
[Federal Register: March 29, 2010 (Volume 75, Number 59)]
[Notices]               
[Page 15468-15470]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29mr10-100]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29179; File No. 812-13685]

 
Rydex Series Funds, et al.; Notice of Application

March 23, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from rule 12d1-2(a) 
under the Act.

-----------------------------------------------------------------------

    Summary of Application: Applicants request an order to permit funds 
of funds relying on rule 12d1-2 under the Act to invest in certain 
financial instruments.
    Applicants: Rydex Series Funds, Rydex Variable Trust (each, a 
``Trust'' and together, the ``Trusts''), PADCO Advisors, Inc., PADCO 
Advisors II, Inc. (collectively, the ``PADCO Advisers''), and Rydex 
Distributors, Inc. (the ``Distributor'').
    Filing Dates: The application was filed on August 27, 2009, and 
amended on January 14, 2010 and March 22, 2010.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on April 19, 2010 and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state

[[Page 15469]]

the nature of the writer's interest, the reason for the request, and 
the issues contested. Persons who wish to be notified of a hearing may 
request notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090; Applicants: 9601 Blackwell Road, Suite 
500, Rockville, Maryland 20850.

FOR FURTHER INFORMATION CONTACT: Lewis Reich, Senior Counsel, at (202) 
551-6919, or Jennifer L. Sawin, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.
    Applicants' Representations:
    1. Each Trust is organized as a Delaware statutory trust, and each 
is registered with the Commission as an open-end management investment 
company. Each of the PADCO Advisers is organized as a Maryland 
corporation and is a wholly owned subsidiary of Security Benefit 
Corporation. PADCO Advisors, Inc. currently serves as the investment 
adviser to the Rydex Series Funds and PADCO Advisors II, Inc. currently 
serves as the investment adviser to the Rydex Variable Trust. Each 
Adviser is or will be registered as an investment adviser under the 
Investment Advisers Act of 1940, as amended, and the Distributor is 
registered as a broker-dealer under the Securities Exchange Act of 
1934, as amended (``Exchange Act'').
    2. Applicants request the exemption on behalf of (i) Each Trust and 
all existing and future series of each Trust (``Funds''); (ii) any 
existing or future registered open-end management investment company or 
series thereof that is advised by the PADCO Advisers or any entity 
controlling, controlled by or under common control with the PADCO 
Advisers (collectively with the PADCO Advisers, the ``Advisers'') and 
that is in the same group of investment companies as defined in section 
12(d)(1)(G) of the Act, as the Trusts (together with the Funds, the 
``Applicant Funds''); and (iii) any entity controlling, controlled by 
or under common control with the Advisers or the Distributor that, now 
or in the future, acts as principal underwriter with respect to the 
transactions described herein. Applicants request the exemption to the 
extent necessary to permit any Applicant Fund that may invest in other 
registered open-end investment companies including Applicant Funds 
(``Underlying Funds'') in reliance on section 12(d)(1)(G) of the Act 
(``Fund of Funds'') and that is also eligible to invest in securities 
(as defined in section 2(a)(36) of the Act) in reliance on rule 12d1-2 
under the Act to also invest, to the extent consistent with its 
investment objective, policies, strategies and limitations, in 
financial instruments that may not be securities within the meaning of 
section 2(a)(36) of the Act (``Other Investments'').\1\
---------------------------------------------------------------------------

    \1\ Every existing entity that currently intends to rely on the 
requested order is named as an applicant. Any existing or future 
entity that relies on the order in the future will do so only in 
accordance with the terms and condition in the application.
---------------------------------------------------------------------------

    3. Consistent with its fiduciary obligations under the Act, each 
Applicant Fund's board of trustees or directors will review the 
advisory fees charged by the Applicant Fund's investment adviser to 
ensure that they are based on services provided that are in addition 
to, rather than duplicative of, services provided pursuant to the 
advisory agreement of any investment company in which the Applicant 
Funds may invest.
    Applicants' Legal Analysis:
    1. Section 12(d)(1)(A) of the Act provides that no registered 
investment company (``acquiring company'') may acquire securities of 
another investment company (``acquired company'') if such securities 
represent more than 3% of the acquired company's outstanding voting 
stock or more than 5% of the acquiring company's total assets, or if 
such securities, together with the securities of other investment 
companies, represent more than 10% of the acquiring company's total 
assets. Section 12(d)(1)(B) of the Act provides that no registered 
open-end investment company may sell its securities to another 
investment company if the sale will cause the acquiring company to own 
more than 3% of the acquired company's voting stock, or cause more than 
10% of the acquired company's voting stock to be owned by investment 
companies and companies controlled by them.
    2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) 
will not apply to securities of an acquired company purchased by an 
acquiring company if: (i) The acquired company and acquiring company 
are part of the same group of investment companies; (ii) the acquiring 
company holds only securities of acquired companies that are part of 
the same group of investment companies, government securities, and 
short-term paper; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not 
excessive under rules adopted pursuant to section 22(b) or section 
22(c) of the Act by a securities association registered under section 
15A of the Exchange Act or by the Commission; and (iv) the acquired 
company has a policy that prohibits it from acquiring securities of 
registered open-end investment companies or registered unit investment 
trusts in reliance on section 12(d)(1)(F) or (G) of the Act.
    3. Rule 12d1-2 under the Act permits a registered open-end 
investment company or a registered unit investment trust that relies on 
section 12(d)(1)(G) of the Act to acquire, in addition to securities 
issued by another registered investment company in the same group of 
investment companies, government securities, and short-term paper: (1) 
Securities issued by an investment company that is not in the same 
group of investment companies, when the acquisition is in reliance on 
section 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other 
than securities issued by an investment company); and (3) securities 
issued by a money market fund, when the investment is in reliance on 
rule 12d1-1 under the Act. For the purposes of rule 12d1-2, 
``securities'' means any security as defined in section 2(a)(36) of the 
Act.
    4. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction from any provision of the Act, or 
from any rule under the Act, if such exemption is necessary or 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policies and 
provisions of the Act.
    5. Applicants state that the proposed arrangement would comply with 
the provisions of rule 12d1-2 under the Act, but for the fact that the 
Funds of Funds may invest a portion of their assets in Other 
Investments. Applicants request an order under section 6(c) of the Act 
for an exemption from rule 12d1-2(a) to allow the Funds of Funds to 
invest in Other Investments while investing in Underlying Funds. 
Applicants assert that permitting the Applicant Funds to invest in 
Other Investments as described in the application would not raise any 
of the concerns that the requirements of section 12(d)(1) were designed 
to address.
    Applicants' Condition:

[[Page 15470]]

    Applicants agree that the order granting the requested relief will 
be subject to the following condition:
    Applicants will comply with all provisions of rule 12d1-2 under the 
Act, except for paragraph (a)(2) to the extent that it restricts any 
Fund of Funds from investing in Other Investments as described in the 
application.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6874 Filed 3-26-10; 8:45 am]
BILLING CODE 8011-01-P

