | 2,078 | ||
DWA Sector Rotation Fund | $ | 3,025 | ||
All-Asset Conservative Strategy Fund | $ | 345 | ||
All-Asset Moderate Strategy Fund | $ | 540 | ||
All-Asset Aggressive Strategy Fund | $ | 110 | ||
|
| |||
Total | $ | 6,098 | ||
|
| |||
What is the Board, is responsible for holding and selling investments for
the accountrequired vote?
Approval of each of the DWA Funds. In accordance with applicable
requirements, DWA will also maintain all books and records relating to the
transactions it executes or that are otherwise required, and render to the Trust
and the Investment Adviser such periodic and special reports at any time upon
reasonable request.
INDEMNITY OBLIGATION. The DWA Sub-Advisory Agreements provide that each
of the Investment Adviser and DWA agrees to indemnify each other against any
losses, claims, damages, liabilities or litigation (including legal and other
expenses) incurred or suffered as a result of error of judgment or mistake of
law, unless such losses, claims, damages, liabilities or litigation arise out of
or are based on (i) any willful misconduct, bad faith, reckless disregard or
gross negligence of the either party in the performance of any of its duties or
obligations under the DWA Sub-Advisory Agreements or (ii) any untrue statement
of a material fact contained in the prospectus, proxy materials, reports,
advertisements, sales literature, or other materials pertaining to a Fund or the
omission to state therein a material fact therein. Unless otherwise obligated
under applicable law, the Investment Adviser and DWA will not be liable for
consequential or indirect damages even if the Investment Adviser and DWA have
been advised of the possibility or likelihood of the occurrence of such damages.
TERM AND CONTINUANCE. Under their terms, the DWA Sub-Advisory Agreements
will remain in full force and effect for a period of up to two years from the
date of their execution, and will continue thereafter as long as their
continuance is approved at least annually by the Board or by vote of a majority
of the outstanding shares of a DWA Fund, as well as by a majority of the
Independent Trustees by vote cast in person at a meeting called for that
purpose. However, the DWA Sub-Advisory Agreements may be terminated with respect
to a DWA Fund, at any time upon 60 days' written notice without the payment of
any penalty, either by the Investment Adviser or DWA. Additionally, each DWA
Sub-Advisory Agreement will terminate immediately in the event of its assignment
or upon the termination of the corresponding Investment Advisory Agreement.
BOARD RECOMMENDATION ON PROPOSAL 3
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS
OF THE DWA FUNDS VOTE "FOR" PROPOSAL 3
17
PROPOSAL 4--THE APPROVAL OF THE ELECTION OF TRUSTEES FOR ALL
FUNDSFund’s Proposal 4 relates to the election of Trustees for the Board. The Board
proposes the election of the following nominees: Donald C. Cacciapaglia, Corey
A. Colehour, J. Kenneth Dalton, John O. Demaret, Richard M. Goldman, Werner E.
Keller, Thomas F. Lydon, Patrick T. McCarville and Roger Somers. Each nominee
has indicated a willingness to serve if elected. If elected, each nominee will
hold office for the life of a Trust or until retirement, removal, or their
office is terminated pursuant to the Trust's Declaration of Trust. A Trustee may
be removed either by: (i) the vote or written consent of at least two-thirds of
the Trustees prior to such removal or (ii) the vote or written consent of
Shareholders owning at least than two-thirds of a Trust's outstanding shares.
In connection with the Transaction, the Board believes that expanding the
Board to include Mr. Cacciapaglia, who is a member of senior management of
Guggenheim's investment management business, and who is proposed serve on other
boards in the Rydex|SGI family of funds, would be appropriate. If elected, Mr.
Cacciapaglia would be an Interested Trustee due to the position he holds with
Guggenheim Capital.
The Board believes that it is in shareholders' best interest to have a
Board that is composed entirely of elected trustees. The Board also believes
that good governance practices involve having a majority of its members be
Independent Trustees. If all of the nominees are elected, the Board will consist
of seven trustees who are not considered to be "interested persons" of the Funds
as defined in the 1940 Act and two trustees who are considered to be "interested
persons" of the Funds as defined in the 1940 Act.
The Trust's Nominating Committee, which is responsible for identifying,
evaluating and nominating individuals to serve as trustees of the Trust,
recommended that the Board expand in size to nine members, and include a trustee
who is affiliated with the Investment Adviser's parent company, Guggenheim
Capital. The Board considered the long-term ability of the Rydex|SGI family of
funds to operate in an efficient and cohesive manner and determined that
expanding the size of the Board to include a representative of the parent of the
Investment Adviser would benefit the Funds. The Nominating Committee also
considered Mr. Cacciapaglia's skills and background, and noted that his past and
current experience in various aspects of banking and finance would make him a
strong addition to the Board. At a meeting held on September 16, 2011, the Board
approved the Nominating Committee's recommendation that the nine nominees stand
for election.
INFORMATION REGARDING THE NOMINEES
The following table lists the nominees for Trustee, including the current
Trustees, their ages, current position(s) held with the Trust, length of time
served, principal occupations during the past five years, number of funds
overseen within the fund complex and other directorships/trusteeships held
outside of the fund complex. For the new Trustee nominee, the table shows the
number of funds the nominee will oversee if elected. The fund complex consists
of Rydex ETF Trust, Rydex Variable Trust, Rydex Series Funds, Rydex Dynamic
Funds, Security Equity Fund, Security Income Fund, Security Large Cap Value
Fund, Security Mid Cap
18
Growth Fund and SBL Fund. The mailing address of each nominee is 805 King Farm
Boulevard, Suite 600, Rockville, Maryland 20850.
---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
POSITION(S) HELD IN FUND
WITH THE TRUST, COMPLEX OTHER
TERM OF OFFICE OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND LENGTH OF PRINCIPAL OCCUPATION(S) BY TRUSTEE HELD BY TRUSTEE
AND AGE OF TRUSTEE TIME SERVED DURING PAST 5 YEARS OR NOMINEE OR NOMINEE
---------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES OR NOMINEES
---------------------------------------------------------------------------------------------------------------------------------
Donald C. Nominee Guggenheim Investments: President and 212 None
Cacciapaglia (60)* Chief Administrative Officer from February
2010 to present
Channel Capital Group Inc.: Chairman and
CEO from April 2002 to February 2010
---------------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman (50)** Trustee and President Security Benefit Corporation: Senior Vice 212 None
from 2009 to present President from March 2007 to present
Security Benefit Asset Management
Holdings, LLC: Chief Executive Officer
from October 2010 to present
Rydex Holdings, LLC: Chief Executive
Officer & Manager from January 2009 to
present
Security Investors, LLC: President, CEO &
Member Representative from August 2007
to present
Rydex Distributors, LLC: President, Chief
Executive Officer and Manager from
January 2009 to present
Rydex Fund Services, LLC: Manager from
July 2009 to present
SBL Fund, Security Equity Fund, Security
Income Fund, Security Large Cap Value
Fund and Security Mid Cap Growth Fund:
President from May 2008 to present
First Security Benefit Life and Annuity
Insurance Company of New York: Director
from September 2007 to September 2010
Rydex Advisors, LLC: Director and Chief
Executive Officer from January 2009 to
January 2010
Rydex Advisors II, LLC: Director and Chief
Executive Officer from January 2009 to
January 2010
---------------------------------------------------------------------------------------------------------------------------------
19
---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
POSITION(S) HELD IN FUND
WITH THE TRUST, COMPLEX OTHER
TERM OF OFFICE OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND LENGTH OF PRINCIPAL OCCUPATION(S) BY TRUSTEE HELD BY TRUSTEE
AND AGE OF TRUSTEE TIME SERVED DURING PAST 5 YEARS OR NOMINEE OR NOMINEE
---------------------------------------------------------------------------------------------------------------------------------
Security Global Investors, LLC: Manager
and President from May 2007 to January
2010
Security Distributors, Inc.: Director from
March 2007 to 2009
R.M. Goldman Partner, LLC: Managing
Member from February 2006 to February
2007
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
---------------------------------------------------------------------------------------------------------------------------------
Corey A. Colehour (65) Trustee from 2003 to Retired; President and Senior Vice 179 None
present; Member of President of Schield Management Company
the Audit Committee (registered investment adviser) from 2003
from 2003 to present; to 2006
and Member of the
Governance and
Nominating
Committees from
2005 to present
---------------------------------------------------------------------------------------------------------------------------------
J. Kenneth Dalton (70) Trustee from 2003 to Retired 179 Trustee of
present; Member and Epiphany Funds
Chairman of the Audit since 2009
Committee from 2003
to present; Member of
the Governance and
Nominating
Committees from
2005 to present; and
Member of the Risk
Oversight Committee
from 2010 to present
---------------------------------------------------------------------------------------------------------------------------------
John O. Demaret (71) Trustee from 2003 to Retired 179 None
present; Chairman of
the Board from 2006
to present; Member of
the Audit Committee
from 2003 to present;
and Member of the
Risk Oversight
Committee from 2010
to present
---------------------------------------------------------------------------------------------------------------------------------
Werner E. Keller (71) Vice Chairman of the Founder and President of Keller Partners, 179 None
Board of Trustee from LLC (registered investment adviser) from
2010 to present; 2005 to present; and Retired from 2001 to
Trustee and Member 2005
---------------------------------------------------------------------------------------------------------------------------------
20
---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
POSITION(S) HELD IN FUND
WITH THE TRUST, COMPLEX OTHER
TERM OF OFFICE OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND LENGTH OF PRINCIPAL OCCUPATION(S) BY TRUSTEE HELD BY TRUSTEE
AND AGE OF TRUSTEE TIME SERVED DURING PAST 5 YEARS OR NOMINEE OR NOMINEE
---------------------------------------------------------------------------------------------------------------------------------
of the Audit and
Governance and
Nominating
Committees from
2005 to present; and
Chairman and
Member of the Risk
Oversight Committee
from 2010 to present
---------------------------------------------------------------------------------------------------------------------------------
Thomas F. Lydon (51) Trustee and Member President of Global Trends Investments 179 Board of
of the Audit and (registered investment adviser) from 1996 Directors of US
Governance and to present Global Investors
Nominating (GROW) since
Committees from April 1995
2005 to present
---------------------------------------------------------------------------------------------------------------------------------
Patrick T. McCarville (69) Trustee from 2003 to Retired. Chief Executive Officer of Par 179 None
present; Member of Industries, Inc., d/b/a Par Leasing from
the Audit Committee 1977 to 2010
from 2003 to present;
and Chairman of the
Governance and
Nominating
Committees from
2005 to present
---------------------------------------------------------------------------------------------------------------------------------
Roger Somers (67) Trustee from 2003 to Founder and Chief Executive Officer of 179 None
present; Member of Arrow Limousine from 1965 to present
the Audit Committee
from 2003 to present;
and Member of the
Governance and
Nominating
Committees from
2005 to present
---------------------------------------------------------------------------------------------------------------------------------
* Mr. Cacciapaglia is an "interested" person of the Trust, as that term is
defined in the 1940 Act by virtue of his affiliation with the Investment
Adviser's parent company.
** Mr. Goldman is an "interested" person of the Trust, as that term is
defined in the 1940 Act by virtue of his affiliation with the Funds'
Investment Adviser.
The Chairman of the Board, John O. Demaret, is an Independent
Trustee. The Trust has determined its leadership structure is
appropriate given the specific characteristics and circumstances of the
Trust. The Trust made this determination in consideration of, among
other things, the fact that the Chairman of the Board is an Independent
Trustee; the fact that only two of the proposed nominees are "interested
persons" of the Trust; the fact that the chairperson of each Committee
of the Board is an Independent Trustee; the amount of assets under
management in the Trust; and the number of Funds (and classes of shares)
overseen by the Board. The Board
21
also believes that its leadership structure facilitates the orderly and
efficient flow of information to the Independent Trustees from Fund management.
BOARD'S CONSIDERATION OF EACH NOMINEE'S QUALIFICATIONS, EXPERIENCE, ATTRIBUTES
OR SKILLS
The Board has concluded that each of the nominees should serve on the
Board because of his ability to review and understand information about the
Trust and the Funds provided to him by management; to identify and request other
information he may deem relevant to the performance of his duties; to question
management and other service providers regarding material factors bearing on the
management and administration of the Funds; and to exercise his business
judgment in a manner that serves the best interests of the Funds' shareholders.
The Board has concluded that each of the nominees should serve as a Trustee
based on his experience, qualifications, attributes and skills as described
below.
The Board has concluded that Donald C. Cacciapaglia should serve as
Trustee because of his prior experience working in the investment banking and
financial services industries. He is President and Chief Administrative Officer
of Guggenheim's investment management business. Most recently he was chairman
and CEO of Channel Capital Group Inc. and its subsidiary broker-dealer, Channel
Capital Group LLC, an affiliate of Guggenheim Capital, from 2002 through 2010.
From 1996 until 2002 when he joined Channel Capital Group, Mr. Cacciapaglia held
the position of Managing Director and Chief Operating Officer of the Investment
Banking Group at PaineWebber. Additionally, in 1998, he started PaineWebber's
Private Equity Group and assumed responsibility for the coverage of leveraged
buyout firms and the Investment Bank's Business Development Group. Before that,
Mr. Cacciapaglia was Chief Operating Officer of the Short and Intermediate
Trading Group at CS First Boston (1995-1996). From his experience as President
and COO of Guggenheim, and from his prior work experience, Mr. Cacciapaglia has
extensive knowledge of the financial services industry and mutual fund business.
The Board has concluded that Richard M. Goldman should serve as Trustee
because of the experience he has gained as a Trustee of each Trust since 2009
and his experience working in the financial services and mutual fund industries.
Mr. Goldman has gained valuable knowledge and experience from holding multiple
roles with Security Global Investors, LLC and Security Benefit Corporation. Mr.
Goldman also serves as a director for First Security Benefit Life and Annuity
Insurance Company of New York and previously served as a director of Security
Distributors, Inc. Prior to working for Security Benefit, Mr. Goldman was the
President and CEO of ForstmannLeff Associates, an investment management firm.
From his experience as CEO of the Investment Adviser, as a Trustee, and from his
prior work experience, Mr. Goldman has extensive knowledge of the financial
services industry and mutual fund business.
The Board has concluded that Corey A. Colehour should serve as Trustee
because of the experience he has gained as a Trustee of each Trust and his prior
experience working in the financial services industry. Mr. Colehour has served
as a Trustee of Rydex Series Funds since 1993, Rydex Variable Trust since 1998,
Rydex Dynamic Funds since 1999, and Rydex ETF Trust since 2003. Mr. Colehour
also has served as a member of the Audit, Nominating and Governance Committees
of each Trust. In addition to his experience as a Trustee for the Funds
22
and his extensive institutional knowledge of the fund complex, Mr. Colehour
acquired valuable knowledge about the operations of a registered investment
adviser in his role as President and Senior Vice-President of Schield Management
Company, an SEC registered investment adviser. Mr. Colehour's significant tenure
as a Trustee and his extensive knowledge of the financial services industry
qualify Mr. Colehour to serve as Trustee.
The Board has concluded that J. Kenneth Dalton should serve as Trustee
because of his role as a Trustee of each Trust and his extensive knowledge of
the banking and financial services industry. Mr. Dalton has served as a Trustee
of Rydex Series Funds since 1995, Rydex Variable Trust since 1998, Rydex Dynamic
Funds since 1999, and Rydex ETF Trust since 2003. Mr. Dalton also has served as
a member and Chairman of the Audit Committee of Rydex Series Funds since 1997,
Rydex Variable Trust since 1998, Rydex Dynamic Funds since 2006, and Rydex ETF
Trust since 2003; and as a member of the Nominating, Governance and Risk
Oversight Committees of each Trust since 2005 and as a member of the Risk
Oversight Committee since 2010. The expertise Mr. Dalton developed during his
more than thirty years in the mortgage and banking industries, including
positions as President of CRAM Mortgage Group, Inc. and as the founder of the
Dalton Group, a mortgage banking consulting firm, serves as a valuable resource
for the Board when evaluating certain of the Funds' investments and the
conditions of the banking and mortgage industries in general, and complements
the other Trustees' areas of expertise. Mr. Dalton's service as a trustee for
another mutual fund company also provides invaluable experience and perspective
to the Board and has contributed to Mr. Dalton's knowledge of the mutual fund
business.
The Board has concluded that John O. Demaret should serve as Trustee and
Chairman of the Board because of the experience he has gained as a Trustee of
each Trust and his experience as Chairman of the Board since 2006. Mr. Demaret
has served as a Trustee of Rydex Series Funds since 1997, Rydex Variable Trust
since 1998, Rydex Dynamic Funds since 1999, and Rydex ETF Trust since 2003. Mr.
Demaret also has served as a member of the Audit and Risk Oversight Committees
of each Trust. As Chairman of the Board, Mr. Demaret has experience working with
all of the Trustees, Officers and management to effectively lead and communicate
with the Board. In addition to his experience as a Trustee for the Rydex Funds,
Mr. Demaret also was Founder and CEO of Health Costs Controls America and served
as General Counsel of the Chicago Transit Authority, and as a senior partner in
a private legal practice. Based on his prior work experience and his experience
serving as a Trustee and Chairman of the Board, Mr. Demaret has extensive
knowledge of the mutual fund business and financial services industry.
The Board has concluded that Werner E. Keller, CFA should serve as
Trustee because of the experience he has gained as a Trustee of each Trust since
2005 and his prior experience working in the financial services industry. Mr.
Keller also served as a trustee of the Rydex Capital Partners Sphinx Fund from
2003 to 2007. Mr. Keller has served as a member of the Audit, Governance and
Nominating Committees of each Trust. In addition, Mr. Keller has served as the
Chairman of the Risk Oversight Committee of each Trust since 2010. Mr. Keller
serves as the Financial Expert of the Audit Committee. In addition to his
experience as a Trustee for the Funds, Mr. Keller acquired understanding about
the operations of a registered investment adviser during his tenure as Founder
and President of Centurion Capital Management, an SEC-registered investor
adviser. He also held the position of Director of Research for three NYSE
23
member firms and taught courses in portfolio management and investment analysis
at UCLA Extension. In addition, he has published several academic articles on
quantitative investment topics. Mr. Keller's service as a Trustee for five
years, specialized prior work experience, and knowledge of the financial
services industry and mutual fund business qualify Mr. Keller to serve as a
Trustee of the Funds.
The Board has concluded that Thomas F. Lydon should serve as Trustee
because of the experience he has gained as a Trustee of each Trust since 2005
and his prior work experience in the financial services industry. Mr. Lydon also
served as a trustee of the Rydex Capital Partners Sphinx Fund from 2003 to 2007.
Mr. Lydon has served as a member of the Audit, Governance and Nominating
Committees of each Trust. In addition to his experience as a Trustee for the
Funds, Mr. Lydon is currently President of Global Trends Investments, an SEC
registered investment adviser, where he has served since 1996. Mr. Lydon has
also served on the board of U.S. Global Investors, Inc. (GROW), the investment
adviser and transfer agent to thirteen open-end investment companies, since
April 1995, and is the editor of ETF Trends, a website specializing in daily
news and commentary about the ETF industry. He has also authored two books about
ETFs. Based on his experience as a Trustee for five years, his experience
serving on another board, and his related work experience, Mr. Lydon has
extensive knowledge of the mutual fund business and the financial services
industry.
The Board has concluded that Patrick T. McCarville should serve as
Trustee because of the experience and institutional knowledge he has gained in
his role as Trustee of each Trust. Mr. McCarville has served as a Trustee of
Rydex Series Funds since 1997, Rydex Variable Trust since 1998, Rydex Dynamic
Funds since 1999, and Rydex ETF Trust since 2003. Mr. McCarville also has served
as a member of the Audit, Governance and Nominating Committees of each Trust.
Mr. McCarville contributes a wealth of business and management experience to the
Board having founded Par Industries, Inc., a well-established equipment leasing
business, and serving as its Chief Executive Officer for more than thirty years.
Mr. McCarville continues to be active in the manufacturing industry and serves
as a Director of Tomco Equipment Co., a manufacturer of cylinders for CO2
distribution. Based on his extensive business experience and experience serving
as a Trustee, Mr. McCarville has extensive knowledge of the financial services
industry.
The Board has concluded that Roger Somers should serve as Trustee because
of the experience and institutional knowledge he has gained in his role as
Trustee of each Trust. Mr. Somers has served as a Trustee of Rydex Series Funds
since 1993, Rydex Variable Trust since 1998, Rydex Dynamic Funds since 1999, and
Rydex ETF Trust since 2003. Mr. Somers also has served as a member of the Audit,
Governance and Nominating Committees of each Trust. Mr. Somers has extensive
business experience as the founder and president of a transportation company.
Due to his business experience and experience serving as a Trustee, Mr. Somers
is very knowledgeable about the financial services industry.
If the nominees are elected, Mr. Demaret would remain the Chairman of the Board.
24
PRINCIPAL OFFICERS OF THE FUNDS
Officers of the Funds are appointed by the Board and serve at the
pleasure of the Board. The following table shows information about the principal
officers, including their ages, their positions with the Trust and their
principal occupations during the past five years. The mailing address of each
officer is 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850. Each
officer will hold office until his or her successor has been duly elected or
appointed or until his or her earlier death, resignation or removal.
----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
POSITION(S) HELD PORTFOLIOS
WITH THE TRUST, IN FUND
TERM OF OFFICE COMPLEX
NAME, ADDRESS AND AGE AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN
OF TRUSTEE/OFFICER TIME SERVED DURING PAST 5 YEARS BY OFFICER
----------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman (50) President from 2009 to Current: Senior Vice President, Security Benefit 212
present Corporation; CEO, Security Benefit Asset Management
Holdings, LLC; CEO, President & Manager
Representative, Security Investors, LLC; CEO & Manager,
Rydex Holdings, LLC; CEO, President, & Manager,
Rydex Distributors, LLC; Manager, Rydex Fund Services,
LLC; and President & Trustee, Rydex Series Funds, Rydex
ETF Trust, Rydex Dynamic Funds and Rydex Variable
Trust
Previous: Director, First Security Benefit Life Insurance
Company (2007-2010); President & Director, Security
Global Investors (2010-2011); CEO & Director, Rydex
Advisors, LLC & Rydex Advisor II, LLC (2010); Director,
Security Distributors, Inc. (2007-2009); and Managing
Member, RM Goldman Partners, LLC (2006-2007).
----------------------------------------------------------------------------------------------------------------------------
Michael P. Byrum (41) Trustee from 2005 to Current: President, Security Benefit Asset Management 179
2009; Vice President Holdings, LLC; Senior Vice President, Security Investors,
from 2003 to present LLC; President & Chief Investment Officer, Rydex
Holdings, LLC; Director & Chairman of the Board,
Advisor Research Center, Inc.; and Manager, Rydex
Specialized Products, LLC.
Previous: Rydex Distributors, LLC (f/k/a Rydex
Distributors, Inc.), Vice President (2009); Rydex Fund
Services, LLC, Director (2009-2010), Secretary (2002-
2010), Executive Vice President (2002-2006); Rydex
Advisors, LLC (f/k/a PADCO Advisors, Inc.), Director
(2008-2010), Chief Investment Officer (2006-2010),
President (2004-2010); Secretary (2002-2010); Rydex
Advisors II, LLC (f/k/a PADCO Advisors II, Inc.),
Director (2008-2010), Chief Investment Officer (2006-
2010), President (2004-2010), Secretary (2002-2010);
Rydex Capital Partners, LLC, (President & Secretary
2003-2007); Rydex Capital Partners II, LLC, (2003-2007);
Rydex Holdings, LLC (f/k/a Rydex Holdings, Inc.),
Secretary 2005-2008), Executive Vice President (2005-
2006); Advisor Research Center, Inc., Secretary (2006-
2009), Executive Vice President (2006); and Rydex
Specialized Products, LLC, Secretary (2005-2008).
----------------------------------------------------------------------------------------------------------------------------
25
----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
POSITION(S) HELD PORTFOLIOS
WITH THE TRUST, IN FUND
TERM OF OFFICE COMPLEX
NAME, ADDRESS AND AGE AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN
OF TRUSTEE/OFFICER TIME SERVED DURING PAST 5 YEARS BY OFFICER
----------------------------------------------------------------------------------------------------------------------------
Nick Bonos (47) Vice President and Current: Senior Vice President, Security Investors, LLC; 179
Treasurer from 2003 Chief Executive Officer & Manager, Rydex Specialized
to present Products, LLC; Chief Executive Officer & President,
Rydex Fund Services, LLC; Vice President, Rydex
Holdings, LLC; Treasurer, SBL Fund; Security Equity
Fund; Security Income Fund; Security Large Cap Value
Fund & Security Mid Cap Growth Fund; and Vice President,
Security Benefit Asset Management Holdings, LLC.
Previous: Security Global Investors, LLC, Senior Vice
President (2010-2011); Rydex Advisors, LLC (f/k/a
PADCO Advisors, Inc.) Senior Vice President (2006-2011);
Rydex Fund Services, LLC (f/k/a Rydex Fund Services,
Inc.), Director (2009) & Senior Vice President
(2003-2006); and Rydex Specialized Products, LLC, Chief
Financial Officer (2005-2009).
