-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pbi75PmbjiAAGBWipc+iys3p1Bqyy2wbkO/5ac/rLtkWf5ceeAcwhU1W0KcVA1BJ c+9lu7Q+N51cXp7a0Sky2A== 0000950135-06-000081.txt : 20060109 0000950135-06-000081.hdr.sgml : 20060109 20060109161056 ACCESSION NUMBER: 0000950135-06-000081 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051031 FILED AS OF DATE: 20060109 DATE AS OF CHANGE: 20060109 EFFECTIVENESS DATE: 20060109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RYDEX ETF TRUST CENTRAL INDEX KEY: 0001208211 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-21261 FILM NUMBER: 06519380 MAIL ADDRESS: STREET 1: 9601 BLACKWELL RD STREET 2: STE 500 CITY: ROCKVILLE STATE: MD ZIP: 20850 N-CSR 1 b57925ssnvcsr.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) Carl G. Verboncoeur 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, 2005 ----------------- Date of reporting period: October 31, 2005 ----------------- 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. [Insert a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1).] [GRAPHIC] OCTOBER 31, 2005 RYDEX ETF TRUST ANNUAL REPORT RYDEX RUSSELL TOP 50 ETF RYDEX S&P EQUAL WEIGHT ETF [RYDEXINVESTMENTS LOGO] ESSENTIAL FOR MODERN MARKETS(TM) ANNUAL REPORT 1 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LETTER FROM THE CEO......................................... 2 MANAGER'S ANALYSIS.......................................... 4 FEES & EXPENSES............................................. 8 PORTFOLIO SUMMARY........................................... 9 SCHEDULE OF INVESTMENTS..................................... 11 STATEMENTS OF ASSETS AND LIABILITIES........................ 29 STATEMENTS OF OPERATIONS.................................... 30 STATEMENTS OF CHANGES IN NET ASSETS......................... 31 FINANCIAL HIGHLIGHTS........................................ 32 NOTES TO FINANCIAL STATEMENTS............................... 34 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S REPORT.................................... 40 SUPPLEMENTAL INFORMATION.................................... 41
- -------------------------------------------------------------------------------- 2 DEAR SHAREHOLDER, The year ended October 31, 2005 was a tumultuous one for the economy and the financial markets. Investors, consumers and businesses alike were rocked by the twin hurricanes of Katrina and Rita and the unprecedented rise in energy prices. Energy prices -- particularly for refined products such as gas, diesel, jet fuel and heating oil -- skyrocketed, causing consumer confidence to plummet and raising the prospect of a pullback in consumer spending. Typically, developments like these would have a downward effect on equity prices and interest rates, but that wasn't the case as stocks rallied and interest rates rose modestly. Surprisingly, U.S. equity markets navigated the storms remarkably well. The Dow Jones Industrial Average rose 6.4%, the S&P 500 rose 8.7% and the S&P Equal Weight Index gained 12.7%. Two factors drove stock prices higher. The first is that earnings growth remained strong, increasing at a double-digit pace during the period. Investors also looked beyond the immediate impact of the hurricanes to the anticipated kick to economic growth as reconstruction efforts get underway. As one might expect, energy stocks led the market higher. In fact, the meteoric rise in energy stocks is responsible for much of the positive performance in the broader market averages. Energy prices were well on their way up prior to the arrival of Katrina as the price of a barrel of crude oil rose from $49.69 in late May to a high of $69.74 by the end of August. While the Gulf storms exacerbated this rise, the year-long increase in energy prices was attributable to the rapid growth in the powerhouse economies of China and India. China in particular continues to import commodities of all kinds at a voracious rate. Clearly, energy stocks were the big winners as the cap weighted S&P Energy Index rose nearly 34% and the companion equal weight sector rose 55%. Utility stocks also fared well as the S&P Utility Index shot up 24% in anticipation of a substantial rise in home heating costs while the equal weight utility sector rose 21%. On the flip side, health care stocks, which tend to be perceived as defensive in nature, fared well as the S&P Health Care Index gained 10% while its equal weight counterpart climbed 22%. Health care stocks were perceived as a safe haven should economic growth stall in the wake of the devastation left by Katrina and Rita. Despite the uncertainty, the Federal Reserve remained vigilant against any signs of increasing inflation. The shock to the economy of the storms and the loss of much of the U.S.'s critical energy infrastructure led many to predict a pause in the Fed's rate hikes. This was not to be, as the Fed implemented a eight rate hikes during the year, bringing the Fed Funds target rate to 3.75%. Central bank policy drove longer rates higher during this 12-month period, with the yield on the benchmark 10-Year Treasury Note rising half a percent to 4.55%. - -------------------------------------------------------------------------------- 3 ANNUAL REPORT With all of the crosscurrents in the economy and the financial markets, stock price behavior is likely to remain choppy and erratic. Investment strategies that do not depend on highly directional markets will likely fare well as we move through the remainder of 2005 and into 2006. We appreciate the trust you have placed in our firm by investing with us. Sincerely, /s/ CARL G. VERBONCOEUR Carl G. Verboncoeur Chief Executive Officer Rydex Investments All sources: Rydex Investments and Bloomberg 4 RYDEX RUSSELL TOP 50 ETF MANAGER'S ANALYSIS - -------------------------------------------------------------------------------- Since inception in May, large-cap stocks significantly underperformed small-cap stocks. During this period, the Russell 2000 Index was up 9.25% versus the Russell Top 50, which increased only 0.43%. CUMULATIVE FUND PERFORMANCE: MAY 4, 2005 - OCTOBER 31, 2005 [LINE GRAPH]
