N-CSR 1 b84158a1nvcsr.txt RYDEX ETF TRUST UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811- 21261 Rydex ETF Trust (Exact name of registrant as specified in charter) 9601 Blackwell Road, Suite 500 Rockville, Maryland 20850 (Address of principal executive offices) (Zip code) Richard Goldman Rydex ETF Trust 9601 Blackwell Road, Suite 500 Rockville, Maryland 20850 (Name and address of agent for service) Registrant's telephone number, including area code: 1-301-296-5100 Date of fiscal year end: October 31, 2010 Date of reporting period: October 31, 2010 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. OCTOBER 31, 2010 RYDEX ETF TRUST ANNUAL REPORT RYDEX S&P EQUAL WEIGHT ETF RYDEX RUSSELL TOP 50 ETF RYDEX | SGI SECURITY GLOBAL INVESTORS(SM) [RYDEXSHARES LOGO] ANNUAL REPORT 1 TABLE OF CONTENTS -------------------------------------------------------------------------------- LETTER TO OUR SHAREHOLDERS............................................... 2 FEES AND EXPENSES........................................................ 4 PREMIUM AND DISCOUNT INFORMATION......................................... 5 MANAGER'S ANALYSIS....................................................... 6 SCHEDULES OF INVESTMENTS................................................. 10 STATEMENTS OF ASSETS AND LIABILITIES..................................... 18 STATEMENTS OF OPERATIONS................................................. 19 STATEMENTS OF CHANGES IN NET ASSETS...................................... 20 FINANCIAL HIGHLIGHTS..................................................... 21 NOTES TO FINANCIAL STATEMENTS............................................ 23 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.................. 29 SUPPLEMENTAL INFORMATION................................................. 30 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS............................ 31
2 LETTER TO OUR SHAREHOLDERS -------------------------------------------------------------------------------- DEAR SHAREHOLDER, More than a full year into the recovery that officially began in mid-2009, the U.S. economy has been growing, but unevenly. Corporate profits, consumer spending and some manufacturing measures have been rising or holding steady, while the employment and housing markets have remained stagnant. A soft patch occurred in mid-2010, when a debt crisis struck Greece, and the potential for a double-dip U.S. recession loomed. While slipping back into recession appears less likely, the U.S. economy has yet to create much in the way of jobs or wean itself off government involvement in everything from cars to banks to housing. Still, by the year ended October 2010, investors looked at an economy where stocks were the highest in two years, growth had persisted for five straight quarters and inflation was virtually flat. Trying to stimulate economic growth, but unable to lower interest rates below their current levels of near zero, the Federal Reserve would like to avoid the specter of deflation and so has resorted to the controversial practice of printing money to buy government bonds, otherwise known as quantitative easing. Proponents hope it will produce more than modest support for the economy, while driving long-term interest rates even lower, thus encouraging businesses and individuals to borrow. Critics contend that it could push down the dollar's value, triggering commodity price rises, and set the stage for inflation above the Fed's generally accepted range of about 2%. Markets reacted positively to the prospect of this new bout of bond buying by the Fed, as stock prices grew about 13% from Labor Day until Halloween, compared with about a 1% rise for corporate bonds. Other analysts attributed the rally to the shift in the political alignment in Washington based on the mid-term elections, which is expected to slow down or even reverse recent overhauls of health care and financial regulation, as well as more prominently address ways to reduce public debt. 2011 OUTLOOK As the impact wanes from recent catalysts such as Congressional realignment, quantitative easing and positive earnings and economic reports, markets are apt to wake up to the reality of a continuing sluggish economy and political stalemate in Washington. Some analysts are expecting an easing of monetary policy globally, as the world responds to a weaker dollar and looser U.S. financial conditions. Many are maintaining neutral allocations across major asset classes, with an emphasis on growth outside the U.S. market, particularly in emerging markets. Favored areas include commodities and growth stocks paying a dividend. Equities are expected to offer the highest risk premia in the coming months, and corporate paper is favored over government securities as the era of extraordinary returns in credit may be coming to an end. RYDEX|SGI ETFS ETFs have continued to enjoy popularity in the current uncertain market environment, and not just because of their well-known benefits of transparency, convenience and low cost. ETFs incorporate some of the most innovative product development and fastest asset growth in the financial industry. There was a 27% increase in assets under management in ETFs over the 12 month period ended September 30, 2010, according to the Investment Company Institute. As of October 2010, there were about 1,000 exchange traded funds with about $900 billion in assets in the U.S. and more than $1 trillion globally. At Rydex|SGI, assets under management increased by 7% during the past 12 months, and the firm closed 12 leveraged or inverse ETFs as it rationalized its product line-up. Today, the firm offers 28 exchange traded products, including currency funds, two leveraged or inverse products, nine sector funds, six pure style funds, a mega cap fund and an equal weight S&P 500 Index* fund, our best-known ETF. GUGGENHEIM PARTNERS As you may know, Security Global Investors' (SGI) parent firm, Security Benefit Corporation (Security Benefit), was acquired this year by a group of investors led by Guggenheim Partners. Guggenheim Partners is a diversified financial services firm with $100 billion in assets under supervision and a well-known name in the investment-management industry. We look forward to a long and productive relationship with Guggenheim Partners, as we do with you, our shareholders, and thank you for the trust you place in us. Sincerely, /s/ Michael Byrum Michael Byrum President and Chief Investment Officer ANNUAL REPORT 3 -------------------------------------------------------------------------------- * The S&P Equal Weight Index is an unmanaged equal-weighted version of the S&P 500 Index, which is an unmanaged capitalization-weighted index comprised of 500 common stocks, chosen by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. ("S&P") on a statistical basis. Unlike the S&P 500 Index, in which each constituent stock's weight is proportionate to its market value, each stock in the S&P Equal Weight Index will be rebalanced quarterly to have the same target weighting as every other stock in the Index. As of December 31, 2009, the S&P 500 Equal Weight Index included companies with a capitalization range of $1.1 billion to $323.8 billion. FOR MORE COMPLETE INFORMATION REGARDING RYDEXSHARES, CALL 800.820.0888 FOR A PROSPECTUS AND A SUMMARY PROSPECTUS (IF AVAILABLE). INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A FUND BEFORE INVESTING. THE FUND'S PROSPECTUS AND ITS SUMMARY PROSPECTUS (IF AVAILABLE) CONTAINS THIS AND OTHER INFORMATION ABOUT THE FUNDS. PLEASE READ THE PROSPECTUS AND SUMMARY PROSPECTUS (IF AVAILABLE) CAREFULLY BEFORE YOU INVEST OR SEND MONEY. ETFS MAY NOT BE SUITABLE FOR ALL INVESTORS. - Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Most investors will also incur customary brokerage commissions when buying or selling shares of an ETF. - Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. - ETF Shares may trade below their net asset value ("NAV"). The NAV of shares will fluctuate with changes in the market value of an ETF's holdings. In addition, there can be no assurance that an active trading market for shares will develop or be maintained. - Tracking error risk refers to the risk that the Advisor may not be able to cause the Fund's performance to match or correlate to that of the Fund's Underlying Index, either on a daily or aggregate basis. Tracking error risk may cause the Fund's performance to be less than you expect. - Each ETF discussed is considered non- diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Rydex|SGI and its affiliates. The product is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the product. THE FUNDS ARE DISTRIBUTED BY RYDEX DISTRIBUTORS, LLC (RDL). Security Global Investors(SM) is the investment advisory arm of Security Benefit Corporation (Security Benefit). Security Global Investors consists of Security Global Investors, LLC, Security Investors, LLC and Rydex Investments. Rydex Investments is the primary business name for Rydex Advisors, LLC and Rydex Advisors II, LLC. Security Global Investors and RDL are affiliates and subsidiaries of Security Benefit, which is wholly owned by Guggenheim SBC Holdings, LLC, a special purpose entity managed by Guggenheim Partners, LLC, a diversified financial services firm with more than $100 billion in assets under supervision. 4 FEES AND EXPENSES -------------------------------------------------------------------------------- SHAREHOLDER EXPENSE EXAMPLE As a shareholder of the Rydex ETF Trust, you incur transaction costs such as creation and redemption fees or brokerage charges, and ongoing costs including advisory fees and, if applicable, distribution fees. All other Trust expenses are paid by the advisor. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested on April 30, 2010 and held for the six months ended October 31, 2010. ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first table under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses attributable to your investment during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second table below provides information about hypothetical account values and hypothetical expenses based on a Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not a Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING EXPENSE VALUE VALUE SIX-MONTH PERIOD* RATIO 4/30/10 10/31/10 4/30/10 TO 10/31/10 ------- --------- --------- ------------------- ACTUAL Rydex S&P Equal Weight ETF................. 0.40% $1,000.00 $1,012.20 $2.03 Rydex Russell Top 50 ETF................... 0.20% $1,000.00 $ 990.30 $1.00 HYPOTHETICAL (ASSUMING A 5% RETURN BEFORE EXPENSES) Rydex S&P Equal Weight ETF................. 0.40% $1,000.00 $1,023.19 $2.04 Rydex Russell Top 50 ETF................... 0.20% $1,000.00 $1,024.20 $1.02
-------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect one-half year period). ANNUAL REPORT 5 PREMIUM AND DISCOUNT INFORMATION (Unaudited) -------------------------------------------------------------------------------- The tables that follow present information about the differences between the daily market price on secondary markets for shares of the Funds and each Fund's NAV. Net Asset Value, or "NAV," is the price per share at which a Fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The "Market Price" of a Fund generally is determined using the midpoint between the highest bid and the lowest offer on the Exchange on which the Fund is listed for trading, as of the time the Fund's NAV is calculated. A Fund's Market Price may be at, above or below its NAV. The NAV of a Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of a Fund will fluctuate in accordance with changes in its NAV, as well as market supply of and demand for shares of the Funds. Premiums or discounts are the differences (generally expressed as a percentage) between the NAV and Market Price of a Fund on a given day, generally at the time NAV is calculated. A premium is the amount that a Fund is trading above the reported NAV, expressed as a positive percentage of the NAV. A discount is the amount that a Fund is trading below the reported NAV, expressed as a negative percentage of the NAV. The following information shows the frequency distribution of premiums and discounts for the Funds. The information shown for each Fund is for the period from inception to October 31, 2010. Each line in the table shows the number of trading days in which the Funds traded within the premium/discount range indicated. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period covered by the table. All data presented here represents past performance, which cannot be used to predict future results.
NUMBER OF DAYS ----------------------- RYDEX RYDEX S&P EQUAL RUSSELL PREMIUM/DISCOUNT RANGE WEIGHT ETF TOP 50 ETF ---------------------- ---------- ---------- Greater Than 8%.............................................. 1 0 Between 3.01% and 8%......................................... 0 0 Between 1.01% and 3%......................................... 3 3 Between .51% and 1%.......................................... 7 7 Between .26% and .5%......................................... 27 23 Between 0% and .25%.......................................... 897 749 Between -0.01% and -0.25%.................................... 835 737 Between -0.26% and -0.5%..................................... 26 26 Between -0.51% and -1%....................................... 8 7 Between -1.01% and -3%....................................... 3 2 Between -3.01% and -8%....................................... 0 0 Less Than -8%................................................ 0 0 ---- ---- Total........................................................ 1807 1554 ---- ----
PERCENTAGE OF TOTAL DAYS ----------------------- RYDEX RYDEX S&P EQUAL RUSSELL PREMIUM/DISCOUNT RANGE WEIGHT ETF TOP 50 ETF ---------------------- ---------- ---------- Greater Than 8%.............................................. 0.06% 0.00% Between 3.01% and 8%......................................... 0.00% 0.00% Between 1.01% and 3%......................................... 0.17% 0.19% Between .51% and 1%.......................................... 0.39% 0.45% Between .26% and .5%......................................... 1.49% 1.48% Between 0% and .25%.......................................... 49.63% 48.20% Between -0.01% and -0.25%.................................... 46.21% 47.43% Between -0.26% and -0.5%..................................... 1.44% 1.67% Between -0.51% and -1%....................................... 0.44% 0.45% Between -1.01% and -3%....................................... 0.17% 0.13% Between -3.01% and -8%....................................... 0.00% 0.00% Less Than -8%................................................ 0.00% 0.00% ------ ------ Total........................................................ 100.00% 100.00% ------ ------
6 RYDEX S&P EQUAL WEIGHT ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- Rydex S&P Equal Weight ETF (RSP) returned 23.67% for the one-year period ended October 31, 2010, compared with the benchmark S&P Equal Weight Total Return Index* (24.28%). During the period, RSP achieved over 99% correlation to its benchmark on a daily basis. Consumer discretionary (30.64%) and information technology (28.31%) were the largest contributors to performance. The S&P Equal Weight Total Return Index handily beat the cap-weighted S&P 500 Total Return Index (16.52%) by over seven percentage points during the past year. Market volatility spiked in mid-2010, but has fallen since. The fund's equal weighting methodology allowed it to purchase stocks that had underperformed and sell stocks that had outperformed between rebalance dates. The outperformance relative to the S&P 500 Total Return Index was mainly caused by the superior performance and heavier weighting of stocks in the financials, consumer discretionary and materials sectors. * The S&P Equal Weight Index is an unmanaged equal-weighted version of the S&P 500 Index, which is an unmanaged capitalization-weighted index comprised of 500 common stocks, chosen by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. ("S&P") on a statistical basis. Unlike the S&P 500 Index, in which each constituent stock's weight is proportionate to its market value, each stock in the S&P Equal Weight Index will be rebalanced quarterly to have the same target weighting as every other stock in the Index. As of December 31, 2009, the S&P 500 Equal Weight Index included companies with a capitalization range of $1.1 billion to $323.8 billion. CUMULATIVE FUND PERFORMANCE: APRIL 24, 2003 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX S&P S&P EQUAL S&P 500 EQUAL WEIGHT WEIGHT TOTAL TOTAL RETURN ETF RETURN INDEX INDEX ------------ ------------ ------------ 4/24/2003 10000 10000 10000 4/30/2003 10114 10114 10063 5/31/2003 11091 11096 10594 6/30/2003 11170 11179 10729 7/31/2003 11457 11468 10918 8/31/2003 11960 11976 11131 9/30/2003 11754 11773 11013 10/31/2003 12575 12605 11636 11/30/2003 12841 12875 11738 12/31/2003 13500 13543 12353 1/31/2004 13821 13872 12580 2/29/2004 14096 14151 12755 3/31/2004 13999 14061 12563 4/30/2004 13643 13707 12365 5/31/2004 13893 13963 12535 6/30/2004 14316 14394 12779 7/31/2004 13684 13761 12356 8/31/2004 13663 13732 12406 9/30/2004 14019 14099 12540 10/31/2004 14348 14437 12732 11/30/2004 15176 15277 13247 12/31/2004 15726 15839 13698 1/31/2005 15254 15367 13364 2/28/2005 15576 15693 13645 3/31/2005 15370 15491 13404 4/30/2005 14897 15012 13149 5/31/2005 15567 15694 13568 6/30/2005 15785 15921 13587 7/31/2005 16577 16728 14092 8/31/2005 16395 16550 13964 9/30/2005 16529 16690 14077 10/31/2005 16112 16272 13842 11/30/2005 16811 16986 14366 12/31/2005 16933 17115 14371 1/31/2006 17620 17821 14751 2/28/2006 17653 17856 14791 3/31/2006 17971 18184 14975 4/30/2006 18155 18377 15176 5/31/2006 17628 17846 14740 6/30/2006 17581 17807 14760 7/31/2006 17320 17546 14851 8/31/2006 17803 18045 15204 9/30/2006 18255 18509 15596 10/31/2006 18918 19192 16104 11/30/2006 19391 19677 16410 12/31/2006 19526 19819 16640 1/31/2007 19979 20291 16892 2/28/2007 19905 20221 16562 3/31/2007 20056 20381 16747 4/30/2007 20919 21265 17489 5/31/2007 21600 21968 18099 6/30/2007 21209 21578 17798 7/31/2007 20247 20603 17246 8/31/2007 20276 20640 17505 9/30/2007 20781 21163 18160 10/31/2007 21043 21437 18448 11/30/2007 20033 20410 17677 12/31/2007 19740 20122 17555 1/31/2008 18872 19233 16502 2/29/2008 18230 18586 15966 3/31/2008 18031 18391 15897 4/30/2008 18970 19359 16671 5/31/2008 19460 19880 16887 6/30/2008 17552 17936 15463 7/31/2008 17459 17850 15333 8/31/2008 17964 18379 15555 9/30/2008 16077 16516 14169 10/31/2008 12680 13037 11789 11/30/2008 11459 11796 10943 12/31/2008 11765 12129 11060 1/31/2009 10834 11171 10128 2/28/2009 9611 9911 9049 3/31/2009 10611 10957 9842 4/30/2009 12556 13006 10784 5/31/2009 13347 13838 11387 6/30/2009 13230 13711 11410 7/31/2009 14444 14985 12273 8/31/2009 15247 15823 12716 9/30/2009 16053 16672 13190 10/31/2009 15494 16096 12945 11/30/2009 16320 16963 13722 12/31/2009 17063 17746 13987 1/31/2010 16523 17186 13484 2/28/2010 17219 17920 13901 3/31/2010 18421 19183 14740 4/30/2010 18928 19723 14973 5/31/2010 17533 18270 13777 6/30/2010 16450 17137 13056 7/31/2010 17641 18390 13971 8/31/2010 16798 17511 13340 9/30/2010 18508 19314 14531 10/31/2010 19163 20003 15083
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR FIVE YEAR (04/24/03) -------- ---------- --------- --------------- RYDEX S&P EQUAL WEIGHT ETF..................... 23.67% (3.07)% 3.53% 9.03% S&P EQUAL WEIGHT TOTAL RETURN INDEX............ 24.28% (2.28)% 4.22% 9.66% S&P 500 TOTAL RETURN INDEX..................... 16.52% (6.49)% 1.73% 5.62%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. ANNUAL REPORT 7 RYDEX S&P EQUAL WEIGHT ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ KING PHARMACEUTICALS, INC. 0.29% MONSTER WORLDWIDE, INC. 0.27% CARMAX, INC. 0.25% NATIONAL-OILWELL VARCO, INC. 0.25% MASSEY ENERGY CO. 0.25% J.C. PENNEY CO., INC. 0.24% GOOGLE, INC. -- CLASS A 0.24% EBAY, INC. 0.23% JABIL CIRCUIT, INC. 0.23% MCGRAW-HILL COS., INC. 0.23% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART)
CONSUMER DISCRETIONARY 16.58 ---------------------- ----- Financials 15.41 Information Technology 15.12 Industrials 11.90 Health Care 10.25 Consumer Staples 8.03 Energy 7.91 Utilities 6.84 Materials 6.18 Telecommunication Services 1.78
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. 8 RYDEX RUSSELL TOP 50 ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- Rydex Russell Top 50(R) ETF (XLG) finished the one-year period ended October 31, 2010, at 10.22% compared with the Russell Top 50(R) Total Return Index* benchmark, which returned 10.44% for the same period. During the period, Rydex Russell Top 50(R) ETF achieved over 99% correlation to its benchmark on a daily basis. Information technology (16%) was the largest contributor to performance, followed by consumer staples (15.97%). The financials sector (-8.92%) was the largest detractor to performance. The mega-cap Russell Top 50(R) Total Return Index underperformed the S&P 500 Total Return Index (16.52%) by six percentage points during the period. The underperformance was mainly caused by weaker performance of mega-cap financials and industrials stocks relative to similar stocks in the S&P 500. The higher relative weighting of the top- performing information technology and consumer staples sectors in the Russell Top 50(R) Total Return Index helped limit the amount of underperformance relative to the S&P 500. * The Russell Top 50(R) Index is an unmanaged equal-weighted version comprised of the 50 largest companies in the Russell 3000(R) Index, which is an unmanaged capitalization-weighted index that offers investors access to the broad U.S. equity universe representing approximately 98% of the U.S. equity market. As of December 31, 2009, the Russell Top 50(R)Index included companies with a capitalization range of $39 billion to $323.8 billion. CUMULATIVE FUND PERFORMANCE: MAY 4, 2005 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX RUSSELL RUSSELL TOP S&P 100 TOP 50 50 TOTAL TOTAL RETURN ETF RETURN INDEX INDEX ------------- ------------ ------------ 5/4/2005 10000 10000 10000 5/31/2005 10116 10118 10088 6/30/2005 9963 9966 9989 7/31/2005 10184 10189 10263 8/31/2005 10108 10114 10142 9/30/2005 10162 10171 10196 10/31/2005 10036 10043 10027 11/30/2005 10364 10375 10381 12/31/2005 10285 10297 10312 1/31/2006 10424 10439 10482 2/28/2006 10457 10472 10550 3/31/2006 10536 10555 10691 4/30/2006 10667 10689 10856 5/31/2006 10393 10417 10618 6/30/2006 10409 10434 10601 7/31/2006 10676 10706 10782 8/31/2006 10978 11010 11061 9/30/2006 11270 11307 11405 10/31/2006 11659 11702 11795 11/30/2006 11863 11909 12001 12/31/2006 12123 12172 12216 1/31/2007 12214 12266 12350 2/28/2007 11758 11806 11960 3/31/2007 11886 11937 12087 4/30/2007 12436 12503 12673 5/31/2007 12828 12902 13117 6/30/2007 12600 12671 12953 7/31/2007 12346 12415 12650 8/31/2007 12617 12689 12902 9/30/2007 13105 13189 13432 10/31/2007 13287 13374 13635 11/30/2007 12757 12841 13061 12/31/2007 12685 12772 12964 1/31/2008 11894 11972 12178 2/29/2008 11339 11414 11654 3/31/2008 11382 11457 11676 4/30/2008 11875 11958 12212 5/31/2008 11804 11885 12209 6/30/2008 10788 10842 11123 7/31/2008 10834 10893 11199 8/31/2008 10990 11052 11360 9/30/2008 10339 10394 10496 10/31/2008 8913 8958 8964 11/30/2008 8414 8456 8388 12/31/2008 8405 8448 8386 1/31/2009 7576 7612 7618 2/28/2009 6849 6874 6810 3/31/2009 7433 7466 7393 4/30/2009 7932 7970 7970 5/31/2009 8407 8450 8418 6/30/2009 8462 8509 8474 7/31/2009 9029 9083 9093 8/31/2009 9283 9341 9404 9/30/2009 9540 9602 9688 10/31/2009 9479 9542 9583 11/30/2009 10040 10110 10174 12/31/2009 10103 10176 10256 1/31/2010 9718 9788 9890 2/28/2010 9917 9991 10136 3/31/2010 10473 10555 10728 4/30/2010 10550 10634 10850 5/31/2010 9663 9739 9927 6/30/2010 9179 9248 9430 7/31/2010 9782 9859 10110 8/31/2010 9326 9399 9633 9/30/2010 10083 10168 10437 10/31/2010 10448 10538 10827
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR FIVE YEAR (05/04/05) -------- ---------- --------- --------------- RYDEX RUSSELL TOP 50 ETF....................... 10.22% (7.70)% 0.81% 0.80% RUSSELL TOP 50 TOTAL RETURN INDEX.............. 10.44% (7.63)% 0.97% (0.24)% S&P 100 TOTAL RETURN INDEX..................... 12.98% (7.40)% 1.55% 1.46%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. ANNUAL REPORT 9 RYDEX RUSSELL TOP 50 ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ EXXON MOBIL CORP. 6.37% APPLE, INC. 5.15% MICROSOFT CORP. 3.84% INTERNATIONAL BUSINESS MACHINES CORP. 3.46% PROCTER & GAMBLE CO. 3.44% JOHNSON & JOHNSON, INC. 3.30% GENERAL ELECTRIC CO. 3.22% AT&T, INC. 3.17% CHEVRON CORP. 3.12% JPMORGAN CHASE & CO. 2.82% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART) Information Technology 25.96 Financials 14.91 Consumer Staples 14.76 Energy 14.20 Health Care 11.58 Industrials 7.60 Consumer Discretionary 6.08 Telecommunication Services 4.91
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. 10 RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------- COMMON STOCKS 99.8% AEROSPACE & DEFENSE 2.4% Boeing Co.(The)........... 64,866 $4,582,134 General Dynamics Corp. ... 66,126 4,504,503 Goodrich Corp. ........... 57,608 4,727,889 Honeywell International, Inc. .................. 92,860 4,374,635 ITT Corp. ................ 89,076 4,203,496 L-3 Communications Holdings, Inc. ........ 58,784 4,243,617 Lockheed Martin Corp. .... 59,174 4,218,514 Northrop Grumman Corp. ... 70,180 4,436,078 Precision Castparts Corp. ................. 32,628 4,456,332 Raytheon Co. ............. 88,750 4,089,600 Rockwell Collins, Inc. ... 70,086 4,240,904 United Technologies Corp. ................. 59,210 4,427,132 -------------- TOTAL AEROSPACE & DEFENSE 52,504,834 -------------- AIR FREIGHT & LOGISTICS 0.8% C.H. Robinson Worldwide, Inc. .................. 59,836 4,217,241 Expeditors International of Washington, Inc. ... 92,274 4,554,645 FedEx Corp. .............. 49,080 4,305,297 United Parcel Service, Inc. -- Class B........ 60,852 4,097,774 -------------- TOTAL AIR FREIGHT & LOGISTICS 17,174,957 -------------- AIRLINES 0.2% Southwest Airlines Co. ... 339,966 4,677,932 -------------- TOTAL AIRLINES 4,677,932 -------------- AUTO COMPONENTS 0.4% Goodyear Tire & Rubber Co.(The)*.............. 375,592 3,838,550 Johnson Controls, Inc. ... 139,778 4,909,004 -------------- TOTAL AUTO COMPONENTS 8,747,554 -------------- AUTOMOBILES 0.4% Ford Motor Co.*........... 326,293 4,610,520 Harley-Davidson, Inc. .... 142,872 4,383,313 -------------- TOTAL AUTOMOBILES 8,993,833 -------------- BEVERAGES 1.4% Brown-Forman Corp. -- Class B....... 66,718 4,057,121 Coca-Cola Co.(The)........ 70,602 4,329,315 Coca-Cola Enterprises, Inc. .................. 176,470 4,237,045 Constellation Brands, Inc. -- Class A*....... 228,826 4,514,737 Dr Pepper Snapple Group, Inc. .................. 115,322 4,215,019 Molson Coors Brewing Co. -- Class B......... 89,826 4,242,482 PepsiCo, Inc. ............ 60,998 3,983,169 -------------- TOTAL BEVERAGES 29,578,888 -------------- BIOTECHNOLOGY 1.2% Amgen, Inc.*.............. 73,680 4,213,759 Biogen Idec, Inc.*........ 70,402 4,414,909 Celgene Corp.*............ 74,020 4,594,421 Cephalon, Inc.*........... 65,342 4,341,323 Genzyme Corp.*............ 57,714 4,162,911 Gilead Sciences, Inc.*.... 116,180 4,608,861 -------------- TOTAL BIOTECHNOLOGY 26,336,184 -------------- BUILDING PRODUCTS 0.2% Masco Corp. .............. 370,805 3,952,781 -------------- TOTAL BUILDING PRODUCTS 3,952,781 -------------- CAPITAL MARKETS 2.8% Ameriprise Financial, Inc. .................. 85,692 4,429,420 Bank of New York Mellon Corp. ................. 158,948 3,983,237 Charles Schwab Corp.(The)............. 296,942 4,572,907 E*TRADE Financial Corp.*.. 289,997 4,146,957 Federated Investors, Inc. -- Class B........ 177,296 4,416,443 Franklin Resources, Inc. .................. 38,124 4,372,823 Goldman Sachs Group, Inc.(The).............. 26,662 4,291,249 Invesco Ltd. ............. 193,278 4,445,394 Janus Capital Group, Inc. .................. 388,061 4,097,924 Legg Mason, Inc. ......... 136,974 4,250,303 Morgan Stanley............ 151,722 3,773,326 Northern Trust Corp. ..... 82,480 4,093,482 State Street Corp. ....... 105,164 4,391,649 T. Rowe Price Group, Inc. .................. 81,825 4,522,468 -------------- TOTAL CAPITAL MARKETS 59,787,582 -------------- CHEMICALS 2.8% Air Products & Chemicals, Inc. .................. 49,610 4,215,362 Airgas, Inc. ............. 60,296 4,276,795 CF Industries Holdings, Inc. .................. 40,722 4,989,667 Dow Chemical Co.(The)..... 153,620 4,736,105 Du Pont (E.I.) de Nemours & Co. ................. 93,494 4,420,396 Eastman Chemical Co. ..... 58,464 4,593,516 Ecolab, Inc. ............. 80,978 3,993,835 FMC Corp. ................ 60,892 4,451,205 International Flavors & Fragrances, Inc. ...... 84,816 4,254,371 Monsanto Co. ............. 70,974 4,217,275 PPG Industries, Inc. ..... 56,248 4,314,222 Praxair, Inc. ............ 45,622 4,167,113 Sherwin-Williams Co.(The)............... 56,052 4,090,114 Sigma-Aldrich Corp. ...... 68,990 4,375,346 -------------- TOTAL CHEMICALS 61,095,322 -------------- COMMERCIAL BANKS 2.6% BB&T Corp. ............... 174,500 4,085,045 Comerica, Inc. ........... 109,322 3,911,541 Fifth Third Bancorp....... 332,235 4,172,872 First Horizon National Corp.*................. 370,693 3,740,292 Huntington Bancshares, Inc. .................. 689,932 3,911,915 KeyCorp................... 496,175 4,063,673 M&T Bank Corp. ........... 46,728 3,492,918 Marshall & Ilsley Corp. .. 586,313 3,465,110 PNC Financial Services Group, Inc. ........... 74,536 4,017,490 Regions Financial Corp. .. 584,708 3,683,660 SunTrust Banks, Inc. ..... 157,100 3,930,642 U.S. Bancorp.............. 178,832 4,324,158 Wells Fargo & Co. ........ 155,850 4,064,568 Zions Bancorp............. 194,318 4,014,610 -------------- TOTAL COMMERCIAL BANKS 54,878,494 -------------- COMMERCIAL SERVICES & SUPPLIES 1.6% Avery Dennison Corp. ..... 113,850 4,138,447 Cintas Corp. ............. 147,080 4,040,288 Iron Mountain, Inc. ...... 200,408 4,366,890 Pitney Bowes, Inc. ....... 194,938 4,276,940 R.R. Donnelley & Sons Co. ................... 243,172 4,486,523 Republic Services, Inc. .. 131,128 3,908,926 Stericycle, Inc.*......... 58,254 4,179,142 Waste Management, Inc. ... 117,428 4,194,528 -------------- TOTAL COMMERCIAL SERVICES & SUPPLIES 33,591,684 -------------- COMMUNICATIONS EQUIPMENT 1.3% Cisco Systems, Inc.*...... 185,134 4,226,609 Harris Corp. ............. 90,738 4,100,450 JDS Uniphase Corp.*....... 334,509 3,515,690 Juniper Networks, Inc.*... 136,438 4,419,227 Motorola, Inc.*........... 482,815 3,934,942
See Notes to Financial Statements. ANNUAL REPORT 11 RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------- COMMON STOCKS (CONTINUED) QUALCOMM, Inc. ........... 96,688 $4,363,530 Tellabs, Inc. ............ 537,187 3,663,615 -------------- TOTAL COMMUNICATIONS EQUIPMENT 28,224,063 -------------- COMPUTERS & PERIPHERALS 1.8% Apple, Inc.*.............. 14,680 4,416,772 Dell, Inc.*............... 326,849 4,700,089 EMC Corp.*................ 197,461 4,148,656 Hewlett-Packard Co. ...... 100,806 4,239,900 Lexmark International, Inc. -- Class A*....... 97,980 3,726,179 NetApp, Inc.*............. 83,380 4,439,985 QLogic Corp.*............. 245,188 4,307,953 SanDisk Corp.*............ 103,484 3,888,929 Western Digital Corp.*.... 150,916 4,832,330 -------------- TOTAL COMPUTERS & PERIPHERALS 38,700,793 -------------- CONSTRUCTION & ENGINEERING 0.6% Fluor Corp. .............. 83,380 4,018,082 Jacobs Engineering Group, Inc.*.................. 112,680 4,350,575 Quanta Services, Inc.*.... 228,908 4,500,331 -------------- TOTAL CONSTRUCTION & ENGINEERING 12,868,988 -------------- CONSTRUCTION MATERIALS 0.2% Vulcan Materials Co. ..... 109,338 3,991,930 -------------- TOTAL CONSTRUCTION MATERIALS 3,991,930 -------------- CONSUMER FINANCE 0.8% American Express Co. ..... 99,060 4,107,028 Capital One Financial Corp. ................. 102,872 3,834,039 Discover Financial Services............... 257,317 4,541,645 SLM Corp.*................ 360,984 4,295,710 -------------- TOTAL CONSUMER FINANCE 16,778,422 -------------- CONTAINERS & PACKAGING 1.0% Ball Corp. ............... 67,984 4,375,450 Bemis Co., Inc. .......... 131,378 4,172,565 Owens-Illinois, Inc.*..... 140,274 3,931,880 Pactiv Corp.*............. 124,988 4,147,102 Sealed Air Corp. ......... 183,364 4,244,877 -------------- TOTAL CONTAINERS & PACKAGING 20,871,874 -------------- DISTRIBUTORS 0.2% Genuine Parts Co. ........ 93,700 4,484,482 -------------- TOTAL DISTRIBUTORS 4,484,482 -------------- DIVERSIFIED CONSUMER SERVICES 0.5% Apollo Group, Inc. -- Class A*....... 83,884 3,143,972 DeVry, Inc. .............. 93,608 4,480,079 H&R Block, Inc. .......... 312,994 3,690,199 -------------- TOTAL DIVERSIFIED CONSUMER SERVICES 11,314,250 -------------- DIVERSIFIED FINANCIAL SERVICES 1.7% Bank of America Corp. .... 299,795 3,429,655 Citigroup, Inc.*.......... 1,022,992 4,265,877 CME Group, Inc. .......... 15,176 4,395,728 IntercontinentalExchange, Inc.*.................. 38,280 4,397,224 JPMorgan Chase & Co. ..... 99,204 3,733,046 Leucadia National Corp.*.. 172,326 4,380,527 Moody's Corp. ............ 163,326 4,419,602 Nasdaq OMX Group (The)*... 209,714 4,408,188 NYSE Euronext............. 136,224 4,173,903 -------------- TOTAL DIVERSIFIED FINANCIAL SERVICES 37,603,750 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.2% AT&T, Inc. ............... 144,412 4,115,742 CenturyTel, Inc. ......... 106,512 4,407,467 Frontier Communications Corp. ................. 514,947 4,521,235 Qwest Communications International, Inc. ... 669,339 4,417,637 Verizon Communications, Inc. .................. 129,156 4,193,695 Windstream Corp. ......... 329,415 4,170,394 -------------- TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 25,826,170 -------------- ELECTRIC UTILITIES 2.7% Allegheny Energy, Inc. ... 178,316 4,136,931 American Electric Power Co., Inc. ............. 112,836 4,224,580 Duke Energy Corp. ........ 231,133 4,208,932 Edison International...... 120,082 4,431,026 Entergy Corp. ............ 52,284 3,896,726 Exelon Corp. ............. 96,318 3,931,701 FirstEnergy Corp. ........ 112,014 4,068,348 NextEra Energy, Inc. ..... 75,372 4,148,475 Northeast Utilities....... 138,772 4,340,788 Pepco Holdings, Inc. ..... 225,484 4,342,822 Pinnacle West Capital Corp. ................. 100,298 4,128,266 PPL Corp. ................ 151,550 4,076,695 Progress Energy, Inc. .... 92,940 4,182,300 Southern Co. ............. 109,702 4,154,415 -------------- TOTAL ELECTRIC UTILITIES 58,272,005 -------------- ELECTRICAL EQUIPMENT 0.6% Emerson Electric Co. ..... 80,216 4,403,858 Rockwell Automation, Inc. .................. 68,304 4,260,121 Roper Industries, Inc. ... 63,470 4,406,722 -------------- TOTAL ELECTRICAL EQUIPMENT 13,070,701 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 1.2% Agilent Technologies, Inc.*.................. 135,046 4,699,601 Amphenol Corp. -- Class A...................... 86,558 4,339,153 Corning, Inc. ............ 238,434 4,358,573 FLIR Systems, Inc.*....... 149,242 4,154,897 Jabil Circuit, Inc. ...... 328,604 5,040,785 Molex, Inc. .............. 208,816 4,238,965 -------------- TOTAL ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 26,831,974 -------------- ENERGY EQUIPMENT & SERVICES 2.2% Baker Hughes, Inc. ....... 101,824 4,717,506 Cameron International Corp.*................. 103,780 4,540,375 Diamond Offshore Drilling, Inc. .................. 65,992 4,366,031 FMC Technologies, Inc.*... 61,884 4,461,836 Halliburton Co. .......... 130,994 4,173,469 Helmerich & Payne, Inc. .. 105,418 4,509,782 Nabors Industries, Ltd.*.. 239,698 5,009,688 National-Oilwell Varco, Inc. .................. 99,190 5,332,454 Rowan Cos., Inc.*......... 137,200 4,513,880 Schlumberger, Ltd. ....... 69,776 4,876,645 -------------- TOTAL ENERGY EQUIPMENT & SERVICES 46,501,666 -------------- FOOD & STAPLES RETAILING 1.8% Costco Wholesale Corp. ... 66,318 4,162,781 CVS Caremark Corp. ....... 137,624 4,145,235 Kroger Co.(The)........... 185,590 4,082,980 Safeway, Inc. ............ 199,814 4,575,741 SUPERVALU, Inc. .......... 362,989 3,916,651 Sysco Corp. .............. 139,492 4,109,434 Wal-Mart Stores, Inc. .... 76,388 4,137,938
See Notes to Financial Statements. 12 RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------- COMMON STOCKS (CONTINUED) Walgreen Co. ............. 139,402 $4,722,940 Whole Foods Market, Inc.*.................. 111,612 4,436,577 -------------- TOTAL FOOD & STAPLES RETAILING 38,290,277 -------------- FOOD PRODUCTS 2.9% Archer-Daniels-Midland Co. ................... 122,428 4,079,301 Campbell Soup Co. ........ 111,804 4,052,895 ConAgra Foods, Inc. ...... 184,048 4,139,240 Dean Foods Co.*........... 402,621 4,187,258 General Mills, Inc. ...... 110,630 4,153,050 H.J. Heinz Co. ........... 85,430 4,195,467 Hershey Co.(The).......... 85,928 4,252,577 Hormel Foods Corp. ....... 91,714 4,211,507 J.M. Smucker Co.(The)..... 66,798 4,293,776 Kellogg Co. .............. 79,672 4,004,315 Kraft Foods, Inc. -- Class A...................... 129,292 4,172,253 McCormick & Co., Inc. .... 99,096 4,382,025 Mead Johnson Nutrition Co. ................... 72,370 4,256,803 Sara Lee Corp. ........... 288,364 4,132,256 Tyson Foods, Inc. -- Class A...................... 239,573 3,725,360 -------------- TOTAL FOOD PRODUCTS 62,238,083 -------------- GAS UTILITIES 0.6% EQT Corp. ................ 118,112 4,422,113 Nicor, Inc. .............. 91,904 4,377,388 Oneok, Inc. .............. 91,854 4,576,166 -------------- TOTAL GAS UTILITIES 13,375,667 -------------- HEALTH CARE EQUIPMENT & SUPPLIES 2.5% Baxter International, Inc. .................. 90,242 4,593,318 Becton, Dickinson & Co. .. 55,746 4,209,938 Boston Scientific Corp.*.. 745,191 4,754,319 C.R. Bard, Inc. .......... 50,452 4,193,570 CareFusion Corp.*......... 168,006 4,055,665 Dentsply International, Inc. .................. 133,400 4,187,426 Hospira, Inc.*............ 72,854 4,333,356 Intuitive Surgical, Inc.*.................. 13,874 3,648,168 Medtronic, Inc. .......... 120,844 4,254,917 St Jude Medical, Inc.*.... 110,352 4,226,482 Stryker Corp. ............ 83,346 4,124,794 Varian Medical Systems, Inc.*.................. 68,760 4,347,007 Zimmer Holdings, Inc.*.... 80,292 3,809,052 -------------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 54,738,012 -------------- HEALTH CARE PROVIDERS & SERVICES 3.2% Aetna, Inc. .............. 134,180 4,006,615 AmerisourceBergen Corp. .. 134,722 4,421,576 Cardinal Health, Inc. .... 124,682 4,325,219 CIGNA Corp. .............. 117,230 4,125,324 Coventry Health Care, Inc.*.................. 192,758 4,514,392 DaVita, Inc.*............. 62,744 4,501,882 Express Scripts, Inc.*.... 88,144 4,276,747 Humana, Inc.*............. 79,002 4,605,027 Laboratory Corp. of America Holdings*...... 54,450 4,427,874 McKesson Corp. ........... 65,072 4,293,450 Medco Health Solutions, Inc.*.................. 86,252 4,530,817 Patterson Cos., Inc. ..... 147,158 4,068,919 Quest Diagnostics, Inc. .. 84,896 4,171,789 Tenet Healthcare Corp.*... 935,011 4,076,648 UnitedHealth Group, Inc. .................. 118,566 4,274,304 WellPoint, Inc.*.......... 74,282 4,036,484 -------------- TOTAL HEALTH CARE PROVIDERS & SERVICES 68,657,067 -------------- HEALTH CARE TECHNOLOGY 0.2% Cerner Corp.*............. 51,242 4,500,585 -------------- TOTAL HEALTH CARE TECHNOLOGY 4,500,585 -------------- HOTELS, RESTAURANTS & LEISURE 2.1% Carnival Corp. ........... 114,210 4,930,446 Darden Restaurants, Inc. .................. 90,258 4,125,693 International Game Technology............. 268,900 4,192,151 Marriott International, Inc. -- Class A........ 114,936 4,258,379 McDonald's Corp. ......... 54,316 4,224,155 Starbucks Corp. .......... 157,842 4,495,340 Starwood Hotels & Resorts Worldwide, Inc. ....... 79,620 4,310,627 Wyndham Worldwide Corp. .. 153,244 4,405,765 Wynn Resorts Ltd. ........ 45,140 4,837,654 Yum! Brands, Inc. ........ 88,636 4,392,800 -------------- TOTAL HOTELS, RESTAURANTS & LEISURE 44,173,010 -------------- HOUSEHOLD DURABLES 1.7% D.R. Horton, Inc. ........ 383,017 3,998,698 Fortune Brands, Inc. ..... 82,834 4,477,178 Harman International Industries, Inc.*...... 125,046 4,195,293 Leggett & Platt, Inc. .... 189,032 3,852,472 Lennar Corp. -- Class A... 288,237 4,182,319 Newell Rubbermaid, Inc. .. 241,879 4,269,164 Pulte Homes, Inc.*........ 492,719 3,867,844 Stanley Black & Decker, Inc. .................. 68,480 4,243,706 Whirlpool Corp. .......... 55,886 4,237,835 -------------- TOTAL HOUSEHOLD DURABLES 37,324,509 -------------- HOUSEHOLD PRODUCTS 0.8% Clorox Co. ............... 60,722 4,041,049 Colgate-Palmolive Co. .... 53,014 4,088,440 Kimberly-Clark Corp. ..... 60,942 3,860,066 Procter & Gamble Co. ..... 66,448 4,224,099 -------------- TOTAL HOUSEHOLD PRODUCTS 16,213,654 -------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 0.6% AES Corp.(The)*........... 372,517 4,447,853 Constellation Energy Group, Inc. ........... 132,440 4,004,986 NRG Energy, Inc.*......... 188,267 3,748,396 -------------- TOTAL INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 12,201,235 -------------- INDUSTRIAL CONGLOMERATES 0.8% 3M Co. ................... 47,738 4,020,494 General Electric Co. ..... 250,131 4,007,099 Textron, Inc. ............ 211,046 4,393,978 Tyco International Ltd. .. 104,060 3,983,417 -------------- TOTAL INDUSTRIAL CONGLOMERATES 16,404,988 -------------- INSURANCE 4.2% ACE Ltd. ................. 70,272 4,175,562 AFLAC, Inc. .............. 78,300 4,376,187 Allstate Corp. ........... 131,584 4,011,996 American International Group, Inc.*........... 113,696 4,776,369 Aon Corp. ................ 107,124 4,258,179 Assurant, Inc. ........... 101,714 4,021,772 Berkshire Hathaway, Inc. -- Class B*....... 48,620 3,868,207 Chubb Corp. .............. 70,542 4,092,847 Cincinnati Financial Corp. ................. 139,402 4,103,995 Genworth Financial, Inc. -- Class A*....... 325,905 3,695,763 Hartford Financial Services Group, Inc. .. 178,864 4,289,159 Lincoln National Corp. ... 164,314 4,022,407
See Notes to Financial Statements. ANNUAL REPORT 13 RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------- COMMON STOCKS (CONTINUED) Loews Corp. .............. 109,606 $4,327,245 Marsh & McLennan Cos., Inc. .................. 168,796 4,216,524 MetLife, Inc. ............ 100,548 4,055,101 Principal Financial Group, Inc. .................. 159,004 4,267,667 Progressive Corp. ........ 193,336 4,090,990 Prudential Financial, Inc. .................. 73,310 3,854,640 Torchmark Corp. .......... 75,352 4,316,162 Travelers Cos., Inc.(The).............. 77,054 4,253,381 Unum Group................ 183,532 4,114,787 XL Group PLC.............. 199,315 4,215,512 -------------- TOTAL INSURANCE 91,404,452 -------------- INTERNET & CATALOG RETAIL 0.6% Amazon.com, Inc.*......... 27,408 4,526,157 Expedia, Inc. ............ 146,304 4,235,501 Priceline.com, Inc.*...... 12,192 4,594,067 -------------- TOTAL INTERNET & CATALOG RETAIL 13,355,725 -------------- INTERNET SOFTWARE & SERVICES 1.4% Akamai Technologies, Inc.*.................. 77,674 4,013,416 eBay, Inc.*............... 169,736 5,059,830 Google, Inc. -- Class A*.. 8,406 5,152,794 Monster Worldwide, Inc.*.. 325,625 5,880,787 VeriSign, Inc.*........... 129,422 4,497,415 Yahoo!, Inc.*............. 286,383 4,728,183 -------------- TOTAL INTERNET SOFTWARE & SERVICES 29,332,425 -------------- IT SERVICES 2.6% Automatic Data Processing, Inc. .................. 98,670 4,382,921 Cognizant Technology Solutions Corp. -- Class A*...... 63,890 4,164,989 Computer Sciences Corp. .. 93,990 4,610,210 Fidelity National Information Services, Inc. .................. 147,696 4,002,562 Fiserv, Inc.*............. 75,992 4,143,084 International Business Machines Corp. ........ 31,302 4,494,967 Mastercard, Inc. -- Class A...................... 19,264 4,624,516 Paychex, Inc. ............ 156,920 4,346,684 SAIC, Inc.*............... 258,810 4,021,907 Teradata Corp.*........... 117,100 4,609,056 Total System Services, Inc. .................. 275,022 4,293,094 Visa, Inc. -- Class A..... 59,396 4,642,985 Western Union Co. ........ 236,865 4,168,824 -------------- TOTAL IT SERVICES 56,505,799 -------------- LEISURE EQUIPMENT & PRODUCTS 0.6% Eastman Kodak Co.*........ 1,041,188 4,903,995 Hasbro, Inc. ............. 91,358 4,225,308 Mattel, Inc. ............. 181,298 4,229,682 -------------- TOTAL LEISURE EQUIPMENT & PRODUCTS 13,358,985 -------------- LIFE SCIENCES TOOLS & SERVICES 0.8% Life Technologies Corp.*.. 86,424 4,336,756 PerkinElmer, Inc. ........ 181,982 4,267,478 Thermo Fisher Scientific, Inc.*.................. 86,328 4,438,986 Waters Corp.*............. 59,250 4,392,203 -------------- TOTAL LIFE SCIENCES TOOLS & SERVICES 17,435,423 -------------- MACHINERY 2.4% Caterpillar, Inc. ........ 56,362 4,430,053 Cummins, Inc. ............ 48,274 4,252,939 Danaher Corp. ............ 101,002 4,379,447 Deere & Co. .............. 58,162 4,466,842 Dover Corp. .............. 81,402 4,322,446 Eaton Corp. .............. 50,932 4,524,290 Flowserve Corp. .......... 39,290 3,929,000 Illinois Tool Works, Inc. .................. 86,690 3,961,733 PACCAR, Inc. ............. 89,596 4,592,691 Pall Corp. ............... 101,138 4,315,558 Parker-Hannifin Corp. .... 60,356 4,620,252 Snap-on, Inc. ............ 89,366 4,557,666 -------------- TOTAL MACHINERY 52,352,917 -------------- MEDIA 3.5% CBS Corp. -- Class B...... 266,505 4,511,930 Comcast Corp. -- Class A.. 231,020 4,754,391 DIRECTV -- Class A*....... 98,404 4,276,638 Discovery Communications, Inc. -- Class A*....... 97,644 4,355,899 Gannett Co., Inc. ........ 305,395 3,618,931 Interpublic Group of Cos., Inc.*.................. 439,710 4,550,998 McGraw-Hill Cos., Inc. ... 133,396 5,022,359 Meredith Corp. ........... 127,224 4,319,255 New York Times Co. -- Class A*........ 505,007 3,873,404 News Corp. -- Class A..... 299,893 4,336,453 Omnicom Group, Inc. ...... 105,766 4,649,473 Scripps Networks Interactive -- Class A...................... 89,476 4,553,434 Time Warner Cable, Inc. .. 79,656 4,609,693 Time Warner, Inc. ........ 129,308 4,203,803 Viacom, Inc. -- Class B... 116,698 4,503,376 Walt Disney Co.(The)...... 118,740 4,287,701 Washington Post Co. -- Class B......... 11,328 4,555,555 -------------- TOTAL MEDIA 74,983,293 -------------- METALS & MINING 1.8% AK Steel Holding Corp. ... 293,381 3,693,667 Alcoa, Inc. .............. 360,727 4,736,345 Allegheny Technologies, Inc. .................. 89,172 4,698,473 Cliffs Natural Resources, Inc. .................. 64,118 4,180,494 Freeport-McMoRan Copper & Gold, Inc. ............ 49,686 4,704,270 Newmont Mining Corp. ..... 64,286 3,913,089 Nucor Corp. .............. 104,272 3,985,276 Titanium Metals Corp.*.... 216,817 4,262,622 United States Steel Corp. ................. 87,380 3,738,990 -------------- TOTAL METALS & MINING 37,913,226 -------------- MULTI-UTILITIES 2.9% Ameren Corp. ............. 147,346 4,270,087 CenterPoint Energy, Inc. .................. 270,807 4,484,564 CMS Energy Corp. ......... 227,315 4,178,050 Consolidated Edison, Inc. .................. 85,312 4,241,713 Dominion Resources, Inc. .................. 93,157 4,048,603 DTE Energy Co. ........... 87,030 4,069,523 Integrys Energy Group, Inc. .................. 81,068 4,312,007 NiSource, Inc. ........... 240,611 4,164,976 PG&E Corp. ............... 89,552 4,282,377 Public Service Enterprise Group, Inc. ........... 128,450 4,155,357 SCANA Corp. .............. 102,154 4,171,969 Sempra Energy............. 76,408 4,086,300 TECO Energy, Inc. ........ 238,327 4,192,172 Wisconsin Energy Corp. ... 71,268 4,243,297 Xcel Energy, Inc. ........ 177,792 4,242,117 -------------- TOTAL MULTI-UTILITIES 63,143,112 --------------
See Notes to Financial Statements. 14 RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTILINE RETAIL 1.6% Big Lots, Inc.*........... 120,804 $3,789,621 Family Dollar Stores, Inc. .................. 94,410 4,358,910 J.C. Penney Co., Inc. .... 166,330 5,186,169 Kohl's Corp.*............. 80,116 4,101,939 Macy's, Inc. ............. 187,176 4,424,841 Nordstrom, Inc. .......... 112,360 4,326,984 Sears Holdings Corp.*..... 59,072 4,252,003 Target Corp. ............. 75,242 3,908,069 -------------- TOTAL MULTILINE RETAIL 34,348,536 -------------- OFFICE ELECTRONICS 0.2% Xerox Corp. .............. 403,887 4,725,478 -------------- TOTAL OFFICE ELECTRONICS 4,725,478 -------------- OIL, GAS & CONSUMABLE FUELS 5.7% Anadarko Petroleum Corp. ................. 75,052 4,620,952 Apache Corp. ............. 43,054 4,349,315 Cabot Oil & Gas Corp. .... 146,214 4,237,282 Chesapeake Energy Corp. .. 187,768 4,074,566 Chevron Corp. ............ 51,388 4,245,163 ConocoPhillips............ 73,350 4,356,990 CONSOL Energy, Inc. ...... 115,124 4,231,958 Denbury Resources, Inc.*.. 258,669 4,402,546 Devon Energy Corp. ....... 65,382 4,251,138 El Paso Corp. ............ 336,665 4,464,178 EOG Resources, Inc. ...... 44,702 4,278,875 Exxon Mobil Corp. ........ 66,588 4,426,104 Hess Corp. ............... 72,780 4,587,323 Marathon Oil Corp. ....... 126,956 4,515,825 Massey Energy Co. ........ 126,036 5,302,334 Murphy Oil Corp. ......... 69,010 4,496,692 Noble Energy, Inc. ....... 53,776 4,381,668 Occidental Petroleum Corp. ................. 53,094 4,174,781 Peabody Energy Corp. ..... 85,968 4,547,707 Pioneer Natural Resources Co. ................... 62,558 4,366,548 QEP Resources, Inc. ...... 136,832 4,519,561 Range Resources Corp. .... 115,318 4,311,740 Southwestern Energy Co.*.. 127,352 4,310,865 Spectra Energy Corp. ..... 186,832 4,440,997 Sunoco, Inc. ............. 115,376 4,323,139 Tesoro Corp. ............. 325,201 4,214,605 Valero Energy Corp. ...... 236,085 4,237,726 Williams Cos., Inc.(The).. 220,180 4,738,274 -------------- TOTAL OIL, GAS & CONSUMABLE FUELS 123,408,852 -------------- PAPER & FOREST PRODUCTS 0.4% International Paper Co. .. 177,952 4,498,627 MeadWestvaco Corp. ....... 169,136 4,351,869 -------------- TOTAL PAPER & FOREST PRODUCTS 8,850,496 -------------- PERSONAL PRODUCTS 0.4% Avon Products, Inc. ...... 130,288 3,967,270 Estee Lauder Cos., Inc -- Class A......... 68,590 4,881,550 -------------- TOTAL PERSONAL PRODUCTS 8,848,820 -------------- PHARMACEUTICALS 2.3% Abbott Laboratories....... 78,640 4,035,805 Allergan, Inc. ........... 62,784 4,546,189 Bristol-Myers Squibb Co. ................... 150,542 4,049,580 Eli Lilly & Co. .......... 113,806 4,005,971 Forest Laboratories, Inc.*.................. 131,088 4,332,458 Johnson & Johnson, Inc. .. 66,202 4,215,081 King Pharmaceuticals, Inc.*.................. 441,835 6,247,547 Merck & Co., Inc. ........ 111,454 4,043,551 Mylan, Inc.*.............. 223,658 4,544,731 Pfizer, Inc. ............. 236,679 4,118,215 Watson Pharmaceuticals, Inc.*.................. 94,066 4,388,179 -------------- TOTAL PHARMACEUTICALS 48,527,307 -------------- PROFESSIONAL SERVICES 0.6% Dun & Bradstreet Corp. ... 59,190 4,404,328 Equifax, Inc. ............ 136,788 4,531,786 Robert Half International, Inc. .................. 169,434 4,593,356 -------------- TOTAL PROFESSIONAL SERVICES 13,529,470 -------------- REAL ESTATE INVESTMENT TRUSTS (REITS) 2.9% Apartment Investment & Management Co. -- Class A...................... 182,512 4,254,355 AvalonBay Communities, Inc. .................. 36,768 3,908,806 Boston Properties, Inc. .. 46,808 4,034,382 Equity Residential........ 83,290 4,050,393 HCP, Inc. ................ 110,522 3,979,897 Health Care REIT, Inc. ... 85,202 4,353,822 Host Hotels & Resorts, Inc. .................. 279,523 4,441,620 Kimco Realty Corp. ....... 254,992 4,393,512 Plum Creek Timber Co., Inc. .................. 113,962 4,198,360 ProLogis.................. 360,727 4,923,924 Public Storage, Inc. ..... 39,310 3,900,338 Simon Property Group, Inc. .................. 42,923 4,121,466 Ventas, Inc. ............. 76,828 4,114,908 Vornado Realty Trust...... 47,128 4,118,516 Weyerhaeuser Co. ......... 256,210 4,155,726 -------------- TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 62,950,025 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT 0.2% CB Richard Ellis Group, Inc. -- Class A*....... 224,313 4,116,144 -------------- TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT 4,116,144 -------------- ROAD & RAIL 0.8% CSX Corp. ................ 74,156 4,556,886 Norfolk Southern Corp. ... 69,486 4,272,694 Ryder System, Inc. ....... 96,762 4,233,338 Union Pacific Corp. ...... 51,412 4,507,804 -------------- TOTAL ROAD & RAIL 17,570,722 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.0% Advanced Micro Devices, Inc.*.................. 660,278 4,839,838 Altera Corp. ............. 144,044 4,495,613 Analog Devices, Inc. ..... 137,595 4,632,824 Applied Materials, Inc. .. 366,537 4,530,397 Broadcom Corp. -- Class A...................... 115,122 4,690,070 First Solar, Inc.*........ 28,074 3,865,228 Intel Corp. .............. 214,100 4,296,987 KLA-Tencor Corp. ......... 130,664 4,667,318 Linear Technology Corp. .. 128,316 4,135,625 LSI Corp.*................ 916,385 4,801,858 MEMC Electronic Materials, Inc.*.................. 356,023 4,564,215 Microchip Technology, Inc. .................. 138,180 4,446,632 Micron Technology, Inc.*.. 573,404 4,742,051 National Semiconductor Corp. ................. 327,976 4,493,271 Novellus Systems, Inc.*... 162,604 4,749,663 NVIDIA Corp.*............. 384,433 4,624,729 Teradyne, Inc.*........... 390,979 4,394,604
See Notes to Financial Statements. ANNUAL REPORT 15 RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------- COMMON STOCKS (CONCLUDED) Texas Instruments, Inc. .. 162,246 $4,797,614 Xilinx, Inc. ............. 154,502 4,142,199 -------------- TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 85,910,736 -------------- SOFTWARE 3.0% Adobe Systems, Inc.*...... 123,603 3,479,425 Autodesk, Inc.*........... 124,072 4,488,925 BMC Software, Inc.*....... 103,800 4,718,748 CA, Inc. ................. 200,578 4,655,415 Citrix Systems, Inc.*..... 60,526 3,877,901 Compuware Corp.*.......... 487,522 4,880,095 Electronic Arts, Inc.*.... 247,971 3,930,340 Intuit, Inc.*............. 90,508 4,344,384 McAfee, Inc.*............. 85,928 4,064,394 Microsoft Corp. .......... 160,304 4,270,499 Novell, Inc.*............. 670,725 3,977,399 Oracle Corp. ............. 159,356 4,685,066 Red Hat, Inc.*............ 108,288 4,576,251 Salesforce.com, Inc.*..... 34,766 4,035,290 Symantec Corp.*........... 271,733 4,396,640 -------------- TOTAL SOFTWARE 64,380,772 -------------- SPECIALTY RETAIL 3.9% Abercrombie & Fitch Co. -- Class A......... 112,192 4,808,549 AutoNation, Inc.*......... 174,528 4,052,540 AutoZone, Inc.*........... 18,554 4,408,987 Bed Bath & Beyond, Inc.*.. 97,256 4,269,538 Best Buy Co., Inc. ....... 109,952 4,725,737 CarMax, Inc.*............. 172,830 5,356,002 GameStop Corp. -- Class A*..................... 209,294 4,114,720 Gap, Inc.(The)............ 218,274 4,149,389 Home Depot, Inc. ......... 135,594 4,187,143 Limited Brands, Inc. ..... 153,390 4,508,132 Lowe's Cos., Inc. ........ 190,652 4,066,607 O'Reilly Automotive, Inc.*.................. 78,570 4,596,345 Office Depot, Inc.*....... 1,005,245 4,513,550 RadioShack Corp. ......... 196,446 3,954,458 Ross Stores, Inc. ........ 75,202 4,436,166 Staples, Inc. ............ 209,348 4,285,354 Tiffany & Co. ............ 91,312 4,839,536 TJX Cos., Inc. ........... 94,892 4,354,594 Urban Outfitters, Inc.*... 116,772 3,593,074 -------------- TOTAL SPECIALTY RETAIL 83,220,421 -------------- TEXTILES, APPAREL & LUXURY GOODS 0.8% Coach, Inc. .............. 97,830 4,891,500 NIKE, Inc. -- Class B..... 52,974 4,314,203 Polo Ralph Lauren Corp. .. 46,942 4,547,741 V.F. Corp. ............... 52,344 4,357,114 -------------- TOTAL TEXTILES, APPAREL & LUXURY GOODS 18,110,558 -------------- THRIFTS & MORTGAGE FINANCE 0.4% Hudson City Bancorp, Inc. .................. 333,851 3,889,364 People's United Financial, Inc. .................. 311,691 3,836,916 -------------- TOTAL THRIFTS & MORTGAGE FINANCE 7,726,280 -------------- TOBACCO 0.8% Altria Group, Inc. ....... 172,956 4,396,542 Lorillard, Inc. .......... 50,306 4,293,114 Philip Morris International, Inc. ... 73,660 4,309,110 Reynolds American, Inc. .. 69,486 4,509,641 -------------- TOTAL TOBACCO 17,508,407 -------------- TRADING COMPANIES & DISTRIBUTORS 0.4% Fastenal Co. ............. 79,319 4,083,342 W.W. Grainger, Inc. ...... 34,750 4,310,043 -------------- TOTAL TRADING COMPANIES & DISTRIBUTORS 8,393,385 -------------- WIRELESS TELECOMMUNICATION SERVICES 0.6% American Tower Corp. -- Class A*...... 83,864 4,328,221 MetroPCS Communications, Inc.*.................. 426,179 4,436,523 Sprint Nextel Corp.*...... 908,646 3,743,622 -------------- TOTAL WIRELESS TELECOMMUNICATION SERVICES 12,508,366 -------------- TOTAL COMMON STOCKS (Cost $2,072,221,447) 2,149,198,332 -------------- SHORT TERM INVESTMENTS 0.2% SSgA Government Money Market Fund............ 4,208,538 4,208,538 -------------- TOTAL SHORT TERM INVESTMENTS (Cost $4,208,538) 4,208,538 -------------- TOTAL INVESTMENTS 100.0%(A) (Cost $2,076,429,985) 2,153,406,870 -------------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.0%(B) 852,403 -------------- NET ASSETS--100.0% $2,154,259,273 --------------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. 16 RYDEX RUSSELL TOP 50 ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------- COMMON STOCKS 99.7% AEROSPACE & DEFENSE 2.3% Boeing Co.(The)............ 46,213 $3,264,487 United Technologies Corp. .................. 56,803 4,247,160 ------------ TOTAL AEROSPACE & DEFENSE 7,511,647 ------------ AIR FREIGHT & LOGISTICS 0.9% United Parcel Service, Inc. -- Class B......... 43,475 2,927,606 ------------ TOTAL AIR FREIGHT & LOGISTICS 2,927,606 ------------ BEVERAGES 4.4% Coca-Cola Co.(The)......... 128,232 7,863,186 PepsiCo, Inc. ............. 98,174 6,410,762 ------------ TOTAL BEVERAGES 14,273,948 ------------ BIOTECHNOLOGY 1.0% Amgen, Inc.*............... 58,313 3,334,920 ------------ TOTAL BIOTECHNOLOGY 3,334,920 ------------ CAPITAL MARKETS 1.6% Goldman Sachs Group, Inc.(The)............... 31,335 5,043,368 ------------ TOTAL CAPITAL MARKETS 5,043,368 ------------ COMMERCIAL BANKS 3.3% U.S. Bancorp............... 116,696 2,821,709 Wells Fargo & Co. ......... 296,245 7,726,070 ------------ TOTAL COMMERCIAL BANKS 10,547,779 ------------ COMMUNICATIONS EQUIPMENT 3.8% Cisco Systems, Inc.*....... 347,680 7,937,534 QUALCOMM, Inc. ............ 99,860 4,506,682 ------------ TOTAL COMMUNICATIONS EQUIPMENT 12,444,216 ------------ COMPUTERS & PERIPHERALS 7.0% Apple, Inc.*............... 55,391 16,665,490 Hewlett-Packard Co. ....... 142,759 6,004,444 ------------ TOTAL COMPUTERS & PERIPHERALS 22,669,934 ------------ CONSUMER FINANCE 0.8% American Express Co. ...... 63,837 2,646,682 ------------ TOTAL CONSUMER FINANCE 2,646,682 ------------ DIVERSIFIED FINANCIAL SERVICES 6.6% Bank of America Corp. ..... 610,778 6,987,301 Citigroup, Inc.*........... 1,287,878 5,370,451 JPMorgan Chase & Co. ...... 242,208 9,114,287 ------------ TOTAL DIVERSIFIED FINANCIAL SERVICES 21,472,039 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 4.9% AT&T, Inc. ................ 359,722 10,252,077 Verizon Communications, Inc. ................... 172,086 5,587,632 ------------ TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 15,839,709 ------------ ENERGY EQUIPMENT & SERVICES 1.8% Schlumberger, Ltd. ........ 83,149 5,811,284 ------------ TOTAL ENERGY EQUIPMENT & SERVICES 5,811,284 ------------ FOOD & STAPLES RETAILING 2.9% CVS Caremark Corp. ........ 82,847 2,495,352 Wal-Mart Stores, Inc. ..... 124,226 6,729,322 ------------ TOTAL FOOD & STAPLES RETAILING 9,224,674 ------------ FOOD PRODUCTS 1.0% Kraft Foods, Inc. -- Class A....................... 97,648 3,151,101 ------------ TOTAL FOOD PRODUCTS 3,151,101 ------------ HEALTH CARE EQUIPMENT & SUPPLIES 1.0% Alcon, Inc. ............... 4,218 707,443 Medtronic, Inc. ........... 67,063 2,361,288 ------------ TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 3,068,731 ------------ HOTELS, RESTAURANTS & LEISURE 1.6% McDonald's Corp. .......... 65,495 5,093,546 ------------ TOTAL HOTELS, RESTAURANTS & LEISURE 5,093,546 ------------ HOUSEHOLD PRODUCTS 3.4% Procter & Gamble Co. ...... 175,321 11,145,156 ------------ TOTAL HOUSEHOLD PRODUCTS 11,145,156 ------------ INDUSTRIAL CONGLOMERATES 4.3% 3M Co. .................... 43,407 3,655,738 General Electric Co. ...... 649,956 10,412,295 ------------ TOTAL INDUSTRIAL CONGLOMERATES 14,068,033 ------------ INSURANCE 2.6% Berkshire Hathaway, Inc. -- Class B*........ 105,286 8,376,554 ------------ TOTAL INSURANCE 8,376,554 ------------ INTERNET & CATALOG RETAIL 1.1% Amazon.com, Inc.*.......... 21,298 3,517,152 ------------ TOTAL INTERNET & CATALOG RETAIL 3,517,152 ------------ INTERNET SOFTWARE & SERVICES 2.8% Google, Inc. -- Class A*... 14,828 9,089,416 ------------ TOTAL INTERNET SOFTWARE & SERVICES 9,089,416 ------------ IT SERVICES 4.2% International Business Machines Corp. ......... 78,063 11,209,847 Visa, Inc. -- Class A...... 28,421 2,221,669 ------------ TOTAL IT SERVICES 13,431,516 ------------ MEDIA 2.4% Comcast Corp. -- Class A... 171,258 3,524,490 Walt Disney Co.(The)....... 119,228 4,305,323 ------------ TOTAL MEDIA 7,829,813 ------------ OIL, GAS & CONSUMABLE FUELS 12.4% Chevron Corp. ............. 122,278 10,101,385 ConocoPhillips............. 90,604 5,381,878 Exxon Mobil Corp. ......... 310,266 20,623,381 Occidental Petroleum Corp. .................. 49,447 3,888,018 ------------ TOTAL OIL, GAS & CONSUMABLE FUELS 39,994,662 ------------ PHARMACEUTICALS 9.6% Abbott Laboratories........ 93,964 4,822,232 Johnson & Johnson, Inc. ... 167,907 10,690,639 Merck & Co., Inc. ......... 189,829 6,886,996 Pfizer, Inc. .............. 491,043 8,544,148 ------------ TOTAL PHARMACEUTICALS 30,944,015 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 2.1% Intel Corp. ............... 338,726 6,798,231 ------------ TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 6,798,231 ------------