----------------------------------------------------------------------------------------------------------------------------
Joanna M. Haigney (44) Chief Compliance Current: Chief Compliance Officer & Secretary, SBL 179
Officer from 2004 to Fund; Security Equity Fund; Security Income Fund;
present; and Secretary Security Large Cap Value Fund & Security Mid Cap
from 2003 to present Growth Fund; Vice President, Rydex Holdings, LLC; Vice
President, Security Benefit Asset Management Holdings,
LLC; and Senior Vice President & Chief Compliance
Officer, Security Investors, LLC
Previous: Security Global Investors, LLC, Senior Vice
President (2010-2011); Rydex Advisors, LLC (f/k/a
PADCO Advisors, Inc.) and Rydex Advisors II, LLC (f/k/a
PADCO Advisors II, Inc.), Chief Compliance Officer and
Senior Vice President (2010-2011); Rydex Capital Partners
I, LLC & Rydex Capital Partners II, LLC, Chief Compliance
Officer (2006-2007); and Rydex Fund Services, LLC (f/k/a
Rydex Fund Services, Inc.), Vice President (2001-2006).
----------------------------------------------------------------------------------------------------------------------------
Joseph Arruda (44) Assistant Treasurer Current: Assistant Treasurer, SBL Fund; Security Equity 179
from 2006 to present Fund; Security Income Fund; Security Large Cap Value
Fund & Security Mid Cap Growth Fund; Vice President,
Security Investors, LLC; and Chief Financial Officer &
Manager, Rydex Specialized Products, LLC.
Previous: Security Global Investors, LLC, Vice President
(2010-2011); and Rydex Advisors, LLC (f/k/a PADCO
Advisors, Inc.) & Rydex Advisors II, LLC (f/ka/ PADCO
Advisors II, Inc.), Vice President (2004-2011).
----------------------------------------------------------------------------------------------------------------------------
Keith Fletcher (53) Vice President from Current: Senior Vice President, Security Investors, LLC; 179
2009 to present Vice President, Rydex Holdings, LLC; Vice President,
----------------------------------------------------------------------------------------------------------------------------
26
----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
POSITION(S) HELD PORTFOLIOS
WITH THE TRUST, IN FUND
TERM OF OFFICE COMPLEX
NAME, ADDRESS AND AGE AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN
OF TRUSTEE/OFFICER TIME SERVED DURING PAST 5 YEARS BY OFFICER
----------------------------------------------------------------------------------------------------------------------------
Rydex Specialized Products, LLC; Vice President, Rydex
Distributors, LLC; Vice President, Rydex Fund Services,
LLC; Vice President and Director, Advisor Research
Center, Inc.; and Vice President, SBL Fund; Security
Equity Fund; Security Income Fund; Security Large Cap
Value Fund & Security Mid Cap Growth Fund.
Previous: Security Global Investors, LLC, Vice President
(2010-2011); Rydex Advisors, LLC (f/ka/ PADCO
Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO
Advisors II, Inc.), Vice President (2009-2011); Lyster
Watson and Company, Managing Director (2007-2008);
and Fletcher Financial Group, Inc., Chief Executive
Officer (2004-2007).
----------------------------------------------------------------------------------------------------------------------------
Amy Lee (50) Vice President and Current: Senior Vice President & Secretary, Security 179
Assistant Secretary Investors, LLC; Secretary & Chief Compliance Officer,
from 2009 to present Security Distributors, Inc.; Vice President, Associate
General Counsel & Assistant Secretary, Security Benefit
Life Insurance Company and Security Benefit Corporation;
Associate General Counsel, First Security Benefit Life
Insurance and Annuity of New York; Vice President &
Secretary, SBL Fund; Security Equity Fund; Security
Income Fund; Security Large Cap Value Fund & Security
Mid Cap Growth Fund; Vice President & Secretary, Rydex
Holdings, LLC Secretary, Advisor Research Center, Inc.,
Rydex Specialized Products, LLC, Rydex Distributors,
LLC and Rydex Fund Services, LLC; and Assistant
Secretary, Security Benefit Clinic and Hospital
Previous: Security Global Investors, LLC, Senior Vice
President & Secretary (2007-2011); Rydex Advisors, LLC
(f/ka/ PADCO Advisors, Inc.) & Rydex Advisors II, LLC
(f/k/a PADCO Advisors II, Inc.), Senior Vice President &
Secretary (2010-2011); and Brecek & Young Advisors,
Inc., Director (2004-2008).
----------------------------------------------------------------------------------------------------------------------------
NOMINEE OWNERSHIP OF PORTFOLIO SHARES
The following table shows the dollar amount range of each Nominee's beneficial
ownership of shares of the Funds and all Funds that the nominee would oversee in
the family of funds as of the end of the most recently completed calendar year.
Dollar amount ranges disclosed are established by the SEC.
27
---------------------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR
RANGE OF SHARES IN ALL
DOLLAR RANGE OF FUNDS OVERSEEN BY
NAME FUND NAME FUND SHARES (1) NOMINEE (1,2)
---------------------------------------------------------------------------------------------------------------------------------
INTERESTED NOMINEES
---------------------------------------------------------------------------------------------------------------------------------
Donald C. Cacciapaglia None None None
---------------------------------------------------------------------------------------------------------------------------------
Richard Goldman None None None
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT NOMINEES
---------------------------------------------------------------------------------------------------------------------------------
Corey A. Colehour None None $50,001 - $100,000
---------------------------------------------------------------------------------------------------------------------------------
J. Kenneth Dalton None None $10,001 - $50,000
---------------------------------------------------------------------------------------------------------------------------------
Thomas F. Lydon, Jr. None None None
---------------------------------------------------------------------------------------------------------------------------------
Werner E. Keller None None Over $100,000
---------------------------------------------------------------------------------------------------------------------------------
Patrick T. McCarville None None $50,001 - $100,000
---------------------------------------------------------------------------------------------------------------------------------
Roger J. Somers None None Over $100,000
---------------------------------------------------------------------------------------------------------------------------------
1 Information provided is as of December 31, 2010.
2 Includes the Trust, Rydex Series Funds, Rydex Variable Trust, Rydex Dynamic
Funds, Security Equity Fund, Security Large Cap Value Fund, Security Mid
Cap Growth Fund, Security Income Fund and SBL Fund, as applicable.
None of the nominees who would be Independent Trustees or their immediate
family members had any interest in the Investment Adviser or Distributor, or any
person controlling, controlled by or under common control with such persons. For
this purpose, "immediate family member" includes the Nominee's spouse, children
residing the in the Nominee's household and dependents of the Nominee.
As of October 3, 2011, the Trustees and officers as a group owned less
than 1% of the outstanding shares of each Fund.
BOARD COMPENSATION
The following table sets forth compensation paid by Rydex Variable Trust
for the fiscal year ended December 31, 2010.
----------------------------------------------------------------------------------------------------------------------------
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL
COMPENSATION BENEFITS ACCRUED AS PART OF BENEFITS UPON TOTAL COMPENSATION
NAME OF TRUSTEE FROM TRUST TRUST'S EXPENSES RETIREMENT FROM FUND COMPLEX *
----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
----------------------------------------------------------------------------------------------------------------------------
Richard Goldman** $0 $0 $0 $0
----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
----------------------------------------------------------------------------------------------------------------------------
Corey A. Colehour $19,900 $0 $0 $162,000
----------------------------------------------------------------------------------------------------------------------------
J. Kenneth Dalton $21,100 $0 $0 $174,000
----------------------------------------------------------------------------------------------------------------------------
John O. Demaret $24,700 $0 $0 $202,000
----------------------------------------------------------------------------------------------------------------------------
Werner E. Keller $20,000 $0 $0 $163,500
----------------------------------------------------------------------------------------------------------------------------
Thomas F. Lydon $19,800 $0 $0 $161,000
----------------------------------------------------------------------------------------------------------------------------
Patrick T. McCarville $20,400 $0 $0 $168,000
----------------------------------------------------------------------------------------------------------------------------
Roger J. Somers $19,900 $0 $0 $162,000
----------------------------------------------------------------------------------------------------------------------------
28
* Represents total compensation for service as Trustee of Rydex ETF Trust,
Rydex Series Funds, Rydex Variable Trust and Rydex Dynamic Funds.
** Mr. Goldman is an Interested Trustee, as that term is defined in the
1940 Act by virtue of his affiliation with the Advisor. He does not
receive compensation from the Funds.
29
COMMITTEES AND MEETINGS OF THE BOARD
The Board has overall responsibility to manage and control the business
affairs of the Trust, including the complete and exclusive authority to oversee
and to establish policies regarding the management, conduct and operation of the
Trust's business. The Board held 4 regular meetings, and 2 special meetings,
during the Trust's most recent fiscal year. Each Trustee then in office attended
at least 75% of the aggregate of the total number of meetings of the Board and
the total number of meetings held by all committees of the Board on which the
Trustee served. The Trust currently does not have a policy with respect to
Trustees' attendance at shareholder meetings. Shareholders wishing to
communicate with the Board or individual directors should send such
correspondence to the Board at the Trust's offices. Shareholder communications
will be sent directly to the applicable Board member(s). The Board has
established the following standing committees:
AUDIT COMMITTEE. The Board has a standing Audit Committee that is
composed of each of the non-interested trustees of the Trust. The Audit
Committee operates pursuant to a written charter approved by the Board. The
principal responsibilities of the Audit Committee include: recommending which
firm to engage as the Trust's independent registered public accounting firm and
whether to terminate this relationship; reviewing the independent registered
public accounting firm's compensation, the proposed scope and terms of its
engagement, and the firm's
30
independence; serving as a channel of communication between the independent
registered public accounting firm and the Board; reviewing the results of each
external audit, including any qualifications in the independent registered
public accounting firm's opinion, any related management letter, management's
responses to recommendations made by the independent registered public
accounting firm in connection with the audit, if any, reports submitted to the
Committee by the Trust's service providers that are material to the Trust as a
whole, and management's responses to any such reports; reviewing the Trust's
audited financial statements and considering any significant disputes between
the Trust's management and the independent registered public accounting firm
that arose in connection with the preparation of those financial statements;
considering, in consultation with the independent registered public accounting
firm and the Trust's senior internal accounting executive, the independent
registered public accounting firm's report on the adequacy of the Trust's
internal financial controls; reviewing, in consultation with the Trust's
independent registered public accounting firm, major changes regarding auditing
and accounting principles and practices to be followed when auditing the Trust's
financial statements; and other audit related matters. Messrs. Colehour, Dalton,
Demaret, Keller, Lydon, McCarville and Somers serve as members of the Audit
Committee. The Audit Committee met four times in the most recently completed
fiscal year.
GOVERNANCE COMMITTEE. The Board has a standing Governance Committee that
operates under a written charter approved by the Board. The role of the
Governance Committee is to assist the Board in assuring the effective governance
of the Trust, including: (i) monitoring and making recommendations regarding
committees of the Board, including the responsibilities of those committees as
reflected in written committee charters, and committee assignments; (ii) making
recommendations regarding the term limits and retirement policies applicable to
the Independent Trustees of the Trust; (iii) considering and making
recommendations to the Board concerning the compensation of the Independent
Trustees, the Independent Chairman of the Board, including any special
compensation for serving as chairman of a member of a committee of the Board,
and expense reimbursement policies applicable to the Independent Trustees; (iv)
periodically reviewing and making recommendations regarding the size and
composition of the Board, including recommendations to the Board concerning the
need to increase or decrease the size of the Board or to add individuals with
special knowledge, skill sets or backgrounds to the Board; (v) overseeing the
orientation and education processes for new Independent Trustees and continuing
education of incumbent Independent Trustees; (vi) monitoring the independence
and performance of legal counsel to the Independent Trustees and making
recommendations to the Independent Trustees regarding the selection of
independent counsel to the Independent Trustees; (vii) overseeing the process
regarding the Board's periodic self-assessments and making recommendations to
the Board concerning that process; and (viii) making recommendations to the
Board concerning all other matters pertaining to the functioning of the Board
and committees of the Board and pertaining generally to the governance of the
Trust. Messrs. Keller, Lydon, and McCarville serve as members of the Governance
Committee. For the most recently completed fiscal year, the Governance Committee
met once.
NOMINATING COMMITTEE. The Board has a separate standing Nominating
Committee that operates under a written charter approved by the Board, attached
hereto as Appendix P. The role of the Nominating Committee is to identify,
evaluate and nominate individuals to serve as trustees of the Trust including,
shareholder recommendations for nominations to fill vacancies on
31
the Board. The Nominating Committee does not currently have specific procedures
in place to consider nominees recommended by shareholders but would consider
such nominees if submitted in accordance with Rule 14a-8 of the Securities
Exchange Act of 1934 in conjunction with a shareholder meeting to consider the
election of Board members. Messrs. Keller, Lydon, and McCarville serve as
members of the Nominating Committee. For the most recently completed fiscal
year, the Nominating Committee met once. Additional information regarding the
Nominating Committee may be found in the charter of the Nominating Committee.
RISK OVERSIGHT COMMITTEE. The Board has a separate standing Risk
Oversight Committee that operates under a written charter approved by the Board.
The role of the Risk Oversight Committee is to assist the Board in fulfilling
its responsibility to oversee risk management activities applicable to the
Funds, including systems failure, disaster recovery, business continuity and
other operational risks; counterparty credit, liquidity, valuation, leverage and
other market and investment risks; and legal and compliance risks. Messrs.
Demaret, Keller, and Dalton, serve as members of the Risk Oversight Committee.
For the most recently completed fiscal year, the Risk Oversight Committee met
three times.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of Ernst & Young LLP ("Ernst & Young") has been selected as
independent auditors of the Trust for the current fiscal year. Ernst & Young has
confirmed to the Audit Committee that they are independent auditors with respect
to the Trusts. Representatives of Ernst & Young are not expected to be present
at the Meeting, but will have the opportunity to make a statement if they wish,
and will be available should any matter arise requiring their presence.
Certain information concerning the fees and services provided by Ernst &
Young to the Trust and to the Investment Adviser and its affiliates for the two
most recently completed fiscal years of the Trust is provided below. The Audit
Committee is responsible for the engagement, compensation, and oversight of
Ernst & Young. The Audit Committee is required to pre-approve all audit and
permitted non-audit services performed by Ernst & Young for the Funds in
accordance with the Audit Committee Charter and the 1940 Act and makes a
determination with respect to Ernst & Young's independence each year. For the
two most recent fiscal years for each if the Funds, none of the services
provided to the Trust or described under "Audit-Related Fees," "Tax Fees," and
"All Other Fees" were approved by the Audit Committee pursuant to the de minimis
exception to the pre-approval requirements.
AUDIT FEES. The aggregate fees billed by Ernst & Young for audit of the
annual financial statements in connection with statutory and regulatory filings
for the fiscal years ended December 31, 2010 and December 31, 2009 were $984,960
and $991,250, respectively.
AUDIT-RELATED FEES. The aggregate fees billed by Ernst & Young for
assurance and related services reasonably related to the performance of the
annual audit or review of the Trust's financial statements (and not reported
above) for the fiscal years ended December 31, 2010 and December 31, 2009 were
$21,465 and $35,625, respectively.
TAX FEES. There were no tax fees billed by Ernst & Young for professional
services rendered for tax compliance, tax advice, and tax planning, including
preparation of tax returns
32
and distribution assistance for the fiscal years ended December 31, 2010 and
December 31, 2009.
ALL OTHER FEES. There were no fees billed by Ernst & Young for products
and services provided by Ernst & Young to the Funds, other than the services
reported above for the fiscal years ended December 31, 2010 and December 31,
2009.
AGGREGATE NON-AUDIT FEES. There were no non-audit fees fees billed by
Ernst & Young for the fiscal years ended December 31, 2010 and December 31,
2009.
BOARD RECOMMENDATION ON PROPOSAL 4
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE FUNDS VOTE "FOR" THE
ELECTION OF EACH NOMINEE
33
PROPOSAL 5--THE APPROVAL OF A "MANAGER OF MANAGERS"
ARRANGEMENT WITH RESPECT TO ALL FUNDS
The Board has approved a "manager of managers" arrangement for the Funds
and voted to recommend its approval to the Fund's shareholders. The 1940 Act
generally requires that a written sub-advisory agreement be approved by thean affirmative vote of a majority of the outstanding shares of a fund. The
appointment of a new sub-adviser or material modification of an existing
sub-advisory agreement must also be presented for approval by a fund's
shareholders under the 1940 Act. The SEC has previously issued an order
permitting the Investment Adviser, for a fund for which it serves as investment
adviser, to enter into a new sub-advisory agreement or materially amend an
existing sub-advisory agreement with an unaffiliated sub-adviser, subject to
approval by the Board (including a majority of the Independent Trustees), but
without obtaining shareholder approval (the "Manager of Managers Order").
Each Fund may rely upon the Manager of Managers Order only if, among
other things, the Fund's shareholders have approved the arrangement.
Shareholders of each Fund are therefore being asked to approve the manager of
managers arrangement to permit the Investment Adviser, subject to prior approval
by the Board, to retain sub-advisers or amend the terms of an existing
sub-advisory agreement without approval by shareholders. The manager of managers
arrangement has previously been implemented by other funds managed by the
Investment Adviser.
"MANAGER OF MANAGERS" ARRANGEMENT
On January 12, 2000, the SEC issued the Manager of Managers Order
permitting the Investment Adviser, with the approval of the Board, to enter into
or materially modify sub-advisory agreements with unaffiliated sub-advisers
without requiring shareholder approval. The Investment Adviser anticipates that
this relief would benefit shareholders to the extent that it will give the
Investment Adviser additional flexibility to implement sub-adviser changes or
materially modify sub-advisory agreements with unaffiliated sub-advisers when
needed, and to avoid expensive proxy solicitations. The Fund would obtain
shareholder approval of a sub-advisory agreement (or a material amendment
thereto) with a sub-adviser considered to be an "affiliated person," as defined
in the 1940 Act, of the Fund or the Investment Adviser, other than by reason of
serving as a sub-adviser to the Fund.
The Investment Adviser believes that the Manager of Managers Order would
enable the Funds to operate with greater efficiency by allowing the Investment
Adviser to employ sub-advisers best suited to the needs of a Fund, without
incurring the expense and delays associated with obtaining shareholder approval
of sub-advisers or material amendments to sub-advisory agreements with
sub-advisersvotes cast that are not affiliated with the Investment Adviser.
The Investment Adviser provides management servicesentitled to the Funds,
including overall supervisory responsibility for the general management and
investment of each Fund. If the proposal is approved, the Investment Adviser,
subject to the review and approval by the Board, would, in connection with the
appointment of an investment sub-adviser for a Fund: (a) set the Fund's overall
investment strategies; (b) evaluate, select and recommend sub-advisers to manage
all or a part of the Fund's assets; (c) when appropriate, allocate and
reallocate a Fund's assets
34
among multiple sub-adviser(s); (d) monitor and evaluate the investment
performance of the Fund's sub-adviser(s); and (e) implement procedures
reasonably designed to ensure that the Fund's sub-adviser(s) comply with the
relevant Fund's investment objectives, policies, and restrictions.
CONDITIONS OF THE EXEMPTIVE RELIEF
Under the terms of the Manager of Managers Order, the Investment Adviser
and the Funds are, and would continue to be, subject to several conditions
imposed by the SEC. In addition, the Board and the Investment Adviser would not
be able to enter into or materially amend a sub-advisory agreement with an
affiliated sub-adviser without complying with the 1940 Act and applicable
regulations governing shareholder approval of advisory agreements.
In order to relyvote on the Manager of Managers Order,Proposal.
What happens if a majority of the
Board must consist of Independent Trustees, and the nomination of new or
additional Independent Trustees must be at the discretion of the then existing
Independent Trustees. In addition, within 90 days of the appointment of any new
sub-adviser, the Investment Adviser is required to provide the Fund'sFund’s shareholders with all information about the new sub-adviser that would be
included in a proxy statement, including any changes caused by the addition of
the new sub-adviser. A Fund relying on the Manager of Managers Order must
disclose in its prospectus the existence, substance and effect of the Manager of
Managers Order and must prominently disclose that the Investment Adviser has
ultimate responsibility to oversee the sub-advisers and recommend their hiring,
termination and replacement.
If shareholders of a Fund do not approve the manager of managers
arrangement, it willFund’s Proposal?
If a Fund’s shareholders do not be implemented and thatapprove the Fund’s Proposal, the Fund will continue to be required to obtain shareholder approvalmanaged in accordance with its current investment objective and policies, and the Board will determine what action, if any, should be taken.
What is the recommendation of the retentionBoard?
Based upon its review, the Board has determined that each Fund’s Proposal is in the best interests of that Fund and its shareholders. In making this determination, the Board took into account materials presented to the Board in advance of its decision, including a sub-advisermemorandum from management discussing its rationale for proposing the liquidation of the Fund or any material changes to a sub-advisory agreement. The Investment Adviser
anticipates that, if this proposal is approved by shareholders, it would rely on
the order to enter into a new sub-advisory agreement with respect to the two
Funds sub-advised by DWA shortly after the approval of this proposal as there
may also be a change in control transaction relating to DWA in the upcoming
months.
BOARD CONSIDERATIONS IN APPROVING THE "MANAGER OF MANAGERS" ARRANGEMENT
In determining whether to approve a "manager of managers" arrangement for
the Funds and to recommend approval of such arrangements to shareholders, the
Board, including the Independent Trustees, considered certain information and
representations provided by the Investment Adviser.Funds. The Board noted that itthe proposed liquidations are part of management’s initiative to reposition, rationalize, and streamline the Guggenheim Investments family of funds so as to reduce duplication among funds and strengthen the fund lineup overall. In particular, the Board considered the fact that management did not anticipate that the Funds would continuebe able to review and approve each
sub-adviser selected byattract sufficient additional assets to maintain viability or believe that any future prospects exist for increasing the Investment Adviser underFunds’ assets. The Board noted that management did not believe that continuing to manage the manager of managers
arrangement, andFunds at their current asset levels would evaluate and consider for approval all newbe beneficial to the Funds or amended
sub-advisory agreements.their shareholders. The Board also considered management’s recommendation to not reorganize each of the Funds into other existing funds included in the Guggenheim Investments family of funds because of the lack of a suitable fund with a complementary investment objective and strategies and the potential cost of a reorganization in comparison to the relatively low level of assets under management that shareholder approvaleach of Proposal 6the Funds would contribute to the existing fund in such a reorganization. The Board further considered the regulatory constraints involved in the reorganization of a variable fund, including the time needed to seek and obtain exemptive relief to carry out a reorganization of the Funds were a complementary fund within the fund complex to be identified. In weighing these considerations, the Board noted that the proposed liquidations would not result in changestax implications for the Funds or the Contract Holders because the Funds are held through Variable Contracts. After consideration of these materials and factors and other information it deemed relevant, the Board, including all of the Independent Trustees, approved the Proposals and voted to recommend their approval to shareholders of the investment advisory fees paid by a
Fund to the Investment Adviser.Funds. The Board also notedis recommending that fees paidshareholders vote“FOR” each Proposal to a sub-
adviser would be negotiated betweenapprove the Investment Adviser and the sub-adviser,
subject to Board approval, and that any increase in the investment advisory fee
paid to the Investment
35
Adviser by the Fund pursuant to the investment advisory agreement would continue
to require shareholder approval.
The Board concluded that it is appropriate and in the interestsPlan on behalf of each Fund.
9
ADDITIONAL INFORMATION
Certain of the Fund's shareholders to provide the Investment Adviser and the Board with maximum
flexibility to enter into or materially modify sub-advisory agreements without
incurring the unnecessary delay or expense of obtaining shareholder approval.
This process will allow the Funds to operate more efficiently.
BOARD RECOMMENDATION ON PROPOSAL 5
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE FUNDS VOTE "FOR" PROPOSAL 5
36
PROPOSAL 6--THE APPROVAL OF THE ELIMINATION OF THE FUNDAMENTAL
INVESTMENT POLICY ON INVESTING IN OTHER INVESTMENT COMPANIES
WITH RESPECT TO THE MONEY MARKET FUND
Proposal 6 relates to the elimination of the fundamental investment
policy on investing in other investment companies for the Money Market Fund. The
1940 Act requires that each fund adopt "fundamental" investment policies with
respect to several types of activities. However, the 1940 Act does not require
that a fund adopt a fundamental investment policy on investing in other
investment companies. Therefore, the Money Market Fund's current fundamental
investment policy on investing in other investment companies is unnecessary.
PROPOSED FUNDAMENTAL INVESTMENT POLICY
It is proposed that the Money Market Fund's fundamental investment restriction
on investing in other investment companies be eliminated in its entirety.
CURRENT FUNDAMENTAL INVESTMENT POLICY
The current fundamental investment policy on investing in other investment
companies for the Money Market Fund reads:
The Money Market Fund shall not:
Invest in securities of other investment companies, except as these
securities may be acquired as part of a merger, consolidation,
acquisition of assets, or plan of reorganization.
DISCUSSION OF PROPOSED MODIFICATION
The Investment Adviser believes that under certain market conditions, it
may be beneficial for the Money Market Fund to invest in other money market
funds (a type of investment company investment permitted under Securities and
Exchange Commission ("SEC") Rule 2a-7, the SEC rule that strictly regulates
money market funds and their investments). These investments could permit
specific investment opportunities or expertise, which could help improve the
Money Market Fund's yield and performance.