RUSSELL TOP 50 TOTAL RETURN DATE RYDEX RUSSELL TOP 50 ETF INDEX S&P 100 TOTAL RETURN INDEX - ---- ------------------------ --------------------------- -------------------------- 5/4/2005 10000.00 10000.00 10000.00 9976.00 9976.00 9972.00 9952.00 9953.00 9958.00 10010.00 10010.00 10014.00 9905.00 9905.00 9905.00 9954.00 9954.00 9941.00 9870.00 9870.00 9853.00 9846.00 9846.00 9824.00 9933.00 9934.00 9911.00 9990.00 9991.00 9968.00 5/18/2005 10078.00 10079.00 10067.00 10132.00 10133.00 10117.00 10115.00 10117.00 10107.00 10151.00 10152.00 10138.00 10163.00 10165.00 10141.00 10145.00 10146.00 10113.00 10200.00 10202.00 10167.00 10204.00 10206.00 10165.00 10117.00 10118.00 10088.00 6/1/2005 10213.00 10215.00 10179.00 10222.00 10224.00 10186.00 10130.00 10132.00 10105.00 10133.00 10135.00 10110.00 10130.00 10132.00 10118.00 10107.00 10109.00 10099.00 10152.00 10155.00 10137.00 10127.00 10129.00 10125.00 10142.00 10144.00 10143.00 10151.00 10153.00 10156.00 6/15/2005 10173.00 10176.00 10180.00 10204.00 10207.00 10202.00 10248.00 10251.00 10237.00 10242.00 10246.00 10229.00 10223.00 10226.00 10213.00 10211.00 10214.00 10213.00 10092.00 10095.00 10101.00 10014.00 10017.00 10018.00 10009.00 10012.00 10010.00 10088.00 10091.00 10093.00 6/29/2005 10078.00 10081.00 10092.00 9963.00 9966.00 9989.00 9984.00 9987.00 10006.00 10064.00 10067.00 10086.00 9979.00 9982.00 10005.00 9992.00 9995.00 10014.00 10115.00 10118.00 10146.00 10158.00 10161.00 10202.00 10183.00 10186.00 10222.00 7/13/2005 10204.00 10208.00 10245.00 10251.00 10255.00 10299.00 10260.00 10264.00 10309.00 10172.00 10176.00 10228.00 10224.00 10228.00 10287.00 10261.00 10266.00 10327.00 10202.00 10207.00 10255.00 10224.00 10228.00 10291.00 10186.00 10191.00 10250.00 10194.00 10199.00 10258.00 7/27/2005 10239.00 10244.00 10303.00 10283.00 10288.00 10351.00 10185.00 10189.00 10263.00 10203.00 10207.00 10271.00 10281.00 10285.00 10342.00 10290.00 10295.00 10353.00 10225.00 10230.00 10281.00 10172.00 10177.00 10226.00 10146.00 10151.00 10199.00 10217.00 10222.00 10277.00 8/10/2005 10185.00 10190.00 10248.00 10256.00 10261.00 10324.00 10190.00 10195.00 10240.00 10210.00 10214.00 10267.00 10113.00 10118.00 10164.00 10125.00 10129.00 10184.00 10127.00 10131.00 10179.00 10119.00 10124.00 10174.00 10133.00 10137.00 10190.00 10091.00 10096.00 10152.00 8/24/2005 10011.00 10016.00 10072.00 9977.00 10036.00 10089.00 9976.00 9980.00 10033.00 10045.00 10050.00 10096.00 10018.00 10023.00 10059.00 10109.00 10114.00 10142.00 10120.00 10125.00 10141.00 10092.00 10097.00 10119.00 10219.00 10225.00 10254.00 9/7/2005 10247.00 10254.00 10282.00 10225.00 10231.00 10249.00 10294.00 10301.00 10317.00 10278.00 10285.00 10307.00 10199.00 10205.00 10239.00 10166.00 10172.00 10201.00 10181.00 10188.00 10217.00 10280.00 10288.00 10308.00 10234.00 10241.00 10249.00 10167.00 10175.00 10177.00 9/21/2005 10097.00 10105.00 10082.00 10126.00 10133.00 10123.00 10096.00 10104.00 10113.00 10090.00 10098.00 10109.00 10078.00 10085.00 10101.00 10087.00 10095.00 10121.00 10181.00 10190.00 10196.00 10163.00 10171.00 10196.00 10120.00 10128.00 10163.00 10035.00 10042.00 10073.00 10/5/2005 9923.00 9930.00 9948.00 9905.00 9912.00 9924.00 9926.00 9933.00 9954.00 9883.00 9890.00 9902.00 9884.00 9891.00 9889.00 9850.00 9857.00 9856.00 9856.00 9863.00 9856.00 9911.00 9918.00 9912.00 9922.00 9929.00 9931.00 9839.00 9845.00 9843.00 10/19/2005 9981.00 9987.00 9977.00 9816.00 9822.00 9817.00 9815.00 9822.00 9806.00 9963.00 9970.00 9964.00 9959.00 9967.00 9954.00 9924.00 9932.00 9912.00 9840.00 9847.00 9820.00 9997.00 10005.00 9986.00 10/31/2005 10035.00 10043.00 10027.00
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2005 - ----------------------------------------------------------------------------- SINCE INCEPTION (05/04/05) --------------- RYDEX RUSSELL TOP 50 ETF................................... 0.36% RUSSELL TOP 50 TOTAL RETURN INDEX.......................... 0.43% S&P 100 TOTAL RETURN INDEX................................. 0.27%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Past performance is no guarantee of future results. The Russell Top 50 Total Return Index and the S&P 100 Total Return Index are unmanaged stock indices and, unlike the Fund, have no management fees or other operating expense to reduce its reported returns. Returns are historical and include changes in principal and reinvested dividends and capital gains. - -------------------------------------------------------------------------------- 5 ANNUAL REPORT
TOP 10 HOLDINGS* - --------------------------------------- COMPANY NAME % OF TOTAL - --------------------------------------- GENERAL ELECTRIC CO. 6.91% EXXON MOBIL CORP. 6.79% CITIGROUP INC. 4.62% MICROSOFT CORP. 4.48% JOHNSON & JOHNSON 3.60% PROCTER & GAMBLE CO. 3.52% BANK OF AMERICA CORP. 3.41% PFIZER INC. 3.12% ALTRIA GROUP INC. 3.00% INTEL CORP. 2.89% - ---------------------------------------
SECTOR ALLOCATION* [PIE CHART]
CONSUMER INFORMATION CONSUMER FINANCIALS DISCRETIONARY TECHNOLOGY HEALTH CARE INDUSTRIALS STAPLES ENERGY - ---------- ------------- ----------- ----------- ----------- -------- ------ 21.22 6.82 18.48 16.79 9.92 12.60 10.97 TELECOMMUNICATION SERVICES ----------------- 3.20