See Notes to Financial Statements. ANNUAL REPORT 17 RYDEX RUSSELL TOP 50 ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------- COMMON STOCKS (CONCLUDED) SOFTWARE 5.9% Microsoft Corp. ........... 466,294 $12,422,072 Oracle Corp. .............. 231,910 6,818,154 ------------ TOTAL SOFTWARE 19,240,226 ------------ SPECIALTY RETAIL 1.0% Home Depot, Inc. .......... 103,084 3,183,234 ------------ TOTAL SPECIALTY RETAIL 3,183,234 ------------ TOBACCO 3.0% Altria Group, Inc. ........ 126,780 3,222,748 Philip Morris International, Inc. .... 112,740 6,595,290 ------------ TOTAL TOBACCO 9,818,038 ------------ TOTAL COMMON STOCKS (Cost $366,801,059) 322,497,230 ------------ SHORT TERM INVESTMENTS 0.2% SSgA Government Money Market Fund............. 769,143 769,143 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $769,143) 769,143 ------------ TOTAL INVESTMENTS 99.9%(A) (Cost $367,570,202) 323,266,373 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--0.1% 402,832 ------------ NET ASSETS--100.0% $323,669,205 -------------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. See Notes to Financial Statements. 18 STATEMENT OF ASSETS AND LIABILITIES October 31, 2010 --------------------------------------------------------------------------------
RYDEX RYDEX S&P EQUAL RUSSELL WEIGHT ETF TOP 50 ETF -------------- ------------ ASSETS Investments at Market Value*.............................. $2,153,406,870 $323,266,373 Receivables: Dividends............................................... 1,561,661 457,718 -------------- ------------ TOTAL ASSETS......................................... 2,154,968,531 323,724,091 -------------- ------------ LIABILITIES Payables: Accrued Management Fees................................. 709,258 54,886 -------------- ------------ TOTAL LIABILITIES.................................... 709,258 54,886 -------------- ------------ NET ASSETS................................................ $2,154,259,273 $323,669,205 ============== ============ NET ASSETS CONSIST OF: Paid-in Capital........................................... $2,551,677,364 $463,729,084 Undistributed (Distributions in Excess) of Net Investment Income.................................................. 478,594 519,049 Accumulated Net Realized Loss on Investment Securities.... (474,873,570) (96,275,099) Net Unrealized Appreciation (Depreciation) on Investment Securities.............................................. 76,976,885 (44,303,829) -------------- ------------ NET ASSETS................................................ $2,154,259,273 $323,669,205 ============== ============ Shares Outstanding (Unlimited Shares Authorized), No Par Value................................................... 49,108,863 3,800,785 ============== ============ Net Asset Value, Offering Price and Repurchase Price Per Share................................................... $ 43.87 $ 85.16 ============== ============ *Total Cost of Investments................................ $2,076,429,985 $367,570,202 ============== ============
See Notes to Financial Statements. ANNUAL REPORT 19 STATEMENT OF OPERATIONS For the Year Ended October 31, 2010 --------------------------------------------------------------------------------
RYDEX RYDEX S&P EQUAL RUSSELL WEIGHT ETF TOP 50 ETF ------------ ------------ INVESTMENT INCOME Dividends, Net of Foreign Tax Withheld................... $ 36,398,477 $ 7,562,041 ------------ ------------ EXPENSES Management Fee........................................... 7,732,992 661,522 ------------ ------------ Net Investment Income...................................... 28,665,485 6,900,519 ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) From: Investments.............................................. (39,068,114) (11,300,101) In-kind Redemptions...................................... 188,541,701 3,810,484 ------------ ------------ Net Realized Gain (Loss).............................. 149,473,587 (7,489,617) Net Change in Unrealized Appreciation (Depreciation) on: Investment Securities.................................... 138,369,551 32,212,043 ------------ ------------ Net Realized and Unrealized Gain on Investments............ 287,843,138 24,722,426 ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $316,508,623 $ 31,622,945 ============ ============ Foreign Taxes Withheld..................................... $ 3,966 --
See Notes to Financial Statements. 20 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT ETF RYDEX RUSSELL TOP 50 ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income............... $ 28,665,485 $ 17,788,125 $ 6,900,519 $ 9,973,248 Net Realized Gain (Loss)............ 149,473,587 (285,269,706) (7,489,617) (99,874,399) Net Change in Unrealized Appreciation (Depreciation) on Investments...................... 138,369,551 498,523,486 32,212,043 79,986,595 --------------- -------------- ------------ ------------- Net Increase (Decrease) in Net Assets Resulting From Operations....................... 316,508,623 231,041,905 31,622,945 (9,914,556) --------------- -------------- ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (27,968,738) (17,303,063) (6,973,425) (10,220,260) --------------- -------------- ------------ ------------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased...... 1,634,617,920 1,265,540,179 45,555,770 218,923,660 Value of Shares Purchased through Dividend Reinvestments........... 10,909 21,599 9,726 27,664 Value of Shares Redeemed............ (1,268,259,958) (823,367,019) (62,207,870) (318,032,504) --------------- -------------- ------------ ------------- Net Increase (Decrease) in Net Assets Resulting From Share Transactions..................... 366,368,871 442,194,759 (16,642,374) (99,081,180) --------------- -------------- ------------ ------------- Increase (Decrease) in Net Assets......................... 654,908,756 655,933,601 8,007,146 (119,215,996) NET ASSETS--BEGINNING OF PERIOD....... 1,499,350,517 843,416,916 315,662,059 434,878,055 --------------- -------------- ------------ ------------- NET ASSETS--END OF PERIOD(1).......... $ 2,154,259,273 $1,499,350,517 $323,669,205 $ 315,662,059 =============== ============== ============ ============= (1) Including Undistributed (Distributions in Excess) of Net Investment Income................... $ 478,594 $ 59,398 $ 519,049 $ 591,955 =============== ============== ============ ============= CHANGES IN SHARES OUTSTANDING: Shares Purchased.................... 39,600,000 40,900,000 550,000 3,100,000 Shares Purchased through Dividend Reinvestments.................... 267 745 115 394 Shares Redeemed..................... (32,150,000) (27,350,000) (750,000) (4,800,000) Shares Outstanding, Beginning of Period........................... 41,658,596 28,107,851 4,000,670 5,700,276 --------------- -------------- ------------ ------------- Shares Outstanding, End of Period... 49,108,863 41,658,596 3,800,785 4,000,670 =============== ============== ============ =============
See Notes to Financial Statements. ANNUAL REPORT 21 FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT ETF ------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006(1) ---------------- ---------------- ---------------- ---------------- ------------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD..... $ 35.99 $ 30.01 $ 50.63 $ 46.06 $ 39.68 ---------- ---------- -------- ---------- ---------- Net Investment Income*.... 0.60 0.54 0.72 0.59 0.52 Net Realized and Unrealized Gain (Loss) on Investments.......... 7.87 5.98 (20.64) 4.56 6.36 ---------- ---------- -------- ---------- ---------- TOTAL FROM INVESTMENT OPERATIONS.............. 8.47 6.52 (19.92) 5.15 6.88 ---------- ---------- -------- ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income..... (0.59) (0.54) (0.70) (0.58) (0.50) ---------- ---------- -------- ---------- ---------- NET ASSET VALUE AT END OF PERIOD.................. $ 43.87 $ 35.99 $ 30.01 $ 50.63 $ 46.06 ========== ========== ======== ========== ========== TOTAL RETURN**............ 23.67% 22.21% (39.75)% 11.23% 17.42% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).. $2,154,259 $1,499,351 $843,417 $2,177,693 $1,759,797 RATIO TO AVERAGE NET ASSETS OF: Expenses.................. 0.40% 0.40% 0.40% 0.40% 0.40% Net Investment Income..... 1.48% 1.75% 1.65% 1.22% 1.21% Portfolio Turnover Rate+.. 20% 37% 32% 25% 16%
* Based on average shares outstanding. ** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. (1) All per share information representing data prior to April 26, 2006 has been adjusted for the effect of a 4 for 1 stock split which occurred on April 26, 2006. + Portfolio turnover does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. 22 FINANCIAL HIGHLIGHTS (concluded) --------------------------------------------------------------------------------
RYDEX RUSSELL TOP 50 ETF ---------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006 ---------------- ---------------- ---------------- ---------------- ---------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 78.90 $ 76.29 $ 116.47 $ 104.15 $ 91.39 -------- -------- -------- -------- -------- Net Investment Income*..... 1.72 1.95 2.34 2.15 1.92 Net Realized and Unrealized Gain (Loss) on Investments.............. 6.26 2.61 (40.20) 12.25 12.71 -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS............... 7.98 4.56 (37.86) 14.40 14.63 -------- -------- -------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income...... (1.72) (1.95) (2.32) (2.08) (1.87) -------- -------- -------- -------- -------- NET ASSET VALUE AT END OF PERIOD................... $ 85.16 $ 78.90 $ 76.29 $ 116.47 $ 104.15 ======== ======== ======== ======== ======== TOTAL RETURN**............. 10.22% 6.35% (32.92)% 13.96% 16.18% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......... $323,669 $315,662 $434,878 $681,355 $364,541 RATIO TO AVERAGE NET ASSETS OF: Expenses................... 0.20% 0.20% 0.20% 0.20% 0.20% Net Investment Income...... 2.09% 2.79% 2.37% 1.96% 1.98% Portfolio Turnover Rate+... 9% 12% 10% 8% 7%
* Based on average shares outstanding. ** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. + Portfolio turnover does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS October 31, 2010 -------------------------------------------------------------------------------- 1. ORGANIZATION Rydex ETF Trust (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, (the "1940 Act"). The Trust was organized as a Delaware statutory trust on November 22, 2002. As of October 31, 2010, the Trust offers nineteen portfolios, each of which represents a separate series of beneficial interest in the Trust (each a "Fund" and collectively the "Funds"). The financial statements herein relate to the following two funds: Rydex S&P Equal Weight ETF and Rydex Russell Top 50 ETF. Rydex S&P Equal Weight ETF commenced operations on April 24, 2003 and the Rydex Russell Top 50 ETF commenced operations on May 4, 2005. The Funds' investment objective is to replicate as closely as possible, before fees and expenses, the daily performance of an index representing publicly traded equity securities (the "Underlying Index"). Rydex S&P Equal Weight ETF tracks the S&P 500 Equal Weight Total Return Index. Rydex Russell Top 50 ETF tracks the Russell Top 50(TM) Index. The Funds seek to achieve their objective by investing in common stocks that comprise the Underlying Index. The Funds use a "replication" strategy to track the Underlying Index. "Replication" refers to investing in substantially all of the securities in the Underlying Index in approximately the same proportions as in the Underlying Index. The Funds operate as index funds and are not actively managed. Adverse performance of a security in the Funds' portfolio will ordinarily not result in the elimination of the security from the Funds' portfolio. The Funds issue and redeem shares on a continuous basis, at net asset value, only in aggregations of 50,000 shares called a "Creation Unit". Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. 2. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures at the date of the financial statements and accompanying notes and the reported amounts of increases and decreases in net assets from operations during the reporting period. Management believes that the estimates utilized in preparing the Funds' financial statements are reasonable and prudent; however, actual results could differ from these estimates. A. SECURITY VALUATION Securities listed on a domestic securities exchange are valued based on the last sale price as of the close of regular trading hours on the New York Stock Exchange or, in the absence of recorded sales, are valued at the most recent bid price. Securities for which the primary market is the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ") are valued at the NASDAQ Official Closing Price. The Funds invest in money market mutual funds, which are valued at their NAV. Securities for which market quotations are not readily available, including investments that are subject to limitations as to their sale, are valued at fair value as determined in good faith by Rydex Investments, an affiliated entity, which acts as the Funds' investment advisor in accordance with procedures adopted by the Board of Trustees. In determining fair value, consideration is given to market conditions, relative benchmarks and other financial data. B. SECURITY TRANSACTIONS AND INCOME RECOGNITION Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from portfolio fund transactions are calculated on the identified cost basis. Dividend income is recorded on the ex- dividend date, net of foreign tax withholdings. Interest income is recorded on the accrual basis. Distributions received from investments in REITs are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. C. REPURCHASE AGREEMENTS The Funds may enter into repurchase agreements with financial institutions. In a repurchase agreement, a Fund buys a security and the seller simultaneously agrees to repurchase the security on a specified future date at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the Fund's money is invested in the security. Because the security constitutes collateral for the repurchase obligation, a repurchase agreement can be considered a collateralized loan. The Funds follow certain procedures designed to minimize the risks inherent in such agreements. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose condition will be continually monitored by Rydex Investments. 24 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- In addition, the value of the collateral underlying the repurchase agreement will always be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Funds will seek to liquidate such collateral. However, the exercising of the Funds' right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Funds could suffer a loss. It is the current policy of the Funds not to invest in repurchase agreements that do not mature within seven days if any such investment, together with any other illiquid assets held by the Funds, amounts to more than 15% of the Funds' net assets. The investments of the Funds in repurchase agreements, at times, may be substantial when, in the view of Rydex Investments, liquidity or other considerations so warrant. For the year ended October 31, 2010, the Funds had not engaged in repurchase agreement transactions. D. FEDERAL INCOME TAXES The Funds' policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of the taxable income and capital gains, if any, to the shareholders within the allowable time limits. Therefore, no provision for Federal income taxes is required. Tax positions taken or expected to be taken in the course of preparing the Funds' tax returns are evaluated to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds' tax positions taken on federal income tax returns for all open tax years (fiscal years 2007 -- 2010), and has concluded that no provision for income tax was required in the Funds' financial statements. Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments for in- kind redemptions, income reclassifications from real estate investment trusts ("REITs") and losses deferred due to wash sales. In order to present paid-in capital, undistributed net investment income (loss) and accumulated net realized gain (loss) on investments on the statement of assets and liabilities that more closely represent their tax character, certain adjustments have been made to these accounts. These adjustments have no effect on net assets or net asset value per share. The most significant of these adjustments is for the net capital gains resulting from in-kind redemptions which, because they are non-taxable to the Funds, and therefore are not distributed to existing Fund shareholders, are reclassified to paid-in-capital. For the year ended October 31, 2010, the adjustments for the Fund were as follows:
UNDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT NET REALIZED CAPITAL INCOME (LOSS) GAIN (LOSS) ------------ -------------- ------------- Rydex S&P Equal Weight ETF...................... $184,946,046 $(277,551) $(184,668,495) Rydex Russell Top 50 ETF........................ 3,271,578 -- (3,271,578)
At October 31, 2010, the Funds had capital loss carryforwards which may be utilized to offset any net realized capital gains expiring October 31:
2013 2014 2015 2016 2017 2018 ------- -------- -------- ------------ ------------ ----------- Rydex S&P Equal Weight ETF..... $ -- $ -- $ -- $119,981,602 $313,762,207 $35,404,956 Rydex Russell Top 50 ETF....... 88,468 675,404 618,363 32,651,414 51,313,952 10,584,384
The Funds did not utilize any capital loss carryforwards during the year ended October 31, 2010. The tax character of distributable earnings (accumulated losses) at October 31, 2010 was as follows:
UNDISTRIBUTED UNDISTRIBUTED UNREALIZED ORDINARY LONG TERM CAPITAL LOSS APPRECIATION INCOME CAPITAL GAIN CARRYFORWARD (DEPRECIATION) ------------- ------------- ------------- -------------- Rydex S&P Equal Weight ETF............. $478,594 $ -- $(469,148,765) $ 71,252,080 Rydex Russell Top 50 ETF............... 519,049 -- (95,931,985) (44,646,943)
ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- The tax character of distributions paid during 2010 were as follows:
ORDINARY INCOME ----------- Rydex S&P Equal Weight ETF.......................................... $27,968,738 Rydex Russell Top 50 ETF............................................ 6,973,425
The tax character of distributions paid during 2009 were as follows:
ORDINARY INCOME ----------- Rydex S&P Equal Weight ETF.......................................... $17,303,063 Rydex Russell Top 50 ETF............................................ 10,220,260
E. FAIR VALUE MEASUREMENT In accordance with U.S. generally accepted accounting principles, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. A three-tier hierarchy is utilized to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Funds' investments. The inputs are summarized in the three broad levels listed below: Level 1 -- quoted prices in active markets for identical securities. The types of assets and liabilities carried at Level 1 fair value generally are government and agency securities, equities listed in active markets and stock index futures. Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). The types of assets and liabilities carried at Level 2 fair value generally are domestic equity index swaps and short term securities with maturities of 60 days or less, including repurchase agreements. Level 3 -- significant unobservable inputs (including the fund's own assumptions used to determine the fair value of investments). Transfers between investment Levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following table summarizes the inputs used to value the Funds' net assets as of October 31, 2010:
LEVEL 1 LEVEL 2 LEVEL 3 INVESTMENTS INVESTMENTS INVESTMENTS FUND IN SECURITIES IN SECURITIES IN SECURITIES TOTAL ---- -------------- ------------- ------------- -------------- ASSETS Rydex S&P Equal Weight ETF.............. $2,153,406,870 $ -- $ -- $2,153,406,870 Rydex Russell Top 50 ETF................ 323,266,373 -- -- 323,266,373
For the year ended October 31, 2010, there were no Level 3 Investments. The Funds adopted updated provisions surrounding fair value measurements and disclosures effective November 1, 2009. This update applies to the Funds' disclosures about transfers in and out of all Levels of the fair value hierarchy on a gross basis and the reasons for the transfers as well as to disclosures about the valuation techniques and inputs used to measure fair value for investments that fall in either Level 2 or Level 3 fair value hierarchy. For the year ended October 31, 2010, there were no securities transferred between any levels. 26 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- F. DIVIDENDS AND DISTRIBUTIONS Distributions of net investment income and net realized capital gains, if any, are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. generally accepted accounting principles. G. RISK AND UNCERTAINTIES The Trust invests in various investments which are exposed to risk, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect amounts reported in future financial statements. The Rydex Russell Top 50 ETF is a non-diversified fund, subjecting it to a greater risk than a fund that is diversified. H. RISK DISCLOSURE Throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience the Funds expect the risk of loss to be remote. 3. ADVISORY, ADMINISTRATION AND OTHER TRANSACTIONS WITH AFFILIATES Rydex Investments determines the composition of the portfolio of securities that must be delivered in exchange for the issuance of Creation Units and periodically adjusts the composition of the portfolio of the Funds to conform to changes in the composition of the relevant index. For these services, Rydex Investments receives a management fee at the annual rate shown below of the average daily net assets of each Fund.
ADVISORY FEE ------------ Rydex S&P Equal Weight ETF.......................................... 0.40% Rydex Russell Top 50 ETF............................................ 0.20%
Rydex Investments pays all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except: interest, taxes, distribution fees or expenses and extraordinary expenses. Under an Administration Agreement, State Street Bank and Trust Company (the "Administrator") provides various administrative and accounting services for the maintenance and operations of the Funds. Under a Custodian Agreement with the Trust, the Administrator maintains cash, securities and other assets of the Trust and the Funds in separate accounts for each Fund, keeps all necessary accounts and records, and provides other services. The Administrator is required, upon the order of the Trust, to deliver securities held by the Custodian and to make payments for securities purchased by the Trust for the Funds. Pursuant to a Transfer Agency and Service Agreement with the Trust, the Administrator acts as a transfer agent for the Trust's authorized and issued shares of beneficial interest, and as dividend disbursing agent of the Trust. Rydex Investments compensates the Administrator directly for the foregoing services. The Funds have adopted a Distribution Plan (the "Plan") that allows the Funds to pay distribution fees to Rydex Distributors, Inc., an affiliated entity, (the "Distributor") and other firms that provide distribution services ("Service Providers"). If a Service Provider provides distribution services, the Funds will pay distribution fees to the Distributor at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. The Distributor will, in turn, pay the Service Provider out of its fees. No such fee is currently charged to the Funds. 4. CAPITAL At October 31, 2010, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee per transaction to those persons purchasing or redeeming Creation Units. An additional charge of up to three times the standard transaction fee may be imposed for purchases and redemptions effected outside the National Securities Clearing Corporation usual clearing process or for cash. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- equate the transaction to the net asset value per unit of the Fund on the transaction date. Transaction fees are not charged to or paid by the Funds. The minimum transaction fees are:
MINIMUM TRANSACTION FEE --------------- Rydex S&P Equal Weight ETF........................................ $2,000 Rydex Russell Top 50 ETF.......................................... 500
5. INVESTMENT TRANSACTIONS For the year ended October 31, 2010, the Funds had investment transactions in- kind associated with subscriptions and redemptions as follows:
SUBSCRIPTIONS REDEMPTIONS -------------- -------------- Rydex S&P Equal Weight ETF............................... $1,549,485,556 $1,183,154,365 Rydex Russell Top 50 ETF................................. 45,391,878 62,113,560
Purchases and sales of investment securities (excluding short-term investments, U.S. government and government agency obligations) for the Funds were as follows:
PURCHASES SALES ------------ ------------ Rydex S&P Equal Weight ETF................................. $373,016,967 $380,180,996 Rydex Russell Top 50 ETF................................... 33,108,876 31,671,834
There were no purchases or sales of U.S. government or government agency obligations for the year ended October 31, 2010. At October 31, 2010, the identified cost of investments in securities owned by each Fund for federal income tax purposes and the gross unrealized appreciation and depreciation were as follows:
GROSS GROSS NET UNREALIZED IDENTIFIED UNREALIZED UNREALIZED APPRECIATION COST APPRECIATION DEPRECIATION (DEPRECIATION) -------------- ------------ ------------- -------------- Rydex S&P Equal Weight ETF............. $2,082,154,790 $174,202,884 $(102,950,804) $ 71,252,080 Rydex Russell Top 50 ETF............... 367,913,316 21,126,744 (65,773,687) (44,646,943)
6. GUGGENHEIM ACQUISITION Guggenheim SBC Holdings, LLC ("Guggenheim SBC Holdings"), an investor group managed by Guggenheim Partners, LLC ("Guggenheim"), acquired control of Security Benefit Corporation ("SBC"), the parent company of Rydex Advisors, LLC (formerly PADCO Advisors, Inc.), the Funds' investment adviser (the "Investment Adviser"), pursuant to an agreement entered between SBC and Guggenheim SBC Holdings. Under the agreement, Guggenheim SBC Holdings received a 100% ownership stake in SBC and consequently acquired control of the Investment Adviser (the "Purchase Transaction"). Guggenheim is a global, independent, privately held, diversified financial services firm with more than $100 billion in assets under supervision. The Purchase Transaction is not expected to result in material changes to the day-to-day management and operations of the Funds or any increase in fees. The Purchase Transaction closed on July 30, 2010. Under the Investment Company Act of 1940, the closing of the Purchase Transaction had the effect of terminating the Funds' investment advisory agreements with the Investment Advisers and any investment sub-advisory agreements entered on behalf of a Fund (together, the "Previous Agreements"). New investment advisory and sub-advisory agreements ("New Agreements") were approved by Fund shareholders in a series of special meetings of shareholders. The terms of the New Agreements are substantially identical to the corresponding Previous Agreements, except with respect to the date of execution. 7. DISTRIBUTOR NAME CHANGE Effective July 30, 2010, the Funds' distributor, Rydex Distributors, Inc., a Maryland corporation, became Rydex Distributors, LLC, a Kansas limited liability company. 28 NOTES TO FINANCIAL STATEMENTS (concluded) -------------------------------------------------------------------------------- 8. NEW ACCOUNTING PRONOUNCEMENT Effective November 1, 2009, the Funds adopted the Financial Accounting Standards Board ASU 2010-06, Improving Disclosures about Fair Value Measurements, which introduces new disclosure requirements and clarifies certain existing disclosure requirements around fair value measurements, which are reflected in Note E. ANNUAL REPORT 29 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Rydex ETF Trust We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Rydex S&P Equal Weight ETF and Rydex Russell Top 50 ETF (the "Funds") (two of the series constituting the Rydex ETF Trust (the "Trust")) as of October 31, 2010, and the related statements of operations for the year then ended, statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Trust's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Funds at October 31, 2010, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. -s- ERNST & YOUNG LLP McLean, Virginia December 23, 2010 30 SUPPLEMENTAL INFORMATION (Unaudited) -------------------------------------------------------------------------------- FEDERAL INCOME TAX INFORMATION Percentage of ordinary distributions (net investment income plus short-term gains) which qualify for the corporate dividends received deduction for the fiscal year ended October 31, 2010:
PERCENTAGE ---------- Rydex S&P Equal Weight ETF........................................... 100.00% Rydex Russell Top 50 ETF............................................. 100.00%
For the fiscal year ended October 31, 2010, the Funds designate approximately the following amounts pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates: Rydex S&P Equal Weight ETF.......................................... $33,672,132 Rydex Russell Top 50 ETF............................................ 7,470,271
PROXY VOTING INFORMATION A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds' portfolios is available, without charge and upon request, by calling 1-800-820-0888. This information is also available from the EDGAR database on the SEC's website at http://www.sec.gov. Information regarding how the Funds voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended September 30, 2010 is also available, without charge and upon request, by (i) calling 1-800-820-0888; or accessing the Trust's Form N-PX on the SEC's website at, http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES INFORMATION The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC's website at http://www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1-800-820-0888. PROXY RESULTS At a special meeting of shareholders held on July 29, 2010, the shareholders of the Funds voted on whether to approve a new investment advisory agreement between Rydex ETF Trust and Padco Advisors II, Inc. A description of the number of shares voted is as follows:
FUND SHARES FOR SHARES AGAINST SHARES ABSTAINED ---- ---------- -------------- ---------------- Rydex S&P Equal Weight ETF....................... 22,623,649 980,747 549,444 Rydex Russell Top 50(R) ETF...................... 1,888,459 31,343 274,689
At a special meeting of shareholders held on July 29, 2010, the shareholders of the Funds also voted on whether to approve a change to a fundamental investment policy on borrowing money, consistent with applicable law. A description of the number of shares voted is as follows:
FUND SHARES FOR SHARES AGAINST SHARES ABSTAINED ---- ---------- -------------- ---------------- Rydex S&P Equal Weight ETF....................... 22,108,182 1,480,034 565,621 Rydex Russell Top 50(R) ETF...................... 1,850,339 67,629 276,521
ANNUAL REPORT 31 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) -------------------------------------------------------------------------------- A Board of Trustees oversees all Rydex Investments, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 1-800-820- 0888. All Trustees and Officers may be reached c/o Rydex Investments, 9601 Blackwell Rd., Suite 500, Rockville, MD 20850. INDEPENDENT TRUSTEES
LENGTH OF SERVICE NAME, POSITION AND AS TRUSTEE NUMBER OF FUNDS YEAR OF BIRTH (YEAR BEGAN) OVERSEEN ----------------------- ---------------------------------------- ---------------- JOHN O. DEMARET Rydex Series Funds - 1997 146 Trustee, Chairman of Rydex Variable Trust - 1998 the Board (1940) Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired --------------------- COREY A. COLEHOUR Rydex Series Funds - 1993 146 Trustee (1945) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired (2006 to present); Owner and President of Schield Management Company, registered investment adviser (2005 to 2006); Senior Vice President of Marketing and Co-Owner of Schield Management Company, registered investment adviser (1985 to 2005) --------------------- J. KENNETH DALTON Rydex Series Funds - 1995 146 Trustee (1941) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Mortgage Banking Consultant and Investor, The Dalton Group --------------------- WERNER E. KELLER Rydex Series Funds - 2005 146 Trustee (1940) Rydex Variable Trust - 2005 Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired (2001 to present); Chairman, Centurion Capital Management (1991 to 2001) --------------------- THOMAS F. LYDON, JR. Rydex Series Funds - 2005 146 Trustee (1960) Rydex Variable Trust - 2005 Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: President, Global Trends Investments --------------------- PATRICK T. MCCARVILLE Rydex Series Funds - 1997 146 Trustee (1942) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Founder and Chief Executive Officer, Par Industries, Inc. --------------------- ROGER SOMERS Rydex Series Funds - 1993 146 Trustee (1944) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Owner, Arrow Limousine ------------------------------------------------------------------------------------
32 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued) -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES (concluded) EXECUTIVE OFFICERS
NAME, POSITION AND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEAR OF BIRTH YEARS ----------------------------------------- ----------------------------------------- RICHARD M. GOLDMAN* President of Rydex Series Funds, Rydex President (1961) Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Chief Executive Officer and Director of Rydex Investments (2009 to present); President, Chief Executive Officer and Director of Rydex Distributors, Inc. (2009 to present); President and Chief Executive Officer of Rydex Holdings, LLC (2009 to present); Senior Vice President of Security Benefit Corp. (2007 to present); Director of First Security Benefit Life and Annuity Insurance Company of New York (2007 to present); Director of Security Distributors, Inc. (2007 to present); President of Security Investors, LLC (2007 to present); Manager and President of Security Global Investors, LLC (2007 to present); Managing Member of R.M. Goldman Partners, LLC (2006 to 2007); President and Chief Executive Officer of FortsmannLeff Associates (2003 to 2005) MICHAEL P. BYRUM* Vice President of Rydex Series Funds Vice President (1970) (1997 to present); Vice President of Rydex Variable Trust (1998 to present); Vice President of Rydex Dynamic Funds (1999 to present); President of Rydex Investments (2004 to present); Chief Investment Officer of Rydex Investments (2006 to present); Secretary of Rydex Investments (2002 to present); Director of Rydex Investments (2008 to present); Chief Investment Officer of Rydex Holdings, LLC (2008 to present); Vice President of Rydex Distributors, Inc. (2009 to present); Manager of Rydex Specialized Products, LLC (2005 to present); Secretary of Rydex Specialized Products, LLC (2005 to 2008); Trustee of Rydex Series Funds, Rydex Variable Trust and Rydex Dynamic Funds (2005 to 2009); Vice President of Rydex ETF Trust (2002 to present); President and Trustee of Rydex Capital Partners SPhinX Fund (2003 to 2007) NICK BONOS* Vice President and Treasurer of Rydex Vice President and Treasurer (1963) Series Funds, Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2003 to present); Senior Vice President of Rydex Investments (2006 to present); Chief Executive Officer of Rydex Specialized Products, LLC (2009 to present); Chief Financial Officer of Rydex Specialized Products, LLC (2005 to 2009); Vice President and Treasurer of Rydex Capital Partners SPhinX Fund (2003 to 2006) JOANNA M. HAIGNEY* Chief Compliance Officer of Rydex Series Chief Compliance Officer and Secretary Funds, Rydex Variable Trust, and Rydex (1966) Dynamic Funds (2004 to present); Secretary of Rydex Series Funds, Rydex Variable Trust, Rydex Dynamic Funds (2000 to present); Secretary of Rydex ETF Trust (2002 to present); Chief Compliance Officer of Rydex Investments (2005 to present) Vice President of Compliance of Rydex Investments (2006 to present); Director of Rydex Distributors, Inc. (2009 to present); Secretary of Rydex Capital Partners SPhinX Fund (2003 to 2006) KEITH FLETCHER* Vice President of Rydex Series Funds, Vice President (1958) Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Vice President of Rydex Investments (2009 to present); Vice President of Rydex Specialized Products, LLC (2009 to present); Vice President and Director of Rydex Distributors, Inc. (2009 to present); Vice President of Security Global Investors, LLC (2009 to present)
ANNUAL REPORT 33 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded) -------------------------------------------------------------------------------- EXECUTIVE OFFICERS (concluded)
NAME, POSITION AND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEAR OF BIRTH YEARS ----------------------------------------- ----------------------------------------- AMY LEE* Vice President and Assistant Secretary of Vice President and Rydex Series Funds, Assistant Secretary (1960) Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Secretary of Rydex Distributors, Inc. (2008 to present); Chief Compliance Officer of Rydex Distributors, Inc. (2008 to 2009); Vice President, Associate General Counsel and Assistant Secretary of Security Benefit Corp. (2005 to present); Vice President, Associate General Counsel and Assistant Secretary of Security Benefit Life Insurance Co. (2004 to present); Assistant General Counsel of First Security Benefit Life and Annuity Company of New York (2004 to present); Chief Compliance Officer and Secretary of Security Distributors, Inc. (2004 to present); Secretary of Security Global Investors, Inc. (2007 to present) JOSEPH ARRUDA* Assistant Treasurer of Rydex Series Assistant Treasurer (1966) Funds, Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2006 to present); Senior Vice President of Rydex Investments (2008 to present); Vice President of Rydex Investments (2004 to 2008); Manager and Chief Financial Officer of Rydex Specialized Products, LLC (2009 to present) Director of Accounting of Rydex Investments (2003 to 2004) PAULA BILLOS* Controller of Rydex Series Funds, Rydex Controller (1974) Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2006 to present); Director of Fund Administration of Rydex Investments (2001 to present)
* Officers of the Funds are deemed to be "interested persons" of the Trust, within the meaning of Section 2(a) (19) of the 1940 Act, inasmuch as this person is affiliated with Rydex Investments. RYDEX | SGI SECURITY GLOBAL INVESTORS(SM) 9601 Blackwell Road - Suite 500 - Rockville, MD 20850 www.rydex-sgi.com - 800.820.0888 ETF-ANN-1010X1011 OCTOBER 31, 2010 RYDEX ETF TRUST ANNUAL REPORT RYDEX S&P 500 PURE VALUE ETF RYDEX S&P 500 PURE GROWTH ETF RYDEX S&P MIDCAP 400 PURE VALUE ETF RYDEX S&P MIDCAP 400 PURE GROWTH ETF RYDEX S&P SMALLCAP 600 PURE VALUE ETF RYDEX S&P SMALLCAP 600 PURE GROWTH ETF RYDEX S&P EQUAL WEIGHT CONSUMER DISCRETIONARY ETF RYDEX S&P EQUAL WEIGHT CONSUMER STAPLES ETF RYDEX S&P EQUAL WEIGHT ENERGY ETF RYDEX S&P EQUAL WEIGHT FINANCIALS ETF RYDEX S&P EQUAL WEIGHT HEALTH CARE ETF RYDEX S&P EQUAL WEIGHT INDUSTRIALS ETF RYDEX S&P EQUAL WEIGHT MATERIALS ETF RYDEX S&P EQUAL WEIGHT TECHNOLOGY ETF RYDEX S&P EQUAL WEIGHT UTILITIES ETF RYDEX | SGI SECURITY GLOBAL INVESTORS(SM) [RYDEXSHARES LOGO] ANNUAL REPORT 1 TABLE OF CONTENTS -------------------------------------------------------------------------------- LETTER TO OUR SHAREHOLDERS.............................................. 2 FEES AND EXPENSES....................................................... 4 PREMIUM AND DISCOUNT INFORMATION........................................ 5 MANAGER'S ANALYSIS...................................................... 7 SCHEDULES OF INVESTMENTS................................................ 37 STATEMENTS OF ASSETS AND LIABILITIES.................................... 60 STATEMENTS OF OPERATIONS................................................ 64 STATEMENTS OF CHANGES IN NET ASSETS..................................... 68 FINANCIAL HIGHLIGHTS.................................................... 76 NOTES TO FINANCIAL STATEMENTS........................................... 91 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................. 100 SUPPLEMENTAL INFORMATION................................................ 101 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS........................... 103
2 LETTER TO OUR SHAREHOLDERS -------------------------------------------------------------------------------- DEAR SHAREHOLDER, More than a full year into the recovery that officially began in mid-2009, the U.S. economy has been growing, but unevenly. Corporate profits, consumer spending and some manufacturing measures have been rising or holding steady, while the employment and housing markets have remained stagnant. A soft patch occurred in mid-2010, when a debt crisis struck Greece, and the potential for a double-dip U.S. recession loomed. While slipping back into recession appears less likely, the U.S. economy has yet to create much in the way of jobs or wean itself off government involvement in everything from cars to banks to housing. Still, by the year ended October 2010, investors looked at an economy where stocks were the highest in two years, growth had persisted for five straight quarters and inflation was virtually flat. Trying to stimulate economic growth, but unable to lower interest rates below their current levels of near zero, the Federal Reserve would like to avoid the specter of deflation and so has resorted to the controversial practice of printing money to buy government bonds, otherwise known as quantitative easing. Proponents hope it will produce more than modest support for the economy, while driving long-term interest rates even lower, thus encouraging businesses and individuals to borrow. Critics contend that it could push down the dollar's value, triggering commodity price rises, and set the stage for inflation above the Fed's generally accepted range of about 2%. Markets reacted positively to the prospect of this new bout of bond buying by the Fed, as stock prices grew about 13% from Labor Day until Halloween, compared with about a 1% rise for corporate bonds. Other analysts attributed the rally to the shift in the political alignment in Washington based on the mid-term elections, which is expected to slow down or even reverse recent overhauls of health care and financial regulation, as well as more prominently address ways to reduce public debt. 2011 OUTLOOK As the impact wanes from recent catalysts such as Congressional realignment, quantitative easing and positive earnings and economic reports, markets are apt to wake up to the reality of a continuing sluggish economy and political stalemate in Washington. Some analysts are expecting an easing of monetary policy globally, as the world responds to a weaker dollar and looser U.S. financial conditions. Many are maintaining neutral allocations across major asset classes, with an emphasis on growth outside the U.S. market, particularly in emerging markets. Favored areas include commodities and growth stocks paying a dividend. Equities are expected to offer the highest risk premia in the coming months, and corporate paper is favored over government securities as the era of extraordinary returns in credit may be coming to an end. RYDEX|SGI ETFS ETFs have continued to enjoy popularity in the current uncertain market environment, and not just because of their well-known benefits of transparency, convenience and low cost. ETFs incorporate some of the most innovative product development and fastest asset growth in the financial industry. There was a 27% increase in assets under management in ETFs over the 12 month period ended September 30, 2010, according to the Investment Company Institute. As of October 2010, there were about 1,000 exchange traded funds with about $900 billion in assets in the U.S. and more than $1 trillion globally. At Rydex|SGI, assets under management increased by 7% during the past 12 months, and the firm closed 12 leveraged or inverse ETFs as it rationalized its product line-up. Today, the firm offers 28 exchange traded products, including currency funds, two leveraged or inverse products, nine sector funds, six pure style funds, a mega cap fund and an equal weight S&P 500 Index* fund, our best-known ETF. GUGGENHEIM PARTNERS As you may know, Security Global Investors' (SGI) parent firm, Security Benefit Corporation (Security Benefit), was acquired this year by a group of investors led by Guggenheim Partners. Guggenheim Partners is a diversified financial services firm with $100 billion in assets under supervision and a well-known name in the investment-management industry. We look forward to a long and productive relationship with Guggenheim Partners, as we do with you, our shareholders, and thank you for the trust you place in us. Sincerely, -s- Michael Byrum Michael Byrum President and Chief Investment Officer ANNUAL REPORT 3 LETTER TO OUR SHAREHOLDERS (concluded) -------------------------------------------------------------------------------- * The S&P Equal Weight Index is an unmanaged equal-weighted version of the S&P 500 Index, which is an unmanaged capitalization-weighted index comprised of 500 common stocks, chosen by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. ("S&P") on a statistical basis. Unlike the S&P 500 Index, in which each constituent stock's weight is proportionate to its market value, each stock in the S&P Equal Weight Index will be rebalanced quarterly to have the same target weighting as every other stock in the Index. As of December 31, 2009, the S&P 500 Equal Weight Index included companies with a capitalization range of $1.1 billion to $323.8 billion. FOR MORE COMPLETE INFORMATION REGARDING RYDEXSHARES, CALL 800.820.0888 FOR A PROSPECTUS AND A SUMMARY PROSPECTUS (IF AVAILABLE). INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A FUND BEFORE INVESTING. THE FUND'S PROSPECTUS AND ITS SUMMARY PROSPECTUS (IF AVAILABLE) CONTAINS THIS AND OTHER INFORMATION ABOUT THE FUNDS. PLEASE READ THE PROSPECTUS AND SUMMARY PROSPECTUS (IF AVAILABLE) CAREFULLY BEFORE YOU INVEST OR SEND MONEY. ETFS MAY NOT BE SUITABLE FOR ALL INVESTORS. - Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Most investors will also incur customary brokerage commissions when buying or selling shares of an ETF. - Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. - ETF Shares may trade below their net asset value ("NAV"). The NAV of shares will fluctuate with changes in the market value of an ETF's holdings. In addition, there can be no assurance that an active trading market for shares will develop or be maintained. - Tracking error risk refers to the risk that the Advisor may not be able to cause the Fund's performance to match or correlate to that of the Fund's Underlying Index, either on a daily or aggregate basis. Tracking error risk may cause the Fund's performance to be less than you expect. - Each ETF discussed is considered non- diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Rydex|SGI and its affiliates. The product is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the product. THE FUNDS ARE DISTRIBUTED BY RYDEX DISTRIBUTORS, LLC (RDL). Security Global Investors(SM) is the investment advisory arm of Security Benefit Corporation (Security Benefit). Security Global Investors consists of Security Global Investors, LLC, Security Investors, LLC and Rydex Investments. Rydex Investments is the primary business name for Rydex Advisors, LLC and Rydex Advisors II, LLC. Security Global Investors and RDL are affiliates and subsidiaries of Security Benefit, which is wholly owned by Guggenheim SBC Holdings, LLC, a special purpose entity managed by Guggenheim Partners, LLC, a diversified financial services firm with more than $100 billion in assets under supervision. 4 FEES AND EXPENSES -------------------------------------------------------------------------------- SHAREHOLDER EXPENSE EXAMPLE As a shareholder of the Rydex ETF Trust, you incur transaction costs such as creation and redemption fees or brokerage charges, and ongoing costs including advisory fees and, if applicable, distribution fees. All other Trust expenses are paid by the advisor. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested on April 30, 2010 and held for the six months ended October 31, 2010. ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first table under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses attributable to your investment during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second table below provides information about hypothetical account values and hypothetical expenses based on a Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not a Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING EXPENSE VALUE VALUE SIX-MONTH PERIOD* RATIO 4/30/10 10/31/10 4/30/10 TO 10/31/10 ------- --------- --------- ------------------- ACTUAL Rydex S&P 500 Pure Value ETF............... 0.35% $1,000.00 $ 945.20 $1.72 Rydex S&P 500 Pure Growth ETF.............. 0.35% $1,000.00 $1,086.20 $1.84 Rydex S&P MidCap 400 Pure Value ETF........ 0.35% $1,000.00 $ 935.00 $1.71 Rydex S&P MidCap 400 Pure Growth ETF....... 0.35% $1,000.00 $1,067.90 $1.82 Rydex S&P SmallCap 600 Pure Value ETF...... 0.35% $1,000.00 $ 871.30 $1.65 Rydex S&P SmallCap 600 Pure Growth ETF..... 0.35% $1,000.00 $1,032.80 $1.79 Rydex S&P Equal Weight Consumer Discretionary ETF....................... 0.50% $1,000.00 $ 980.20 $2.50 Rydex S&P Equal Weight Consumer Staples ETF..................................... 0.50% $1,000.00 $1,037.10 $2.57 Rydex S&P Equal Weight Energy ETF.......... 0.50% $1,000.00 $1,002.20 $2.52 Rydex S&P Equal Weight Financials ETF...... 0.50% $1,000.00 $ 950.20 $2.46 Rydex S&P Equal Weight Health Care ETF..... 0.50% $1,000.00 $1,013.00 $2.54 Rydex S&P Equal Weight Industrials ETF..... 0.50% $1,000.00 $ 998.70 $2.52 Rydex S&P Equal Weight Materials ETF....... 0.50% $1,000.00 $1,045.90 $2.58 Rydex S&P Equal Weight Technology ETF...... 0.50% $1,000.00 $1,049.00 $2.58 Rydex S&P Equal Weight Utilities ETF....... 0.50% $1,000.00 $1,094.20 $2.64 HYPOTHETICAL (ASSUMING A 5% RETURN BEFORE EXPENSES) Rydex S&P 500 Pure Value ETF............... 0.35% $1,000.00 $1,023.44 $1.79 Rydex S&P 500 Pure Growth ETF.............. 0.35% $1,000.00 $1,023.44 $1.79 Rydex S&P MidCap 400 Pure Value ETF........ 0.35% $1,000.00 $1,023.44 $1.79 Rydex S&P MidCap 400 Pure Growth ETF....... 0.35% $1,000.00 $1,023.44 $1.79 Rydex S&P SmallCap 600 Pure Value ETF...... 0.35% $1,000.00 $1,023.44 $1.79 Rydex S&P SmallCap 600 Pure Growth ETF..... 0.35% $1,000.00 $1,023.44 $1.79 Rydex S&P Equal Weight Consumer Discretionary ETF....................... 0.50% $1,000.00 $1,022.68 $2.55 Rydex S&P Equal Weight Consumer Staples ETF..................................... 0.50% $1,000.00 $1,022.68 $2.55 Rydex S&P Equal Weight Energy ETF.......... 0.50% $1,000.00 $1,022.68 $2.55 Rydex S&P Equal Weight Financials ETF...... 0.50% $1,000.00 $1,022.68 $2.55 Rydex S&P Equal Weight Health Care ETF..... 0.50% $1,000.00 $1,022.68 $2.55 Rydex S&P Equal Weight Industrials ETF..... 0.50% $1,000.00 $1,022.68 $2.55 Rydex S&P Equal Weight Materials ETF....... 0.50% $1,000.00 $1,022.68 $2.55 Rydex S&P Equal Weight Technology ETF...... 0.50% $1,000.00 $1,022.68 $2.55 Rydex S&P Equal Weight Utilities ETF....... 0.50% $1,000.00 $1,022.68 $2.55
-------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect one-half year period). ANNUAL REPORT 5 PREMIUM AND DISCOUNT INFORMATION (Unaudited) -------------------------------------------------------------------------------- The tables that follow present information about the differences between the daily market price on secondary markets for shares of the Funds and each Fund's NAV. Net Asset Value, or "NAV," is the price per share at which a Fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The "Market Price" of a Fund generally is determined using the midpoint between the highest bid and the lowest offer on the Exchange on which the Fund is listed for trading, as of the time the Fund's NAV is calculated. A Fund's Market Price may be at, above or below its NAV. The NAV of a Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of a Fund will fluctuate in accordance with changes in its NAV, as well as market supply of and demand for shares of the Funds. Premiums or discounts are the differences (generally expressed as a percentage) between the NAV and Market Price of a Fund on a given day, generally at the time NAV is calculated. A premium is the amount that a Fund is trading above the reported NAV, expressed as a positive percentage of the NAV. A discount is the amount that a Fund is trading below the reported NAV, expressed as a negative percentage of the NAV. The following information shows the frequency distribution of premiums and discounts for the Funds. The information shown for each Fund is for the period from inception to October 31, 2010. Each line in the table shows the number of trading days in which the Funds traded within the premium/discount range indicated. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period covered by the table. All data presented here represents past performance, which cannot be used to predict future results.
