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James Rafton, Trustee of the James and Cynthia Rafton Trust, 14 et al v. Rydex Series Funds; et al

September 13, 2011

JAMES RAFTON, TRUSTEE OF THE JAMES AND CYNTHIA RAFTON TRUST, 14 ET AL.,
PLAINTIFFS,
v.
RYDEX SERIES FUNDS; ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Judge: Hon. Lucy H. Koh

Action Filed: March 19, 2010

[PROPOSED] ORDER GRANTING UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF PROPOSED CLASS SETTLEMENT AND APPROVAL OF NOTICE PLAN

Date: September 8, 2011 Time: 1:30 p.m. Dept: Courtroom 8, 4th Floor

2 the Settlement Class (as hereinafter defined) have applied to the Court pursuant to Rule 23(e) of 3 the Federal Rules of Civil Procedures for: (1) an order approving the settlement of the above-4 captioned litigation (the "Action") in accordance with the Stipulation and Settlement Agreement 5 dated July 28, 2011 ("Stipulation"), which together with the exhibits annexed thereto, sets forth 6 the terms and conditions for a proposed settlement of the Action (the "Settlement"); (2) dismissal 7 of the Action with prejudice as to all Defendants upon the terms and conditions set forth in the 8 (4) approval of the form and method for providing notice of the Settlement to the Class and the 10 schedule therefor. 11

12 settlement; 13

14 reviewed the Stipulation, including the exhibits attached to the Stipulation, and found good cause 15 for entering the following Order;

18 definitions in the Stipulation, and all terms used herein shall have the same meanings as set forth 19 in the Stipulation.

WHEREAS, Lead Plaintiffs James Rafton and James Darst, on behalf of themselves and Stipulation; and (3) certification of the Action as a class action for settlement purposes only; and 9

WHEREAS, the Defendants do not oppose the motion for preliminary approval of the

WHEREAS, the Court is familiar with and has reviewed the record in the Action and has

NOW, THEREFORE, IT IS HEREBY ORDERED:

1. This Preliminary Approval Order ("Order") hereby incorporates by reference the

2. The Court hereby grants preliminary approval to the Settlement and the

Stipulation, subject to further consideration at the Final Approval Hearing described below; 22

23 in this order, in the Stipulation and the Notice(s) of Pendency and Proposed Settlement of Class 24

Action, except the Final Approval Hearing, are hereby taken off calendar. 26

28 purposes:

3. Pending further order of the Court, all litigation activity, except that contemplated

Action, annexed thereto is hereby stayed and all hearings, deadlines and other proceedings in this 25

CLASS CERTIFICATION

4. Pursuant to Federal Rule 23, the Court certifies the following Class for settlement

All persons and entities ("Class" or "Class Members") who purchased or otherwise acquired 2 shares of the Rydex Inverse Government Long Bond Strategy Fund ("Rydex Fund") from August 3

Excluded from the Class are: Defendants; the Rydex Defendants' officers and directors; 5 members of Defendants' immediate families; Defendants' legal representatives, heirs, successors, 6 or assigns; and any entity in which Defendants have or had a controlling interest. Also excluded 7 from the Class are any proposed Class Members who properly exclude themselves by filing a 8 valid and timely request for exclusion in accordance with the requirements set forth in the Notice 9 and Publication Notice. 10

1, 2007 through July 31, 2009, inclusive ("Class Period") and who were damaged thereby. 4

5. The Court finds that certification of the Class meets the requirements of Federal Rule 23 as follows: 12

13 geographically dispersed that joinder of all Class Members is impracticable, and accordingly 14 satisfies Federal Rule 23(a)(1).