As a shareholder of another investment company, the Money Market Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Money Market Fund bears
directly in connection with its own operations. Notwithstanding this greater
freedom to invest in other investment companies, the Money Market Fund would
continue to comply with other provisions of the 1940 Act relating to investments
in other investment companies. In addition, the Money Market Fund would be
subject to the risks of investing in the underlying money market funds.
However, the Money Market Fund as well as the underlying money market
funds would be subject to SEC Rule 2a-7 and would invest in compliance with the
strict requirements included in the rule. These requirements include stringent
portfolio quality, maturity and
37
liquidity requirements and other risk-limiting conditions intended to enhance
(but not guarantee) a money market fund's ability to maintain a stable $1.00
price per share. Among other things, Rule 2a-7 limits portfolio holdings to
short-term securities (i) that are denominated in U.S. dollars, (ii) that pose
minimal credit risk to a fund and meet stringent credit quality requirements,
and (iii) that are "Eligible Securities" as defined in Rule 2a-7 under the 1940
Act. Each Money Market Fund will continue to seek to maintain a stable $1.00
price per share, as permitted by current Rule 2a-7.
Should the Money Market Fund's shareholders not approve the proposal to
eliminate the Money Market Fund's fundamental investment policy on investing in
other investment companies, the Money Market Fund's current fundamental
investment policy on investing in other investment companies would continue to
apply unchanged and the Board would decide whether to consider other changes to
the Money Market Fund's investment program.
BOARD RECOMMENDATION ON PROPOSAL 6
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS
OF EACH MONEY MARKET FUND VOTE "FOR" PROPOSAL 6
38
OTHER BUSINESS
The Trustees do not know of any matters to be presented at the Meeting
other than those set forth in this Joint Proxy Statement. If other business
should properly come before the Meeting, proxies will be voted in accordance
with the judgment of the persons named in the accompanying proxy.
ADDITIONAL INFORMATION
ADMINISTRATOR, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
The principal underwriter/distributor of the Trust is RydexFunds’ Service Providers
Principal Underwriter. Guggenheim Distributors, LLC (the “Distributor”), located at 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850, serves as the distributor and principal underwriter for shares of the Trust and the Funds under the general supervision and control of the Board and the officers of the Trust and pursuant to a distribution agreement between the Distributor and the Trust. The Distributor is a subsidiary of Security Benefit Corporation (“Security Benefit”) and an affiliate of the Investment Adviser because it is commonly held with the
Investment Adviser (and will remain under common control after the Transaction)Advisor.
The Administrator. Rydex Fund Services, LLC (the "Administrator"“Administrator”), also an affiliate of the
Investment Adviser, is located at 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850, and provides general administrative, shareholder, dividend
disbursement,serves as the administrator, transfer agent, and registraraccounting services agent for the Trust and the Funds, subject to the Funds. Information
regarding the fees paid by each Fund to the Distributorgeneral supervision and the Administrator
during the previous fiscal year is provided in Appendix C.
The Transaction would affect the control of the DistributorBoard and the Administrator because they are commonly held withofficers of the Investment Adviser.
However, shareholder approval is not required in order forTrust, pursuant to an administration agreement between the DistributorTrust and the Administrator. The Administrator to continue providing services to the Funds after the closingis a subsidiary of Security Benefit and an affiliate of the Transaction. The Board has been assured that there will be no material
change in the nature or quality of the services provided by the Distributor and
the Administrator to each Fund due to the change in control.
AFFILIATIONS AND AFFILIATED BROKERAGE
During the Funds' most recent fiscal year, the Funds paid no commissions
on portfolio brokerage transactions to brokers who may be deemed to be
affiliated persons of the Funds, the Investment Adviser, or affiliated persons
of such persons ("Affiliated Brokers").
OTHER INFORMATION
Advisor.
Voting Information
Proxy materials, reports and other information filed by the Funds can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
100 F Street, NE, Washington, DC 20549. The SEC maintains an Internet web site
(at http://www.sec.gov), which contains other information about the Funds.
VOTING INFORMATION
PROXY SOLICITATION.Solicitation. The principal solicitation of proxies will be by the mailing of this Joint Proxy Statement on or about October 13, 2011,July 12, 2013, but proxies may also be solicited by telephone and/or in person by representatives of the Trust, regular employees of the Investment AdviserGuggenheim Investments, its affiliates, or its affiliate(s)AST Fund Solutions, LLC (“AST”), or The
Altman Group, a private proxy services firm. If we have not received your vote as the date of the Special Meeting approaches, you may receive a telephone call from
39
COST OF THE MEETING.
The costcosts of the Special Meeting, including the costs of retaining The Altman Group, preparingAST, preparation and mailing of the notice, proxy statement and proxy, and the solicitation of proxies, including reimbursement to broker-dealers and others who forwarded proxy materials to their clients, will be borne by Guggenheim Capital the Advisor and/or its affiliates, and not the Funds.affiliates. The estimated cost of retaining The Altman GroupAST is approximately $963,183.
SHAREHOLDER VOTING. $8,094. Per the arrangement made between the Advisor and AST, AST will act as overall manager of the proxy process and will provide mailing, tabulation, and solicitation services.
Shareholder Voting.Shareholders of the Funds who own shares atas of the close
of business on October 3, 2011Record Date will be entitled to notice of, and to vote at, the Special Meeting. Each whole share isShareholders are entitled to one vote for each share held and fractional votes for fractional shares held. The number of shares of each fractional share
is entitled to a proportionate fractional vote on each matterFund as to which suchvoting instructions may be given to the Trust is determined by dividing the amount of the shareholder’s variable annuity or life insurance policy value attributable to the Fund on the Record Date by the net asset value per share of the Fund as of the same date. As of the Record Date, the following shares of each Fund were issued and outstanding, representing the same number of votes:
Fund | Shares Issued and Outstanding as of Record Date | |||
DWA Flexible Allocation Fund | 441,108.882 | |||
DWA Sector Rotation Fund | 521,441.118 | |||
All-Asset Conservative Strategy Fund | 427,395.068 | |||
All-Asset Moderate Strategy Fund | 750,665.384 | |||
All-Asset Aggressive Strategy Fund | 194,933.65 | |||
10
The Insurance Companies who are known to be voted athave owned beneficially 5% or more of each Fund’s outstanding shares as of the Meeting. One-third (331/3%)Record Date are listed in Appendix B. As of the Record Date, the Trustees and officers, as a group, owned less than 1% of the outstanding shares of the Funds. As of the Record Date, there were no persons who were known to control the Funds.
An Insurance Company that uses shares of a Trust's shares
entitled to vote on a Proposal constitutes a quorum.
Shares of the Funds are available primarilyFund as funding media for insurance products. Life
insurance companiesits Variable Contracts will vote shares attributable to insurance productsof the Fund held by its separate accounts in accordance with the instructions received from shareholders. An Insurance Company also will vote shares of a Fund held in such separate account for which no votingit has not received timely instructions arein the same proportion as it votes shares so held for which it has received instructions even in proportion ("for" or "withhold
authority") to thoseinstances where a broker would be prevented from exercising discretion. “Broker non-votes,” therefore, will be voted by each Insurance Company just as any other shares for which instructions are received.the Insurance Company does not receive voting instructions. As a result, a small number of insurance product ownersshareholders could determine the outcome of the vote if other ownersshareholders fail to vote. In addition, abstentions and broker non-votesAn Insurance Company whose separate account invests in a Fund will not be counted for or
against the Proposals, but will be counted for purposes of determining whether a
quorum is present. "Broker non-votes" arevote shares held by a broker or nomineeits general account and its subsidiaries in the same proportion as to which instructions have not been received fromother votes cast by its separate account in the beneficial owners or
persons entitled to vote, and the broker or nominee does not have discretionary
voting power. Because the affirmative vote of a majority of the outstanding
voting securitiesaggregate.
More than 50% of each Fund, as defined below, is required to approve each
Proposal (other than Proposal 4), abstentionsFund’s shares, represented in person or by proxy, will constitute a quorum for the Special Meeting and broker non-votes will
effectivelymust be a vote against those Proposals. Abstentions and broker non-votes
will have no effect on Proposal 4,present for which the required vote is a pluralitytransaction of a Trust's shares voting.
Ifbusiness at the Special Meeting. In the event that a quorum is not present at the Special Meeting, or if a quorum is present at
the Meeting but sufficient votes to approve one or more of the Proposals are not received, or
if other matters arise requiring shareholder attention, the persons named as proxy agentsproxies may propose one or more adjournments of the Special Meeting to permit further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of thosethe Fund shares presentrepresented at the Special Meeting in person or represented by proxy.proxy (excluding abstentions). The persons named as proxies will vote those proxies that they are entitled to vote "FOR" aFOR each Proposal in favor of such an adjournment of the Special Meeting, and will vote those proxies required to be voted "AGAINST" aAGAINST each Proposal against such an adjournment. Information regardingA shareholder vote may be taken on any Proposal prior to any such adjournment if sufficient votes have been received and it is otherwise appropriate. As a practical matter, because the number of issued and outstanding sharesInsurance Companies own more than 50% of each Fund as ofFund’s shares and each Insurance Company is expected to be present at the Record DateSpecial Meeting, in person or by proxy, it is provided in Appendix N, representinglikely that there will be a quorum at the same
number of votes for each of such Funds. The persons who are known to have owned
beneficially 5% or more of each Fund's outstanding shares as of the Record Date
are listed in Appendix O.
Special Meeting.
The person(s) named as proxies on the enclosed proxy card will vote in accordance with your directions, if your proxy is received properly executed. If we receive your proxy, and it is 40
"FOR"FOR the Proposal.Proposal or Proposals for which you are entitled to vote. The duly appointed proxies may, in their discretion, vote upon such other matters as may properly come before the Special Meeting.
In order that your shares may be represented at the Special Meeting, you are requested to vote your shares by mail, the Internet or telephoneby following the enclosed instructions. IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT
RETURN YOUR PROXY CARD, UNLESS YOU LATER ELECT TO CHANGE YOUR VOTE. If you vote by telephone or Internet, please do not return your proxy card, unless you later elect to change your vote. You may revoke your proxy: (a) at any time prior to its exercise by written notice of its revocation to the secretarySecretary of the TrustFunds prior to the Special Meeting; (b) by the subsequent execution and timely return of another proxy prior to the Meeting
(following the methods noted above);Special Meeting; or (c) by being present and voting in person at the Special Meeting and giving oral notice of revocation to the chairchairman of the Special Meeting. However, attendance in-person at the Special Meeting, by itself, will not revoke a previously-tendered proxy.
REQUIRED VOTE.
Required Vote.Approval of each Fund’s Proposal (other than Proposal 4) requires the vote of a "majority“majority of the outstanding voting securities"securities” of athat Fund, which means the vote of 67% or more of the shares that are present at the Special Meeting, provided thatif the holders of more than 50% of the outstanding shares are present or represented by
11
proxy, or the vote of more than 50% of the Fund'sFund’s outstanding shares, whichever is less. With respect to Proposal 4, a pluralityAccordingly, assuming the presence of a Trust's
shares voting is required to elect a Trustee with respect to that Trust.
The Current Agreements will remain in place untilquorum, abstentions and broker non-votes have the completion of the
Transaction, at which time, the Current Agreements will terminate and, subject
to shareholder approval, the New Agreements will go into effect. As a result, if
for some reason the Transaction does not occur, the Current Agreements will not
automatically terminate and will remain in effect and the New Agreements will
not be entered into, even if they have been approved by Fund shareholders.
If Proposals 1 through 3 are not approved by shareholders of any Fund,
the Board will evaluate other short- and long-term options, as previously
discussed. If the nominees are not elected, the current Trustees will continue
their current terms. New Trustees could be appointed in compliance with
applicable law. With respect to Proposal 5, should shareholders of a Fund not
approvenegative vote on the manager of managers arrangement, it will not be implemented and that
Fund will continue to be required to obtain shareholder approval ofProposal.
Shareholders Sharing the retention of an unaffiliated sub-adviser of the Fund or any material changes to
a sub-advisory agreements. With respect to Proposal 6, should shareholders of
the Money Market Fund not approve the proposal to amend the Money Market Fund's
fundamental policy on investing in other investment companies, the Money Market
Fund's fundamental investment policy on investing in other investment companies
would continue to apply unchanged.
SHAREHOLDERS SHARING THE SAME ADDRESS. Same Address.As permitted by law, only one copy of this Joint Proxy Statement may be delivered to shareholders residing at the same address, unless such shareholders have notified the TrustFunds of their desire to receive multiple copies of the shareholder reports and proxy statements that the Trust sends.Funds send. If you would like to receive an additional copy, please contact the TrustFunds by writing to the Trust's address,Funds, or by calling the telephone number shown on the front page of this Joint Proxy Statement. The TrustFunds will then promptly deliver, upon request, a separate copy of this Jointthe Proxy Statement to any shareholder residing
41
Trust'sFunds’ shareholder reports and proxy statements in the future, and shareholders sharing an address that wish to receive a single copy if they are receiving multiple copies, should also send a request as indicated.
SHAREHOLDER PROPOSALS
The Trust is organized as
Shareholder Proposals
As a statutory trust under the laws of Delaware.
As such,general matter, the Trust is not required to, and does not hold annual shareholder
meetings. Nonetheless, the Board may callmeetings of shareholders. Shareholders wishing to submit proposals for inclusion in a special meeting of shareholdersproxy statement for action by shareholder vote as may be required by the 1940 Act or as required or
permitted by the Trust's Declaration of Trust and By-Laws. Shareholders who wish
to present a proposal for action at a futuresubsequent shareholders’ meeting should submit asend their written proposal to the Secretary of the Trust c/o Rydex Variable Trust,at 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850 for inclusion in a future proxy
statement. Shareholder proposals to be presented at any future meeting of the
Trust20850.
Proposals must be received by the Trust in writing within a reasonable amounttime prior to the date of time before the Trust solicits proxies for thata meeting in orderof shareholders to be considered for inclusion in the proxy materials for thatthe meeting. WhetherTimely submission of a proposal is included in a proxy statementdoes not, however, necessarily mean that the proposal will be determinedincluded. Persons named as proxies for any subsequent shareholders’ meeting will vote in accordancetheir discretion with applicable federalrespect to proposals submitted on an untimely basis.
To ensure the presence of a quorum at the Special Meeting, prompt execution and state laws. Shareholders retain the right to request that
a meetingreturn of the shareholders be heldenclosed proxy is requested. A self-addressed, postage-paid envelope is enclosed for the purpose of considering matters
requiring shareholder approval.
TO ENSURE THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING, PROMPT EXECUTION AND
RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG WITH INSTRUCTIONS ON HOW TO
VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU PREFER TO VOTE BY ONE OF THOSE
METHODS.
your convenience.
By Order of the Board of Trustees,
Richard M. Goldman
President
42
/s/ Donald C. Cacciapaglia |
| Donald C. Cacciapaglia |
| President |
12
LIST OF APPENDICES
| Appendix A: | Summary Information of the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market), and Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) | |
| Appendix B: | Beneficial and Record Owners | |
| Appendix C: | Plan of Liquidation | |
13
APPENDIX A
CORPORATE STRUCTURE OF THE INVESTMENT ADVISER
Summary Information of the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market) and Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2)
The following sets forthinformation is extracted from the name and business address of each parent companyFunds May 1, 2013 prospectus; the April 29, 2013 prospectus of the Money Market Fund (Series I shares), a separate series of AIM Investment Adviser,Securities Fund (Invesco Investment Securities Funds); the May 1, 2013 prospectus of the NVIT Money Market Fund (Class II Shares), a separate series of Nationwide Variable Insurance Trust; the May 1, 2013 prospectus of the U.S. Government Money Market Fund, a separate series of Rydex Variable Trust; the April 30, 2013 prospectus, as supplemented May 9, 2013, of the Series C (Money Market), a separate series of SBL Fund; and the basisApril 30, 2013 prospectus of each parent company's control the Investment Adviser as of September 20, 2011.
The Investment Adviser is an indirect wholly-owned subsidiary of an entity that
is managed by Guggenheim Partners, LLC ("Guggenheim Partners"). Guggenheim
Partners is a wholly-owned subsidiary of Guggenheim Capital, LLC ("Guggenheim
Capital"), 227 West Monroe Street, 48th Floor, Chicago, Illinois 60606. Sage
Assets, Inc., 5949 Sherry Lane, Suite 1900, Dallas, Texas 76225, a wholly-owned
subsidiary of Sammons Enterprises, Inc., 5949 Sherry Lane, Suite 1900, Dallas,
Texas 75225, is a control person of Guggenheim Partners as a result of its
equity ownership in excess of 25% (but less than 50%) of Guggenheim Capital.
Following the Transaction, the Investment Adviser will be an indirect
wholly-owned subsidiary of Guggenheim Capital.
A-1
APPENDIX B
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of this [ ] day of [ ], 2011 by and between RYDEX
VARIABLE TRUST (the "Trust")Money Market Portfolio (Service Class 2), a Delaware statutory trust registeredseparate series of Variable Insurance Products Fund V (Fidelity Variable Insurance Products). Contract Holders should review the prospectuses of the AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares), Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares), Rydex Variable Trust - U.S. Government Money Market Fund, SBL Fund - Series C (Money Market), and Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) carefully before making any investment decisions with respect to these funds.
A-1
DWA Flexible Allocation Fund
Annual Portfolio Operating Expenses (% of average daily net assets) | ||||||||||||
| DWA Flexible Allocation Fund | AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares) | Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares) | Rydex Variable Trust - U.S. Government Money Market Fund | SBL Fund - Series C (Money Market) | Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) | |||||||
Management Fees | 1.00% | 0.40% | 0.38% | 0.50% | 0.50% | 0.17% | ||||||
Distribution and/or Shareholder Service (12b-1) Fees | None | None | 0.25% | None | None | 0.25% | ||||||
Other Expenses | 0.82% | 0.23%** | 0.20% | 0.77% | 0.21% | 0.09% | ||||||
Acquired Fund Fees and Expenses | 0.26% | None | 0.02% | None | None | None | ||||||
Total Annual Fund Operating Expenses | 2.08%* | 0.63%*** | 0.85% | 1.27% | 0.71% | 0.51% | ||||||
| * | The Total Annual Fund Operating Expenses in this fee table may not correlate to the expense ratios in the Fund’s financial highlights and financial statements because the financial highlights and financial statements reflect only the operating expenses of the Fund and do not include Acquired Fund Fees and Expenses, which are fees and expenses incurred indirectly by the Fund through its investments in certain underlying investment companies. |
| ** | Other Expenses have been restated to reflect current fees. |
| *** | The Adviser has contractually agreed, through at least June 30, 2014, to waive advisory fees and/or reimburse expenses of Series I shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Series I shares to 1.50% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary or non-routine items, including litigation expenses; (v) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco Advisers, Inc. mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2014. |
A-2
DWA Sector Rotation Fund
Annual Portfolio Operating Expenses (% of average daily net assets) | ||||||||||||
| DWA Sector Rotation Fund | AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares) | Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares) | Rydex Variable Trust - U.S. Government Money Market Fund | SBL Fund - Series C (Money Market) | Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) | |||||||
Management Fees | 1.00% | 0.40% | 0.38% | 0.50% | 0.50% | 0.17% | ||||||
Distribution and/or Shareholder Service (12b-1) Fees | None | None | 0.25% | None | None | 0.25% | ||||||
Other Expenses | 0.82% | 0.23%** | 0.20% | 0.77% | 0.21% | 0.09% | ||||||
Acquired Fund Fees and Expenses | 0.44% | None | 0.02% | None | None | None | ||||||
Total Annual Fund Operating Expenses | 2.26%* | 0.63%*** | 0.85% | 1.27% | 0.71% | 0.51% | ||||||
| * | The Total Annual Fund Operating Expenses in this fee table may not correlate to the expense ratios in the Fund’s financial highlights and financial statements because the financial highlights and financial statements reflect only the operating expenses of the Fund and do not include Acquired Fund Fees and Expenses, which are fees and expenses incurred indirectly by the Fund through its investments in certain underlying investment companies. |
| ** | Other Expenses have been restated to reflect current fees. |
| *** | The Adviser has contractually agreed, through at least June 30, 2014, to waive advisory fees and/or reimburse expenses of Series I shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Series I shares to 1.50% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary or non-routine items, including litigation expenses; (v) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco Advisers, Inc. mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2014. |
A-3
All-Asset Conservative Strategy Fund
Annual Portfolio Operating Expenses (% of average daily net assets) | ||||||||||||
| All-Asset Conservative Strategy Fund | AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares) | Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares) | Rydex Variable Trust - U.S. Government Money Market Fund | SBL Fund - Series C (Money Market) | Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) | |||||||
Management Fees | None | 0.40% | 0.38% | 0.50% | 0.50% | 0.17% | ||||||
Distribution and/or Shareholder Service (12b-1) Fees | None | None | 0.25% | None | None | 0.25% | ||||||
Other Expenses | None | 0.23%** | 0.20% | 0.77% | 0.21% | 0.09% | ||||||
Acquired Fund Fees and Expenses | 0.75% | None | 0.02% | None | None | None | ||||||
Total Annual Fund Operating Expenses | 0.75%* | 0.63%*** | 0.85% | 1.27% | 0.71% | 0.51% | ||||||
| * | The Total Annual Fund Operating Expenses in this fee table may not correlate to the expense ratios in the Fund’s financial highlights and financial statements because the financial highlights and financial statements reflect only the operating expenses of the Fund and do not include Acquired Fund Fees and Expenses, which are fees and expenses incurred indirectly by the Fund through its investments in certain underlying investment companies. |
| ** | Other Expenses have been restated to reflect current fees. |
| *** | The Adviser has contractually agreed, through at least June 30, 2014, to waive advisory fees and/or reimburse expenses of Series I shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Series I shares to 1.50% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary or non-routine items, including litigation expenses; (v) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco Advisers, Inc. mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2014. |
A-4
All-Asset Moderate Strategy Fund
Annual Portfolio Operating Expenses (% of average daily net assets) | ||||||||||||
| All-Asset Moderate Strategy Fund | AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares) | Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares) | Rydex Variable Trust - U.S. Government Money Market Fund | SBL Fund - Series C (Money Market) | Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) | |||||||
Management Fees | None | 0.40% | 0.38% | 0.50% | 0.50% | 0.17% | ||||||
Distribution and/or Shareholder Service (12b-1) Fees | None | None | 0.25% | None | None | 0.25% | ||||||
Other Expenses | None | 0.23%** | 0.20% | 0.77% | 0.21% | 0.09% | ||||||
Acquired Fund Fees and Expenses | 0.85% | None | 0.02% | None | None | None | ||||||
Total Annual Fund Operating Expenses | 0.85%* | 0.63%*** | 0.85% | 1.27% | 0.71% | 0.51% | ||||||
| * | The Total Annual Fund Operating Expenses in this fee table may not correlate to the expense ratios in the Fund’s financial highlights and financial statements because the financial highlights and financial statements reflect only the operating expenses of the Fund and do not include Acquired Fund Fees and Expenses, which are fees and expenses incurred indirectly by the Fund through its investments in certain underlying investment companies. |
| ** | Other Expenses have been restated to reflect current fees. |
| *** | The Adviser has contractually agreed, through at least June 30, 2014, to waive advisory fees and/or reimburse expenses of Series I shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Series I shares to 1.50% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary or non-routine items, including litigation expenses; (v) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco Advisers, Inc. mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2014. |
A-5
All-Asset Aggressive Strategy Fund
Annual Portfolio Operating Expenses (% of average daily net assets) | ||||||||||||
| All-Asset Aggressive Strategy Fund | AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares) | Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares) | Rydex Variable Trust - U.S. Government Money Market Fund | SBL Fund - Series C (Money Market) | Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2) | |||||||
Management Fees | None | 0.40% | 0.38% | 0.50% | 0.50% | 0.17% | ||||||
Distribution and/or Shareholder Service (12b-1) Fees | None | None | 0.25% | None | None | 0.25% | ||||||
Other Expenses | None | 0.23%** | 0.20% | 0.77% | 0.21% | 0.09% | ||||||
Acquired Fund Fees and Expenses | 0.88% | None | 0.02% | None | None | None | ||||||
Total Annual Fund Operating Expenses | 0.88%* | 0.63%*** | 0.85% | 1.27% | 0.71% | 0.51% | ||||||
| * | The Total Annual Fund Operating Expenses in this fee table may not correlate to the expense ratios in the Fund’s financial highlights and financial statements because the financial highlights and financial statements reflect only the operating expenses of the Fund and do not include Acquired Fund Fees and Expenses, which are fees and expenses incurred indirectly by the Fund through its investments in certain underlying investment companies. |
| ** | Other Expenses have been restated to reflect current fees. |
| *** | The Adviser has contractually agreed, through at least June 30, 2014, to waive advisory fees and/or reimburse expenses of Series I shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Series I shares to 1.50% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary or non-routine items, including litigation expenses; (v) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco Advisers, Inc. mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2014. |
A-6
AIM Investment Securities Fund (Invesco Investment Securities Funds) - Money Market Fund (Series I shares)
Investment Objective(s)
The Fund’s investment objective is to provide current income consistent with preservation of capital and liquidity.