NUMBER OF DAYS ----------------------------------------------------------------------------- RYDEX RYDEX S&P 500 RYDEX S&P RYDEX S&P RYDEX S&P RYDEX S&P S&P 500 PURE MIDCAP 400 MIDCAP 400 SMALLCAP 600 SMALLCAP 600 PURE VALUE GROWTH PURE VALUE PURE GROWTH PURE VALUE PURE GROWTH PREMIUM/DISCOUNT RANGE ETF ETF ETF ETF ETF ETF ---------------------- ---------- ------- ---------- ----------- ------------ ------------ Greater Than 3%.............. 2 2 6 0 4 4 Between 1.01% and 3%......... 32 17 28 11 21 45 Between .51% and 1%.......... 46 32 38 24 42 49 Between .26% and .5%......... 64 62 64 35 83 93 Between 0% and .25%.......... 537 580 477 586 479 421 Between -0.01% and -0.25%.... 524 529 546 550 535 483 Between -0.26% and -0.5%..... 69 64 76 84 84 118 Between -0.51% and -1%....... 40 29 43 36 53 80 Between -1.01% and -3%....... 30 29 56 20 40 49 Less Than -3%................ 3 3 13 1 6 5 ----- ----- ----- ----- ----- ----- Total........................ 1,347 1,347 1,347 1,347 1,347 1,347 ----- ----- ----- ----- ----- -----
PERCENTAGE OF TOTAL DAYS ----------------------------------------------------------------------------- RYDEX RYDEX RYDEX S&P 500 S&P MIDCAP RYDEX S&P RYDEX S&P RYDEX S&P S&P 500 PURE 400 PURE MIDCAP 400 SMALLCAP 600 SMALLCAP 600 PURE VALUE GROWTH VALUE PURE GROWTH PURE VALUE PURE GROWTH PREMIUM/DISCOUNT RANGE ETF ETF ETF ETF ETF ETF ---------------------- ---------- ------- ---------- ----------- ------------ ------------ Greater Than 3%.............. 0.15% 0.15% 0.45% 0.00% 0.30% 0.30% Between 1.01% and 3%......... 2.38% 1.26% 2.08% 0.82% 1.56% 3.34% Between .51% and 1%.......... 3.41% 2.38% 2.82% 1.78% 3.12% 3.64% Between .26% and .5%......... 4.75% 4.60% 4.75% 2.60% 6.16% 6.90% Between 0% and .25%.......... 39.87% 43.07% 35.41% 43.51% 35.56% 31.25% Between -0.01% and -0.25%.... 38.90% 39.27% 40.53% 40.83% 39.73% 35.86% Between -0.26% and -0.5%..... 5.12% 4.75% 5.64% 6.24% 6.24% 8.76% Between -0.51% and -1%....... 2.97% 2.15% 3.19% 2.67% 3.93% 5.94% Between -1.01% and -3%....... 2.23% 2.15% 4.16% 1.48% 2.97% 3.64% Less Than -3%................ 0.22% 0.22% 0.97% 0.07% 0.45% 0.37% ------ ------ ------ ------ ------ ------ Total........................ 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% ------ ------ ------ ------ ------ ------
6 PREMIUM AND DISCOUNT INFORMATION (Unaudited) (continued) --------------------------------------------------------------------------------
NUMBER OF DAYS ------------------------------------------------------------------------------------------------------- RYDEX RYDEX S&P EQUAL S&P EQUAL RYDEX RYDEX RYDEX RYDEX RYDEX RYDEX WEIGHT WEIGHT S&P EQUAL S&P EQUAL S&P EQUAL S&P EQUAL S&P EQUAL S&P EQUAL CONSUMER CONSUMER WEIGHT WEIGHT WEIGHT WEIGHT WEIGHT WEIGHT DISCRETIONARY STAPLES ENERGY FINANCIALS HEALTH CARE INDUSTRIALS MATERIALS TECHNOLOGY PREMIUM/DISCOUNT RANGE ETF ETF ETF ETF ETF ETF ETF ETF ---------------------- ------------- --------- --------- ---------- ----------- ----------- --------- ---------- Greater Than 30%........ 0 0 0 1 0 0 0 0 Between 10.01% and 30%.. 0 0 0 1 0 0 0 0 Between 8.01% and 10%... 1 0 0 0 0 0 0 0 Between 3.01% and 8%.... 7 0 7 12 0 6 3 6 Between 1.01% and 3%.... 24 25 33 57 7 48 36 26 Between .51% and 1%..... 34 48 63 58 31 51 45 39 Between .26% and .5%.... 39 64 74 61 65 70 53 54 Between 0% and .25%..... 449 410 356 353 477 364 435 459 Between -0.01% and -0.25%................ 472 443 394 395 471 421 437 429 Between -0.26% and -0.5%................. 78 99 102 81 79 93 72 72 Between -0.51% and -1%.. 47 66 82 72 38 78 51 54 Between -1.01% and -3%.. 18 21 51 67 8 42 39 35 Between -3.01% and -8%.. 6 0 13 16 0 3 5 2 Between -8.01% and -10%.................. 1 0 0 1 0 0 0 0 Between -10.01% and -30%.................. 0 0 0 1 0 0 0 0 Less Than -30%.......... 0 0 1 0 0 0 0 0 ----- ----- ----- ----- ----- ----- ----- ----- Total................... 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 ----- ----- ----- ----- ----- ----- ----- ----- NUMBER OF DAYS --------- RYDEX S&P EQUAL WEIGHT UTILITIES PREMIUM/DISCOUNT RANGE ETF ---------------------- --------- Greater Than 30%........ 0 Between 10.01% and 30%.. 0 Between 8.01% and 10%... 0 Between 3.01% and 8%.... 2 Between 1.01% and 3%.... 39 Between .51% and 1%..... 44 Between .26% and .5%.... 72 Between 0% and .25%..... 393 Between -0.01% and -0.25%................ 423 Between -0.26% and -0.5%................. 93 Between -0.51% and -1%.. 76 Between -1.01% and -3%.. 28 Between -3.01% and -8%.. 5 Between -8.01% and -10%.................. 0 Between -10.01% and -30%.................. 0 Less Than -30%.......... 1 ----- Total................... 1,176 -----
PERCENTAGE OF TOTAL DAYS ------------------------------------------------------------------------------------------------------- RYDEX RYDEX S&P EQUAL S&P EQUAL RYDEX RYDEX RYDEX RYDEX RYDEX RYDEX WEIGHT WEIGHT S&P EQUAL S&P EQUAL S&P EQUAL S&P EQUAL S&P EQUAL S&P EQUAL CONSUMER CONSUMER WEIGHT WEIGHT WEIGHT WEIGHT WEIGHT WEIGHT DISCRETIONARY STAPLES ENERGY FINANCIALS HEALTH CARE INDUSTRIALS MATERIALS TECHNOLOGY PREMIUM/DISCOUNT RANGE ETF ETF ETF ETF ETF ETF ETF ETF ---------------------- ------------- --------- --------- ---------- ----------- ----------- --------- ---------- Greater Than 30%........ 0.00% 0.00% 0.00% 0.09% 0.00% 0.00% 0.00% 0.00% Between 10.01% and 30%.. 0.00% 0.00% 0.00% 0.09% 0.00% 0.00% 0.00% 0.00% Between 8.01% and 10%... 0.09% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Between 3.01% and 8%.... 0.60% 0.00% 0.60% 1.02% 0.00% 0.51% 0.26% 0.51% Between 1.01% and 3%.... 2.04% 2.13% 2.81% 4.85% 0.60% 4.08% 3.06% 2.21% Between .51% and 1%..... 2.89% 4.08% 5.36% 4.92% 2.64% 4.34% 3.82% 3.32% Between .26% and .5%.... 3.31% 5.44% 6.29% 5.18% 5.52% 5.95% 4.50% 4.59% Between 0% and .25%..... 38.17% 34.86% 30.26% 30.01% 40.56% 30.95% 36.99% 39.03% Between -0.01% and -0.25%................ 40.14% 37.67% 33.50% 33.59% 40.05% 35.80% 37.16% 36.48% Between -0.26% and -0.5%................. 6.63% 8.42% 8.67% 6.89% 6.72% 7.91% 6.12% 6.12% Between -0.51% and -1%.. 4.00% 5.61% 6.97% 6.12% 3.23% 6.63% 4.34% 4.59% Between -1.01% and -3%.. 1.53% 1.79% 4.34% 5.70% 0.68% 3.57% 3.32% 2.98% Between -3.01% and -8%.. 0.51% 0.00% 1.11% 1.36% 0.00% 0.26% 0.43% 0.17% Between -8.01% and -10%.................. 0.09% 0.00% 0.00% 0.09% 0.00% 0.00% 0.00% 0.00% Between -10.01% and -30%.................. 0.00% 0.00% 0.00% 0.09% 0.00% 0.00% 0.00% 0.00% Less Than -30%.......... 0.00% 0.00% 0.09% 0.00% 0.00% 0.00% 0.00% 0.00% ------ ------ ------ ------ ------ ------ ------ ------ Total................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% ------ ------ ------ ------ ------ ------ ------ ------ PERCENT- AGE OF TOTAL DAYS --------- RYDEX S&P EQUAL WEIGHT UTILITIES PREMIUM/DISCOUNT RANGE ETF ---------------------- --------- Greater Than 30%........ 0.00% Between 10.01% and 30%.. 0.00% Between 8.01% and 10%... 0.00% Between 3.01% and 8%.... 0.17% Between 1.01% and 3%.... 3.32% Between .51% and 1%..... 3.74% Between .26% and .5%.... 6.12% Between 0% and .25%..... 33.41% Between -0.01% and -0.25%................ 35.97% Between -0.26% and -0.5%................. 7.91% Between -0.51% and -1%.. 6.46% Between -1.01% and -3%.. 2.38% Between -3.01% and -8%.. 0.43% Between -8.01% and -10%.................. 0.00% Between -10.01% and -30%.................. 0.00% Less Than -30%.......... 0.09% ------ Total................... 100.00% ------
ANNUAL REPORT 7 RYDEX S&P 500 PURE VALUE ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P 500 Pure Value ETF returned 22.67%. Over the year, its benchmark, the S&P 500 Pure Value Total Return Index*, posted a return of 23.30%. For the period, RPV achieved a correlation of over 99% to its benchmark of the daily price movement of the S&P 500 Pure Value Total Return Index. The heavily weighted financials sector (25.87% return) was the largest contributor to performance during the period, followed by consumer discretionary (19.11%) and utilities (35.18%). The sector contributing the least to performance was lightly weighted telecommunication services (38.68%). No sector was a detractor from performance. From a style perspective, growth outperformed value at all cap levels by two-to- four percentage points (small cap growth had the greatest differential). Within the value space, mid-cap value stocks significantly outperformed large-cap value stocks, but only slightly beat performance of small-cap value stocks. The 23.30% return of the S&P 500 Pure Value Total Return Index outperformed both the S&P 500 Value Total Return Index* (15.55%) and the broad S&P 500 Total Return Index* (16.52%) for the year. * The S&P 500 Value Total Return Index consists of value companies in the Standard & Poor's 500 Index (S&P 500), which is a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The S&P 500 Pure Value Index is narrow in focus, containing only those S&P 500 companies with strong value characteristics as selected by S&P. As of December 31, 2009, the S&P 500(R) Pure Value Index included 126 of the constituents that comprise the S&P 500. As of December 31, 2009, the S&P 500 Pure Value Index included companies with a capitalization range of $1.1 billion to $154.5 billion. CUMULATIVE FUND PERFORMANCE: MARCH 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
S&P 500 RYDEX S&P PURE VALUE S&P 500 500 PURE TOTAL RETURN VALUE TOTAL VALUE ETF INDEX RETURN INDEX --------- ------------ ------------ 3/1/2006 10000.00 10000.00 10000.00 4/30/2006 10378.00 10382.00 10357.00 7/31/2006 10264.00 10273.00 10240.00 10/31/2006 11027.00 11053.00 11029.00 1/31/2007 11733.00 11775.00 11700.00 4/30/2007 12335.00 12392.00 12140.00 7/31/2007 11731.00 11793.00 11860.00 10/31/2007 11888.00 11961.00 12523.00 1/31/2008 11253.00 11345.00 11318.00 4/30/2008 10063.00 10137.00 11076.00 7/31/2008 8494.00 8566.00 9979.00 10/31/2008 6450.00 6495.00 7756.00 1/31/2009 4803.00 4853.00 6261.00 4/30/2009 5646.00 5710.00 6639.00 7/31/2009 6965.00 7068.00 7618.00 10/31/2009 7978.00 8114.00 7987.00 1/31/2010 8841.00 9012.00 8462.00 4/30/2010 10356.00 10571.00 9423.00 7/31/2010 9404.00 9605.00 8758.00 10/31/2010 9786.00 10004.00 9228.00
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (03/01/06) -------- ---------- --------------- RYDEX S&P 500 PURE VALUE ETF......................... 22.67% (6.28)% (0.46)% S&P 500 PURE VALUE TOTAL RETURN INDEX................ 23.30% (5.77)% 0.01% S&P 500 VALUE TOTAL RETURN INDEX..................... 15.55% (9.68)% (1.71)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 8 RYDEX S&P 500 PURE VALUE ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ SUNOCO, INC. 2.83% TESORO CORP. 2.83% VALERO ENERGY CORP. 2.56% HUNTINGTON BANCSHARES, INC. 2.49% INTEGRYS ENERGY GROUP, INC. 2.38% ZIONS BANCORP. 2.04% HUMANA, INC. 1.97% CARDINAL HEALTH, INC. 1.90% SUNTRUST BANKS, INC. 1.90% TYSON FOODS, INC. -- CLASS A 1.89% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART) Financials 26.27 Utilities 16.93 Energy 12.65 Health Care 11.47 Consumer Discretionary 9.10 Consumer Staples 8.46 Industrials 6.59 Materials 3.41 Telecommunication Services 2.92 Information Technology 2.20
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 9 RYDEX S&P 500 PURE GROWTH ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P 500 Pure Growth ETF returned 31.51%. Over the year, its benchmark, the S&P 500 Pure Growth Total Return Index*, turned in a 32.04% return. For the period, RPG achieved over 99% correlation to its benchmark on a daily basis. By far the largest contributor to performance, the information technology sector, returned 43.18% during the period, followed by consumer discretionary (50.23%). Utilities returned 4.67% and contributed the least to portfolio return. No sector detracted from performance for the year. From a style perspective, large-cap growth stocks slightly outperformed large- cap value stocks. Within the growth space, mid-cap growth stocks significantly outperformed large-cap growth stocks, but just beat performance of small-cap growth stocks. The S&P 500 Pure Growth Total Return Index (32.04%) roughly doubled performance of both the S&P 500 Growth Total Return Index* (17.55%) and the broad S&P 500 Total Return Index* (16.52%) for the year. * The S&P 500 Growth Total Return Index consists of growth companies in the Standard & Poor's 500 Index (S&P 500), which is a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The S&P 500 Pure Growth Index is narrow in focus, containing only those S&P 500 companies with strong growth characteristics as selected by S&P. As of December 31, 2009, the S&P 500 Pure Growth Index included 125 of the constituents that comprise the S&P 500. As of December 31, 2009, the S&P 500 Pure Growth Index included companies with a capitalization range of $2.1 billion to $271.3 billion. CUMULATIVE FUND PERFORMANCE: MARCH 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
S&P 500 RYDEX S&P PURE GROWTH S&P 500 500 PURE TOTAL RETURN GROWTH TOTAL GROWTH ETF INDEX RETURN INDEX ---------- ------------ ------------ 3/1/2006 10000.00 10000.00 10000.00 4/30/2006 9974.00 9977.00 9994.00 7/31/2006 9404.00 9419.00 9677.00 10/31/2006 10277.00 10305.00 10567.00 1/31/2007 10714.00 10754.00 10955.00 4/30/2007 11124.00 11177.00 11316.00 7/31/2007 10804.00 10866.00 11270.00 10/31/2007 11592.00 11667.00 12216.00 1/31/2008 10320.00 10386.00 10819.00 4/30/2008 10741.00 10822.00 11269.00 7/31/2008 9990.00 10069.00 10561.00 10/31/2008 7187.00 7245.00 8044.00 1/31/2009 6416.00 6469.00 7308.00 4/30/2009 7389.00 7459.00 7810.00 7/31/2009 8407.00 8493.00 8825.00 10/31/2009 9156.00 9259.00 9360.00 1/31/2010 9543.00 9656.00 9590.00 4/30/2010 11085.00 11235.00 10618.00 7/31/2010 10283.00 10429.00 9947.00 10/31/2010 12041.00 12225.00 11002.00
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (03/01/06) -------- ---------- --------------- RYDEX S&P 500 PURE GROWTH ETF........................ 31.51% 1.28% 4.06% S&P 500 PURE GROWTH TOTAL RETURN INDEX............... 32.04% 1.58% 4.40% S&P 500 GROWTH TOTAL RETURN INDEX.................... 17.55% (3.43)% 2.07%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 10 RYDEX S&P 500 PURE GROWTH ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ PRICELINE.COM, INC. 2.63% SALESFORCE.COM, INC. 2.46% RED HAT, INC. 2.44% AKAMAI TECHNOLOGIES, INC. 2.23% COGNIZANT TECHNOLOGY SOLUTIONS CORP. -- CLASS A 2.14% NETAPP, INC. 2.07% AMAZON.COM, INC. 1.98% WYNN RESORTS LTD. 1.77% APPLE, INC. 1.74% CF INDUSTRITES HOLDINGS, INC. 1.59% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART) Information Technology 29.10 Consumer Discretionary 22.82 Energy 15.31 Health Care 11.70 Financials 7.02 Industrials 6.35 Materials 5.93 Consumer Staples 1.77
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 11 RYDEX S&P MIDCAP 400 PURE VALUE ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P MidCap Pure Value ETF returned 28.75%. Over the year, its benchmark, the S&P MidCap 400 Pure Value Total Return Index*, posted a 29.52% return. RFV achieved over 98% correlation to its benchmark on a daily basis. Financials (36.22%) and industrials (30.40%) were the biggest contributors to performance. The energy sector had performance of 13.64%, making it the lowest contributor to portfolio performance. From a style perspective, growth outperformed value at all cap levels by two-to- four percentage points (small cap growth had the greatest differential). Within the value space, mid-cap value stocks significantly outperformed large-cap value stocks, but only slightly beat performance of small-cap value stocks. The S&P MidCap 400 Pure Value Total Return Index (29.52%) outperformed both the S&P MidCap 400 Value Total Return Index* (25.77%) and the broader S&P MidCap 400 Total Return Index* (27.64%) for the year. * The S&P MidCap 400 Total Return Index measures the performance of the mid capitalization sector of the U.S. equity market. S&P MidCap 400 Value Total Return Index consists of value companies of the S&P MidCap 400. The S&P MidCap 400 Pure Value Index is narrow in focus, containing only those S&P MidCap 400 companies with strong value characteristics as selected by S&P. As of December 31, 2009, the S&P MidCap 400 Pure Value Index included 93 of the constituents that comprise the S&P MidCap 400. As of December 31, 2009, the S&P MidCap 400 Pure Value Index included companies with a capitalization range of $293.8 million to $4.7 billion. CUMULATIVE FUND PERFORMANCE: MARCH 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX S&P S&P MIDCAP S&P MIDCAP MIDCAP 400 400 PURE 400 VALUE PURE VALUE VALUE TOTAL TOTAL RETURN ETF RETURN INDEX INDEX ---------- ------------ ------------ 3/1/2006 10000.00 10000.00 10000.00 4/30/2006 10181.00 10187.00 10339.00 7/31/2006 9911.00 9926.00 9701.00 10/31/2006 10646.00 10674.00 10311.00 1/31/2007 11572.00 11617.00 10996.00 4/30/2007 12055.00 12114.00 11563.00 7/31/2007 11337.00 11402.00 11174.00 10/31/2007 11706.00 11778.00 11648.00 1/31/2008 10975.00 11013.00 10366.00 4/30/2008 10608.00 10614.00 10710.00 7/31/2008 9574.00 9588.00 10176.00 10/31/2008 6818.00 6826.00 7433.00 1/31/2009 5188.00 5227.00 6506.00 4/30/2009 6392.00 6448.00 7236.00 7/31/2009 7878.00 7954.00 8125.00 10/31/2009 8410.00 8502.00 8512.00 1/31/2010 9673.00 9808.00 9273.00 4/30/2010 11579.00 11755.00 10838.00 7/31/2010 10104.00 10265.00 9967.00 10/31/2010 10827.00 11011.00 10705.00
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (03/01/06) -------- ---------- --------------- RYDEX S&P MIDCAP 400 PURE VALUE ETF.................. 28.75% (2.57)% 1.71% S&P MIDCAP 400 PURE VALUE TOTAL RETURN INDEX......... 29.52% (2.22)% 2.08% S&P MIDCAP 400 VALUE TOTAL RETURN INDEX.............. 25.77% (2.77)% 1.47%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 12 RYDEX S&P MIDCAP 400 PURE VALUE ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ CATHAY GENERAL BANCORP. 3.68% FOOT LOCKER, INC. 2.92% KINDRED HEALTHCARE, INC. 2.64% TEREX CORP. 2.59% SAKS, INC. 2.44% FRONTIER OIL CORP. 2.44% ASHLAND, INC. 2.41% HEALTH NET, INC. 2.32% REGIS CORP. 2.32% BJ'S WHOLESALE CLUB, INC. 2.21% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART) Industrials 20.91 Consumer Discretionary 15.29 Financials 14.48 Information Technology 10.09 Utilities 9.60 Health Care 9.27 Consumer Staples 8.35 Energy 5.70 Materials 5.42 Telecommunication Services 0.89
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 13 RYDEX S&P MIDCAP 400 PURE GROWTH ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P MidCap Pure Growth ETF returned 33.32%. Over the year, its benchmark, the S&P MidCap 400 Pure Growth Total Return Index*, turned in a 33.75% total return. RFG achieved over 99% correlation to its benchmark on a daily basis. Consumer discretionary (46.51%) and information technology (39.53%) were large contributors to performance. No sectors had a negative impact on performance during the period. Mid-cap growth stocks were the best performing pure style box, beating all capitalizations in the growth space and both core and value mid-caps. The S&P MidCap 400 Pure Growth Total Return Index (33.75%) outperformed both the S&P MidCap 400 Growth Total Return Index* (29.52%) and the broader S&P MidCap 400 Total Return Index* (27.64%) for the year. * The S&P MidCap 400 Total Return Index measures the performance of the mid capitalization sector of the U.S. equity market. S&P MidCap 400 Growth Total Return Index consists of growth companies of the S&P MidCap 400. The S&P MidCap 400 Pure Growth Index is narrow in focus, containing only those S&P MidCap 400 companies with strong growth characteristics as selected by S&P. As of December 31, 2009, the S&P MidCap 400 Pure Growth Index included 114 of the constituents that comprise the S&P MidCap 400. As of December 31, 2009, the S&P MidCap 400 Pure Growth Index included companies with a capitalization range of $883.5 million to $6.8 billion. CUMULATIVE FUND PERFORMANCE: MARCH 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX S&P S&P SMALLCAP S&P SMALLCAP 600 600 PURE SMALLCAP 600 PURE GROWTH GROWTH TOTAL GROWTH TOTAL ETF RETURN INDEX RETURN INDEX ------------ ------------ ------------ 3/1/2006 10000 10000 10000 4/30/2006 10394 10401 10336 7/31/2006 9496 9510 9471 10/31/2006 9947 9970 10007 1/31/2007 10402 10436 10487 4/30/2007 10763 10809 10993 7/31/2007 10663 10715 10925 10/31/2007 11432 11498 11836 1/31/2008 9946 10000 10197 4/30/2008 9822 9860 10465 7/31/2008 9647 9685 10349 10/31/2008 7425 7459 7781 1/31/2009 6170 6174 6458 4/30/2009 7401 7408 7223 7/31/2009 8526 8543 8233 10/31/2009 8757 8781 8381 1/31/2010 9237 9286 8960 4/30/2010 10777 10845 10529 7/31/2010 10065 10137 9885 10/31/2010 11130 11220 10735
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (03/01/06) -------- ---------- --------------- RYDEX S&P MIDCAP 400 PURE GROWTH ETF................. 33.32% 5.78% 6.72% S&P MIDCAP 400 PURE GROWTH TOTAL RETURN INDEX........ 33.75% 6.18% 7.11% S&P MIDCAP 400 GROWTH TOTAL RETURN INDEX............. 29.52% (0.05)% 3.74%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 14 RYDEX S&P MIDCAP 400 PURE GROWTH ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ NETFLIX, INC. 4.36% GREEN MOUNTAIN COFFEE ROASTERS, INC. 2.66% BUCYRUS INTERNATIONAL, INC. -- CLASS. A 2.28% RIVERBED TECHNOLOGY, INC. 2.19% F5 NETWORKS, INC. 2.03% CHIPOTLE MEXICAN GRILL, INC. -- CLASS. A 1.91% CHEESECAKE FACTORY, INC. (THE) 1.89% NEWMARKET CORP. 1.80% FOSSIL, INC. 1.75% JONES LANG LASALLE, INC. 1.73% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART) Consumer Discretionary 28.98 Information Technology 23.50 Health Care 11.28 Industrials 11.25 Energy 8.45 Materials 5.58 Financials 5.53 Consumer Staples 3.75 Telecommunication Services 1.68
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 15 RYDEX S&P SMALLCAP 600 PURE VALUE ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P SmallCap Pure Value ETF returned 21.07%. Over the year, its benchmark, the S&P SmallCap 600 Pure Value Total Return Index*, turned in a 19.29% return. RZV achieved over 99% correlation to its benchmark on a daily basis. The largest contributor to performance was the consumer discretionary (46.41%) sector. Financials (16.32%) also contributed. The only detractor to performance was the consumer staples (-2.60%) sector. From a style perspective, growth outperformed value at all cap levels by two-to- four percentage points (small cap growth had the greatest differential). Within the value space, mid-cap value stocks significantly outperformed large-cap value stocks, but only slightly beat performance of small-cap value stocks. The S&P SmallCap 600 Pure Value Index (19.29%) underperformed the S&P SmallCap 600 Value Index* (24.56%) and the broad S&P SmallCap 600 Index* (26.27%) for the year. * The S&P SmallCap 600 Index measures the performance of the small capitalization sector of the U.S. equity market. The S&P SmallCap 600 Value Index consists of value companies in the S&P 600. The S&P SmallCap 600 Pure Value Index is narrow in focus, containing only those S&P SmallCap 600 companies with strong value characteristics as selected by S&P. As of December 31, 2009, the S&P SmallCap 600 Pure Value Index included 123 of the constituents that comprise the S&P SmallCap 600. As of December 31, 2009, the S&P SmallCap 600 Pure Value Index included companies with a capitalization range of $57.7 million to $1.8 billion. CUMULATIVE FUND PERFORMANCE: MARCH 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX S&P S&P SMALLCAP S&P SMALLCAP SMALLCAP 600 600 PURE 600 VALUE PURE VALUE VALUE TOTAL TOTAL RETURN ETF RETURN INDEX INDEX ------------ ------------ ------------ 3/1/2006 10000 10000 10000 4/30/2006 10359 10368 10351 7/31/2006 9714 9728 9593 10/31/2006 10519 10538 10519 1/31/2007 11319 11355 11041 4/30/2007 11418 11462 11267 7/31/2007 10559 10602 10836 10/31/2007 9953 9989 11110 1/31/2008 9345 9406 9834 4/30/2008 8483 8541 9818 7/31/2008 7995 8028 9630 10/31/2008 6323 6343 7670 1/31/2009 4099 4169 6187 4/30/2009 5956 6056 6925 7/31/2009 8150 8289 7855 10/31/2009 7903 8043 7937 1/31/2010 8633 8610 8611 4/30/2010 10979 10964 10373 7/31/2010 9127 9144 9294 10/31/2010 9567 9594 9886
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (03/01/06) -------- ---------- --------------- RYDEX S&P SMALLCAP 600 PURE VALUE ETF................ 21.07% (1.31)% (0.94)% S&P SMALLCAP 600 PURE VALUE TOTAL RETURN INDEX....... 19.29% (1.34)% (0.88)% S&P SMALLCAP 600 VALUE TOTAL RETURN INDEX............ 24.56% (3.82)% (0.25)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 16 RYDEX S&P SMALLCAP 600 PURE VALUE ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ QUIKSILVER, INC. 3.63% TUESDAY MORNING CORP. 2.58% BASIC ENERGY SERVICES, INC. 1.91% NATIONAL FINANCIAL PARTNERS CORP. 1.84% JAKKS PACIFIC, INC. 1.77% OSEOTECH, INC. 1.76% CIBER, INC. 1.74% PETROLEUM DEVELOPMENT CORP. 1.69% ARCTIC CAT, INC. 1.69% NCI BUILDING SYSTEMS, INC. 1.68% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART) Consumer Discretionary 26.75 Industrials 21.80 Financials 18.27 Health Care 9.00 Information Technology 7.37 Energy 6.25 Consumer Staples 4.66 Materials 4.28 Utilities 1.62
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 17 RYDEX S&P SMALLCAP 600 PURE GROWTH ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P SmallCap Pure Growth ETF returned 27.11%. Over the year, its benchmark, the S&P SmallCap 600 Pure Growth Total Return Index*, turned in a 27.76% return. RZG achieved over 99% correlation to its benchmark on a daily basis. The information technology (32.76%) and consumer discretionary (32.21%) sectors were the largest contributors to performance, with materials (2.99%) the smallest contributor to return. No sector detracted from performance during the year. Small-cap growth stocks were the second-best performing of the pure style boxes, trailing only mid-cap growth. The weakest capitalization space in growth was large-cap. Small-cap growth stocks outperformed small-cap value stocks by about four percentage points for the year. The S&P SmallCap 600 Pure Growth Total Return Index (27.76%) slightly underperformed the S&P SmallCap 600 Growth Total Return Index* (28.08%) and outperformed the broad S&P SmallCap 600 Total Return Index* (26.27%) for the year. * The S&P SmallCap 600 Index measures the performance of the small capitalization sector of the U.S. equity market. The S&P SmallCap 600 Growth Index consists of growth companies in the S&P 600. The S&P SmallCap 600 Pure Growth Index is narrow in focus, containing only those S&P SmallCap 600 companies with strong growth characteristics as selected by S&P. As of December 31, 2009, the S&P SmallCap 600 Pure Growth Index included 170 of the constituents that comprise the S&P SmallCap 600. As of December 31, 2009, the S&P SmallCap 600 Pure Growth Index included companies with a capitalization range of $142.2 million to $2.8 billion. CUMULATIVE FUND PERFORMANCE: MARCH 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX S&P S&P SMALLCAP S&P SMALLCAP 600 600 PURE SMALLCAP 600 PURE GROWTH GROWTH TOTAL GROWTH TOTAL ETF RETURN INDEX RETURN INDEX ------------ ------------ ------------ 3/1/2006 10000 10000 10000 4/30/2006 10394 10401 10336 7/31/2006 9496 9510 9471 10/31/2006 9947 9970 10007 1/31/2007 10402 10436 10487 4/30/2007 10763 10809 10993 7/31/2007 10663 10715 10925 10/31/2007 11432 11498 11836 1/31/2008 9946 10000 10197 4/30/2008 9822 9860 10465 7/31/2008 9647 9685 10349 10/31/2008 7425 7459 7781 1/31/2009 6170 6174 6458 4/30/2009 7401 7408 7223 7/31/2009 8526 8543 8233 10/31/2009 8757 8781 8381 1/31/2010 9237 9286 8960 4/30/2010 10777 10845 10529 7/31/2010 10065 10137 9885 10/31/2010 11130 11220 10735
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (03/01/06) -------- ---------- --------------- RYDEX S&P SMALLCAP 600 PURE GROWTH ETF............... 27.11% (0.89)% 2.32% S&P SMALLCAP 600 PURE GROWTH TOTAL RETURN INDEX...... 27.76% (0.82)% 2.50% S&P SMALLCAP 600 GROWTH TOTAL RETURN INDEX........... 28.08% (3.20)% 1.53%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 18 RYDEX S&P SMALLCAP 600 PURE GROWTH ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ CROCS, INC. 1.49% TRIQUINT SEMICONDUCTOR, INC. 1.42% EBIX, INC. 1.35% DOLAN MEDIA CO. 1.34% ANDERSONS, INC. (THE) 1.31% NETSCOUT SYSTEMS, INC. 1.30% SOURCEFIRE, INC. 1.29% DECKERS OUTDOOR CORP. 1.24% WRIGHT EXPRESS CORP. 1.24% PERFICIENT, INC. 1.20% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART) Information Technology 33.99 Consumer Discretionary 25.40 Health Care 15.00 Financials 7.15 Consumer Staples 6.30 Energy 4.76 Industrials 3.33 Materials 2.62 Telecommunication Services 1.45
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 19 RYDEX S&P EQUAL WEIGHT CONSUMER DISCRETIONARY ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Consumer Discretionary ETF returned 30.35% compared to its benchmark S&P Equal Weight Consumer Discretionary Total Return Index*, which delivered 30.97% and the capitalization-weighted S&P Consumer Discretionary Total Return Index, which turned in a 33.49% total return in the same time period. The ETF achieved over 99% correlation to its benchmark on a daily basis. The economic downturn that lasted through most of 2009 compelled consumer discretionary companies to tighten costs and reduce inventories, which played into a profit rebound over the course of 2010. Volatile reports on the strength of consumer sentiment and spending, however, continue to weigh on the sector, as do the increasing cost of commodities underlying many products. Consumer confidence and spending increases will likely be muted until there is a significant improvement in job conditions. Media (36.80%) was the largest contributor to performance. Diversified consumer services (-24.84%) was the only detractor. Priceline.com Inc., Ford Motor Co. and Wynn Resorts Ltd. were among the stocks with largest positive contributions to performance for the year. H&R Block Inc., Apollo Group Inc. (Class A) and GameStop Corp. (Class A) were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Consumer Discretionary Index is an unmanaged equal weighted version of the S&P 500 Consumer Discretionary Index that consists of the common stocks of the following industries: automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing that comprise the Consumer Discretionary sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Consumer Discretionary Index included companies with a capitalization range of $1.1 billion to $67.4 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX S&P S&P EQUAL EQUAL WEIGHT S&P 500 WEIGHT CONSUMER CONSUMER DISCRETIONARY TOTAL RETURN DISCRETIONARY TOTAL ETF INDEX RETURN INDEX ---------------------- ------------ ------------------- 11/1/2006 10000 10000 10000 1/31/2007 10767 10566 10779 4/30/2007 10953 10939 10976 7/31/2007 10202 10787 10240 10/31/2007 9960 11539 10027 1/31/2008 8875 10322 8939 4/30/2008 8649 10427 8690 7/31/2008 7532 9591 7577 10/31/2008 5652 7374 5702 1/31/2009 4523 6335 4574 4/30/2009 6171 6745 6250 7/31/2009 6934 7676 7013 10/31/2009 7583 8097 7660 1/31/2010 8348 8434 8435 4/30/2010 10085 9365 10214 7/31/2010 8945 8738 9063 10/31/2010 9885 9434 10032
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT CONSUMER DISCRETIONARY ETF.... 30.35% (0.25)% (0.29)% S&P EQUAL WEIGHT CONSUMER DISCRETIONARY TOTAL RETURN INDEX.............................................. 30.97% 0.02% 0.08% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 20 RYDEX S&P EQUAL WEIGHT CONSUMER DISCRETIONARY ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ CARMAX, INC. 1.52% J.C. PENNEY CO., INC. 1.47% MCGRAW-HILL COS., INC. 1.42% CARNIVAL CORP. 1.40% JOHNSON CONTROLS, INC. 1.39% EASTMAN KODAK CO. 1.39% COACH, INC. 1.38% TIFFANY & CO. 1.37% WYNN RESORTS LTD. 1.37% ABERCROMBIE & FITCH CO. -- CLASS A 1.36% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART) Specialty Retail 23.70 Media 21.22 Hotels, Restaurants & Leisure 12.55 Household Durables 10.58 Multiline Retail 9.80 Textiles, Apparel & Luxury Goods 5.14 Leisure Equipment & Products 3.79 Internet & Catalog Retail 3.76 Diversified Consumer Services 3.18 Automobiles 2.55 Auto Components 2.46 Distributors 1.27
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 21 RYDEX S&P EQUAL WEIGHT CONSUMER STAPLES ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Consumer Staples ETF returned 16.89%. For the same period, its benchmark, the S&P Equal Weight Consumer Staples Total Return Index*, returned 17.67% while the cap- weighted S&P Consumer Staples Total Return Index delivered a 14.91% return. The fund achieved over 99% correlation to its benchmark on a daily basis. Consumer staples stocks have remained in favor due to their defensive nature and potential to benefit as a safe haven amid uncertainty about the speed of the recovery. They also offer solid fundamentals, attractive dividends and one of the higher exposures to emerging markets among equity sectors. The food products industry (18.92%) was the largest contributor to performance. None of the industries the fund held during the period had negative performance. Coca-Cola Enterprises Inc., Estee Lauder Cos. (Class A) and Altria Group Inc. were among the stocks with largest positive contributions to performance for the year. Dean Foods Co., SUPERVALU Inc. and CVS Caremark Corp. were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Consumer Staples Index is an unmanaged equal weighted version of the S&P Consumer Staples Index that consists of the common stocks of the following industries: food and drug retailing, beverages, food products, tobacco, household products and personal products that comprise the Consumer Staples sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Consumer Staples Index included companies with a capitalization range of $2.6 billion to $203.7 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX S&P S&P EQUAL EQUAL WEIGHT S&P 500 WEIGHT CONSUMER CONSUMER STAPLES TOTAL RETURN STAPLES TOTAL ETF INDEX RETURN INDEX ---------------- ------------ --------------- 11/1/2006 10000 10000 10000 1/31/2007 10416 10566 10429 4/30/2007 10952 10939 10977 7/31/2007 10421 10787 10498 10/31/2007 11146 11539 11252 1/31/2008 10327 10322 10410 4/30/2008 10713 10427 10802 7/31/2008 10381 9591 10480 10/31/2008 8931 7374 9029 1/31/2009 8381 6335 8471 4/30/2009 8781 6745 8891 7/31/2009 9938 7676 10075 10/31/2009 10681 8097 10847 1/31/2010 10968 8434 11154 4/30/2010 12039 9365 12266 7/31/2010 11778 8738 12010 10/31/2010 12486 9434 12762
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT CONSUMER STAPLES ETF.......... 16.89% 3.86% 5.71% S&P EQUAL WEIGHT CONSUMER STAPLES TOTAL RETURN INDEX.............................................. 17.67% 4.28% 6.29% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 22 RYDEX S&P EQUAL WEIGHT CONSUMER STAPLES ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ ESTEE LAUDER COS., INC -- CLASS A 2.81% WALGREEN CO. 2.72% COCA-COLA ENTERPRISES, INC. 2.70% SAFEWAY, INC. 2.63% REYNOLDS AMERICAN, INC. 2.59% CONSTELLATION BRANDS, INC. -- CLASS A 2.55% ALTRIA GROUP, INC. 2.53% MCCORMICK & CO., INC. 2.49% COCA-COLA CO. (THE) 2.49% WHOLE FOODS MARKT, INC. 2.49% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART) Food Products 36.15 Food & Staples Retailing 22.00 Beverages 17.28 Tobacco 10.12 Household Products 9.33 Personal Products 5.12
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 23 RYDEX S&P EQUAL WEIGHT ENERGY ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Energy ETF returned 13.74%. For the same period, its benchmark, the S&P Equal Weight Energy Total Return Index*, returned 14.43%, outperforming the cap-weighted S&P Energy Index's 7.14% total return. The fund achieved over 99% correlation to its benchmark on a daily basis. High inventory and slack demand combined to keep the price of a barrel of oil trading in the range of $75-$85 a barrel since last May, although by October it was at the high end of that range. Analysts attributed the rising price to the removal of uncertainty around mid-term elections and the Fed's expected quantitative easing that pushed the dollar lower, supporting oil prices. Inventories are still high worldwide and demand hasn't moved significantly from recessionary levels. The oil, gas and consumable fuels (12.36%) industry and energy equipment and services (20.83%) contributed the most to performance. None of the Rydex S&P Equal Weight Energy ETF's industries had negative performance during the period. Pioneer Natural Resources Co., Massey Energy Co. and Smith International were among the stocks with largest positive contributions to performance for the year. Diamond Offshore Drilling Inc., Range Resources Corp. and Cabot Oil & Gas Corp. were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Energy Index is an unmanaged equal weighted version of the S&P Energy Index that consists of the common stocks of the following industries: oil and gas exploration, production, marketing, refining and/or transportation and energy equipment and services industries that comprise the Energy sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Energy Index included companies with a capitalization range of $1.8 billion to $323.8 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
S&P EQUAL RYDEX S&P S&P 500 WEIGHT ENERGY EQUAL WEIGHT TOTAL RETURN TOTAL RETURN ENERGY ETF INDEX INDEX ------------ ------------ ------------- 11/1/2006 10000 10000 10000 1/31/2007 10383 10566 10398 4/30/2007 11604 10939 11640 7/31/2007 12446 10787 12502 10/31/2007 14027 11539 14113 1/31/2008 12942 10322 13026 4/30/2008 15306 10427 15435 7/31/2008 14244 9591 14375 10/31/2008 8518 7374 8600 1/31/2009 7566 6335 7665 4/30/2009 7977 6745 8102 7/31/2009 9197 7676 9354 10/31/2009 10340 8097 10533 1/31/2010 10510 8434 10725 4/30/2010 11735 9365 11995 7/31/2010 10670 8738 10915 10/31/2010 11760 9434 12052
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT ENERGY ETF.................... 13.74% (5.71)% 4.14% S&P EQUAL WEIGHT ENERGY TOTAL RETURN INDEX........... 14.43% (5.12)% 4.78% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 24 RYDEX S&P EQUAL WEIGHT ENERGY ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ MASSEY ENERGY CO. 3.25% NATIONAL-OILWELL VARCO, INC. 3.01% NABORS INDUSTRIES, INC. 2.83% SCHLUMBERGER, LTD. 2.79% WILLIAMS COS., INC. (THE) 2.71% BAKER HUGHES, INC. 2.69% ANADARKO PETROLEUM CORP. 2.64% HESS CORP. 2.63% PEABODY ENERGY CORP. 2.60% QEP RESOURCES, INC. 2.59% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART) Oil, Gas & Consumable Fuels 73.54 Energy Equipment & Services 26.46
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 25 RYDEX S&P EQUAL WEIGHT FINANCIALS ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Financials ETF returned 19.46%. For the same period, its benchmark, the S&P Equal Weight Financials Total Return Index*, returned 20.12%, outperforming the cap-weighted S&P Financials Index's 4.83% total return. Rydex S&P Equal Weight Financials ETF achieved a daily correlation of over 99% to its benchmark on a daily basis. The economy is improving, albeit at a tepid and uneven pace, and stability has returned to many financial institutions. Banks have been enjoying high capital levels, ample liquidity and better asset quality, although real-estate weakness remains an issue. There is apprehension about the recently enacted financial regulatory reform and its establishment of a new consumer financial protection bureau, but less concern about the new capitalization requirements called for in the Basel accords. Insurers now offer low historical valuations and solid balance sheets. REIT valuations are off their high for the year, but well- capitalized ones featuring high-quality assets and good management remain in demand. Real estate investment trusts (46.50%) and insurance (19.03%) were the largest contributors to performance, while thrifts and mortgage finance (-13.63%) was the only industry that detracted from performance. Apartment Investment & Management Co., CB Richard Ellis Group Inc. (Class A) and Equity Residential were among the stocks bringing the largest positive contributions to performance for the year. Morgan Stanley, People's United Financial Inc. and Bank of America Corp. were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Financials Index is an unmanaged equal weighted version of the S&P Financials Index that consists of the common stocks of the following industries: banks, diversified financials, brokerage, asset management insurance and real estate, including investment trusts that comprise the Financials sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Financials Index included companies with a capitalization range of $1.7 billion to $164.2 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
S&P EQUAL RYDEX S&P S&P 500 WEIGHT FINANCIALS EQUAL WEIGHT TOTAL RETURN TOTAL RETURN FINANCIALS ETF INDEX INDEX -------------- ------------ ----------------- 11/1/2006 10000 10000 10000 1/31/2007 10745 10566 10765 4/30/2007 10757 10939 10792 7/31/2007 9699 10787 9739 10/31/2007 9777 11539 9831 1/31/2008 8524 10322 8592 4/30/2008 7873 10427 7940 7/31/2008 6504 9591 6581 10/31/2008 4606 7374 4720 1/31/2009 3030 6335 3108 4/30/2009 3553 6745 3674 7/31/2009 4316 7676 4479 10/31/2009 4752 8097 4938 1/31/2010 5050 8434 5255 4/30/2010 5974 9365 6230 7/31/2010 5499 8738 5738 10/31/2010 5676 9434 5932
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT FINANCIALS ETF................ 19.46% (16.57)% (13.20)% S&P EQUAL WEIGHT FINANCIALS TOTAL RETURN INDEX....... 20.12% (15.49)% (12.25)% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 26 RYDEX S&P EQUAL WEIGHT FINANCIALS ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ PROLOGIS 1.47% AMERICAN INTERNATIONAL GROUP, INC. 1.42% CHARLES SCHWAB CORP. (THE) 1.36% DISCOVER FINANCIAL SERVICES 1.35% T. ROWE PRICE GROUP, INC. 1.35% CME GROUP, INC. 1.33% INVESCO LTD. 1.32% HOST HOTELS & RESORTS, INC. 1.32% AMERIPRISE FINANCIAL, INC. 1.32% MOODY'S CORP. 1.32% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART) Insurance 27.25 Capital Markets 17.84 Real Estate Investment Trusts (REITs) 17.56 Commercial Banks 16.35 Diversified Financial Services 11.25 Consumer Finance 4.98 Thrifts & Mortgage Finance 2.30 Paper & Forest Products 1.24 Real Estate Management & Development 1.23
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 27 RYDEX S&P EQUAL WEIGHT HEALTH CARE ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Health Care ETF returned 18.64%. For the same period, its benchmark, the S&P Equal Weight Health Care Total Return Index*, returned 19.38% while the cap-weighted S&P Health Care Index delivered a 13.14% return. The fund achieved over 99% correlation to its benchmark on a daily basis. While the Health Care Reform Act passed in March after contentious debate, its impact on the industry was thrown into some doubt by the outcome of mid-term elections. Most the bill's provisions, including those to expand Medicaid eligibility, subsidize premiums and give businesses incentives to provide health coverage, will take effect over the next four years. While there may be attempts to alter aspects of the legislation, President Obama's veto power is likely to push the battle into the next administration. Health care providers and services (19.08%) and pharmaceuticals (22.72%) contributed the most to performance for the year. No industry held by the fund detracted from performance. Millipore, King Pharmaceuticals and Genzyme Corp. were among the stocks with largest positive contributions to performance for the year. Boston Scientific Corp., Tenet Healthcare Corp. and Quest Diagnostics Inc. were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Health Care Index is an unmanaged equal weighted version of the S&P Health Care Index that consists of the common stocks of the following industries: health care equipment and supplies, health care providers and services, and biotechnology and pharmaceuticals that comprise the Health Care sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Health Care Index included companies with a capitalization range of $2.4 billion to $177.7 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX S&P S&P EQUAL EQUAL WEIGHT S&P 500 WEIGHT HEALTH HEALTH CARE TOTAL RETURN CARE TOTAL ETF INDEX RETURN INDEX ------------ ------------ ------------- 11/1/2006 10000 10000 10000 1/31/2007 10782 10566 10803 4/30/2007 11490 10939 11540 7/31/2007 11032 10787 11093 10/31/2007 11737 11539 11820 1/31/2008 11120 10322 11329 4/30/2008 10746 10427 10964 7/31/2008 11014 9591 11252 10/31/2008 8572 7374 8777 1/31/2009 8410 6335 8627 4/30/2009 8488 6745 8726 7/31/2009 9910 7676 10215 10/31/2009 10313 8097 10646 1/31/2010 11607 8434 12002 4/30/2010 12077 9365 12515 7/31/2010 11025 8738 11436 10/31/2010 12233 9434 12710
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT HEALTH CARE ETF............... 18.64% 1.39% 5.17% S&P EQUAL WEIGHT HEALTH CARE TOTAL RETURN INDEX...... 19.38% 2.45% 6.18% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 28 RYDEX S&P EQUAL WEIGHT HEALTH CARE ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ KING PHARMACEUTICALS, INC. 2.79% BOSTON SCIENTIFIC CORP. 2.16% HUMANA, INC. 2.13% GILEAD SCIENCES, INC. 2.09% CELGENE CORP. 2.08% BAXTER INTERNATIONAL, INC. 2.08% ALLERGAN, INC. 2.06% MYLAN, INC. 2.06% MEDCO HEALTH SOLUTIONS, INC. 2.06% COVENTRY HEALTH CARE, INC. 2.05% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART) Health Care Providers & Services 31.30 Health Care Equipment & Supplies 24.83 Pharmaceuticals 21.97 Biotechnology 11.95 Life Sciences Tools & Services 7.91 Health Care Technology 2.04
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Industry Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 29 RYDEX S&P EQUAL WEIGHT INDUSTRIALS ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Industrials ETF returned 26.28% compared to its benchmark S&P Equal Weight Industrials Total Return Index* (26.88%) and the capitalization-weighted S&P Industrials Index (28.52%). The fund achieved over 99% correlation to its benchmark on a daily basis. The industrial sector experienced volatility in 2010, which dissipated as the year progressed. Projections for sales growth and earnings growth for the sector going into the fourth quarter were higher than for the market as a whole, with growth-oriented sectors like industrials poised to benefit in line with the steadily expanding global economy. Machinery (42.21%) and aerospace and defense (22.73%) were the biggest contributors to performance. Detractors were building products (-7.18%) and construction and engineering (-0.97%). Cummins Inc., Deere & Co. and Southwest Airlines Co. were among the stocks with largest positive contributions to performance for the year. Iron Mountain Inc., Jacobs Engineering Group Inc. and Quanta Services Inc. were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Industrials Index is an unmanaged equal weighted version of the S&P Industrials Index that consists of the common stocks of the following industries: aerospace and defense, building products, construction and engineering, electrical equipment, conglomerates, machinery; commercial services and supplies, air freight and logistics, airlines, and marine, road and rail transportation infrastructure that comprise the 52 Industrials sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Industrials Index included companies with a capitalization range of $2 billion to $161.1 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
S&P EQUAL RYDEX S&P S&P 500 WEIGHT INDUSTRIALS EQUAL WEIGHT TOTAL RETURN TOTAL RETURN INDUSTRIALS ETF INDEX INDEX --------------- ------------ ------------------ 11/1/2006 10000 10000 10000 1/31/2007 10713 10566 10726 4/30/2007 11264 10939 11294 7/31/2007 11846 10787 11894 10/31/2007 12201 11539 12253 1/31/2008 11248 10322 11282 4/30/2008 11883 10427 11935 7/31/2008 10874 9591 10927 10/31/2008 7672 7374 7724 1/31/2009 6667 6335 6725 4/30/2009 7410 6745 7487 7/31/2009 8174 7676 8271 10/31/2009 8735 8097 8884 1/31/2010 9262 8434 9458 4/30/2010 11044 9365 11267 7/31/2010 10310 8738 10522 10/31/2010 11030 9434 11271
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT INDUSTRIALS ETF............... 26.28% (3.31)% 2.48% S&P EQUAL WEIGHT INDUSTRIALS TOTAL RETURN INDEX...... 26.88% (2.74)% 3.04% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 30 RYDEX S&P EQUAL WEIGHT INDUSTRIALS ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ SOUTHWEST AIRLINES CO. 1.93% GOODRICH CORP. 1.92% PARKER-HANNIFIN CORP. 1.87% PACCAR, INC. 1.86% BOEING CO. (THE) 1.86% SNAP-ON, INC. 1.85% CSX CORP. 1.85% EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. 1.85% EQUIFAX, INC. 1.84% ROBERT HALF INTERNATIONAL, INC. 1.84% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART) Aerospace & Defense 21.32 Machinery 21.27 Commercial Services & Supplies 13.66 Road & Rail 7.13 Air Freight & Logistics 7.01 Industrial Conglomerates 6.67 Professional Services 5.47 Electrical Equipment 5.31 Construction & Engineering 5.20 Trading Companies & Distributors 3.41 Airlines 1.94 Building Products 1.61
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Industry Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 31 RYDEX S&P EQUAL WEIGHT MATERIALS ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Materials ETF returned 29.05% compared to the benchmark S&P Equal Weight Materials Total Return Index's* 29.97% return and the capitalization-weighted S&P Materials Index's 24.12% return. The fund achieved over 99% correlation to its benchmark on a daily basis. The materials sector experienced volatility during the year as the uneven economic recovery continued. The sector soared 17% in the third quarter, due to rising global commodity prices, but year to date through October, the sector had underperformed the broader market S&P 500. Chemicals (32.02%) was the largest contributor to performance, followed by metals and mining (39.20%). Construction materials (-18.90%) was the only detractor to performance for the year. Titanium Metals Corp., Allegheny Technologies Inc. and Airgas Inc. were among the stocks with the largest positive contributions to performance for the year. Vulcan Materials Co., Owens-Illinois Inc. and AK Steel Holding Corp. were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Materials Index is an unmanaged equal weighted version of the S&P Materials Index that consists of the common stocks of the following industries: chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products that comprise the Materials sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Materials Index included companies with a capitalization range of $2.2 billion to $44.6 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
S&P EQUAL RYDEX S&P S&P 500 WEIGHT MATERIALS EQUAL WEIGHT TOTAL RETURN TOTAL RETURN MATERIALS ETF INDEX INDEX ------------- ------------ ---------------- 11/1/2006 10000 10000 10000 1/31/2007 11090 10566 11104 4/30/2007 11780 10939 11811 7/31/2007 11826 10787 11921 10/31/2007 12402 11539 12523 1/31/2008 11279 10322 11398 4/30/2008 11672 10427 11811 7/31/2008 11148 9591 11303 10/31/2008 7359 7374 7491 1/31/2009 6142 6335 6270 4/30/2009 8112 6745 8313 7/31/2009 9742 7676 10003 10/31/2009 9995 8097 10277 1/31/2010 10525 8434 10841 4/30/2010 12332 9365 12728 7/31/2010 11798 8738 12210 10/31/2010 12897 9434 13356
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT MATERIALS ETF................. 29.05% 1.31% 6.57% S&P EQUAL WEIGHT MATERIALS TOTAL RETURN INDEX........ 29.97% 2.17% 7.51% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 32 RYDEX S&P EQUAL WEIGHT MATERIALS ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ CF INDUSTRIES HOLDINGS, INC. 3.75% ALCOA, INC. 3.59% FREEPORT-MCMORAN COPPER & GOLD, INC. 3.54% ALLEGHENY TECHNOLOGIES, INC. 3.53% DOW CHEMICAL CO. (THE) 3.53% EASTMAN CHEMICAL CO. 3.43% FMC CORP. 3.32% SIGMA-ALDRICH CORP. 3.30% INTERNATIONAL PAPER CO. 3.29% BALL CORP. 3.29% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART) Chemicals Metals & Mining Containers & Packaging Paper & Forest Products Construction Materials 45.94 28.78 15.68 6.55 3.05
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Industry Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 33 RYDEX S&P EQUAL WEIGHT TECHNOLOGY ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Technology ETF returned 27.23% compared to its benchmark S&P Equal Weight Information Technology Total Return Index* (28.07%) and the capitalization- weighted S&P Information Technology Index (18.24%). The fund achieved over 99% correlation to its benchmark on a daily basis. Technology stocks rose sharply as the economy improved. Although the industry benefited from corporate computer purchases, weak consumer demand did have some impact on PC sales. Consumers are also redirecting their spending to smartphones and tablets. Outside the PC market, industrial customers have been a pocket of strength. Demand there has been characterized as steady, but not booming. Semiconductors and semiconductor equipment (28.25%), software (32.07%) and computers and peripherals (33.81%) were the biggest contributors to performance. Consumer Finance (-10.27%) and diversified financial services (-1.85%) were the only detractors from performance. Akamai Technologies, Inc., Salesforce.com Inc. and NetApp Inc. were among the stocks with largest positive contributions to performance for the year. SAIC Inc., Electronic Arts Inc. and Adobe Systems Inc. were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Information Technology Index is an unmanaged equal weighted version of the S&P Information Technology Index that consists of the common stocks of the following industries: internet equipment, computers and peripherals, electronic equipment, office electronics and instruments, semiconductor equipment and products, diversified telecommunication services, and wireless telecommunication services that comprise the Information Technology sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Information Technology Index included companies with a capitalization range of $1.4 billion to $271.3 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
S&P EQUAL RYDEX S&P S&P 500 WEIGHT INFORMATION EQUAL WEIGHT TOTAL RETURN TECHNOLOGY TOTAL TECHNOLOGY ETF INDEX RETURN INDEX -------------- ------------ ------------------ 11/1/2006 10000 10000 10000 1/31/2007 10370 10566 10385 4/30/2007 10839 10939 10870 7/31/2007 10881 10787 10920 10/31/2007 11544 11539 11600 1/31/2008 9465 10322 9488 4/30/2008 9866 10427 9900 7/31/2008 9206 9591 9253 10/31/2008 6282 7374 6315 1/31/2009 5559 6335 5606 4/30/2009 6930 6745 7011 7/31/2009 7872 7676 7977 10/31/2009 8415 8097 8540 1/31/2010 8827 8434 8967 4/30/2010 10205 9365 10398 7/31/2010 9501 8738 9692 10/31/2010 10705 9434 10936
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT TECHNOLOGY ETF................ 27.23% (2.48)% 1.72% S&P EQUAL WEIGHT INFORMATION TECHNOLOGY TOTAL RETURN INDEX.............................................. 28.07% (1.94)% 2.26% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 34 RYDEX S&P EQUAL WEIGHT TECHNOLOGY ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ MONSTER WORLDWIDE, INC. 1.76% GOOGLE, INC. -- CLASS A 1.52% EBAY, INC. 1.51% MICRON TECHNOLOGY, INC. 1.49% WESTERN DIGITAL CORP. 1.47% JABIL CIRCUIT, INC. 1.46% BROADCOM CORP. -- CLASS A 1.46% ADVANCED MICRO DEVICES, INC. 1.45% YAHOO!, INC. 1.44% LSI CORP. 1.43% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART)
Semiconductors & Semiconductor Equipment Software IT Services Computers & Peripherals Internet Software & Services 25.77 19.07 16.89 11.67 8.78 Semiconductors & Semiconductor Equipment Communications Equipment Electronic Equipment, Instruments & Components Office Electronics 25.77 8.43 7.98 1.41
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Industry Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 35 RYDEX S&P EQUAL WEIGHT UTILITIES ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex S&P Equal Weight Utilities ETF returned 24.10% while its benchmark, the S&P Equal Weight Telecommunication Services & Utilities Total Return Index*, returned 20.35%, as opposed to the cap-weighted S&P Utilities Index return of 16.70%. The fund had a 98% correlation to its benchmark on a daily basis. The ETF outperformed the equal-weighted index for the year -- mostly due to the telecom exposure in the ETF that is not present in the S&P Equal Weight Total Return Index. Utilities tend to be a more defensive, low-beta sector. They may benefit from the current low-interest-rate environment, given their relatively higher yields compared with corporate bond yields. Another benefit in a deflationary environment is that utilities' costs may fall quicker than the changes in rates charged customers, improving profits. Multi-utilities (31.90%) was the biggest contributor to performance while independent power producers (-11.24%) was the largest detractor. Qwest Communications International Inc., Integrys Energy Group Inc. and MetroPCS Communications Inc. were among the stocks with largest positive contributions to performance for the year. NRG Energy Inc., EQT Corp. and FirstEnergy Corp. were among the stocks with the largest negative contributions to performance. * The S&P Equal Weight Telecommunication Services & Utilities Index is an unmanaged equal weighted version of the S&P Telecommunication Services & Utilities Index that consists of the common stocks of the following industries: electric utilities, gas utilities, multi-utilities and unregulated power and water utilities, telecommunication service companies, including fixed-line, cellular, wireless, high bandwidth and fiber-optic cable networks that comprise the Utilities sector of the S&P 500 Index. As of December 31, 2009, the S&P Equal Weight Telecommunication Services & Utilities Index included companies with a capitalization range of $1.9 billion to $165.4 billion. CUMULATIVE FUND PERFORMANCE: NOVEMBER 1, 2006 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
S&P TELECOMMUNICATION SERVICES & RYDEX S&P S&P 500 EQUAL WEIGHT EQUAL WEIGHT TOTAL RETURN UTILITIES TOTAL UTILITIES ETF INDEX RETURN INDEX ------------- ------------ --------------------- 11/1/2006 10000 10000 10000 1/31/2007 10448 10566 10458 4/30/2007 11597 10939 11628 7/31/2007 10810 10787 10846 10/31/2007 11641 11539 11701 1/31/2008 10620 10322 10673 4/30/2008 10559 10427 10619 7/31/2008 10347 9591 10419 10/31/2008 7960 7374 8021 1/31/2009 7969 6335 8063 4/30/2009 7520 6745 7617 7/31/2009 8546 7676 8653 10/31/2009 8513 8097 8634 1/31/2010 9066 8434 9216 4/30/2010 9656 9365 9836 7/31/2010 9808 8738 10004 10/31/2010 10565 9434 10795
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR THREE YEAR (11/01/06) -------- ---------- --------------- RYDEX S&P EQUAL WEIGHT UTILITIES ETF................. 24.10% (3.18)% 1.38% S&P EQUAL WEIGHT TELECOMMUNICATION SERVICES & UTILITIES TOTAL RETURN INDEX....................... 25.02% (2.65)% 1.93% S&P 500 TOTAL RETURN INDEX........................... 16.52% (6.49)% (1.45)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 36 RYDEX S&P EQUAL WEIGHT UTILITIES ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ ONEOK, INC. 2.52% FRONTIER COMMUNICATIONS CORP. 2.48% CENTERPOINT ENERGY, INC. 2.47% AES CORP. (THE) 2.45% METROPCS COMMUNICATIONS, INC. 2.44% EDISON INTERNATIONAL 2.44% NICOR, INC. 2.41% QWEST COMMUNICATIONS INTERNATIONAL, INC. 2.39% NORTHEAST UTILITIES 2.39% PEPCO HOLDINGS, INC. 2.39% ------------------------------------------------------------------------------------
INDUSTRY ALLOCATIONS* (PIE CHART)
Multi- Utilities Electric Utilities Diversified Telecommunication Services Wireless Telecommunication Services 34.94 32.27 14.21 6.88 Multi- Utilities Independent Power Producers & Energy Traders Gas Utilities 34.94 6.75 4.95