* The Fund's holdings are expressed as a percentage of net assets and the sector allocation is expressed as a percentage of market value. These percentages may change over time. 6 RYDEX S&P EQUAL WEIGHT ETF MANAGER'S ANALYSIS - -------------------------------------------------------------------------------- Over the one-year reporting period, broad-based performance continues to be strong as smaller companies helped drive outperformance versus the S&P 500. During this reporting period, Rydex S&P Equal Weight ETF (RSP) returned 12.29% versus the S&P 500's 8.72%. RSP has outperformed the cap-weighted index 22.45% versus 14.80% since inception April 24, 2003. CUMULATIVE FUND PERFORMANCE: APRIL 24, 2003 - OCTOBER 31, 2005 [LINE GRAPH]
RYDEX S&P EQUAL WEIGHT S&P EQUAL WEIGHT TOTAL ETF RETURN INDEX S&P 500 TOTAL RETURN INDEX ---------------------- ---------------------- -------------------------- 4/24/03 10000 10000 10000 9845 9845 9862 10041 10041 10039 10113 10113 10072 10113 10114 10063 10091 10092 10058 10280 10282 10210 10300 10303 10171 10397 10399 10257 10341 10343 10206 10240 10242 10104 10405 10408 10251 10566 10569 10380 10566 10569 10350 10565 10568 10320 10687 10691 10402 10723 10727 10377 10417 10421 10119 10402 10406 10108 10457 10461 10149 10582 10586 10242 10646 10651 10257 10878 10884 10458 10899 10905 10478 10882 10888 10440 11089 11096 10594 11146 11152 10631 11141 11148 10682 11363 11371 10846 11455 11462 10890 11410 11418 10864 11217 11225 10734 11309 11317 10832 11492 11501 10975 11522 11531 10987 11359 11368 10878 11593 11602 11122 11588 11597 11132 11576 11586 11116 11409 11418 10946 11390 11399 10957 11185 11195 10803 11199 11209 10823 11137 11146 10733 11260 11269 10853 11176 11186 10748 11168 11179 10729 11229 11239 10817 11374 11384 10943 11287 11298 10854 11504 11515 11060 11601 11613 11102 11573 11585 11041 11386 11398 10892 11474 11486 10997 11544 11555 11060 11471 11496 11022 11389 11399 10952 11232 11241 10817 11367 11377 10945 11218 11228 10785 11358 11368 10888 11361 11372 10893 7/24/03 11313 11323 10816 11498 11509 11004 11503 11515 10981 11427 11438 10902 11387 11398 10884 11456 11468 10918 11368 11380 10806 11363 11375 10835 11163 11174 10645 11158 11169 10664 11225 11236 10742 11261 11273 10781 11311 11323 10816 11440 11452 10924 11422 11434 10859 11518 11530 10930 11517 11531 10934 11656 11671 11034 11737 11751 11063 11749 11765 11042 11843 11859 11075 11714 11730 10962 11692 11708 10969 11728 11743 11003 11767 11784 11005 11873 11890 11073 11959 11976 11130 12124 12143 11285 12153 12174 11336 12158 12178 11355 12086 12105 11283 12215 12235 11397 12100 12119 11303 11893 11909 11169 11969 11988 11233 12009 12028 11257 11966 11986 11215 12145 12166 11376 12113 12133 11339 12263 12285 11490 12250 12272 11454 12090 12112 11305 12170 12193 11373 11948 11970 11156 11834 11857 11091 11731 11754 11022 11847 11871 11130 11751 11773 11013 11988 12012 11260 12035 12059 11283 12191 12215 11390 12257 12281 11439 12312 12341 11494 12277 12301 11438 12356 12381 11493 12352 12377 11486 12463 12488 11567 12512 12538 11613 12466 12491 11585 12503 12529 11622 12352 12378 11503 12403 12429 11577 12418 12444 11577 12240 12266 11405 12247 12273 11443 10/24/03 12208 12235 11389 12288 12315 11413 12469 12496 11587 12527 12555 11604 12541 12570 11594 12576 12605 11636 12697 12725 11728 12643 12672 11664 12645 12673 11650 12722 12752 11720 12708 12737 11669 12590 12620 11602 12577 12607 11596 12748 12779 11734 12770 12801 11732 12648 12678 11645 12525 12556 11570 12399 12429 11466 12472 12502 11559 12384 12415 11462 12442 12473 11480 12676 12708 11667 12748 12781 11688 12827 12860 11740 12842 12875 11738 13000 13035 11871 12950 12984 11832 12928 12962 11814 12953 12988 11870 12843 12877 11779 12933 12969 11867 12811 12846 11765 12747 12782 11755 12941 12977 11891 12987 13023 11924 12883 12918 11857 12937 12974 11935 12972 13009 11952 13168 13206 12094 13166 13205 12089 13247 13286 12137 13307 13346 12171 13285 13324 12149 13314 13354 12169 13483 13524 12325 13494 13535 12328 13502 13543 12353 13449 13491 12316 13618 13660 12469 13642 13684 12486 13665 13707 12518 13766 13809 12581 13684 13727 12469 13753 13796 12529 13685 13729 12463 13816 13859 12567 13846 13891 12584 13977 14022 12670 14011 14057 12659 14085 14131 12758 14012 14058 12717 1/23/04 13978 14024 12691 14106 14148 12844 13987 14033 12719 13801 13847 12548 13812 13858 12613 13825 13872 12580 13852 13900 12626 13854 13902 12635 13694 13741 12531 13737 13784 12555 13955 14004 12713 13952 14001 12682 14032 14081 12746 14198 14248 12887 14147 14197 12825 14047 14097 12756 14210 14260 12887 14159 14210 12825 14084 14135 12773 14013 14064 12740 13918 13969 12706 13886 13938 12684 13972 14024 12737 14035 14087 12755 14099 14151 12755 14269 14323 12878 14200 14253 12802 14218 14271 12827 14276 14330 12870 14312 14368 12893 14175 14228 12786 14052 14106 12712 13821 13873 12527 13617 13668 12340 13825 13877 12494 13599 13651 12315 13659 13711 12385 13869 13923 12531 13843 13897 12515 13722 13777 12376 13526 13580 12215 13516 13570 12199 13479 13534 12170 13723 13779 12369 13721 13777 12357 13905 13961 12520 13981 14038 12570 14004 14061 12563 14079 14137 12629 14226 14285 12738 14321 14381 12835 14296 14355 12812 14219 14278 12728 14201 14261 12714 14256 14316 12780 14030 14090 12605 13987 14046 12591 13976 14036 12599 14061 14122 12663 14068 14129 12677 13858 13918 12480 13951 14034 12547 14203 14265 12724 4/23/04 14179 14241 12732 14096 14158 12675 14119 14181 12704 13907 13968 12531 13734 13795 12439 13647 13707 12365 13760 13821 12479 