Principal Investment Strategies of the Fund
The Fund invests primarily in high-quality U.S. dollar-denominated short-term debt obligations: (i) securities issued by the U.S. Government or its agencies; (ii) bankers’ acceptances, certificates of deposit, and time deposits from U.S. or foreign banks; (iii) repurchase agreements; (iv) commercial paper; (v) municipal securities; (vi) master notes; and (vii) cash equivalents.
The Fund may engage in repurchase agreement transactions that are collateralized by cash or government securities. In addition, it may engage in repurchase agreement transactions that are collateralized by nongovernment securities such as anequity securities that are rated investment companygrade and below investment grade by nationally recognized statistical rating organizations or unrated securities of comparable quality.
The Fund invests primarily in those securities that are First Tier Securities (defined below) at the time of purchase.
As permitted by Rule 2a-7 under the Investment Company Act of 1940 (Rule 2a-7), the Fund seeks to maintain a stable price of $1.00 per share by using the amortized cost method to value portfolio securities and rounding the share value to the nearest cent. The Fund invests in conformity with SEC rules and regulations requirements for money market funds for the quality, maturity, diversification and liquidity of investments. The Fund invests only in U.S. dollar-denominated securities maturing within 397 days of the date of purchase, with certain exceptions permitted by applicable regulations. The Fund maintains a dollar-weighted average portfolio maturity of no more than 60 days, and a dollar-weighted average portfolio maturity as amended (the
"1940 Act"), and SECURITY INVESTORS, LLC, a Kansas limited liability company,
with its principal placedetermined without exceptions regarding certain interest rate adjustments under Rule 2a-7 of business at 805 King Farm Boulevard, Suite 600,
Rockville, Maryland 20850 (the "Adviser").
W I T N E S S E T H
WHEREAS,no more than 120 days. Each investment must be determined to present minimal credit risks by the Fund’s Adviser pursuant to guidelines approved by the Fund’s Board of Trustees, (the "Board")and must be an “Eligible Security” as defined under applicable regulations. First Tier Securities generally means Eligible Securities rated within the highest short-term category, an unrated security of the Trust has selectedcomparable quality as determined by 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 provideof Trustees, U.S. Government Securities as defined by applicable regulations, and securities issued by other registered money market funds. Such securities may also include Rule 144A securities, which are subject to resale restrictions.
The Fund may invest up to 50% of its assets in U.S. dollar denominated foreign securities. The Fund may also invest in securities, whether or not considered foreign securities, which carry foreign credit exposure.
In selecting securities for the FundsFund’s portfolio, the portfolio managers focus on securities that offer safety, liquidity, and a competitive yield. The Adviser conducts a credit analysis of each potential issuer prior to the purchase of its securities.
The portfolio managers normally hold portfolio securities to maturity, but may sell a particular security when they deem it advisable, such as when market or credit factors materially change.
A-7
Principal Risks of Investing in the Fund
As with any mutual fund investment, research, adviceloss of money is a risk of investing. An investment in the Fund is not a deposit in a bank and supervision and shall
furnish continuouslyis not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, you may lose money by investing in the Fund. The risks associated with an investment program forin the Funds, consistent withFund can increase during times of significant market volatility. The principal risks of investing in the respective investment objectivesFund are:
Cash/Cash Equivalents Risk. Holding cash or cash equivalents may negatively affect performance.
Counterparty Risk. Counterparty risk is the risk that the other party to the contract will not fulfill its contractual obligations, which may cause losses or additional costs to the Fund.
Credit Risk. The issuer of instruments in which the Fund invests may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
Foreign Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest.
Foreign Securities Risk. The Fund’s foreign investments may be affected by changes in a foreign country’s exchange rates, political and social instability, changes in economic or taxation policies, difficulties when enforcing obligations, decreased liquidity, and increased volatility. Foreign companies may be subject to less regulation resulting in less publicly available information about the companies.
Industry Focus Risk. To the extent the Fund invests in securities issued or guaranteed by companies in the banking and financial services industries, the Fund’s performance will depend on the overall condition of each Fund. The
Adviser shall determine, from time to time, what securities shallthose industries, which may be purchased for the Funds, what securities shall be held or soldaffected by the Fundsfollowing factors: the supply of short-term financing, changes in government regulation and what portion ofinterest rates, and the Funds' assets shall be held uninvested in cash,
subject alwaysoverall economy.
Interest Rate Risk. Interest rate risk refers to the provisions of the Trust's Declaration of Trust,
By-Laws and its registration statementrisk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending 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
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.
B-1
(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 and Section 817(h) 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")their individual characteristics, including duration.
Liquidity Risk. The Fund Booksmay hold illiquid securities that it may be unable to sell at the preferred time or price and Records shall be available tocould lose its entire investment in such securities.
Management Risk. The investment techniques and risk analysis used by 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.
(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
B-2
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 FundFund’s portfolio managers may not reflect fair value.produce the desired results.
Market Risk. The Adviser agrees to provide any
pricing informationprices of whichand 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 establishedincome generated by the Board.
(f) Cooperation with Agents of the Trust. The Adviser agreesFund’s securities may decline in response to, cooperate with and provide reasonable assistance to the Trust, any Trust
custodian or foreign sub-custodians, any Trust pricing agents and allamong 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 and Section 817(h) of the Code, and the Fund's
policies, guidelines or 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
B-3
connection with such certifications of Fund financial statements and
disclosure controls pursuant to the Sarbanes-Oxley 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 prospectivethings, investor sentiment, general economic and market conditions, regional or global instability, and shall furnishinterest rate fluctuations.
Money Market Fund Risk. Although the Fund seeks to preserve the Board such information asvalue of your investment at $1.00 per share, you may reasonably be
necessarylose money by investing in order for the Board to evaluate this AgreementFund. The share price of money market funds can fall below the $1.00 share price. You should not rely on or any proposed
amendments thereto.
(c) Transaction Information. The Adviser shall furnish toexpect the Trust
such information concerning portfolio transactions as may be necessary to
enable the TrustFund’s adviser or its designated agentaffiliates to perform such compliance testingenter into support agreements or take other actions to maintain the Fund’s $1.00 share price. The credit quality of the Fund’s holdings can change rapidly in certain markets, and the default of a single holding could
A-8
have an adverse impact on the FundsFund’s share price. The Fund’s share price can also be negatively affected during periods of high redemption pressures and/or illiquid markets. Further regulation could impact the way the Fund is managed, possibly negatively impacting its return. Additionally, the Fund’s yield will vary as the short-term securities in its portfolio mature or are sold and the Adviser's services asproceeds are reinvested in other securities.
Municipal Securities Risk. The Fund may invest in municipal securities. Constitutional amendments, legislative enactments, executive orders, administrative regulations, voter initiatives, and the Trustissuer’s regional economic conditions may in its sole
discretion, determineaffect the municipal security’s value, interest payments, repayment of principal and the Fund’s ability 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 accountsell it. Failure of a Fund, neithermunicipal security issuer to comply with applicable tax requirements may make income paid thereon taxable, resulting in a decline in the Adviser nor anysecurity’s value. In addition, there could be changes in applicable tax laws or tax treatments that reduce or eliminate the current federal income tax exemption on municipal securities or otherwise adversely affect the current federal or state tax status of municipal securities.
Reinvestment Risk. Reinvestment risk is the risk that a bond’s cash flows (coupon income and principal repayment) will be reinvested at an interest rate below that on the original bond.
Repurchase Agreement Risk. If the seller of a repurchase agreement defaults or otherwise does not fulfill 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 forobligations, the Fund may incur delays and losses arising from selling 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 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 ofunderlying securities, for a
Fund with such brokers, subject to review by the Board from time to time
with respectenforcing its rights, or declining collateral value. These risks are magnified to the extent that a repurchase agreement is secured by securities other than cash or U.S. Government securities.
U.S. Government Obligations Risk. The Fund may invest in obligations issued by U.S. Government agencies and continuationinstrumentalities that may receive varying levels of this practice. Itsupport from the government, which could affect the Fund’s ability to recover should they default.
Variable-Rate Demand Notes Risk. The absence of an active secondary market for certain variable and floating rate notes could make it difficult to dispose of the instruments, and a portfolio could suffer a loss if the issuer defaults during periods in which a portfolio is understoodnot entitled to exercise its demand rights.
FEES AND EXPENSES
This table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the services provided by such brokers
B-4
may be useful toSeries I shares of the AdviserFund but does not represent the effect of any fees or other expenses assessed 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 toyour variable product, and if it did, expenses would be in the best interest ofhigher.
Shareholder Fees(fees paid directly from your investment)
| Class: Series I shares | ||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | N/A | |||
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) | N/A | |||
A-9
Annual 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 requirementOperating Expenses (expenses 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.
Notwithstanding the foregoing paragraph, with respect to the All Asset
Conservative Strategy, All Asset Moderate Strategy, All Asset Aggressive
Strategy, and Alternative Strategies Allocation Funds, the Adviser will bear its
own costs of providing services hereunder. In addition, the Adviser agrees toyou pay all expenses incurred by the foregoing Funds except for acquired fund fees
and expenses, interest, taxes, brokerage and other expenses incurred in placing
orders for the purchase and sale of securities and other investment instruments,
extraordinary expenses, and distribution fees and expenses paid by the Funds
under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act.
Notwithstanding the foregoing paragraphs, with respect to the Multi-Hedge
Strategies Fund, the Adviser will bear its own costs of providing services
hereunder. The Adviser agrees to pay all expenses incurred by the foregoing Fund
except for interest, taxes, brokerage and other expenses incurred in placing
orders for the purchase and sale of securities and other investment instruments,
extraordinary expenses, distribution fees, investors services fees, and expenses
paid
B-5
by the Fund under any distribution plan adopted pursuant to Rule 12b-1 under
the 1940 Act or investor services plan.
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 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
affect 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
B-6
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 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 sublicense 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
B-7
adjustment based on the number of days elapsed in the current montheach year as a percentage of the total numbervalue of your investment)
| Class: Series I shares | ||||
Management Fees | 0.40 | % | ||
Distribution and/or Service (12b-1) Fees | None | |||
Other Expenses1 | 0.23 | % | ||
Total Annual Fund Operating Expenses2 | 0.63 | % | ||
| 1 | “Other Expenses” have been restated to reflect current fees. |
| 2 | The Adviser has contractually agreed, through at least June 30, 2014, to waive advisory fees and/or reimburse expenses of Series I shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Series I shares to 1.50% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary or non-routine items, including litigation expenses; (v) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco Advisers, Inc. mutually agree to amend or continue the fee waiver agreement, it will terminate on June 30, 2014. |
A-10
Nationwide Variable Insurance Trust - NVIT Money Market Fund (Class II Shares)
OBJECTIVE
The Fund seeks as high a level of current income as is consistent with preserving capital and maintaining liquidity. The Fund is a money market fund that seeks to maintain a stable net asset value of $1.00 per share.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in a portfolio of high-quality, fixed-income securities that mature in 397 days or less. These securities are issued by banks, corporations and the U.S. government, and may include asset-backed securities, shares of other money market mutual funds, and obligations of states, municipalities and foreign governments. The Fund may purchase foreign money market securities, although all obligations held by the Fund must be denominated in U.S. dollars. The Fund may invest in floating and variable-rate obligations and may enter into repurchase agreements. The Fund maintains a dollar-weighted average maturity of no more than 60 days, and a weighted average life of no more than 120 days.
Because the Fund invests in short-term securities, the Fund’s subadviser generally sells securities only to meet liquidity needs, to maintain target allocations or to take advantage of more favorable opportunities.
PRINCIPAL RISKS
Investments in the Fund are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. While the Fund seeks to preserve capital, there can be no guarantee that the Fund will meet its objective or be able to maintain a fixed net asset value of $1.00 per share; therefore, you could lose money.
There is no guarantee that the Fund will provide a certain level of income or that any such month.
10. INDEPENDENT CONTRACTOR. Inincome will stay ahead of inflation. Further, the Fund’s yield will vary; it is not fixed for a specific period like the yield on a bank certificate of deposit. A low interest rate environment may prevent the Fund from providing a positive yield or from paying Fund expenses out of current income without impairing the Fund’s ability to maintain a stable net asset value.
Other risks of investing in the Fund include:
Interest rate risk– generally, when interest rates go up, the value of fixed-income securities goes down. Prices of longer-term securities generally change more in response to interest rate changes than prices of shorter-term securities. To the extent the Fund invests a substantial portion of its assets in fixed income securities with longer-term maturities, rising interest rates may cause the value of the Fund’s investments to decline significantly.
Credit risk– an issuer may be unable to pay the interest or principal when due. If an issuer defaults, the Fund may lose money. Changes in a bond issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of a bond.
Liquidity risk – the risk that the Fund will experience significant net redemptions of Fund shares at a time when it cannot find willing buyers for its portfolio securities or can only sell its portfolio securities at a material loss. An inability to sell portfolio securities may result from adverse market developments or investor perceptions regarding the portfolio securities. While the Fund endeavors to maintain a high level
A-11
of liquidity in its portfolio so that it can satisfy redemption requests, the Fund’s ability to sell portfolio securities can deteriorate rapidly due to credit events affecting particular issuers or credit enhancement providers, or due to general market conditions and a lack of willing buyers.
Asset-backed securities risk– asset-backed securities are generally subject to the same types of risk that apply to other fixed-income securities, such as interest rate risk and credit risk. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities.
Repurchase agreements risk– exposes the Fund to the risk that the party that sells the securities to the Fund may default on its obligation to repurchase them.
Foreign securities risk– foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
Investments in other money market mutual funds – to the extent that the Fund invests in shares of other money market mutual funds, its performance is directly tied to the performance of such other funds. If one of these other money market mutual funds fails to meet its duties hereunder,objective, the Adviser is and shallFund’s performance could 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 anynegatively affected. In addition, Fund in any way or otherwise
be deemed to be an agentshareholders will pay a proportionate share of the Trustfees and expenses of such other money market mutual fund (including applicable management, administration and custodian fees) as well as the Fund’s direct expenses. Any such other money market mutual fund will not charge any front-end sales loads, contingent deferred sales charges or any Fund. Rule 12b-1 fees.
In addition to these risks, the Fund’s portfolio managers may select securities that underperform the money markets, the Fund’s benchmark or other mutual funds with similar investment objectives and strategies.If any occasion should arise
in which the Adviser gives any advice to its clients concerningvalue of the shares of a
Fund,Fund’s investments goes down, you may lose money.
FEES AND EXPENSES
The following table describes the Adviser will act solely as investment counsel for such clientsfees and not
in any way on behalfexpenses that you may pay when buying and holding shares of the Fund. 11. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically
terminate, withoutThe fees and expenses do not include sales charges and other expenses that may be imposed by variable insurance contracts. If these amounts were reflected, the payment of any penalty,fees and expenses would be higher than shown. Such sales charges and other expenses are described in the event of its assignment
(as defined in section 2(a)(4) of the 1940 Act); providedvariable insurance contract’s prospectus.
Annual Fund Operating Expenses
(expenses 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 ofyou pay 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.
B-8
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
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 1940 Act) 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.
B-9
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 or federal, in Delaware, with
respect to any dispute under this Agreement.
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.
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 VARIABLE TRUST, on behalf of each
Fund listed on Schedule A
By: -------------------------------
Name: Richard M. Goldman
Title: President
SECURITY INVESTORS, LLC
By: -------------------------------
Name: Richard M. Goldman
Title: Chief Executive Officer
B-10
SCHEDULE A
TO THE
ADVISORY AGREEMENT
DATED [ ], 2011 BETWEEN
RYDEX VARIABLE TRUST
AND
SECURITY INVESTORS, LLC
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 FUND RATE
----------------------------------------------- ---------------------------------------------
Nova 0.75% Banking 0.85%
Inverse S&P 500 Strategy 0.90% Basic Materials 0.85%
NASDAQ-100(R) 0.75% Biotechnology 0.85%
Inverse NASDAQ-100(R) Strategy 0.90% Consumer Products 0.85%
Mid-Cap 1.5x Strategy 0.90% Electronics 0.85%
Russell 2000(R) 1.5x Strategy 0.90% Energy 0.85%
Government Long Bond 1.2x Strategy 0.50% Energy Services 0.85%
Inverse Government Long Bond Strategy 0.90% Financial Services 0.85%
Europe 1.25x Strategy 0.90% Health Care 0.85%
Japan 2x Strategy 0.75% Internet 0.85%
S&P 500 Pure Value 0.75% Leisure 0.85%
S&P 500 Pure Growth 0.75% Precious Metals 0.75%
S&P MidCap 400 Pure Value 0.75% Real Estate 0.85%
S&P MidCap 400 Pure Growth 0.75% Retailing 0.85%
Inverse Mid-Cap Strategy 0.90% Technology 0.85%
S&P SmallCap 600 Pure Value 0.75% Telecommunications 0.85%
S&P SmallCap 600 Pure Growth 0.75% Transportation 0.85%
Inverse Russell 2000(R) Strategy 0.90% Utilities 0.85%
Strengthening Dollar 2x Strategy 0.90% Commodities Strategy 0.75%
Weakening Dollar 2x Strategy 0.90% U.S. Long Short Momentum 0.90%
U.S. Government Money Market 0.50% S&P 500* 0.75%
High Yield Strategy* 0.75% Russell 2000(R)* 0.75%
Inverse High Yield Strategy* 0.75% Inverse Dow 2x Strategy 0.90%
Dow 2x Strategy 0.90% Inverse Russell 2000(R) 2x Strategy* 0.90%
NASDAQ-100(R) 2x Strategy 0.90% CLS AdvisorOne Amerigo 0.90%
Russell 2000(R) 2x Strategy 0.90% CLS AdvisorOne Select Allocation 0.90%
S&P 500 2x Strategy 0.90% All-Asset Moderate Strategy 0.00%
Inverse NASDAQ-100(R) 2x Strategy* 0.90% All-Asset Conservative Strategy 0.00%
Inverse S&P 500 2x Strategy* 0.90% All-Asset Aggressive Strategy 0.00%
CLS AdvisorOne Clermont 0.90% Alternative Strategies Allocation 0.00%
Managed Futures Strategy 0.90% DWA Sector Rotation Fund 1.00%
Long/Short Commodities Strategy* 0.90% DWA Flexible Allocation Fund 1.00%
Multi-Hedge Strategies 1.15%
* Denotes Funds that have not yet commenced operations.
B-11
APPENDIX C
INFORMATION REGARDING THE INVESTMENT ADVISORY
AGREEMENTS AND FEES PAID TO THE INVESTMENT ADVISER
AND AFFILIATES
Security Investors, LLC, a Kansas limited liability company (the
"Investment Adviser") currently serves as investment adviser to all series
(collectively, the "Funds") of Rydex Variable Trust ("RVT"), pursuant to
investment advisory agreements between Trust, on behalf of its series, and the
Investment Adviser. Rydex Fund Services, Inc. ("RFS") serves as the
administrator, transfer agent and accounting services agent for the Funds. Rydex
Distributors, LLC ("RDL") serves as principal underwriter to the Funds. RFS and
RDL are affiliates of the Investment Adviser. The table below provides the
following information:
(i) the date on which each Fund's shareholders last approved the
Fund's investment advisory agreement;
(ii) the annual rate of management fees paid by each Fund to the
Investment Adviser, statedyear as a percentage of that Fund's average
daily net assets;
(iii) the aggregate amountvalue of management fees paid by each Fund to the
Investment Adviser for the Fund's fiscal year ended December 31,
2010;
(iv) the amount of fees paid by each Fund to the Administrator for
administrative and transfer agency services for the Fund during
the Fund's fiscal year ended December 31, 2010;
(v) the amount of accounting service fees paid by each Fund to the
Administrator for accounting services for the Fund during the
Fund's fiscal year ended March 31, 2011 December 31, 2010; and
(vi) the amount of investor service fees paid by each RVT Fund to RDL
during the Fund's fiscal year ended December 31, 2010 for RDL's
services to owners of variable annuity and variable life
insurance contracts who indirectly through insurance company
separate accounts invest in shares of the Fund, pursuant to the
Fund's investor services agreement with RDL.
C-1
RYDEX VARIABLE TRUST
your investment)
| Class II Shares | ||||
Management Fees | 0.38 | % | ||
Distribution and/or Service (12b-1) Fees | 0.25 | % | ||
Other Expenses | 0.20 | % | ||
Acquired Fund | 0.02 | % | ||
Total Annual Fund | 0.85 | % | ||
A-12
Rydex Variable Trust a Delaware statutory trust- U.S. Government Money Market Fund
INVESTMENT OBJECTIVE
The U.S. Government Money Market Fund (the "Trust"“Fund”) is an open-end management investment company registered underseeks to provide security of principal, high current income, and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in money market instruments issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities, and enters into repurchase agreements collateralized fully by U.S. government securities. The Fund also may invest in other securities that are determined to be “Eligible Securities” as defined in Rule 2a-7 of the Investment Company Act of 1940 (the “1940 Act”), including, but not limited to Eurodollar Time Deposits, securities issued by the International Bank for Reconstruction and Development (also known as amendedThe World Bank), and high-quality commercial paper certificates of deposit, and short-term corporate bonds. The Fund operates in compliance with U.S. Securities and Exchange Commission (the "1940 Act"“SEC”);
WHEREAS, rules, including Rule 2a-7, which impose certain liquidity, maturity and diversification requirements on all registered money market funds. All securities purchased by the Adviser has entered intoFund must have remaining maturities of 397 days or less, and must be found by the Advisor to represent minimal credit risk and be of eligible quality.
Under normal circumstances, the Fund will invest at least 80% of its net assets, plus any borrowings for investment purposes, in government securities as defined by Section 2(a)(16) of the 1940 Act (and derivatives thereof). Section 2(a)(16) of the 1940 Act defines “government security” to mean any security issued or guaranteed as to principal or interest by the United States, or by a person controlled or supervised by and acting as an Investment Advisory Agreement
dated [ ], 2011,instrumentality of the government of the United States pursuant to authority granted by the Congress of the United States; or any certificate of deposit for any of the foregoing.
PRINCIPAL RISKS
As with all mutual funds, a shareholder is subject to the risk that his or her investment could lose money. In addition to this risk, the Fund is subject to a number of additional risks that may affect the value of its shares, including:
CREDIT RISK– The Fund could lose money if the issuer or guarantor of a debt instrument in which it invests becomes unwilling or unable to make timely principal and/or interest payments, or to otherwise meet its obligations.
INCOME RISK – Income Risk involves the potential for decline in the Fund’s yield (the rate of dividends the Fund pays) in the event of declining interest rates.
INTEREST RATE RISK – The market value of fixed income investments and related financial instruments will change in response to interest rate changes. During periods of falling interest rates, the values of fixed income securities generally rise. Conversely, during periods of rising interest rates, the values of such securities generally decline.
REPURCHASE AGREEMENT RISK– The Fund’s investment in repurchase agreements may be subject to market and credit risk with respect to the repurchase agreement counterparty and underlying collateral securing the repurchase agreements. Investments in repurchase agreements also may be subject to the risk that the market value of the underlying obligations may decline prior to the expiration of the repurchase agreement term.
A-13
STABLE PRICE PER SHARE RISK – The Fund’s assets are valued using the amortized cost method, which enables the Fund to maintain a stable price of $1.00 per share. Although the Fund is managed to maintain a stable price per share of $1.00, there is no guarantee that the price will be constantly maintained, and it is possible to lose money.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Owners of variable annuity and insurance contracts that invest in the Fund also should refer to the variable insurance contract prospectus for a description of fees and expenses that may be deducted at the separate account level or contract level for any charges that may be incurred under a contract. If the information below were to reflect the deduction of insurance charges, fees and expenses would be higher.
SHAREHOLDER FEES (fees paid directly from your investment) | N/A | |||
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) | ||||
Management Fees | 0.50 | % | ||
Distribution (12b-1) and Shareholder Service Fees | None | |||
Other Expenses | 0.77 | % | ||
Total Annual Fund Operating Expenses | 1.27 | % | ||
A-14
SBL Fund - Series C (Money Market)
INVESTMENT OBJECTIVE
Series C seeks as amended (the "Advisory Agreement")high a level of current income as is consistent with preservation of capital by investing in money market securities with varying maturities.
PRINCIPAL INVESTMENT STRATEGIES
Series C pursues its objective by investing in a diversified and liquid portfolio of high-quality money market instruments. Generally, the Series is required to invest its assets in the securities of issuers with the Trust, pursuanthighest short-term credit rating, and it may not invest more than 3% of its assets in securities with the second-highest short-term credit rating. Unlike a traditional money market fund, the Series does not seek to maintain a stable share price of $1.00 and it is possible to lose money by investing in the Series. The Series is subject to certain portfolio quality, maturity, diversification and liquidity requirements under the federal securities laws, including the following:
Maintain a dollar-weighted average portfolio maturity of 60 calendar days or less and a dollar weighted average life to maturity of 120 calendar days or less
Invest only in high-quality, dollar-denominated, short-term obligations.
A money market instrument is a short-term debt instrument issued by banks or other U.S. corporations, or the U.S. government or state or local governments. Money market instruments have limited maturity dates and may include certificates of deposit, bankers’ acceptances, variable rate demand notes, fixed-term obligations, commercial paper, asset-backed commercial paper and repurchase agreements. Money market instruments may also include certain securities with limitations on resale (i.e., “restricted securities,” which include Rule 144A securities that are eligible for resale to qualified institutional buyers).