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Industry Allocations are expressed as a percentage of the Fund's investments market value. These percentages may change over time. ANNUAL REPORT 37 RYDEX S&P 500 PURE VALUE ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.7% AEROSPACE & DEFENSE 0.4% L-3 Communications Holdings, Inc. .................... 3,381 $244,074 ----------- TOTAL AEROSPACE & DEFENSE 244,074 ----------- AIRLINES 0.6% Southwest Airlines Co. ..... 25,604 352,311 ----------- TOTAL AIRLINES 352,311 ----------- AUTO COMPONENTS 0.8% Goodyear Tire & Rubber Co.(The)*................ 44,690 456,732 ----------- TOTAL AUTO COMPONENTS 456,732 ----------- CAPITAL MARKETS 1.4% E*TRADE Financial Corp.*.... 31,702 453,339 Morgan Stanley.............. 14,151 351,935 ----------- TOTAL CAPITAL MARKETS 805,274 ----------- CHEMICALS 0.6% Dow Chemical Co.(The)....... 9,988 307,930 ----------- TOTAL CHEMICALS 307,930 ----------- COMMERCIAL BANKS 9.7% BB&T Corp. ................. 10,750 251,658 Comerica, Inc. ............. 12,841 459,451 Huntington Bancshares, Inc. .................... 245,803 1,393,703 KeyCorp..................... 73,676 603,406 Marshall & Ilsley Corp. .... 48,072 284,106 Regions Financial Corp. .... 40,205 253,291 SunTrust Banks, Inc. ....... 42,355 1,059,722 Zions Bancorp............... 55,069 1,137,726 ----------- TOTAL COMMERCIAL BANKS 5,443,063 ----------- COMMERCIAL SERVICES & SUPPLIES 0.8% Avery Dennison Corp. ....... 5,844 212,429 R.R. Donnelley & Sons Co. .. 14,073 259,647 ----------- TOTAL COMMERCIAL SERVICES & SUPPLIES 472,076 ----------- COMPUTERS & PERIPHERALS 0.7% Lexmark International, Inc. -- Class A*......... 10,594 402,890 ----------- TOTAL COMPUTERS & PERIPHERALS 402,890 ----------- CONSTRUCTION & ENGINEERING 1.8% Fluor Corp. ................ 9,870 475,635 Jacobs Engineering Group, Inc.*.................... 13,564 523,706 ----------- TOTAL CONSTRUCTION & ENGINEERING 999,341 ----------- CONSUMER FINANCE 1.5% Capital One Financial Corp. ................... 14,776 550,702 Discover Financial Services................. 14,610 257,866 ----------- TOTAL CONSUMER FINANCE 808,568 ----------- DIVERSIFIED FINANCIAL SERVICES 3.1% Bank of America Corp. ...... 49,254 563,466 Citigroup, Inc.*............ 180,150 751,225 Nasdaq OMX Group (The)*..... 20,728 435,703 ----------- TOTAL DIVERSIFIED FINANCIAL SERVICES 1,750,394 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.5% CenturyTel, Inc. ........... 6,704 277,411 ----------- TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 277,411 ----------- ELECTRIC UTILITIES 5.6% Allegheny Energy, Inc. ..... 10,154 235,573 American Electric Power Co., Inc. .................... 8,356 312,849 Duke Energy Corp. .......... 13,379 243,631 Edison International........ 9,714 358,447 Northeast Utilities......... 13,340 417,275 Pepco Holdings, Inc. ....... 50,769 977,811 Pinnacle West Capital Corp. ................... 7,808 321,377 Progress Energy, Inc. ...... 5,580 251,100 ----------- TOTAL ELECTRIC UTILITIES 3,118,063 ----------- FOOD & STAPLES RETAILING 4.5% Costco Wholesale Corp. ..... 5,512 345,988 CVS Caremark Corp. ......... 12,832 386,500 Kroger Co.(The)............. 38,064 837,408 Safeway, Inc. .............. 41,465 949,549 ----------- TOTAL FOOD & STAPLES RETAILING 2,519,445 ----------- FOOD PRODUCTS 3.9% Archer-Daniels-Midland Co. ..................... 21,588 719,312 Dean Foods Co.*............. 40,576 421,990 Tyson Foods, Inc. -- Class A........................ 67,959 1,056,763 ----------- TOTAL FOOD PRODUCTS 2,198,065 ----------- GAS UTILITIES 1.9% Nicor, Inc. ................ 7,496 357,034 Oneok, Inc. ................ 14,424 718,604 ----------- TOTAL GAS UTILITIES 1,075,638 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.5% CareFusion Corp.*........... 11,463 276,717 ----------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 276,717 ----------- HEALTH CARE PROVIDERS & SERVICES 10.9% Aetna, Inc. ................ 13,105 391,315 AmerisourceBergen Corp. .... 31,097 1,020,604 Cardinal Health, Inc. ...... 30,627 1,062,451 Coventry Health Care, Inc.*.................... 38,240 895,581 Humana, Inc.*............... 18,891 1,101,156 McKesson Corp. ............. 12,059 795,653 Tenet Healthcare Corp.*..... 90,818 395,966 WellPoint, Inc.*............ 8,336 452,978 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 6,115,704 ----------- HOUSEHOLD DURABLES 1.6% Fortune Brands, Inc. ....... 5,717 309,004 Whirlpool Corp. ............ 7,466 566,147 ----------- TOTAL HOUSEHOLD DURABLES 875,151 ----------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 0.4% Constellation Energy Group, Inc. .................... 7,310 221,054 ----------- TOTAL INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 221,054 ----------- INDUSTRIAL CONGLOMERATES 0.8% Textron, Inc. .............. 21,949 456,978 ----------- TOTAL INDUSTRIAL CONGLOMERATES 456,978 ----------- INSURANCE 8.9% Allstate Corp. ............. 8,150 248,494 American International Group, Inc.*............. 16,946 711,901 Assurant, Inc. ............. 21,930 867,112 Cincinnati Financial Corp. ................... 13,457 396,174 Genworth Financial, Inc. -- Class A*......... 72,640 823,738 Lincoln National Corp. ..... 24,969 611,241 MetLife, Inc. .............. 13,662 550,988
See Notes to Financial Statements. 38 RYDEX S&P 500 PURE VALUE ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS (CONCLUDED) Travelers Cos., Inc.(The)... 4,310 $237,912 Unum Group.................. 23,874 535,255 ----------- TOTAL INSURANCE 4,982,815 ----------- LEISURE EQUIPMENT & PRODUCTS 0.6% Eastman Kodak Co.*.......... 64,890 305,632 ----------- TOTAL LEISURE EQUIPMENT & PRODUCTS 305,632 ----------- MACHINERY 1.2% Eaton Corp. ................ 3,958 351,589 Snap-on, Inc. .............. 5,903 301,053 ----------- TOTAL MACHINERY 652,642 ----------- MEDIA 1.7% Comcast Corp. -- Class A.... 14,200 292,236 Interpublic Group of Cos., Inc.*.................... 62,359 645,416 ----------- TOTAL MEDIA 937,652 ----------- METALS & MINING 2.9% Alcoa, Inc. ................ 51,042 670,181 United States Steel Corp. .. 21,549 922,082 ----------- TOTAL METALS & MINING 1,592,263 ----------- MULTI-UTILITIES 9.0% Ameren Corp. ............... 21,246 615,709 CenterPoint Energy, Inc. ... 26,826 444,238 CMS Energy Corp. ........... 29,425 540,831 Consolidated Edison, Inc. .. 6,206 308,562 DTE Energy Co. ............. 8,737 408,542 Integrys Energy Group, Inc. .................... 24,989 1,329,165 NiSource, Inc. ............. 45,873 794,062 SCANA Corp. ................ 7,115 290,577 Xcel Energy, Inc. .......... 12,059 287,728 ----------- TOTAL MULTI-UTILITIES 5,019,414 ----------- MULTILINE RETAIL 3.6% Big Lots, Inc.*............. 11,600 363,892 J.C. Penney Co., Inc. ...... 19,369 603,926 Sears Holdings Corp.*....... 14,591 1,050,260 ----------- TOTAL MULTILINE RETAIL 2,018,078 ----------- OFFICE ELECTRONICS 1.5% Xerox Corp. ................ 70,168 820,966 ----------- TOTAL OFFICE ELECTRONICS 820,966 ----------- OIL, GAS & CONSUMABLE FUELS 12.6% Chesapeake Energy Corp. .... 14,376 311,959 Chevron Corp. .............. 3,303 272,861 ConocoPhillips.............. 4,877 289,694 Hess Corp. ................. 7,672 483,566 Marathon Oil Corp. ......... 23,396 832,196 Sunoco, Inc. ............... 42,208 1,581,534 Tesoro Corp. ............... 121,856 1,579,254 Valero Energy Corp. ........ 79,657 1,429,843 Williams Cos., Inc.(The).... 12,441 267,730 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 7,048,637 ----------- REAL ESTATE INVESTMENT TRUSTS (REITS) 1.5% Host Hotels & Resorts, Inc. .................... 29,660 471,297 Kimco Realty Corp. ......... 22,037 379,698 ----------- TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 850,995 ----------- ROAD & RAIL 0.9% Ryder System, Inc. ......... 11,297 494,244 ----------- TOTAL ROAD & RAIL 494,244 ----------- SPECIALTY RETAIL 0.9% AutoNation, Inc.*........... 20,630 479,029 ----------- TOTAL SPECIALTY RETAIL 479,029 ----------- WIRELESS TELECOMMUNICATION SERVICES 2.4% MetroPCS Communications, Inc.*.................... 48,854 508,570 Sprint Nextel Corp.*........ 204,503 842,552 ----------- TOTAL WIRELESS TELECOMMUNICATION SERVICES 1,351,122 ----------- TOTAL COMMON STOCKS (Cost $58,981,919) 55,730,368 ----------- SHORT TERM INVESTMENTS 0.2% SSgA Government Money Market Fund..................... 116,455 116,455 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $116,455) 116,455 ----------- TOTAL INVESTMENTS 99.9%(A) (Cost $59,098,374) 55,846,823 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.1% 28,742 ----------- NET ASSETS--100.0% $55,875,565 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. See Notes to Financial Statements. ANNUAL REPORT 39 RYDEX S&P 500 PURE GROWTH ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------ COMMON STOCKS 100.0% AEROSPACE & DEFENSE 2.9% Goodrich Corp. ............. 10,654 $874,374 Honeywell International, Inc. .................... 15,098 711,267 ITT Corp. .................. 11,542 544,667 Precision Castparts Corp. .. 12,124 1,655,896 United Technologies Corp. .. 6,782 507,090 ------------ TOTAL AEROSPACE & DEFENSE 4,293,294 ------------ BIOTECHNOLOGY 1.9% Biogen Idec, Inc.*.......... 19,542 1,225,479 Celgene Corp.*.............. 13,584 843,159 Gilead Sciences, Inc.*...... 19,784 784,831 ------------ TOTAL BIOTECHNOLOGY 2,853,469 ------------ CAPITAL MARKETS 1.2% Invesco Ltd. ............... 47,060 1,082,380 Janus Capital Group, Inc. .. 59,692 630,347 ------------ TOTAL CAPITAL MARKETS 1,712,727 ------------ CHEMICALS 2.3% CF Industries Holdings, Inc. .................... 19,087 2,338,730 FMC Corp. .................. 8,158 596,350 Praxair, Inc. .............. 5,534 505,475 ------------ TOTAL CHEMICALS 3,440,555 ------------ COMMERCIAL SERVICES & SUPPLIES 0.5% Stericycle, Inc.*........... 9,766 700,613 ------------ TOTAL COMMERCIAL SERVICES & SUPPLIES 700,613 ------------ COMMUNICATIONS EQUIPMENT 0.8% Juniper Networks, Inc.*..... 38,734 1,254,594 ------------ TOTAL COMMUNICATIONS EQUIPMENT 1,254,594 ------------ COMPUTERS & PERIPHERALS 6.4% Apple, Inc.*................ 8,538 2,568,828 EMC Corp.*.................. 65,976 1,386,156 NetApp, Inc.*............... 57,193 3,045,527 QLogic Corp.*............... 58,972 1,036,138 Western Digital Corp.*...... 46,330 1,483,487 ------------ TOTAL COMPUTERS & PERIPHERALS 9,520,136 ------------ CONSUMER FINANCE 0.4% American Express Co. ....... 15,754 653,161 ------------ TOTAL CONSUMER FINANCE 653,161 ------------ DIVERSIFIED FINANCIAL SERVICES 1.4% CME Group, Inc. ............ 2,348 680,098 IntercontinentalExchange, Inc.*.................... 12,686 1,457,241 ------------ TOTAL DIVERSIFIED FINANCIAL SERVICES 2,137,339 ------------ ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 2.1% Amphenol Corp. -- Class A... 30,778 1,542,901 Corning, Inc. .............. 40,870 747,104 FLIR Systems, Inc.*......... 26,926 749,620 ------------ TOTAL ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 3,039,625 ------------ ENERGY EQUIPMENT & SERVICES 7.8% Baker Hughes, Inc. ......... 22,916 1,061,698 Cameron International Corp.*................... 46,636 2,040,325 Diamond Offshore Drilling, Inc. .................... 13,860 916,978 FMC Technologies, Inc.*..... 22,038 1,588,940 Helmerich & Payne, Inc. .... 17,890 765,334 National-Oilwell Varco, Inc. .................... 36,998 1,989,013 Rowan Cos., Inc.*........... 59,968 1,972,947 Schlumberger, Ltd. ......... 16,198 1,132,078 ------------ TOTAL ENERGY EQUIPMENT & SERVICES 11,467,313 ------------ FOOD & STAPLES RETAILING 1.4% Whole Foods Market, Inc.*... 50,952 2,025,342 ------------ TOTAL FOOD & STAPLES RETAILING 2,025,342 ------------ HEALTH CARE EQUIPMENT & SUPPLIES 2.3% Hospira, Inc.*.............. 10,422 619,900 Intuitive Surgical, Inc.*... 6,728 1,769,128 St Jude Medical, Inc.*...... 14,166 542,558 Zimmer Holdings, Inc.*...... 8,528 404,568 ------------ TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 3,336,154 ------------ HEALTH CARE PROVIDERS & SERVICES 3.1% CIGNA Corp. ................ 47,504 1,671,666 DaVita, Inc.*............... 13,500 968,625 Express Scripts, Inc.*...... 17,510 849,585 Laboratory Corp. of America Holdings*................ 6,782 551,512 Medco Health Solutions, Inc.*.................... 10,422 547,468 ------------ TOTAL HEALTH CARE PROVIDERS & SERVICES 4,588,856 ------------ HEALTH CARE TECHNOLOGY 0.8% Cerner Corp.*............... 13,352 1,172,706 ------------ TOTAL HEALTH CARE TECHNOLOGY 1,172,706 ------------ HOTELS, RESTAURANTS & LEISURE 3.9% Starbucks Corp. ............ 56,486 1,608,721 Starwood Hotels & Resorts Worldwide, Inc. ......... 14,156 766,406 Wyndham Worldwide Corp. .... 24,968 717,830 Wynn Resorts Ltd. .......... 24,292 2,603,374 ------------ TOTAL HOTELS, RESTAURANTS & LEISURE 5,696,331 ------------ INTERNET & CATALOG RETAIL 5.3% Amazon.com, Inc.*........... 17,678 2,919,345 Expedia, Inc. .............. 36,278 1,050,248 Priceline.com, Inc.*........ 10,274 3,871,346 ------------ TOTAL INTERNET & CATALOG RETAIL 7,840,939 ------------ INTERNET SOFTWARE & SERVICES 5.0% Akamai Technologies, Inc.*.. 63,756 3,294,273 eBay, Inc.*................. 72,921 2,173,775 Google, Inc. -- Class A*.... 3,078 1,886,783 ------------ TOTAL INTERNET SOFTWARE & SERVICES 7,354,831 ------------ IT SERVICES 4.2% Cognizant Technology Solutions Corp. -- Class A*....................... 48,318 3,149,850 International Business Machines Corp. .......... 3,630 521,268 Teradata Corp.*............. 28,396 1,117,667 Visa, Inc. -- Class A....... 17,426 1,362,190 ------------ TOTAL IT SERVICES 6,150,975 ------------ LEISURE EQUIPMENT & PRODUCTS 0.5% Hasbro, Inc. ............... 15,966 738,427 ------------ TOTAL LEISURE EQUIPMENT & PRODUCTS 738,427 ------------ LIFE SCIENCES TOOLS & SERVICES 1.1% Life Technologies Corp.*.... 16,474 826,665 Waters Corp.*............... 11,004 815,727 ------------ TOTAL LIFE SCIENCES TOOLS & SERVICES 1,642,392 ------------
See Notes to Financial Statements. 40 RYDEX S&P 500 PURE GROWTH ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------ COMMON STOCKS (CONCLUDED) MACHINERY 2.0% Caterpillar, Inc. .......... 11,892 $934,711 Danaher Corp. .............. 12,474 540,873 Flowserve Corp. ............ 14,536 1,453,600 ------------ TOTAL MACHINERY 2,929,184 ------------ MEDIA 2.4% DIRECTV -- Class A*......... 34,502 1,499,457 Viacom, Inc. -- Class B..... 52,328 2,019,337 ------------ TOTAL MEDIA 3,518,794 ------------ METALS & MINING 3.0% Cliffs Natural Resources, Inc. .................... 33,116 2,159,163 Freeport-McMoRan Copper & Gold, Inc. .............. 17,204 1,628,875 Newmont Mining Corp. ....... 10,452 636,213 ------------ TOTAL METALS & MINING 4,424,251 ------------ MULTILINE RETAIL 1.4% Kohl's Corp.*............... 10,072 515,686 Nordstrom, Inc. ............ 39,272 1,512,365 ------------ TOTAL MULTILINE RETAIL 2,028,051 ------------ OIL, GAS & CONSUMABLE FUELS 7.5% Anadarko Petroleum Corp. ... 23,169 1,426,515 Denbury Resources, Inc.*.... 104,858 1,784,683 EOG Resources, Inc. ........ 9,046 865,883 Massey Energy Co. .......... 36,120 1,519,569 Noble Energy, Inc. ......... 8,740 712,135 Occidental Petroleum Corp. ................... 9,416 740,380 Peabody Energy Corp. ....... 21,392 1,131,637 Pioneer Natural Resources Co. ..................... 15,690 1,095,162 Range Resources Corp. ...... 23,266 869,916 Southwestern Energy Co.*.... 28,312 958,361 ------------ TOTAL OIL, GAS & CONSUMABLE FUELS 11,104,241 ------------ PAPER & FOREST PRODUCTS 0.6% MeadWestvaco Corp. ......... 34,127 878,088 ------------ TOTAL PAPER & FOREST PRODUCTS 878,088 ------------ PERSONAL PRODUCTS 0.4% Avon Products, Inc. ........ 18,886 575,079 ------------ TOTAL PERSONAL PRODUCTS 575,079 ------------ PHARMACEUTICALS 2.5% Allergan, Inc. ............. 14,018 1,015,043 Mylan, Inc.*................ 80,862 1,643,116 Watson Pharmaceuticals, Inc.*.................... 21,372 997,004 ------------ TOTAL PHARMACEUTICALS 3,655,163 ------------ REAL ESTATE INVESTMENT TRUSTS (REITS) 2.6% ProLogis.................... 142,586 1,946,299 Ventas, Inc. ............... 34,744 1,860,889 ------------ TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 3,807,188 ------------ REAL ESTATE MANAGEMENT & DEVELOPMENT 1.0% CB Richard Ellis Group, Inc. -- Class A*......... 77,340 1,419,189 ------------ TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT 1,419,189 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 2.5% Altera Corp. ............... 24,504 764,770 Broadcom Corp. -- Class A... 41,210 1,678,895 First Solar, Inc.*.......... 6,338 872,616 NVIDIA Corp.*............... 30,354 365,159 ------------ TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 3,681,440 ------------ SOFTWARE 8.7% Adobe Systems, Inc.*........ 19,128 538,453 Autodesk, Inc.*............. 20,810 752,906 BMC Software, Inc.*......... 15,522 705,630 Citrix Systems, Inc.*....... 18,536 1,187,602 McAfee, Inc.*............... 17,658 835,223 Microsoft Corp. ............ 21,002 559,493 Oracle Corp. ............... 33,116 973,611 Red Hat, Inc.*.............. 85,074 3,595,227 Salesforce.com, Inc.*....... 31,232 3,625,098 ------------ TOTAL SOFTWARE 12,773,243 ------------ SPECIALTY RETAIL 7.3% Abercrombie & Fitch Co. -- Class A........... 22,176 950,463 AutoZone, Inc.*............. 3,744 889,687 Bed Bath & Beyond, Inc.*.... 20,568 902,935 Best Buy Co., Inc. ......... 34,438 1,480,145 CarMax, Inc.*............... 46,034 1,426,594 O'Reilly Automotive, Inc.*.. 17,604 1,029,834 Ross Stores, Inc. .......... 17,130 1,010,499 Tiffany & Co. .............. 25,530 1,353,090 TJX Cos., Inc. ............. 14,368 659,347 Urban Outfitters, Inc.*..... 35,336 1,087,289 ------------ TOTAL SPECIALTY RETAIL 10,789,883 ------------ TEXTILES, APPAREL & LUXURY GOODS 2.0% Coach, Inc. ................ 42,088 2,104,400 Polo Ralph Lauren Corp. .... 9,490 919,391 ------------ TOTAL TEXTILES, APPAREL & LUXURY GOODS 3,023,791 ------------ THRIFTS & MORTGAGE FINANCE 0.4% Hudson City Bancorp, Inc. .. 52,846 615,656 ------------ TOTAL THRIFTS & MORTGAGE FINANCE 615,656 ------------ TRADING COMPANIES & DISTRIBUTORS 0.4% W.W. Grainger, Inc. ........ 4,548 564,088 ------------ TOTAL TRADING COMPANIES & DISTRIBUTORS 564,088 ------------ TOTAL COMMON STOCKS (Cost $132,179,168) 147,407,108 ------------ SHORT TERM INVESTMENTS 0.0%(A) SSgA Government Money Market Fund..................... 67,922 67,922 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $67,922) 67,922 ------------ TOTAL INVESTMENTS 100.0%(B) (Cost $132,247,090) 147,475,030 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--0.0%(A) (4,625) ------------ NET ASSETS--100.0% $147,470,405 ------------------------------------------------------
* Non-Income Producing Security. (a) Amount represents less than 0.05% of net assets. (b) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. See Notes to Financial Statements. ANNUAL REPORT 41 RYDEX S&P MIDCAP 400 PURE VALUE ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.8% AIRLINES 2.3% Alaska Air Group, Inc.*..... 9,669 $510,523 JetBlue Airways Corp.*...... 65,768 459,061 ----------- TOTAL AIRLINES 969,584 ----------- CHEMICALS 3.2% Ashland, Inc. .............. 20,079 1,036,679 Cytec Industries, Inc. ..... 7,336 363,278 ----------- TOTAL CHEMICALS 1,399,957 ----------- COMMERCIAL BANKS 6.6% Associated Banc-Corp. ...... 56,548 716,463 Cathay General Bancorp...... 116,587 1,585,583 Synovus Financial Corp. .... 172,566 372,743 Wilmington Trust Corp. ..... 23,570 167,583 ----------- TOTAL COMMERCIAL BANKS 2,842,372 ----------- COMMERCIAL SERVICES & SUPPLIES 0.7% Brink's Co.(The)............ 12,849 303,236 ----------- TOTAL COMMERCIAL SERVICES & SUPPLIES 303,236 ----------- COMPUTERS & PERIPHERALS 2.0% Diebold, Inc. .............. 8,670 265,736 NCR Corp.*.................. 44,238 606,945 ----------- TOTAL COMPUTERS & PERIPHERALS 872,681 ----------- CONSTRUCTION & ENGINEERING 5.9% Aecom Technology Corp.*..... 12,429 329,244 Granite Construction, Inc. .................... 12,739 308,029 KBR, Inc. .................. 35,838 910,285 Shaw Group, Inc.(The)*...... 13,590 415,310 URS Corp.*.................. 15,119 588,583 ----------- TOTAL CONSTRUCTION & ENGINEERING 2,551,451 ----------- DIVERSIFIED CONSUMER SERVICES 2.3% Regis Corp. ................ 48,778 997,510 ----------- TOTAL DIVERSIFIED CONSUMER SERVICES 997,510 ----------- ELECTRIC UTILITIES 4.3% Great Plains Energy, Inc. .. 18,449 351,084 Hawaiian Electric Industries, Inc. ........ 15,525 349,934 NV Energy, Inc. ............ 33,039 451,313 PNM Resources, Inc. ........ 34,489 406,625 Westar Energy, Inc. ........ 11,430 289,179 ----------- TOTAL ELECTRIC UTILITIES 1,848,135 ----------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 6.1% Arrow Electronics, Inc.*.... 23,439 694,029 Avnet, Inc.*................ 10,973 326,776 Ingram Micro, Inc. -- Class A*....................... 43,638 770,647 Tech Data Corp.*............ 19,750 849,052 ----------- TOTAL ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 2,640,504 ----------- ENERGY EQUIPMENT & SERVICES 0.8% Patterson-UTI Energy, Inc. .................... 16,919 328,398 ----------- TOTAL ENERGY EQUIPMENT & SERVICES 328,398 ----------- FOOD & STAPLES RETAILING 3.7% BJ's Wholesale Club, Inc.*.. 22,800 951,444 Ruddick Corp. .............. 18,240 636,576 ----------- TOTAL FOOD & STAPLES RETAILING 1,588,020 ----------- FOOD PRODUCTS 3.7% Corn Products International, Inc. .................... 11,830 503,367 Ralcorp Holdings, Inc.*..... 4,121 255,749 Smithfield Foods, Inc.*..... 51,059 855,238 ----------- TOTAL FOOD PRODUCTS 1,614,354 ----------- GAS UTILITIES 2.7% Atmos Energy Corp. ......... 13,639 401,669 UGI Corp. .................. 14,649 440,788 WGL Holdings, Inc. ......... 8,010 308,785 ----------- TOTAL GAS UTILITIES 1,151,242 ----------- HEALTH CARE PROVIDERS & SERVICES 9.3% Health Net, Inc.*........... 37,149 998,937 Kindred Healthcare, Inc.*... 82,977 1,138,444 LifePoint Hospitals, Inc.*.. 14,909 505,713 Omnicare, Inc. ............. 26,499 639,156 Owens & Minor, Inc. ........ 24,739 704,567 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 3,986,817 ----------- HOTELS, RESTAURANTS & LEISURE 2.7% Bob Evans Farms, Inc. ...... 11,661 334,671 Boyd Gaming Corp.*.......... 52,628 437,339 Brinker International, Inc. .................... 20,899 387,467 ----------- TOTAL HOTELS, RESTAURANTS & LEISURE 1,159,477 ----------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 1.1% Dynegy, Inc.*............... 100,898 468,167 ----------- TOTAL INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 468,167 ----------- INSURANCE 6.0% American Financial Group, Inc. .................... 13,349 408,212 Hanover Insurance Group, Inc.(The)................ 5,439 246,115 HCC Insurance Holdings, Inc. .................... 7,710 204,161 Old Republic International Corp. ................... 23,789 314,015 Protective Life Corp. ...... 12,840 307,775 Reinsurance Group of America, Inc. ........... 6,929 346,935 StanCorp Financial Group, Inc. .................... 6,600 283,140 Unitrin, Inc. .............. 19,759 480,143 ----------- TOTAL INSURANCE 2,590,496 ----------- IT SERVICES 1.9% Convergys Corp.*............ 21,770 246,436 CoreLogic, Inc. ............ 19,119 335,921 SRA International, Inc. -- Class A*......... 12,149 243,102 ----------- TOTAL IT SERVICES 825,459 ----------- MACHINERY 8.0% AGCO Corp.*................. 17,279 733,839 Terex Corp.*................ 49,638 1,114,373 Timken Co. ................. 16,629 688,773 Trinity Industries, Inc. ... 39,289 893,039 ----------- TOTAL MACHINERY 3,430,024 ----------- MARINE 0.7% Alexander & Baldwin, Inc. .. 9,099 313,279 ----------- TOTAL MARINE 313,279 ----------- MEDIA 1.5% Harte-Hanks, Inc. .......... 23,220 280,498 Scholastic Corp. ........... 11,889 350,131 ----------- TOTAL MEDIA 630,629 -----------
See Notes to Financial Statements. 42 RYDEX S&P MIDCAP 400 PURE VALUE ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS (CONCLUDED) METALS & MINING 2.2% Commercial Metals Co. ...... 38,009 $527,565 Worthington Industries, Inc. .................... 26,120 402,248 ----------- TOTAL METALS & MINING 929,813 ----------- MULTI-UTILITIES 1.5% Alliant Energy Corp. ....... 9,960 363,839 Black Hills Corp. .......... 9,249 294,488 ----------- TOTAL MULTI-UTILITIES 658,327 ----------- MULTILINE RETAIL 2.4% Saks, Inc.*................. 94,388 1,051,482 ----------- TOTAL MULTILINE RETAIL 1,051,482 ----------- OIL, GAS & CONSUMABLE FUELS 4.9% Frontier Oil Corp. ......... 79,337 1,051,215 Overseas Shipholding Group, Inc. .................... 17,909 598,698 Patriot Coal Corp.*......... 35,030 472,555 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 2,122,468 ----------- PROFESSIONAL SERVICES 1.8% Manpower, Inc. ............. 14,320 783,734 ----------- TOTAL PROFESSIONAL SERVICES 783,734 ----------- REAL ESTATE INVESTMENT TRUSTS (REITS) 0.8% Hospitality Properties Trust.................... 14,249 325,020 ----------- TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 325,020 ----------- ROAD & RAIL 1.0% Con-way, Inc. .............. 12,739 420,514 ----------- TOTAL ROAD & RAIL 420,514 ----------- SPECIALTY RETAIL 6.3% Barnes & Noble, Inc. ....... 33,848 507,043 Coldwater Creek, Inc.*...... 69,268 233,433 Foot Locker, Inc. .......... 78,878 1,256,527 Rent-A-Center, Inc. ........ 29,259 735,571 ----------- TOTAL SPECIALTY RETAIL 2,732,574 ----------- THRIFTS & MORTGAGE FINANCE 1.1% Astoria Financial Corp. .... 37,510 465,874 ----------- TOTAL THRIFTS & MORTGAGE FINANCE 465,874 ----------- TOBACCO 0.9% Universal Corp. ............ 9,309 385,765 ----------- TOTAL TOBACCO 385,765 ----------- TRADING COMPANIES & DISTRIBUTORS 0.5% GATX Corp. ................. 7,030 222,570 ----------- TOTAL TRADING COMPANIES & DISTRIBUTORS 222,570 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.9% Telephone & Data Systems, Inc. .................... 10,943 381,145 ----------- TOTAL WIRELESS TELECOMMUNICATION SERVICES 381,145 ----------- TOTAL COMMON STOCKS (Cost $44,140,886) 42,991,078 ----------- SHORT TERM INVESTMENTS 0.2% SSgA Government Money Market Fund..................... 88,303 88,303 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $88,303) 88,303 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $44,229,189) 43,079,381 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.0%(B) 9,364 ----------- NET ASSETS--100.0% $43,088,745 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. ANNUAL REPORT 43 RYDEX S&P MIDCAP 400 PURE GROWTH ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------ COMMON STOCKS 99.9% AEROSPACE & DEFENSE 1.5% BE Aerospace, Inc.*......... 115,181 $4,234,054 ------------ TOTAL AEROSPACE & DEFENSE 4,234,054 ------------ AUTO COMPONENTS 0.5% Gentex Corp. ............... 74,591 1,490,328 ------------ TOTAL AUTO COMPONENTS 1,490,328 ------------ BEVERAGES 1.1% Hansen Natural Corp.*....... 61,798 3,164,676 ------------ TOTAL BEVERAGES 3,164,676 ------------ BIOTECHNOLOGY 1.3% United Therapeutics Corp.*.. 62,512 3,750,720 ------------ TOTAL BIOTECHNOLOGY 3,750,720 ------------ CAPITAL MARKETS 1.6% Affiliated Managers Group, Inc.*.................... 24,807 2,123,727 Waddell & Reed Financial, Inc. -- Class A.......... 87,270 2,536,939 ------------ TOTAL CAPITAL MARKETS 4,660,666 ------------ CHEMICALS 2.5% Lubrizol Corp. ............. 19,641 2,013,006 NewMarket Corp. ............ 44,511 5,275,444 ------------ TOTAL CHEMICALS 7,288,450 ------------ COMMUNICATIONS EQUIPMENT 6.7% CommScope, Inc.*............ 131,419 4,160,726 F5 Networks, Inc.*.......... 50,364 5,927,843 Polycom, Inc.*.............. 95,580 3,228,692 Riverbed Technology, Inc.*.. 111,207 6,398,851 ------------ TOTAL COMMUNICATIONS EQUIPMENT 19,716,112 ------------ CONTAINERS & PACKAGING 0.6% Greif, Inc. -- Class A...... 27,194 1,597,376 ------------ TOTAL CONTAINERS & PACKAGING 1,597,376 ------------ DISTRIBUTORS 1.3% LKQ Corp.*.................. 172,962 3,760,194 ------------ TOTAL DISTRIBUTORS 3,760,194 ------------ DIVERSIFIED CONSUMER SERVICES 1.5% ITT Educational Services, Inc.*.................... 13,104 845,601 Sotheby's................... 63,395 2,779,237 Strayer Education, Inc. .... 5,063 707,959 ------------ TOTAL DIVERSIFIED CONSUMER SERVICES 4,332,797 ------------ DIVERSIFIED FINANCIAL SERVICES 0.7% MSCI, Inc. -- Class A*...... 55,759 1,998,960 ------------ TOTAL DIVERSIFIED FINANCIAL SERVICES 1,998,960 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 0.8% tw telecom, Inc.*........... 126,376 2,325,318 ------------ TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 2,325,318 ------------ ELECTRICAL EQUIPMENT 3.0% AMETEK, Inc. ............... 30,524 1,649,822 Baldor Electric Co. ........ 91,854 3,859,705 Thomas & Betts Corp.*....... 72,071 3,138,692 ------------ TOTAL ELECTRICAL EQUIPMENT 8,648,219 ------------ ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 0.8% Itron, Inc.*................ 36,002 2,187,842 ------------ TOTAL ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 2,187,842 ------------ ENERGY EQUIPMENT & SERVICES 5.6% Atwood Oceanics, Inc.*...... 122,764 3,991,058 Dril-Quip, Inc.*............ 63,097 4,360,003 Oceaneering International, Inc.*.................... 71,573 4,428,221 Superior Energy Services, Inc.*.................... 134,540 3,715,995 ------------ TOTAL ENERGY EQUIPMENT & SERVICES 16,495,277 ------------ FOOD PRODUCTS 2.7% Green Mountain Coffee Roasters, Inc.*.......... 236,066 7,787,817 ------------ TOTAL FOOD PRODUCTS 7,787,817 ------------ HEALTH CARE EQUIPMENT & SUPPLIES 3.1% Edwards Lifesciences Corp.*................... 26,842 1,715,472 Idexx Laboratories, Inc.*... 44,232 2,652,151 Kinetic Concepts, Inc.*..... 43,070 1,637,952 Masimo Corp. ............... 61,466 1,854,429 ResMed, Inc.*............... 36,855 1,174,569 ------------ TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 9,034,573 ------------ HEALTH CARE PROVIDERS & SERVICES 4.6% Community Health Systems, Inc.*.................... 149,161 4,486,763 Lincare Holdings, Inc. ..... 93,183 2,443,258 MEDNAX, Inc.*............... 50,384 2,983,237 WellCare Health Plans, Inc.*.................... 126,987 3,527,699 ------------ TOTAL HEALTH CARE PROVIDERS & SERVICES 13,440,957 ------------ HEALTH CARE TECHNOLOGY 0.8% Allscripts Healthcare Solutions, Inc.*......... 124,694 2,380,408 ------------ TOTAL HEALTH CARE TECHNOLOGY 2,380,408 ------------ HOTELS, RESTAURANTS & LEISURE 7.9% Bally Technologies, Inc.*... 90,892 3,279,383 Cheesecake Factory, Inc.(The)*............... 189,645 5,522,462 Chipotle Mexican Grill, Inc. -- Class A*......... 26,633 5,598,523 Life Time Fitness, Inc.*.... 92,997 3,359,982 Panera Bread Co. -- Class A*....................... 41,015 3,671,253 WMS Industries, Inc.*....... 39,903 1,740,968 ------------ TOTAL HOTELS, RESTAURANTS & LEISURE 23,172,571 ------------ HOUSEHOLD DURABLES 1.1% Tupperware Brands Corp. .... 73,097 3,275,477 ------------ TOTAL HOUSEHOLD DURABLES 3,275,477 ------------ INTERNET & CATALOG RETAIL 4.4% NetFlix, Inc.*.............. 73,449 12,743,401 ------------ TOTAL INTERNET & CATALOG RETAIL 12,743,401 ------------ INTERNET SOFTWARE & SERVICES 2.6% Equinix, Inc.*.............. 41,065 3,459,316 Rackspace Hosting, Inc.*.... 98,143 2,449,649 ValueClick, Inc.*........... 129,653 1,784,025 ------------ TOTAL INTERNET SOFTWARE & SERVICES 7,692,990 ------------ IT SERVICES 2.2% Alliance Data Systems Corp.*................... 19,661 1,193,816 Broadridge Financial Solutions, Inc. ......... 42,841 942,502 Gartner, Inc.*.............. 57,854 1,833,393
See Notes to Financial Statements. 44 RYDEX S&P MIDCAP 400 PURE GROWTH ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------ COMMON STOCKS (CONCLUDED) Global Payments, Inc. ...... 33,907 $1,321,017 NeuStar, Inc. -- Class A*... 41,241 1,064,430 ------------ TOTAL IT SERVICES 6,355,158 ------------ LIFE SCIENCES TOOLS & SERVICES 0.9% Covance, Inc.*.............. 18,811 883,929 Mettler Toledo International, Inc.*..... 12,928 1,687,880 ------------ TOTAL LIFE SCIENCES TOOLS & SERVICES 2,571,809 ------------ MACHINERY 5.8% Bucyrus International, Inc. -- Class A.......... 97,957 6,676,749 Gardner Denver, Inc. ....... 39,106 2,261,109 Joy Global, Inc. ........... 61,144 4,338,167 Nordson Corp. .............. 16,052 1,252,377 Oshkosh Corp.*.............. 27,722 818,076 Valmont Industries, Inc. ... 19,933 1,571,717 ------------ TOTAL MACHINERY 16,918,195 ------------ MARINE 0.6% Kirby Corp.*................ 42,904 1,844,443 ------------ TOTAL MARINE 1,844,443 ------------ MEDIA 1.1% DreamWorks Animation SKG, Inc. -- Class A*......... 42,207 1,489,907 Lamar Advertising Co. -- Class A*.......... 54,491 1,852,149 ------------ TOTAL MEDIA 3,342,056 ------------ METALS & MINING 2.5% Reliance Steel & Aluminum Co. ..................... 98,299 4,113,813 Steel Dynamics, Inc. ....... 226,448 3,288,025 ------------ TOTAL METALS & MINING 7,401,838 ------------ MULTILINE RETAIL 0.6% Dollar Tree, Inc.*.......... 34,136 1,751,518 ------------ TOTAL MULTILINE RETAIL 1,751,518 ------------ OIL, GAS & CONSUMABLE FUELS 2.8% Bill Barrett Corp.*......... 95,321 3,598,368 Plains Exploration & Production Co.*.......... 35,859 999,390 Quicksilver Resources, Inc.*.................... 239,014 3,578,040 ------------ TOTAL OIL, GAS & CONSUMABLE FUELS 8,175,798 ------------ PHARMACEUTICALS 0.6% Medicis Pharmaceutical Corp. -- Class A......... 59,461 1,768,965 ------------ TOTAL PHARMACEUTICALS 1,768,965 ------------ PROFESSIONAL SERVICES 0.4% FTI Consulting, Inc.*....... 34,093 1,208,938 ------------ TOTAL PROFESSIONAL SERVICES 1,208,938 ------------ REAL ESTATE INVESTMENT TRUSTS (REITS) 1.5% SL Green Realty Corp. ...... 67,263 4,420,524 ------------ TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 4,420,524 ------------ REAL ESTATE MANAGEMENT & DEVELOPMENT 1.7% Jones Lang LaSalle, Inc. ... 64,939 5,069,138 ------------ TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT 5,069,138 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 2.4% Cree, Inc.*................. 43,442 2,228,140 Semtech Corp.*.............. 62,150 1,330,632 Silicon Laboratories, Inc.*.................... 23,160 924,084 Skyworks Solutions, Inc.*... 115,584 2,648,029 ------------ TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 7,130,885 ------------ SOFTWARE 8.7% Advent Software, Inc.*...... 66,343 3,563,946 Ansys, Inc.*................ 62,326 2,820,251 Factset Research Systems, Inc. .................... 33,077 2,903,499 Informatica Corp.*.......... 88,774 3,612,214 MICROS Systems, Inc.*....... 36,749 1,668,037 Rovi Corp.*................. 55,892 2,830,930 Solera Holdings, Inc. ...... 96,898 4,655,949 TIBCO Software, Inc.*....... 181,345 3,485,451 ------------ TOTAL SOFTWARE 25,540,277 ------------ SPECIALTY RETAIL 6.5% Aeropostale, Inc.*.......... 184,436 4,496,550 Chico's FAS, Inc. .......... 137,871 1,340,106 Collective Brands, Inc.*.... 108,312 1,660,423 Dress Barn, Inc.(The)*...... 106,579 2,444,922 Guess?, Inc. ............... 116,985 4,553,056 J. Crew Group, Inc.*........ 64,401 2,060,188 Williams-Sonoma, Inc. ...... 75,348 2,439,015 ------------ TOTAL SPECIALTY RETAIL 18,994,260 ------------ TEXTILES, APPAREL & LUXURY GOODS 4.0% Fossil, Inc.*............... 86,812 5,121,040 Under Armour, Inc. -- Class A*....................... 75,524 3,525,460 Warnaco Group, Inc.*........ 59,255 3,147,033 ------------ TOTAL TEXTILES, APPAREL & LUXURY GOODS 11,793,533 ------------ WIRELESS TELECOMMUNICATION SERVICES 0.9% Syniverse Holdings, Inc.*... 85,112 2,595,065 ------------ TOTAL WIRELESS TELECOMMUNICATION SERVICES 2,595,065 ------------ TOTAL COMMON STOCKS (Cost $264,101,378) 292,061,583 ------------ SHORT TERM INVESTMENTS 0.1% SSgA Government Money Market Fund..................... 421,016 421,016 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $421,016) 421,016 ------------ TOTAL INVESTMENTS 100.0%(A) (Cost $264,522,394) 292,482,599 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--0.0%(B) (53,338) ------------ NET ASSETS--100.0% $292,429,261 ------------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. ANNUAL REPORT 45 RYDEX S&P SMALLCAP 600 PURE VALUE ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.9% AEROSPACE & DEFENSE 1.5% AAR Corp.*.................. 15,828 $348,849 Ceradyne, Inc.*............. 25,740 612,870 Moog, Inc.-Class A*......... 8,910 335,016 ----------- TOTAL AEROSPACE & DEFENSE 1,296,735 ----------- AIRLINES 1.0% SkyWest, Inc. .............. 57,570 872,761 ----------- TOTAL AIRLINES 872,761 ----------- AUTO COMPONENTS 1.1% Standard Motor Products, Inc. .................... 61,178 650,322 Superior Industries International, Inc. ..... 18,726 336,132 ----------- TOTAL AUTO COMPONENTS 986,454 ----------- BUILDING PRODUCTS 3.1% Apogee Enterprises, Inc. ... 25,288 265,271 Gibraltar Industries, Inc.*.................... 35,380 323,019 Griffon Corp.*.............. 27,106 319,580 NCI Building Systems, Inc.*.................... 147,875 1,465,441 Universal Forest Products, Inc. .................... 9,882 297,844 ----------- TOTAL BUILDING PRODUCTS 2,671,155 ----------- CAPITAL MARKETS 0.8% LaBranche & Co., Inc.*...... 166,994 542,731 SWS Group, Inc. ............ 20,090 138,018 ----------- TOTAL CAPITAL MARKETS 680,749 ----------- CHEMICALS 1.8% A. Schulman, Inc. .......... 22,381 485,668 OM Group, Inc.*............. 13,548 450,742 Penford Corp.*.............. 30,800 182,952 Quaker Chemical Corp. ...... 13,423 488,865 ----------- TOTAL CHEMICALS 1,608,227 ----------- COMMERCIAL BANKS 7.8% East West Bancorp, Inc. .... 18,416 324,674 First BanCorp.*............. 530,282 161,736 First Commonwealth Financial Corp. ................... 128,822 749,744 First Midwest Bancorp, Inc. .................... 30,348 325,027 Hanmi Financial Corp.*...... 518,581 606,740 National Penn Bancshares, Inc. .................... 115,976 752,684 Pinnacle Financial Partners, Inc.*.................... 45,744 521,939 Sterling Bancorp............ 33,090 310,715 Sterling Bancshares, Inc. .. 74,928 403,862 Susquehanna Bancshares, Inc. .................... 133,700 1,056,230 Umpqua Holdings Corp. ...... 37,228 409,508 United Community Banks, Inc.*.................... 134,086 262,809 Whitney Holding Corp. ...... 82,704 684,789 Wintrust Financial Corp. ... 8,698 260,418 ----------- TOTAL COMMERCIAL BANKS 6,830,875 ----------- COMMERCIAL SERVICES & SUPPLIES 3.5% ABM Industries, Inc. ....... 24,970 563,073 Bowne & Co., Inc. .......... 91,834 1,042,316 Standard Register Co.(The).. 95,790 307,486 United Stationers, Inc.*.... 8,534 479,611 Viad Corp. ................. 32,812 654,928 ----------- TOTAL COMMERCIAL SERVICES & SUPPLIES 3,047,414 ----------- COMMUNICATIONS EQUIPMENT 1.6% Black Box Corp. ............ 16,482 547,202 Digi International, Inc.*... 24,440 236,090 EMS Technologies, Inc.*..... 32,928 587,436 ----------- TOTAL COMMUNICATIONS EQUIPMENT 1,370,728 ----------- CONSTRUCTION & ENGINEERING 1.9% Comfort Systems USA, Inc. .. 30,744 352,019 Dycom Industries, Inc.*..... 60,274 644,932 EMCOR Group, Inc.*.......... 24,460 632,291 ----------- TOTAL CONSTRUCTION & ENGINEERING 1,629,242 ----------- CONSUMER FINANCE 0.4% Rewards Network, Inc.*...... 28,540 390,998 ----------- TOTAL CONSUMER FINANCE 390,998 ----------- CONTAINERS & PACKAGING 0.2% Myers Industries, Inc. ..... 23,864 210,719 ----------- TOTAL CONTAINERS & PACKAGING 210,719 ----------- DISTRIBUTORS 0.6% Audiovox Corp. -- Class A*.. 82,982 537,723 ----------- TOTAL DISTRIBUTORS 537,723 ----------- DIVERSIFIED FINANCIAL SERVICES 0.6% Interactive Brokers Group, Inc.-Class A*............ 27,434 513,564 ----------- TOTAL DIVERSIFIED FINANCIAL SERVICES 513,564 ----------- ELECTRIC UTILITIES 0.3% Central Vermont Public Service Corp. ........... 12,894 260,717 ----------- TOTAL ELECTRIC UTILITIES 260,717 ----------- ELECTRICAL EQUIPMENT 0.4% Encore Wire Corp. .......... 16,050 333,198 ----------- TOTAL ELECTRICAL EQUIPMENT 333,198 ----------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 3.5% CTS Corp. .................. 35,284 358,133 Gerber Scientific, Inc.*.... 164,184 1,098,391 Insight Enterprises, Inc.*.. 24,056 363,727 Scansource, Inc.*........... 15,328 458,920 SYNNEX Corp.*............... 25,412 737,964 ----------- TOTAL ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 3,017,135 ----------- ENERGY EQUIPMENT & SERVICES 3.5% Basic Energy Services, Inc.*.................... 150,819 1,668,058 Bristow Group, Inc.*........ 5,812 225,389 Matrix Service Co.*......... 48,420 439,654 Pioneer Drilling Co.*....... 35,054 215,933 Seahawk Drilling, Inc.*..... 47,514 478,941 ----------- TOTAL ENERGY EQUIPMENT & SERVICES 3,027,975 ----------- FOOD & STAPLES RETAILING 2.8% Casey's General Stores, Inc. .................... 6,456 267,666 Great Atlantic & Pacific Tea Co., Inc.*............... 31,994 110,059 Nash Finch Co. ............. 21,900 917,610 Spartan Stores, Inc. ....... 53,528 800,244 United Natural Foods, Inc.*.................... 10,824 387,066 ----------- TOTAL FOOD & STAPLES RETAILING 2,482,645 ----------- GAS UTILITIES 1.0% Laclede Group, Inc. ........ 10,768 378,064 New Jersey Resources Corp. ................... 5,466 221,318 Southwest Gas Corp. ........ 8,468 294,348 ----------- TOTAL GAS UTILITIES 893,730 -----------
See Notes to Financial Statements. 46 RYDEX S&P SMALLCAP 600 PURE VALUE ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS (CONTINUED) HEALTH CARE EQUIPMENT & SUPPLIES 2.0% Osteotech, Inc.*............ 237,592 $1,541,972 Symmetry Medical, Inc.*..... 25,488 225,569 ----------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 1,767,541 ----------- HEALTH CARE PROVIDERS & SERVICES 6.6% AMERIGROUP Corp.*........... 14,694 613,181 AMN Healthcare Services, Inc.*.................... 100,216 531,145 Centene Corp.*.............. 28,848 643,887 Gentiva Health Services, Inc.*.................... 9,208 214,362 Healthspring, Inc.*......... 19,620 572,708 MedCath Corp.*.............. 100,245 993,428 Molina Healthcare, Inc.*.... 39,432 1,022,077 PharMerica Corp.*........... 35,650 357,926 Res-Care, Inc.*............. 64,594 854,579 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 5,803,293 ----------- HOTELS, RESTAURANTS & LEISURE 2.7% O'Charleys, Inc.*........... 45,792 343,440 Red Robin Gourmet Burgers, Inc.*.................... 41,934 851,260 Ruby Tuesday, Inc.*......... 93,326 1,129,245 ----------- TOTAL HOTELS, RESTAURANTS & LEISURE 2,323,945 ----------- HOUSEHOLD DURABLES 0.6% Blyth, Inc. ................ 13,288 533,115 ----------- TOTAL HOUSEHOLD DURABLES 533,115 ----------- HOUSEHOLD PRODUCTS 0.6% Central Garden & Pet Co. -- Class A*.......... 48,996 512,008 ----------- TOTAL HOUSEHOLD PRODUCTS 512,008 ----------- INDUSTRIAL CONGLOMERATES 0.7% Standex International Corp. ................... 13,423 361,482 Tredegar Corp. ............. 14,346 276,734 ----------- TOTAL INDUSTRIAL CONGLOMERATES 638,216 ----------- INSURANCE 4.4% Horace Mann Educators Corp. ................... 24,980 466,876 National Financial Partners Corp.*................... 116,448 1,606,982 Presidential Life Corp. .... 31,734 303,694 Safety Insurance Group, Inc. .................... 6,110 283,871 Selective Insurance Group, Inc. .................... 22,584 382,121 Stewart Information Services Corp. ................... 45,330 490,471 United Fire & Casualty Co. ..................... 15,550 311,467 ----------- TOTAL INSURANCE 3,845,482 ----------- IT SERVICES 2.3% Ciber, Inc.*................ 413,381 1,517,108 Heartland Payment Systems, Inc. .................... 36,564 522,134 ----------- TOTAL IT SERVICES 2,039,242 ----------- LEISURE EQUIPMENT & PRODUCTS 4.4% Arctic Cat, Inc.*........... 110,810 1,474,881 Callaway Golf Co. .......... 77,796 535,237 JAKKS Pacific, Inc.*........ 82,164 1,548,791 Nautilus, Inc.*............. 184,584 273,184 ----------- TOTAL LEISURE EQUIPMENT & PRODUCTS 3,832,093 ----------- LIFE SCIENCES TOOLS & SERVICES 0.3% Kendle International, Inc.*.................... 30,166 274,812 ----------- TOTAL LIFE SCIENCES TOOLS & SERVICES 274,812 ----------- MACHINERY 4.2% Astec Industries, Inc.*..... 8,766 258,334 Briggs & Stratton Corp. .... 11,344 199,654 Cascade Corp. .............. 10,632 376,266 EnPro Industries, Inc.*..... 16,732 587,963 Federal Signal Corp. ....... 129,122 729,539 Lydall, Inc.*............... 134,288 997,760 Mueller Industries, Inc. ... 16,964 498,742 ----------- TOTAL MACHINERY 3,648,258 ----------- MEDIA 0.4% Live Nation, Inc.*.......... 34,514 327,538 ----------- TOTAL MEDIA 327,538 ----------- METALS & MINING 2.2% AM Castle & Co.*............ 55,954 861,692 Century Aluminum Co.*....... 38,624 522,196 Olympic Steel, Inc. ........ 23,912 536,107 ----------- TOTAL METALS & MINING 1,919,995 ----------- MULTI-UTILITIES 0.3% CH Energy Group, Inc. ...... 5,792 263,246 ----------- TOTAL MULTI-UTILITIES 263,246 ----------- MULTILINE RETAIL 3.7% Fred's, Inc. -- Class A..... 81,078 971,314 Tuesday Morning Corp.*...... 470,874 2,255,487 ----------- TOTAL MULTILINE RETAIL 3,226,801 ----------- OIL, GAS & CONSUMABLE FUELS 2.8% Penn Virginia Corp. ........ 23,940 354,791 Petroleum Development Corp.*................... 47,438 1,480,540 World Fuel Services Corp. .. 20,900 590,007 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 2,425,338 ----------- PERSONAL PRODUCTS 0.4% Mannatech, Inc.*............ 187,750 351,093 ----------- TOTAL PERSONAL PRODUCTS 351,093 ----------- PROFESSIONAL SERVICES 4.6% CDI Corp. .................. 69,992 1,002,985 Kelly Services, Inc. -- Class A*......... 77,700 1,153,845 School Specialty, Inc.*..... 19,936 267,142 SFN Group, Inc.*............ 83,136 630,171 Volt Information Sciences, Inc.*.................... 113,822 919,682 ----------- TOTAL PROFESSIONAL SERVICES 3,973,825 ----------- REAL ESTATE INVESTMENT TRUSTS (REITS) 4.2% Cedar Shopping Centers, Inc. .................... 60,534 381,970 Colonial Properties Trust... 22,026 394,926 Kite Realty Group Trust..... 202,904 969,881 Lexington Realty Trust...... 104,748 814,939 Pennsylvania Real Estate Investment Trust......... 78,488 1,120,024 ----------- TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 3,681,740 ----------- ROAD & RAIL 0.5% Arkansas Best Corp. ........ 16,608 420,681 ----------- TOTAL ROAD & RAIL 420,681 ----------- SPECIALTY RETAIL 7.3% Brown Shoe Co., Inc. ....... 40,106 471,246 Cabela's, Inc.*............. 49,237 912,854 Christopher & Banks Corp. .. 51,672 307,965 Finish Line, Inc. -- Class A........................ 36,344 556,063 Group 1 Automotive, Inc.*... 26,720 942,147
See Notes to Financial Statements. ANNUAL REPORT 47 RYDEX S&P SMALLCAP 600 PURE VALUE ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS (CONCLUDED) Haverty Furniture Cos., Inc. .................... 25,634 $274,028 Hot Topic, Inc. ............ 89,506 512,869 Lithia Motors, Inc. -- Class A........................ 45,466 495,579 MarineMax, Inc.*............ 39,306 294,009 PEP Boys-Manny Moe & Jack... 75,612 883,904 Stage Stores, Inc. ......... 27,952 372,600 Zale Corp.*................. 145,460 372,378 ----------- TOTAL SPECIALTY RETAIL 6,395,642 ----------- TEXTILES, APPAREL & LUXURY GOODS 5.9% K-Swiss, Inc. -- Class A*... 21,612 262,802 Movado Group, Inc.*......... 51,546 579,377 Perry Ellis International, Inc.*.................... 51,682 1,161,811 Quiksilver, Inc.*........... 761,110 3,173,829 ----------- TOTAL TEXTILES, APPAREL & LUXURY GOODS 5,177,819 ----------- TOBACCO 0.8% Alliance One International, Inc.*.................... 163,116 720,973 ----------- TOTAL TOBACCO 720,973 ----------- TRADING COMPANIES & DISTRIBUTORS 0.6% Lawson Products, Inc. ...... 26,702 492,118 ----------- TOTAL TRADING COMPANIES & DISTRIBUTORS 492,118 ----------- TOTAL COMMON STOCKS (Cost $98,623,259) 87,257,558 ----------- SHORT TERM INVESTMENTS 0.1% SSgA Government Money Market Fund..................... 128,270 128,270 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $128,270) 128,270 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $98,751,529) 87,385,828 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS--0.0%(B) (2,917) ----------- NET ASSETS--100.0% $87,382,911 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. 48 RYDEX S&P SMALLCAP 600 PURE GROWTH ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.9% AEROSPACE & DEFENSE 0.4% GenCorp, Inc.*............... 13,151 $64,045 ----------- TOTAL AEROSPACE & DEFENSE 64,045 ----------- AIRLINES 0.4% Allegiant Travel Co. ........ 1,620 76,286 ----------- TOTAL AIRLINES 76,286 ----------- BEVERAGES 0.7% Boston Beer Co., Inc. -- Class A*.......... 1,590 113,828 ----------- TOTAL BEVERAGES 113,828 ----------- BIOTECHNOLOGY 1.3% Cubist Pharmaceuticals, Inc.*..................... 3,740 87,067 Regeneron Pharmaceuticals, Inc.*..................... 5,000 130,400 ----------- TOTAL BIOTECHNOLOGY 217,467 ----------- BUILDING PRODUCTS 0.3% AAON, Inc. .................. 2,010 49,346 ----------- TOTAL BUILDING PRODUCTS 49,346 ----------- CAPITAL MARKETS 1.2% optionsXpress Holdings, Inc.*..................... 6,080 97,098 Stifel Financial Corp.*...... 1,790 84,828 TradeStation Group, Inc.*.... 5,480 30,085 ----------- TOTAL CAPITAL MARKETS 212,011 ----------- CHEMICALS 0.8% Balchem Corp. ............... 4,330 132,325 ----------- TOTAL CHEMICALS 132,325 ----------- COMMERCIAL BANKS 0.5% Signature Bank*.............. 2,170 91,661 ----------- TOTAL COMMERCIAL BANKS 91,661 ----------- COMMERCIAL SERVICES & SUPPLIES 0.4% SYKES Enterprises, Inc.*..... 2,350 39,033 Tetra Tech, Inc.*............ 1,300 27,378 ----------- TOTAL COMMERCIAL SERVICES & SUPPLIES 66,411 ----------- COMMUNICATIONS EQUIPMENT 2.6% Blue Coat Systems, Inc.*..... 6,970 187,981 NETGEAR, Inc.*............... 3,010 92,738 Oplink Communications, Inc.*..................... 9,401 164,329 ----------- TOTAL COMMUNICATIONS EQUIPMENT 445,048 ----------- COMPUTERS & PERIPHERALS 3.2% Compellent Technologies, Inc.*..................... 6,920 174,869 Novatel Wireless, Inc.*...... 17,111 179,323 Stratasys, Inc.*............. 3,090 96,779 Synaptics, Inc.*............. 3,780 101,795 ----------- TOTAL COMPUTERS & PERIPHERALS 552,766 ----------- CONSTRUCTION & ENGINEERING 0.9% Orion Marine Group, Inc.*.... 11,780 147,368 ----------- TOTAL CONSTRUCTION & ENGINEERING 147,368 ----------- CONSUMER FINANCE 1.7% Cash America International, Inc. ..................... 2,020 71,165 First Cash Financial Services, Inc.*........... 3,120 90,698 World Acceptance Corp.*...... 3,230 139,374 ----------- TOTAL CONSUMER FINANCE 301,237 ----------- DIVERSIFIED CONSUMER SERVICES 1.4% Capella Education Co.*....... 740 40,574 Coinstar, Inc.*.............. 3,600 207,288 ----------- TOTAL DIVERSIFIED CONSUMER SERVICES 247,862 ----------- DIVERSIFIED FINANCIAL SERVICES 0.7% Portfolio Recovery Associates, Inc.*......... 1,780 119,349 ----------- TOTAL DIVERSIFIED FINANCIAL SERVICES 119,349 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.0% Atlantic Tele-Network, Inc. ..................... 2,770 117,060 Cbeyond, Inc.*............... 4,430 60,027 ----------- TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 177,087 ----------- ELECTRICAL EQUIPMENT 0.7% AZZ, Inc. ................... 3,380 125,533 ----------- TOTAL ELECTRICAL EQUIPMENT 125,533 ----------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 1.5% FARO Technologies, Inc.*..... 1,820 43,935 Mercury Computer Systems, Inc.*..................... 6,090 96,466 TTM Technologies, Inc.*...... 11,620 121,777 ----------- TOTAL ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 262,178 ----------- ENERGY EQUIPMENT & SERVICES 3.9% CARBO Ceramics, Inc. ........ 670 56,126 Gulf Island Fabrication, Inc. ..................... 5,180 118,311 Hornbeck Offshore Services, Inc.*..................... 5,370 119,429 Lufkin Industries, Inc. ..... 1,260 61,551 Oil States International, Inc.*..................... 3,560 181,987 TETRA Technologies, Inc.*.... 13,431 131,087 ----------- TOTAL ENERGY EQUIPMENT & SERVICES 668,491 ----------- FOOD & STAPLES RETAILING 1.3% Andersons, Inc.(The)......... 5,780 227,559 ----------- TOTAL FOOD & STAPLES RETAILING 227,559 ----------- FOOD PRODUCTS 3.3% Cal-Maine Foods, Inc. ....... 3,110 90,097 Calavo Growers, Inc. ........ 3,970 87,062 Darling International, Inc.*..................... 16,561 165,776 Sanderson Farms, Inc. ....... 1,790 75,144 TreeHouse Foods, Inc.*....... 3,270 152,709 ----------- TOTAL FOOD PRODUCTS 570,788 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 4.6% Abaxis, Inc.*................ 2,620 62,906 Align Technology, Inc.*...... 6,530 111,206 American Medical Systems Holdings, Inc.*........... 7,120 143,824 Cantel Medical Corp. ........ 3,450 63,894 Cooper Cos., Inc.(The)....... 2,750 135,685 Integra LifeSciences Holdings Corp.*.................... 2,290 98,516 Natus Medical, Inc.*......... 6,010 78,731 Neogen Corp.*................ 1,860 62,161 Zoll Medical Corp.*.......... 1,430 46,518 ----------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 803,441 ----------- HEALTH CARE PROVIDERS & SERVICES 5.5% Air Methods Corp.*........... 2,740 112,066 Almost Family, Inc.*......... 1,170 40,400 Amedisys, Inc.*.............. 1,930 49,138 Bio-Reference Labs, Inc.*.... 3,240 69,854 Catalyst Health Solutions, Inc.*..................... 3,350 126,797 Genoptix, Inc.*.............. 2,690 45,784
See Notes to Financial Statements. ANNUAL REPORT 49 RYDEX S&P SMALLCAP 600 PURE GROWTH ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS (CONTINUED) Healthways, Inc.*............ 7,960 $83,421 HMS Holdings Corp.*.......... 2,510 150,876 IPC The Hospitalist Co., Inc.*..................... 4,360 139,651 LHC Group, Inc.*............. 2,060 55,414 RehabCare Group, Inc.*....... 3,840 85,363 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 958,764 ----------- HEALTH CARE TECHNOLOGY 0.9% Quality Systems, Inc. ....... 2,410 154,867 ----------- TOTAL HEALTH CARE TECHNOLOGY 154,867 ----------- HOTELS, RESTAURANTS & LEISURE 6.5% BJ's Restaurants, Inc.*...... 5,860 194,259 Buffalo Wild Wings, Inc.*.... 3,100 145,793 California Pizza Kitchen, Inc.*..................... 5,940 98,069 CEC Entertainment, Inc.*..... 3,100 102,920 Cracker Barrel Old Country Store, Inc. .............. 3,060 164,904 Interval Leisure Group, Inc.*..................... 4,140 59,409 P.F. Chang's China Bistro, Inc. ..................... 2,510 115,259 Peet's Coffee & Tea, Inc.*... 2,120 81,090 Texas Roadhouse, Inc.*....... 11,180 171,725 ----------- TOTAL HOTELS, RESTAURANTS & LEISURE 1,133,428 ----------- HOUSEHOLD DURABLES 1.0% National Presto Industries, Inc. ..................... 1,190 133,196 Universal Electronics, Inc.*..................... 2,080 43,805 ----------- TOTAL HOUSEHOLD DURABLES 177,001 ----------- INSURANCE 1.0% eHealth, Inc.*............... 6,600 89,166 Tower Group, Inc. ........... 3,150 76,482 ----------- TOTAL INSURANCE 165,648 ----------- INTERNET & CATALOG RETAIL 1.9% Blue Nile, Inc.*............. 2,490 106,074 HSN, Inc.*................... 4,300 128,742 NutriSystem, Inc. ........... 4,780 91,394 ----------- TOTAL INTERNET & CATALOG RETAIL 326,210 ----------- INTERNET SOFTWARE & SERVICES 3.8% comScore, Inc.*.............. 8,630 202,891 DealerTrack Holdings, Inc.*.. 3,850 74,382 j2 Global Communications, Inc.*..................... 3,000 79,050 Knot, Inc.(The)*............. 3,310 29,923 Perficient, Inc.*............ 19,721 208,254 Stamps.com, Inc.*............ 3,920 62,563 ----------- TOTAL INTERNET SOFTWARE & SERVICES 657,063 ----------- IT SERVICES 2.4% CSG Systems International, Inc.*..................... 3,960 76,982 MAXIMUS, Inc. ............... 810 49,110 TeleTech Holdings, Inc.*..... 5,120 77,722 Wright Express Corp.*........ 5,700 214,947 ----------- TOTAL IT SERVICES 418,761 ----------- LEISURE EQUIPMENT & PRODUCTS 1.3% Polaris Industries, Inc. .... 1,060 75,355 Sturm Ruger & Co., Inc. ..... 9,100 142,506 ----------- TOTAL LEISURE EQUIPMENT & PRODUCTS 217,861 ----------- LIFE SCIENCES TOOLS & SERVICES 0.6% Dionex Corp.*................ 650 58,000 Enzo Biochem, Inc.*.......... 11,340 48,875 ----------- TOTAL LIFE SCIENCES TOOLS & SERVICES 106,875 ----------- MEDIA 1.6% Arbitron, Inc. .............. 1,760 44,563 Dolan Media Co.*............. 21,631 231,452 ----------- TOTAL MEDIA 276,015 ----------- METALS & MINING 1.4% AMCOL International Corp. ... 1,940 53,816 Kaiser Aluminum Corp. ....... 4,070 183,109 ----------- TOTAL METALS & MINING 236,925 ----------- OIL, GAS & CONSUMABLE FUELS 0.9% Gulfport Energy Corp.*....... 4,380 72,971 SM Energy Co. ............... 1,960 81,693 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 154,664 ----------- PAPER & FOREST PRODUCTS 0.5% Schweitzer-Mauduit International, Inc. ...... 1,320 84,718 ----------- TOTAL PAPER & FOREST PRODUCTS 84,718 ----------- PERSONAL PRODUCTS 1.0% Medifast, Inc.*.............. 7,460 178,145 ----------- TOTAL PERSONAL PRODUCTS 178,145 ----------- PHARMACEUTICALS 2.0% Hi-Tech Pharmacal Co., Inc.*..................... 6,480 140,162 Par Pharmaceutical Cos., Inc.*..................... 2,800 91,028 Salix Pharmaceuticals Ltd.*.. 3,260 123,326 ----------- TOTAL PHARMACEUTICALS 354,516 ----------- PROFESSIONAL SERVICES 0.3% Heidrick & Struggles International, Inc. ...... 2,230 47,900 ----------- TOTAL PROFESSIONAL SERVICES 47,900 ----------- REAL ESTATE INVESTMENT TRUSTS (REITS) 1.6% Acadia Realty Trust.......... 2,940 56,095 DiamondRock Hospitality Co.*...................... 11,700 123,786 Medical Properties Trust, Inc. ..................... 9,300 104,067 ----------- TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 283,948 ----------- REAL ESTATE MANAGEMENT & DEVELOPMENT 0.4% Forestar Real Estate Group, Inc.*..................... 3,730 63,783 ----------- TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT 63,783 ----------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 7.4% Cymer, Inc.*................. 1,170 43,232 Diodes, Inc.*................ 7,980 175,400 Hittite Microwave Corp.*..... 2,570 132,792 Kopin Corp.*................. 16,031 61,078 Monolithic Power Systems, Inc.*..................... 6,750 108,473 Pericom Semiconductor Corp.*.................... 5,500 51,810 Sigma Designs, Inc.*......... 9,730 111,019 Tessera Technologies, Inc.*.. 5,120 101,018 TriQuint Semiconductor, Inc.*..................... 23,811 245,253 Veeco Instruments, Inc.*..... 2,060 86,211 Volterra Semiconductor Corp.*.................... 8,410 171,816 ----------- TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 1,288,102 -----------