Registration Statements contained a material misstatement or omission when they became 18 effective in violation of §11 of the Securities Act of 1933; whether either the 2007 or the 2008 19

Rydex Fund Prospectus contained "an untrue statement of material fact or omit[ted] to state a 20 material fact necessary in order to make the statements, in light of the circumstances under which 21 they were made, not misleading," in violation of §12(a)(2) of the Securities Act of 1933; whether 22 and to what extent Class Members have sustained damages and the proper measure of damages; 23 and whether certain Defendants exercised actual power or control over primary violators giving 24 rise to liability under §15 of the Securities Act of 1933.

a. The Class consists of thousands of members, and is sufficiently large and

b. There are questions of law and fact common to the Class that satisfy

Federal Rule 23(a)(2), including but not limited to: whether the 2007 and 2008 Rydex Fund 17

c. Lead Plaintiffs' asserted claims that the Defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 are typical of the Class, and accordingly satisfy the 27 requirements of Federal Rule 23(a)(3). 28

d. Lead Plaintiffs James Rafton and James Darst, Jr. and their counsel, Sparer Law Group, will fairly and adequately protect the interest of the Class, and accordingly their 3 appointment satisfies Federal Rule 23(a)(4). 4

5 since questions of law and fact common to the Class predominate over any questions affecting 6 only individual members and a class action is superior to other available methods for the fair and 7 efficient adjudication of this matter. 8

9 representatives of the Class. 10

"Notice of Pendency and Proposed Settlement of Class Action for Unidentified Purchasers or 15

Notice, in substantially the forms annexed hereto as Exhibits A-1, A-2, and A-5. 17

18 the Publication Notice, as set forth herein, meet the requirements of Federal Rule 23(c)(2)(B), 19 due process, and Section 27 of the Securities Act of 1933, 15 U.S.C. §77z-1(a)(7), as amended by 20 the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), and constitutes the best 21 notice practicable under the circumstances and shall constitute due and sufficient notice to all 22 persons and entities entitled thereto. 23

Settlement, as set forth in Paragraph 9 of this Order and as more fully set forth in the Stipulation: 27

28 a non-disclosure agreement between the Claims Administrator and the Rydex Defendants, the

e. Lead Plaintiffs also satisfy the requirements of Federal Rule 23(b)(3)

6. Lead Plaintiffs James Rafton and James Darst, Jr., are hereby appointed

7. Sparer Law Group is hereby appointed Class Counsel.

CLASS NOTICE

8. The Court approves the form and content of the "Notice of Pendency and

Proposed Settlement of Class Action for Purchasers with Identified Transactions" and the 14

Purchasers with Unidentified Transactions," (collectively, the "Notice"), and the Publication 16

9. The Court finds that the mailing and distribution of the Notice and publishing of

CLAIMS PROCESS AND ADMINISTRATION

10. The Court hereby appoints the Garden City Group, Inc. as the Claims

Administrator to supervise and execute the notice program as well as the administration of the 26

a. Within four (4) business days after entry of this Order and the execution of

Rydex Defendants shall provide to the Claims Administrator in electronic, searchable form: (1) 2 the names and addresses and account data for all accounts reflected in Defendant's records as 3 having acquired Rydex Fund shares during the Class Period; and (2) the names and addresses and 4 account data of all broker-dealers or other intermediaries ("Intermediaries") reflected in 5

Defendant's records as having acquired Rydex Fund shares on behalf of Class Members during 6 the Class Period. This information and data shall be provided at no cost and in electronic, 7 searchable form. In the event the Claims Administrator is unable, after reasonable efforts, to 8 locate any Class Member utilizing this information, the Claims Administer may request that 9

Defendants provide Social Security numbers of such Class Members. Defendants will comply 10 with such requests to the extent that such numbers are accessible and provide such numbers on a 11 confidential and limited basis. 12

Pursuant to this Order, the Intermediary Notification: 15

16 address(es), and all transaction data for all accounts that acquired Rydex Fund shares during the 17

ii. shall inform the Intermediaries that, if it is not feasible to provide

19 the name(s), address(es), and Fund transaction data for each Intermediary ...


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