13793 13855 12502 13836 13925 12526 13706 13773 12443 13467 13528 12273 13283 13342 12144 13418 13478 12239 13423 13484 12264 13448 13509 12255 13440 13502 12248 13265 13329 12120 13387 13449 12203 13376 13437 12173 13352 13414 12179 13434 13496 12228 13510 13573 12249 13753 13818 12446 13797 13862 12469 13870 13936 12542 13897 13963 12535 13900 13967 12541 13943 14010 12587 13805 13872 12494 13892 13959 12560 14135 14204 12761 14156 14226 12782 13993 14062 12661 14056 14126 12719 13888 13957 12598 14013 14083 12673 14035 14105 12691 14021 14091 12674 14057 14127 12707 14016 14087 12654 14114 14185 12701 14270 14342 12809 14231 14303 12773 14248 14322 12704 14193 14266 12694 14232 14306 12726 14321 14395 12779 14127 14207 12647 14080 14153 12608 13922 13993 12505 13953 14025 12532 13791 13862 12429 13846 13919 12471 13843 13916 12489 13847 13921 12498 13807 13880 12458 13803 13876 12404 13718 13791 12345 13718 13791 12339 13835 13909 12426 13617 13689 12262 13610 13682 12295 7/23/04 13481 13554 12176 13405 13477 12152 13532 13605 12273 13533 13605 12282 13656 13729 12341 13687 13761 12356 13724 13799 12411 13593 13667 12333 13563 13637 12324 13338 13411 12123 13104 13172 11936 13135 13199 11950 13334 13401 12105 13273 13338 12076 13111 13173 11935 13110 13172 11954 13324 13390 12118 13367 13435 12145 13555 13630 12299 13495 13570 12255 13608 13684 12335 13565 13640 12306 13566 13640 12312 13680 13756 12411 13683 13758 12412 13714 13788 12444 13603 13671 12348 13666 13732 12406 13709 13777 12429 13821 13945 12568 13821 13890 12516 13925 13998 12602 13827 13903 12548 13886 13959 12572 13967 14041 12634 14025 14099 12659 14036 14111 12688 13932 14006 12598 14007 14082 12634 14063 14139 12691 14010 14086 12619 14116 14193 12699 13935 14012 12523 13883 13959 12467 13900 13976 12486 13793 13868 12412 13876 13953 12488 13938 14016 12543 14022 14099 12540 14243 14323 12731 14308 14389 12773 14278 14358 12766 14382 14462 12855 14237 14317 12728 14110 14190 12632 14119 14200 12657 14069 14149 12629 13958 14037 12538 13853 13932 12421 13924 14004 12476 13975 14055 12542 13831 13910 12420 13854 13933 12426 13962 14043 12459 10/22/04 13852 13932 12338 13867 13947 12327 14076 14158 12511 14272 14356 12674 14293 14377 12701 14352 14437 12732 14373 14459 12735 14358 14444 12736 14522 14609 12881 14773 14861 13090 14859 14949 13141 14840 14930 13127 14847 14937 13123 14855 14947 13113 15007 15098 13232 15145 15238 13354 15154 15253 13351 15060 15153 13258 15169 15262 13333 15198 15292 13351 15019 15112 13202 15137 15231 13280 15145 15239 13277 15250 15345 13332 15283 15379 13344 15238 15334 13300 15181 15277 13247 15397 15495 13449 15350 15449 13438 15379 15477 13447 15369 15468 13437 15175 15273 13289 15218 15316 13357 15294 15393 13430 15305 15405 13416 15440 15541 13538 15526 15628 13591 15592 15695 13619 15521 15623 13591 15454 15557 13490 15442 15545 13495 15582 15687 13617 15634 15738 13668 15638 15743 13675 15561 15666 13616 15693 15800 13713 15717 15824 13714 15742 15848 13716 15732 15839 13697 15539 15645 13587 15303 15407 13430 15192 15295 13382 15233 15337 13432 15205 15310 13413 15251 15356 13459 15148 15252 13378 15217 15322 13433 15129 15233 13317 15247 15353 13397 15400 15507 13526 15262 15368 13399 15146 15251 13295 15049 15154 13210 1/24/05 14966 15071 13163 14997 15103 13216 15101 15207 13280 15145 15252 13287 15090 15198 13252 15258 15367 13364 15365 15475 13456 15425 15536 13501 15395 15505 13467 15579 15691 13616 15551 15663 13602 15566 15679 13611 15399 15509 13498 15451 15562 13555 15608 15719 13652 15602 15714 13663 15663 15776 13709 15670 15783 13713 15535 15647 13605 15532 15645 13615 15293 15404 13418 15376 15488 13494 15517 15630 13605 15675 15791 13733 15579 15694 13645 15691 15807 13722 15675 15791 13723 15694 15810 13728 15853 15971 13860 15918 16037 13897 15821 15940 13832 15660 15776 13692 15669 15786 13718 15579 15696 13618 15698 15817 13695 15576 15694 13592 15425 15541 13483 15468 15585 13508 15443 15559 13501 15403 15520 13435 15266 15382 13298 15259 15374 13308 15269 15385 13295 15270 15387 13327 15127 15239 13229 15342 15459 13413 15374 15491 13404 15300 15412 13316 15322 15435 13354 15377 15491 13414 15414 15529 13448 15510 15625 13529 15378 15493 13416 15371 15486 13416 15453 15568 13491 15237 15350 13334 15033 15145 13201 14728 14837 12980 14790 14900 13018 14927 15039 13096 14719 14829 12923 15012 15125 13178 4/22/05 14881 14993 13090 15025 15139 13203 14874 14986 13085 14916 15030 13140 14734 14845 12994 14899 15012 13149 14969 15083 13210 14965 15079 13198 15184 15301 13366 15129 15246 13332 15144 15260 13318 15257 15374 13403 15101 15218 13260 15160 15278 13323 14991 15107 13190 14912 15028 13132 15083 15201 13265 15205 15325 13359 15409 15530 13496 15478 15600 13559 15489 15612 13538 15545 15669 13591 15537 15660 13593 15472 15596 13548 15590 15715 13636 15616 15742 13651 15569 15694 13568 15707 15834 13695 15752 15879 13718 15659 15786 13624 15683 15811 13641 15683 15811 13640 15660 15784 13612 15747 15872 13684 15717 15847 13652 15785 15915 13687 15852 15983 13722 15884 16015 13753 15957 16089 13803 16031 16166 13871 16011 16145 13862 15990 16124 13833 15999 16134 13837 15845 15978 13690 15709 15842 13585 15686 15818 13575 15876 16010 13702 15859 15993 13684 15787 15921 13587 15840 15975 13624 15985 16122 13744 15880 16016 13633 15926 16062 13667 16121 16260 13827 16246 16387 13914 16272 16413 13946 16284 16413 13960 16317 16459 13997 16334 16476 14013 16295 16437 13935 16427 16571 14029 16543 16688 14097 16401 16545 14004 7/22/05 16514 16660 14080 16439 16584 14027 16501 16647 14052 16567 16714 14118 16679 