Security Investors, LLC, also known as Guggenheim Investments (the “Investment Manager”), attempts to increase return and manage risk by (1) selecting securities that mature at regular intervals over the Adviser will actlife of the portfolio; (2) purchasing only instruments that have minimal credit risk, as determined by Guggenheim Investments, and that have received a rating from the requisite nationally recognized statistical rating organizations in one of the two highest short-term categories or an unrated security that is of comparable quality; and (3) constantly evaluating alternative investment adviseropportunities for diversification without additional risk.
PRINCIPAL RISKS
An investment in the Series is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. It is possible to lose money by investing in the Series. The principal risks of investing in the Series are listed below.
Credit Risk – The Series could lose money if the issuer of a bond is unable to repay interest and principal on time or defaults. The issuer of a bond could also suffer a decrease in quality rating, which would affect the volatility of the price and liquidity of the bond.
Interest Rate Risk – Investments in fixed-income securities are subject to the possibility that interest rates could rise sharply, causing the value of the Series’ securities and share price to decline. Fixed income securities with longer durations are subject to more volatility than those with shorter durations.
A-15
Market Risk – The market value of the securities held by the Series may fluctuate as a result of factors affecting individual companies or other factors such as changing economic, political or financial market conditions. Moreover, changing economic, political or financial market conditions in one country or geographic region could adversely impact the market value of the securities held by the Series in a different country or geographic region. The Series may not maintain a positive yield. In addition, unlike a traditional money market fund, the Series does not seek to maintain a stable share price of $1.00. As a result, the Series’ share price, which is its net asset value per share, will vary.
Liquidity Risk – Although the Series primarily invests in a diversified portfolio of high quality instruments of governmental and private issuers, the Series’ investments may become less liquid as a result of market developments or adverse investor perception.
Prepayment Risk – Securities subject to prepayment risk generally offer less potential for gains when interest rates decline, because issuers of the securities may be able to prepay the principal due on the securities, and may offer a greater potential for loss when interest rates rise.
Regulatory Risk – Regulations of money market funds are evolving. New regulations may affect negatively the Series’ performance, yield and cost.
Restricted Securities Risk – Restricted securities generally cannot be sold to the public and may involve a high degree of business, financial and liquidity risk, which may result in substantial losses to the Series.
FEES AND EXPENSES OF THE SERIES
This table describes the fees and expenses that you may pay if you buy and hold shares of the Series. The table below does not take into account any of the expenses associated with an investment in variable insurance products offered by participating insurance companies. If such fees and expenses were reflected, the overall expenses would be higher.
SHAREHOLDER FEES(fees paid directly from your investment) | ||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | None | |||
ANNUAL FUND OPERATING EXPENSES(expenses that you pay each year as a percentage of the value of your investment) | ||||
Management Fees | 0.50 | % | ||
Other Expenses | 0.21 | % | ||
Total Annual Fund Operating Expenses | 0.71 | % | ||
A-16
Variable Insurance Products Fund V (Fidelity Variable Insurance Products) - Money Market Portfolio (Service Class 2)
INVESTMENT OBJECTIVE
The fund seeks as high a level of current income as is consistent with preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
Investing in U.S. dollar-denominated money market securities of domestic and foreign issuers and repurchase agreements.
Potentially entering into reverse repurchase agreements.
Investing more than 25% of total assets in the financial services industries.
Investing in compliance with industry-standard regulatory requirements for money market funds for the quality, maturity, and diversification of investments.
PRINCIPAL INVESTMENT RISKS
| • | Interest Rate Changes. Interest rate increases can cause the price of a money market security to decrease. |
| • | Foreign Exposure. Entities located in foreign countries can be affected by adverse political, regulatory, market, or economic developments in those countries. |
| • | Financial Services Exposure. Changes in government regulation and interest rates and economic downturns can have a significant negative effect on issuers in the financial services sector, including the price of their securities or their ability to meet their payment obligations. |
| • | Issuer-Specific Changes. A decline in the credit quality of an issuer or a provider of credit support or a maturity-shortening structure for a security can cause the price of a money market security to decrease. |
An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of a shareholder’s investment at $1.00 per share, it is possible to lose money by investing in the fund.
FEE TABLE
The following table describes the fees and expenses that may be incurred, directly or indirectly, when you, as a variable product owner, buy and hold interests in a separate account that invests in shares of the fund. The table does not include any fees or other expenses of any variable annuity or variable life insurance product; if it did, overall fees and expenses would be higher.
A-17
FEES (fees paid directly from your investment) | Not Applicable |
Annual class operating expenses
(expenses that you pay each year as a % of the value of your investment)
| Service Class 2 | ||||
Management fee | 0.17 | % | ||
Distribution and/or Service (12b-1) fees | 0.25 | % | ||
Other expenses | 0.09 | % | ||
Total annual operating expenses | 0.51 | % | ||
A-18
APPENDIX B
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL AND RECORD OWNERS
The following tables provide information about the persons or entities who, to the knowledge of the Funds, owned beneficially or of record 5% or more of any class of each Fund’s outstanding shares as of June 26, 2013:
DWA Flexible Allocation Fund
Name and Address of Shareholder | Number of Shares and Type of Ownership | Percentage of Fund | ||||||
Nationwide Insurance Company NWVA4 c/o IPO Portfolio Accounting P.O. Box 182029 Columbus, Ohio 43218-2029 | 424,799.518 | 96.3 | % | |||||
DWA Sector Rotation Fund
Name and Address of Shareholder | Number of Shares and Type of Ownership | Percentage of Fund | ||||||
Nationwide Insurance Company NWVA4 c/o IPO Portfolio Accounting P.O. Box 182029 Columbus, Ohio 43218-2029 | 507,556.366 | 97.34 | % | |||||
All-Asset Conservative Strategy Fund
Name and Address of Shareholder | Number of Shares and Type of Ownership | Percentage of Fund | ||||||
FSBL Variable Account A One Security Benefit Place Topeka, Kansas 66636-0001 | 27,096.932 | 6.34 | % | |||||
Nationwide Insurance Company NWVA4 c/o IPO Portfolio Accounting P.O. Box 182029 Columbus, Ohio 43218-2029 | 102,609.383 | 24.01 | % | |||||
Security Benefit Life Insurance Co. SBL Variable Annuity Account XIV One Security Benefit Place Topeka, Kansas 66636-0001 | 261,890.099 | 61.28 | % | |||||
B-1
Name and Address of Shareholder | Number of Shares and Type of Ownership | Percentage of Fund | ||||||
Jefferson National Life Insurance Company Attn: Separate Account 10350 Ormsby Park Place Suite 600 Louisville, Kentucky 40233 | 35,798.654 | 8.38 | % | |||||
All-Asset Moderate Strategy Fund
Name and Address of Shareholder | Number of Shares and Type of Ownership | Percentage of Fund | ||||||
FSBL Variable Account A One Security Benefit Place Topeka, Kansas 66636-0001 | 41,021.906 | 5.47 | % | |||||
Nationwide Insurance Company NWVA4 c/o IPO Portfolio Accounting P.O. Box 182029 Columbus, Ohio 43218-2029 | 156,845.303 | 20.89 | % | |||||
Security Benefit Life Insurance Co. SBL Variable Annuity Account XIV One Security Benefit Place Topeka, Kansas 66636-0001 | 509,764.361 | 67.91 | % | |||||
Jefferson National Life Insurance Company Attn: Separate Account 10350 Ormsby Park Place Suite 600 Louisville, Kentucky 40233 | 43,033.814 | 5.73 | % | |||||
All-Asset Aggressive Strategy Fund
Name and Address of Shareholder | Number of Shares and Type of Ownership | Percentage of Fund | ||||||
FSBL Variable Account A One Security Benefit Place Topeka, Kansas 66636-0001 | 17,884.879 | 9.17 | % | |||||
Nationwide Insurance Company NWVA4 c/o IPO Portfolio Accounting P.O. Box 182029 Columbus, Ohio 43218-2029 | 35,744.207 | 18.34 | % | |||||
Security Benefit Life Insurance Co. SBL Variable Annuity Account XIV One Security Benefit Place Topeka, Kansas 66636-0001 | 129,601.536 | 66.49 | % | |||||
B-2
Name and Address of Shareholder | Number of Shares and Type of Ownership | Percentage of Fund | ||||||
Jefferson National Life Insurance Company Attn: Separate Account 10350 Ormsby Park Place Suite 600 Louisville, Kentucky 40233 | 11,703.028 | 6 | % | |||||
B-3
APPENDIX C
RYDEX VARIABLE TRUST
PLAN OF LIQUIDATION
This Plan of Liquidation (“Plan”) concerns the DWA Flexible Allocation Fund, DWA Sector Rotation Fund, All-Asset Aggressive Strategy Fund, All-Asset Moderate Strategy Fund, and All-Asset Conservative Strategy Fund (each, a “Fund” and collectively, the “Funds”), each a separate series of Rydex Variable Trust (the “Trust”). The Trust is organized and existing as a statutory trust under the Trust set forth therein; and
WHEREAS, the Adviser, with the approvallaws of the State of Delaware. The Trust desires to retain
the Sub-Adviser as its agent to furnish sub-investment advisory services to the
Adviser in connection with the management of the separate series of the Trust
set forth on Schedule A of this Investment Sub-Advisory Agreement (each a "Fund"
and together, the "Funds"), and the Sub-Adviser is willing to render such
sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. APPOINTMENT. The Adviser hereby appoints the Sub-Adviser to provide
certain sub-investment advisory services to each Fund for the period and on the
terms set forth in this Agreement (the "Sub-Advisory Agreement"). The
Sub-Adviser hereby accepts such appointment and agrees to furnish the services
herein set forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Sub-Adviser hereby acknowledges receipt of
properly certified or authenticated copies of each of the following:
(a) The Trust's Declaration of Trust and all amendments thereto or
restatements thereof (such Declaration, as presently in effect and
as it shall from time to time be amended or restated, is herein
called the "Declaration of Trust");
(b) The Trust's By-Laws and amendments thereto;
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Sub- Adviser and approving this Agreement;
(d) The Trust's Notification of Registration on Form N-8A under the
1940 Act as filedregistered with the U.S. Securities and Exchange Commission (the "SEC") and all amendments thereto;
(e) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") and under the
1940 Act as filed with the SEC and all
F-1
amendments thereto insofar as such Registration Statement and such
amendments relate to each Fund; and
(f) The Trust's most recent prospectus and Statement of Additional
Information for each Fund (such prospectus and Statement of
Additional Information, as presently in effect, and all amendments
and supplements thereto are herein collectively called the
"Prospectus").
The Adviser will furnish the Sub-Adviser from time to time with copies of
all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject always to the supervision of the Trust's Board
of Trustees and the Adviser, the Sub-Adviser will furnish, direct, and
administer an investment program in respect of, and make investment and
reinvestment decisions for, all assets of each Fund and place all orders for the
purchase and sale of securities, all on behalf of each Fund. In the performance
of its duties, the Sub- Adviser will satisfy its fiduciary duties to each Fund,
and will monitor each Fund's investments, and will comply with the provisions of
the Trust's Declaration of Trust and By-Laws, as amended from time to time, any
policies or restrictions imposed by the Adviser and/or the Trust, and the stated
investment objectives, policies and restrictions of each Fund as provided in
each Fund's prospectus and statement of additional information, as amended from
time to time. The Sub-Adviser and the Adviser will each make its officers and
employees available to the other from time to time at reasonable times to review
investment policies of each Fund and to consult with each other regarding the
investment affairs of each Fund. The Sub-Adviser shall also make itself
reasonably available to the Board of Trustees at such times as the Board of
Trustees shall request.
The Sub-Adviser represents and warrants that it is in compliance with all
applicable rules and regulations of the SEC pertaining to its investment
advisory activities and agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) will conform with all applicable rules and regulations of the SEC
pertaining to its investment advisory activities;
(c) will place orders pursuant to its investment determinations for
each Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers or dealers, the Sub-Adviser
will attempt to obtain the best combination of prompt execution of
orders in an effective manner and at the most favorable price
consistent with its "best execution" obligation. Consistent with
this obligation, when the execution and price offered by two or
more brokers or dealers are comparable, the Sub-Adviser may, in
its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Sub-Adviser with research
advice and other services (as those terms are defined in Section
28(e) of the Securities Act of 1934). In no instance will portfolio
securities be purchased from or sold to the Adviser, the
Sub-Adviser, Rydex Distributors, Inc. or any affiliated person of
either the Trust, the Adviser, the Sub-Adviser or Rydex
Distributors, Inc., except as may be permitted under the 1940 Act;
F-2
(d) will report regularly to the Adviser and will make appropriate
persons available for the purpose of reviewing at reasonable times
with representatives of the Adviser and the Board of Trustees the
management of each Fund, including, without limitation, review of
the general investment strategy of each Fund, the performance of
each Fund in relation to standard industry indices, interest rate
considerations and general conditions affecting the marketplace
and will provide various other reports from time to time as
reasonably requested by the Adviser;
(e) will maintain books and records required to be maintained by Rule
31a-3 under the 1940 Act with respect to the Trust's securities
transactions and will furnish the Adviser and the Trust's Board of
Trustees such periodic and special reports as the Board of
Trustees or the Adviser may request;
(f) will act upon instructions from the Adviser not inconsistent with
the fiduciary duties hereunder; and
(g) will treat confidentially and as proprietary information of the
Trust all such records and other information relative to the Trust
maintained by the Sub-Adviser, and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld
where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested
by the Trust.
4. PROXY VOTING; CORPORATE ACTIONS. The Sub-Adviser shall execute and
deliver, or cause its nominee to execute and deliver, all proxy votes, notices
of meetings and other notices affecting or relating to the securities of each
Fund during the term of this Sub-Advisory Agreement. The Sub- Adviser shall
maintain and preserve written proxy voting procedures, and shall provide a copy
of such voting procedures, along with a record of its actual proxy votes
relating to the securities of each Fund, to the Adviser or the Trust upon
request. The Adviser and Sub-Adviser understand that the Funds may pursue their
investment objectives by investing in other investment companies that are not
affiliated "underlying funds" and specific proxy rules are applicable under the
1940 Act to this type of relationship. In particular, the Sub-Adviser will vote
all proxies received from the underlying funds in the same proportion that all
shares of the underlying funds are voted, or in accordance with instructions
received from Fund shareholders, pursuant to Section 12(d)(1)(F) of the 1940
Act. Beginning July 1, 2003, the Sub-Adviser shall maintain records regarding
proxy voting on behalf of the Funds in order that the Funds may complete the
annual Form N-PX filing.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for each Fund, on behalf of the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any of such records upon
the Trust's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31 a-1 under the 1940 Act.
F-3
6. EXPENSES. During the term of this Agreement, the Sub-Adviser will
pay all expenses incurred by it in connection with its activities under this
Sub-Advisory Agreement.
7. COMPENSATION. For the services to be provided by the Sub-Adviser
pursuant to this Agreement, the Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory fee
paid at the rate specified on Schedule A, which is attached hereto and made part
of this Agreement. The fee will be calculated based on the average daily net
asset value of the assets under the Sub-Adviser's management. This fee will be
paid at least quarterly. Except as may otherwise be prohibited by law or
regulation (including any then current SEC staff interpretation), the
Sub-Adviser may, in its discretion and from time to time, waive a portion of its
fee. The Sub-Adviser shall not be responsible for expenses and costs of a
Fund's operations payable by a Fund or the Adviser.
8. SERVICES TO OTHERS. The Adviser understands, and has advised the
Trust's Board of Trustees, that the Sub-Adviser now acts, and may in the future
act, as an investment adviser and fiduciary to other managed accounts, and as
investment adviser, sub-investment adviser, and/or administrator to other
investment companies. The Adviser has no objection to the Sub-Adviser's acting
in such capacities, provided that the Sub-Adviser furnishes adequate disclosure
of such possible conflicts of interest and implements procedures designed to
mitigate or eliminate such conflicts. For example, whenever a Fund and one or
more other investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with a formula believed by the Sub-Adviser to be equitable to each
company. The Adviser recognizes, and has advised the Trust's Board of Trustees,
that in some cases the Sub-Adviser's procedures may adversely affect the size of
the position that each Fund may obtain in a particular security. In addition,
the Adviser understands, and has advised the Trust's Board of Trustees, that the
persons employed by the Sub-Adviser to assist in the Sub-Adviser's duties under
this Sub-Advisory Agreement will not devote their full time to such service and
nothing contained in this Sub-Advisory Agreement will be deemed to limit or
restrict the right of the Sub-Adviser or any of its affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
9. STANDARD OF CARE. Each of the Adviser and Sub-Adviser shall
discharge its duties under this Sub-Advisory Agreement with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims. The parties
recognize that the opinions, recommendations and actions of the Sub-Adviser will
be based on advice and information deemed to be reliable but not guaranteed by
or to the Sub-Adviser.
10. INDEMNIFICATION. Each of the Adviser and Sub-Adviser agrees to
indemnify each other against any claim, loss or liability (including reasonable
attorney's fees) arising as a result of the failure to meet the standard of care
set forth in the first sentence of Paragraph 9 hereof, Notwithstanding the
generality of the foregoing, the Adviser and Sub-Adviser each further agrees to
indemnify each other against any claim, loss or liability (including reasonable
attorney's fees) arising or as a result of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligation and duties hereunder. The federal securities laws
impose liabilities under certain circumstances on persons who act in good faith,
and therefore nothing herein shall in any way
F-4
constitute a waiver or limitation of any rights which each party may have
against the other under any federal securities laws based on negligence and
which cannot be modified in advance by contract.
11. DURATION AND TERMINATION. This Sub-Advisory Agreement will become
effective as of the date hereof provided that it has been approved by vote of a
majority of the outstanding voting securities of each Fund in accordance with
the requirements under the 1940 Act, and, unless sooner terminated as provided
herein, will continue in effect for two years.
Thereafter, if not terminated, this Sub-Advisory Agreement will continue
in effect for each Fund for successive periods of 12 months, each ending on the
day preceding the anniversary of the Sub- Advisory Agreement's effective date of
each year, provided that such continuation is specifically approved at least
annually (a) by the vote of a majority of those members of the Trust's Board of
Trustees who are not interested persons of the Trust, the Sub-Adviser, or the
Adviser, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of a majority of the Trust's Board of Trustees or
by the vote of a majority of all votes attributable to the outstanding shares of
each Fund. Notwithstanding the foregoing, this Sub-Advisory Agreement may be
terminated as to each Fund at any time, without the payment of any penalty, on
sixty (60) days' written notice by the Adviser or by the Sub-Adviser. This
Sub-Advisory Agreement will immediately terminate in the event of its
assignment. (As used in this Sub-Advisory Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" have the
same meaning of such terms ascribed in the 1940 Act.)
This Agreement will terminate automatically if the investment advisory
agreement between the Trust and the Adviser is terminated.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Sub-Advisory
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
13. MULTIPLE ORIGINALS. This Sub-Advisory Agreement may be executed in
two or more counterparts, each of which when so executed shall be deemed to be
an original, but such counterparts shall together constitute but one and the
same document.
14. CUSTODY. All securities and other assets of each Fund shall be
maintained with a custodian designated by the Adviser. The Sub-Adviser shall
have no responsibility or liability with respect to any custodial function.
15. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be affected
thereby. This Agreement will be binding upon and shall inure to the benefit of
the parties hereto and will be governed by the internal laws of the state of
Delaware. The Sub-Adviser shall notify the Adviser of any changes in its
officers and directors within a reasonable time.
16. LIMITATION OF LIABILITY. The names "Rydex Variable Trust" and
"Trustees of the Rydex Variable Trust" refer respectively to the Trust created
by, and the Trustees, as trustees but not individually or personally, acting
from time to time under, the Declaration of Trust, to which reference
F-5
is hereby made and a copy of which is on file at the office of the Secretary of
State of the State of Delaware and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of the Trust
entered in the name or on behalf thereof by any of the Trustees, representatives
or agents are made not individually but only in such capacities and are not
binding upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust. Persons dealing with each
Fund must look solely to the assets of the Trust belonging to each Fund for the
enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
SECURITY INVESTORS, LLC
By:
--------------------------------
Name: Richard M. Goldman
Title: Chief Executive Officer
CLS INVESTMENTS, LLC
By:
--------------------------------
Name:
Title:
F-6
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
DATED [ ], 2011
BETWEEN
SECURITY INVESTORS, LLC
AND
CLS INVESTMENTS, LLC
Pursuant to Section 7 of this Investment Sub-Advisory Agreement, the Adviser
shall pay the Sub-Adviser compensation at an annual rate as follows:
Amerigo Fund ................................................ 0.40%
Clermont Fund ............................................... 0.40%
Select Allocation Fund ...................................... 0.40%
Should either of the aforementioned Funds not average $10,000,000 in assets
over a quarter, the Sub-Adviser will not receive compensation for assets in that
Fund for that specific quarter.
F-7
APPENDIX G
INFORMATION REGARDING THE SUB-ADVISORY AGREEMENT WITH
CLS INVESTMENTS, LLC AND FEES PAID TO THE SUB-ADVISER
CLS Investments, LLC (the "Sub-Adviser") currently serves as sub-adviser to
the Amerigo Fund, the Clermont Fund and the Select Allocation Fund, each a
series of Rydex Variable Trust (collectively, the "CLS Funds"), pursuant to the
investment sub-advisory agreement between Security Investors, LLC, the CLS
Funds' investment adviser (the "Investment Adviser"), and the Sub-Adviser. The
table below provides the following information:
(i) the date of the Sub-Advisory Agreement;
(ii) the date on which the CLS Funds' shareholders last approved the Funds'
Sub-Advisory Agreement;
(iii) the annual rate of sub-advisory fees paid by the Investment Adviser
to the Sub-Adviser for the Sub-Adviser's sub-advisory services to the
CLS Funds; and
(iv) the aggregate amount of advisory fees paid by the Investment Adviser
to the Sub-Adviser for the Sub-Adviser's sub-advisory services to the
CLS Funds during the CLS Funds' fiscal year ended December 31, 2010.
DATE OF DATE OF LAST SUB-ADVISORY
SUB-ADVISORY SHAREHOLDER SUB-ADVISORY FEES PAID TO
FUND AGREEMENT APPROVAL FEES SUB-ADVISER
----------------------------------------------------------------------------------------------
Amerigo Fund 8/1/2010 5/21/2010 0.40% $1,069,290
Clermont Fund 8/1/2010 5/21/2010 0.40% $381,906
Select Allocation 8/1/2010 5/21/2010 0.40% $228,214
Fund
G-1
APPENDIX H
DIRECTORS/TRUSTEES/MANAGERS AND OFFICERS OF CLS INVESTMENTS, LLC
MANAGERS AND PRINCIPAL EXECUTIVE OFFICERS OF CLS INVESTMENTS, LLC. The business
address of the managers and principal executive officers is 4020 South 147th
Street, Omaha, Nebraska 68137.
POSITION HELD WITH CLS OTHER PRINCIPAL
NAME INVESTMENTS, LLC OCCUPATION/POSITION
------------------------------------------------------------------------------------------------
W. Patrick Clarke Manager Manager, NorthStar Financial
Services Group, LLC; Manager,
Gemini Fund Services, LLC;
Manager, Orion Advisor Services,
LLC; Manager, Northern Lights
Distributors, LLC; Manager, Forum
Financial Consultants LLC;
Manager, Gemcom, LLC; Manager,
Northern Lights Compliance
Services, LLC; Director,
Constellation Trust Company; and
President, AdvisorOne Funds
Michael Miola Manager Manager, NorthStar Financial
Services Group, LLC; Manager,
Orion Advisor Services, LLC;
Manager, Gemcom, LLC; Manager,
Northern Lights Compliance
Services, LLC; Director,
Constellation Trust Company;
Manager, Gemini Fund Services,
LLC; and Chairman of the Board of
Trustees, AdvisorOne Funds
Todd P. Clarke President, Manager N/A
There are no Trustees/Officers of the CLS Funds who hold position(s) with CLS
Investments, LLC.
H-1
APPENDIX I
ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT OBJECTIVES
ADVISED OR SUB-ADVISED BY CLS INVESTMENTS, LLC
The table below lists the names of other mutual funds advised or sub-advised
by CLS Investments, LLC ("CLS") with similar investment objectives as the
Amerigo Fund, Clermont Fund and Select Allocation Fund, each a series of Rydex
Variable Trust (the "CLS Funds"), and information concerning the CLS Funds' and
such other funds' net assets and the rate of compensation for CLS for its
services to the CLS Funds and such other funds.
ANNUAL
COMPENSATION
TO CLS (AS A
PERCENTAGE OF
NAME OF FUND SUBJECT TO THIS PROXY STATEMENT AVERAGE DAILY NET ASSETS
Name(s) of Other Fund(s) with Similar Objectives NET ASSETS) (IN MILLIONS)
-------------------------------------------------------------------------------------
AMERIGO FUND, A SERIES OF RYDEX VARIABLE TRUST 0.40% $ 189.4
Amerigo Fund, a series of AdvisorOne Funds* 1.00% $ 576.5
CLERMONT FUND, A SERIES OF RYDEX VARIABLE TRUST 0.40% $ 83.6
Clermont Fund, a series of AdvisorOne Funds* 1.00% $ 256.4
SELECT ALLOCATION FUND, A SERIES OF RYDEX VARIABLE 0.40% $ 42.7
TRUST
Select Allocation Fund (formerly known as 1.00% $ 240.8
Berolina Fund), a series of AdvisorOne Funds*
* CLS is the investment adviser to the fund.