See Notes to Financial Statements. 50 RYDEX S&P SMALLCAP 600 PURE GROWTH ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS (CONCLUDED) SOFTWARE 13.4% Blackbaud, Inc. ............. 4,940 $125,427 Commvault Systems, Inc.*..... 5,680 164,322 Concur Technologies, Inc.*... 2,100 108,402 Ebix, Inc.*.................. 9,440 233,168 Epicor Software Corp.*....... 9,210 86,574 Interactive Intelligence, Inc.*..................... 7,910 195,456 JDA Software Group, Inc.*.... 3,310 83,743 Manhattan Associates, Inc.*.. 3,140 96,649 MicroStrategy, Inc. -- Class A*........................ 2,000 181,260 Netscout Systems, Inc.*...... 9,630 226,016 Radiant Systems, Inc.*....... 10,580 206,416 Smith Micro Software, Inc.*.. 11,630 141,421 Sourcefire, Inc.*............ 9,500 224,105 Taleo Corp. Class A*......... 3,550 101,849 Tyler Technologies, Inc.*.... 4,070 83,069 Websense, Inc.*.............. 3,250 65,390 ----------- TOTAL SOFTWARE 2,323,267 ----------- SPECIALTY RETAIL 5.6% Big 5 Sporting Goods Corp. .. 5,090 68,817 Buckle, Inc.(The)............ 2,340 68,071 Gymboree Corp.*.............. 2,250 146,385 Hibbett Sports, Inc.*........ 2,290 61,715 Jos. A. Bank Clothiers, Inc.*..................... 3,590 156,524 Kirkland's, Inc.*............ 4,860 65,367 Lumber Liquidators Holdings, Inc.*..................... 7,300 175,784 Monro Muffler, Inc. ......... 1,510 72,087 Zumiez, Inc.*................ 5,890 154,436 ----------- TOTAL SPECIALTY RETAIL 969,186 ----------- TEXTILES, APPAREL & LUXURY GOODS 5.7% Crocs, Inc.*................. 18,491 257,580 Deckers Outdoor Corp.*....... 3,710 215,551 Iconix Brand Group, Inc.*.... 9,640 168,700 Steven Madden, Ltd.*......... 2,450 103,635 True Religion Apparel, Inc.*..................... 6,770 138,446 Volcom, Inc.*................ 5,960 102,333 ----------- TOTAL TEXTILES, APPAREL & LUXURY GOODS 986,245 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.4% NTELOS Holdings Corp. ....... 4,110 74,679 ----------- TOTAL WIRELESS TELECOMMUNICATION SERVICES 74,679 ----------- TOTAL COMMON STOCKS (Cost $15,051,880) 17,310,658 ----------- SHORT TERM INVESTMENTS 0.1% SSgA Government Money Market Fund...................... 20,369 20,369 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $20,369) 20,369 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $15,072,249) 17,331,027 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS--0.0%(B) (1,665) ----------- NET ASSETS--100.0% $17,329,362 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. ANNUAL REPORT 51 RYDEX S&P EQUAL WEIGHT CONSUMER DISCRETIONARY ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.7% AUTO COMPONENTS 2.4% Goodyear Tire & Rubber Co.(The)*................. 26,340 $269,195 Johnson Controls, Inc. ...... 10,060 353,307 ----------- TOTAL AUTO COMPONENTS 622,502 ----------- AUTOMOBILES 2.5% Ford Motor Co.*.............. 23,500 332,055 Harley-Davidson, Inc. ....... 10,280 315,390 ----------- TOTAL AUTOMOBILES 647,445 ----------- DISTRIBUTORS 1.3% Genuine Parts Co. ........... 6,750 323,055 ----------- TOTAL DISTRIBUTORS 323,055 ----------- DIVERSIFIED CONSUMER SERVICES 3.2% Apollo Group, Inc. -- Class A*........................ 6,050 226,754 DeVry, Inc. ................. 6,570 314,440 H&R Block, Inc. ............. 22,540 265,747 ----------- TOTAL DIVERSIFIED CONSUMER SERVICES 806,941 ----------- HOTELS, RESTAURANTS & LEISURE 12.5% Carnival Corp. .............. 8,230 355,289 Darden Restaurants, Inc. .... 6,490 296,658 International Game Technology................ 19,360 301,822 Marriott International, Inc. -- Class A........... 8,280 306,774 McDonald's Corp. ............ 3,910 304,081 Starbucks Corp. ............. 11,360 323,533 Starwood Hotels & Resorts Worldwide, Inc. .......... 5,740 310,764 Wyndham Worldwide Corp. ..... 11,040 317,400 Wynn Resorts Ltd. ........... 3,250 348,302 Yum! Brands, Inc. ........... 6,380 316,193 ----------- TOTAL HOTELS, RESTAURANTS & LEISURE 3,180,816 ----------- HOUSEHOLD DURABLES 10.5% D.R. Horton, Inc. ........... 27,580 287,935 Fortune Brands, Inc. ........ 5,970 322,678 Harman International Industries, Inc.*......... 9,010 302,286 Leggett & Platt, Inc. ....... 13,610 277,372 Lennar Corp. -- Class A...... 20,740 300,937 Newell Rubbermaid, Inc. ..... 17,410 307,287 Pulte Homes, Inc.*........... 35,470 278,440 Stanley Black & Decker, Inc. ..................... 4,930 305,512 Whirlpool Corp. ............. 3,940 298,770 ----------- TOTAL HOUSEHOLD DURABLES 2,681,217 ----------- INTERNET & CATALOG RETAIL 3.8% Amazon.com, Inc.*............ 1,970 325,326 Expedia, Inc. ............... 10,230 296,158 Priceline.com, Inc.*......... 880 331,593 ----------- TOTAL INTERNET & CATALOG RETAIL 953,077 ----------- LEISURE EQUIPMENT & PRODUCTS 3.8% Eastman Kodak Co.*........... 74,950 353,014 Hasbro, Inc. ................ 6,580 304,325 Mattel, Inc. ................ 13,060 304,690 ----------- TOTAL LEISURE EQUIPMENT & PRODUCTS 962,029 ----------- MEDIA 21.2% CBS Corp. -- Class B......... 19,180 324,718 Comcast Corp. -- Class A..... 16,640 342,451 DIRECTV -- Class A*.......... 7,090 308,131 Discovery Communications, Inc. -- Class A*.......... 7,030 313,608 Gannett Co., Inc. ........... 21,980 260,463 Interpublic Group of Cos., Inc.*..................... 30,460 315,261 McGraw-Hill Cos., Inc. ...... 9,600 361,440 Meredith Corp. .............. 9,160 310,982 New York Times Co. -- Class A*........................ 36,360 278,881 News Corp. -- Class A........ 21,590 312,191 Omnicom Group, Inc. ......... 7,620 334,975 Scripps Networks Interactive -- Class A.... 6,440 327,732 Time Warner Cable, Inc. ..... 5,740 332,174 Time Warner, Inc. ........... 9,310 302,668 Viacom, Inc. -- Class B...... 8,410 324,542 Walt Disney Co.(The)......... 8,550 308,741 Washington Post Co. -- Class B......................... 800 321,720 ----------- TOTAL MEDIA 5,380,678 ----------- MULTILINE RETAIL 9.8% Big Lots, Inc.*.............. 8,690 272,605 Family Dollar Stores, Inc. .. 6,800 313,956 J.C. Penney Co., Inc. ....... 11,970 373,225 Kohl's Corp.*................ 5,770 295,424 Macy's, Inc. ................ 13,480 318,667 Nordstrom, Inc. ............. 8,090 311,546 Sears Holdings Corp.*........ 4,400 316,712 Target Corp. ................ 5,420 281,515 ----------- TOTAL MULTILINE RETAIL 2,483,650 ----------- SPECIALTY RETAIL 23.6% Abercrombie & Fitch Co. -- Class A............ 8,090 346,737 AutoNation, Inc.*............ 12,570 291,875 AutoZone, Inc.*.............. 1,340 318,424 Bed Bath & Beyond, Inc.*..... 7,150 313,885 Best Buy Co., Inc. .......... 7,920 340,402 CarMax, Inc.*................ 12,450 385,825 GameStop Corp. -- Class A*... 15,070 296,276 Gap, Inc.(The)............... 15,730 299,027 Home Depot, Inc. ............ 9,760 301,389 Limited Brands, Inc. ........ 11,050 324,760 Lowe's Cos., Inc. ........... 13,720 292,648 O'Reilly Automotive, Inc.*... 5,660 331,110 Office Depot, Inc.*.......... 72,350 324,851 RadioShack Corp. ............ 14,140 284,638 Ross Stores, Inc. ........... 5,410 319,136 Staples, Inc. ............... 15,080 308,688 Tiffany & Co. ............... 6,580 348,740 TJX Cos., Inc. .............. 6,830 313,429 Urban Outfitters, Inc.*...... 8,630 265,545 ----------- TOTAL SPECIALTY RETAIL 6,007,385 ----------- TEXTILES, APPAREL & LUXURY GOODS 5.1% Coach, Inc. ................. 7,040 352,000 NIKE, Inc. -- Class B........ 3,810 310,286 Polo Ralph Lauren Corp. ..... 3,380 327,455 V.F. Corp. .................. 3,770 313,815 ----------- TOTAL TEXTILES, APPAREL & LUXURY GOODS 1,303,556 ----------- TOTAL COMMON STOCKS (Cost $23,482,078) 25,352,351 ----------- SHORT TERM INVESTMENTS 0.3% SSgA Government Money Market Fund...................... 72,127 72,127 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $72,127) 72,127 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $23,554,205) 25,424,478 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.0%(B) 396 ----------- NET ASSETS--100.0% $25,424,874 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. 52 RYDEX S&P EQUAL WEIGHT CONSUMER STAPLES ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.6% BEVERAGES 17.2% Brown-Forman Corp. -- Class B......................... 5,320 $323,509 Coca-Cola Co.(The)........... 5,630 345,232 Coca-Cola Enterprises, Inc. ..................... 15,570 373,836 Constellation Brands, Inc. -- Class A*.......... 17,940 353,956 Dr Pepper Snapple Group, Inc. ..................... 9,200 336,260 Molson Coors Brewing Co. -- Class B............ 7,080 334,388 PepsiCo, Inc. ............... 4,860 317,358 ----------- TOTAL BEVERAGES 2,384,539 ----------- FOOD & STAPLES RETAILING 21.9% Costco Wholesale Corp. ...... 5,290 332,053 CVS Caremark Corp. .......... 10,800 325,296 Kroger Co.(The).............. 14,790 325,380 Safeway, Inc. ............... 15,930 364,797 SUPERVALU, Inc. ............. 28,600 308,594 Sysco Corp. ................. 11,120 327,595 Wal-Mart Stores, Inc. ....... 6,090 329,895 Walgreen Co. ................ 11,120 376,746 Whole Foods Market, Inc.*.... 8,680 345,030 ----------- TOTAL FOOD & STAPLES RETAILING 3,035,386 ----------- FOOD PRODUCTS 36.0% Archer-Daniels-Midland Co. .. 9,950 331,534 Campbell Soup Co. ........... 8,910 322,988 ConAgra Foods, Inc. ......... 14,670 329,928 Dean Foods Co.*.............. 32,080 333,632 General Mills, Inc. ......... 8,910 334,481 H.J. Heinz Co. .............. 6,720 330,019 Hershey Co.(The)............. 6,850 339,007 Hormel Foods Corp. .......... 7,310 335,675 J.M. Smucker Co.(The)........ 5,330 342,612 Kellogg Co. ................. 6,350 319,151 Kraft Foods, Inc. -- Class A......................... 10,310 332,704 McCormick & Co., Inc. ....... 7,810 345,358 Mead Johnson Nutrition Co. .. 5,850 344,097 Sara Lee Corp. .............. 22,990 329,447 Tyson Foods, Inc. -- Class A......................... 20,330 316,132 ----------- TOTAL FOOD PRODUCTS 4,986,765 ----------- HOUSEHOLD PRODUCTS 9.3% Clorox Co. .................. 4,840 322,102 Colgate-Palmolive Co. ....... 4,160 320,819 Kimberly-Clark Corp. ........ 4,860 307,833 Procter & Gamble Co. ........ 5,300 336,921 ----------- TOTAL HOUSEHOLD PRODUCTS 1,287,675 ----------- PERSONAL PRODUCTS 5.1% Avon Products, Inc. ......... 10,390 316,375 Estee Lauder Cos., Inc -- Class A............ 5,470 389,300 ----------- TOTAL PERSONAL PRODUCTS 705,675 ----------- TOBACCO 10.1% Altria Group, Inc. .......... 13,790 350,542 Lorillard, Inc. ............. 4,010 342,213 Philip Morris International, Inc. ..................... 5,870 343,395 Reynolds American, Inc. ..... 5,540 359,546 ----------- TOTAL TOBACCO 1,395,696 ----------- TOTAL COMMON STOCKS (Cost $12,201,123) 13,795,736 ----------- SHORT TERM INVESTMENTS 0.3% SSgA Government Money Market Fund...................... 46,252 46,252 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $46,252) 46,252 ----------- TOTAL INVESTMENTS 99.9%(A) (Cost $12,247,375) 13,841,988 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.1% 13,518 ----------- NET ASSETS--100.0% $13,855,506 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. See Notes to Financial Statements. ANNUAL REPORT 53 RYDEX S&P EQUAL WEIGHT ENERGY ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.9% ENERGY EQUIPMENT & SERVICES 26.4% Baker Hughes, Inc. .......... 9,374 $434,297 Cameron International Corp.*.................... 9,410 411,688 Diamond Offshore Drilling, Inc. ..................... 6,010 397,622 FMC Technologies, Inc.*...... 5,710 411,691 Halliburton Co. ............. 12,059 384,200 Helmerich & Payne, Inc. ..... 9,699 414,923 Nabors Industries, Ltd.*..... 21,820 456,038 National-Oilwell Varco, Inc. ..................... 9,020 484,915 Rowan Cos., Inc.*............ 12,629 415,494 Schlumberger, Ltd. .......... 6,430 449,393 ----------- TOTAL ENERGY EQUIPMENT & SERVICES 4,260,261 ----------- OIL, GAS & CONSUMABLE FUELS 73.5% Anadarko Petroleum Corp. .... 6,904 425,079 Apache Corp. ................ 3,960 400,039 Cabot Oil & Gas Corp. ....... 13,790 399,634 Chesapeake Energy Corp. ..... 17,340 376,278 Chevron Corp. ............... 4,750 392,398 ConocoPhillips............... 6,760 401,544 CONSOL Energy, Inc. ......... 10,630 390,759 Denbury Resources, Inc.*..... 23,880 406,438 Devon Energy Corp. .......... 6,025 391,746 El Paso Corp. ............... 30,977 410,755 EOG Resources, Inc. ......... 4,180 400,110 EQT Corp. ................... 10,910 408,470 Exxon Mobil Corp. ........... 6,135 407,793 Hess Corp. .................. 6,720 423,562 Marathon Oil Corp. .......... 11,720 416,880 Massey Energy Co. ........... 12,440 523,351 Murphy Oil Corp. ............ 6,344 413,375 Noble Energy, Inc. .......... 5,030 409,844 Occidental Petroleum Corp. .. 4,895 384,894 Peabody Energy Corp. ........ 7,930 419,497 Pioneer Natural Resources Co. ...................... 5,690 397,162 QEP Resources, Inc. ......... 12,630 417,169 Range Resources Corp. ....... 10,630 397,456 Southwestern Energy Co.*..... 11,760 398,076 Spectra Energy Corp. ........ 17,250 410,032 Sunoco, Inc. ................ 10,870 407,299 Tesoro Corp. ................ 29,640 384,134 Valero Energy Corp. ......... 21,800 391,310 Williams Cos., Inc.(The)..... 20,289 436,619 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 11,841,703 ----------- TOTAL COMMON STOCKS (Cost $14,652,509) 16,101,964 ----------- SHORT TERM INVESTMENTS 0.1% SSgA Government Money Market Fund...................... 15,673 15,673 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $15,673) 15,673 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $14,668,182) 16,117,637 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.0%(B) 4,239 ----------- NET ASSETS--100.0% $16,121,876 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. 54 RYDEX S&P EQUAL WEIGHT FINANCIALS ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.7% CAPITAL MARKETS 17.8% Ameriprise Financial, Inc. .. 4,210 $217,615 Bank of New York Mellon Corp. .................... 7,810 195,719 Charles Schwab Corp.(The).... 14,590 224,686 E*TRADE Financial Corp.*..... 14,250 203,775 Federated Investors, Inc. -- Class B........... 8,710 216,966 Franklin Resources, Inc. .... 1,870 214,489 Goldman Sachs Group, Inc.(The)................. 1,310 210,844 Invesco Ltd. ................ 9,490 218,270 Janus Capital Group, Inc. ... 19,070 201,379 Legg Mason, Inc. ............ 6,730 208,832 Morgan Stanley............... 7,450 185,282 Northern Trust Corp. ........ 4,050 201,001 State Street Corp. .......... 5,160 215,482 T. Rowe Price Group, Inc. ... 4,020 222,185 ----------- TOTAL CAPITAL MARKETS 2,936,525 ----------- COMMERCIAL BANKS 16.3% BB&T Corp. .................. 8,570 200,624 Comerica, Inc. .............. 5,370 192,138 Fifth Third Bancorp.......... 16,330 205,105 First Horizon National Corp.*.................... 18,220 183,840 Huntington Bancshares, Inc. ..................... 33,870 192,043 KeyCorp...................... 24,390 199,754 M&T Bank Corp. .............. 2,300 171,925 Marshall & Ilsley Corp. ..... 28,830 170,385 PNC Financial Services Group, Inc. ..................... 3,660 197,274 Regions Financial Corp. ..... 28,700 180,810 SunTrust Banks, Inc. ........ 7,720 193,154 U.S. Bancorp................. 8,790 212,542 Wells Fargo & Co. ........... 7,660 199,773 Zions Bancorp................ 9,280 191,725 ----------- TOTAL COMMERCIAL BANKS 2,691,092 ----------- CONSUMER FINANCE 5.0% American Express Co. ........ 4,870 201,910 Capital One Financial Corp. .................... 5,160 192,313 Discover Financial Services.. 12,630 222,920 SLM Corp.*................... 17,020 202,538 ----------- TOTAL CONSUMER FINANCE 819,681 ----------- DIVERSIFIED FINANCIAL SERVICES 11.2% Bank of America Corp. ....... 14,720 168,397 Citigroup, Inc.*............. 50,250 209,542 CME Group, Inc. ............. 760 220,134 IntercontinentalExchange, Inc.*..................... 1,880 215,956 JPMorgan Chase & Co. ........ 4,870 183,258 Leucadia National Corp.*..... 8,470 215,307 Moody's Corp. ............... 8,030 217,292 Nasdaq OMX Group (The)*...... 10,300 216,506 NYSE Euronext................ 6,690 204,982 ----------- TOTAL DIVERSIFIED FINANCIAL SERVICES 1,851,374 ----------- INSURANCE 27.2% ACE Ltd. .................... 3,450 204,999 AFLAC, Inc. ................. 3,850 215,177 Allstate Corp. .............. 6,470 197,270 American International Group, Inc.*..................... 5,590 234,836 Aon Corp. ................... 5,260 209,085 Assurant, Inc. .............. 5,000 197,700 Berkshire Hathaway, Inc. -- Class B*.......... 2,390 190,148 Chubb Corp. ................. 3,470 201,329 Cincinnati Financial Corp. .. 6,850 201,664 Genworth Financial, Inc. -- Class A*.......... 16,010 181,553 Hartford Financial Services Group, Inc. .............. 8,780 210,545 Lincoln National Corp. ...... 8,070 197,554 Loews Corp. ................. 5,390 212,797 Marsh & McLennan Cos., Inc. ..................... 8,300 207,334 MetLife, Inc. ............... 4,940 199,230 Principal Financial Group, Inc. ..................... 7,810 209,621 Progressive Corp. ........... 9,500 201,020 Prudential Financial, Inc. .. 3,600 189,288 Torchmark Corp. ............. 3,700 211,936 Travelers Cos., Inc.(The).... 3,790 209,208 Unum Group................... 9,020 202,228 XL Group PLC................. 9,550 201,983 ----------- TOTAL INSURANCE 4,486,505 ----------- REAL ESTATE INVESTMENT TRUSTS (REITS) 18.7% Apartment Investment & Management Co. -- Class A......................... 8,970 209,091 AvalonBay Communities, Inc. ..................... 1,810 192,421 Boston Properties, Inc. ..... 2,300 198,237 Equity Residential........... 4,090 198,897 HCP, Inc. ................... 5,430 195,534 Health Care REIT, Inc. ...... 4,190 214,109 Host Hotels & Resorts, Inc. ..................... 13,730 218,170 Kimco Realty Corp. .......... 12,540 216,064 Plum Creek Timber Co., Inc. ..................... 5,600 206,304 ProLogis..................... 17,720 241,878 Public Storage, Inc. ........ 1,930 191,494 Simon Property Group, Inc. .. 2,110 202,602 Ventas, Inc. ................ 3,780 202,457 Vornado Realty Trust......... 2,320 202,745 Weyerhaeuser Co. ............ 12,590 204,210 ----------- TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 3,094,213 ----------- REAL ESTATE MANAGEMENT & DEVELOPMENT 1.2% CB Richard Ellis Group, Inc. -- Class A*.......... 11,030 202,400 ----------- TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT 202,400 ----------- THRIFTS & MORTGAGE FINANCE 2.3% Hudson City Bancorp, Inc. ... 16,390 190,944 People's United Financial, Inc. ..................... 15,310 188,466 ----------- TOTAL THRIFTS & MORTGAGE FINANCE 379,410 ----------- TOTAL COMMON STOCKS (Cost $15,946,406) 16,461,200 ----------- SHORT TERM INVESTMENTS 0.3% SSgA Government Money Market Fund...................... 45,855 45,855 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $45,855) 45,855 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $15,992,261) 16,507,055 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.0%(B) 2,896 ----------- NET ASSETS--100.0% $16,509,951 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. ANNUAL REPORT 55 RYDEX S&P EQUAL WEIGHT HEALTH CARE ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 100.0% BIOTECHNOLOGY 12.0% Amgen, Inc.*................ 17,970 $1,027,704 Biogen Idec, Inc.*.......... 17,170 1,076,731 Celgene Corp.*.............. 18,060 1,120,984 Cephalon, Inc.*............. 15,930 1,058,389 Genzyme Corp.*.............. 14,080 1,015,591 Gilead Sciences, Inc.*...... 28,309 1,123,018 ----------- TOTAL BIOTECHNOLOGY 6,422,417 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 24.8% Baxter International, Inc. .................... 22,010 1,120,309 Becton, Dickinson & Co. .... 13,610 1,027,827 Boston Scientific Corp.*.... 181,679 1,159,112 C.R. Bard, Inc. ............ 12,299 1,022,293 CareFusion Corp.*........... 40,980 989,257 Dentsply International, Inc. .................... 32,550 1,021,744 Hospira, Inc.*.............. 17,770 1,056,960 Intuitive Surgical, Inc.*... 3,390 891,401 Medtronic, Inc. ............ 29,460 1,037,287 St Jude Medical, Inc.*...... 26,920 1,031,036 Stryker Corp. .............. 20,310 1,005,142 Varian Medical Systems, Inc.*.................... 16,770 1,060,199 Zimmer Holdings, Inc.*...... 19,580 928,875 ----------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 13,351,442 ----------- HEALTH CARE PROVIDERS & SERVICES 31.3% Aetna, Inc. ................ 33,318 994,875 AmerisourceBergen Corp. .... 32,859 1,078,432 Cardinal Health, Inc. ...... 30,410 1,054,923 CIGNA Corp. ................ 28,590 1,006,082 Coventry Health Care, Inc.*.................... 46,990 1,100,506 DaVita, Inc.*............... 15,300 1,097,775 Express Scripts, Inc.*...... 21,510 1,043,665 Humana, Inc.*............... 19,658 1,145,865 Laboratory Corp. of America Holdings*................ 13,289 1,080,662 McKesson Corp. ............. 15,860 1,046,443 Medco Health Solutions, Inc.*.................... 21,049 1,105,704 Patterson Cos., Inc. ....... 36,442 1,007,621 Quest Diagnostics, Inc. .... 20,710 1,017,689 Tenet Healthcare Corp.*..... 234,638 1,023,022 UnitedHealth Group, Inc. ... 28,920 1,042,566 WellPoint, Inc.*............ 18,099 983,500 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 16,829,330 ----------- HEALTH CARE TECHNOLOGY 2.0% Cerner Corp.*............... 12,500 1,097,875 ----------- TOTAL HEALTH CARE TECHNOLOGY 1,097,875 ----------- LIFE SCIENCES TOOLS & SERVICES 7.9% Life Technologies Corp.*.... 21,070 1,057,293 PerkinElmer, Inc. .......... 44,370 1,040,476 Thermo Fisher Scientific, Inc.*.................... 21,060 1,082,905 Waters Corp.*............... 14,460 1,071,920 ----------- TOTAL LIFE SCIENCES TOOLS & SERVICES 4,252,594 ----------- PHARMACEUTICALS 22.0% Abbott Laboratories......... 19,180 984,317 Allergan, Inc. ............. 15,310 1,108,597 Bristol-Myers Squibb Co. ... 36,740 988,306 Eli Lilly & Co. ............ 27,760 977,152 Forest Laboratories, Inc.*.. 31,980 1,056,939 Johnson & Johnson, Inc. .... 16,149 1,028,207 King Pharmaceuticals, Inc.*.................... 106,020 1,499,123 Merck & Co., Inc. .......... 27,179 986,054 Mylan, Inc.*................ 54,549 1,108,436 Pfizer, Inc. ............... 57,699 1,003,962 Watson Pharmaceuticals, Inc.*.................... 22,940 1,070,151 ----------- TOTAL PHARMACEUTICALS 11,811,244 ----------- TOTAL COMMON STOCKS (Cost $55,557,056) 53,764,902 ----------- SHORT TERM INVESTMENTS 0.0%(A) SSgA Government Money Market Fund..................... 1,917 1,917 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $1,917) 1,917 ----------- TOTAL INVESTMENTS 100.0%(B) (Cost $55,558,973) 53,766,819 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.0%(A) 3,160 ----------- NET ASSETS--100.0% $53,769,979 -----------------------------------------------------
* Non-Income Producing Security. (a) Amount represents less than 0.05% of net assets. (b) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. See Notes to Financial Statements. 56 RYDEX S&P EQUAL WEIGHT INDUSTRIALS ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.8% AEROSPACE & DEFENSE 21.3% Boeing Co.(The).............. 11,080 $782,691 General Dynamics Corp. ...... 11,307 770,233 Goodrich Corp. .............. 9,840 807,569 Honeywell International, Inc. ..................... 15,850 746,693 ITT Corp. ................... 15,210 717,760 L-3 Communications Holdings, Inc. ..................... 9,890 713,959 Lockheed Martin Corp. ....... 10,120 721,455 Northrop Grumman Corp. ...... 12,000 758,520 Precision Castparts Corp. ... 5,570 760,750 Raytheon Co. ................ 15,160 698,573 Rockwell Collins, Inc. ...... 11,970 724,305 United Technologies Corp. ... 10,110 755,925 ----------- TOTAL AEROSPACE & DEFENSE 8,958,433 ----------- AIR FREIGHT & LOGISTICS 7.0% C.H. Robinson Worldwide, Inc. ..................... 10,220 720,306 Expeditors International of Washington, Inc. ......... 15,760 777,913 FedEx Corp. ................. 8,510 746,497 United Parcel Service, Inc. -- Class B........... 10,390 699,663 ----------- TOTAL AIR FREIGHT & LOGISTICS 2,944,379 ----------- AIRLINES 1.9% Southwest Airlines Co. ...... 59,150 813,904 ----------- TOTAL AIRLINES 813,904 ----------- BUILDING PRODUCTS 1.6% Masco Corp. ................. 63,311 674,895 ----------- TOTAL BUILDING PRODUCTS 674,895 ----------- COMMERCIAL SERVICES & SUPPLIES 13.6% Avery Dennison Corp. ........ 19,450 707,007 Cintas Corp. ................ 25,110 689,772 Iron Mountain, Inc. ......... 34,230 745,872 Pitney Bowes, Inc. .......... 33,290 730,383 R.R. Donnelley & Sons Co. ... 41,531 766,247 Republic Services, Inc. ..... 22,400 667,744 Stericycle, Inc.*............ 9,950 713,813 Waste Management, Inc. ...... 20,070 716,900 ----------- TOTAL COMMERCIAL SERVICES & SUPPLIES 5,737,738 ----------- CONSTRUCTION & ENGINEERING 5.2% Fluor Corp. ................. 14,240 686,226 Jacobs Engineering Group, Inc.*..................... 19,240 742,856 Quanta Services, Inc.*....... 38,420 755,337 ----------- TOTAL CONSTRUCTION & ENGINEERING 2,184,419 ----------- ELECTRICAL EQUIPMENT 5.3% Emerson Electric Co. ........ 13,700 752,130 Rockwell Automation, Inc. ... 11,670 727,858 Roper Industries, Inc. ...... 10,830 751,927 ----------- TOTAL ELECTRICAL EQUIPMENT 2,231,915 ----------- INDUSTRIAL CONGLOMERATES 6.7% 3M Co. ...................... 8,160 687,235 General Electric Co. ........ 42,711 684,230 Textron, Inc. ............... 36,031 750,166 Tyco International Ltd. ..... 17,780 680,618 ----------- TOTAL INDUSTRIAL CONGLOMERATES 2,802,249 ----------- MACHINERY 21.2% Caterpillar, Inc. ........... 9,630 756,918 Cummins, Inc. ............... 8,250 726,825 Danaher Corp. ............... 17,260 748,394 Deere & Co. ................. 9,660 741,888 Dover Corp. ................. 13,910 738,621 Eaton Corp. ................. 8,700 772,821 Flowserve Corp. ............. 6,710 671,000 Illinois Tool Works, Inc. ... 15,140 691,898 PACCAR, Inc. ................ 15,300 784,278 Pall Corp. .................. 17,270 736,911 Parker-Hannifin Corp. ....... 10,310 789,230 Snap-on, Inc. ............... 15,260 778,260 ----------- TOTAL MACHINERY 8,937,044 ----------- PROFESSIONAL SERVICES 5.5% Dun & Bradstreet Corp. ...... 10,110 752,285 Equifax, Inc. ............... 23,370 774,248 Robert Half International, Inc. ..................... 28,510 772,906 ----------- TOTAL PROFESSIONAL SERVICES 2,299,439 ----------- ROAD & RAIL 7.1% CSX Corp. ................... 12,660 777,957 Norfolk Southern Corp. ...... 11,860 729,271 Ryder System, Inc. .......... 16,530 723,188 Union Pacific Corp. ......... 8,780 769,831 ----------- TOTAL ROAD & RAIL 3,000,247 ----------- TRADING COMPANIES & DISTRIBUTORS 3.4% Fastenal Co. ................ 13,550 697,554 W.W. Grainger, Inc. ......... 5,940 736,738 ----------- TOTAL TRADING COMPANIES & DISTRIBUTORS 1,434,292 ----------- TOTAL COMMON STOCKS (Cost $35,494,100) 42,018,954 ----------- SHORT TERM INVESTMENTS 0.2% SSgA Government Money Market Fund...................... 78,208 78,208 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $78,208) 78,208 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $35,572,308) 42,097,162 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.0%(B) 7,791 ----------- NET ASSETS--100.0% $42,104,953 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. ANNUAL REPORT 57 RYDEX S&P EQUAL WEIGHT MATERIALS ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.9% CHEMICALS 45.9% Air Products & Chemicals, Inc. ..................... 12,850 $1,091,864 Airgas, Inc. ................ 15,620 1,107,927 CF Industries Holdings, Inc. ..................... 10,540 1,291,466 Dow Chemical Co.(The)........ 39,340 1,212,852 Du Pont (E.I.) de Nemours & Co. ...................... 23,910 1,130,465 Eastman Chemical Co. ........ 15,000 1,178,550 Ecolab, Inc. ................ 20,960 1,033,747 FMC Corp. ................... 15,600 1,140,360 International Flavors & Fragrances, Inc. ......... 21,720 1,089,475 Monsanto Co. ................ 18,680 1,109,966 PPG Industries, Inc. ........ 14,550 1,115,985 Praxair, Inc. ............... 11,890 1,086,033 Sherwin-Williams Co.(The).... 14,510 1,058,795 Sigma-Aldrich Corp. ......... 17,870 1,133,315 ----------- TOTAL CHEMICALS 15,780,800 ----------- CONSTRUCTION MATERIALS 3.1% Vulcan Materials Co. ........ 28,700 1,047,837 ----------- TOTAL CONSTRUCTION MATERIALS 1,047,837 ----------- CONTAINERS & PACKAGING 15.7% Ball Corp. .................. 17,600 1,132,736 Bemis Co., Inc. ............. 34,020 1,080,475 Owens-Illinois, Inc.*........ 36,300 1,017,489 Pactiv Corp.*................ 32,350 1,073,373 Sealed Air Corp. ............ 46,710 1,081,336 ----------- TOTAL CONTAINERS & PACKAGING 5,385,409 ----------- METALS & MINING 28.7% AK Steel Holding Corp. ...... 75,930 955,959 Alcoa, Inc. ................. 94,020 1,234,482 Allegheny Technologies, Inc. ..................... 23,070 1,215,558 Cliffs Natural Resources, Inc. ..................... 17,250 1,124,700 Freeport-McMoRan Copper & Gold, Inc. ............... 12,860 1,217,585 Newmont Mining Corp. ........ 16,640 1,012,877 Nucor Corp. ................. 26,980 1,031,176 Titanium Metals Corp.*....... 57,220 1,124,945 United States Steel Corp. ... 22,610 967,482 ----------- TOTAL METALS & MINING 9,884,764 ----------- PAPER & FOREST PRODUCTS 6.5% International Paper Co. ..... 44,810 1,132,797 MeadWestvaco Corp. .......... 43,430 1,117,454 ----------- TOTAL PAPER & FOREST PRODUCTS 2,250,251 ----------- TOTAL COMMON STOCKS (Cost $28,335,468) 34,349,061 ----------- SHORT TERM INVESTMENTS 0.1% SSgA Government Money Market Fund...................... 40,734 40,734 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $40,734) 40,734 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $28,376,202) 34,389,795 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.0%(B) 5,016 ----------- NET ASSETS--100.0% $34,394,811 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. 58 RYDEX S&P EQUAL WEIGHT TECHNOLOGY ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.9% COMMUNICATIONS EQUIPMENT 8.4% Cisco Systems, Inc.*........ 49,080 $1,120,496 Harris Corp. ............... 24,050 1,086,819 JDS Uniphase Corp.*......... 88,660 931,817 Juniper Networks, Inc.*..... 36,190 1,172,194 Motorola, Inc.*............. 127,990 1,043,119 QUALCOMM, Inc. ............. 25,650 1,157,584 Tellabs, Inc. .............. 142,380 971,032 ----------- TOTAL COMMUNICATIONS EQUIPMENT 7,483,061 ----------- COMPUTERS & PERIPHERALS 11.6% Apple, Inc.*................ 3,890 1,170,384 Dell, Inc.*................. 86,669 1,246,300 EMC Corp.*.................. 52,360 1,100,084 Hewlett-Packard Co. ........ 27,580 1,160,015 Lexmark International, Inc. -- Class A*......... 25,980 988,019 NetApp, Inc.*............... 22,110 1,177,358 QLogic Corp.*............... 65,039 1,142,735 SanDisk Corp.*.............. 28,300 1,063,514 Western Digital Corp.*...... 40,730 1,304,175 ----------- TOTAL COMPUTERS & PERIPHERALS 10,352,584 ----------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 8.0% Agilent Technologies, Inc.*.................... 35,830 1,246,884 Amphenol Corp. -- Class A... 22,950 1,150,483 Corning, Inc. .............. 63,210 1,155,479 FLIR Systems, Inc.*......... 39,570 1,101,629 Jabil Circuit, Inc. ........ 84,490 1,296,077 Molex, Inc. ................ 55,400 1,124,620 ----------- TOTAL ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 7,075,172 ----------- INTERNET SOFTWARE & SERVICES 8.8% Akamai Technologies, Inc.*.. 20,600 1,064,402 eBay, Inc.*................. 45,040 1,342,643 Google, Inc. -- Class A*.... 2,200 1,348,578 Monster Worldwide, Inc.*.... 86,389 1,560,185 VeriSign, Inc.*............. 34,320 1,192,620 Yahoo!, Inc.*............... 77,410 1,278,039 ----------- TOTAL INTERNET SOFTWARE & SERVICES 7,786,467 ----------- IT SERVICES 16.9% Automatic Data Processing, Inc. .................... 26,170 1,162,471 Cognizant Technology Solutions Corp. -- Class A*....................... 16,940 1,104,319 Computer Sciences Corp. .... 24,929 1,222,767 Fidelity National Information Services, Inc. .................... 39,150 1,060,965 Fiserv, Inc.*............... 20,160 1,099,123 International Business Machines Corp. .......... 8,300 1,191,880 Mastercard, Inc. -- Class A........................ 5,120 1,229,107 Paychex, Inc. .............. 41,609 1,152,569 SAIC, Inc.*................. 68,599 1,066,029 Teradata Corp.*............. 31,040 1,221,734 Total System Services, Inc. .................... 72,970 1,139,062 Visa, Inc. -- Class A....... 15,740 1,230,396 Western Union Co. .......... 62,760 1,104,576 ----------- TOTAL IT SERVICES 14,984,998 ----------- OFFICE ELECTRONICS 1.4% Xerox Corp. ................ 107,100 1,253,070 ----------- TOTAL OFFICE ELECTRONICS 1,253,070 ----------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 25.7% Advanced Micro Devices, Inc.*.................... 175,012 1,282,838 Altera Corp. ............... 38,240 1,193,470 Analog Devices, Inc. ....... 36,510 1,229,292 Applied Materials, Inc. .... 97,148 1,200,749 Broadcom Corp. -- Class A... 31,700 1,291,458 First Solar, Inc.*.......... 7,440 1,024,339 Intel Corp. ................ 56,739 1,138,752 KLA-Tencor Corp. ........... 34,630 1,236,983 Linear Technology Corp. .... 34,020 1,096,465 LSI Corp.*.................. 242,975 1,273,189 MEMC Electronic Materials, Inc.*.................... 94,340 1,209,439 Microchip Technology, Inc. .................... 36,650 1,179,397 Micron Technology, Inc.*.... 159,390 1,318,155 National Semiconductor Corp. ................... 87,018 1,192,147 Novellus Systems, Inc.*..... 43,139 1,260,090 NVIDIA Corp.*............... 101,928 1,226,194 Teradyne, Inc.*............. 103,598 1,164,441 Texas Instruments, Inc. .... 42,000 1,241,940 Xilinx, Inc. ............... 40,970 1,098,406 ----------- TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 22,857,744 ----------- SOFTWARE 19.1% Adobe Systems, Inc.*........ 32,770 922,476 Autodesk, Inc.*............. 32,890 1,189,960 BMC Software, Inc.*......... 27,530 1,251,514 CA, Inc. ................... 53,210 1,235,004 Citrix Systems, Inc.*....... 16,060 1,028,964 Compuware Corp.*............ 125,220 1,253,452 Electronic Arts, Inc.*...... 65,710 1,041,503 Intuit, Inc.*............... 23,990 1,151,520 McAfee, Inc.*............... 22,780 1,077,494 Microsoft Corp. ............ 42,500 1,132,200 Novell, Inc.*............... 177,920 1,055,066 Oracle Corp. ............... 39,350 1,156,890 Red Hat, Inc.*.............. 28,180 1,190,887 Salesforce.com, Inc.*....... 9,210 1,069,005 Symantec Corp.*............. 72,050 1,165,769 ----------- TOTAL SOFTWARE 16,921,704 ----------- TOTAL COMMON STOCKS (Cost $82,363,556) 88,714,800 ----------- SHORT TERM INVESTMENTS 0.1% SSgA Government Money Market Fund..................... 59,566 59,566 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $59,566) 59,566 ----------- TOTAL INVESTMENTS 100.0%(A) (Cost $82,423,122) 88,774,366 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS--0.0%(B) (15,210) ----------- NET ASSETS--100.0% $88,759,156 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. ANNUAL REPORT 59 RYDEX S&P EQUAL WEIGHT UTILITIES ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------- COMMON STOCKS 99.4% DIVERSIFIED TELECOMMUNICATION SERVICES 14.1% AT&T, Inc. ................. 15,968 $455,088 CenturyTel, Inc. ........... 11,581 479,222 Frontier Communications Corp. ................... 56,901 499,591 Qwest Communications International, Inc. ..... 72,927 481,318 Verizon Communications, Inc. .................... 14,277 463,574 Windstream Corp. ........... 36,402 460,849 ----------- TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 2,839,642 ----------- ELECTRIC UTILITIES 32.1% Allegheny Energy, Inc. ..... 19,712 457,318 American Electric Power Co., Inc. .................... 12,479 467,214 Duke Energy Corp. .......... 25,562 465,484 Edison International........ 13,282 490,106 Entergy Corp. .............. 5,854 436,299 Exelon Corp. ............... 10,657 435,019 FirstEnergy Corp. .......... 12,380 449,642 NextEra Energy, Inc. ....... 8,337 458,868 Northeast Utilities......... 15,353 480,242 Pepco Holdings, Inc. ....... 24,916 479,882 Pinnacle West Capital Corp. ................... 11,094 456,629 PPL Corp. .................. 16,754 450,682 Progress Energy, Inc. ...... 10,283 462,735 Southern Co. ............... 12,129 459,325 ----------- TOTAL ELECTRIC UTILITIES 6,449,445 ----------- GAS UTILITIES 4.9% Nicor, Inc. ................ 10,163 484,064 Oneok, Inc. ................ 10,161 506,221 ----------- TOTAL GAS UTILITIES 990,285 ----------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 6.7% AES Corp.(The)*............. 41,193 491,844 Constellation Energy Group, Inc. .................... 14,637 442,623 NRG Energy, Inc.*........... 20,813 414,387 ----------- TOTAL INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 1,348,854 ----------- MULTI-UTILITIES 34.7% Ameren Corp. ............... 16,303 472,461 CenterPoint Energy, Inc. ... 29,935 495,724 CMS Energy Corp. ........... 25,144 462,147 Consolidated Edison, Inc. .. 9,424 468,561 Dominion Resources, Inc. ... 10,306 447,899 DTE Energy Co. ............. 9,625 450,065 Integrys Energy Group, Inc. .................... 8,966 476,902 NiSource, Inc. ............. 26,594 460,342 PG&E Corp. ................. 9,904 473,609 Public Service Enterprise Group, Inc. ............. 14,197 459,273 SCANA Corp. ................ 11,294 461,247 Sempra Energy............... 8,450 451,906 TECO Energy, Inc. .......... 26,358 463,637 Wisconsin Energy Corp. ..... 7,883 469,354 Xcel Energy, Inc. .......... 19,656 468,992 ----------- TOTAL MULTI-UTILITIES 6,982,119 ----------- WIRELESS TELECOMMUNICATION SERVICES 6.9% American Tower Corp. -- Class A*........ 9,112 470,270 MetroPCS Communications, Inc.*.................... 47,149 490,821 Sprint Nextel Corp.*........ 100,506 414,085 ----------- TOTAL WIRELESS TELECOMMUNICATION SERVICES 1,375,176 ----------- TOTAL COMMON STOCKS (Cost $18,294,118) 19,985,521 ----------- SHORT TERM INVESTMENTS 0.4% SSgA Government Money Market Fund..................... 79,077 79,077 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $79,077) 79,077 ----------- TOTAL INVESTMENTS 99.8%(A) (Cost $18,373,195) 20,064,598 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.2% 44,997 ----------- NET ASSETS--100.0% $20,109,595 -----------------------------------------------------
* Non-Income Producing Security. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. See Notes to Financial Statements. 60 STATEMENT OF ASSETS AND LIABILITIES October 31, 2010 --------------------------------------------------------------------------------
RYDEX S&P RYDEX S&P RYDEX S&P RYDEX S&P 500 PURE 500 PURE MIDCAP 400 MIDCAP 400 PURE VALUE ETF GROWTH ETF PURE VALUE ETF GROWTH ETF ----------- ------------ -------------- --------------- ASSETS Investments at Market Value*........... $55,846,823 $147,475,030 $43,079,381 $292,482,599 Receivables: Fund Shares Sold..................... -- 6,059,931 -- 7,026,306 Dividends............................ 45,486 31,494 22,056 25,504 ----------- ------------ ----------- ------------ TOTAL ASSETS...................... 55,892,309 153,566,455 43,101,437 299,534,409 ----------- ------------ ----------- ------------ LIABILITIES Payables: Investments Purchased................ -- 6,059,580 -- 7,026,553 Accrued Management Fees.............. 16,744 36,470 12,692 78,595 ----------- ------------ ----------- ------------ TOTAL LIABILITIES................. 16,744 6,096,050 12,692 7,105,148 ----------- ------------ ----------- ------------ NET ASSETS............................. $55,875,565 $147,470,405 $43,088,745 $292,429,261 =========== ============ =========== ============ NET ASSETS CONSIST OF: Paid-in Capital........................ $68,128,349 $140,081,930 $48,395,558 $266,731,217 Undistributed (Distributions in Excess) of Net Investment Income............. 6,288 -- 6,164 -- Accumulated Net Realized Loss on Investment Securities................ (9,007,521) (7,839,465) (4,163,169) (2,262,161) Net Unrealized Appreciation (Depreciation) on Investment Securities........................... (3,251,551) 15,227,940 (1,149,808) 27,960,205 ----------- ------------ ----------- ------------ NET ASSETS............................. $55,875,565 $147,470,405 $43,088,745 $292,429,261 =========== ============ =========== ============ Shares Outstanding (Unlimited Shares Authorized), No Par Value............ 2,152,836 3,650,299 1,400,499 4,150,021 =========== ============ =========== ============ Net Asset Value, Offering Price and Repurchase Price Per Share........... $ 25.95 $ 40.40 $ 30.77 $ 70.46 =========== ============ =========== ============ *Total Cost of Investments............. $59,098,374 $132,247,090 $44,229,189 $264,522,394 =========== ============ =========== ============
See Notes to Financial Statements. ANNUAL REPORT 61 STATEMENT OF ASSETS AND LIABILITIES (continued) October 31, 2010 --------------------------------------------------------------------------------
RYDEX S&P RYDEX S&P RYDEX S&P RYDEX S&P EQUAL WEIGHT EQUAL WEIGHT SMALLCAP 600 SMALLCAP 600 CONSUMER CONSUMER PURE VALUE ETF PURE GROWTH ETF DISCRETIONARY ETF STAPLES ETF -------------- --------------- ----------------- ------------ ASSETS Investments at Market Value*......... $ 87,385,828 $17,331,027 $25,424,478 $13,841,988 Receivables: Dividends.......................... 23,474 3,369 11,065 19,329 ------------ ----------- ----------- ----------- TOTAL ASSETS.................... 87,409,302 17,334,396 25,435,543 13,861,317 ------------ ----------- ----------- ----------- LIABILITIES Payables: Accrued Management Fees............ 26,391 5,034 10,669 5,811 ------------ ----------- ----------- ----------- TOTAL LIABILITIES............... 26,391 5,034 10,669 5,811 ------------ ----------- ----------- ----------- NET ASSETS........................... $ 87,382,911 $17,329,362 $25,424,874 $13,855,506 ============ =========== =========== =========== NET ASSETS CONSIST OF: Paid-in Capital...................... $121,306,051 $17,082,772 $26,769,288 $12,528,684 Undistributed (Distributions in Excess) of Net Investment Income... -- -- 5,183 28,843 Accumulated Net Realized Loss on Investment Securities.............. (22,557,439) (2,012,188) (3,219,870) (296,634) Net Unrealized Appreciation (Depreciation) on Investment Securities......................... (11,365,701) 2,258,778 1,870,273 1,594,613 ------------ ----------- ----------- ----------- NET ASSETS........................... $ 87,382,911 $17,329,362 $25,424,874 $13,855,506 ============ =========== =========== =========== Shares Outstanding (Unlimited Shares Authorized), No Par Value.......... 2,550,040 400,004 600,000 250,000 ============ =========== =========== =========== Net Asset Value, Offering Price and Repurchase Price Per Share......... $ 34.27 $ 43.32 $ 42.37 $ 55.42 ============ =========== =========== =========== *Total Cost of Investments........... $ 98,751,529 $15,072,249 $23,554,205 $12,247,375 ============ =========== =========== ===========
See Notes to Financial Statements. 62 STATEMENT OF ASSETS AND LIABILITIES (continued) October 31, 2010 --------------------------------------------------------------------------------
RYDEX S&P RYDEX S&P RYDEX S&P RYDEX S&P EQUAL WEIGHT EQUAL WEIGHT EQUAL WEIGHT EQUAL WEIGHT ENERGY ETF FINANCIALS ETF HEALTH CARE ETF INDUSTRIALS ETF ------------ -------------- --------------- --------------- ASSETS Investments at Market Value*........... $16,117,637 $16,507,055 $53,766,819 $42,097,162 Receivables: Dividends............................ 10,980 9,901 27,173 25,578 ----------- ----------- ----------- ----------- TOTAL ASSETS...................... 16,128,617 16,516,956 53,793,992 42,122,740 ----------- ----------- ----------- ----------- LIABILITIES Payables: Accrued Management Fees.............. 6,741 7,005 24,013 17,787 ----------- ----------- ----------- ----------- TOTAL LIABILITIES................. 6,741 7,005 24,013 17,787 ----------- ----------- ----------- ----------- NET ASSETS............................. $16,121,876 $16,509,951 $53,769,979 $42,104,953 =========== =========== =========== =========== NET ASSETS CONSIST OF: Paid-in Capital........................ $17,279,000 $22,303,337 $60,071,976 $36,952,064 Undistributed (Distributions in Excess) of Net Investment Income............. 3,574 -- 16,583 14,627 Accumulated Net Realized Loss on Investment Securities................ (2,610,153) (6,308,180) (4,526,426) (1,386,592) Net Unrealized Appreciation (Depreciation) on Investment Securities........................... 1,449,455 514,794 (1,792,154) 6,524,854 ----------- ----------- ----------- ----------- NET ASSETS............................. $16,121,876 $16,509,951 $53,769,979 $42,104,953 =========== =========== =========== =========== Shares Outstanding (Unlimited Shares Authorized), No Par Value............ 300,005 650,000 900,000 850,000 =========== =========== =========== =========== Net Asset Value, Offering Price and Repurchase Price Per Share........... $ 53.74 $ 25.40 $ 59.74 $ 49.54 =========== =========== =========== =========== *Total Cost of Investments............. $14,668,182 $15,992,261 $55,558,973 $35,572,308 =========== =========== =========== ===========
See Notes to Financial Statements. ANNUAL REPORT 63 STATEMENT OF ASSETS AND LIABILITIES (concluded) October 31, 2010 --------------------------------------------------------------------------------
RYDEX S&P RYDEX S&P RYDEX S&P EQUAL WEIGHT EQUAL WEIGHT EQUAL WEIGHT MATERIALS ETF TECHNOLOGY ETF UTILITIES ETF ------------- -------------- ------------- ASSETS Investments at Market Value*..................... $34,389,795 $88,774,366 $20,064,598 Receivables: Fund Shares Sold............................... -- -- 2,513,699 Dividends...................................... 19,369 21,249 44,864 ----------- ----------- ----------- TOTAL ASSETS................................ 34,409,164 88,795,615 22,623,161 ----------- ----------- ----------- LIABILITIES Payables: Investments Purchased.......................... -- -- 2,506,089 Accrued Management Fees........................ 14,353 36,459 7,477 ----------- ----------- ----------- TOTAL LIABILITIES........................... 14,353 36,459 2,513,566 ----------- ----------- ----------- NET ASSETS....................................... $34,394,811 $88,759,156 $20,109,595 =========== =========== =========== NET ASSETS CONSIST OF: Paid-in Capital.................................. $29,705,154 $85,706,407 $19,658,339 Undistributed (Distributions in Excess) of Net Investment Income.............................. 20,709 -- 52,999 Accumulated Net Realized Loss on Investment Securities..................................... (1,344,645) (3,298,495) (1,293,146) Net Unrealized Appreciation on Investment Securities..................................... 6,013,593 6,351,244 1,691,403 ----------- ----------- ----------- NET ASSETS....................................... $34,394,811 $88,759,156 $20,109,595 =========== =========== =========== Shares Outstanding (Unlimited Shares Authorized), No Par Value................................... 600,000 1,750,000 400,000 =========== =========== =========== Net Asset Value, Offering Price and Repurchase Price Per Share................................ $ 57.32 $ 50.72 $ 50.27 =========== =========== =========== *Total Cost of Investments....................... $28,376,202 $82,423,122 $18,373,195 =========== =========== ===========
See Notes to Financial Statements. 64 STATEMENT OF OPERATIONS For the Year Ended October 31, 2010 --------------------------------------------------------------------------------
RYDEX S&P RYDEX S&P RYDEX S&P RYDEX S&P 500 PURE 500 PURE MIDCAP 400 MIDCAP 400 VALUE ETF GROWTH ETF PURE VALUE ETF PURE GROWTH ETF ----------- ----------- -------------- --------------- INVESTMENT INCOME Dividends............................. $ 1,099,297 $ 535,228 $ 687,735 $ 633,321 ----------- ----------- ----------- ----------- EXPENSES Management Fee........................ 221,815 261,394 154,809 584,349 Other Fees............................ 63 -- -- -- ----------- ----------- ----------- ----------- Total Expenses..................... 221,878 261,394 154,809 584,349 ----------- ----------- ----------- ----------- Net Investment Income................... 877,419 273,834 532,926 48,972 ----------- ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS........................... Net Realized Gain From: Investments........................... 3,596,136 133,458 3,006,444 1,878,086 In-kind Redemptions................... 6,544,119 4,087,109 3,470,202 12,412,886 ----------- ----------- ----------- ----------- Net Realized Gain.................. 10,140,255 4,220,567 6,476,646 14,290,972 Net Change in Unrealized Appreciation (Depreciation) on: Investment Securities................. (4,582,840) 14,201,445 (2,350,651) 25,139,989 ----------- ----------- ----------- ----------- Net Realized and Unrealized Gain on Investments........................... 5,557,415 18,422,012 4,125,995 39,430,961 ----------- ----------- ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 6,434,834 $18,695,846 $ 4,658,921 $39,479,933 =========== =========== =========== ===========
See Notes to Financial Statements. ANNUAL REPORT 65 STATEMENT OF OPERATIONS (continued) For the Year Ended October 31, 2010 --------------------------------------------------------------------------------
RYDEX S&P RYDEX S&P RYDEX S&P EQUAL RYDEX S&P EQUAL SMALLCAP 600 SMALLCAP 600 WEIGHT CONSUMER WEIGHT CONSUMER PURE VALUE ETF PURE GROWTH ETF DISCRETIONARY ETF STAPLES ETF -------------- --------------- ----------------- --------------- INVESTMENT INCOME Dividends....................... $ 1,062,394 $ 81,301 $ 352,745 $ 310,911 ----------- ---------- ---------- ---------- EXPENSES Management Fee.................. 390,528 57,563 127,244 57,583 Other Fees...................... -- 151 -- -- ----------- ---------- ---------- ---------- Total Expenses............... 390,528 57,714 127,244 57,583 ----------- ---------- ---------- ---------- Net Investment Income............. 671,866 23,587 225,501 253,328 ----------- ---------- ---------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) From: Investments..................... (8,950,694) (96,977) 34,471 156,024 In-kind Redemptions............. 11,458,534 1,104,774 3,070,748 -- ----------- ---------- ---------- ---------- Net Realized Gain............ 2,507,840 1,007,797 3,105,219 156,024 Net Change in Unrealized Appreciation (Depreciation) on: Investment Securities........... (1,095,620) 2,751,747 543,585 1,476,439 ----------- ---------- ---------- ---------- Net Realized and Unrealized Gain on Investments.................. 1,412,220 3,759,544 3,648,804 1,632,463 ----------- ---------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $ 2,084,086 $3,783,131 $3,874,305 $1,885,791 =========== ========== ========== ==========
See Notes to Financial Statements. 66 STATEMENT OF OPERATIONS (continued) For the Year Ended October 31, 2010 --------------------------------------------------------------------------------
RYDEX S&P RYDEX S&P RYDEX S&P RYDEX S&P EQUAL WEIGHT EQUAL WEIGHT EQUAL WEIGHT EQUAL WEIGHT ENERGY ETF FINANCIALS ETF HEALTH CARE ETF INDUSTRIALS ETF ------------ -------------- --------------- --------------- INVESTMENT INCOME Dividends, Net of Foreign Tax Withheld.......................... $ 212,628 $ 306,382 $ 583,029 $ 567,134 ---------- ---------- ----------- ---------- EXPENSES Management Fee....................... 77,506 87,069 344,028 154,258 ---------- ---------- ----------- ---------- Net Investment Income.................. 135,122 219,313 239,001 412,876 ---------- ---------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) From: Investments.......................... (757,270) (433,049) (25,696) (35,402) In-kind Redemptions.................. 1,397,543 2,854,135 11,842,120 1,029,010 ---------- ---------- ----------- ---------- Net Realized Gain................. 640,273 2,421,086 11,816,424 993,608 Net Change in Unrealized Appreciation (Depreciation) on: Investment Securities................ 1,516,371 (407,694) (234,579) 4,470,909 ---------- ---------- ----------- ---------- Net Realized and Unrealized Gain on Investments.......................... 2,156,644 2,013,392 11,581,845 5,464,517 ---------- ---------- ----------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $2,291,766 $2,232,705 $11,820,846 $5,877,393 ========== ========== =========== ========== Foreign Taxes Withheld................. -- -- $ 210 $ 599
See Notes to Financial Statements. ANNUAL REPORT 67 STATEMENT OF OPERATIONS (concluded) For the Year Ended October 31, 2010 --------------------------------------------------------------------------------
RYDEX S&P RYDEX S&P RYDEX S&P EQUAL WEIGHT EQUAL WEIGHT EQUAL WEIGHT MATERIALS ETF TECHNOLOGY ETF UTILITIES ETF ------------- -------------- ------------- INVESTMENT INCOME Dividends...................................... $1,188,172 $ 637,012 $ 535,943 ---------- ----------- ---------- EXPENSES Management Fee................................. 175,520 420,958 60,169 ---------- ----------- ---------- Net Investment Income............................ 1,012,652 216,054 475,774 ---------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) From: Investments.................................... 478,027 288,136 (330,684) In-kind Redemptions............................ 4,770,449 11,655,275 -- ---------- ----------- ---------- Net Realized Gain (Loss).................... 5,248,476 11,943,411 (330,684) Net Change in Unrealized Appreciation (Depreciation) on: Investment Securities.......................... 2,675,915 5,055,947 2,266,186 ---------- ----------- ---------- Net Realized and Unrealized Gain on Investments.. 7,924,391 16,999,358 1,935,502 ---------- ----------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $8,937,043 $17,215,412 $2,411,276 ========== =========== ==========
See Notes to Financial Statements. 68 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
RYDEX S&P 500 PURE VALUE ETF RYDEX S&P 500 PURE GROWTH ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income.............. $ 877,419 $ 479,519 $ 273,834 $ 200,784 Net Realized Gain (Loss)........... 10,140,255 (10,405,959) 4,220,567 (7,113,217) Net Change in Unrealized Appreciation (Depreciation) on Investments..................... (4,582,840) 13,980,811 14,201,445 15,522,201 ------------ ------------ ------------ ----------- Net Increase in Net Assets Resulting From Operations....... 6,434,834 4,054,371 18,695,846 8,609,768 ------------ ------------ ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.............. (867,443) (515,568) (285,918) (214,179) ------------ ------------ ------------ ----------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased..... 85,657,155 11,067,164 117,266,926 8,335,525 Value of Shares Purchased through Dividend Reinvestments.......... 6,581 24,282 1,529 3,946 Value of Shares Redeemed........... (65,456,767) (2,522,624) (26,775,492) (2,565,332) ------------ ------------ ------------ ----------- Net Increase in Net Assets Resulting From Share Transactions.................... 20,206,969 8,568,822 90,492,963 5,774,139 ------------ ------------ ------------ ----------- Increase in Net Assets.......... 25,774,360 12,107,625 108,902,891 14,169,728 NET ASSETS--BEGINNING OF PERIOD...... 30,101,205 17,993,580 38,567,514 24,397,786 ------------ ------------ ------------ ----------- NET ASSETS--END OF PERIOD(1)......... $ 55,875,565 $ 30,101,205 $147,470,405 $38,567,514 ============ ============ ============ =========== (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................. $ 6,288 $ -- $ -- $ 5,486 ============ ============ ============ =========== CHANGES IN SHARES OUTSTANDING: Shares Purchased................... 3,350,000 550,000 3,200,000 350,000 Shares Purchased through Dividend Reinvestments................... 266 1,581 44 158 Shares Redeemed.................... (2,600,000) (150,000) (800,000) (100,000) Shares Outstanding, Beginning of Period.......................... 1,402,570 1,000,989 1,250,255 1,000,097 ------------ ------------ ------------ ----------- Shares Outstanding, End of Period.. 2,152,836 1,402,570 3,650,299 1,250,255 ============ ============ ============ ===========
See Notes to Financial Statements. ANNUAL REPORT 69 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------------------------------------------------------
RYDEX S&P MIDCAP 400 RYDEX S&P MIDCAP 400 PURE VALUE ETF PURE GROWTH ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income.............. $ 532,926 $ 325,832 $ 48,972 $ 63,967 Net Realized Gain (Loss)........... 6,476,646 (7,117,028) 14,290,972 (4,466,151) Net Change in Unrealized Appreciation (Depreciation) on Investments..................... (2,350,651) 8,073,464 25,139,989 11,908,189 ------------ ----------- ------------ ------------ Net Increase in Net Assets Resulting From Operations....... 4,658,921 1,282,268 39,479,933 7,506,005 ------------ ----------- ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.............. (526,762) (307,090) (89,353) (48,422) ------------ ----------- ------------ ------------ SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased..... 43,241,178 13,278,363 229,792,522 95,440,614 Value of Shares Purchased through Dividend Reinvestments.......... 2,368 4,588 122 314 Value of Shares Redeemed........... (27,284,312) (1,386,313) (85,185,473) (12,062,845) ------------ ----------- ------------ ------------ Net Increase in Net Assets Resulting From Share Transactions.................... 15,959,234 11,896,638 144,607,171 83,378,083 ------------ ----------- ------------ ------------ Increase in Net Assets.......... 20,091,393 12,871,816 183,997,751 90,835,666 NET ASSETS--BEGINNING OF PERIOD...... 22,997,352 10,125,536 108,431,510 17,595,844 ------------ ----------- ------------ ------------ NET ASSETS--END OF PERIOD(1)......... $ 43,088,745 $22,997,352 $292,429,261 $108,431,510 ============ =========== ============ ============ (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................. $ 6,164 $ -- $ -- $ 15,638 ============ =========== ============ ============ CHANGES IN SHARES OUTSTANDING: Shares Purchased................... 1,400,000 550,000 3,550,000 1,900,000 Shares Purchased through Dividend Reinvestments................... 81 250 2 8 Shares Redeemed.................... (950,000) (100,000) (1,450,000) (300,000) Shares Outstanding, Beginning of Period.......................... 950,418 500,168 2,050,019 450,011 ------------ ----------- ------------ ------------ Shares Outstanding, End of Period.. 1,400,499 950,418 4,150,021 2,050,019 ============ =========== ============ ============
See Notes to Financial Statements. 70 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------------------------------------------------------
RYDEX S&P SMALLCAP 600 RYDEX S&P SMALLCAP 600 PURE VALUE ETF PURE GROWTH ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income.............. $ 671,866 $ 601,004 $ 23,587 $ 18,381 Net Realized Gain (Loss)........... 2,507,840 2,445,137 1,007,797 (981,454) Net Change in Unrealized Appreciation (Depreciation) on Investments..................... (1,095,620) (548,873) 2,751,747 2,147,377 ------------- ------------ ----------- ----------- Net Increase in Net Assets Resulting From Operations....... 2,084,086 2,497,268 3,783,131 1,184,304 ------------- ------------ ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.............. (707,768) (480,887) (25,566) (20,833) ------------- ------------ ----------- ----------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased..... 108,057,601 121,659,746 7,478,723 9,770,800 Value of Shares Purchased through Dividend Reinvestments.......... -- 14 -- -- Value of Shares Redeemed........... (130,334,749) (40,919,190) (5,851,855) (6,246,728) ------------- ------------ ----------- ----------- Net Increase (Decrease) in Net Assets Resulting From Share Transactions.................... (22,277,148) 80,740,570 1,626,868 3,524,072 ------------- ------------ ----------- ----------- Increase (Decrease) in Net Assets........................ (20,900,830) 82,756,951 5,384,433 4,687,543 NET ASSETS--BEGINNING OF PERIOD...... 108,283,741 25,526,790 11,944,929 7,257,386 ------------- ------------ ----------- ----------- NET ASSETS--END OF PERIOD(1)......... $ 87,382,911 $108,283,741 $17,329,362 $11,944,929 ============= ============ =========== =========== (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................. $ -- $ 34,677 $ -- $ -- ============= ============ =========== =========== CHANGES IN SHARES OUTSTANDING: Shares Purchased................... 2,850,000 4,150,000 200,000 300,000 Shares Purchased through Dividend Reinvestments................... -- 1 -- -- Shares Redeemed.................... (4,100,000) (1,450,000) (150,000) (200,000) Shares Outstanding, Beginning of Period.......................... 3,800,040 1,100,039 350,004 250,004 ------------- ------------ ----------- ----------- Shares Outstanding, End of Period.. 2,550,040 3,800,040 400,004 350,004 ============= ============ =========== ===========
See Notes to Financial Statements. ANNUAL REPORT 71 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT RYDEX S&P EQUAL WEIGHT CONSUMER DISCRETIONARY ETF CONSUMER STAPLES ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income.............. $ 225,501 $ 133,691 $ 253,328 $ 232,510 Net Realized Gain (Loss)........... 3,105,219 (2,115,968) 156,024 (262,743) Net Change in Unrealized Appreciation (Depreciation) on Investments..................... 543,585 4,599,724 1,476,439 1,526,281 ------------ ----------- ----------- ----------- Net Increase in Net Assets Resulting From Operations....... 3,874,305 2,617,447 1,885,791 1,496,048 ------------ ----------- ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.............. (221,575) (134,899) (244,303) (224,373) ------------ ----------- ----------- ----------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased..... 23,320,514 12,583,909 2,529,276 -- Value of Shares Redeemed........... (13,022,663) (7,314,430) -- (1,954,772) ------------ ----------- ----------- ----------- Net Increase (Decrease) in Net Assets Resulting From Share Transactions.................... 10,297,851 5,269,479 2,529,276 (1,954,772) ------------ ----------- ----------- ----------- Increase (Decrease) in Net Assets........................ 13,950,581 7,752,027 4,170,764 (683,097) NET ASSETS--BEGINNING OF PERIOD...... 11,474,293 3,722,266 9,684,742 10,367,839 ------------ ----------- ----------- ----------- NET ASSETS--END OF PERIOD(1)......... $ 25,424,874 $11,474,293 $13,855,506 $ 9,684,742 ============ =========== =========== =========== (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................. $ 5,183 $ 1,257 $ 28,843 $ 19,818 ============ =========== =========== =========== CHANGES IN SHARES OUTSTANDING: Shares Purchased................... 600,000 600,000 50,000 -- Shares Redeemed.................... (350,000) (400,000) -- (50,000) Shares Outstanding, Beginning of Period.......................... 350,000 150,000 200,000 250,000 ------------ ----------- ----------- ----------- Shares Outstanding, End of Period.. 600,000 350,000 250,000 200,000 ============ =========== =========== ===========