16827 14201 16581 16728 14092 16588 16736 14106 16691 16840 14206 16696 16845 14219 16553 16701 14115 16390 16536 14007 16343 16489 13970 16428 16575 14065 16420 16568 14045 16535 16684 14146 16453 16601 14061 16523 16672 14103 16303 16450 13937 16322 16469 13951 16281 16428 13938 16316 16464 13947 16335 16484 13970 16290 16453 13923 16222 16370 13832 16276 16425 13865 16172 16320 13781 16266 16415 13865 16209 16357 13823 16400 16550 13964 16418 16569 13978 16360 16511 13938 16552 16706 14114 16608 16763 14150 16528 16682 14097 16680 16836 14209 16701 16858 14199 16591 16746 14096 16529 16684 14050 16511 16666 14057 16617 16774 14174 16486 16640 14095 16339 16493 13984 16154 16305 13857 16214 16367 13911 16273 16427 13919 16275 16429 13922 16287 16441 13923 16318 16473 13940 16454 16611 14064 16533 16690 14077 16539 16697 14053 16376 16532 13914 16085 16239 13712 15977 16129 13656 16038 16192 13707 15855 16007 13608 15777 15927 13581 15646 15795 13500 15633 15782 13491 15782 15933 13602 15852 16004 13643 15685 15835 13506 15887 16040 13709 15697 15847 13504 15749 15901 13524 10/31/05 16021 16175 13751
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2005 - ----------------------------------------------------------------------------- SINCE INCEPTION ONE YEAR (04/24/03) -------- --------------- RYDEX S&P EQUAL WEIGHT ETF...................... 12.29% 22.45% S&P EQUAL WEIGHT TOTAL RETURN INDEX............. 12.71% 22.95% S&P 500 TOTAL RETURN INDEX...................... 8.72% 14.80%
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Past performance is no guarantee of future results. The S&P Equal Weight Total Return Index and the S&P 500 Index are unmanaged stock indices and, unlike the Fund, have no management fees or other operating expense to reduce its reported returns. Returns are historical and include changes in principal and reinvested dividends and capital gains. - -------------------------------------------------------------------------------- 7 ANNUAL REPORT
TOP 10 HOLDINGS* - --------------------------------------- COMPANY NAME % OF TOTAL - --------------------------------------- EXPRESS SCRIPTS INC. 0.25% STARBUCKS CORP. 0.25% RYDER SYSTEM INC. 0.25% JANUS CAPITAL GROUP INC. 0.24% PAYCHEX INC. 0.24% AVAYA INC. 0.24% NETWORK APPLIANCE INC. 0.24% FEDEX CORP. 0.24% MEDIMMUNE INC. 0.24% QWEST COMMUNICATIONS INTERNATIONAL INC. 0.23% - ---------------------------------------
SECTOR ALLOCATIONS* [PIE CHART]
CONSUMER INFORMATION HEALTH CONSUMER FINANCIALS DISCRETIONARY TECHNOLOGY CARE INDUSTRIALS STAPLES MATERIALS UTILITIES ENERGY - ---------- ------------- ----------- ------ ----------- -------- --------- --------- ------ 17.47 17.26 15.51 11.20 10.73 7.48 6.51 6.32 5.70 TELECOMMUNICATION SERVICES ----------------- 1.82
* The Fund's holdings are expressed as a percentage of net assets and the sector allocation is expressed as a percentage of market value. These percentages may change over time. - -------------------------------------------------------------------------------- 8 SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) As a shareholder of the Rydex ETF Trust, you incur advisory fees and distribution fees. All other Trust expenses are paid by the adviser. 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 is based on an investment of $1,000 invested at the beginning of the period and held for the six-months ended October 31, 2005. 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 the 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 ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/01/05** 10/31/05 5/01/05 TO 10/31/05** --------- --------- --------------------- ACTUAL Rydex Russell Top 50 ETF........... $1,000 $1,003.60 $0.99 Rydex S&P Equal Weight ETF......... $1,000 $1,081.60 $2.10 HYPOTHETICAL (ASSUMING A 5% RETURN BEFORE EXPENSES) Rydex Russell Top 50 ETF........... $1,000 $1,023.80 $1.00 Rydex S&P Equal Weight ETF......... $1,000 $1,023.19 $2.04
- --------------- * Expenses are equal to the Fund's annualized expense ratio of 0.20% and 0.40%, respectively, multiplied by the average account value of the period, multiplied by 181/365 and 184/365, respectively. ** The Rydex Russell Top 50 ETF commenced operations on 5/4/05. 9 ANNUAL REPORT RYDEX RUSSELL TOP 50 ETF PORTFOLIO SUMMARY October 31, 2005 - --------------------------------------------------------------------------------
INCEPTION DATE PORTFOLIO STATISTICS -------------- -------------------- 5/4/2005 Net Assets ($million): $137.1
INDUSTRY BREAKDOWN (AS A % OF NET ASSETS) ------------------ 1.0% Aerospace & Defense 0.9% Air Freight & Logistics 3.6% Beverages 2.7% Biotechnology 1.3% Capital Markets 8.0% Commercial Banks 3.4% Communications Equipment 5.6% Computers & Peripherals 1.1% Consumer Finance 7.1% Diversified Financial Services 3.2% Diversified Telecommunication Services 0.1% Food Products 2.3% Food & Staples Retailing 1.3% Health Care Equipment & Supplies 1.4% Health Care Providers & Services
(AS A % OF NET ASSETS) ------------------ 3.5% Household Products 8.0% Industrial Conglomerates 2.9% Insurance 1.1% Internet Software & Services 5.1% Media 11.0% Oil, Gas & Consumable Fuels 11.4% Pharmaceuticals 2.9% Semiconductor & Semiconductor Equipment 5.4% Software 1.7% Specialty Retail 0.9% Thrifts & Mortgage Finance 3.0% Tobacco 0.0% Short Term Investments(a) 0.1% Other Assets
(a) Amount represents less than 0.05% of net assets. 10 RYDEX S&P EQUAL WEIGHT ETF PORTFOLIO SUMMARY October 31, 2005 - --------------------------------------------------------------------------------
INCEPTION DATE PORTFOLIO STATISTICS -------------- -------------------- 4/24/2003 Net Assets ($million): $1,071.4