I-1
APPENDIX J
FORM OF NEW SUB-ADVISORY AGREEMENT WITH
DORSEY, WRIGHT & ASSOCIATES, INC.
THIS AGREEMENT is made and entered into as of the close of business on
the [ ] day of [ ], 2011 between Security Investors, LLC (the "Adviser"), a
Kansas limited liability company, registered under the Investment Advisers Act
of 1940, as amended (the "Investment Advisers Act"), and Dorsey Wright &
Associates, Inc. (the "Subadviser"), a Virginia corporation registered under the
Investment Advisers Act.
W I T N E S S E T H:
WHEREAS, Rydex Variable Trust, a Delaware statutory trust ("RVT" or the
"Trust"), is registered with the Securities and Exchange Commission (the
"Commission"“SEC”) as an open-end management investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"“1940 Act”);
WHEREAS, RVT. This Plan is authorizedintended to issue shares of (a)accomplish the DWA Flexible
Allocation Fund and (b) the DWA Sector Rotation Fund, each a separate series of
RVT (referred to herein individually as the "Fund" and together the "Funds");
WHEREAS, RVT has, pursuant to an Advisory Agreement with the Adviser
(the "Advisory Agreement"), retained the Adviser to act as investment adviser
for and to manage the Funds' assets;
WHEREAS, the Advisory Agreement permits the Adviser to delegate certain
of its duties under the Advisory Agreement to other investment advisers, subject
to the requirements of the Investment Company Act; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain
the Subadviser to act as investment adviser for and to manage the Funds'
Investments (as defined below) and the Subadviser desires to render such
services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and
promise as follows:
1. Appointment as Subadviser. The Adviser hereby retains the
Subadviser to act as investment adviser for and to manage certain assetscomplete liquidation of the Funds subject toin conformity with the supervisionlaws of the Adviser andState of Delaware, the Board of Trustees of the
Trust and to the terms of this Agreement, and consistent with its fiduciary
duties to each Fund; and the Subadviser hereby accepts such employment. In such
capacity, the Subadviser shall be responsible for the Funds' Investments
(defined below).
2. Duties of Subadviser.
---------------------
(a) INVESTMENTS. The Subadviser is hereby authorized and directed
and hereby agrees, subject to the stated investment policies and
restrictions of the Funds as set forth in each Fund's current
prospectus and statement of additional information as currently in
effect and as supplemented or amended from time to time (collectively
referred to hereinafter as the
J-1
"Prospectus") and subject to the directions of the Adviser and the
Trust's Board to purchase, hold and sell investments for the account of
the Funds (hereinafter "Investments") and to monitor on a continuous
basis the performance of such Investments. The Subadviser in managing
the Funds shall give the Trust the benefit of its best efforts in
rendering its services as Subadviser. The Adviser agrees to provide the
Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with the Subadviser's activities under this
Agreement, including, without limitation, providing information
concerning each Fund, its funds available, or to become available, for
investment and generally as to the conditions of the Fund's or the
Trust's affairs.
The Subadviser acknowledges that the Trust may engage in certain
transactions in reliance on exemptions under Rule 10f-3, Rule 12d3-1,
Rule 17a-10 and Rule 17e-1 under the Investment Company Act.
Accordingly, the Subadviser hereby agrees that it will not consult with
any other subadviser of the Trust, or an affiliated person of such
other subadviser, concerning transactions for the Trust in securities
or other fund assets. The Subadviser shall be limited to providing
investment advice with respect to only the Funds, and shall not consult
with any other subadviser as to any other portion of the Trust's
portfolio concerning transactions for the Trust in securities or other
assets.
(b) Brokerage. The Subadviser is authorized, subject to the
supervision of the Adviser and the Trust's Board, to establish and
maintain accounts on behalf of each Fund. In addition, the Subadviser
is authorized, again subject to the supervision of the Adviser and the
Trust's Board, to place orders for the purchase and sale of each Fund's
Investments with or through such persons, brokers or dealers as
Subadviser may select and also to negotiate commissions to be paid on
such transactions. The Subadviser agrees that in placing such orders it
shall attempt to obtain best execution, provided that, the Subadviser
may, on behalf of each Fund, pay brokerage commissions to a broker
which provides brokerage and research services to the Subadviser in
excess of the amount another broker would have charged for effecting
the transaction, provided (i) the Subadviser determines in good faith
that the amount is reasonable in relation to the value of the brokerage
and research services provided by the executing broker in terms of the
particular transaction or in terms of the Subadviser's overall
responsibilities with respect to each Fund and the accounts as to which
the Subadviser exercises investment discretion, (ii) such payment is
made in compliance with Section 28(e) of the Securities Exchange1940 Act, of
1934, as amended, and any other applicable laws and regulations, and
(iii) in the opinion of the Subadviser, the total commissions paid by
each Fund will be reasonable in relation to the benefits to the Fund
over the long term. It is recognized that the services provided by such
brokers may be useful to the Subadviser in connection with the
Subadviser's services to other clients. On occasions when the
Subadviser deems the purchase or sale of a security to be in the best
interests of the Funds as well as other clients of the Subadviser, the
Subadviser, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to
be sold or purchased in order to obtain the most favorable price or
lower brokerage commissions and efficient execution. In such event,
allocation of securities so sold or purchased, as well as the expenses
incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and consistent
with its fiduciary obligations to the Funds and to such other clients.
The Subadviser will report on such allocations at the request of the
Adviser, the Trust or the Trust's Board, providing such
J-2
information as the number of aggregated trades to which the Funds were
a party, the broker(s) to whom such trades were directed, and the
basis of the allocation for the aggregated trades.
(c) Securities Transactions. The Subadviser and any affiliated
person of the Subadviser will not purchase securities or other
instruments from or sell securities or other instruments to the Funds
("Principal Transactions"); provided, however, the Subadviser may
enter into a Principal Transaction with the Funds if (i) the
transaction is permissible under applicable laws and regulations,
including, without limitation, the Investment Company Act and the
Investment Advisers Act and the rules and regulations promulgated
thereunder, and (ii) the transaction receives the express written
approval of the Adviser.
The Subadviser agrees to adopt and comply with a Code of Ethics
that complies with Rule 17j-1 under the Investment Company Act, as the
same may be amended from time to time. The Subadviser agrees to
provide the Adviser and the Trust with a copy of such Code of Ethics.
(d) Books and Records. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company
Act and the rules and regulations promulgated thereunder with respect
to transactions made by it on behalf of the Funds including, without
limitation, the books and records listed in Exhibit A, and shall
timely furnish to the Adviser all information relating to the
Subadviser's services hereunder requested by the Adviser to keep such
other books and records of the Funds required by Rule 31a-1 under the
Investment Company Act. The Subadviser will also preserve all such
books and records for the periods prescribed in Rule 31a-2 under the
Investment Company Act (generally 6 years, the first 2 in an easily
accessible place), and agrees that such books and records shall remain
the sole property of the Trust and shall be immediately surrendered to
the Trust upon request. The Subadviser further agrees that all books
and records maintained hereunder shall be made available to the Trust
or the Adviser at any time upon reasonable request, including
telecopy, during any business day.
(e) Information Concerning Investments and Subadviser. From time
to time as the Adviser or the Trust may request, the Subadviser will
furnish the requesting party reports on portfolio transactions and
reports on Investments held in the portfolio, all in such detail as
the Adviser or the Trust may reasonably request. The Subadviser will
make available its officers and employees to meet with the Trust's
Board of Trustees at the Trust's principal place of business on due
notice to review the Investments of the Funds.
The Subadviser will also provide such information or perform such
additional acts as are customarily performed by a subadviser and may
be required for the Trust or the Adviser to comply with their
respective obligations under applicable laws, including, without
limitation, the Internal Revenue Code of 1986, as amended (the "Code"“Code”), and the Investment Company Act, the Investment Advisers Act, the
Securities ActTrust’s Declaration of 1933, as amendedTrust and Amended and Restated Bylaws (the "Securities Act"“Organizational Documents”) and any
state securities laws, and any rule or regulation thereunder.
During the term of. All references in this Agreement, the Adviser agreesPlan to furnish the
Subadviser at its principal office all registration statements, proxy
statements, reports to stockholders, sales
J-3
literature or other materials prepared for distribution to stockholders
ofaction taken by the Funds or the public that refer to the Subadviser for
Subadviser's review and approval. The Subadviser shall be deemed to have approved all such materials unless the Subadviser reasonably
objects by giving notice to the Adviser in writing within five (5)
business days (or such other period as may be mutually agreed) after
receipt thereof. The Subadviser's right to object to such materials is
limited to the portions of such materials that expressly relate to the
Subadviser, its services and its clients. The Adviser agrees to use
its best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Subadviser or its clients
in any way are consistent with those materials previously approvedaction taken by the Subadviser as referenced in this paragraph. Sales literature may
be furnished to the Subadviser by first class or overnight mail,
facsimile transmission equipment, hand delivery or in electronic
format.
(f) Custody Arrangements. The Subadviser shall provide the Funds'
custodian, on each business day with information relating to all
transactions concerning the Funds' assets.
(g) Compliance with Applicable Laws and Governing Documents. In
all matters relating to the performance of this Agreement, the
Subadviser and its directors, officers, partners, employees and
interested persons shall act in conformity with the Trust Agreement
and Declaration of Trust, By-Laws, currently effective registration
statement, and the terms and conditions of exemptive and no-action
relief granted to the Trust as amended from time to time, and with the
written instructions and directions of the Trust's Board and the
Adviser, after receipt of such documents from the Trust, and shall
comply with the requirements of the Investment Company Act, the
Investment Advisers Act, the rules thereunder, and all other
applicable federal and state laws and regulations. Without limiting
the preceding sentence, the Adviser promptly shall notify the
Subadviser as to any act or omission of the Subadviser hereunder that
the Adviser reasonably deems to constitute or to be the basis of any
noncompliance or nonconformance with any of the Trust's Agreement and
Declaration of Trust, By-Laws, currently effective registration
statement, the instructions and directions received in writing from
the Adviser or the Trustees of the Trust, the Investment Company Act,
the Code, and all other applicable federal and state laws and
regulations. Notwithstanding the foregoing, the Adviser shall remain
responsible for ensuring the Funds' and the Trust's overall compliance
with the Investment Company Act, the Code and all other applicable
federal and state laws and regulations and the Subadviser is only
obligated to comply with this subsection (g) with respect to the
assets of each Fund. The Adviser will provide the Subadviser with
reasonable advance notice of any change in the Funds' investment
objectives, policies and restrictions as stated in its currently
effective registration statement, and the Subadviser shall, in the
performance of their duties and obligations under this Agreement,
manage the Funds' Investments consistent with such changes, provided
that the Subadviser has received prompt notice of the effectiveness of
such changes from the Trust or the Adviser. In addition to such
notice, the Adviser shall provide to the Subadviser a copy of a
modified Prospectus and SAI reflecting such changes.
The Adviser shall be responsible for ensuring that the Funds comply
with all applicable statutes and regulations necessary to qualify each
Fund as a Regulated Investment Company under Subchapter M of the Code
(or any successor provision) and the diversification provisions of
Section 817(h) of the Code (or any successor provision) and the
regulations issued thereunder relating to the diversification
requirements for variable insurance contracts and any prospective
J-4
amendments or other modifications to Section 817 or regulations
thereunder. In connection with such compliance tests, the Adviser
shall inform the Subadviser prior to a calendar quarter end if the
Subadviser Assets are out of compliance with the diversification
requirements under Subchapter M. If the Adviser notifies the
Subadviser that the Subadviser Assets are not in compliance with such
requirements noted above, the Subadviser will take prompt action to
bring the Subadviser Assets back into compliance within the time
permitted under the Code thereunder or to adequately diversify each
Fund so as to achieve compliance within the grace period afforded by
Regulation 1.817-5.
Subadviser further agrees that the Adviser and its affiliates shall
be exclusively responsible for the marketing and distribution of
shares of the Funds in the United States.
(h) Information Concerning the Funds. The Adviser or the Trust
has furnished the Subadviser with copies of each of the following
documents and will furnish the Subadviser at its principal office all
future amendments and supplements to such documents, if any, as soon
as practicable after such documents become available: (i) the Trust
Agreement and Declaration of Trust, (ii) the By-Laws of RVT, (iii) the
Funds' registration statement under the Investment Company Act and the
Securities Act as filed with the Commission, and (iv) any written
instructions of the Funds' Board and the Adviser.
(i) Voting of Proxies. The Subadviser shall direct the custodian
as to how to vote such proxies as may be necessary or advisable in
connection with any matters submitted to a vote of shareholders of
securities held by the Funds. The Subadviser shall provide to the
Adviser its applicable proxy voting policies and procedures for
inclusion in the Funds' Statement of Additional Information.
(j) Informational Material. The Subadviser shall provide the
Adviser for its review prior to their use, copies of all informational
materials prepared by or on behalf of the Subadviser, mentioning
either Fund, including but not limitedFunds.
WHEREAS, Security Investors, LLC (the “Advisor”) has recommended to advertisements, brochures,
and promotional and any other similar materials (the "Informational
Materials"), and that such Informational Materials shall conform with,
and be disseminated in accordance with, applicable laws.
3. Independent Contractor. In the performance of its duties
hereunder, the Subadviser 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 the Adviser in any way or
otherwise be deemed an agent of the Trust or the Adviser.
4. Compensation. The Adviser shall pay to the Subadviser, for the
services rendered hereunder, the fees set forth in Exhibit B attached hereto.
5. Expenses. The Subadviser shall bear all expenses incurred by it
in connection with its services under this Agreement. The Subadviser shall not
be responsible for the Trust's, the Funds' or Adviser's expenses.
J-5
6. Delegation. The Subadviser shall not assign or delegate any of
its duties under this Agreement without the approval of the Adviser and the
Trust's Board.
7. Non-Exclusivity. The services of the Subadviser to the Trust in
managing the Funds are not deemed to be exclusive, and the Subadviser and its
officers shall be free to render investment advisory and administrative or other
services to others (including other investment companies) and to engage in other
activities so long as its duties hereunder are not impaired thereby.
8. Representations and Warranties of Subadviser. The Subadviser
represents and warrants to the Adviser and the Trust as follows:
(a) The Subadviser is registered as an investment adviser under
the Investment Advisers Act;
(b) The Subadviser will immediately notify the Adviser of the
occurrence of any event that would disqualify the Subadviser from
serving as an investment adviser of an investment company pursuant to
Section 9(a) of the Investment Company Act;
(c) The Subadviser is fully authorized under all applicable law
to serve as Subadviser to the Trust and to perform the services
described under this Agreement;
(d) The Subadviser is a corporation duly organized and validly
existing under the laws of the Commonwealth of Virginia with the power
to own and possess its assets and carry on its business as it is now
being conducted;
(e) The execution, delivery and performance by the Subadviser of
this Agreement are within the Subadviser's powers and have been duly
authorized by all necessary action on the part of its shareholders,
and no action by or in respect of, or filing with, any governmental
body, agency or official is required on the part of the Subadviser for
the execution, delivery and performance by the Subadviser of this
Agreement, and the execution, delivery and performance by the
Subadviser of this Agreement do not contravene or constitute a default
under (i) any provision of applicable law, rule or regulation, (ii)
the Subadviser's governing instruments, or (iii) any agreement,
judgment, injunction, order, decree or other instrument binding upon
the Subadviser;
(f) This Agreement is a valid and binding agreement of the
Subadviser;
(g) The Form ADV of the Subadviser previously provided to the
Adviser is a true and complete copy of the form filed with the
Commission and the information contained therein 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;
(h) The Subadviser, in accordance with Rule 206(4)9-7 under the
Investment Advisers Act, has adopted and will maintain compliance
policies and procedures reasonably designed to prevent violation by
the Subadviser and its supervised persons (as such term is
J-6
defined by the Investment Advisers Act) of the Investment Advisers Act
and the rules thereunder, has provided the Adviser with a copy of such
compliance policies and procedures (and will provide them with any
amendments thereto), and, to the extent the Subadviser's activities
and services could affect the Funds, policies and procedures
reasonably designed to prevent violation of the federal securities
laws (as such terms is defined in Rule 38a-1 under the Investment
Company Act) by the Funds and the Subadviser. The Subadviser
understands that RVT's Board of Trustees is required to approve the
Subadviser's compliance policies and procedures and acknowledges that
this Agreement is conditioned upon such Board approval;
(i) The Subadviser shall not divert any Fund portfolio securities
transactions to a broker or dealer in consideration of such broker or
dealer's promotion or sales of shares of the Funds, any other series
of RVT, or any other registered investment company; and
(j) The Subadviser agrees to maintain an appropriate level of
errors and omissions or professional liability insurance coverage.
9. Representations and Warranties of Adviser. The Adviser
represents and warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Adviser is a limited liability company duly organized and
validly existing under the laws of the State of Kansas with the power
to own and possess its assets and carry on its business as it is now
being conducted;
(c) The execution, delivery and performance by the Adviser of
this Agreement are within the Adviser's powers and have been duly
authorized by all necessary action on the part of its members, and no
action by or in respect of, or filing with, any governmental body,
agency or official is required on the part of the Adviser for the
execution, delivery and performance by the Adviser of this Agreement,
and the execution, delivery and performance by the Adviser of this
Agreement do not contravene or constitute a default under (i) any
provision of applicable law, rule or regulation, (ii) the Adviser's
governing instruments, or (iii) any agreement, judgment, injunction,
order, decree or other instrument binding upon the Adviser;
(d) This Agreement is a valid and binding agreement of the
Adviser;
(e) The Form ADV of the Adviser previously provided to the
Subadviser is a true and complete copy of the form filed with the
Commission and the information contained therein is accurate and
complete in all material respects and does not omit any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and
(f) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV at least 48 hours prior to the execution of this
Agreement.
J-7
10. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Subadviser and the
Adviser pursuant to Sections 8 and 9 hereof shall survive for the duration of
this Agreement and the parties hereto shall promptly notify each other in
writing upon becoming aware that any of the foregoing representations and
warranties are no longer true.
11. Liability and Indemnification.
------------------------------
(a) Except as may otherwise be provided by the Investment
Company Act or any other federal securities law, neither the Subadviser nor any
of its officers, members or employees (its "AFFILIATES") shall be liable for any
losses, claims, damages, liabilities or litigation (including legal and other
expenses) incurred or suffered by the Adviser or the Trust as a result of any
error of judgment or mistake of law by the Subadviser or its Affiliates with
respect to each Fund, except that nothing in this Agreement shall operate or
purport to operate in any way to exculpate, waive or limit the liability of the
Subadviser or its Affiliates for, and the Subadviser shall indemnify and hold
harmless the Trust, the Adviser, all affiliated persons thereof (within the
meaning of Section 2(a)(3) of the Investment Company Act) and all controlling
persons (as described in Section 15 of the Securities Act) (collectively,
"Adviser Indemnitees") against any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses) to which any of
the Adviser Indemnitees may become subject under the Securities Act, the
Investment Company Act, the Investment Advisers Act, or under any other statute,
or common law or otherwise arising out of or based on (i) any willful
misconduct, bad faith, reckless disregard or gross negligence of the Subadviser
in the performance of any of its duties or obligations hereunder or (ii) any
untrue statement of a material fact contained in the Prospectus, proxy
materials, reports, advertisements, sales literature, or other materials
pertaining to each Fund or the omission to state therein a material fact known
to the Subadviser which was required to be stated therein or necessary to make
the statements therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Adviser or the Trust by the
Subadviser Indemnitees (as defined below) for use therein. Unless otherwise
obligated under applicable law, neither the Subadviser nor its Affiliates will
be liable for consequential or indirect damages even if the Subadviser has been
advised of the possibility or likelihood of the occurrence of such damages.
(b) Except as may otherwise be provided by the Investment Company
Act or any other federal securities law, the Adviser and its Affiliates shall
not be liable for any losses, claims, damages, liabilities or litigation
(including legal and other expenses) incurred or suffered by the Subadviser as a
result of any error of judgment or mistake of law by the Adviser with respect to
each Fund, except that nothing in this Agreement shall operate or purport to
operate in any way to exculpate, waive or limit the liability of the Adviser
for, and the Adviser shall indemnify and hold harmless the Subadviser, all
affiliated persons thereof (within the meaning of Section 2(a)(3) of the
Investment Company Act) and all controlling persons (as described in Section 15
of the 1933 Act) (collectively, "Subadviser Indemnitees") against any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses) to which any of the Subadviser Indemnitees may become
subject under the Securities Act, the Investment Company Act, the Investment
Advisers Act, or under any other statute, at common law or otherwise arising out
of or based on (i) any willful misconduct, bad faith, reckless disregard or
gross negligence of the Adviser in the performance of any of its duties or
obligations
J-8
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus, proxy materials, reports, advertisements, sales literature, or other
materials pertaining to the Fund(s) or the omission to state therein a material
fact known to the Adviser that was required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon information furnished to the Adviser or the Trust by
the Subadviser Indemnitees for use therein. Unless otherwise obligated under
applicable law, neither the Adviser nor its Affiliates will be liable for
consequential or indirect damages even if the Adviser has been advised of the
possibility or likelihood of the occurrence of such damages.
12. Duration and Termination.
-------------------------
(a) Duration. This Agreement shall become effective upon the date
first above written, provided that this Agreement shall not take effect with
respect to each of the Funds unless it has first been approved (i) by a vote of
a majority of those directors of the Funds who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) to the extent required by
applicable law, by vote of a majority of the Funds' outstanding voting
securities. This Agreement shall continue in effect for a period of two years
from the date hereof, subject thereafter to being continued in force and effect
from year to year with respect to each Fund if specifically approved each year
by either (i) the Board of Trustees of the Trust (the “Board”) that the Funds or (ii) bybe liquidated; and
WHEREAS, pursuant to Section 2.05 of the affirmativeDeclaration of Trust, the Board has full power and authority, in its sole discretion, and without obtaining any prior authorization or vote of a majoritythe shareholders of any series of the Funds' outstanding voting securities. In additionTrust, to abolish any one or more series as the foregoing,Trustees may deem desirable; and
WHEREAS, the Board has considered the impact on each renewal of this Agreement with respect to the Funds must be
approved by the vote of a majorityFund’s shareholders of the Funds' directors who are not parties
to this Agreement or interested personsliquidation of any such party, cast in personthe Fund; and
WHEREAS, the Board, at a meeting called forheld on June 5, 2013, has determined that the purposeliquidation of voting oneach Fund is advisable and in the best interests of the shareholders of that Fund, has considered and approved this Plan as the method of accomplishing such approval. Prioractions, and has authorized submitting the proposal to voting onliquidate each Fund to shareholders of each respective Fund;
NOW THEREFORE, the renewal of this Agreement, the Board of Trusteesliquidation of the Funds may request
and evaluate, andshall be carried out in the Subadviser shall furnish, such information as may
reasonably be necessary to enablemanner set forth herein:
| 1. | Effective Date of Plan. This Plan shall be and become effective, with respect to each Fund, only upon the adoption and approval of this Plan, by the affirmative vote of a majority of shareholders of such Fund. The day of such adoption and approval is hereinafter called the “Effective Date.” |
| 2. | Liquidation. Consistent with the provisions of this Plan, each Fund shall be liquidated on or about September 6, 2013 or as promptly thereafter as practicable in accordance with its Organizational Documents, and all applicable law, including but not limited to Sections 331 and 332 of the Code (the “Liquidation”, and the date on which the final liquidating distribution is made, the “Liquidation Date”). |
| 3. | Notice of Liquidation. As soon as reasonable and practicable after the adoption of this Plan, each Fund shall provide notice to its shareholders and other appropriate parties that this Plan has been approved by the Board and that the Fund intends to liquidate its assets. |
C-1
| 4. | Cessation of Business. On or before the Liquidation Date, each Fund shall close to new investments and shall cease its regular business as a series of a registered investment company and shall not engage in any business activities except for the purposes of winding up its business and affairs, preserving the value of its assets, complying with applicable regulatory requirements, and distributing its respective assets to shareholders in the Fund in accordance with the provisions of this Plan after discharging or making reasonable provision for the Fund’s liabilities; provided, however, that the Fund may continue to carry on any activities necessary to maintain its status as a regulated investment company under Subchapter M of the Code. |
| 5. | Payments of Debts. As soon as reasonable and practicable after the Effective Date, each Fund shall determine and pay in full or discharge, or make reasonable provision to pay or discharge all claims and obligations, including, without limitation, all contingent, conditional or unmatured claims and obligations known to the Fund or reasonably ascertainable by the Fund. |
| 6. | Liquidation of Assets. As soon as reasonable and practicable after the Effective Date, the Advisor shall use all commercially reasonable efforts to sell all of each Fund’s portfolio assets for cash no later than the Liquidation Date and shall hold or reinvest the proceeds thereof in cash and such short-term securities as the Fund may lawfully hold or invest in. Following the Effective Date and prior to the Liquidation Date, each Fund shall have the authority to engage in such transactions as may be appropriate to complete liquidation with no further approvals by the Board except as required by law. |
| 7. | Liquidating Distribution. On the Liquidation Date, or as soon as reasonable and practicable thereafter, the Fund shall distribute pro rata to its shareholders of record as of the close of business on the Liquidation Date all of the Fund’s then existing assets in complete and full cancellation and redemption of all the outstanding shares of the Fund, except for cash, bank deposits, or cash equivalent securities in an estimated amount necessary to: (a) discharge any unpaid liabilities and obligations of the Fund on the Fund’s books on the Liquidation Date, including, but not limited to, income dividends and capital gains distributions, if any, payable through the Liquidation Date, and (b) pay such contingent liabilities as the Board shall reasonably deem to exist against the assets of the Fund on the Fund’s books. |
Following the Funds' Board of Trustees to evaluate the
terms of this Agreement.