See Notes to Financial Statements. 72 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT RYDEX S&P EQUAL WEIGHT ENERGY ETF FINANCIALS ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income.............. $ 135,122 $ 83,961 $ 219,313 $ 217,309 Net Realized Gain (Loss)........... 640,273 (1,676,952) 2,421,086 (3,250,473) Net Change in Unrealized Appreciation (Depreciation) on Investments..................... 1,516,371 3,463,565 (407,694) 3,985,344 ----------- ----------- ------------ ----------- Net Increase in Net Assets Resulting From Operations....... 2,291,766 1,870,574 2,232,705 952,180 ----------- ----------- ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.............. (137,899) (78,547) (251,198) (243,410) ----------- ----------- ------------ ----------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased..... 7,318,377 6,057,007 12,509,461 6,405,261 Value of Shares Redeemed........... (5,272,130) (1,884,823) (11,975,988) (3,824,425) ----------- ----------- ------------ ----------- Net Increase in Net Assets Resulting From Share Transactions.................... 2,046,247 4,172,184 533,473 2,580,836 ----------- ----------- ------------ ----------- Increase in Net Assets.......... 4,200,114 5,964,211 2,514,980 3,289,606 NET ASSETS--BEGINNING OF PERIOD...... 11,921,762 5,957,551 13,994,971 10,705,365 ----------- ----------- ------------ ----------- NET ASSETS--END OF PERIOD(1)......... $16,121,876 $11,921,762 $ 16,509,951 $13,994,971 =========== =========== ============ =========== (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................. $ 3,574 $ 6,351 $ -- $ -- =========== =========== ============ =========== CHANGES IN SHARES OUTSTANDING: Shares Purchased................... 150,000 150,000 500,000 350,000 Shares Redeemed.................... (100,000) (50,000) (500,000) (200,000) Shares Outstanding, Beginning of Period.......................... 250,005 150,005 650,000 500,000 ----------- ----------- ------------ ----------- Shares Outstanding, End of Period.. 300,005 250,005 650,000 650,000 =========== =========== ============ ===========
See Notes to Financial Statements. ANNUAL REPORT 73 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT RYDEX S&P EQUAL WEIGHT HEALTH CARE ETF INDUSTRIALS ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income.............. $ 239,001 $ 233,256 $ 412,876 $ 209,818 Net Realized Gain (Loss)........... 11,816,424 (216,300) 993,608 (1,921,389) Net Change in Unrealized Appreciation (Depreciation) on Investments..................... (234,579) 12,475,194 4,470,909 4,801,448 ------------- ------------ ----------- ----------- Net Increase in Net Assets Resulting From Operations....... 11,820,846 12,492,150 5,877,393 3,089,877 ------------- ------------ ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.............. (247,927) (219,171) (398,481) (204,603) ------------- ------------ ----------- ----------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased..... 78,908,687 52,467,908 21,282,423 10,670,318 Value of Shares Redeemed........... (110,019,690) (39,969,426) (2,546,360) (2,811,423) ------------- ------------ ----------- ----------- Net Increase (Decrease) in Net Assets Resulting From Share Transactions.................... (31,111,003) 12,498,482 18,736,063 7,858,895 ------------- ------------ ----------- ----------- Increase (Decrease) in Net Assets........................ (19,538,084) 24,771,461 24,214,975 10,744,169 NET ASSETS--BEGINNING OF PERIOD...... 73,308,063 48,536,602 17,889,978 7,145,809 ------------- ------------ ----------- ----------- NET ASSETS--END OF PERIOD(1)......... $ 53,769,979 $ 73,308,063 $42,104,953 $17,889,978 ============= ============ =========== =========== (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................. $ 16,583 $ 25,509 $ 14,627 $ 3,576 ============= ============ =========== =========== CHANGES IN SHARES OUTSTANDING: Shares Purchased................... 1,400,000 1,150,000 450,000 350,000 Shares Redeemed.................... (1,950,000) (850,000) (50,000) (100,000) Shares Outstanding, Beginning of Period.......................... 1,450,000 1,150,000 450,000 200,000 ------------- ------------ ----------- ----------- Shares Outstanding, End of Period.. 900,000 1,450,000 850,000 450,000 ============= ============ =========== ===========
See Notes to Financial Statements. 74 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT RYDEX S&P EQUAL WEIGHT MATERIALS ETF TECHNOLOGY ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income.............. $ 1,012,652 $ 268,197 $ 216,054 $ 57,660 Net Realized Gain (Loss)........... 5,248,476 (281,229) 11,943,411 (2,314,699) Net Change in Unrealized Appreciation (Depreciation) on Investments..................... 2,675,915 5,501,066 5,055,947 7,831,217 ------------ ----------- ------------ ----------- Net Increase in Net Assets Resulting From Operations....... 8,937,043 5,488,034 17,215,412 5,574,178 ------------ ----------- ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.............. (1,001,234) (264,238) (230,398) (68,005) ------------ ----------- ------------ ----------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased..... 10,346,920 35,570,213 86,546,014 46,698,982 Value of Shares Redeemed........... (25,086,993) (4,749,941) (68,740,444) (5,731,696) ------------ ----------- ------------ ----------- Net Increase (Decrease) in Net Assets Resulting From Share Transactions.................... (14,740,073) 30,820,272 17,805,570 40,967,286 ------------ ----------- ------------ ----------- Increase (Decrease) in Net Assets........................ (6,804,264) 36,044,068 34,790,584 46,473,459 NET ASSETS--BEGINNING OF PERIOD...... 41,199,075 5,155,007 53,968,572 7,495,113 ------------ ----------- ------------ ----------- NET ASSETS--END OF PERIOD(1)......... $ 34,394,811 $41,199,075 $ 88,759,156 $53,968,572 ============ =========== ============ =========== (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................. $ 20,709 $ 9,291 $ -- $ -- ============ =========== ============ =========== CHANGES IN SHARES OUTSTANDING: Shares Purchased................... 200,000 850,000 1,900,000 1,250,000 Shares Redeemed.................... (500,000) (100,000) (1,500,000) (150,000) Shares Outstanding, Beginning of Period.......................... 900,000 150,000 1,350,000 250,000 ------------ ----------- ------------ ----------- Shares Outstanding, End of Period.. 600,000 900,000 1,750,000 1,350,000 ============ =========== ============ ===========
See Notes to Financial Statements. ANNUAL REPORT 75 STATEMENTS OF CHANGES IN NET ASSETS (concluded) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT UTILITIES ETF ---------------------------------- YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- OPERATIONS Net Investment Income.................................. $ 475,774 $ 298,297 Net Realized Loss...................................... (330,684) (887,060) Net Change in Unrealized Appreciation (Depreciation) on Investments......................................... 2,266,186 1,054,143 ----------- ---------- Net Increase in Net Assets Resulting From Operations... 2,411,276 465,380 ----------- ---------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.................................. (451,578) (287,015) ----------- ---------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased......................... 9,722,935 4,130,846 ----------- ---------- Net Increase in Net Assets Resulting From Share Transactions........................................ 9,722,935 4,130,846 ----------- ---------- Increase in Net Assets.............................. 11,682,633 4,309,211 NET ASSETS--BEGINNING OF PERIOD.......................... 8,426,962 4,117,751 ----------- ---------- NET ASSETS--END OF PERIOD(1)............................. $20,109,595 $8,426,962 =========== ========== (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................................. $ 52,999 $ 28,803 =========== ========== CHANGES IN SHARES OUTSTANDING: Shares Purchased....................................... 200,000 100,000 Shares Outstanding, Beginning of Period................ 200,000 100,000 ----------- ---------- Shares Outstanding, End of Period...................... 400,000 200,000 =========== ==========
See Notes to Financial Statements. 76 FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
RYDEX S&P 500 PURE VALUE ETF ----------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006* ---------------- ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 21.46 $ 17.98 $ 34.46 $ 32.66 $ 29.87 ------- ------- ------- ------- ------- Net Investment Income**.... 0.35 0.49 1.00 0.75 0.49 Net Realized and Unrealized Gain (Loss) on Investments.............. 4.49 3.53 (16.44) 1.80 2.58 ------- ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS............... 4.84 4.02 (15.44) 2.55 3.07 ------- ------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income...... (0.35) (0.54) (1.04) (0.75) (0.28) ------- ------- ------- ------- ------- NET ASSET VALUE AT END OF PERIOD................... $ 25.95 $ 21.46 $ 17.98 $ 34.46 $ 32.66 ======= ======= ======= ======= ======= TOTAL RETURN***............ 22.67% 23.73% (45.76)% 7.79% 10.27% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......... $55,876 $30,101 $17,994 $39,635 $21,232 RATIO TO AVERAGE NET ASSETS OF: Expenses................... 0.35% 0.35% 0.35% 0.35% 0.35%**** Net Investment Income...... 1.38% 2.92% 3.63% 2.15% 2.37%**** Portfolio Turnover Rate+... 27% 45% 53% 26% 4%
* The Fund commenced operations on March 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 77 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P 500 PURE GROWTH ETF ----------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006* ---------------- ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 30.85 $ 24.40 $ 39.59 $ 35.30 $ 34.42 -------- ------- ------- ------- ------- Net Investment Income**.... 0.13 0.18 0.20 0.25 0.11 Net Realized and Unrealized Gain (Loss) on Investments.............. 9.57 6.46 (15.19) 4.26 0.84 -------- ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS............... 9.70 6.64 (14.99) 4.51 0.95 -------- ------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income...... (0.15) (0.19) (0.20) (0.22) (0.07) -------- ------- ------- ------- ------- NET ASSET VALUE AT END OF PERIOD................... $ 40.40 $ 30.85 $ 24.40 $ 39.59 $ 35.30 ======== ======= ======= ======= ======= TOTAL RETURN***............ 31.51% 27.41% (38.00)% 12.79% 2.77% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......... $147,470 $38,568 $24,398 $63,340 $17,649 RATIO TO AVERAGE NET ASSETS OF: Expenses................... 0.35% 0.35% 0.35% 0.35% 0.35%**** Net Investment Income...... 0.37% 0.69% 0.57% 0.66% 0.48%**** Portfolio Turnover Rate+... 31% 27% 30% 24% 7%
* The Fund commenced operations on March 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. 78 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P MIDCAP 400 PURE VALUE ETF ----------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006* ---------------- ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 24.20 $ 20.24 $ 35.76 $ 33.27 $ 31.53 ------- ------- ------- ------- ------- Net Investment Income**.... 0.36 0.59 0.87 0.82 0.44 Net Realized and Unrealized Gain (Loss) on Investments.............. 6.57 3.92 (15.54) 2.48 1.60 ------- ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS............... 6.93 4.51 (14.67) 3.30 2.04 ------- ------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income...... (0.36) (0.55) (0.84) (0.81) (0.30) ------- ------- ------- ------- ------- NET ASSET VALUE AT END OF PERIOD................... $ 30.77 $ 24.20 $ 20.24 $ 35.76 $ 33.27 ======= ======= ======= ======= ======= TOTAL RETURN***............ 28.75% 23.32% (41.75)% 9.94% 6.48% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......... $43,089 $22,997 $10,126 $21,458 $14,973 RATIO TO AVERAGE NET ASSETS OF: Expenses................... 0.35% 0.35% 0.35% 0.35% 0.35%**** Net Investment Income...... 1.20% 2.90% 2.87% 2.28% 2.07%**** Portfolio Turnover Rate+... 35% 57% 64% 46% 4%
* The Fund commenced operations on March 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 79 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P MIDCAP 400 PURE GROWTH ETF ----------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006* ---------------- ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 52.89 $ 39.10 $ 59.75 $ 50.10 $ 52.62 -------- -------- ------- ------- ------- Net Investment Income**.... 0.02 0.09 0.02 0.33 0.02 Net Realized and Unrealized Gain (Loss) on Investments.............. 17.59 13.79 (20.63) 9.73 (2.53) -------- -------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS............... 17.61 13.88 (20.61) 10.06 (2.51) -------- -------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income...... (0.04) (0.09) (0.04) (0.27) (0.01) Net Realized Gains......... -- -- -- (0.14) -- -------- -------- ------- ------- ------- Total Distributions........ (0.04) (0.09) (0.04) (0.41) (0.01) -------- -------- ------- ------- ------- NET ASSET VALUE AT END OF PERIOD................... $ 70.46 $ 52.89 $ 39.10 $ 59.75 $ 50.10 ======== ======== ======= ======= ======= TOTAL RETURN***............ 33.32% 35.59% (34.52)% 20.17% (4.76)% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......... $292,429 $108,432 $17,596 $20,914 $22,547 RATIO TO AVERAGE NET ASSETS OF: Expenses................... 0.35% 0.35% 0.35% 0.35% 0.35%**** Net Investment Income...... 0.03% 0.19% 0.04% 0.60% 0.07%**** Portfolio Turnover Rate+... 51% 29% 52% 53% 14%
* The Fund commenced operations on March 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. 80 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P SMALLCAP 600 PURE VALUE ETF ----------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006* ---------------- ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 28.50 $ 23.21 $ 37.38 $ 40.13 $38.45 ------- -------- ------- ------- ------ Net Investment Income**.... 0.20 0.32 0.79 0.74 0.37 Net Realized and Unrealized Gain (Loss) on Investments.............. 5.78 5.29 (14.26) (2.85) 1.62 ------- -------- ------- ------- ------ TOTAL FROM INVESTMENT OPERATIONS............... 5.98 5.61 (13.47) (2.11) 1.99 ------- -------- ------- ------- ------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income...... (0.21) (0.32) (0.70) (0.62) (0.31) Capital.................... -- -- -- (0.02) -- ------- -------- ------- ------- ------ Total Distributions........ (0.21) (0.32) (0.70) (0.64) (0.31) ------- -------- ------- ------- ------ NET ASSET VALUE AT END OF PERIOD................... $ 34.27 $ 28.50 $ 23.21 $ 37.38 $40.13 ======= ======== ======= ======= ====== TOTAL RETURN***............ 21.07% 25.00% (36.48)% (5.38)% 5.19% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......... $87,383 $108,284 $25,527 $22,426 $6,019 RATIO TO AVERAGE NET ASSETS OF: Expenses................... 0.35% 0.35% 0.35% 0.35% 0.35%**** Net Investment Income...... 0.60% 1.18% 2.57% 1.78% 1.46%**** Portfolio Turnover Rate+... 62% 43% 50% 37% 7%
* The Fund commenced operations on March 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 81 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P SMALLCAP 600 PURE GROWTH ETF ----------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006* ---------------- ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 34.13 $ 29.03 $ 44.92 $ 39.10 $39.31 ------- ------- ------- ------- ------ Net Investment Income (Loss)**................. 0.06 0.06 0.17 -- (0.01) Net Realized and Unrealized Gain (Loss) on Investments.............. 9.18 5.13 (15.87) 5.84 (0.20) ------- ------- ------- ------- ------ TOTAL FROM INVESTMENT OPERATIONS............... 9.24 5.19 (15.70) 5.84 (0.21) ------- ------- ------- ------- ------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income...... (0.05) (0.09) (0.19) (0.02) -- ------- ------- ------- ------- ------ NET ASSET VALUE AT END OF PERIOD................... $ 43.32 $ 34.13 $ 29.03 $ 44.92 $39.10 ======= ======= ======= ======= ====== TOTAL RETURN***............ 27.11% 17.93% (35.05)% 14.93% (0.55)% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......... $17,329 $11,945 $ 7,257 $11,229 $7,820 RATIO TO AVERAGE NET ASSETS OF: Expenses................... 0.35% 0.35% 0.35% 0.35% 0.35%**** Net Investment Income (Loss)................... 0.14% 0.21% 0.44% 0.00% (0.04)%**** Portfolio Turnover Rate+... 55% 46% 63% 51% 14%
* The Fund commenced operations on March 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. 82 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT CONSUMER DISCRETIONARY ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 32.78 $ 24.82 $ 44.50 $ 44.98 ------- ------- ------- ------- Net Investment Income**............. 0.35 0.40 0.53 0.32 Net Realized and Unrealized Gain (Loss) on Investments............. 9.56 7.93 (19.59) (0.49) ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS.... 9.91 8.33 (19.06) (0.17) ------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (0.32) (0.37) (0.62) (0.31) ------- ------- ------- ------- NET ASSET VALUE AT END OF PERIOD.... $ 42.37 $ 32.78 $ 24.82 $ 44.50 ======= ======= ======= ======= TOTAL RETURN***..................... 30.35% 34.20% (43.27)% (0.40)% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $25,425 $11,474 $ 3,722 $28,928 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 0.89% 1.61% 1.44% 0.67%**** Portfolio Turnover Rate+............ 28% 42% 29% 28%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 83 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT CONSUMER STAPLES ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 48.42 $41.47 $ 52.68 $48.16 ------- ------ ------- ------ Net Investment Income**............. 1.14 1.04 0.88 1.16 Net Realized and Unrealized Gain (Loss) on Investments............. 6.95 6.91 (11.22) 4.32 ------- ------ ------- ------ TOTAL FROM INVESTMENT OPERATIONS.... 8.09 7.95 (10.34) 5.48 ------- ------ ------- ------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (1.09) (1.00) (0.87) (0.96) ------- ------ ------- ------ NET ASSET VALUE AT END OF PERIOD.... $ 55.42 $48.42 $ 41.47 $52.68 ======= ====== ======= ====== TOTAL RETURN***..................... 16.89% 19.60% (19.87)% 11.45% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $13,856 $9,685 $10,368 $7,902 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 2.20% 2.52% 1.78% 2.29%**** Portfolio Turnover Rate+............ 18% 25% 25% 19%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. 84 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT ENERGY ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 47.69 $ 39.72 $ 67.48 $ 48.35 ------- ------- ------- ------- Net Investment Income**............. 0.44 0.46 0.33 0.27 Net Realized and Unrealized Gain (Loss) on Investments............. 6.07 7.93 (25.94) 19.14 ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS.... 6.51 8.39 (25.61) 19.41 ------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (0.46) (0.42) (0.35) (0.28) Net Realized Gains.................. -- -- (1.80) -- ------- ------- ------- ------- Total Distributions................. (0.46) (0.42) (2.15) (0.28) ------- ------- ------- ------- NET ASSET VALUE AT END OF PERIOD.... $ 53.74 $ 47.69 $ 39.72 $ 67.48 ======= ======= ======= ======= TOTAL RETURN***..................... 13.74% 21.39% (39.28)% 40.28% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $16,122 $11,922 $ 5,958 $10,122 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 0.87% 1.16% 0.50% 0.47%**** Portfolio Turnover Rate+............ 31% 33% 38% 34%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 85 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT FINANCIALS ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 21.53 $ 21.41 $ 46.67 $48.57 ------- ------- ------- ------ Net Investment Income**............. 0.31 0.36 1.02 0.92 Net Realized and Unrealized Gain (Loss) on Investments............. 3.87 0.18 (25.40) (1.95) ------- ------- ------- ------ TOTAL FROM INVESTMENT OPERATIONS.... 4.18 0.54 (24.38) (1.03) ------- ------- ------- ------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (0.31) (0.42) (0.88) (0.87) ------- ------- ------- ------ NET ASSET VALUE AT END OF PERIOD.... $ 25.40 $ 21.53 $ 21.41 $46.67 ======= ======= ======= ====== TOTAL RETURN***..................... 19.46% 3.15% (52.88)% (2.23)% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $16,510 $13,995 $10,705 $7,000 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 1.26% 2.00% 3.09% 1.84%**** Portfolio Turnover Rate+............ 19% 49% 51% 31%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. 86 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT HEALTH CARE ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 50.56 $ 42.21 $ 57.94 $ 49.46 ------- ------- ------- ------- Net Investment Income**............. 0.20 0.19 0.14 0.11 Net Realized and Unrealized Gain (Loss) on Investments............. 9.20 8.35 (15.74) 8.48 ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS.... 9.40 8.54 (15.60) 8.59 ------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (0.22) (0.19) (0.13) (0.11) ------- ------- ------- ------- NET ASSET VALUE AT END OF PERIOD.... $ 59.74 $ 50.56 $ 42.21 $ 57.94 ======= ======= ======= ======= TOTAL RETURN***..................... 18.64% 20.31% (26.98)% 17.37% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $53,770 $73,308 $48,537 $17,383 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 0.35% 0.42% 0.26% 0.20%**** Portfolio Turnover Rate+............ 20% 38% 26% 55%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 87 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT INDUSTRIALS ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 39.76 $ 35.73 $ 59.37 $49.15 ------- ------- ------- ------ Net Investment Income**............. 0.61 0.67 0.61 0.56 Net Realized and Unrealized Gain (Loss) on Investments............. 9.78 4.12 (21.82) 10.21 ------- ------- ------- ------ TOTAL FROM INVESTMENT OPERATIONS.... 10.39 4.79 (21.21) 10.77 ------- ------- ------- ------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (0.61) (0.76) (0.65) (0.55) Net Realized Gains.................. -- -- (1.78) -- ------- ------- ------- ------ Total Distributions................. (0.61) (0.76) (2.43) (0.55) ------- ------- ------- ------ NET ASSET VALUE AT END OF PERIOD.... $ 49.54 $ 39.76 $ 35.73 $59.37 ======= ======= ======= ====== TOTAL RETURN***..................... 26.28% 13.84% (37.12)% 22.00% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $42,105 $17,890 $ 7,146 $8,905 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 1.34% 1.88% 1.17% 1.02%**** Portfolio Turnover Rate+............ 18% 35% 30% 36%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. 88 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT MATERIALS ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 45.78 $ 34.37 $ 59.42 $48.43 ------- ------- ------- ------ Net Investment Income**............. 1.52 0.60 1.40 0.85 Net Realized and Unrealized Gain (Loss) on Investments............. 11.65 11.49 (25.11) 10.74 ------- ------- ------- ------ TOTAL FROM INVESTMENT OPERATIONS.... 13.17 12.09 (23.71) 11.59 ------- ------- ------- ------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (1.63) (0.68) (1.34) (0.60) ------- ------- ------- ------ NET ASSET VALUE AT END OF PERIOD.... $ 57.32 $ 45.78 $ 34.37 $59.42 ======= ======= ======= ====== TOTAL RETURN***..................... 29.05% 35.82% (40.67)% 24.02% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $34,395 $41,199 $ 5,155 $8,913 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 2.88% 1.41% 2.69% 1.53%**** Portfolio Turnover Rate+............ 27% 57% 34% 31%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 89 FINANCIAL HIGHLIGHTS (continued) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT TECHNOLOGY ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 39.98 $ 29.98 $ 55.18 $ 47.80 ------- ------- ------- ------- Net Investment Income (Loss)**...... 0.12 0.11 0.06 (0.05) Net Realized and Unrealized Gain (Loss) on Investments............. 10.75 10.03 (25.19) 7.43 ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS.... 10.87 10.14 (25.13) 7.38 ------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (0.13) (0.14) (0.07) -- ------- ------- ------- ------- NET ASSET VALUE AT END OF PERIOD.... $ 50.72 $ 39.98 $ 29.98 $ 55.18 ======= ======= ======= ======= TOTAL RETURN***..................... 27.23% 33.94% (45.58)% 15.44% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $88,759 $53,969 $ 7,495 $19,312 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 0.26% 0.30% 0.14% (0.10)%**** Portfolio Turnover Rate+............ 25% 30% 36% 60%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. 90 FINANCIAL HIGHLIGHTS (concluded) --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT UTILITIES ETF ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007* ---------------- ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 42.13 $41.18 $ 62.28 $54.91 ------- ------ ------- ------ Net Investment Income**............. 1.84 1.89 1.81 1.55 Net Realized and Unrealized Gain (Loss) on Investments............. 8.13 0.88 (21.09) 7.38 ------- ------ ------- ------ TOTAL FROM INVESTMENT OPERATIONS.... 9.97 2.77 (19.28) 8.93 ------- ------ ------- ------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............... (1.83) (1.82) (1.82) (1.56) ------- ------ ------- ------ NET ASSET VALUE AT END OF PERIOD.... $ 50.27 $42.13 $ 41.18 $62.28 ======= ====== ======= ====== TOTAL RETURN***..................... 24.10% 6.97% (31.63)% 16.41% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted).......................... $20,110 $8,427 $ 4,118 $6,228 RATIO TO AVERAGE NET ASSETS OF: Expenses............................ 0.50% 0.50% 0.50% 0.50%**** Net Investment Income............... 3.95% 4.64% 3.30% 2.59%**** Portfolio Turnover Rate+............ 16% 26% 25% 20%
* The Fund commenced operations on November 1, 2006. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. See Notes to Financial Statements. ANNUAL REPORT 91 NOTES TO FINANCIAL STATEMENTS October 31, 2010 -------------------------------------------------------------------------------- 1. ORGANIZATION Rydex ETF Trust (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940 (the "1940 Act"). The Trust was organized as a Delaware statutory trust on November 22, 2002. As of October 31, 2010, the Trust offers nineteen portfolios, each of which represents a separate series of beneficial interest in the Trust, (each a "Fund" and collectively, the "Funds"). The financial statements herein relate to the following Funds: Rydex S&P 500 Pure Value ETF, Rydex S&P 500 Pure Growth ETF, Rydex S&P MidCap 400 Pure Value ETF, Rydex S&P MidCap 400 Pure Growth ETF, Rydex S&P SmallCap 600 Pure Value ETF, Rydex S&P SmallCap 600 Pure Growth ETF, Rydex S&P Equal Weight Consumer Discretionary ETF, Rydex S&P Equal Weight Consumer Staples ETF, Rydex S&P Equal Weight Energy ETF, Rydex S&P Equal Weight Financials ETF, Rydex S&P Equal Weight Health Care ETF, Rydex S&P Equal Weight Industrials ETF, Rydex S&P Equal Weight Materials ETF, Rydex S&P Equal Weight Technology ETF and Rydex S&P Equal Weight Utilities ETF. Rydex S&P 500 Pure Value ETF, Rydex S&P 500 Pure Growth ETF, Rydex S&P MidCap 400 Pure Value ETF, Rydex S&P MidCap 400 Pure Growth ETF, Rydex S&P SmallCap 600 Pure Value ETF and Rydex S&P SmallCap 600 Pure Growth ETF commenced operations on March 1, 2006. Rydex S&P Equal Weight Consumer Discretionary ETF, Rydex S&P Equal Weight Consumer Staples ETF, Rydex S&P Equal Weight Energy ETF, Rydex S&P Equal Weight Financials ETF, Rydex S&P Equal Weight Health Care ETF, Rydex S&P Equal Weight Industrials ETF, Rydex S&P Equal Weight Materials ETF, Rydex S&P Equal Weight Technology ETF and Rydex S&P Equal Weight Utilities ETF commenced operations on November 1, 2006. The Funds' investment objective is to replicate as closely as possible, before fees and expenses, the daily performance of an index representing publicly traded equity securities (the "Underlying Index"). Rydex S&P 500 Pure Value ETF tracks the S&P 500 Pure Value Index, the Rydex S&P 500 Pure Growth ETF tracks the S&P 500 Pure Growth Index, the Rydex S&P MidCap 400 Pure Value ETF tracks the S&P MidCap 400 Pure Value Index, the Rydex S&P MidCap 400 Pure Growth ETF tracks the S&P MidCap 400 Pure Growth Index, the Rydex S&P SmallCap 600 Pure Value ETF tracks the S&P SmallCap 600 Pure Value Index, the Rydex S&P SmallCap 600 Pure Growth ETF tracks the S&P SmallCap 600 Pure Growth Index, Rydex S&P Equal Weight Consumer Discretionary ETF tracks the S&P Equal Weight Consumer Discretionary Index, the Rydex S&P Equal Weight Consumer Staples ETF tracks the S&P Equal Weight Consumer Staples Index, the Rydex S&P Equal Weight Energy ETF tracks the S&P Equal Weight Energy Index, the Rydex S&P Equal Weight Financials ETF tracks the S&P Equal Weight Financials Index, the Rydex S&P Equal Weight Health Care ETF tracks the S&P Equal Weight Health Care Index, the Rydex S&P Equal Weight Industrials ETF tracks the S&P Equal Weight Industrials Index, the Rydex S&P Equal Weight Materials ETF tracks the S&P Equal Weight Materials Index, the Rydex S&P Equal Weight Technology ETF tracks the S&P Equal Weight Information Technology Index and the Rydex S&P Equal Weight Utilities ETF tracks the S&P Equal Weight Telecommunication Services & Utilities Index. The Funds seek to achieve their objective by investing in common stocks that comprise the Underlying Index. The Funds use a "replication" strategy to track the Underlying Index. "Replication" refers to investing in substantially all of the securities in the Underlying Index in approximately the same proportions as in the Underlying Index. The Funds operate as index funds and are not actively managed. Adverse performance of a security in the Funds' portfolio will ordinarily not result in the elimination of the security from the Funds' portfolio. The Funds issue and redeem shares on a continuous basis, at net asset value, only in aggregations of 50,000 shares called a "Creation Unit". Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. 2. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures at the date of the financial statements and accompanying notes and the reported amounts of increases and decreases in net assets from operations during the reporting period. Management believes that the estimates utilized in preparing the Funds' financial statements are reasonable and prudent; however, actual results could differ from these estimates. A. SECURITY VALUATION Securities listed on a domestic securities exchange are valued based on the last sale price as of the close of regular trading hours on the New York Stock Exchange or, in the absence of recorded sales, are valued at the most recent bid price. Securities for which the primary market is the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ") are valued at the NASDAQ Official Closing Price. The Funds invest in money market mutual funds, which are valued at their NAV. 92 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- Securities, for which market quotations are not readily available, including investments that are subject to limitations as to their sale, are valued at fair value as determined in good faith by Rydex Investments, an affiliated entity, which acts as the Funds' investment advisor, in accordance with procedures adopted by the Board of Trustees. In determining fair value, consideration is given to market conditions, relative benchmarks and other financial data. B. SECURITY TRANSACTIONS AND INCOME RECOGNITION Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from portfolio fund transactions are calculated on the identified cost basis. Dividend income is recorded on the ex- dividend date, net of foreign tax withholdings. Interest income is recorded on the accrual basis. Distributions received from investments in REITs are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. C. REPURCHASE AGREEMENTS The Funds may enter into repurchase agreements with financial institutions. In a repurchase agreement, a Fund buys a security and the seller simultaneously agrees to repurchase the security on a specified future date at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the Fund's money is invested in the security. Because the security constitutes collateral for the repurchase obligation, a repurchase agreement can be considered a collateralized loan. The Funds follow certain procedures designed to minimize the risks inherent in such agreements. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose condition will be continually monitored by Rydex Investments. In addition, the value of the collateral underlying the repurchase agreement will always be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Funds will seek to liquidate such collateral. However, the exercising of the Funds' right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Funds could suffer a loss. It is the current policy of the Funds not to invest in repurchase agreements that do not mature within seven days if any such investment, together with any other illiquid assets held by the Funds, amounts to more than 15% of the Funds net assets. The investments of the Funds in repurchase agreements, at times, may be substantial when, in the view of Rydex Investments, liquidity or other considerations so warrant. For the year ended October 31, 2010, the Funds had not engaged in repurchase agreement transactions. D. FEDERAL INCOME TAXES The Funds' policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of the taxable income and capital gains, if any, to the shareholders within the allowable time limits. Therefore, no provision for Federal income taxes is required. Tax positions taken or expected to be taken in the course of preparing the Funds' tax returns are evaluated to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds' tax positions taken on federal income tax returns for all open tax years (fiscal years 2007 - 2010), and has concluded that no provision for income tax was required in the Funds' financial statements. Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments for in- kind redemptions, distributions in excess of current year earnings, excise taxes paid, income reclassifications from real estate investment trusts ("REITs") and losses deferred due to wash sales. In order to present paid-in-capital, undistributed net investment income (loss) and accumulated net realized gain (loss) on investments on the statement of assets and liabilities that more closely represent their tax character, certain adjustments have been made to these accounts. These adjustments have no effect on net assets or net asset value per share. The most significant of these adjustments are for net capital gains resulting from in-kind redemptions which, because they are non-taxable to the Funds, and therefore are not ANNUAL REPORT 93 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- distributed to existing Fund shareholders, are reclassified to paid-in-capital. For the year ended October 31, 2010, the adjustments for the Funds were as follows:
UNDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT NET REALIZED CAPITAL INCOME (LOSS) GAIN (LOSS) ----------- -------------- ------------ Rydex S&P 500 Pure Value ETF...................... $ 6,216,412 $(3,688) $ (6,212,724) Rydex S&P 500 Pure Growth ETF..................... 3,957,880 6,598 (3,964,478) Rydex S&P MidCap 400 Pure Value ETF............... 3,347,950 -- (3,347,950) Rydex S&P MidCap 400 Pure Growth ETF.............. 11,951,856 24,743 (11,976,599) Rydex S&P SmallCap 600 Pure Value ETF............. 10,075,213 1,225 (10,076,438) Rydex S&P SmallCap 600 Pure Growth ETF............ 1,084,488 1,979 (1,086,467) Rydex S&P Equal Weight Consumer Discretionary ETF............................................. 2,787,849 -- (2,787,849) Rydex S&P Equal Weight Consumer Staples ETF....... -- -- -- Rydex S&P Equal Weight Energy ETF................. 1,181,154 -- (1,181,154) Rydex S&P Equal Weight Financials ETF............. 2,692,913 31,885 (2,724,798) Rydex S&P Equal Weight Health Care ETF............ 11,377,875 -- (11,377,875) Rydex S&P Equal Weight Industrials ETF............ 1,017,241 (3,344) (1,013,897) Rydex S&P Equal Weight Materials ETF.............. 4,657,219 -- (4,657,219) Rydex S&P Equal Weight Technology ETF............. 11,271,835 14,344 (11,286,179) Rydex S&P Equal Weight Utilities ETF.............. (2) -- 2
Differences between the book basis and tax basis of net unrealized appreciation (depreciation) in value of investments relate to tax deferral of losses on wash sales and estimated return of capital payments on REITs. At October 31, 2010, the Funds had capital loss carryforwards which may be utilized to offset any net realized capital gains expiring October 31, 2010:
2014 2015 2016 2017 2018 ------- -------- ---------- ---------- ---------- Rydex S&P 500 Pure Value ETF............. $ -- $ -- $ 117,723 $8,747,672 $ -- Rydex S&P 500 Pure Growth ETF............ 28,988 142,389 524,164 6,919,390 173,734 Rydex S&P MidCap 400 Pure Value ETF...... -- -- -- 4,090,972 -- Rydex S&P MidCap 400 Pure Growth ETF..... -- -- -- 2,017,406 -- Rydex S&P SmallCap 600 Pure Value ETF.... 16,654 170,782 3,946,225 9,954,238 8,320,242 Rydex S&P SmallCap 600 Pure Growth ETF... -- -- 127,914 1,715,604 46,973 Rydex S&P Equal Weight Consumer Discretionary ETF...................... -- -- 1,122,435 1,981,333 -- Rydex S&P Equal Weight Consumer Staples ETF.................................... -- -- 32,363 195,890 -- Rydex S&P Equal Weight Energy ETF........ -- -- -- 1,743,348 393,314 Rydex S&P Equal Weight Financials ETF.... -- -- 1,811,004 4,062,086 384,011 Rydex S&P Equal Weight Health Care ETF... -- -- 929,808 3,545,994 -- Rydex S&P Equal Weight Industrials ETF... -- -- -- 1,121,912 -- Rydex S&P Equal Weight Materials ETF..... -- -- -- 1,182,017 -- Rydex S&P Equal Weight Technology ETF.... -- -- -- 3,058,317 -- Rydex S&P Equal Weight Utilities ETF..... -- -- 60,408 555,032 336,672
The Funds utilized capital loss carryforwards during the year ended October 31, 2010: Rydex S&P 500 Pure Value ETF......................................... $2,681,137 Rydex S&P 500 Pure Growth ETF........................................ -- Rydex S&P MidCap 400 Pure Value ETF.................................. 2,949,067 Rydex S&P MidCap 400 Pure Growth ETF................................. 1,998,809 Rydex S&P SmallCap 600 Pure Value ETF................................ -- Rydex S&P SmallCap 600 Pure Growth ETF............................... -- Rydex S&P Equal Weight Consumer Discretionary ETF.................... 154,897 Rydex S&P Equal Weight Consumer Staples ETF.......................... 175,311 Rydex S&P Equal Weight Energy ETF.................................... -- Rydex S&P Equal Weight Financials ETF................................ -- Rydex S&P Equal Weight Health Care ETF............................... 21,197 Rydex S&P Equal Weight Industrials ETF............................... 83,504 Rydex S&P Equal Weight Materials ETF................................. 633,345 Rydex S&P Equal Weight Technology ETF................................ 677,212 Rydex S&P Equal Weight Utilities ETF................................. --
94 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- The tax character of distributable earnings (accumulated losses) at October 31, 2010 was as follows:
UNDISTRIBUTED UNDISTRIBUTED UNREALIZED ORDINARY LONG TERM CAPITAL LOSS APPRECIATION INCOME CAPITAL GAIN CARRYFORWARD (DEPRECIATION) ------------- ------------- ------------ -------------- Rydex S&P 500 Pure Value ETF............ $ 6,288 $ -- $ (8,865,395) $ (3,393,677) Rydex S&P 500 Pure Growth ETF........... -- -- (7,788,665) 15,177,140 Rydex S&P MidCap 400 Pure Value ETF..... 6,164 -- (4,090,972) (1,222,005) Rydex S&P MidCap 400 Pure Growth ETF.... -- -- (2,017,406) 27,715,450 Rydex S&P SmallCap 600 Pure Value ETF... -- -- (22,408,141) (11,514,999) Rydex S&P SmallCap 600 Pure Growth ETF.. -- -- (1,890,491) 2,137,081 Rydex S&P Equal Weight Consumer Discretionary ETF..................... 5,183 -- (3,103,768) 1,754,171 Rydex S&P Equal Weight Consumer Staples ETF................................... 28,843 -- (228,253) 1,526,232 Rydex S&P Equal Weight Energy ETF....... 3,574 -- (2,136,662) 975,964 Rydex S&P Equal Weight Financials ETF... -- -- (6,257,101) 463,715 Rydex S&P Equal Weight Health Care ETF.. 16,583 -- (4,475,802) (1,842,778) Rydex S&P Equal Weight Industrials ETF.. 14,627 -- (1,121,912) 6,260,174 Rydex S&P Equal Weight Materials ETF.... 20,709 -- (1,182,017) 5,850,965 Rydex S&P Equal Weight Technology ETF... -- -- (3,058,317) 6,111,066 Rydex S&P Equal Weight Utilities ETF.... 52,999 -- (952,112) 1,350,369
The tax character of distributions paid during 2010 was as follows:
ORDINARY INCOME --------------- Rydex S&P 500 Pure Value ETF..................................... $ 867,443 Rydex S&P 500 Pure Growth ETF.................................... 285,918 Rydex S&P MidCap 400 Pure Value ETF.............................. 526,762 Rydex S&P MidCap 400 Pure Growth ETF............................. 89,353 Rydex S&P SmallCap 600 Pure Value ETF............................ 707,768 Rydex S&P SmallCap 600 Pure Growth ETF........................... 25,566 Rydex S&P Equal Weight Consumer Discretionary ETF................ 221,575 Rydex S&P Equal Weight Consumer Staples ETF...................... 244,303 Rydex S&P Equal Weight Energy ETF................................ 137,899 Rydex S&P Equal Weight Financials ETF............................ 251,198 Rydex S&P Equal Weight Health Care ETF........................... 247,927 Rydex S&P Equal Weight Industrials ETF........................... 398,481 Rydex S&P Equal Weight Materials ETF............................. 1,001,234 Rydex S&P Equal Weight Technology ETF............................ 230,398 Rydex S&P Equal Weight Utilities ETF............................. 451,578
The tax character of distributions paid during 2009 was as follows:
ORDINARY INCOME --------------- Rydex S&P 500 Pure Value ETF..................................... $515,568 Rydex S&P 500 Pure Growth ETF.................................... 214,179 Rydex S&P MidCap 400 Pure Value ETF.............................. 307,090 Rydex S&P MidCap 400 Pure Growth ETF............................. 48,422 Rydex S&P SmallCap 600 Pure Value ETF............................ 480,887 Rydex S&P SmallCap 600 Pure Growth ETF........................... 20,833 Rydex S&P Equal Weight Consumer Discretionary ETF................ 134,899 Rydex S&P Equal Weight Consumer Staples ETF...................... 224,373 Rydex S&P Equal Weight Energy ETF................................ 78,547 Rydex S&P Equal Weight Financials ETF............................ 243,410 Rydex S&P Equal Weight Health Care ETF........................... 219,171 Rydex S&P Equal Weight Industrials ETF........................... 204,603 Rydex S&P Equal Weight Materials ETF............................. 264,238 Rydex S&P Equal Weight Technology ETF............................ 68,005 Rydex S&P Equal Weight Utilities ETF............................. 287,015
E. FAIR VALUE MEASUREMENT In accordance with U.S. generally accepted accounting principles, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence ANNUAL REPORT 95 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- of a principal market the most advantageous market for the investment or liability. A three-tier hierarchy is utilized to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Funds' investments. The inputs are summarized in the three broad levels listed below: Level 1 -- quoted prices in active markets for identical securities. The types of assets and liabilities carried at Level 1 fair value generally are government and agency securities, equities listed in active markets and stock index futures. Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). The types of assets and liabilities carried at Level 2 fair value generally are domestic equity index swaps and short term securities with maturities of 60 days or less, including repurchase agreements. Level 3 -- significant unobservable inputs (including the fund's own assumptions used to determine the fair value of investments). Transfers between investment Levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following table summarizes the inputs used to value the Funds' net assets as of October 31, 2010:
LEVEL 1 LEVEL 2 LEVEL 3 INVESTMENTS INVESTMENTS INVESTMENTS FUND IN SECURITIES IN SECURITIES IN SECURITIES TOTAL ---- ------------- ------------- ------------- ------------ ASSETS Rydex S&P 500 Pure Value ETF.............. $ 55,846,823 $ -- $ -- $ 55,846,823 Rydex S&P 500 Pure Growth ETF............. 147,475,030 -- -- 147,475,030 Rydex S&P MidCap 400 Pure Value ETF....... 43,079,381 -- -- 43,079,381 Rydex S&P MidCap 400 Pure Growth ETF...... 292,482,599 -- -- 292,482,599 Rydex S&P SmallCap 600 Pure Value ETF..... 87,385,828 -- -- 87,385,828 Rydex S&P SmallCap 600 Pure Growth ETF.... 17,331,027 -- -- 17,331,027 Rydex S&P Equal Weight Consumer Discretionary ETF....................... 25,424,478 -- -- 25,424,478 Rydex S&P Equal Weight Consumer Staples ETF..................................... 13,841,988 -- -- 13,841,988 Rydex S&P Equal Weight Energy ETF......... 16,117,637 -- -- 16,117,637 Rydex S&P Equal Weight Financials ETF..... 16,507,055 -- -- 16,507,055 Rydex S&P Equal Weight Health Care ETF.... 53,766,819 -- -- 53,766,819 Rydex S&P Equal Weight Industrials ETF.... 42,097,162 -- -- 42,097,162 Rydex S&P Equal Weight Materials ETF...... 34,389,795 -- -- 34,389,795 Rydex S&P Equal Weight Technology ETF..... 88,774,366 -- -- 88,774,366 Rydex S&P Equal Weight Utilities ETF...... 20,064,598 -- -- 20,064,598
For the year ended October 31, 2010, there were no Level 3 Investments. The Funds adopted updated provisions surrounding fair value measurements and disclosures effective November 1, 2009. This update applies to the Funds' disclosures about transfers in and out of all Levels of the fair value hierarchy on a gross basis and the reasons for the transfers as well as to disclosures about the valuation techniques and inputs used to measure fair value for investments that fall in either Level 2 or Level 3 fair value hierarchy. For the year ended October 31, 2010, there were no securities transferred between any levels. F. DIVIDENDS AND DISTRIBUTIONS Distributions of net investment income and net realized capital gains, if any, are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. generally accepted accounting principles. 96 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- G. RISK AND UNCERTAINTIES The Trust invests in various investments which are exposed to risk, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect amounts reported in future financial statements. The Rydex S&P Equal Weight Sector ETFs are non-diversified funds, subjecting them to a greater risk than funds that are diversified. H. RISK Throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience the Funds expect the risk of loss to be remote. 3. ADVISORY, ADMINISTRATION AND OTHER TRANSACTIONS WITH AFFILIATES Rydex Investments determines the composition of the portfolio of securities that must be delivered in exchange for the issuance of Creation Units and periodically adjusts the composition of the portfolio of each Fund's to conform to changes in the composition of the relevant index. For these services, Rydex Investments receives a management fee at the annual rate shown below of the average daily net assets of the Funds.
ADVISORY FEE ------------ Rydex S&P 500 Pure Value ETF........................................ 0.35% Rydex S&P 500 Pure Growth ETF....................................... 0.35% Rydex S&P MidCap 400 Pure Value ETF................................. 0.35% Rydex S&P MidCap 400 Pure Growth ETF................................ 0.35% Rydex S&P SmallCap 600 Pure Value ETF............................... 0.35% Rydex S&P SmallCap 600 Pure Growth ETF.............................. 0.35% Rydex S&P Equal Weight Consumer Discretionary ETF................... 0.50% Rydex S&P Equal Weight Consumer Staples ETF......................... 0.50% Rydex S&P Equal Weight Energy ETF................................... 0.50% Rydex S&P Equal Weight Financials ETF............................... 0.50% Rydex S&P Equal Weight Health Care ETF.............................. 0.50% Rydex S&P Equal Weight Industrials ETF.............................. 0.50% Rydex S&P Equal Weight Materials ETF................................ 0.50% Rydex S&P Equal Weight Technology ETF............................... 0.50% Rydex S&P Equal Weight Utilities ETF................................ 0.50%
Rydex Investments pays all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except: interest, taxes, distribution fees or expenses and extraordinary expenses. Under an Administration Agreement, State Street Bank and Trust Company (the "Administrator") provides various administrative and accounting services for the maintenance and operations of the Funds. Under a Custodian Agreement with the Trust, the Administrator maintains cash, securities and other assets of the Trust and the Funds in separate accounts for each Fund, keeps all necessary accounts and records, and provides other services. The Administrator is required, upon the order of the Trust, to deliver securities held by the Custodian and to make payments for securities purchased by the Trust for the Funds. Pursuant to a Transfer Agency and Service Agreement with the Trust, the Administrator acts as a transfer agent for the Trust's authorized and issued shares of beneficial interest, and as dividend disbursing agent of the Trust. Rydex Investments compensates the Administrator directly for the foregoing services. The Funds have adopted a Distribution Plan (the "Plan") that allows the Funds to pay distribution fees to Rydex Distributors, Inc., an affiliated entity, (the "Distributor") and other firms that provide distribution services ("Service Providers"). If a Service Provider provides distribution services, the Funds will pay distribution fees to the Distributor at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. The Distributor will, in turn, pay the Service Provider out of its fees. No such fee is currently charged to the Funds. 4. CAPITAL At October 31, 2010, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee per transaction to those persons purchasing or redeeming Creation Units. An additional charge of up to three times the ANNUAL REPORT 97 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- standard transaction fee may be imposed for purchases and redemptions effected outside the National Securities Clearing Corporation usual clearing process or for cash. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit of the Fund on the transaction date. Transaction fees are not charged to or paid by the Funds. The minimum transaction fees are:
MINIMUM TRANSACTION FEE --------------- Rydex S&P 500 Pure Value ETF...................................... $1,000 Rydex S&P 500 Pure Growth ETF..................................... 1,000 Rydex S&P MidCap 400 Pure Value ETF............................... 750 Rydex S&P MidCap 400 Pure Growth ETF.............................. 750 Rydex S&P SmallCap 600 Pure Value ETF............................. 1,000 Rydex S&P SmallCap 600 Pure Growth ETF............................ 1,000 Rydex S&P Equal Weight Consumer Discretionary ETF................. 750 Rydex S&P Equal Weight Consumer Staples ETF....................... 500 Rydex S&P Equal Weight Energy ETF................................. 500 Rydex S&P Equal Weight Financials ETF............................. 750 Rydex S&P Equal Weight Health Care ETF............................ 500 Rydex S&P Equal Weight Industrials ETF............................ 500 Rydex S&P Equal Weight Materials ETF.............................. 500 Rydex S&P Equal Weight Technology ETF............................. 750 Rydex S&P Equal Weight Utilities ETF.............................. 500
5. INVESTMENT TRANSACTIONS For the year ended October 31, 2010, the Funds had investment transactions in- kind associated with subscriptions and redemptions as follows:
SUBSCRIPTIONS REDEMPTIONS ------------- ------------ Rydex S&P 500 Pure Value ETF............................... $ 85,553,639 $ 65,322,351 Rydex S&P 500 Pure Growth ETF.............................. 114,041,866 23,552,335 Rydex S&P MidCap 400 Pure Value ETF........................ 43,188,231 27,256,344 Rydex S&P MidCap 400 Pure Growth ETF....................... 222,975,001 78,422,434 Rydex S&P SmallCap 600 Pure Value ETF...................... 107,979,296 130,177,381 Rydex S&P SmallCap 600 Pure Growth ETF..................... 7,476,636 5,851,384 Rydex S&P Equal Weight Consumer Discretionary ETF.......... 23,285,247 13,016,020 Rydex S&P Equal Weight Consumer Staples ETF................ 2,522,172 -- Rydex S&P Equal Weight Energy ETF.......................... 7,312,460 5,265,280 Rydex S&P Equal Weight Financials ETF...................... 12,412,446 11,942,515 Rydex S&P Equal Weight Health Care ETF..................... 56,992,740 88,082,433 Rydex S&P Equal Weight Industrials ETF..................... 21,269,114 2,545,682 Rydex S&P Equal Weight Materials ETF....................... 10,289,281 25,062,622 Rydex S&P Equal Weight Technology ETF...................... 86,535,676 68,720,929 Rydex S&P Equal Weight Utilities ETF....................... 9,706,024 --
98 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- Purchases and sales of investment securities (excluding short-term investments, U.S. government and government agency obligations) for the Funds were as follows:
PURCHASES SALES ----------- ----------- Rydex S&P 500 Pure Value ETF................................ $16,554,527 $16,799,898 Rydex S&P 500 Pure Growth ETF............................... 23,329,365 25,713,053 Rydex S&P MidCap 400 Pure Value ETF......................... 16,580,118 15,020,646 Rydex S&P MidCap 400 Pure Growth ETF........................ 93,100,891 85,365,036 Rydex S&P SmallCap 600 Pure Value ETF....................... 67,104,246 69,808,484 Rydex S&P SmallCap 600 Pure Growth ETF...................... 10,607,259 8,865,569 Rydex S&P Equal Weight Consumer Discretionary ETF........... 6,756,958 6,687,929 Rydex S&P Equal Weight Consumer Staples ETF................. 2,134,484 2,094,560 Rydex S&P Equal Weight Energy ETF........................... 4,764,715 4,964,274 Rydex S&P Equal Weight Financials ETF....................... 3,229,437 3,530,303 Rydex S&P Equal Weight Health Care ETF...................... 13,892,805 13,872,220 Rydex S&P Equal Weight Industrials ETF...................... 6,016,329 5,378,638 Rydex S&P Equal Weight Materials ETF........................ 9,488,855 10,041,097 Rydex S&P Equal Weight Technology ETF....................... 20,840,741 21,442,371 Rydex S&P Equal Weight Utilities ETF........................ 2,233,468 2,015,184
There were no purchases or sales of U.S. government or government agency obligations for the year ended October 31, 2010. At October 31, 2010, the identified cost of investments in securities owned by each fund for federal income tax purposes and the gross unrealized appreciation and depreciation were as follows:
GROSS GROSS IDENTIFIED UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION APPRECIATION ------------ ------------ ------------ -------------- Rydex S&P 500 Pure Value ETF............ $ 59,240,500 $ 2,561,056 $ (5,954,733) $ (3,393,677) Rydex S&P 500 Pure Growth ETF........... 132,297,890 17,177,426 (2,000,286) 15,177,140 Rydex S&P MidCap 400 Pure Value ETF..... 44,301,386 2,662,975 (3,884,980) (1,222,005) Rydex S&P MidCap 400 Pure Growth ETF.... 264,767,149 36,250,883 (8,535,433) 27,715,450 Rydex S&P SmallCap 600 Pure Value ETF... 98,900,827 3,804,000 (15,318,999) (11,514,999) Rydex S&P SmallCap 600 Pure Growth ETF.. 15,193,947 2,822,777 (685,697) 2,137,080 Rydex S&P Equal Weight Consumer Discretionary ETF..................... 23,670,307 3,028,692 (1,274,521) 1,754,171 Rydex S&P Equal Weight Consumer Staples ETF................................... 12,315,756 1,843,932 (317,700) 1,526,232 Rydex S&P Equal Weight Energy ETF....... 15,141,673 1,525,771 (549,807) 975,964 Rydex S&P Equal Weight Financials ETF... 16,043,340 1,243,229 (779,514) 463,715 Rydex S&P Equal Weight Health Care ETF.. 55,609,598 2,069,260 (3,912,039) (1,842,779) Rydex S&P Equal Weight Industrials ETF.. 35,836,988 6,808,045 (547,871) 6,260,174 Rydex S&P Equal Weight Materials ETF.... 28,538,830 6,830,937 (979,972) 5,850,965 Rydex S&P Equal Weight Technology ETF... 82,663,300 8,927,842 (2,816,776) 6,111,066 Rydex S&P Equal Weight Utilities ETF.... 18,714,229 1,685,704 (335,335) 1,350,369
6. GUGGENHEIM ACQUISITION Guggenheim SBC Holdings, LLC ("Guggenheim SBC Holdings"), an investor group managed by Guggenheim Partners, LLC ("Guggenheim"), acquired control of Security Benefit Corporation ("SBC"), the parent company of Rydex Advisors, LLC (formerly PADCO Advisors, Inc.), the Funds' investment adviser (the "Investment Adviser"), pursuant to an agreement entered between SBC and Guggenheim SBC Holdings. Under the agreement, Guggenheim SBC Holdings received a 100% ownership stake in SBC and consequently acquired control of the Investment Adviser (the "Purchase Transaction"). Guggenheim is a global, independent, privately held, diversified financial services firm with more than $100 billion in assets under supervision. The Purchase Transaction is not expected to result in material changes to the day-to-day management and operations of the Funds or any increase in fees. The Purchase Transaction closed on July 30, 2010. Under the Investment Company Act of 1940, the closing of the Purchase Transaction had the effect of terminating the Funds' investment advisory agreements with the Investment Advisers and any investment sub-advisory agreements entered on behalf of a Fund (together, the "Previous Agreements"). New investment advisory and sub-advisory agreements ("New Agreements") were approved by Fund shareholders in a series of special meetings of shareholders. The terms of the New Agreements are substantially identical to the corresponding Previous Agreements, except with respect to the date of execution. ANNUAL REPORT 99 NOTES TO FINANCIAL STATEMENTS (concluded) -------------------------------------------------------------------------------- 7. DISTRIBUTOR NAME CHANGE Effective July 30, 2010, the Funds' distributor, Rydex Distributors, Inc., a Maryland corporation, became Rydex Distributors, LLC, a Kansas limited liability company. 8. NEW ACCOUNTING PRONOUNCEMENT Effective November 1, 2009, the Funds adopted the Financial Accounting Standards Board ASU 2010-06, Improving Disclosures about Fair Value Measurements, which introduces new disclosure requirements and clarifies certain existing disclosure requirements around fair value measurements, which are reflected in Note E. 100 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Rydex ETF Trust We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Rydex S&P 500 Pure Value ETF, Rydex S&P 500 Pure Growth ETF, Rydex S&P MidCap 400 Pure Value ETF, Rydex S&P MidCap 400 Pure Growth ETF, Rydex S&P SmallCap 600 Pure Value ETF, Rydex S&P SmallCap 600 Pure Growth ETF, Rydex S&P Equal Weight Consumer Discretionary ETF, Rydex S&P Equal Weight Consumer Staples ETF, Rydex S&P Equal Weight Energy ETF, Rydex S&P Equal Weight Financials ETF, Rydex S&P Equal Weight Health Care ETF, Rydex S&P Equal Weight Industrials ETF, Rydex S&P Equal Weight Materials ETF, Rydex S&P Equal Weight Technology ETF, and Rydex S&P Equal Weight Utilities ETF (the "Funds")(fifteen of the series constituting the Rydex ETF Trust (the "Trust")) as of October 31, 2010, and the related statements of operations for the year then ended, statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years or periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Trust's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds at October 31, 2010, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the years or periods indicated therein, in conformity with U.S. generally accepted accounting principles. -s- ERNST & YOUNG LLP McLean, Virginia December 23, 2010 ANNUAL REPORT 101 SUPPLEMENTAL INFORMATION (Unaudited) -------------------------------------------------------------------------------- FEDERAL INCOME TAX INFORMATION For federal income tax purposes, the following information is furnished for the year ended October 31, 2010 in respect to percentage of ordinary distributions (net investment income plus short-term gains) which qualify for corporate dividends received deduction, designated qualified dividend income eligible for reduced taxes and distributions from long-term capital gains. These long-term capital gains distributions may be subject to a maximum tax rate of 15% as provided by the internal revenue code. The funds below hereby designate the maximum amount of such dividend allowable up to the amount of the dividends paid during the year.