INDUSTRY BREAKDOWN (AS A % OF NET ASSETS) ------------------ 1.9% Aerospace & Defense 0.7% Air Freight & Logistics 0.2% Airlines 0.9% Auto Components 0.5% Automobiles 1.6% Beverages 1.5% Biotechnology 0.4% Building Products 3.5% Capital Markets 2.9% Chemicals 4.3% Commercial Banks 2.0% Commercial Services & Supplies 2.6% Communications Equipment 2.2% Computers & Peripherals 0.2% Construction & Engineering 0.2% Construction Materials 0.8% Consumer Finance 1.1% Containers & Packaging 0.2% Distributors 0.4% Diversified Consumer Services 1.1% Diversified Financial Services 1.4% Diversified Telecommunication Services 2.3% Electric Utilities 0.8% Electrical Equipment 1.3% Electronic Equipment & Instruments 2.0% Energy Equipment & Services 2.3% Food Products 1.8% Food & Staples Retailing 0.4% Gas Utilities 3.3% Health Care Equipment & Supplies 3.9% Health Care Providers & Services 2.2% Hotels, Restaurants & Leisure 2.5% Household Durables
(AS A % OF NET ASSETS) ------------------ 0.8% Household Products 1.1% Independent Power Producers And Energy Traders 0.8% Industrial Conglomerates 4.7% Insurance 0.2% Internet & Catalog Retail 0.2% Internet Software & Services 2.1% IT Services 0.7% Leisure Equipment & Products 2.5% Machinery 3.1% Media 1.4% Metals & Mining 2.5% Multi-Utilities 2.0% Multiline Retail 0.2% Office Electronics 3.7% Oil, Gas & Consumable Fuels 1.0% Paper & Forest Products 0.4% Personal Products 2.5% Pharmaceuticals 1.8% Real Estate 0.9% Road & Rail 3.7% Semiconductor & Semiconductor Equipment 3.1% Software 3.2% Specialty Retail 1.2% Textiles, Apparel & Luxury Goods 1.4% Thrifts & Mortgage Finance 0.6% Tobacco 0.2% Trading Companies & Distributors 0.4% Wireless Telecommunication Services 0.2% Short Term Investments 0.0% Other Assets(a)
(a) Amount represents less than 0.05% of net assets. 11 ANNUAL REPORT RYDEX RUSSELL TOP 50 ETF SCHEDULE OF INVESTMENTS October 31, 2005 - --------------------------------------------------------------------------------
MARKET SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCKS 99.9% AEROSPACE & DEFENSE 1.0% United Technologies Corp. ...................... 27,382 $1,404,149 ------------ TOTAL AEROSPACE & DEFENSE 1,404,149 ------------ AIR FREIGHT & LOGISTICS 0.9% United Parcel Service Inc., -- Class B.......... 16,042 1,170,103 ------------ TOTAL AIR FREIGHT & LOGISTICS 1,170,103 ------------ BEVERAGES 3.6% Coca-Cola Co. (The)............................. 55,548 2,376,343 PepsiCo, Inc. .................................. 44,119 2,606,551 ------------ TOTAL BEVERAGES 4,982,894 ------------ BIOTECHNOLOGY 2.7% Amgen, Inc.*.................................... 32,994 2,499,625 Genentech, Inc.*................................ 12,365 1,120,269 ------------ TOTAL BIOTECHNOLOGY 3,619,894 ------------ CAPITAL MARKETS 1.3% Ameriprise Financial, Inc.*..................... 5,750 214,015 Morgan Stanley.................................. 28,906 1,572,776 ------------ TOTAL CAPITAL MARKETS 1,786,791 ------------ COMMERCIAL BANKS 8.0% Bank of America Corp. .......................... 106,835 4,672,963 U.S. Bancorp.................................... 50,096 1,481,839 Wachovia Corp. ................................. 41,867 2,115,121 Wells Fargo & Co. .............................. 44,685 2,690,037 ------------ TOTAL COMMERCIAL BANKS 10,959,960 ------------ COMMUNICATIONS EQUIPMENT 3.4% Cisco Systems, Inc.*............................ 171,470 2,992,152 QUALCOMM, Inc. ................................. 43,258 1,719,938 ------------ TOTAL COMMUNICATIONS EQUIPMENT 4,712,090 ------------
MARKET SHARES VALUE - -------------------------------------------------------------------------- COMPUTERS & PERIPHERALS 5.6% Dell, Inc.*..................................... 64,427 $2,053,933 Hewlett-Packard Co. ............................ 76,145 2,135,106 International Business Machines Corp. .......... 42,764 3,501,516 ------------ TOTAL COMPUTERS & PERIPHERALS 7,690,555 ------------ CONSUMER FINANCE 1.1% American Express Co. .......................................... 28,990 1,442,832 ------------ TOTAL CONSUMER FINANCE 1,442,832 ------------ DIVERSIFIED FINANCIAL SERVICES 7.1% Citigroup, Inc. ................................ 138,180 6,325,880 JPMorgan Chase & Co. ........................... 93,004 3,405,807 ------------ TOTAL DIVERSIFIED FINANCIAL SERVICES 9,731,687 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 3.2% SBC Communications, Inc. ....................... 87,140 2,078,289 Verizon Communications, Inc. ................... 73,194 2,306,343 ------------ TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 4,384,632 ------------ FOOD PRODUCTS 0.1% Kraft Foods, Inc. .............................. 6,604 186,893 ------------ TOTAL FOOD PRODUCTS 186,893 ------------ FOOD & STAPLES RETAILING 2.3% Wal-Mart Stores, Inc. .......................... 66,798 3,160,213 ------------ TOTAL FOOD & STAPLES RETAILING 3,160,213 ------------
See Notes to Financial Statements. RYDEX RUSSELL TOP 50 ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 12