(b) Termination. Notwithstanding whatever may be provided herein
to the contrary, this Agreement may be terminated at any time, without payment
of any penalty:
(i) By vote of a majority of the Board of Trustees of the Funds, or
by vote of a majority of the outstanding voting securities of the Funds, or by
the Adviser, in each case, upon sixty (60) days' written notice to the
Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof, which shall not have
been cured during the notice period, upon twenty (20) days written notice;
(iii) By the Adviser immediately upon written notice to the SubadviserLiquidation Date, if the Subadviser becomes unableFund receives any assets or monies or is entitled to discharge its duties and obligations under
this Agreement; or
(iv) By the Subadviser upon sixty (60) days written notice to the
Adviser and the Funds.
This Agreement shall not be assigned (as such term is defined in the Investment
Company Act) without the prior written consent of the parties hereto. This
Agreement shall terminate automatically in the event of its assignment without
such consent.
J-9
13. Duties of the Adviser. The Adviser shall continue to have
responsibility for all services to be provided to the Funds pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement.
14. Amendment. This Agreement may be amended by mutual consent of
the parties, providedany other distributions that the terms of each such amendment shall be approved by
the Board of Trustees of the Funds or by a vote of a majority of the outstanding
voting securities of the Funds.
15. Confidentiality. Subject to the duties of the Adviser, the
Funds and the Subadviser to comply with applicable law, including any demand of
any regulatory or taxing authority having jurisdiction, the parties hereto shall
treat as confidential all information pertaining to the Funds and the actions of
the Subadviser, the Adviser and the Funds in respect thereof.
16. Notice. Any notice that is required to be given by the
parties to each other (or to the Funds) under the terms of this Agreement shall
be in writing, delivered, or mailed postpaid to the other party, or transmitted
by facsimile with acknowledgment of receipt, to the parties at the following
addresses or facsimile numbers, which may from time to time be changed by the
parties by notice to the other party:
(a) If to the Subadviser:
Dorsey Wright & Associates, Inc.
9201 Forest Hill Avenue; Ste 100
Richmond, VA 23225
Attention: Watson H. Wright, Secretary/Treasurer
Facsimile: (804) 320-8577
(b) If to the Adviser:
Security Investors, LLC
805 King Farm Boulevard, Suite 600
Rockville, MD 20850
Attention: Rich Goldman
Facsimile: (785) 438-3080
with a copy to:
Security Investors, LLC
One Security Benefit Place
Topeka, KS 66636-0001
Attention: General Counsel
Facsimile: (785) 438-3080
17. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Kansas.
J-10
18. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
19. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
20. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision or applicable law, the remainder of the
Agreement shall not be affected adversely and shall remain in full force and
effect.
21. Certain Definitions.
--------------------
(a) "Business day." As used herein, business day means any
customary business day in the United States on which the New York Stock
Exchange is open.
(b) Miscellaneous. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the Investment Company Act shall be resolved by
reference to such term or provision of the Investment Company Act and to
interpretations thereof, if any, by the U.S. courts or, in the absence of any
controlling decisions of any such court, by rules, regulation or order of the
Commission validly issued pursuant to the Investment Company Act. Specifically,
as used herein, "investment company," "affiliated person," "interested person,"
"assignment," "broker," "dealer" and "affirmative vote of the majority of each
Fund's outstanding voting securities" shall all have such meaning as such terms
have in the Investment Company Act. The term "investment adviser" shall have
such meaning as such term has in the Investment Advisers Act and the Investment
Company Act, and in the event of a conflict between such Acts, the most
expansive definition shall control. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is relaxed by a rule, regulation or order of the Commission, whether
of special or general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
SECURITY INVESTORS, LLC
By:
-------------------------------
Name: Richard Goldman
Title: President
Attest:
-------------------------------
Name: Michael Byrum
Title: Secretary
J-11
DORSEY, WRIGHT & ASSOCIATES, INC.
By:
-------------------------------
Name: Thomas J. Dorsey
Title: President
Attest:
-------------------------------
Name: Watson H. Wright
Title: Secretary
J-12
EXHIBIT A
BOOKS AND RECORDS
Pursuant to Section 2(d) of this Agreement, the following are a list of books
and records the Subadviser will keep pursuant to Rule 31a-1(b) and (f) under the
Investment Company Act of 1940.
b. Every registered investment company shall maintain and keep
current the following books, accounts, and other documents:
1. Journals (or other records of original entry) containing an
itemized daily record in detail of all purchases and sales of
securities (including sales and redemptions of its own
securities), all receipts and deliveries of securities (including
certificate numbers if such detail isit had not recorded by custodianon its books on or transfer agent), all receipts and disbursements of cash and
all other debits and credits. Such records shall show for each
such transactionbefore the name and quantity of securities, the unit
and aggregate purchase or sale price, commission paid, the market
on which effected, the trade date, the settlement date, and the
name of the person through or from whom purchased or received or
to whom sold or delivered. In the case of a money market fund,
also identify the provider of any Demand Feature or Guarantee (as
defined in Rule 2a-7(a)(8) or Rule 2a-7(a)(15) respectively) and
give a brief description of the nature of the Demand Feature or
Guarantee (e.g., unconditional demand feature, conditional demand
feature, letter of credit, or bond insurance) and, in a
subsidiary portfolio investment record, provide the complete
legal name and accounting and other information (including
sufficient information to calculate coupons, accruals,
maturities, puts, and calls) necessary to identify, value, and
account for each investment.
5. A record of each brokerage order given by or in behalf of the
investment company for, or in connection with, the purchase or
sale of securities, whether executed or unexecuted. Such record
shall include the name of the broker, the terms and conditions of
the order and of any modification or cancellation thereof, the
time of entry or cancellation, the price at which executed, and
the time of receipt of report of execution. The record shall
indicate the name of the person who placed the order in behalf of
the investment company.
6. A record of all other portfolio purchases or sales showing
details comparable to those prescribed in paragraph (b)(5) of this
section.
7. A record of all puts, calls, spreads, straddles, and other
options in which the investment company has any direct or
indirect interest or which the investment company has granted or
guaranteed; and a record of any contractual commitments to
purchase, sell, receive or deliver securities or other property
(but not including open orders placed with broker-dealers for the
purchase or sale of securities, which may be cancelled by the
company on notices without penalty or cost of any kind);
containing, at least, an identification of the security, the
number of units involved, the option price, the date of maturity,
the date of issuance, and the person to whom issued.
J-13
9. A record for each fiscal quarter, which shall be completed
within ten days after the end of such quarter, showing
specifically the basis or bases upon which the allocation of
orders for the purchase and sale of portfolio securities to named
brokers or dealers and the division of brokerage commissions or
other compensation on such purchase and sale orders among named
persons were made during such quarter. The record shall indicate
the consideration given to (i) sales of shares of the investment
company by brokers or dealers, (ii) the supplying of services or
benefits by brokers or dealers to the investment company, its
investment adviser or principal underwriter or any persons
affiliated therewith, and (iii) any other considerations other
than the technical qualifications of the brokers and dealers as
such. The record shall show the nature of the services or
benefits made available, and shall describe in detail the
application of any general or specific formula or other
determinant used in arriving at such allocation of purchase and
sale orders and such division of brokerage commissions or other
compensation. The record shall also include the identities of the
persons responsible for the determination of such allocation and
such division of brokerage commissions or other compensation.
10. A record in the form of an appropriate memorandum identifying
the person or persons, committees, or groups authorizing the
purchase or sale of portfolio securities. Where an authorization
is made by a committee or group, a record shall be kept of the
names of its members who participated in the authorization. There
shall be retained as part of the record required by this
paragraph any memorandum, recommendation, or instruction
supporting or authorizing the purchase or sale of portfolio
securities. The requirements of this paragraph are applicable to
the extent they are not met by compliance with the requirements
of paragraph (b)(4) of this section.
11. Files of all advisory material received from the investment
adviser, any advisory board or advisory committee, or any other
persons from whom the investment company accepts investment
advice, other than material which is furnished solely through
uniform publications distributed generally.
f. Every investment adviser not a majority-owned subsidiary of a
registered investment company shall maintain such accounts, books and other
documents as are required to be maintained by registered investment
advisers by rule adopted under section 204 of the Investment Advisers Act
of 1940, to the extent such records are necessary or appropriate to record
such person's transactions with such registered investment company.
J-14
EXHIBIT B
SUBADVISORY FEE
For all services rendered by the Subadviser hereunder, Adviser shall
pay to Subadviser an annual fee (the "Subadvisory Fee"), as follows:
An annual rate of .25% of the average daily net assets of the DWA
Flexible Allocation Fund.
An annual rate of .25% of the average daily net assets of the DWA
Sector Rotation Fund.
For purposes of calculating the compensation to be paid hereunder,
each Fund's assets shall be computed in the same manner at the end of the
business day as the value of such net assets is computed in connection with the
determination of the net asset value of such Fund's shares as described in the
then current prospectus for that Fund.
The Subadvisory Fee shall be accrued for each calendar day the
Subadviser renders subadvisory services hereunder and the sum of the daily fee
accruals shall be paid monthly to the Subadviser as soon as practicable
following the last day of each month, by wire transfer if so requested by the
Subadviser, but no later than ten (10) calendar days thereafter. If this
Agreement shall be effective for only a portion of a year, then the Subadviser's
fee for said year shall be prorated for such portion.
J-15
APPENDIX K
INFORMATION REGARDING THE SUB-ADVISORY AGREEMENT WITH
DORSEY, WRIGHT & ASSOCIATES, INC. AND FEES PAID TO THE SUB-ADVISER
Dorsey, Wright & Associates, Inc. (the "Sub-Adviser") currently serves
as sub-adviser to the DWA Flexible Allocation Fund and the DWA Sector Rotation
Fund, each a series of Rydex Variable Trust (collectively, the "DWA Funds"),
pursuant to the investment sub-advisory agreement between Security Investors,
LLC, the DWA Funds' investment adviser (the "Investment Adviser"), and the Sub-
Adviser. The table below provides the following information:
(i) the date of the Sub-Advisory Agreement;
(ii) the date on which the DWA Funds' shareholders last approved the
DWA Funds' Sub-Advisory Agreement;
(iii) the annual rate of sub-advisory fees paid by the Investment
Adviser to the Sub-Adviser for the Sub-Adviser's sub-advisory
services to the DWA Funds; and
(iv)Liquidation Date, the aggregate amount of advisory fees paidwhich is determined by the Investment
AdviserBoard not to be de minimis after taking into account all expenses associated with effecting the disposition thereof, such cash or distribution shall be disbursed to the Sub-Adviser forshareholders of record as of the Sub-Adviser's sub-advisory
servicesLiquidation Date, on a pro rata basis, in such manner as the Board or, subject to the DWA Funds during the DWA Funds' fiscal year
ended December 31, 2010.
DATE OF DATE OF LAST SUB-ADVISORY
SUB-ADVISORY SHAREHOLDER SUB-ADVISORY FEES PAID TO
FUND AGREEMENT APPROVAL FEES SUB-ADVISER
----------------------------------------------------------------------------------------------------------
DWA Flexible Allocation Fund 4/26/2010 2/11/11 0.25% $27,284
DWA Sector Rotation Fund 4/26/2010 2/11/11 0.25% $49,279
K-1
APPENDIX L
DIRECTORS/TRUSTEES/MANAGERS AND OFFICERS OF DORSEY WRIGHT &
ASSOCIATES, INC.
MANAGERS AND PRINCIPAL EXECUTIVE OFFICERS OF DORSEY, WRIGHT & ASSOCIATES, INC.
The business address of the managers and principal executive officers is 9210
Forest Hill Avenue, Suite 100, Richmond, VA 23235.
POSITION HELD WITH DORSEY, OTHER PRINCIPAL
NAME WRIGHT & ASSOCIATES, INC. OCCUPATION/POSITION
-------------------------------------------------------------------------------
Thomas J. Dorsey Director President
Watson H. Wright Director Secretary - Treasurer
Tammy F. DeRosier Director Executive Vice President
Susan L. Morrison Senior Vice President None
James C. Ball Senior Vice President None
Michael J. Moody Senior Vice President None
Harold B. Parker, Jr. Senior Vice President None
John G. Lewis Vice President None
Steven T. Raymond Vice President None
Paul L. Keeton Vice President None
Jay M. Gragnani Vice President None
There are no Trustees/Officers of the DWA Funds who hold position(s) with
Dorsey, Wright & Associates, Inc.
L-1
APPENDIX M
ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT OBJECTIVES
ADVISED OR SUB-ADVISED BY DORSEY WRIGHT & ASSOCIATES, INC.
There are no other mutual funds advised or sub-advised by Dorsey, Wright
& Associates, Inc. with similar investment objectives as the DWA
Flexible Allocation Fund and DWA Sector Rotation Fund.
M-1
APPENDIX N
OUTSTANDING SHARES
As of the Record Date, the total number of shares outstanding for each
Fund is set forth in the table below:
RYDEX VARIABLE TRUST
FUND SHARES OUTSTANDING
------------------------------------------------------------------------------------------
All-Asset Aggressive Strategy 285523.41
All-Asset Conservative Strategy 471680.97
All-Asset Moderate Strategy 767944.58
Alternative Strategies Allocation 332450.77
Amerigo 4718270.64
Banking 165968.80
Basic Materials 554509.53
Biotechnology 383924.99
Clermont 3255209.59
Commodities Strategy 1108871.20
Consumer Products 411395.42
Dow 2x Strategy 156660.79
DWA Flexible Allocation Fund 908296.96
DWA Sector Rotation Fund 1239133.61
Electronics 414343.82
Energy 984416.82
Energy Services 950965.13
Europe 1.25x Strategy 419940.44
Financial Services 312788552.43
Government Long Bond 1.2x Strategy 3640154.18
Health Care 595539.10
Internet 312469.27
Inverse Dow 2x Strategy 773727.89
Inverse Government Long Bond Strategy 862808.38
Inverse Mid-Cap Strategy 91667.77
Inverse NASDAQ-100(R) Strategy 834092.15
Inverse Russell 2000(R) Strategy 442445.40
Inverse S&P 500 Strategy 1035397.34
Japan 2x Strategy 141819.54
Leisure 93721.73
Managed Futures Strategy 708937.42
Mid-Cap 1.5x Strategy 358637.54
Multi-Hedge Strategies 820330.57
NASDAQ-100(R) 1898772.33
NASDAQ-100(R) 2x Strategy 873066.21
Nova 287204.57
Precious Metals 4721139.73
Real Estate 644293.93
Retailing 585075.72
Russell 2000(R) 1.5x Strategy 188364.86
Russell 2000(R) 2x Strategy 35379.93
S&P 500 2x Strategy 93812.66
S&P 500 Pure Growth 1185237.16
S&P 500 Pure Value 369459.82
N-1
FUND SHARES OUTSTANDING
------------------------------------------------------------------------------------------
S&P MidCap 400 Pure Growth 728862.00
S&P MidCap 400 Pure Value 151374.80
S&P SmallCap 600 Pure Growth 403441.44
S&P SmallCap 600 Pure Value 73918.36
Select Allocation 1583317.37
Strengthening Dollar 2x Strategy 1467477.68
Technology 771678.36
Telecommunications 360071.40
Transportation 330800.99
U.S. Government Money Market 351959.04
U.S. Long Short Momentum 3487850.71
Utilities 1208246.73
Weakening Dollar 2x Strategy 99104.82
N-2
APPENDIX O
BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF EACH FUND
As of the Record Date, the following persons owned, of record and
beneficially (unless otherwise indicated), 5% or more* of a class of each Fund's
outstanding securities:
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
All-Asset Aggressive Strategy Fund 125,185.11 43.84% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2029
All-Asset Aggressive Strategy Fund 118,806.23 41.61% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0001
All-Asset Aggressive Strategy Fund 33,701.41 11.80% FSBL VARIABLE ACCOUNT A
ATTN: DENISE MACHELL - FINANCE
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0001
All-Asset Conservative Strategy Fund 328,363.74 69.61% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0002
All-Asset Conservative Strategy Fund 100,129.79 21.23% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2030
All-Asset Conservative Strategy Fund 23,937.52 5.07% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40223
All-Asset Moderate Strategy Fund 517,366.82 67.37% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0003
All-Asset Moderate Strategy Fund 188,730.79 24.58% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2031
All-Asset Moderate Strategy Fund 38,613.23 5.03% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40224
Alternative Strategies Allocation Fund 181,873.39 54.71% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2032
Alternative Strategies Allocation Fund 69,432.86 20.89% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0004
Alternative Strategies Allocation Fund 34,512.50 10.38% NATIONAL INTEGRITY LIFE INSURANCE CO
400 BROADWAY STREET
CINCINNATI, OH 45202-3341
Alternative Strategies Allocation Fund 31,433.66 9.46% INTEGRITY LIFE INSURANCE CO
400 BROADWAY STREET
MAIL STATION #24 VA ACCOUNTING
CINCINNATI, OH 45202-3341
Amerigo Fund 3,946,212.28 83.63% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0005
O-1
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Amerigo Fund 389,376.08 8.25% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2033
Banking Fund 83,980.23 50.60% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0006
Banking Fund 60,134.06 36.23% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2034
Banking Fund 21,339.01 12.86% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40225
Basic Materials Fund 254,006.83 45.81% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0007
Basic Materials Fund 234,571.11 42.30% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2035
Basic Materials Fund 60,909.05 10.98% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40226
Biotechnology Fund 210,157.65 54.74% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2036
Biotechnology Fund 102,693.05 26.75% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0008
Biotechnology Fund 64,537.34 16.81% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40227
Clermont Fund 2,600,976.34 79.90% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0009
Clermont Fund 391,877.27 12.04% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2037
Commodities Strategy Fund 581,149.94 52.41% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2038
Commodities Strategy Fund 421,126.66 37.98% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0010
Consumer Products Fund 215,006.25 52.26% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2039
Consumer Products Fund 130,573.15 31.74% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0011
O-2
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Consumer Products Fund 55,847.96 13.58% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40228
Dow 2x Strategy Fund 85,912.81 54.84% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2040
Dow 2x Strategy Fund 46,970.03 29.98% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0012
Dow 2x Strategy Fund 22,704.84 14.49% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40229
DWA Flexible Allocation Fund 852,890.04 93.90% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2041
DWA Flexible Allocation Fund 55,406.92 6.10% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40230
DWA Sector Rotation Fund 1,193,862.47 96.35% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2042
Electronics Fund 262,033.48 63.25% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2043
Electronics Fund 114,436.40 27.62% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0013
Electronics Fund 30,841.78 7.44% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40231
Energy Fund 379,134.71 38.52% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2045
Energy Fund 280,121.95 28.46% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0015
Energy Fund 177,451.48 18.03% TRANSAMERICA LIFE INSURANCE COMPANY
4333 EDGEWOOD ROAD NORTHEAST
CEDAR RAPIDS, IA 52499
Energy Fund 127,950.34 13.00% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40233
Energy Services Fund 385,134.71 40.50% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2044
Energy Services Fund 376,986.74 39.64% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0014
Energy Services Fund 175,020.37 18.40% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40232
O-3
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Europe 1.25x Strategy Fund 234,752.90 55.90% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2046
Europe 1.25x Strategy Fund 129,694.25 30.88% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0016
Europe 1.25x Strategy Fund 53,678.77 12.78% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40234
Financial Services Fund 225,587.36 64.09% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2047
Financial Services Fund 106,717.95 30.32% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0017
Government Long Bond 1.2x Strategy Fund 1,591,781.50 43.73% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2048
Government Long Bond 1.2x Strategy Fund 953,818.28 26.20% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40236
Government Long Bond 1.2x Strategy Fund 547,853.98 15.05% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0019
Government Long Bond 1.2x Strategy Fund 276,597.28 7.60% FSBL VARIABLE ACCOUNT A
ATTN: DENISE MACHELL - FINANCE
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0003
Health Care Fund 280,513.27 47.10% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2049
Health Care Fund 223,345.10 37.50% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0020
Health Care Fund 70,437.71 11.83% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40237
Internet Fund 209,154.58 66.93% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2050
Internet Fund 68,460.52 21.91% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0021
Internet Fund 31,711.57 10.15% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40238
Inverse Dow 2x Strategy Fund 376,608.01 48.67% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2051
O-4
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Inverse Dow 2x Strategy Fund 310,340.82 40.11% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0022
Inverse Dow 2x Strategy Fund 85,973.47 11.11% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40239
Inverse Government Long Bond Strategy 335,352.12 38.87% SECURITY BENEFIT LIFE INSURANCE CO
Fund SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0023
Inverse Government Long Bond Strategy 319,128.74 36.98% NATIONWIDE INSURANCE COMPANY
Fund NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2052
Inverse Government Long Bond Strategy 77,805.78 9.02% PHOENIX HOME LIFE VARIABLE, INSURANCE
Fund COMPANY
31 TECH VALLEY DR
EAST GREENBUSH, NY 12061
Inverse Mid-Cap Strategy Fund 65,193.30 71.11% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2053
Inverse Mid-Cap Strategy Fund 21,985.52 23.98% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0024
Inverse NASDAQ-100(R) Strategy Fund 260,034.66 31.17% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2054
Inverse NASDAQ-100(R) Strategy Fund 243,720.25 29.22% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0025
Inverse NASDAQ-100(R) Strategy Fund 178,112.34 21.35% MIDLAND NATIONAL LIFE
ATTN: VARIABLE ANNUITY DIVISION
PO BOX 79907
WEST DES MOINES, IA 50325-0907
Inverse NASDAQ-100(R) Strategy Fund 100,241.33 12.02% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40240
Inverse NASDAQ-100(R) Strategy Fund 50,591.01 6.07% AMERITAS LIFE INSURANCE CORP
ATTN: VARIABLE TRADES
5900 O STREET P.O. BOX 81889.
LINCOLN, NE 68501-1889
Inverse Russell 2000(R) Strategy Fund 282,350.17 63.81% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2055
Inverse Russell 2000(R) Strategy Fund 120,771.66 27.30% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0026
Inverse Russell 2000(R) Strategy Fund 34,474.21 7.79% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40241
Inverse S&P 500 Strategy Fund 456,289.50 44.07% FSBL VARIABLE ACCOUNT A
ATTN: DENISE MACHELL - FINANCE
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0004
O-5
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Inverse S&P 500 Strategy Fund 230,729.16 22.29% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2056
Inverse S&P 500 Strategy Fund 160,235.55 15.48% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0027
Inverse S&P 500 Strategy Fund 75,237.37 7.27% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40242
Inverse S&P 500 Strategy Fund 67,387.19 6.50% AMERITAS LIFE INSURANCE CORP
ATTN: VARIABLE TRADES
5900 O STREET P.O. BOX 81889.
LINCOLN, NE 68501-1890
Japan 2x Strategy Fund 69,864.68 49.26% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2057
Japan 2x Strategy Fund 58,683.15 41.38% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0028
Japan 2x Strategy Fund 11,064.89 7.80% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40243
Leisure Fund 82,392.71 87.91% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2058
Leisure Fund 8,190.18 8.74% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0029
Managed Futures Strategy Fund 335,328.33 47.30% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2059
Managed Futures Strategy Fund 133,922.90 18.89% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0030
Managed Futures Strategy Fund 76,201.61 10.75% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40244
Managed Futures Strategy Fund 48,233.23 6.80% RYDEX EPT MODERATE -VA
9601 BLACKWELL RD, STE 500
ROCKVILLE, MD 20850
Managed Futures Strategy Fund 40,286.86 5.68% RYDEX VA ALTERNATIVE STRATEGIES
ALLOCATION FUND
9601 BLACKWELL RD, STE 500
ROCKVILLE, MD 20850
Mid-Cap 1.5x Strategy Fund 225,162.08 62.79% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2060
Mid-Cap 1.5x Strategy Fund 91,640.87 25.55% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0031
Mid-Cap 1.5x Strategy Fund 39,928.47 11.13% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40245
O-6
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Multi-Hedge Strategies Fund 299,888.00 36.56% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2061
Multi-Hedge Strategies Fund 232,211.25 28.31% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0032
Multi-Hedge Strategies Fund 86,976.09 10.61% RYDEX EPT MODERATE -VA
9601 BLACKWELL RD, STE 500
ROCKVILLE, MD 20851
Multi-Hedge Strategies Fund 54,103.69 6.60% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40246
Multi-Hedge Strategies Fund 48,750.79 5.94% NATIONAL INTEGRITY LIFE INSURANCE CO
400 BROADWAY STREET
CINCINNATI, OH 45202-3342
Multi-Hedge Strategies Fund 45,756.40 5.58% RYDEX VA ALTERNATIVE STRATEGIES
ALLOCATION FUND
9601 BLACKWELL RD, STE 500
ROCKVILLE, MD 20851
NASDAQ-100(R) 2x Strategy Fund 588,280.89 67.38% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0033
NASDAQ-100(R) 2x Strategy Fund 184,973.87 21.19% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2062
NASDAQ-100(R) 2x Strategy Fund 99,195.58 11.36% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40247
NASDAQ-100(R) Fund 486,619.62 25.63% AMERICAN SKANDIA LIFE ASSURANCE CO
ONE CORPORATE DRIVE
PO BOX 883
SHELTON, CT 06484-0883
NASDAQ-100(R) Fund 282,701.58 14.89% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2063
NASDAQ-100(R) Fund 270,649.34 14.25% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0034
NASDAQ-100(R) Fund 259,344.86 13.66% GE LIFE AND ANNUITY INSURANCE CO
ATTN: VARIABLE ACCOUNTING
6610 WEST BROAD STREET
RICHMOND, VA 23230
NASDAQ-100(R) Fund 244,230.06 12.86% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40248