DIVIDEND LONG TERM QUALIFIED RECEIVED CAPITAL GAINS DIVIDEND DEDUCTION DISTRIBUTION INCOME --------- ------------- ---------- Rydex S&P 500 Pure Value ETF......................... 100.00% $ -- $1,029,809 Rydex S&P 500 Pure Growth ETF........................ 100.00% -- 426,425 Rydex S&P MidCap 400 Pure Value ETF.................. 100.00% -- 641,449 Rydex S&P MidCap 400 Pure Growth ETF................. 100.00% -- 590,761 Rydex S&P SmallCap 600 Pure Value ETF................ 99.34% -- 814,290 Rydex S&P SmallCap 600 Pure Growth ETF............... 100.00% -- 67,802 Rydex S&P Equal Weight Consumer Discretionary ETF.... 100.00% -- 347,569 Rydex S&P Equal Weight Consumer Staples ETF.......... 100.00% -- 309,318 Rydex S&P Equal Weight Energy ETF.................... 100.00% -- 206,238 Rydex S&P Equal Weight Financials ETF................ 95.27% -- 187,607 Rydex S&P Equal Weight Health Care ETF............... 100.00% -- 564,797 Rydex S&P Equal Weight Industrials ETF............... 100.00% -- 562,813 Rydex S&P Equal Weight Materials ETF................. 100.00% -- 1,178,929 Rydex S&P Equal Weight Technology ETF................ 100.00% -- 629,425 Rydex S&P Equal Weight Utilities ETF................. 100.00% -- 526,264
PROXY VOTING INFORMATION A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds' portfolios is available, without charge and upon request, by calling 1-800-820-0888. This information is also available from the EDGAR database on the SEC's website at http://www.sec.gov. Information regarding how the Funds voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, 2010 is also available, without charge and upon request, by (i) calling 1-800-820-0888; or accessing the Trust's Form N-PX on the SEC's website at, http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES INFORMATION The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC's website at http://www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1-800-820-0888. 102 SUPPLEMENTAL INFORMATION (Unaudited) (concluded) -------------------------------------------------------------------------------- PROXY RESULTS At a special meeting of shareholders held on July 29, 2010, the shareholders of the Funds voted on whether to approve a new investment advisory agreement between Rydex ETF Trust and Padco Advisors II, Inc. A description of the number of shares voted is as follows:
FUND SHARES FOR SHARES AGAINST SHARES ABSTAINED ---- ---------- -------------- ---------------- Rydex S&P 500 Pure Value ETF..................... 1,608,561 15,180 49,844 Rydex S&P 500 Pure Growth ETF.................... 1,148,455 2,973 2,171 Rydex S&P Midcap 400 Pure Value ETF.............. 819,714 7,351 11,503 Rydex S&P Midcap 400 Pure Growth ETF............. 997,533 23,024 27,110 Rydex S&P Smallcap 600 Pure Value ETF............ 1,304,859 18,715 45,153 Rydex S&P Smallcap 600 Pure Growth ETF........... 238,822 3,050 8,936 Rydex S&P Equal Weight Consumer Discretionary ETF............................................ 300,463 4,014 4,718 Rydex S&P Equal Weight Consumer Staples ETF...... 117,876 632 8,085 Rydex S&P Equal Weight Energy ETF................ 177,421 621 4,555 Rydex S&P Equal Weight Financials ETF............ 359,422 5,572 15,401 Rydex S&P Equal Weight Health Care ETF........... 654,137 1,916 16,611 Rydex S&P Equal Weight Industrials ETF........... 195,628 2,021 16,177 Rydex S&P Equal Weight Materials ETF............. 463,871 2,821 8,011 Rydex S&P Equal Weight Technology ETF............ 1,230,049 2,272 3,024 Rydex S&P Equal Weight Utilities ETF............. 126,393 1,713 2,016
At a special meeting of shareholders held on July 29, 2010, the shareholders of the Funds also voted on whether to approve a change to a fundamental investment policy on borrowing money, consistent with applicable law. A description of the number of shares voted is as follows:
FUND SHARES FOR SHARES AGAINST SHARES ABSTAINED ---- ---------- -------------- ---------------- Rydex S&P 500 Pure Value ETF..................... 1,569,255 53,681 50,648 Rydex S&P 500 Pure Growth ETF.................... 1,141,968 8,234 3,397 Rydex S&P Midcap 400 Pure Value ETF.............. 813,675 14,485 10,407 Rydex S&P Midcap 400 Pure Growth ETF............. 982,253 37,468 27,946 Rydex S&P Smallcap 600 Pure Value ETF............ 1,294,245 29,726 44,754 Rydex S&P Smallcap 600 Pure Growth ETF........... 237,753 4,312 8,743 Rydex S&P Equal Weight Consumer Discretionary ETF............................................ 298,408 6,069 4,718 Rydex S&P Equal Weight Consumer Staples ETF...... 116,573 1,936 8,085 Rydex S&P Equal Weight Energy ETF................ 178,163 639 3,795 Rydex S&P Equal Weight Financials ETF............ 354,380 10,713 15,302 Rydex S&P Equal Weight Health Care ETF........... 650,580 5,107 16,977 Rydex S&P Equal Weight Industrials ETF........... 191,995 4,934 16,897 Rydex S&P Equal Weight Materials ETF............. 462,929 4,361 7,413 Rydex S&P Equal Weight Technology ETF............ 1,228,483 3,673 3,189 Rydex S&P Equal Weight Utilities ETF............. 124,254 3,560 2,308
ANNUAL REPORT 103 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) -------------------------------------------------------------------------------- A Board of Trustees oversees all Rydex Investments, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 1-800-820- 0888. All Trustees and Officers may be reached c/o Rydex Investments, 9601 Blackwell Rd., Suite 500, Rockville, MD 20850. INDEPENDENT TRUSTEES
LENGTH OF SERVICES NAME, POSITION AND AS TRUSTEE NUMBER OF FUNDS YEAR OF BIRTH (YEAR BEGAN) OVERSEEN ----------------------- ---------------------------------------- ---------------- JOHN O. DEMARET Rydex Series Funds - 1997 146 Trustee, Chairman of Rydex Variable Trust - 1998 the Rydex Dynamic Funds - 1999 Board (1940) Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired --------------------- COREY A. COLEHOUR Rydex Series Funds - 1993 146 Trustee (1945) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired (2006 to present); Owner and President of Schield Management Company, registered investment adviser (2005 to 2006); Senior Vice President of Marketing and Co-Owner of Schield Management Company, registered investment adviser (1985 to 2005) --------------------- J. KENNETH DALTON Rydex Series Funds - 1995 146 Trustee (1941) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Mortgage Banking Consultant and Investor, The Dalton Group --------------------- WERNER E. KELLER Rydex Series Funds - 2005 146 Trustee (1940) Rydex Variable Trust - 2005 Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired (2001 to present); Chairman, Centurion Capital Management (1991 to 2001) --------------------- THOMAS F. LYDON, JR. Rydex Series Funds - 2005 146 Trustee (1960) Rydex Variable Trust - 2005 Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: President, Global Trends Investments --------------------- PATRICK T. MCCARVILLE Rydex Series Funds - 1997 146 Trustee (1942) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Founder and Chief Executive Officer, Par Industries, Inc. --------------------- ROGER SOMERS Rydex Series Funds - 1993 146 Trustee (1944) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Owner, Arrow Limousine ------------------------------------------------------------------------------------
104 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued) -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES (concluded) EXECUTIVE OFFICERS
NAME, POSITION AND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEAR OF BIRTH YEARS ----------------------------------------- ----------------------------------------- RICHARD M. GOLDMAN* President of Rydex Series Funds, Rydex President (1961) Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Chief Executive Officer and Director of Rydex Investments (2009 to present); President, Chief Executive Officer and Director of Rydex Distributors, Inc. (2009 to present); President and Chief Executive Officer of Rydex Holdings, LLC (2009 to present); Senior Vice President of Security Benefit Corp. (2007 to present); Director of First Security Benefit Life and Annuity Insurance Company of New York (2007 to present); Director of Security Distributors, Inc. (2007 to present); President of Security Investors, LLC (2007 to present); Manager and President of Security Global Investors, LLC (2007 to present); Managing Member of R.M. Goldman Partners, LLC (2006 to 2007); President and Chief Executive Officer of FortsmannLeff Associates (2003 to 2005) MICHAEL P. BYRUM* Vice President of Rydex Series Funds Vice President (1970) (1997 to present); Vice President of Rydex Variable Trust (1998 to present); Vice President of Rydex Dynamic Funds (1999 to present); President of Rydex Investments (2004 to present); Chief Investment Officer of Rydex Investments (2006 to present); Secretary of Rydex Investments (2002 to present); Director of Rydex Investments (2008 to present); Chief Investment Officer of Rydex Holdings, LLC (2008 to present); Vice President of Rydex Distributors, Inc. (2009 to present); Manager of Rydex Specialized Products, LLC (2005 to present); Secretary of Rydex Specialized Products, LLC (2005 to 2008); Trustee of Rydex Series Funds, Rydex Variable Trust and Rydex Dynamic Funds (2005 to 2009); Vice President of Rydex ETF Trust (2002 to present); President and Trustee of Rydex Capital Partners SPhinX Fund (2003 to 2007) NICK BONOS* Vice President and Treasurer of Rydex Vice President and Treasurer (1963) Series Funds, Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2003 to present); Senior Vice President of Rydex Investments (2006 to present); Chief Executive Officer of Rydex Specialized Products, LLC (2009 to present); Chief Financial Officer of Rydex Specialized Products, LLC (2005 to 2009); Vice President and Treasurer of Rydex Capital Partners SPhinX Fund (2003 to 2006) JOANNA M. HAIGNEY* Chief Compliance Officer of Rydex Series Chief Compliance Officer and Secretary Funds, Rydex Variable Trust, and Rydex (1966) Dynamic Funds (2004 to present); Secretary of Rydex Series Funds, Rydex Variable Trust, Rydex Dynamic Funds (2000 to present); Secretary of Rydex ETF Trust (2002 to present); Chief Compliance Officer of Rydex Investments (2005 to present) Vice President of Compliance of Rydex Investments (2006 to present); Director of Rydex Distributors, Inc. (2009 to present); Secretary of Rydex Capital Partners SPhinX Fund (2003 to 2006) KEITH FLETCHER* Vice President of Rydex Series Funds, Vice President (1958) Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Vice President of Rydex Investments (2009 to present); Vice President of Rydex Specialized Products, LLC (2009 to present); Vice President and Director of Rydex Distributors, Inc. (2009 to present); Vice President of Security Global Investors, LLC (2009 to present)
ANNUAL REPORT 105 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded) -------------------------------------------------------------------------------- EXECUTIVE OFFICERS (concluded)
NAME, POSITION AND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEAR OF BIRTH YEARS ----------------------------------------- ----------------------------------------- AMY LEE* Vice President and Assistant Secretary of Vice President and Assistant Secretary Rydex Series Funds, Rydex Variable Trust, (1960) Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Secretary of Rydex Distributors, Inc. (2008 to present); Chief Compliance Officer of Rydex Distributors, Inc. (2008 to 2009); Vice President, Associate General Counsel and Assistant Secretary of Security Benefit Corp. (2005 to present); Vice President, Associate General Counsel and Assistant Secretary of Security Benefit Life Insurance Co. (2004 to present); Assistant General Counsel of First Security Benefit Life and Annuity Company of New York (2004 to present); Chief Compliance Officer and Secretary of Security Distributors, Inc. (2004 to present); Secretary of Security Global Investors, Inc. (2007 to present) JOSEPH ARRUDA* Assistant Treasurer of Rydex Series Assistant Treasurer (1966) Funds, Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2006 to present); Senior Vice President of Rydex Investments (2008 to present); Vice President of Rydex Investments (2004 to 2008); Manager and Chief Financial Officer of Rydex Specialized Products, LLC (2009 to present) Director of Accounting of Rydex Investments (2003 to 2004) PAULA BILLOS* Controller of Rydex Series Funds, Rydex Controller (1974) Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2006 to present); Director of Fund Administration of Rydex Investments (2001 to present)
* Officers of the Funds are deemed to be ''interested persons" of the Trust, within the meaning of Section 2(a) (19) of the 1940 Act, inasmuch as this person is affiliated with Rydex Investments. RYDEX | SGI SECURITY GLOBAL INVESTORS(SM) 9601 Blackwell Road - Suite 500 - Rockville, MD 20850 www.rydex-sgi.com - 800.820.0888 ETF2-ANN-1010X1011 OCTOBER 31, 2010 RYDEX ETF TRUST ANNUAL REPORT RYDEX 2x S&P 500 ETF RYDEX INVERSE 2x S&P 500 ETF RYDEX | SGI SECURITY GLOBAL INVESTORS (SM) [RYDEXSHARES LOGO] ANNUAL REPORT 1 TABLE OF CONTENTS -------------------------------------------------------------------------------- LETTER TO OUR SHAREHOLDERS............................................... 2 A BRIEF NOTE ON THE COMPOUNDING OF RETURNS............................... 4 FEES & EXPENSES.......................................................... 5 PREMIUM AND DISCOUNT INFORMATION......................................... 6 MANAGER'S ANALYSIS....................................................... 7 SCHEDULES OF INVESTMENTS................................................. 10 STATEMENTS OF ASSETS AND LIABILITIES..................................... 17 STATEMENTS OF OPERATIONS................................................. 18 STATEMENTS OF CHANGES IN NET ASSETS...................................... 19 FINANCIAL HIGHLIGHTS..................................................... 20 NOTES TO FINANCIAL STATEMENTS............................................ 22 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.................. 30 SUPPLEMENTAL INFORMATION................................................. 31 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS............................ 32
2 LETTER TO OUR SHAREHOLDERS -------------------------------------------------------------------------------- DEAR SHAREHOLDER, More than a full year into the recovery that officially began in mid-2009, the U.S. economy has been growing, but unevenly. Corporate profits, consumer spending and some manufacturing measures have been rising or holding steady, while the employment and housing markets have remained stagnant. A soft patch occurred in mid-2010, when a debt crisis struck Greece, and the potential for a double-dip U.S. recession loomed. While slipping back into recession appears less likely, the U.S. economy has yet to create much in the way of jobs or wean itself off government involvement in everything from cars to banks to housing. Still, by the year ended October 2010, investors looked at an economy where stocks were the highest in two years, growth had persisted for five straight quarters and inflation was virtually flat. Trying to stimulate economic growth, but unable to lower interest rates below their current levels of near zero, the Federal Reserve would like to avoid the specter of deflation and so has resorted to the controversial practice of printing money to buy government bonds, otherwise known as quantitative easing. Proponents hope it will produce more than modest support for the economy, while driving long-term interest rates even lower, thus encouraging businesses and individuals to borrow. Critics contend that it could push down the dollar's value, triggering commodity price rises, and set the stage for inflation above the Fed's generally accepted range of about 2%. Markets reacted positively to the prospect of this new bout of bond buying by the Fed, as stock prices grew about 13% from Labor Day until Halloween, compared with about a 1% rise for corporate bonds. Other analysts attributed the rally to the shift in the political alignment in Washington based on the mid-term elections, which is expected to slow down or even reverse recent overhauls of health care and financial regulation, as well as more prominently address ways to reduce public debt. 2011 OUTLOOK As the impact wanes from recent catalysts such as Congressional realignment, quantitative easing and positive earnings and economic reports, markets are apt to wake up to the reality of a continuing sluggish economy and political stalemate in Washington. Some analysts are expecting an easing of monetary policy globally, as the world responds to a weaker dollar and looser U.S. financial conditions. Many are maintaining neutral allocations across major asset classes, with an emphasis on growth outside the U.S. market, particularly in emerging markets. Favored areas include commodities and growth stocks paying a dividend. Equities are expected to offer the highest risk premia in the coming months, and corporate paper is favored over government securities as the era of extraordinary returns in credit may be coming to an end. RYDEX|SGI ETFS ETFs have continued to enjoy popularity in the current uncertain market environment, and not just because of their well-known benefits of transparency, convenience and low cost. ETFs incorporate some of the most innovative product development and fastest asset growth in the financial industry. There was a 27% increase in assets under management in ETFs over the 12 month period ended September 30, 2010, according to the Investment Company Institute. As of October 2010, there were about 1,000 exchange traded funds with about $900 billion in assets in the U.S. and more than $1 trillion globally. At Rydex|SGI, assets under management increased by 7% during the past 12 months, and the firm closed 12 leveraged or inverse ETFs as it rationalized its product line-up. Today, the firm offers 28 exchange traded products, including currency funds, two leveraged or inverse products, nine sector funds, six pure style funds, a mega cap fund and an equal weight S&P 500 Index* fund, our best-known ETF. ANNUAL REPORT 3 LETTER TO OUR SHAREHOLDERS (CONTINUED) -------------------------------------------------------------------------------- GUGGENHEIM PARTNERS As you may know, Security Global Investors' (SGI) parent firm, Security Benefit Corporation (Security Benefit), was acquired this year by a group of investors led by Guggenheim Partners. Guggenheim Partners is a diversified financial services firm with $100 billion in assets under supervision and a well-known name in the investment-management industry. We look forward to a long and productive relationship with Guggenheim Partners, as we do with you, our shareholders, and thank you for the trust you place in us. Sincerely, -s- Michael Byrum, CFA Michael Byrum President and Chief Investment Officer *The S&P Equal Weight Index is an unmanaged equal-weighted version of the S&P 500 Index, which is an unmanaged capitalization-weighted index comprised of 500 common stocks, chosen by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. ("S&P") on a statistical basis. Unlike the S&P 500 Index, in which each constituent stock's weight is proportionate to its market value, each stock in the S&P Equal Weight Index will be rebalanced quarterly to have the same target weighting as every other stock in the Index. As of December 31, 2009, the S&P 500 Equal Weight Index included companies with a capitalization range of $1.1 billion to $323.8 billion. FOR MORE COMPLETE INFORMATION REGARDING RYDEXSHARES, CALL 800.820.0888 FOR A PROSPECTUS AND A SUMMARY PROSPECTUS (IF AVAILABLE). INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A FUND BEFORE INVESTING. THE FUND'S PROSPECTUS AND ITS SUMMARY PROSPECTUS (IF AVAILABLE) CONTAINS THIS AND OTHER INFORMATION ABOUT THE FUNDS. PLEASE READ THE PROSPECTUS AND SUMMARY PROSPECTUS (IF AVAILABLE) CAREFULLY BEFORE YOU INVEST OR SEND MONEY. ETFS MAY NOT BE SUITABLE FOR ALL INVESTORS. - Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Most investors will also incur customary brokerage commissions when buying or selling shares of an ETF. - Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. - ETF Shares may trade below their net asset value ("NAV"). The NAV of shares will fluctuate with changes in the market value of an ETF's holdings. In addition, there can be no assurance that an active trading market for shares will develop or be maintained. - Tracking error risk refers to the risk that the Advisor may not be able to cause the Fund's performance to match or correlate to that of the Fund's Underlying Index, either on a daily or aggregate basis. Tracking error risk may cause the Fund's performance to be less than you expect. - Each ETF discussed is considered non- diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Rydex|SGI and its affiliates. The product is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the product. THE FUNDS ARE DISTRIBUTED BY RYDEX DISTRIBUTORS, LLC (RDL). Security Global Investors(SM) is the investment advisory arm of Security Benefit Corporation (Security Benefit). Security Global Investors consists of Security Global Investors, LLC, Security Investors, LLC and Rydex Investments. Rydex Investments is the primary business name for Rydex Advisors, LLC and Rydex Advisors II, LLC. Security Global Investors and RDL are affiliates and subsidiaries of Security Benefit, which is wholly owned by Guggenheim SBC Holdings, LLC, a special purpose entity managed by Guggenheim Partners, LLC, a diversified financial services firm with more than $100 billion in assets under supervision. 4 A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) -------------------------------------------------------------------------------- The Funds described in this report are benchmarked daily to leveraged or inverse versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns. Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period. It is also possible that a fund that performs in-line with its benchmark on a daily basis may seem to outperform its benchmark over longer periods. AN EXAMPLE OF COMPOUNDING For example, consider a hypothetical fund that is designed to produce returns that correspond to 150% of an index. On the first day of a period, the index rises from a level of 100 to a level of 106, producing a 6% gain and an expectation that the fund will rise by 9%. On the same day, the fund's Net Asset Value ("NAV") increases from $10.00 to $10.90 for a gain of 9.0% -- in line with its benchmark. On day two, assume the index falls from 106 to 99 for a loss of about 6.6%. The fund, as expected, falls 9.9% to a price of $9.82. On each day, the fund performed exactly in line with its benchmark, but for the two-day period, the fund was down 1.8%, while the index was down only 1.0%. Without taking into account the daily compounding of returns, one would expect the fund to lose 1.5% and would see the fund as trailing by 0.3% when in fact it had performed perfectly. This example is summarized in the table below.
INDEX INDEX FUND FUND FUND LEVEL PERFORMANCE EXPECTATION NAV PERFORMANCE ASSESSMENT ---------------------------------------------------------------------------------------------------------- Start 100 $10.00 Day 1 106 6.00% 9.00% $10.90 9.00% In line Day 2 99 (6.60)% (9.90)% $ 9.82 (9.90)% In line Cumulative (1.00)% (1.50)% (1.80)% (0.30)% ----------------------------------------------------------------------------------------------------------
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index. Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds' returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds' holdings consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund's shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus. In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor's favor, causing the fund to seemingly beat its benchmark. As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect. ANNUAL REPORT 5 FEES AND EXPENSES -------------------------------------------------------------------------------- SHAREHOLDER EXPENSE EXAMPLE As a shareholder of the Rydex ETF Trust, you incur transaction costs such as creation and redemption fees or brokerage charges, and ongoing costs including advisory fees, trustee fees and, if applicable, distribution fees. All other Trust expenses are paid by the advisor. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested on April 30, 2010 and held for the six months ended October 31, 2010. ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first table under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses attributable to your investment during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second table below provides information about hypothetical account values and hypothetical expenses based on a Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not a Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING EXPENSE VALUE VALUE SIX-MONTH PERIOD* RATIO 4/30/10 10/31/10 4/30/10 TO 10/31/10 ------- --------- --------- ------------------- ACTUAL Rydex 2x S&P 500 ETF....................... 0.71% $1,000.00 $ 986.80 $3.56 Rydex Inverse 2x S&P 500 ETF............... 0.71% $1,000.00 $ 917.40 $3.43 HYPOTHETICAL (ASSUMING A 5% RETURN BEFORE EXPENSES) Rydex 2x S&P 500 ETF....................... 0.71% $1,000.00 $1,021.63 $3.62 Rydex Inverse 2x S&P 500 ETF............... 0.71% $1,000.00 $1,021.63 $3.62
-------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect one-half year period). 6 PREMIUM AND DISCOUNT INFORMATION (Unaudited) -------------------------------------------------------------------------------- The tables that follow present information about the differences between the daily market price on secondary markets for shares of the Funds and each Fund's NAV. NAV is the price per share at which a Fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The "Market Price" of a Fund generally is determined using the midpoint between the highest bid and the lowest offer on the Exchange on which the Fund is listed for trading, as of the time the Fund's NAV is calculated. A Fund's Market Price may be at, above or below its NAV. The NAV of a Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of a Fund will fluctuate in accordance with changes in its NAV, as well as market supply of and demand for shares of the Funds. Premiums or discounts are the differences (generally expressed as a percentage) between the NAV and Market Price of a Fund on a given day, generally at the time NAV is calculated. A premium is the amount that a Fund is trading above the reported NAV, expressed as a positive percentage of the NAV. A discount is the amount that a Fund is trading below the reported NAV, expressed as a negative percentage of the NAV. The following information shows the frequency distribution of premiums and discounts for the Funds. The information shown for each Fund is for the period from inception to October 31, 2010. Each line in the table shows the number of trading days in which the Funds traded within the premium/discount range indicated. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period covered by the table. All data presented here represents past performance, which cannot be used to predict future results.
NUMBER OF DAYS ------------------------ RYDEX 2X RYDEX INVERSE S&P 500 2X S&P 500 PREMIUM/DISCOUNT RANGE ETF ETF ---------------------- -------- ------------- Greater Than 30%............................................. 1 0 Between 10.01% and 30%....................................... 0 0 Between 8.01% and 10%........................................ 0 0 Between 3.01% and 8%......................................... 7 1 Between 1.01% and 3%......................................... 17 12 Between .51% and 1%.......................................... 41 36 Between .26% and .5%......................................... 42 40 Between 0% and .25%.......................................... 252 439 Between -0.01% and -0.25%.................................... 449 316 Between -0.26% and -0.5%..................................... 67 39 Between -0.51% and -1%....................................... 30 20 Between -1.01% and -3%....................................... 17 16 Between -3.01% and -8%....................................... 0 4 Between -8.01% and -10%...................................... 0 0 Between -10.01% and -30%..................................... 0 0 Less Than -30%............................................... 0 0 --- --- Total........................................................ 923 923 --- ---
PERCENTAGE OF TOTAL DAYS ------------------------ RYDEX 2X RYDEX INVERSE S&P 500 2X S&P 500 PREMIUM/DISCOUNT RANGE ETF ETF ---------------------- -------- ------------- Greater Than 30%............................................. 0.11% 0.00% Between 10.01% and 30%....................................... 0.00% 0.00% Between 8.01% and 10%........................................ 0.00% 0.00% Between 3.01% and 8%......................................... 0.76% 0.11% Between 1.01% and 3%......................................... 1.84% 1.30% Between .51% and 1%.......................................... 4.44% 3.90% Between .26% and .5%......................................... 4.55% 4.33% Between 0% and .25%.......................................... 27.30% 47.56% Between -0.01% and -0.25%.................................... 48.65% 34.24% Between -0.26% and -0.5%..................................... 7.26% 4.23% Between -0.51% and -1%....................................... 3.25% 2.17% Between -1.01% and -3%....................................... 1.84% 1.73% Between -3.01% and -8%....................................... 0.00% 0.43% Between -8.01% and -10%...................................... 0.00% 0.00% Between -10.01% and -30%..................................... 0.00% 0.00% Less Than -30%............................................... 0.00% 0.00% ------ ------ Total........................................................ 100.00% 100.00% ------ ------
ANNUAL REPORT 7 RYDEX 2x S&P 500 ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex 2x S&P 500 ETF (RSU) maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the S&P 500 Total Return Index*. Rydex 2x S&P 500 ETF returned 30.12% while the S&P 500 Total Return Index returned 16.52% over the same time period. The biggest performance contributors during the period were the consumer discretionary (33.21%) and information technology (18.87%) sectors. No sector detracted from performance. The global financial crisis eased in the last half of 2009, as markets recovered and, as investors were told later, the Great Recession ended. The Volatility Index (VIX) stayed in the 20% to 30% range for the first half of 2010, but spiked as high as 50% in May as concerns grew about the Greek debt crisis and possibility of a U.S. double-dip recession. GDP growth for the second quarter turned out to be weak but positive (1.7%), and markets rebounded and volatility eased. However, the Fed was concerned enough about the perils of too-slow growth and its possible deflationary impact to signal its interest in another round of quantitative easing in the last months of 2010. While corporate earnings and manufacturing activity were strong or improving during much of the past 12 months, weak employment and housing markets continued to be a drag on growth in the U.S. By the end of October 2010, U.S. equity markets were at two-year highs. In order to gain leveraged exposure in the S&P 500 Index, the Rydex 2x S&P 500 ETF employs as its investment strategy a program of engaging in investing in leveraged derivative instruments, such as equity index swaps and futures contracts on stock indices. Due to the compounding of daily returns, leveraged and inverse funds' returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds' holdings to ensure that they are consistent with their strategies, as frequently as daily. The effects of compounding may cause the longer-term correlation of the fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 4 of this report. * The S&P 500 Index is a capitalization-weighted index composed of 500 common stocks, which are chosen by the Standard & Poor's Corporation ("S&P") on a statistical basis, and which generally represent large-capitalization companies with a capitalization range of $1.1 billion to $323.8 billion as of December 31, 2009. CUMULATIVE FUND PERFORMANCE: NOVEMBER 5, 2007 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX 2X S&P 500 S&P 500 TOTAL RETURN ETF INDEX -------- ------------ 11/5/2007 10000 10000 1/31/2008 8286 9222 4/30/2008 8315 9317 7/31/2008 6914 8569 10/31/2008 3732 6589 1/31/2009 2537 5660 4/30/2009 2755 6027 7/31/2009 3507 6859 10/31/2009 3863 7235 1/31/2010 4159 7536 4/30/2010 5094 8368 7/31/2010 4349 7808 10/31/2010 5027 8430
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR (11/05/2007) -------- --------------- RYDEX 2X S&P 500 ETF........................................ 30.12% (20.55)% S&P 500 TOTAL RETURN INDEX.................................. 16.52% (5.55)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 8 RYDEX 2x S&P 500 ETF PORTFOLIO SUMMARY (Unaudited) As of October 31, 2010 -------------------------------------------------------------------------------- TOP 10 HOLDINGS* --------------------------------------------------------------------------------
DESCRIPTION % OF NET ASSETS ------------------------------------------------------------------------------------ EXXON MOBIL CORP. 2.56% APPLE, INC. 2.08% MICROSOFT CORP. 1.54% INTERNATIONAL BUSINESS MACHINES CORP. 1.37% PROCTER & GAMBLE CO. 1.36% JOHNSON & JOHNSON, INC. 1.33% GENERAL ELECTRIC CO. 1.30% AT&T, INC. 1.27% CHEVRON CORP. 1.26% GOOGLE, INC. -- CLASS A 1.15% ------------------------------------------------------------------------------------
SECTOR ALLOCATIONS* (PIE CHART) Information Technology 17.93 Industrials 16.77 Financials 14.28 Health Care 10.68 Consumer Staples 10.40 Energy 10.33 Consumer Discretionary 9.93 Materials 3.41 Utilities 3.36 Telecommunication Services 2.91
* The Fund's Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund's equity investments market value. These percentages may change over time. ANNUAL REPORT 9 RYDEX INVERSE 2x S&P 500 ETF MANAGER'S ANALYSIS (Unaudited) -------------------------------------------------------------------------------- For the one-year period ended October 31, 2010, Rydex Inverse 2x S&P 500 ETF (RSW) achieved a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the S&P 500 Total Return Index*. Rydex Inverse 2x S&P 500 ETF delivered a -33.61% total return compared to the S&P 500, which came in at 16.52%. The biggest performance contributors during the period were the consumer discretionary (33.21%) and information technology (18.87%) sectors. No sector detracted from performance. The global financial crisis eased in the last half of 2009, as markets recovered and, as investors were told later, the Great Recession ended. The Volatility Index (VIX) stayed in the 20% to 30% range for the first half of 2010, but spiked as high as 50% in June as concerns grew about the Greek debt crisis and possibility of a U.S. double-dip recession. GDP growth for the second quarter turned out to be weak but positive (1.7%), and markets rebounded and volatility eased. However, the Fed was concerned enough about the perils of too-slow growth and its possible deflationary impact to signal its interest in another round of quantitative easing in the last months of 2010. While corporate earnings and manufacturing activity were strong or improving during much of the past 12 months, weak employment and housing markets continued to be a drag on growth in the U.S. By the end of October 2010, U.S. equity markets were at two-year highs. In order to gain inverse and leveraged exposure in the S&P 500 Index, the Rydex Inverse 2x S&P 500 ETF employs as its investment strategy a program of engaging in investing in leveraged derivative instruments, such as equity index swaps and futures contracts on stock indices. Due to the compounding of daily returns, leveraged and inverse funds' returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds' holdings to ensure that they are consistent with their strategies, as frequently as daily. The effects of compounding may cause the longer-term correlation of the fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 4 of this report. * The S&P 500 Index is a capitalization-weighted index composed of 500 common stocks, which are chosen by the Standard & Poor's Corporation ("S&P") on a statistical basis, and which generally represent large-capitalization companies with a capitalization range of $1.1 billion to $323.8 billion as of December 31, 2009. CUMULATIVE FUND PERFORMANCE: NOVEMBER 5, 2007 - OCTOBER 31, 2010 (PERFORMANCE GRAPH)
RYDEX INVERSE S&P 500 2X S&P TOTAL RETURN 500 ETF INDEX ------------- ------------ 11/5/2007 10000 10000 1/31/2008 11777 9222 4/30/2008 11292 9317 7/31/2008 13204 8569 10/31/2008 17827 6589 1/31/2009 20404 5660 4/30/2009 16057 6027 7/31/2009 11895 6859 10/31/2009 10439 7235 1/31/2010 9473 7536 4/30/2010 7554 8368 7/31/2010 8244 7808 10/31/2010 6930 8430
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2010 --------------------------------------------------------------------------------
SINCE INCEPTION ONE YEAR (11/05/2007) -------- --------------- RYDEX INVERSE 2X S&P 500 ETF................................ (33.61)% (11.54)% S&P 500 TOTAL RETURN INDEX.................................. 16.52% (5.55)%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results. Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit www.rydex-sgi.com. 10 RYDEX 2X S&P 500 ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------- COMMON STOCKS 81.1% AEROSPACE & DEFENSE 2.2% Boeing Co.(The)........... 4,426 $312,653 General Dynamics Corp. ... 2,297 156,472 Goodrich Corp. ........... 759 62,291 Honeywell International, Inc. .................. 4,668 219,909 ITT Corp. ................ 1,105 52,145 L-3 Communications Holdings, Inc. ........ 695 50,172 Lockheed Martin Corp. .... 1,800 128,322 Northrop Grumman Corp. ... 1,780 112,514 Precision Castparts Corp. ................. 863 117,868 Raytheon Co. ............. 2,260 104,141 Rockwell Collins, Inc. ... 947 57,303 United Technologies Corp. ................. 5,615 419,834 ----------- TOTAL AEROSPACE & DEFENSE 1,793,624 ----------- AIR FREIGHT & LOGISTICS 0.9% C.H. Robinson Worldwide, Inc. .................. 1,004 70,762 Expeditors International of Washington, Inc. ... 1,283 63,329 FedEx Corp. .............. 1,904 167,019 United Parcel Service, Inc. -- Class B........ 5,991 403,434 ----------- TOTAL AIR FREIGHT & LOGISTICS 704,544 ----------- AIRLINES 0.1% Southwest Airlines Co. ... 4,510 62,058 ----------- TOTAL AIRLINES 62,058 ----------- AUTO COMPONENTS 0.2% Goodyear Tire & Rubber Co.(The)*.............. 1,471 15,034 Johnson Controls, Inc. ... 4,067 142,833 ----------- TOTAL AUTO COMPONENTS 157,867 ----------- AUTOMOBILES 0.4% Ford Motor Co.*........... 20,801 293,918 Harley-Davidson, Inc. .... 1,424 43,688 ----------- TOTAL AUTOMOBILES 337,606 ----------- BEVERAGES 2.1% Brown-Forman Corp. -- Class B....... 628 38,189 Coca-Cola Co.(The)........ 13,967 856,456 Coca-Cola Enterprises, Inc. .................. 2,005 48,140 Constellation Brands, Inc. -- Class A*....... 1,068 21,072 Dr Pepper Snapple Group, Inc. .................. 1,444 52,778 Molson Coors Brewing Co. -- Class B......... 957 45,199 PepsiCo, Inc. ............ 9,628 628,708 ----------- TOTAL BEVERAGES 1,690,542 ----------- BIOTECHNOLOGY 1.2% Amgen, Inc.*.............. 5,793 331,302 Biogen Idec, Inc.*........ 1,461 91,619 Celgene Corp.*............ 2,841 176,341 Cephalon, Inc.*........... 460 30,562 Genzyme Corp.*............ 1,538 110,936 Gilead Sciences, Inc.*.... 5,071 201,167 ----------- TOTAL BIOTECHNOLOGY 941,927 ----------- BUILDING PRODUCTS 0.0%(A) Masco Corp. .............. 2,166 23,090 ----------- TOTAL BUILDING PRODUCTS 23,090 ----------- CAPITAL MARKETS 2.0% Ameriprise Financial, Inc. .................. 1,518 78,465 Bank of New York Mellon Corp. ................. 7,341 183,966 Charles Schwab Corp.(The)............. 5,991 92,261 E*TRADE Financial Corp.*.. 1,199 17,146 Federated Investors, Inc. -- Class B........ 554 13,800 Franklin Resources, Inc. .................. 890 102,083 Goldman Sachs Group, Inc.(The).............. 3,123 502,647 Invesco Ltd. ............. 2,831 65,113 Janus Capital Group, Inc. .................. 1,105 11,669 Legg Mason, Inc. ......... 937 29,075 Morgan Stanley............ 8,446 210,052 Northern Trust Corp. ..... 1,461 72,509 State Street Corp. ....... 3,039 126,909 T. Rowe Price Group, Inc. .................. 1,548 85,558 ----------- TOTAL CAPITAL MARKETS 1,591,253 ----------- CHEMICALS 1.7% Air Products & Chemicals, Inc. .................. 1,283 109,016 Airgas, Inc. ............. 450 31,918 CF Industries Holdings, Inc. .................. 430 52,688 Dow Chemical Co.(The)..... 7,012 216,180 Du Pont (E.I.) de Nemours & Co. ................. 5,484 259,284 Eastman Chemical Co. ..... 440 34,571 Ecolab, Inc. ............. 1,417 69,886 FMC Corp. ................ 440 32,164 International Flavors & Fragrances, Inc. ...... 487 24,428 Monsanto Co. ............. 3,271 194,363 PPG Industries, Inc. ..... 1,004 77,007 Praxair, Inc. ............ 1,847 168,705 Sherwin-Williams Co.(The)............... 544 39,696 Sigma-Aldrich Corp. ...... 732 46,423 ----------- TOTAL CHEMICALS 1,356,329 ----------- COMMERCIAL BANKS 2.2% BB&T Corp. ............... 4,191 98,111 Comerica, Inc. ........... 1,068 38,213 Fifth Third Bancorp....... 4,819 60,527 First Horizon National Corp.*................. 1,407 14,197 Huntington Bancshares, Inc. .................. 4,342 24,619 KeyCorp................... 5,326 43,620 M&T Bank Corp. ........... 514 38,421 Marshall & Ilsley Corp. .. 3,187 18,835 PNC Financial Services Group, Inc. ........... 3,177 171,240 Regions Financial Corp. .. 7,593 47,836 SunTrust Banks, Inc. ..... 3,029 75,786 U.S. Bancorp.............. 11,596 280,391 Wells Fargo & Co. ........ 31,658 825,641 Zions Bancorp............. 1,051 21,714 ----------- TOTAL COMMERCIAL BANKS 1,759,151 ----------- COMMERCIAL SERVICES & SUPPLIES 0.4% Avery Dennison Corp. ..... 665 24,173 Cintas Corp. ............. 806 22,141 Iron Mountain, Inc. ...... 1,219 26,562 Pitney Bowes, Inc. ....... 1,246 27,337 R.R. Donnelley & Sons Co. ................... 1,246 22,989 Republic Services, Inc. .. 1,857 55,357 Stericycle, Inc.*......... 517 37,090 Waste Management, Inc. ... 2,888 103,159 ----------- TOTAL COMMERCIAL SERVICES & SUPPLIES 318,808 ----------- COMMUNICATIONS EQUIPMENT 1.9% Cisco Systems, Inc.*...... 34,546 788,685 Harris Corp. ............. 779 35,203 JDS Uniphase Corp.*....... 1,340 14,083 Juniper Networks, Inc.*... 3,140 101,705 Motorola, Inc.*........... 14,118 115,062
See Notes to Financial Statements. ANNUAL REPORT 11 RYDEX 2X S&P 500 ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------- COMMON STOCKS (CONTINUED) QUALCOMM, Inc. ........... 9,712 $438,302 Tellabs, Inc. ............ 2,307 15,734 ----------- TOTAL COMMUNICATIONS EQUIPMENT 1,508,774 ----------- COMPUTERS & PERIPHERALS 3.6% Apple, Inc.*.............. 5,521 1,661,103 Dell, Inc.*............... 10,236 147,194 EMC Corp.*................ 12,422 260,986 Hewlett-Packard Co. ...... 13,715 576,853 Lexmark International, Inc. -- Class A*....... 477 18,140 NetApp, Inc.*............. 2,156 114,807 QLogic Corp.*............. 655 11,508 SanDisk Corp.*............ 1,407 52,875 Western Digital Corp.*.... 1,387 44,412 ----------- TOTAL COMPUTERS & PERIPHERALS 2,887,878 ----------- CONSTRUCTION & ENGINEERING 0.1% Fluor Corp. .............. 1,078 51,949 Jacobs Engineering Group, Inc.*.................. 759 29,305 Quanta Services, Inc.*.... 1,276 25,086 ----------- TOTAL CONSTRUCTION & ENGINEERING 106,340 ----------- CONSTRUCTION MATERIALS 0.0%(A) Vulcan Materials Co. ..... 779 28,441 ----------- TOTAL CONSTRUCTION MATERIALS 28,441 ----------- CONSUMER FINANCE 0.6% American Express Co. ..... 6,327 262,317 Capital One Financial Corp. ................. 2,767 103,126 Discover Financial Services............... 3,291 58,086 SLM Corp.*................ 2,935 34,927 ----------- TOTAL CONSUMER FINANCE 458,456 ----------- CONTAINERS & PACKAGING 0.2% Ball Corp. ............... 554 35,655 Bemis Co., Inc. .......... 655 20,803 Owens-Illinois, Inc.*..... 994 27,862 Pactiv Corp.*............. 826 27,407 Sealed Air Corp. ......... 967 22,386 ----------- TOTAL CONTAINERS & PACKAGING 134,113 ----------- DISTRIBUTORS 0.1% Genuine Parts Co. ........ 957 45,802 ----------- TOTAL DISTRIBUTORS 45,802 ----------- DIVERSIFIED CONSUMER SERVICES 0.1% Apollo Group, Inc. -- Class A*....... 769 28,822 DeVry, Inc. .............. 386 18,474 H&R Block, Inc. .......... 1,867 22,012 ----------- TOTAL DIVERSIFIED CONSUMER SERVICES 69,308 ----------- DIVERSIFIED FINANCIAL SERVICES 3.2% Bank of America Corp. .... 60,693 694,328 Citigroup, Inc.*.......... 154,223 643,110 CME Group, Inc. .......... 403 116,729 IntercontinentalExchange, Inc.*.................. 450 51,692 JPMorgan Chase & Co. ..... 23,981 902,405 Leucadia National Corp.*.. 1,189 30,224 Moody's Corp. ............ 1,239 33,527 Nasdaq OMX Group (The)*... 873 18,350 NYSE Euronext............. 1,575 48,258 ----------- TOTAL DIVERSIFIED FINANCIAL SERVICES 2,538,623 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.3% AT&T, Inc. ............... 35,745 1,018,732 CenturyTel, Inc. ......... 1,827 75,601 Frontier Communications Corp. ................. 6,001 52,689 Qwest Communications International, Inc. ... 10,518 69,419 Verizon Communications, Inc. .................. 17,100 555,237 Windstream Corp. ......... 2,925 37,031 ----------- TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 1,808,709 ----------- ELECTRIC UTILITIES 1.5% Allegheny Energy, Inc. ... 1,021 23,687 American Electric Power Co., Inc. ............. 2,898 108,501 Duke Energy Corp. ........ 7,979 145,298 Edison International...... 1,968 72,619 Entergy Corp. ............ 1,135 84,592 Exelon Corp. ............. 3,993 162,994 FirstEnergy Corp. ........ 1,847 67,083 NextEra Energy, Inc. ..... 2,512 138,260 Northeast Utilities....... 1,068 33,407 Pepco Holdings, Inc. ..... 1,350 26,001 Pinnacle West Capital Corp. ................. 655 26,960 PPL Corp. ................ 2,915 78,414 Progress Energy, Inc. .... 1,773 79,785 Southern Co. ............. 5,024 190,259 ----------- TOTAL ELECTRIC UTILITIES 1,237,860 ----------- ELECTRICAL EQUIPMENT 0.4% Emerson Electric Co. ..... 4,547 249,630 Rockwell Automation, Inc. .................. 863 53,825 Roper Industries, Inc. ... 571 39,645 ----------- TOTAL ELECTRICAL EQUIPMENT 343,100 ----------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 0.5% Agilent Technologies, Inc.*.................. 2,089 72,697 Amphenol Corp. -- Class A...................... 1,051 52,686 Corning, Inc. ............ 9,450 172,746 FLIR Systems, Inc.*....... 957 26,643 Jabil Circuit, Inc. ...... 1,182 18,132 Molex, Inc. .............. 833 16,910 ----------- TOTAL ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 359,814 ----------- ENERGY EQUIPMENT & SERVICES 1.6% Baker Hughes, Inc. ....... 2,606 120,736 Cameron International Corp.*................. 1,461 63,919 Diamond Offshore Drilling, Inc. .................. 423 27,986 FMC Technologies, Inc.*... 722 52,056 Halliburton Co. .......... 5,514 175,676 Helmerich & Payne, Inc. .. 638 27,294 Nabors Industries, Ltd.*.. 1,726 36,073 National-Oilwell Varco, Inc. .................. 2,532 136,120 Rowan Cos., Inc.*......... 695 22,865 Schlumberger, Ltd. ....... 8,268 577,851 ----------- TOTAL ENERGY EQUIPMENT & SERVICES 1,240,576 ----------- FOOD & STAPLES RETAILING 2.0% Costco Wholesale Corp. ... 2,653 166,529 CVS Caremark Corp. ....... 8,211 247,315 Kroger Co.(The)........... 3,882 85,404 Safeway, Inc. ............ 2,307 52,830 SUPERVALU, Inc. .......... 1,283 13,844 Sysco Corp. .............. 3,563 104,966 Wal-Mart Stores, Inc. .... 12,103 655,619
See Notes to Financial Statements. 12 RYDEX 2X S&P 500 ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------- COMMON STOCKS (CONTINUED) Walgreen Co. ............. 5,887 $199,452 Whole Foods Market, Inc.*.................. 880 34,980 ----------- TOTAL FOOD & STAPLES RETAILING 1,560,939 ----------- FOOD PRODUCTS 1.5% Archer-Daniels-Midland Co. ................... 3,872 129,015 Campbell Soup Co. ........ 1,172 42,485 ConAgra Foods, Inc. ...... 2,663 59,891 Dean Foods Co.*........... 1,108 11,523 General Mills, Inc. ...... 3,882 145,730 H.J. Heinz Co. ........... 1,921 94,340 Hershey Co.(The).......... 937 46,372 Hormel Foods Corp. ....... 423 19,424 J.M. Smucker Co.(The)..... 722 46,410 Kellogg Co. .............. 1,575 79,160 Kraft Foods, Inc. -- Class A...................... 10,545 340,287 McCormick & Co., Inc. .... 806 35,642 Mead Johnson Nutrition Co. ................... 1,236 72,702 Sara Lee Corp. ........... 4,003 57,363 Tyson Foods, Inc. -- Class A...................... 1,800 27,990 ----------- TOTAL FOOD PRODUCTS 1,208,334 ----------- GAS UTILITIES 0.1% Nicor, Inc. .............. 272 12,955 Oneok, Inc. .............. 648 32,284 ----------- TOTAL GAS UTILITIES 45,239 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 1.4% Baxter International, Inc. .................. 3,533 179,830 Becton, Dickinson & Co. .. 1,407 106,257 Boston Scientific Corp.*.. 9,178 58,556 C.R. Bard, Inc. .......... 561 46,630 CareFusion Corp.*......... 1,340 32,348 Dentsply International, Inc. .................. 863 27,090 Hospira, Inc.*............ 1,011 60,134 Intuitive Surgical, Inc.*.................. 235 61,793 Medtronic, Inc. .......... 6,535 230,097 St Jude Medical, Inc.*.... 1,978 75,758 Stryker Corp. ............ 2,062 102,048 Varian Medical Systems, Inc.*.................. 732 46,277 Zimmer Holdings, Inc.*.... 1,219 57,829 ----------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 1,084,647 ----------- HEALTH CARE PROVIDERS & SERVICES 1.6% Aetna, Inc. .............. 2,522 75,307 AmerisourceBergen Corp. .. 1,689 55,433 Cardinal Health, Inc. .... 2,129 73,855 CIGNA Corp. .............. 1,649 58,028 Coventry Health Care, Inc.*.................. 900 21,078 DaVita, Inc.*............. 618 44,341 Express Scripts, Inc.*.... 3,281 159,194 Humana, Inc.*............. 1,021 59,514 Laboratory Corp. of America Holdings*...... 618 50,256 McKesson Corp. ........... 1,585 104,578 Medco Health Solutions, Inc.*.................. 2,626 137,944 Patterson Cos., Inc. ..... 581 16,065 Quest Diagnostics, Inc. .. 890 43,735 Tenet Healthcare Corp.*... 2,935 12,797 UnitedHealth Group, Inc. .................. 6,797 245,032 WellPoint, Inc.*.......... 2,418 131,394 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 1,288,551 ----------- HEALTH CARE TECHNOLOGY 0.0%(A) Cerner Corp.*............. 430 37,767 ----------- TOTAL HEALTH CARE TECHNOLOGY 37,767 ----------- HOTELS, RESTAURANTS & LEISURE 1.4% Carnival Corp. ........... 2,626 113,364 Darden Restaurants, Inc. .................. 833 38,076 International Game Technology............. 1,800 28,062 Marriott International, Inc. -- Class A........ 1,733 64,208 McDonald's Corp. ......... 6,441 500,917 Starbucks Corp. .......... 4,480 127,590 Starwood Hotels & Resorts Worldwide, Inc. ....... 1,152 62,369 Wyndham Worldwide Corp. .. 1,078 30,993 Wynn Resorts Ltd. ........ 460 49,298 Yum! Brands, Inc. ........ 2,821 139,809 ----------- TOTAL HOTELS, RESTAURANTS & LEISURE 1,154,686 ----------- HOUSEHOLD DURABLES 0.3% D.R. Horton, Inc. ........ 1,696 17,706 Fortune Brands, Inc. ..... 920 49,726 Harman International Industries, Inc.*...... 423 14,192 Leggett & Platt, Inc. .... 880 17,934 Lennar Corp. -- Class A... 967 14,031 Newell Rubbermaid, Inc. .. 1,914 33,782 Pulte Homes, Inc.*........ 2,035 15,975 Stanley Black & Decker, Inc. .................. 1,004 62,218 Whirlpool Corp. .......... 460 34,882 ----------- TOTAL HOUSEHOLD DURABLES 260,446 ----------- HOUSEHOLD PRODUCTS 1.9% Clorox Co. ............... 843 56,102 Colgate-Palmolive Co. .... 2,945 227,118 Kimberly-Clark Corp. ..... 2,475 156,767 Procter & Gamble Co. ..... 17,164 1,091,115 ----------- TOTAL HOUSEHOLD PRODUCTS 1,531,102 ----------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 0.1% AES Corp.(The)*........... 4,030 48,118 Constellation Energy Group, Inc. ........... 1,219 36,863 NRG Energy, Inc.*......... 1,528 30,422 ----------- TOTAL INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 115,403 ----------- INDUSTRIAL CONGLOMERATES 1.9% 3M Co. ................... 4,312 363,157 General Electric Co. ..... 64,666 1,035,949 Textron, Inc. ............ 1,659 34,540 Tyco International Ltd. .. 3,009 115,185 ----------- TOTAL INDUSTRIAL CONGLOMERATES 1,548,831 ----------- INSURANCE 3.2% ACE Ltd. ................. 2,052 121,930 AFLAC, Inc. .............. 2,851 159,342 Allstate Corp. ........... 3,254 99,215 American International Group, Inc.*........... 816 34,280 Aon Corp. ................ 1,988 79,023 Assurant, Inc. ........... 648 25,622 Berkshire Hathaway, Inc. -- Class B*....... 10,461 832,277 Chubb Corp. .............. 1,904 110,470 Cincinnati Financial Corp. ................. 984 28,969 Genworth Financial, Inc. -- Class A*....... 2,962 33,589 Hartford Financial Services Group, Inc. .. 2,690 64,506 Lincoln National Corp. ... 1,911 46,781
See Notes to Financial Statements. ANNUAL REPORT 13 RYDEX 2X S&P 500 ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------- COMMON STOCKS (CONTINUED) Loews Corp. .............. 1,921 $75,841 Marsh & McLennan Cos., Inc. .................. 3,281 81,959 MetLife, Inc. ............ 5,484 221,170 Principal Financial Group, Inc. .................. 1,941 52,097 Progressive Corp. ........ 4,040 85,487 Prudential Financial, Inc. .................. 2,821 148,328 Torchmark Corp. .......... 487 27,895 Travelers Cos., Inc.(The).............. 2,841 156,823 Unum Group................ 1,978 44,347 XL Group PLC.............. 2,072 43,823 ----------- TOTAL INSURANCE 2,573,774 ----------- INTERNET & CATALOG RETAIL 0.6% Amazon.com, Inc.*......... 2,136 352,739 Expedia, Inc. ............ 1,256 36,361 Priceline.com, Inc.*...... 289 108,898 ----------- TOTAL INTERNET & CATALOG RETAIL 497,998 ----------- INTERNET SOFTWARE & SERVICES 1.7% Akamai Technologies, Inc.*.................. 1,098 56,734 eBay, Inc.*............... 6,985 208,223 Google, Inc. -- Class A*.. 1,501 920,098 Monster Worldwide, Inc.*.. 789 14,249 VeriSign, Inc.*........... 1,051 36,522 Yahoo!, Inc.*............. 8,157 134,672 ----------- TOTAL INTERNET SOFTWARE & SERVICES 1,370,498 ----------- IT SERVICES 2.6% Automatic Data Processing, Inc. .................. 2,972 132,016 Cognizant Technology Solutions Corp. -- Class A*...... 1,820 118,646 Computer Sciences Corp. .. 937 45,960 Fidelity National Information Services, Inc. .................. 1,595 43,224 Fiserv, Inc.*............. 910 49,613 International Business Machines Corp. ........ 7,630 1,095,668 Mastercard, Inc. -- Class A...................... 581 139,475 Paychex, Inc. ............ 1,951 54,043 SAIC, Inc.*............... 1,773 27,552 Teradata Corp.*........... 1,014 39,911 Total System Services, Inc. .................. 1,004 15,672 Visa, Inc. -- Class A..... 3,009 235,214 Western Union Co. ........ 3,993 70,277 ----------- TOTAL IT SERVICES 2,067,271 ----------- LEISURE EQUIPMENT & PRODUCTS 0.1% Eastman Kodak Co.*........ 1,622 7,639 Hasbro, Inc. ............. 843 38,989 Mattel, Inc. ............. 2,176 50,766 ----------- TOTAL LEISURE EQUIPMENT & PRODUCTS 97,394 ----------- LIFE SCIENCES TOOLS & SERVICES 0.3% Life Technologies Corp.*.. 1,105 55,449 PerkinElmer, Inc. ........ 712 16,697 Thermo Fisher Scientific, Inc.*.................. 2,465 126,750 Waters Corp.*............. 554 41,068 ----------- TOTAL LIFE SCIENCES TOOLS & SERVICES 239,964 ----------- MACHINERY 1.6% Caterpillar, Inc. ........ 3,815 299,859 Cummins, Inc. ............ 1,199 105,632 Danaher Corp. ............ 3,234 140,226 Deere & Co. .............. 2,559 196,531 Dover Corp. .............. 1,125 59,738 Eaton Corp. .............. 1,011 89,807 Flowserve Corp. .......... 336 33,600 Illinois Tool Works, Inc. .................. 3,046 139,202 PACCAR, Inc. ............. 2,203 112,926 Pall Corp. ............... 702 29,954 Parker-Hannifin Corp. .... 974 74,560 Snap-on, Inc. ............ 346 17,646 ----------- TOTAL MACHINERY 1,299,681 ----------- MEDIA 2.6% CBS Corp. -- Class B...... 4,114 69,650 Comcast Corp. -- Class A.. 16,979 349,428 DIRECTV -- Class A*....... 5,239 227,687 Discovery Communications, Inc. -- Class A*....... 1,726 76,997 Gannett Co., Inc. ........ 1,444 17,111 Interpublic Group of Cos., Inc.*.................. 2,952 30,553 McGraw-Hill Cos., Inc. ... 1,864 70,180 Meredith Corp. ........... 215 7,299 New York Times Co. -- Class A*........ 712 5,461 News Corp. -- Class A..... 13,789 199,389 Omnicom Group, Inc. ...... 1,817 79,875 Scripps Networks Interactive -- Class A...................... 544 27,684 Time Warner Cable, Inc. .. 2,146 124,189 Time Warner, Inc. ........ 6,807 221,296 Viacom, Inc. -- Class B... 3,674 141,780 Walt Disney Co.(The)...... 11,569 417,757 Washington Post Co. -- Class B......... 37 14,879 ----------- TOTAL MEDIA 2,081,215 ----------- METALS & MINING 0.9% AK Steel Holding Corp. ... 665 8,372 Alcoa, Inc. .............. 6,179 81,130 Allegheny Technologies, Inc. .................. 601 31,667 Cliffs Natural Resources, Inc. .................. 816 53,203 Freeport-McMoRan Copper & Gold, Inc. ............ 2,851 269,933 Newmont Mining Corp. ..... 2,982 181,514 Nucor Corp. .............. 1,914 73,153 Titanium Metals Corp.*.... 544 10,695 United States Steel Corp. ................. 873 37,356 ----------- TOTAL METALS & MINING 747,023 ----------- MULTI-UTILITIES 1.1% Ameren Corp. ............. 1,444 41,847 CenterPoint Energy, Inc. .................. 2,549 42,211 CMS Energy Corp. ......... 1,397 25,677 Consolidated Edison, Inc. .................. 1,706 84,822 Dominion Resources, Inc. .................. 3,563 154,848 DTE Energy Co. ........... 1,021 47,742 Integrys Energy Group, Inc. .................. 470 24,999 NiSource, Inc. ........... 1,679 29,064 PG&E Corp. ............... 2,361 112,903 Public Service Enterprise Group, Inc. ........... 3,056 98,862 SCANA Corp. .............. 685 27,975 Sempra Energy............. 1,501 80,274 TECO Energy, Inc. ........ 1,293 22,744 Wisconsin Energy Corp. ... 702 41,797 Xcel Energy, Inc. ........ 2,784 66,426 ----------- TOTAL MULTI-UTILITIES 902,191 -----------
See Notes to Financial Statements. 14 RYDEX 2X S&P 500 ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTILINE RETAIL 0.7% Big Lots, Inc.*........... 460 $14,430 Family Dollar Stores, Inc. .................. 806 37,213 J.C. Penney Co., Inc. .... 1,434 44,712 Kohl's Corp.*............. 1,867 95,590 Macy's, Inc. ............. 2,559 60,495 Nordstrom, Inc. .......... 1,021 39,319 Sears Holdings Corp.*..... 272 19,579 Target Corp. ............. 4,369 226,926 ----------- TOTAL MULTILINE RETAIL 538,264 ----------- OFFICE ELECTRONICS 0.1% Xerox Corp. .............. 8,362 97,835 ----------- TOTAL OFFICE ELECTRONICS 97,835 ----------- OIL, GAS & CONSUMABLE FUELS 7.5% Anadarko Petroleum Corp. ................. 2,989 184,033 Apache Corp. ............. 2,203 222,547 Cabot Oil & Gas Corp. .... 628 18,199 Chesapeake Energy Corp. .. 3,956 85,845 Chevron Corp. ............ 12,160 1,004,538 ConocoPhillips............ 8,973 532,996 CONSOL Energy, Inc. ...... 1,370 50,361 Denbury Resources, Inc.*.. 2,418 41,154 Devon Energy Corp. ....... 2,636 171,393 El Paso Corp. ............ 4,255 56,421 EOG Resources, Inc. ...... 1,538 147,217 EQT Corp. ................ 900 33,696 Exxon Mobil Corp. ........ 30,795 2,046,944 Hess Corp. ............... 1,773 111,752 Marathon Oil Corp. ....... 4,295 152,773 Massey Energy Co. ........ 618 25,999 Murphy Oil Corp. ......... 1,162 75,716 Noble Energy, Inc. ....... 1,058 86,206 Occidental Petroleum Corp. ................. 4,913 386,309 Peabody Energy Corp. ..... 1,632 86,333 Pioneer Natural Resources Co. ................... 702 49,000 QEP Resources, Inc. ...... 1,058 34,946 Range Resources Corp. .... 964 36,044 Southwestern Energy Co.*.. 2,089 70,713 Spectra Energy Corp. ..... 3,919 93,155 Sunoco, Inc. ............. 732 27,428 Tesoro Corp. ............. 863 11,184 Valero Energy Corp. ...... 3,422 61,425 Williams Cos., Inc.(The).. 3,533 76,030 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 5,980,357 ----------- PAPER & FOREST PRODUCTS 0.1% International Paper Co. .. 2,643 66,815 MeadWestvaco Corp. ....... 1,031 26,528 ----------- TOTAL PAPER & FOREST PRODUCTS 93,343 ----------- PERSONAL PRODUCTS 0.2% Avon Products, Inc. ...... 2,596 79,048 Estee Lauder Cos., Inc -- Class A......... 695 49,463 ----------- TOTAL PERSONAL PRODUCTS 128,511 ----------- PHARMACEUTICALS 4.8% Abbott Laboratories....... 9,336 479,124 Allergan, Inc. ........... 1,857 134,465 Bristol-Myers Squibb Co. ................... 10,367 278,872 Eli Lilly & Co. .......... 6,142 216,199 Forest Laboratories, Inc.*.................. 1,726 57,044 Johnson & Johnson, Inc. .. 16,660 1,060,742 King Pharmaceuticals, Inc.*.................. 1,508 21,323 Merck & Co., Inc. ........ 18,618 675,461 Mylan, Inc.*.............. 1,874 38,080 Pfizer, Inc. ............. 48,627 846,110 Watson Pharmaceuticals, Inc.*.................. 648 30,229 ----------- TOTAL PHARMACEUTICALS 3,837,649 ----------- PROFESSIONAL SERVICES 0.1% Dun & Bradstreet Corp. ... 299 22,248 Equifax, Inc. ............ 759 25,146 Robert Half International, Inc. .................. 890 24,128 ----------- TOTAL PROFESSIONAL SERVICES 71,522 ----------- REAL ESTATE INVESTMENT TRUSTS (REITS) 1.2% Apartment Investment & Management Co. -- Class A...................... 712 16,597 AvalonBay Communities, Inc. .................. 517 54,962 Boston Properties, Inc. .. 843 72,658 Equity Residential........ 1,716 83,449 HCP, Inc. ................ 1,874 67,483 Health Care REIT, Inc. ... 806 41,187 Host Hotels & Resorts, Inc. .................. 3,983 63,290 Kimco Realty Corp. ....... 2,455 42,300 Plum Creek Timber Co., Inc. .................. 974 35,882 ProLogis.................. 3,370 46,000 Public Storage, Inc. ..... 843 83,642 Simon Property Group, Inc. .................. 1,773 170,243 Ventas, Inc. ............. 947 50,721 Vornado Realty Trust...... 984 85,992 Weyerhaeuser Co. ......... 3,244 52,618 ----------- TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 967,024 ----------- REAL ESTATE MANAGEMENT & DEVELOPMENT 0.0%(A) CB Richard Ellis Group, Inc. -- Class A*....... 1,753 32,168 ----------- TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT 32,168 ----------- ROAD & RAIL 0.7% CSX Corp. ................ 2,297 141,151 Norfolk Southern Corp. ... 2,230 137,123 Ryder System, Inc. ....... 319 13,956 Union Pacific Corp. ...... 3,009 263,829 ----------- TOTAL ROAD & RAIL 556,059 ----------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 2.0% Advanced Micro Devices, Inc.*.................. 3,432 25,157 Altera Corp. ............. 1,857 57,957 Analog Devices, Inc. ..... 1,800 60,606 Applied Materials, Inc. .. 8,080 99,869 Broadcom Corp. -- Class A...................... 2,710 110,405 First Solar, Inc.*........ 329 45,297 Intel Corp. .............. 33,683 676,018 KLA-Tencor Corp. ......... 1,011 36,113 Linear Technology Corp. .. 1,360 43,833 LSI Corp.*................ 3,882 20,342 MEMC Electronic Materials, Inc.*.................. 1,377 17,653 Microchip Technology, Inc. .................. 1,125 36,202 Micron Technology, Inc.*.. 5,175 42,797 National Semiconductor Corp. ................. 1,454 19,920 Novellus Systems, Inc.*... 554 16,182 NVIDIA Corp.*............. 3,469 41,732 Teradyne, Inc.*........... 1,098 12,341