MARKET SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) HEALTH CARE EQUIPMENT & SUPPLIES 1.3% Medtronic, Inc. ................................ 32,439 $1,837,994 ------------ TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 1,837,994 ------------ HEALTH CARE PROVIDERS & SERVICES 1.4% UnitedHealth Group, Inc. ....................... 33,939 1,964,729 ------------ TOTAL HEALTH CARE PROVIDERS & SERVICES 1,964,729 ------------ HOUSEHOLD PRODUCTS 3.5% Procter & Gamble Co. ........................... 86,018 4,816,148 ------------ TOTAL HOUSEHOLD PRODUCTS 4,816,148 ------------ INDUSTRIAL CONGLOMERATES 8.0% 3M Co. ......................................... 20,283 1,541,102 General Electric Co. ........................... 279,228 9,468,622 ------------ TOTAL INDUSTRIAL CONGLOMERATES 11,009,724 ------------ INSURANCE 2.9% American International Group, Inc. ............. 60,753 3,936,794 ------------ TOTAL INSURANCE 3,936,794 ------------ INTERNET SOFTWARE & SERVICES 1.1% Google, Inc.*................................... 4,200 1,562,988 ------------ TOTAL INTERNET SOFTWARE & SERVICES 1,562,988 ------------ MEDIA 5.1% Comcast Corp.* -- Class A....................... 53,893 1,499,842 News Corp. ..................................... 61,005 869,321 Time Warner, Inc.*.............................. 121,190 2,160,818 Viacom, Inc. -- Class B ........................ 37,481 1,160,787 Walt Disney Co. ................................ 54,479 1,327,653 ------------ TOTAL MEDIA 7,018,421 ------------
MARKET SHARES VALUE - -------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS 11.0% Chevron Corp. .................................. 58,909 $3,361,937 ConocoPhillips.................................. 36,151 2,363,552 Exxon Mobil Corp. .............................. 165,771 9,306,384 ------------ TOTAL OIL, GAS & CONSUMABLE FUELS 15,031,873 ------------ PHARMACEUTICALS 11.4% Abbott Laboratories............................. 42,122 1,813,352 Eli Lilly & Co. ................................ 25,767 1,282,939 Johnson & Johnson............................... 78,838 4,936,836 Merck & Co, Inc. ............................... 58,504 1,650,983 Pfizer, Inc. ................................... 196,831 4,279,106 Wyeth........................................... 36,133 1,610,086 ------------ TOTAL PHARMACEUTICALS 15,573,302 ------------ SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT 2.9% Intel Corp. .................................... 168,298 3,955,003 ------------ TOTAL SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT 3,955,003 ------------ SOFTWARE 5.4% Microsoft Corp. ................................ 238,852 6,138,497 Oracle Corp.*................................... 99,124 1,256,892 ------------ TOTAL SOFTWARE 7,395,389 ------------ SPECIALTY RETAIL 1.7% Home Depot, Inc. ............................... 56,839 2,332,673 ------------ TOTAL SPECIALTY RETAIL 2,332,673 ------------ THRIFTS & MORTGAGE FINANCE 0.9% Federal Nat'l Mtg. Assn......................... 25,291 1,201,828 ------------ TOTAL THRIFTS & MORTGAGE FINANCE 1,201,828 ------------
See Notes to Financial Statements. RYDEX RUSSELL TOP 50 ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 13 ANNUAL REPORT
MARKET SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) TOBACCO 3.0% Altria Group, Inc. ............................. 54,741 $4,108,312 ------------ TOTAL TOBACCO 4,108,312 ------------ TOTAL COMMON STOCKS (Cost $139,040,296) 136,977,871 ------------ SHORT TERM INVESTMENTS 0.0%(A) Short-Term Investment Co. ...................... 36,886 36,886 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $36,886) 36,886 ------------ TOTAL INVESTMENTS 99.9% (Cost $139,077,182) 137,014,757 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--0.1% 70,464 ------------ NET ASSETS--100.0% $137,085,221 - --------------------------------------------------------------------------
* Non-Income Producing Security. (a) Amount represents less than 0.05% of net assets. See Notes to Financial Statements. 14 RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS October 31, 2005 - --------------------------------------------------------------------------------
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS 99.8% AEROSPACE & DEFENSE 1.9% Boeing Co. ..................................... 34,066 $2,202,026 General Dynamics Corp. ......................... 18,851 2,192,371 Goodrich Corp. ................................. 49,562 1,787,701 Honeywell International, Inc. .................. 56,184 1,921,493 L-3 Communications Holdings, Inc. .............. 26,973 2,099,039 Lockheed Martin Corp. .......................... 35,388 2,143,097 Northrop Grumman Corp. ......................... 39,195 2,102,812 Raytheon Co. ................................... 57,712 2,132,459 Rockwell Collins, Inc. ......................... 45,562 2,087,651 United Technologies Corp. ...................... 42,964 2,203,194 -------------- TOTAL AEROSPACE & DEFENSE 20,871,843 -------------- AIR FREIGHT & LOGISTICS 0.7% FedEx Corp. .................................... 27,528 2,530,649 Ryder System, Inc. ............................. 66,590 2,641,625 United Parcel Service, Inc. -- Class B.......... 32,002 2,334,226 -------------- TOTAL AIR FREIGHT & LOGISTICS 7,506,500 -------------- AIRLINES 0.2% Southwest Airlines Co. ......................... 151,197 2,420,664 -------------- TOTAL AIRLINES 2,420,664 --------------
MARKET SHARES VALUE - ------------------------------------------------------------------------------- AUTO COMPONENTS 0.9% Cooper Tire & Rubber Co. ....................... 128,863 $1,760,269 Dana Corp. ..................................... 230,425 1,730,492 Goodyear Tire & Rubber Co.*..................... 135,928 2,125,914 Johnson Controls, Inc. ......................... 35,725 2,431,086 Visteon Corp. .................................. 222,080 1,849,926 -------------- TOTAL AUTO COMPONENTS 9,897,687 -------------- AUTOMOBILES 0.5% Ford Motor Co. ................................. 222,304 1,849,569 General Motors Corp. ........................... 67,964 1,862,214 Harley-Davidson, Inc. .......................... 42,698 2,114,832 -------------- TOTAL AUTOMOBILES 5,826,615 -------------- BEVERAGES 1.6% Anheuser-Busch Cos., Inc. ...................... 48,838 2,015,056 Brown-Forman Corp. -- Class B................... 35,513 2,249,394 Coca-Cola Co (The).............................. 50,863 2,175,919 Coca-Cola Enterprises, Inc. .................... 113,087 2,137,344 Constellation Brands, Inc. -- Class A*.......... 76,808 1,808,060 Molson Coors Brewing Co. -- Class B............. 32,972 2,034,372 Pepsi Bottling Group, Inc. ..................... 78,474 2,231,016 PepsiCo, Inc. .................................. 39,419 2,328,875 -------------- TOTAL BEVERAGES 16,980,036 --------------