NASDAQ-100(R) Fund 154,746.73 8.15% AMERITAS LIFE INSURANCE CORP
ATTN: VARIABLE TRADES
5900 O STREET P.O. BOX 81889.
LINCOLN, NE 68501-1891
Nova Fund 138,454.39 48.21% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2064
Nova Fund 51,037.14 17.77% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0035
O-7
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Nova Fund 37,724.30 13.13% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40249
Nova Fund 21,296.59 7.42% AMERICAN SKANDIA LIFE ASSURANCE CO
ONE CORPORATE DRIVE
PO BOX 883
SHELTON, CT 06484-0884
Precious Metals Fund 2,221,291.21 47.05% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2065
Precious Metals Fund 1,259,827.01 26.68% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0036
Precious Metals Fund 622,774.71 13.19% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40250
Precious Metals Fund 567,387.98 12.02% AMERITAS LIFE INSURANCE CORP
ATTN: VARIABLE TRADES
5900 O STREET P.O. BOX 81889.
LINCOLN, NE 68501-1892
Real Estate Fund 355,473.61 55.17% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2066
Real Estate Fund 191,181.83 29.67% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0037
Real Estate Fund 58,755.87 9.12% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40251
Retailing Fund 348,248.37 59.52% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2067
Retailing Fund 143,245.95 24.48% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0038
Retailing Fund 54,523.18 9.32% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40252
Retailing Fund 33,015.52 5.64% SAGE LIFE ASSURANCE COMPANY
969 HIGH RIDGE RD, STE 200
STAMFORD, CT 06905
Russell 2000(R) 1.5x Strategy Fund 90,458.69 48.02% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2068
Russell 2000(R) 1.5x Strategy Fund 40,436.34 21.47% AMERITAS LIFE INSURANCE CORP
ATTN: VARIABLE TRADES
5900 O STREET P.O. BOX 81889.
LINCOLN, NE 68501-1893
Russell 2000(R) 1.5x Strategy Fund 28,916.40 15.35% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0039
Russell 2000(R) 1.5x Strategy Fund 26,952.52 14.31% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40253
O-8
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Russell 2000(R) 2x Strategy Fund 28,982.29 81.92% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0040
Russell 2000(R) 2x Strategy Fund 6,313.65 17.85% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40254
S&P 500 2x Strategy Fund 41,607.60 44.36% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2069
S&P 500 2x Strategy Fund 41,364.94 44.09% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0041
S&P 500 2x Strategy Fund 10,520.91 11.21% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40255
S&P 500 Pure Growth Fund 706,696.20 59.62% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2070
S&P 500 Pure Growth Fund 349,164.78 29.46% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0042
S&P 500 Pure Growth Fund 116,894.04 9.86% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40256
S&P 500 Pure Value Fund 232,020.23 62.80% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2071
S&P 500 Pure Value Fund 109,183.63 29.55% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0043
S&P MidCap 400 Pure Growth Fund 326,225.61 44.75% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2072
S&P MidCap 400 Pure Growth Fund 287,138.82 39.40% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0044
S&P MidCap 400 Pure Growth Fund 107,067.27 14.69% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40257
S&P MidCap 400 Pure Value Fund 101,132.23 66.81% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2073
S&P MidCap 400 Pure Value Fund 32,728.06 21.62% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0045
S&P MidCap 400 Pure Value Fund 15,468.74 10.22% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40258
O-9
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
S&P SmallCap 600 Pure Growth Fund 184,656.22 45.77% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0046
S&P SmallCap 600 Pure Growth Fund 162,411.60 40.26% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2074
S&P SmallCap 600 Pure Growth Fund 52,942.87 13.12% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40259
S&P SmallCap 600 Pure Value Fund 31,781.69 42.99% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2075
S&P SmallCap 600 Pure Value Fund 26,774.95 36.22% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0047
S&P SmallCap 600 Pure Value Fund 14,191.92 19.20% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40260
Select Allocation Fund 1,129,851.68 71.36% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0048
Select Allocation Fund 364,071.47 22.99% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2076
Select Allocation Fund 89,394.22 5.65% FSBL VARIABLE ACCOUNT A
ATTN: DENISE MACHELL - FINANCE
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0005
Strengthening Dollar 2x Strategy Fund 585,659.76 39.91% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0049
Strengthening Dollar 2x Strategy Fund 478,699.89 32.62% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2077
Strengthening Dollar 2x Strategy Fund 400,775.71 27.31% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40261
Technology Fund 469,742.39 60.87% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2078
Technology Fund 236,420.27 30.64% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0050
Technology Fund 54,611.03 7.08% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40262
Telecommunications Fund 204,541.63 56.80% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2079
O-10
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Telecommunications Fund 110,649.50 30.73% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0051
Telecommunications Fund 35,191.71 9.77% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40263
Transportation Fund 266,461.40 80.55% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2080
Transportation Fund 34,398.64 10.40% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0052
Transportation Fund 16,674.33 5.04% SAGE LIFE ASSURANCE COMPANY
969 HIGH RIDGE RD, STE 200
STAMFORD, CT 06906
U.S. Government Money Market Fund 173,469,119.28 55.46% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0018
U.S. Government Money Market Fund 117,672,305.55 37.62% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40235
U.S. Government Money Market Fund 20,313,973.10 6.49% FSBL VARIABLE ACCOUNT A
ATTN: DENISE MACHELL - FINANCE
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0002
U.S. Long Short Momentum Fund 1,639,538.43 47.02% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0053
U.S. Long Short Momentum Fund 786,658.21 22.55% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2081
U.S. Long Short Momentum Fund 326,384.01 9.36% RYDEX EPT MODERATE -VA
9601 BLACKWELL RD, STE 500
ROCKVILLE, MD 20852
U.S. Long Short Momentum Fund 267,590.52 7.67% LINCOLN BENEFIT LIFE COMPANY
544 LAKEVIEW PRKWAY
VERNON HILLS, IL 60016
Utilities Fund 516,873.82 42.78% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2082
Utilities Fund 476,834.29 39.46% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0054
Utilities Fund 192,718.11 15.95% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40264
Weakening Dollar 2x Strategy Fund 50,152.48 50.61% SECURITY BENEFIT LIFE INSURANCE CO
SBL VARIABLE ANNUITY ACCOUNT XIV
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0055
Weakening Dollar 2x Strategy Fund 41,440.90 41.81% NATIONWIDE INSURANCE COMPANY
NWVA4 , C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS, OH 43218-2083
O-11
PERCENTAGE
AMOUNT OF OF THE
NAME OF THE FUND SHARES OWNED CLASS NAME AND ADDRESS OF THE BENEFICIAL OWNER
---------------------------------------------------------------------------------------------------------------------------
Weakening Dollar 2x Strategy Fund 7,130.27 7.19% JEFFERSON NATIONAL LIFE INSURANCE COMPANY
ATTN: SEPERATE ACCOUNT
9920 CORPORATE CAMPUS, SUITE 1000
LOUISVILLE, IN 40265
---------------------
* A party holding in excess of 25% of the outstanding voting securities of a
Fund is presumed to be a "control person" (as defined in the 1940 Act) of
such Fund, based on the substantial ownership interest held and the party's
resultant ability to influence voting on certain matters submitted for
shareholder consideration.
O-12
APPENDIX P
NOMINATING COMMITTEE CHARTER
I. THE COMMITTEE
The Nominating Committee (the "Committee") of the Rydex Series Funds,
Rydex Dynamic Funds, Rydex Variable Trust and Rydex ETF Trust (each a
"Trust" and collectively "the Trusts") shall be composed of at least
three members plus the Independent Chairman as an ex officio member
pursuant to the following sentence, each of whom is a Trustee who is
not an "interested person" of the Trusts ("Independent Trustee") as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended (the "1940 Act"). At any time when there is an Independent
Chairmandirection of the Board, the Independent ChairmanFund’s officers shall deem appropriate. Any such monies or the assets not so distributed may be a full, voting
memberdisposed of the Committee, ex officio. The Board shall appoint the other
members of the Committee and shall designate one member of the Committee
to act as chairman of the Committee. All members of the Committee
appointed by the Board shall serve at the pleasure of the Board. The
role of the Committee shall be to assist the Board of Trustees of the
Trusts (the "Board")determine in identifying and nominating individuals to serve
as Independent Trustees of the Trusts.
II. COMMITTEE FUNCTIONS AND RESPONSIBILITIES
The Committee shall identify and recommend to the Independent Trustees
candidates to serve as Independent Trustees, including thoseits sole discretion to be elected byappropriate under the Shareholders or appointed by the Board to fill vacancies.
For this purpose, the Committee shall canvas, recruit, interview and
solicit candidates to serve as Independent Trustees. The Committee shall
evaluate candidates' qualifications for Board membership in light of
their background, knowledge and experience, in order to assure that the
Board as a whole represents a proper mix of backgrounds and relevant
skill sets. The Committee shall also determine whether each such
candidate qualifies as not being an "interested person" of the Trusts in
terms of both the letter and spirit of the 1940 Act, rules and
regulations of the Securities and Exchange Commission ("SEC") adopted
under said Act, and any other applicable standards of independence.
Among other things, this determination requires the Committee to find
the candidates to be independent from the investment advisers, principal
underwriters and other principal service providers for the Trusts. The
Committee shall also consider the effect of any relationships beyond
those delineated in the 1940 Act or the rules and regulations thereunder
that might impair independence, (e.g., business, financial or family
relationships with investment advisers, principal underwriters or other
service providers). Finally, the Committee shall consider the
willingness and ability of each such candidate to devote the time and
attention needed to perform the functions of an Independent Trustee
i. The Committee also shall evaluate and report to the Board
concerning the qualifications of candidates to serve as
"interested" Trustees of the Funds.
ii. The Committee may adopt from time to time specific, minimum
qualifications that the Committee believes a candidate must
meet before
P-1
being considered as a candidate for Board membership and
shall comply with any rules adopted from time to time by the
SEC regarding investment company nominating committees and
the nomination of persons to be considered as candidates for
Board membership.
iii. The Committee shall review shareholder recommendations for
nominations to fill vacancies on the Board if such
recommendations are submitted in a timely fashion in writing
and addressed to the Committee at the applicable Trust's
offices. The Committee may adopt, by resolution, a policy
regarding its procedures for considering candidates for the
Board, including any recommended by shareholders.
III. COMMITTEE PROCEDURES
A. MEETINGS
i. The Committee shall meet as needed in open or executive
session.
ii. The Committee may invite members of management, counsel to
the Independent Trustees, Fund counsel, advisers and others
to attend its meetings as it deems appropriate.
iii. A majority of the members of the Committee shall constitute
a quorum for the transaction of business at any meeting of
the Committee. The action of a majority of the members of
the Committee present at a meeting at which a quorum is
present shall be the action of the Committee. The Committee
may meet in person or by telephone, and the Committee may
act by written consent, to the extent permitted by law and
by the applicable Trust's by-laws. The chairman, or a person
designated by the chairman, shall take minutes of all
meetings of the Committee, copies of which shall be
furnished to the Board. In the event of any inconsistency
between this Charter and a Trust's organizational documents,
the provisions of the Trust's organizational documents shall
govern.
B. REPORTS TO THE BOARD
The Committee shall report its activities to the Board and make such
recommendations as are called for under this Charter or as the
Committee may otherwise deem necessary or appropriate.
C. RESOURCES
The Committee shall have the resources appropriate to discharge its
responsibilities, including the authority to consult with counsel
and to retain, at the Trusts' expense, such other experts or
advisors as the Committee deems necessary or appropriate.
P-2
[LOGO OF RYDEX | SGI] PROXY CARD FOR
RYDEX | SGI [FUND NAME PRINTS HERE]
SECURITY GLOBAL INVESTORS(SM) PROXY FOR A SPECIAL JOINT MEETING OF
SHAREHOLDERS - NOVEMBER 22, 2011
circumstances.
| 8. | Satisfaction of Federal Income and Excise Tax Distribution Requirements. If necessary, each Fund shall, by the Liquidation Date, have declared and paid a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to the Fund’s shareholders all of the Fund’s investment company taxable income for the taxable years ending at or prior to the Liquidation Date (computed without regard to any deduction for dividends paid), and all of the Fund’s net capital gain, if any, realized in the taxable years ending at or prior to the Liquidation Date (after reduction for any capital loss carry-forward) and any additional amounts necessary to avoid any excise tax for such periods. Alternatively, each |
C-2
| Fund may, if eligible, treat all or any portion of the amounts to be distributed pursuant to this Section 8 as having been paid out as part of the liquidating distributions made to the Fund’s shareholders pursuant to Section 7. |
| 9. | Expenses Incurred in Connection with this Plan. The Advisor will bear the costs incurred in by each Fund in connection with the implementation of the Plan, other than transaction costs associated with the liquidation of the Fund’s portfolio. Notwithstanding the foregoing, each Fund will continue to bear its operating expenses through and including the Liquidation Date. |
| 10. | Restriction on Transfer and Redemption of Shares. The proportionate interests of shareholders in the assets of each Fund shall be fixed on the basis of their respective shareholdings at the close of business on the Liquidation Date. On the Liquidation Date, the books of each Fund shall be closed. Thereafter, unless the books are reopened because this Plan cannot be carried into effect under the laws of the State of Delaware or otherwise, the shareholders’ respective interests in the Funds’ assets shall not be transferable. |
| 11. | Power of Board of Trustees. The Board and, subject to the direction of the Board, the officers of the Trust, shall have authority to do or authorize any or all acts and things as provided for in this Plan and any and all such further acts and things as they may consider necessary or desirable to carry out the purposes of this Plan, including the execution and filing of all certificates, documents, information returns, tax returns and other papers which may be necessary or appropriate to implement this Plan. The death, resignation or disability of any Trustee or any Officer of the Trust shall not impair the authority of the surviving or remaining Trustees or Officers to exercise any of the powers provided for in this Plan. |
| 12. | Amendment of Plan. The Board of Trustees of the Trust shall have the authority to authorize such variations from or amendments of the provisions of this Plan as may be necessary or appropriate to effect the marshaling of Fund assets and the complete liquidation and termination of the existence of the Funds, and the distribution of its net assets to shareholders in accordance with the laws of the State of Delaware and the purposes to be accomplished by this Plan. The Board may abandon this Plan at any time with respect to the Funds if it determines that abandonment would be advisable and in the best interest of the Funds and their shareholders. |
C-3
GUGGENHEIM FUNDS (shows through upper window on outbound envelope) | PROXY CARD | small barcode here | ||||||
| RYDEX VARIABLE TRUST | ||||||||
| DWA SECTOR ROTATION FUND | ||||||||
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 22, 2013 | ||||||||
The undersigned hereby appoint(s) Joanna Haigney, Amy J. Lee and BethElisabeth Miller, or anyeither one of them, proxies, each of them with full power of substitution, to vote and act with respect to all shares of the above referenced fund (the "Fund")
which the undersigned is entitled to vote at the Special Meetingmeeting of shareholders of theDWA Sector Rotation Fund, a series of Rydex Variable Trust, (the “Fund”), to be held at 1:00 p.m. local time, on August 22, 2013 at 805 King Farm Boulevard,Blvd., Suite 600, Rockville, MarylandMD 20850 on November 22, 2011 at 1:00 p.m. ET, and at any adjournment(s) or postponementspostponement(s) thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal.
SHAREHOLDER REGISTRATION PRINTED HERE (shows through lower window on outbound envelope) NOTE: red dotted line boxes are placeholders and are not printed on the final ballots |
QUESTIONS ABOUT THIS PROXY CARD
WILLPROXY?Should you have any questions about the proxy materials or regarding how to vote your shares, please contact our proxy information linetoll-free at 1-866-304-2059. Representatives are available Monday through Friday 9:00 a.m. to 10:00 p.m. Eastern Time.
YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE VOTED AS INSTRUCTED. IF NO SPECIFICATION IS MADE, THE PROXY CARD WILL BE
VOTED "FOR" THE PROPOSALS. THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION, TO
VOTE UPON SUCH MATTERS AS MAY COME BEFORE THE SPECIAL MEETING OR ANY
ADJOURNMENTS.
----------------------------------------------------
| TAG ID: 123456 |
| |
| NA1 - RYDEX SGI - BALLOT 4 - BOOK 4 RYDEX VA |
| NA2 - RYDEX SGI - BALLOT 4 - BOOK 4 RYDEX VA |
| NA3 - RYDEX SGI - BALLOT 4 - BOOK 4 RYDEX VA |
| NA4 - RYDEX SGI - BALLOT 4 - BOOK 4 RYDEX VA |
| NA5 - RYDEX SGI - BALLOT 4 - BOOK 4 RYDEX VA |
| NA6 - RYDEX SGI - BALLOT 4 - BOOK 4 RYDEX VA |
| NA7 - RYDEX SGI - BALLOT 4 - BOOK 4 RYDEX VA |
----------------------------------------------------
NOTE:COUNTED. This proxy must be signed exactly as your name(s) appears here on.hereon. If as an attorney, executor, guardian or in some representative capacity or as an officer of a corporation, please add titles as such. Joint owners must each sign. By signing this proxy card, you acknowledge that you have received the
proxy statement that the proxy card accompanies.
________________________________________________________________________________
Shareholder sign here Date
________________________________________________________________________________
Joint owner sign here Date
PLEASE SEE THE INSTRUCTIONS BELOW IF YOU WISH TO VOTE BY PHONE (live proxy
representative or touch-tone phone), BY MAIL OR VIA THE INTERNET. Please use
whichever method is most convenient for you. If you choose
| SIGNATURE | DATE | |
| SIGNATURE (if held jointly) | DATE | |
THREE OPTIONS FOR VOTING YOUR PROXY
| 1. Internet | Log on towww.proxyonline.com. Make sure to have this proxy card available when you plan to vote CONTROL NUMBER 2. Phone Simply dial toll-free1 (800) 814-9324 and have this proxy 3. Mail Simply sign, date, and complete the reverse side of this proxy card Important Notice Regarding the Availability of Proxy Materials for this Special Meeting of Shareholders to Be Held on August 22, 2013 The proxy statement for this meeting is available at: [ ] IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER’S VOTE IS IMPORTANT. TAG ID:
RYDEX VARIABLE TRUST DWA SECTOR ROTATION FUND THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal. Please vote, date and sign this proxy card and return it promptly in the enclosed envelope
PROPOSAL:
THANK YOU FOR VOTING
The undersigned hereby appoint(s) Amy J. Lee and Elisabeth Miller, or either one of them, proxies, each with full power of substitution, to vote and act with respect to all shares which the undersigned is entitled to vote at the meeting of shareholders of DWA Flexible Allocation Fund, a series of Rydex Variable Trust, (the “Fund”), to be held at 1:00 p.m. local time, on August 22, 2013 at 805 King Farm Blvd., Suite 600, Rockville, MD 20850 and at any adjournment(s) or postponement(s) thereof. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal.
QUESTIONS ABOUT THIS PROXY?Should you have any questions about the proxy materials or regarding how to vote your shares, please contact our proxy information line YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. This proxy must be signed exactly as your name(s) appears hereon. If as an attorney, executor, guardian or in some representative capacity or as an officer of a corporation, please add titles as such. Joint owners must each sign.
THREE OPTIONS FOR VOTING YOUR PROXY
Important Notice Regarding the Availability of Proxy Materials for this Special Meeting of Shareholders to Be Held on August 22, 2013 The IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER’S VOTE IS IMPORTANT.
RYDEX VARIABLE TRUST DWA FLEXIBLE ALLOCATION FUND THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal. Please vote, date and sign this proxy card and return it promptly in the
PROPOSAL:
THANK YOU FOR VOTING
The undersigned hereby appoint(s) Amy J. Lee and Elisabeth Miller, or either one of them, proxies, each with full power of substitution, to vote and act with respect to all shares which the undersigned is entitled to vote at the meeting of shareholders of All-Asset Conservative Strategy Fund, a series of Rydex Variable Trust, (the “Fund”), to be held at 1:00 p.m. local time, on August 22, 2013 at 805 King Farm Blvd., Suite 600, Rockville, MD 20850 and at any adjournment(s) or postponement(s) thereof. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal.
QUESTIONS ABOUT THIS PROXY?Should you have any questions about the proxy materials or regarding how to vote your shares, please contact our proxy information linetoll-free at 1-866-304-2059. Representatives are available Monday through Friday 9:00 a.m. to 10:00 p.m. Eastern Time. YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. This proxy must be signed exactly as your name(s) appears hereon. If as an attorney, executor, guardian or in some representative capacity or as an officer of a corporation, please add titles as such. Joint owners must each sign.
THREE OPTIONS FOR VOTING YOUR PROXY
Important Notice Regarding the Availability of Proxy Materials for this Special Meeting of Shareholders to Be Held on August 22, 2013 The proxy statement for this meeting is available at: [ ] IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER’S VOTE IS IMPORTANT.
RYDEX VARIABLE TRUST ALL-ASSET CONSERVATIVE STRATEGY FUND THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal. Please vote, date and sign this proxy card and return it promptly in the enclosed envelope
PROPOSAL:
THANK YOU FOR VOTING
The undersigned hereby appoint(s) Amy J. Lee and Elisabeth Miller, or either one of them, proxies, each with full power of substitution, to vote and act with respect to all shares which the undersigned is entitled to vote at the meeting of shareholders of All-Asset Moderate Strategy Fund, a series of Rydex Variable Trust, (the “Fund”), to be held at 1:00 p.m. local time, on August 22, 2013 at 805 King Farm Blvd., Suite 600, Rockville, MD 20850 and at any adjournment(s) or postponement(s) thereof. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal.
QUESTIONS ABOUT THIS PROXY?Should you have any questions about the proxy materials or regarding how to vote your shares, please contact our proxy information linetoll-free at 1-866-304-2059. Representatives are available Monday through Friday 9:00 a.m. to 10:00 p.m. Eastern Time. YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. This proxy must be signed exactly as your name(s) appears hereon. If as an attorney, executor, guardian or in some representative capacity or as an officer of a corporation, please add titles as such. Joint owners must each sign.
THREE OPTIONS FOR VOTING YOUR PROXY
Important Notice Regarding the Availability of Proxy Materials for this Special Meeting of Shareholders to Be Held on August 22, 2013 The proxy statement for this meeting is available at: [ ] IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER’S VOTE IS IMPORTANT.
RYDEX VARIABLE TRUST ALL-ASSET MODERATE STRATEGY FUND THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal. Please vote, date and sign this proxy card and return it promptly in the enclosed envelope
PROPOSAL:
THANK YOU FOR VOTING
The undersigned hereby appoint(s) Amy J. Lee and Elisabeth Miller, or either one of them, proxies, each with full power of substitution, to vote and act with respect to all shares which the undersigned is entitled to vote at the meeting of shareholders of All-Asset Aggressive Strategy Fund, a series of Rydex Variable Trust, (the “Fund”), to be held at 1:00 p.m. local time, on August 22, 2013 at 805 King Farm Blvd., Suite 600, Rockville, MD 20850 and at any adjournment(s) or postponement(s) thereof. THIS PROXY IS SOLICITED ON BEHALF OF THE
QUESTIONS ABOUT THIS PROXY?Should you have any questions about the proxy materials or regarding how to vote your shares, please contact our proxy information linetoll-free at 1-866-304-2059. Representatives are available Monday through Friday 9:00 a.m. to 10:00 p.m. Eastern Time. YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. This proxy must be signed exactly as your name(s) appears hereon. If as an attorney, executor, guardian or in some representative capacity or as an officer of a corporation, please add titles as such. Joint owners must each sign.
THREE OPTIONS FOR VOTING YOUR PROXY
Important Notice Regarding the Availability of Proxy Materials for this Special Meeting of Shareholders to Be Held on August 22, 2013 The proxy statement for this meeting is available at: [ ] IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER’S VOTE IS IMPORTANT.
RYDEX VARIABLE TRUST ALL-ASSET AGGRESSIVE STRATEGY FUND THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card will be voted as instructed. If no specification is made, the proxy card will be voted “FOR” each proposal. Please vote, date and
PROPOSAL:
THANK YOU FOR VOTING
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