See Notes to Financial Statements. ANNUAL REPORT 15 RYDEX 2x S&P 500 ETF SCHEDULE OF INVESTMENTS (concluded) October 31, 2010 --------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------- COMMON STOCKS (CONCLUDED) Texas Instruments, Inc. .. 7,227 $213,702 Xilinx, Inc. ............. 1,565 41,958 ----------- TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 1,618,084 ----------- SOFTWARE 3.3% Adobe Systems, Inc.*...... 3,177 89,433 Autodesk, Inc.*........... 1,377 49,820 BMC Software, Inc.*....... 1,078 49,006 CA, Inc. ................. 2,344 54,404 Citrix Systems, Inc.*..... 1,135 72,719 Compuware Corp.*.......... 1,350 13,513 Electronic Arts, Inc.*.... 1,998 31,668 Intuit, Inc.*............. 1,706 81,888 McAfee, Inc.*............. 920 43,516 Microsoft Corp. .......... 46,068 1,227,252 Novell, Inc.*............. 2,129 12,625 Oracle Corp. ............. 23,410 688,254 Red Hat, Inc.*............ 1,145 48,388 Salesforce.com, Inc.*..... 702 81,481 Symantec Corp.*........... 4,772 77,211 ----------- TOTAL SOFTWARE 2,621,178 ----------- SPECIALTY RETAIL 1.6% Abercrombie & Fitch Co. -- Class A......... 534 22,887 AutoNation, Inc.*......... 386 8,963 AutoZone, Inc.*........... 178 42,298 Bed Bath & Beyond, Inc.*.. 1,595 70,020 Best Buy Co., Inc. ....... 2,089 89,785 CarMax, Inc.*............. 1,350 41,836 GameStop Corp. -- Class A*..................... 910 17,891 Gap, Inc.(The)............ 2,663 50,624 Home Depot, Inc. ......... 10,078 311,209 Limited Brands, Inc. ..... 1,602 47,083 Lowe's Cos., Inc. ........ 8,483 180,942 O'Reilly Automotive, Inc.*.................. 843 49,315 Office Depot, Inc.*....... 1,669 7,494 RadioShack Corp. ......... 759 15,279 Ross Stores, Inc. ........ 732 43,181 Staples, Inc. ............ 4,416 90,395 Tiffany & Co. ............ 759 40,227 TJX Cos., Inc. ........... 2,428 111,421 Urban Outfitters, Inc.*... 779 23,970 ----------- TOTAL SPECIALTY RETAIL 1,264,820 ----------- TEXTILES, APPAREL & LUXURY GOODS 0.5% Coach, Inc. .............. 1,800 90,000 NIKE, Inc. -- Class B..... 2,334 190,081 Polo Ralph Lauren Corp. .. 393 38,074 V.F. Corp. ............... 524 43,618 ----------- TOTAL TEXTILES, APPAREL & LUXURY GOODS 361,773 ----------- THRIFTS & MORTGAGE FINANCE 0.1% Hudson City Bancorp, Inc. .................. 3,187 37,129 People's United Financial, Inc. .................. 2,240 27,574 ----------- TOTAL THRIFTS & MORTGAGE FINANCE 64,703 ----------- TOBACCO 1.4% Altria Group, Inc. ....... 12,610 320,546 Lorillard, Inc. .......... 920 78,513 Philip Morris International, Inc. ... 11,092 648,882 Reynolds American, Inc. .. 1,021 66,263 ----------- TOTAL TOBACCO 1,114,204 ----------- TRADING COMPANIES & DISTRIBUTORS 0.1% Fastenal Co. ............. 890 45,817 W.W. Grainger, Inc. ...... 356 44,155 ----------- TOTAL TRADING COMPANIES & DISTRIBUTORS 89,972 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.3% American Tower Corp. -- Class A*...... 2,428 125,309 MetroPCS Communications, Inc.*.................. 1,585 16,500 Sprint Nextel Corp.*...... 18,057 74,395 ----------- TOTAL WIRELESS TELECOMMUNICATION SERVICES 216,204 ----------- TOTAL COMMON STOCKS (Cost $52,847,049) 64,871,217 ------------------------------------------------------- FACE AMOUNT ------------------------------------------------------- REPURCHASE AGREEMENTS 5.9% State Street Bank & Trust Co., 0.120%, dated 10/29/10, to be repurchased at $4,686,047 on 11/01/10 collateralized by $4,360,000 US Treasury Note at 3.125% due 04/30/17 with a value of $4,780,304.......... $4,686,000 4,686,000 ----------- TOTAL REPURCHASE AGREEMENTS (Cost $4,686,000) 4,686,000 ----------- TOTAL INVESTMENTS 87.0%(B) (Cost $57,533,049) 69,557,217 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--13.0% 10,388,472 ----------- NET ASSETS--100.0% $79,945,689 ------------------------------------------------------- UNREALIZED CONTRACTS GAIN (LOSS) ------------------------------------------------------- FUTURES CONTRACTS PURCHASED December 2010 S&P 500 Index E-Mini Futures Contracts (Aggregate Market Value of Contracts $24,372,163)(b)........ 413 $1,494,227 ------------------------------------------------------- UNITS ------------------------------------------------------- EQUITY INDEX SWAP AGREEMENTS PURCHASED Credit Suisse First Boston November 2010 S&P 500 Index Swap, Terminating 11/30/10 (Notional Market Value $32,560,807)**(c)...... 27,518 (14,308) Goldman Sachs International November 2010 S&P 500 Index Swap, Terminating 11/29/10 (Notional Market Value $38,010,665)**(c)...... 32,124 (75,668) ----------- (TOTAL NOTIONAL MARKET VALUE $70,571,472) $(89,976) -------------------------------------------------------
* Non-Income Producing Security. ** Price return based on S&P 500 Index +/- financing at a variable rate. (a) Amount represents less than 0.05% of net assets. (b) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (c) Values determined based on Level 2 inputs. REIT--Real Estate Investment Trust See Notes to Financial Statements. 16 RYDEX INVERSE 2X S&P 500 ETF SCHEDULE OF INVESTMENTS October 31, 2010 --------------------------------------------------------------------------------
FACE MARKET AMOUNT VALUE -------------------------------------------------------- REPURCHASE AGREEMENTS 69.6% State Street Bank & Trust Co., 0.120%, dated 10/29/10, to be repurchased at $58,652,587 on 11/01/10 collateralized by $50,330,000 FHLMC at 5.250% due 04/18/16 with a value of $59,829,788............ $58,652,000 $58,652,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $58,652,000) 58,652,000 ------------ TOTAL INVESTMENTS 69.6%(A) (Cost $58,652,000) 58,652,000 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--30.4% 25,561,479 ------------ NET ASSETS--100.0% $84,213,479 -------------------------------------------------------- UNREALIZED CONTRACTS GAIN (LOSS) -------------------------------------------------------- FUTURES CONTRACTS SOLD SHORT December 2010 S&P 500 Index E-Mini Futures Contracts (Aggregate Market Value of Contracts $29,683,288)(a)........ 503 $(1,826,439) -------------------------------------------------------- UNREALIZED UNITS GAIN (LOSS) -------------------------------------------------------- EQUITY INDEX SWAP AGREEMENTS SOLD SHORT Credit Suisse First Boston November 2010 S&P 500 Index Swap, Terminating 11/30/10 (Notional Market Value $99,331,636)*(b)....... 83,948 $43,653 Goldman Sachs International November 2010 S&P 500 Index Swap, Terminating 11/29/10 (Notional Market Value $39,220,596)*(b)....... 33,146 79,689 ------------ (TOTAL NOTIONAL MARKET VALUE $138,552,232).......................... $123,342 --------------------------------------------------------
* Price return based on S&P 500 Index +/- financing at a variable rate. (a) Unless otherwise indicated, the values of the Portfolio are determined based on Level 1 inputs. (b) Values determined based on Level 2 inputs. FHLMC--Federal Home Loan Mortgage Corporation. See Notes to Financial Statements. ANNUAL REPORT 17 STATEMENT OF ASSETS AND LIABILITIES October 31, 2010 --------------------------------------------------------------------------------
RYDEX RYDEX 2X INVERSE 2X S&P 500 ETF S&P 500 ETF ------------ ------------ ASSETS Investments at Market Value*............................... $ 64,871,217 $ -- Repurchase Agreements...................................... 4,686,000 58,652,000 ------------ ------------ Total Investments.......................................... 69,557,217 58,652,000 ------------ ------------ Cash....................................................... 556 848 Segregated Cash for Swaps.................................. 8,570,972 23,259,862 Margin Deposit for Future Contracts........................ 1,858,500 2,263,500 Unrealized Appreciation on Swap Agreements................. -- 123,342 Receivables: Dividends................................................ 76,755 587 Variation Margin on Futures Contracts.................... 19,618 -- Equity Index Swap Settlement............................. 7,098 -- ------------ ------------ TOTAL ASSETS.......................................... 80,090,716 84,300,139 ------------ ------------ LIABILITIES Unrealized Depreciation on Swap Agreements................. 89,976 -- Payables: Investments Purchased.................................... 6,471 -- Equity Index Swap Settlement............................. -- 8,637 Variation Margin on Futures Contracts.................... -- 23,893 Accrued Management Fees.................................. 48,580 54,130 ------------ ------------ TOTAL LIABILITIES..................................... 145,027 86,660 ------------ ------------ NET ASSETS................................................. $ 79,945,689 $ 84,213,479 ============ ============ NET ASSETS CONSIST OF: Paid-in Capital............................................ $ 81,695,980 $181,196,743 Undistributed (Distributions in Excess) of Net Investment Income................................................... 42,287 -- Accumulated Net Realized Loss on Investment Securities, Futures and Swaps........................................ (15,220,997) (95,280,167) Net Unrealized Appreciation (Depreciation) on Investment Securities, Futures and Swaps............................ 13,428,419 (1,703,097) ------------ ------------ NET ASSETS................................................. $ 79,945,689 $ 84,213,479 ============ ============ Shares Outstanding (Unlimited Shares Authorized), No Par Value.................................................... 2,200,002 1,900,000 ============ ============ Net Asset Value, Offering Price and Repurchase Price Per Share.................................................... $ 36.34 $ 44.32 ============ ============ *Total Cost of Investments................................. $ 57,533,049 $ 58,652,000 ============ ============
See Notes to Financial Statements. 18 STATEMENT OF OPERATIONS For the Year Ended October 31, 2010 --------------------------------------------------------------------------------
RYDEX RYDEX 2X INVERSE 2X S&P 500 ETF S&P 500 ETF ----------- ------------ INVESTMENT INCOME Dividends, Net of Foreign Tax Withheld.................... $ 1,636,658 $ -- Interest.................................................. 2,083 52,688 ----------- ------------ Total Income........................................... 1,638,741 52,688 ----------- ------------ EXPENSES Management Fee............................................ 669,299 672,201 Trustee Fees.............................................. 8,479 8,077 ----------- ------------ Total Expenses......................................... 677,778 680,278 ----------- ------------ Net Investment Income (Loss)................................ 960,963 (627,590) ----------- ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) From: Investments............................................... (329,171) (2,489) In-kind Redemptions....................................... 9,794,776 -- Futures Contracts......................................... 1,254,973 (11,051,464) Swap Contracts............................................ 13,967,030 (26,550,312) ----------- ------------ Net Realized Gain (Loss)............................... 24,687,608 (37,604,265) Net Change in Unrealized Appreciation (Depreciation) on: Investment Securities..................................... 1,427,853 -- Futures Contracts......................................... 1,730,721 (1,883,955) Swap Contracts............................................ (89,973) 123,337 ----------- ------------ Net Change in Unrealized Appreciation (Depreciation) on Investments............................................... 3,068,601 (1,760,618) ----------- ------------ Net Realized and Unrealized Gain (Loss) on Investments, Futures and Swap Contracts................................ 27,756,209 (39,364,883) ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................... $28,717,172 $(39,992,473) =========== ============ Foreign Taxes Withheld...................................... $ 95 --
See Notes to Financial Statements. ANNUAL REPORT 19 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
RYDEX 2X S&P 500 ETF RYDEX INVERSE 2X S&P 500 ETF ---------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2010 OCTOBER 31, 2009 ---------------- ---------------- ---------------- ---------------- OPERATIONS Net Investment Income (Loss)....... $ 960,963 $ 1,827,179 $ (627,590) $ (634,418) Net Realized Gain (Loss)........... 24,687,608 (5,159,831) (37,604,265) (68,148,665) Net Change in Unrealized Appreciation (Depreciation) on Investments..................... 3,068,601 27,212,395 (1,760,618) 10,530,284 ------------ ------------- ------------ ------------ Net Increase (Decrease) in Net Assets Resulting From Operations...................... 28,717,172 23,879,743 (39,992,473) (58,252,799) ------------ ------------- ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income.............. (964,096) (1,841,018) -- -- Net Realized Gains................. -- -- -- (12,634,948) ------------ ------------- ------------ ------------ Decrease in Net Assets From Distributions to Shareholders... (964,096) (1,841,018) -- (12,634,948) ------------ ------------- ------------ ------------ SHAREHOLDER TRANSACTIONS Proceeds From Shares Purchased..... 16,758,573 88,152,392 83,801,968 175,280,502 Value of Shares Purchased through Dividend Reinvestments.......... 72 -- -- -- Value of Shares Redeemed........... (81,692,319) (106,428,723) (63,069,991) (67,024,337) ------------ ------------- ------------ ------------ Net Increase (Decrease) in Net Assets Resulting From Share Transactions.................... (64,933,674) (18,276,331) 20,731,977 108,256,165 ------------ ------------- ------------ ------------ Increase (Decrease) in Net Assets........................ (37,180,598) 3,762,394 (19,260,496) 37,368,418 NET ASSETS--BEGINNING OF PERIOD...... 117,126,287 113,363,893 103,473,975 66,105,557 ------------ ------------- ------------ ------------ NET ASSETS--END OF PERIOD(1)......... $ 79,945,689 $ 117,126,287 $ 84,213,479 $103,473,975 ============ ============= ============ ============ (1) Including Undistributed (Distributions in Excess) of Net Investment Income.................. $ 42,287 $ 47,400 $ -- $ -- ============ ============= ============ ============ CHANGES IN SHARES OUTSTANDING: Shares Purchased................... 550,000 4,750,000 1,500,000 1,600,000 Shares Purchased through Dividend Reinvestments................... 2 -- -- -- Shares Redeemed.................... (2,500,000) (4,700,000) (1,150,000) (550,000) Shares Outstanding, Beginning of Period.......................... 4,150,000 4,100,000 1,550,000 500,000 ------------ ------------- ------------ ------------ Shares Outstanding, End of Period.. 2,200,002 4,150,000 1,900,000 1,550,000 ============ ============= ============ ============
See Notes to Financial Statements. 20 FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
RYDEX 2X S&P 500 ETF ----------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008* ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD........ $ 28.22 $ 27.65 $ 75.00 ------- -------- -------- Net Investment Income**....................... 0.33 0.31 0.61 Net Realized and Unrealized Gain (Loss) on Investments................................. 8.13 0.57 (47.27) ------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS.............. 8.46 0.88 (46.66) ------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income......................... (0.34) (0.31) (0.69) ------- -------- -------- NET ASSET VALUE AT END OF PERIOD.............. $ 36.34 $ 28.22 $ 27.65 ======= ======== ======== TOTAL RETURN***............................... 30.12% 3.51% (62.68)% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted)... $79,946 $117,126 $113,364 RATIO TO AVERAGE NET ASSETS OF: Expenses...................................... 0.71% 0.70% 0.70%**** Net Investment Income......................... 1.01% 1.43% 1.35%**** Portfolio Turnover Rate+...................... 23% 69% 44%
* The Fund commenced operations on November 5, 2007. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. Portfolio turnover rate is calculated without regard to instruments having a maturity of less than one year from acquisition or derivative instruments (including swap agreements and futures contracts). The portfolio turnover rate can be high and volatile due to the sales and purchases of fund shares during the period. See Notes to Financial Statements. ANNUAL REPORT 21 FINANCIAL HIGHLIGHTS (concluded) --------------------------------------------------------------------------------
RYDEX INVERSE 2X S&P 500 ETF ----------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2010 OCTOBER 31, 2009 OCTOBER 31, 2008* ---------------- ---------------- ----------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD........ $ 66.76 $ 132.21 $ 75.00 ------- -------- ------- Net Investment Income (Loss)**................ (0.35) (0.61) 1.04 Net Realized and Unrealized Gain (Loss) on Investments................................. (22.09) (46.79) 57.20 ------- -------- ------- TOTAL FROM INVESTMENT OPERATIONS.............. (22.44) (47.40) 58.24 ------- -------- ------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income......................... -- -- (1.03) Net Realized Gains............................ -- (18.05) -- ------- -------- ------- Total Distributions........................... -- (18.05) (1.03) ------- -------- ------- NET ASSET VALUE AT END OF PERIOD.............. $ 44.32 $ 66.76 $132.21 ======= ======== ======= TOTAL RETURN***............................... (33.61)% (41.45)% 78.27% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's Omitted)... $84,213 $103,474 $66,106 RATIO TO AVERAGE NET ASSETS OF: Expenses...................................... 0.71% 0.71% 0.71%**** Net Investment Income (Loss).................. (0.65)% (0.64)% 1.09%**** Portfolio Turnover Rate+...................... -- -- --
* The Fund commenced operations on November 5, 2007. ** Based on average shares outstanding. *** Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. **** Annualized. + Portfolio turnover rate is calculated without regard to instruments having a maturity of less than one year from acquisition or derivative instruments (including swap agreements and futures contracts). See Notes to Financial Statements. 22 NOTES TO FINANCIAL STATEMENTS October 31, 2010 -------------------------------------------------------------------------------- 1. ORGANIZATION Rydex ETF Trust (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940 (the "1940 Act"). The Trust was organized as a Delaware statutory trust on November 22, 2002. As of October 31, 2010, the Trust offers nineteen portfolios, each of which represents a separate series of beneficial interest in the Trust (each a "Fund," and collectively the "Funds"). The financial statements herein relate to the following Funds: Rydex 2x S&P 500 ETF and Rydex Inverse 2x S&P 500 ETF. Rydex 2x S&P 500 ETF and Rydex Inverse 2x S&P 500 ETF commenced operations on November 5, 2007. The Funds' investment objective is to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. For Rydex 2x S&P 500 ETF (a "Leveraged Fund"), the Fund's benchmark is 200% of the daily performance of an index representing publicly traded securities (the "Underlying Index"). For Rydex Inverse 2x S&P 500 ETF (a "Leveraged Inverse Fund"), the Fund's benchmark is 200% of the daily inverse (opposite) performance of its Underlying Index. The Underlying Index for Rydex 2x S&P 500 ETF and Rydex Inverse 2x S&P 500 ETF is the S&P 500 Index. The Funds operate as index funds and are not actively managed. Adverse performance of a security in the Funds' portfolio will ordinarily not result in the elimination of the security from the Funds' portfolio. The Funds issue and redeem shares on a continuous basis, at net asset value, only in aggregations of 50,000 shares called a "Creation Unit". Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. 2. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures at the date of the financial statements and accompanying notes and the reported amounts of increases and decreases in net assets from operations during the reporting period. Management believes that the estimates utilized in preparing the Funds' financial statements are reasonable and prudent; however, actual results could differ from these estimates. A. SECURITY VALUATION Securities listed on a domestic securities exchange are valued based on the last sale price as of the close of regular trading hours on the New York Stock Exchange ("NYSE") or, in the absence of recorded sales, are valued at the most recent bid price. Securities for which the primary market is the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ") are valued at the NASDAQ Official Closing Price. The Funds invest in money market mutual funds, which are valued at their Net asset value per share (NAV). Investments for which market quotations are not readily are fair valued as determine in good faith by Rydex Investments, an affiliated entity, under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) general information as to how these securities and assets trade, (ii) in connection with futures contracts and options thereupon, and other derivative instruments, information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contacts and other derivative investments trade in the cash market, and (iii) other information and considerations, including current values in related-markets. The value of futures contracts purchased and sold by the Trust is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the last quoted sales price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation. The value of domestic equity index swap agreements entered into by a Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the last quoted value of the index that the swap pertains to at the close of the NYSE. The swap's market value is then adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreements. ANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- Debt securities with a maturity greater than 60 days are valued at the last traded fill price at the close of business, unless no trades were executed. If there are no trades, a security is valued at the reported bid price, at the close of business. Short-term debt securities, with a maturity of 60 days or less are valued at amortized cost, which approximates market value. Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity. The Funds may also purchase American Depository Receipts, U.S. Government securities, and enter into repurchase agreements. B. SECURITY TRANSACTIONS AND INCOME RECOGNITION Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from portfolio fund transactions are calculated on the identified cost basis. Dividend income is recorded on the ex- dividend date, net of foreign tax withholdings. Interest income is recorded on the accrual basis. Distributions received from investments in REITs are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. C. REPURCHASE AGREEMENTS The Funds may enter into repurchase agreements with financial institutions. In a repurchase agreement, a Fund buys a security and the seller simultaneously agrees to repurchase the security on a specified future date at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the Fund's money is invested in the security. Because the security constitutes collateral for the repurchase obligation, a repurchase agreement can be considered a collateralized loan. The Funds follows certain procedures designed to minimize the risks inherent in such agreements. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose condition will be continually monitored by Rydex Investments, which acts as the Funds' investment advisor. In addition, the value of the collateral underlying the repurchase agreement will always be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Funds will seek to liquidate such collateral. However, the exercising of the Funds right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Funds could suffer a loss. It is the current policy of the Funds not to invest in repurchase agreements that do not mature within seven days if any such investment, together with any other illiquid assets held by the Funds, amounts to more than 15% of the Funds net assets. The investments of the Funds in repurchase agreements, at times, may be substantial when, in the view of Rydex Investments, liquidity or other considerations so warrant. D. FUTURES CONTRACTS The Funds utilized stock index futures contracts to gain exposure to the Underlying Index. Futures contracts are contracts for delayed delivery of securities at a specified futures delivery date and at a specific price. Upon entering into a contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. There are several risks in connection with the use of futures contracts. Risks may be caused by an imperfect correlation between movements in the price of the instruments and the price of the underlying securities. In addition, there is the risk that a Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Since futures are exchange-traded and the exchange's clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default, there is minimal counterparty credit risk to the Funds. E. SWAP AGREEMENTS The Funds utilized domestic equity index swap agreements to gain exposure to the Underlying Index, which are over-the-counter contracts in which one party agrees to make periodic payments based on the change in market value of a specified equity index, in return for periodic payment based on a fixed or variable interest rate. Swap agreements are used to obtain exposure to an equity or market without owning or taking physical custody of securities. The swap agreements are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of the agreement are recognized as realized gains or losses. There are several risks associated with the use 24 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- of swap agreements that are different from those associated with ordinary portfolio securities transactions, due to the fact they could be considered illiquid. Since swaps are not exchange-traded, there is an element of counterparty credit risk to the Funds. The risk is managed through the terms of the swap contracts which include trigger points to terminate the current contract based on pre-determined thresholds and limit the amount of potential loss. Although the Trust will not enter into any swap agreement unless Rydex Investments believes that the other party to the transaction is creditworthy, the Funds bear the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of the agreement counterparty. F. COLLATERAL In conjunction with the use of short sales, futures and swap agreements, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes, or repurchase agreements allocated to each Fund. G. FEDERAL INCOME TAXES The Funds policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of the taxable income and capital gains, if any to the shareholders within the allowable time limits. Therefore, no provision for Federal income taxes is required. Tax positions taken or expected to be taken in the course of preparing the Funds' tax returns are evaluated to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds' tax positions taken on federal income tax returns for all open tax years (fiscal years 2008 - 2010), and has concluded that no provision for income tax was required in the Funds' financial statements. Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments for in- kind redemptions, mark-to-market on futures contracts, income reclassifications from real estate investment trusts ("REITs") and losses deferred due to wash sales. In order to present paid-in-capital, undistributed net investment income (loss) and accumulated net realized gain (loss) on investments on the statement of assets and liabilities that more closely represent their tax character, certain adjustments have been made to these accounts. These adjustments have no effect on net assets or NAV. The most significant of these adjustments are for net capital gains resulting from in-kind redemptions which, because they are non- taxable to the Funds, and therefore are not distributed to existing Fund shareholders, are reclassified to paid-in-capital. For the year ended October 31, 2010, the adjustments for the Funds were as follows:
UNDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT NET REALIZED CAPITAL INCOME (LOSS) GAIN (LOSS) ---------- -------------- ------------ Rydex 2x S&P 500 ETF.............................. $3,761,261 $ (1,980) $(3,759,281) Rydex Inverse 2x S&P 500 ETF...................... (627,590) 627,590 --
Differences between the book basis and tax basis of net unrealized appreciation (depreciation) in value of investments relate to tax deferral of losses on wash sales and the estimated return of capital payments on REITs. At October 31, 2010, the Funds had capital loss carryforwards which may be utilized to offset any net realized capital gains expiring October 31:
2016 2017 2018 ---------- ----------- ----------- Rydex 2x S&P 500 ETF................................ $6,267,117 $ -- $ -- Rydex Inverse 2x S&P 500 ETF........................ -- 57,618,386 39,488,221
The Funds utilized capital loss carryforwards during the year ended October 31, 2010: Rydex 2x S&P 500 ETF................................................ $15,334,257 Rydex Inverse 2x S&P 500 ETF........................................ --
ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- The tax character of distributable earnings (accumulated losses) at October 31, 2010 was as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG TERM CAPITAL LOSS UNREALIZED INCOME CAPITAL GAIN CARRYFORWARD APPRECIATION ------------- ------------- ------------ ------------ Rydex/SGI 2x S&P 500 ETF................ $42,287 $ -- $ (6,267,117) $4,474,539 Rydex/SGI Inverse 2x S&P 500 ETF........ -- -- (97,106,607) 123,343
The tax character of distributions paid during 2010 was as follows:
ORDINARY LONG-TERM INCOME CAPITAL GAIN -------- ------------ Rydex 2x S&P 500 ETF......................................... $964,096 $ -- Rydex Inverse 2x S&P 500 ETF................................. -- --
The tax character of distributions paid during 2009 was as follows:
ORDINARY LONG-TERM INCOME CAPITAL GAIN ---------- ------------ Rydex 2x S&P 500 ETF........................................ $1,841,018 $ -- Rydex Inverse 2x S&P 500 ETF................................ -- 12,634,948
H. FAIR VALUE MEASUREMENT In accordance with U.S. generally accepted accounting principles, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. A three-tier hierarchy is utilized to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Funds' investments. The inputs are summarized in the three broad levels listed below: Level 1 -- quoted prices in active markets for identical securities. The types of assets and liabilities carried at Level 1 fair value generally are government and agency securities, equities listed in active markets and stock index futures. Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). The types of assets and liabilities carried at Level 2 fair value generally are domestic equity index swaps and short term securities with maturities of 60 days or less, including repurchase agreements. Level 3 -- significant unobservable inputs (including the fund's own assumptions used to determine the fair value of investments). Transfers between investment Levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following table summarizes the inputs used to value the Funds' net assets as of October 31, 2010:
LEVEL 1 LEVEL 1 LEVEL 2 LEVEL 2 LEVEL 3 INVESTMENTS OTHER FINANCIAL INVESTMENTS OTHER FINANCIAL INVESTMENTS FUND IN SECURITIES INSTRUMENTS IN SECURITIES INSTRUMENTS IN SECURITIES TOTAL ---- ------------- --------------- ------------- --------------- ------------- ----------- ASSETS Rydex 2x S&P 500 ETF.......... $69,557,217 $1,494,227 $ -- $ -- $ -- $71,051,444 Rydex Inverse 2x S&P 500 ETF.. 58,652,000 -- -- 123,342 -- 58,775,342 LIABILITIES Rydex 2x S&P 500 ETF.......... -- -- -- 89,976 -- 89,976 Rydex Inverse 2x S&P 500 ETF.. -- 1,826,439 -- -- -- 1,826,439
-------- * Other financial instruments may include futures contracts and /or swap agreements, which are reported as unrealized gain/loss at year end. For the year ended October 31, 2010, there were no Level 3 Investments. 26 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- The Funds adopted updated provisions surrounding fair value measurements and disclosures effective November 1, 2009. This update applies to the Funds' disclosures about transfers in and out of all Levels of the fair value hierarchy on a gross basis and the reasons for the transfers as well as to disclosures about the valuation techniques and inputs used to measure fair value for investments that fall in either Level 2 or Level 3 fair value hierarchy. For the year ended October 31, 2010, there were no securities transferred between any levels. I. DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES U.S. generally accepted accounting principles require disclosures to enable investors to better understand how and why the Funds use derivative instruments, how these derivative instruments are accounted for and their effects on the Funds' financial position and results of operations. None of the derivatives currently held by the Funds are being used as hedging instruments. Each Leveraged Fund employs as its investment strategy a program of investing in equity securities contained in the Underlying Index and leveraged derivative instruments, such as equity index swaps, futures contracts and options on securities, futures contracts, and stock indices. Equity index swaps and futures, and options contracts enable the Fund to create the additional needed exposure to pursue its investment objective. The notional amount of derivative instruments outstanding generally will approximate 100% of a Leveraged Fund's net assets on a daily basis, while the risk to the Fund is limited to the profit earned on such derivatives. Each Leveraged Inverse Fund employs as its investment strategy a program of investing in leveraged derivative instruments, such as equity index swaps, futures contracts and options on securities, futures contracts, and stock indices. Equity index swaps and futures, and options contracts enable the Fund to pursue its objective without selling short each of the securities included in the Underlying Index. The notional amount of derivative instruments outstanding generally will approximate 200% of a Leveraged Inverse Fund's net assets on a daily basis, while the risk to the Fund is limited to the profit earned on such derivatives.
APPROXIMATE PERCENTAGE OF FUNDS' FUND NET ASSETS ON A DAILY BASIS ---- -------------------------------- Rydex 2x S&P 500 ETF..................................... 119% Rydex Inverse 2x S&P 500 ETF............................. 200%
DERIVATIVE INVESTMENT HOLDINGS CATEGORIZED BY RISK EXPOSURE The following is a summary of the location of derivative investments on the Funds' Statements of Assets and Liabilities as of October 31, 2010:
LOCATION ON THE STATEMENTS OF ASSETS AND LIABILITIES --------------------------------------------------------------- DERIVATIVE INVESTMENTS TYPE ASSET LIABILITY --------------------------- ------------------------------ ------------------------------ Equity Index Swap Contracts... Unrealized Appreciation on Unrealized Depreciation on Swap Agreements Swap Agreements Equity Index Futures Receivables: Variation Margin Payables: Variation Margin on Contracts................... on Futures Contracts Futures Contracts
Because investment companies value their derivatives at fair value and recognize changes in fair value through the Statements of Operations, they do not qualify for under hedge accounting. The following table sets forth the fair value, on a gross basis of the asset and liability components of the Funds' derivative contracts by primary risk exposure as of October 31, 2010:
ASSET DERIVATIVE INVESTMENTS VALUE ------------------------------------------------------ TOTAL VALUE AT EQUITY INDEX EQUITY INDEX PORTFOLIO OCTOBER 31, 2010 SWAP CONTRACTS FUTURES CONTRACTS* --------- ---------------- -------------- ------------------ Rydex 2x S&P 500 ETF........................ $1,494,227 $ -- $1,494,227 Rydex Inverse 2x S&P 500 ETF................ 123,342 123,342 --
LIABILITY DERIVATIVE INVESTMENTS VALUE ------------------------------------------------------ TOTAL VALUE AT EQUITY INDEX EQUITY INDEX PORTFOLIO OCTOBER 31, 2010 SWAP CONTRACTS FUTURES CONTRACTS* --------- ---------------- -------------- ------------------ Rydex 2x S&P 500 ETF........................ $ 89,976 $89,976 $ -- Rydex Inverse 2x S&P 500 ETF................ 1,826,439 -- 1,826,439
-------- * Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedule of Investments. Only current day's variation margin is reported within the Statement of Assets and Liabilities. ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- The following is a summary of the location of derivative investments on the Funds' Statements of Operations as of October 31, 2010:
DERIVATIVE INVESTMENT TYPE LOCATION OF GAIN (LOSS) ON DERIVATIVES -------------------------- ----------------------------------------- Net Realized Gain (Loss) From: Swap Equity Index Swap Contracts.............. Contracts Net Change in Unrealized Appreciation (Depreciation) on: Swap Contracts Net Realized Gain (Loss) From: Futures Futures Contracts........................ Contracts Net Change in Unrealized Appreciation (Depreciation) on: Futures Contracts
The following is a summary of the Funds' realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized in the Statements of Operations categorized by primary risk exposure for the year ended October 31, 2010:
REALIZED GAIN (LOSS) ON DERIVATIVE INVESTMENTS RECOGNIZED IN THE STATEMENT OF OPERATIONS ------------------------------------------------- EQUITY INDEX EQUITY INDEX PORTFOLIO TOTAL SWAP CONTRACTS FUTURES CONTRACTS --------- ------------ -------------- ----------------- Rydex 2x S&P 500 ETF........................... $ 15,222,003 $ 13,967,030 $ 1,254,973 Rydex Inverse 2x S&P 500 ETF................... (37,601,776) (26,550,312) (11,051,464)
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVE INVESTMENTS RECOGNIZED IN THE STATEMENT OF OPERATIONS ------------------------------------------------ EQUITY INDEX EQUITY INDEX PORTFOLIO TOTAL SWAP CONTRACTS FUTURES CONTRACTS --------- ----------- -------------- ----------------- Rydex 2x S&P 500 ETF........................... $ 1,640,748 $(89,973) $ 1,730,721 Rydex Inverse 2x S&P 500 ETF................... (1,760,618) 123,337 (1,883,955)
J. DIVIDENDS AND DISTRIBUTIONS Distributions of net investment income and net realized capital gains, if any, are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. generally accepted accounting principles. K. RISK AND UNCERTAINTIES The Trust invests in various investments which are exposed to risk, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect amounts reported in the financial statements. The risk inherent in the use of futures and options contracts, and swap agreements, include i) adverse changes in the value of such instruments; ii) imperfect correlation between the price of the instruments and movements in the price of the underlying securities, indices, or futures contracts; iii) the possible absence of a liquid secondary market for any particular instrument at any time; and iv) the potential of counterparty default. The Funds have established strict counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk. L. RISK Throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience the Funds expect the risk of loss to be remote. 3. ADVISORY, ADMINISTRATION AND OTHER TRANSACTIONS WITH AFFILIATES Rydex Investments determines the composition of the portfolio of securities that must be delivered in exchange for the issuance of Creation Units and periodically adjusts the composition of the portfolio of the Funds to conform to changes in the composition of the 28 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- relevant index. For these services, the Advisor receives a management fee at the annual rate shown below of the average daily net assets of the Funds.
ADVISORY FEE ------------ Rydex 2x S&P 500 ETF................................................ 0.70% Rydex Inverse 2x S&P 500 ETF........................................ 0.70%
The Advisor pays all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except: interest, taxes, distribution and trustee fees or expenses and extraordinary expenses. Under an Administration Agreement, State Street Bank and Trust Company (the "Administrator") provides various administrative and accounting services for the maintenance and operations of the Funds. Under a Custodian Agreement with the Trust, the Administrator maintains cash, securities and other assets of the Trust and the Funds in separate accounts for each Fund, keeps all necessary accounts and records, and provides other services. The Administrator is required, upon the order of the Trust, to deliver securities held by the Custodian and to make payments for securities purchased by the Trust for the Funds. Pursuant to a Transfer Agency and Service Agreement with the Trust, the Administrator acts as a transfer agent for the Trust's authorized and issued shares of beneficial interest, and as dividend disbursing agent of the Trust. The Advisor compensates the Administrator directly for the foregoing services. The Funds have adopted a Distribution Plan (the "Plan") that allows the Funds to pay distribution fees to Rydex Distributors, Inc., an affiliated entity, (the "Distributor") and other firms that provide distribution services ("Service Providers"). If a Service Provider provides distribution services, the Funds will pay distribution fees to the Distributor at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. The Distributor will, in turn, pay the Service Provider out of its fees. No such fee is currently charged to the Funds. 4. CAPITAL At October 31, 2010, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee per transaction to those persons purchasing or redeeming Creation Units. An additional charge of up to three times the standard transaction fee may be imposed for purchases and redemptions effected outside the National Securities Clearing Corporation usual clearing process or for cash. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit of the Fund on the transaction date. The minimum transaction fees are:
MINIMUM TRANSACTION FEE --------------- Rydex 2x S&P 500 ETF.............................................. $2,000 Rydex Inverse 2x S&P 500 ETF...................................... 50
5. INVESTMENT TRANSACTIONS For the year ended October 31, 2010, the Funds had investment transactions in- kind associated with subscriptions and redemptions as follows:
SUBSCRIPTIONS REDEMPTIONS ------------- ----------- Rydex 2x S&P 500 ETF....................................... $10,960,277 $38,400,288 Rydex Inverse 2x S&P 500 ETF............................... -- --
Purchases and sales of investment securities (excluding short-term investments, U.S. government and government agency obligations) for the Funds were as follows:
PURCHASES SALES ----------- ----------- Rydex 2x S&P 500 ETF........................................ $18,209,825 $35,206,397 Rydex Inverse 2x S&P 500 ETF................................ -- --
At October 31, 2010, the identified cost of investments in securities owned by each Fund for federal income tax purposes and the gross unrealized appreciation and depreciation was as follows:
GROSS GROSS IDENTIFIED UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION APPRECIATION ----------- ------------ ------------ -------------- Rydex 2x S&P 500 ETF..................... $64,992,702 $5,589,580 $(1,025,065) $4,564,515 Rydex Inverse 2x S&P 500 ETF............. 58,652,000 -- -- --
ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (concluded) -------------------------------------------------------------------------------- 6. GUGGENHEIM ACQUISITION Guggenheim SBC Holdings, LLC ("Guggenheim SBC Holdings"), an investor group managed by Guggenheim Partners, LLC ("Guggenheim"), acquired control of Security Benefit Corporation ("SBC"), the parent company of Rydex Advisors, LLC (formerly PADCO Advisors, Inc.), the Funds' investment adviser (the "Investment Adviser"), pursuant to an agreement entered between SBC and Guggenheim SBC Holdings. Under the agreement, Guggenheim SBC Holdings received a 100% ownership stake in SBC and consequently acquired control of the Investment Adviser (the "Purchase Transaction"). Guggenheim is a global, independent, privately held, diversified financial services firm with more than $100 billion in assets under supervision. The Purchase Transaction is not expected to result in material changes to the day-to-day management and operations of the Funds or any increase in fees. The Purchase Transaction closed on July 30, 2010. Under the Investment Company Act of 1940, the closing of the Purchase Transaction had the effect of terminating the Funds' investment advisory agreements with the Investment Advisers and any investment sub-advisory agreements entered on behalf of a Fund (together, the "Previous Agreements"). New investment advisory and sub-advisory agreements ("New Agreements") were approved by Fund shareholders in a series of special meetings of shareholders. The terms of the New Agreements are substantially identical to the corresponding Previous Agreements, except with respect to the date of execution. 7. DISTRIBUTOR NAME CHANGE Effective July 30, 2010, the Funds' distributor, Rydex Distributors, Inc., a Maryland corporation, became Rydex Distributors, LLC, a Kansas limited liability company. 8. NEW ACCOUNTING PRONOUNCEMENT Effective November 1, 2009, the Funds adopted the Financial Accounting Standards Board ASU 2010-06, Improving Disclosures about Fair Value Measurements, which introduces new disclosure requirements and clarifies certain existing disclosure requirements around fair value measurements, which are reflected in Note H. 30 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Rydex ETF Trust We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Rydex 2x S&P 500 ETF and Rydex Inverse 2x S&P 500 ETF (the "Funds")(two of the series constituting the Rydex ETF Trust (the "Trust")) as of October 31, 2010, and the related statements of operations for the year then ended, statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years or periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Trust's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds at October 31, 2010, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the years or periods indicated therein, in conformity with U.S. generally accepted accounting principles. -s- ERNST & YOUNG LLP McLean, Virginia December 23, 2010 ANNUAL REPORT 31 SUPPLEMENTAL INFORMATION (Unaudited) -------------------------------------------------------------------------------- For federal income tax purposes, the following information is furnished with respect to the distributions paid by the funds during the year ended October 31, 2010.
DIVIDEND LONG TERM QUALIFIED RECEIVED CAPITAL GAINS INCOME DEDUCTION DISTRIBUTION DISTRIBUTION --------- ------------- ------------ Rydex 2x S&P 500 ETF................................ 100.00% $-- $1,574,544 Rydex Inverse 2x S&P 500 ETF........................ 0.00% -- --
PROXY VOTING INFORMATION A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds' portfolios is available, without charge and upon request, by calling 1-800-820-0888. This information is also available from the EDGAR database on the SEC's website at http://www.sec.gov. Information regarding how the Funds voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, 2010 is also available, without charge and upon request, by (i) calling 1-800-820-0888; or accessing the Trust's Form N-PX on the SEC's website at, http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES INFORMATION The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC's website at http://www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1-800-820-0888. PROXY RESULTS At a special meeting of shareholders held on July 29, 2010, the shareholders of the Funds voted on whether to approve a new investment advisory agreement between Rydex ETF Trust and Padco Advisors II, Inc. A description of the number of shares voted is as follows:
FUND SHARES FOR SHARES AGAINST SHARES ABSTAINED ---- ---------- -------------- ---------------- Rydex 2x S&P 500 ETF............................. 1,495,363 82,538 345,193 Rydex Inverse 2x S&P 500 ETF..................... 848,779 26,917 23,683
At a special meeting of shareholders held on July 29, 2010, the shareholders of the Funds also voted on whether to approve a change to a fundamental investment policy on borrowing money, consistent with applicable law. A description of the number of shares voted is as follows:
FUND SHARES FOR SHARES AGAINST SHARES ABSTAINED ---- ---------- -------------- ---------------- Rydex 2x S&P 500 ETF............................. 1,454,987 126,458 341,648 Rydex Inverse 2x S&P 500 ETF..................... 816,104 59,381 23,894
32 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) -------------------------------------------------------------------------------- A Board of Trustees oversees all Rydex Investments, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 1-800-820- 0888. All Trustees and Officers may be reached c/o Rydex Investments, 9601 Blackwell Rd., Suite 500, Rockville, MD 20850. INDEPENDENT TRUSTEES
LENGTH OF SERVICE NAME, POSITION AND AS TRUSTEE NUMBER OF FUNDS YEAR OF BIRTH (YEAR BEGAN) OVERSEEN ----------------------- ---------------------------------------- ---------------- JOHN O. DEMARET Rydex Series Funds - 1997 146 Trustee, Chairman of Rydex Variable Trust - 1998 the Board (1940) Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired --------------------- COREY A. COLEHOUR Rydex Series Funds - 1993 146 Trustee (1945) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired (2006 to present); Owner and President of Schield Management Company, registered investment adviser (2005 to 2006); Senior Vice President of Marketing and Co-Owner of Schield Management Company, registered investment adviser (1985 to 2005) --------------------- J. KENNETH DALTON Rydex Series Funds - 1995 146 Trustee (1941) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Mortgage Banking Consultant and Investor, The Dalton Group --------------------- WERNER E. KELLER Rydex Series Funds - 2005 146 Trustee (1940) Rydex Variable Trust - 2005 Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired (2001 to present); Chairman, Centurion Capital Management (1991 to 2001) --------------------- THOMAS F. LYDON, JR. Rydex Series Funds - 2005 146 Trustee (1960) Rydex Variable Trust - 2005 Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: President, Global Trends Investments --------------------- PATRICK T. MCCARVILLE Rydex Series Funds - 1997 146 Trustee (1942) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Founder and Chief Executive Officer, Par Industries, Inc. --------------------- ROGER SOMERS Rydex Series Funds - 1993 146 Trustee (1944) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Owner, Arrow Limousine ------------------------------------------------------------------------------------
ANNUAL REPORT 33 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued) -------------------------------------------------------------------------------- EXECUTIVE OFFICERS
NAME, POSITION AND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEAR OF BIRTH YEARS ----------------------------------------- ----------------------------------------- RICHARD M. GOLDMAN* President of Rydex Series Funds, Rydex President (1961) Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Chief Executive Officer and Director of Rydex Investments (2009 to present); President, Chief Executive Officer and Director of Rydex Distributors, Inc. (2009 to present); President and Chief Executive Officer of Rydex Holdings, LLC (2009 to present); Senior Vice President of Security Benefit Corp. (2007 to present); Director of First Security Benefit Life and Annuity Insurance Company of New York (2007 to present); Director of Security Distributors, Inc. (2007 to present); President of Security Investors, LLC (2007 to present); Manager and President of Security Global Investors, LLC (2007 to present); Managing Member of R.M. Goldman Partners, LLC (2006 to 2007); President and Chief Executive Officer of FortsmannLeff Associates (2003 to 2005) MICHAEL P. BYRUM* Vice President of Rydex Series Funds Vice President (1970) (1997 to present); Vice President of Rydex Variable Trust (1998 to present); Vice President of Rydex Dynamic Funds (1999 to present); President of Rydex Investments (2004 to present); Chief Investment Officer of Rydex Investments (2006 to present); Secretary of Rydex Investments (2002 to present); Director of Rydex Investments (2008 to present); Chief Investment Officer of Rydex Holdings, LLC (2008 to present); Vice President of Rydex Distributors, Inc. (2009 to present); Manager of Rydex Specialized Products, LLC (2005 to present); Secretary of Rydex Specialized Products, LLC (2005 to 2008); Trustee of Rydex Series Funds, Rydex Variable Trust and Rydex Dynamic Funds (2005 to 2009); Vice President of Rydex ETF Trust (2002 to present); President and Trustee of Rydex Capital Partners SPhinX Fund (2003 to 2007) NICK BONOS* Vice President and Treasurer of Rydex Vice President and Treasurer (1963) Series Funds, Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2003 to present); Senior Vice President of Rydex Investments (2006 to present); Chief Executive Officer of Rydex Specialized Products, LLC (2009 to present); Chief Financial Officer of Rydex Specialized Products, LLC (2005 to 2009); Vice President and Treasurer of Rydex Capital Partners SPhinX Fund (2003 to 2006) JOANNA M. HAIGNEY* Chief Compliance Officer of Rydex Series Chief Compliance Officer and Secretary Funds, Rydex Variable Trust, and Rydex (1966) Dynamic Funds (2004 to present); Secretary of Rydex Series Funds, Rydex Variable Trust, Rydex Dynamic Funds (2000 to present); Secretary of Rydex ETF Trust (2002 to present); Chief Compliance Officer of Rydex Investments (2005 to present) Vice President of Compliance of Rydex Investments (2006 to present); Director of Rydex Distributors, Inc. (2009 to present); Secretary of Rydex Capital Partners SPhinX Fund (2003 to 2006) KEITH FLETCHER* Vice President of Rydex Series Funds, Vice President (1958) Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Vice President of Rydex Investments (2009 to present); Vice President of Rydex Specialized Products, LLC (2009 to present); Vice President and Director of Rydex Distributors, Inc. (2009 to present); Vice President of Security Global Investors, LLC (2009 to present)
34 INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded) -------------------------------------------------------------------------------- EXECUTIVE OFFICERS (concluded)
NAME, POSITION AND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEAR OF BIRTH YEARS ----------------------------------------- ----------------------------------------- AMY LEE* Vice President and Assistant Secretary of Vice President and Assistant Secretary Rydex Series Funds, Rydex Variable Trust, (1960) Rydex Dynamic Funds and Rydex ETF Trust (2009 to present); Secretary of Rydex Distributors, Inc. (2008 to present); Chief Compliance Officer of Rydex Distributors, Inc. (2008 to 2009); Vice President, Associate General Counsel and Assistant Secretary of Security Benefit Corp. (2005 to present); Vice President, Associate General Counsel and Assistant Secretary of Security Benefit Life Insurance Co. (2004 to present); Assistant General Counsel of First Security Benefit Life and Annuity Company of New York (2004 to present); Chief Compliance Officer and Secretary of Security Distributors, Inc. (2004 to present); Secretary of Security Global Investors, Inc. (2007 to present) JOSEPH ARRUDA* Assistant Treasurer of Rydex Series Assistant Treasurer (1966) Funds, Rydex Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2006 to present); Senior Vice President of Rydex Investments (2008 to present); Vice President of Rydex Investments (2004 to 2008); Manager and Chief Financial Officer of Rydex Specialized Products, LLC (2009 to present) Director of Accounting of Rydex Investments (2003 to 2004) PAULA BILLOS* Controller of Rydex Series Funds, Rydex Controller (1974) Variable Trust, Rydex Dynamic Funds and Rydex ETF Trust (2006 to present); Director of Fund Administration of Rydex Investments (2001 to present)
* Officers of the Funds are deemed to be "interested persons" of the Trust, within the meaning of Section 2(a) (19) of the 1940 Act, inasmuch as this person is affiliated with Rydex Investments. RYDEX | SGI SECURITY GLOBAL INVESTORS (SM) 9601 Blackwell Road - Suite 500 - Rockville, MD 20850 www.rydex-sgi.com - 800.820.0888 ETF3-ANN-1010X1011 ITEM 2. CODE OF ETHICS. The Board of Trustees of the Trust has adopted a Combined Code of Ethics (the "Code") pursuant to Rule 17j-1 under the 1940 Act. The Advisor and Distributor are also covered by the Code. The Code applies to the personal investing activities of trustees, directors, officers, and certain employees ("access persons"). Rule 17j-1 and the Code are designed to prevent unlawful practices in connection with the purchase or sale of securities by access persons. Under the Code, access persons are permitted to engage in personal securities transactions, but are required to report their personal securities transactions for monitoring purposes. In addition, certain access persons are required to obtain approval before investing in initial public offerings or private placements. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that Werner Keller, an "independent" Trustee serving on the registrant's audit committee, is an "audit committee financial expert," as defined in Item 3 of Form N-CSR. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a)-(d) The aggregate Audit Fees billed by the Trust's principal accountant, for the audit of the annual financial statements in connection with statutory and regulatory filings for the fiscal years ended October 31, 2010 and October 31, 2009 were $266,000 and $391,150, respectively. The aggregate Tax Fees billed by the Trust's principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended October 31, 2010 and October 31, 2009 were $76,250 and $100,750, respectively. (e) The audit committee has adopted a policy whereby audit and non-audit services performed by the registrant's principal accountant for the registrant, its investment advisor, and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such service is required between regularly scheduled audit committee meetings, the chairman of the audit committee, J. Kenneth Dalton, is authorized to pre-approve the service with full committee approval at the next scheduled meeting. There shall be no waivers of the pre-approval process. No services described in (b)-(d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g) The aggregate non-audit fees were for Tax Fees billed by the Trust's principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended October 31, 2010 and October 31, 2009, and were $76,250 and $100,750, respectively. (h) All non-audit services rendered in (g) above were pre-approved by the registrant's audit committee. As such, the audit committee has considered these services in maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 11. CONTROLS AND PROCEDURES. (a) Based on their evaluation on January 7, 2011, the President (principal executive officer) and the Treasurer (principal financial officer) of the Rydex ETF Trust (the "Trust") believe that there were no significant deficiencies in the design or operation of the internal controls of the Trust or Rydex Investments ("RI"), the investment advisor and manager of the Trust, and State Street Bank and Trust Company (the "Administrator"), the administrator of the Trust, or Rydex Distributors, LLC ("RD"), which acts as distributor for the Trust, including disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) which would have adversely affected the ability of the Trust, the Administrator or RI on behalf of the Trust, to record, process, summarize, and report the subject matter contained in this Report, and the President and Treasurer of the Trust have identified no material weaknesses in such internal controls on behalf of the Trust. There was no fraud, whether or not material, involving officers or employees of RI, the Administrator, RD or the Trust who have a significant role in the Trust's internal controls, including disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) that has come to the attention of the advisor or the officers of the Trust, including its President and Treasurer. (b) There were no significant changes in the Trust's and RI's internal controls over financial reporting, including disclosure controls and procedures (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is attached. (a)(2) Separate certifications by the President (principal executive officer) and Treasurer (principal financial officer) of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)) are attached. (b) A certification by the registrant's President (principal executive officer) and Treasurer (principal financial officer) as required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)) is attached. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Rydex ETF Trust By (Signature and Title)* /s/ Richard Goldman ---------------------------------------- Richard Goldman, President Date January 7, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Richard Goldman ---------------------------------------- Richard Goldman, President Date January 7, 2011 By (Signature and Title)* /s/ Nick Bonos ---------------------------------------- Nick Bonos, Vice President and Treasurer Date January 7, 2011 * Print the name and title of each signing officer under his or her signature.