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 15 ANNUAL REPORT
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) BIOTECHNOLOGY 1.5% Amgen, Inc.*.................................... 26,013 $1,970,745 Applera Corp. -- Applied Biosystems Group....... 94,458 2,292,496 Biogen Idec, Inc.*.............................. 53,528 2,174,842 Chiron Corp.*................................... 50,457 2,227,172 Genzyme Corp.*.................................. 30,310 2,191,413 Gilead Sciences, Inc.*.......................... 47,709 2,254,250 Medimmune, Inc.*................................ 72,046 2,520,169 -------------- TOTAL BIOTECHNOLOGY 15,631,087 -------------- BUILDING PRODUCTS 0.4% American Standard Cos., Inc. ................... 47,058 1,790,086 Masco Corp. .................................... 73,192 2,085,972 -------------- TOTAL BUILDING PRODUCTS 3,876,058 -------------- CAPITAL MARKETS 3.5% Ameriprise Financial, Inc. ..................... 57,462 2,138,736 Bank of New York Co., Inc. ..................... 72,329 2,263,174 Bear Stearns Cos., Inc. ........................ 21,144 2,237,035 Charles Schwab Corp. ........................... 153,831 2,338,231 E*Trade Financial Corp.*........................ 130,388 2,418,697 Federated Investors, Inc. -- Class B............ 66,231 2,318,747 Franklin Resources, Inc. ....................... 27,456 2,426,287
MARKET SHARES VALUE - ------------------------------------------------------------------------------- Goldman Sachs Group, Inc. ...................... 18,644 $2,356,042 Janus Capital Group, Inc. ...................... 147,263 2,584,466 Lehman Brothers Holdings, Inc. ................. 19,499 2,333,445 Mellon Financial Corp. ......................... 66,611 2,110,903 Merrill Lynch & Co., Inc. ...................... 36,529 2,364,888 Morgan Stanley.................................. 42,451 2,309,759 Northern Trust Corp. ........................... 44,722 2,397,099 State Street Corp. ............................. 43,851 2,421,891 T. Rowe Price Group, Inc. ...................... 34,503 2,260,637 -------------- TOTAL CAPITAL MARKETS 37,280,037 -------------- CHEMICALS 2.9% Air Products & Chemicals, Inc. ................. 39,174 2,242,320 Ashland, Inc. .................................. 37,760 2,020,538 Dow Chemical Co. ............................... 50,387 2,310,748 Du Pont (E.I.) de Nemours & Co. ................ 54,492 2,271,771 Eastman Chemical Co. ........................... 46,818 2,470,118 Ecolab, Inc. ................................... 67,714 2,239,979 Engelhard Corp. ................................ 77,510 2,108,272 Hercules, Inc.*................................. 175,754 1,957,900 International Flavors & Fragrances, Inc. ....... 61,490 2,028,555 Monsanto Co. ................................... 34,747 2,189,408 PPG Industries, Inc. ........................... 35,518 2,130,014
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 16
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) Praxair, Inc. .................................. 45,198 $2,233,233 Rohm & Haas Co. ................................ 54,668 2,379,698 Sigma-Aldrich Corp. ............................ 35,581 2,266,510 -------------- TOTAL CHEMICALS 30,849,064 -------------- COMMERCIAL BANKS 4.3% AmSouth Bancorp................................. 83,332 2,102,466 Bank of America Corp. .......................... 50,537 2,210,488 BB&T Corp. ..................................... 53,828 2,279,078 Comerica, Inc. ................................. 36,099 2,085,800 Compass Bancshares, Inc. ....................... 46,759 2,279,969 Fifth Third Bancorp............................. 55,829 2,242,651 First Horizon National Corp. ................... 57,011 2,205,185 Huntington Bancshares, Inc. .................... 93,458 2,173,833 KeyCorp......................................... 66,251 2,135,932 M&T Bank Corp. ................................. 20,660 2,222,603 Marshall & Ilsley Corp. ........................ 49,142 2,111,140 National City Corp. ............................ 62,008 1,998,518 North Fork Bancorporation, Inc. ................ 84,062 2,130,131 PNC Financial Services Group, Inc. ............. 38,086 2,312,201 Regions Financial Corp. ........................ 67,610 2,200,706 SunTrust Banks, Inc. ........................... 30,574 2,216,004 Synovus Financial Corp. ........................ 77,728 2,135,188 U.S. Bancorp.................................... 73,704 2,180,164
MARKET SHARES VALUE - ------------------------------------------------------------------------------- Wachovia Corp. ................................. 44,407 $2,243,442 Wells Fargo & Co. .............................. 36,810 2,215,962 Zions Bancorp................................... 30,732 2,257,880 -------------- TOTAL COMMERCIAL BANKS 45,939,341 -------------- COMMERCIAL SERVICES & SUPPLIES 2.0% Allied Waste Industries, Inc.*.................. 265,321 2,159,713 Avery Dennison Corp. ........................... 40,504 2,294,552 Cendant Corp. .................................. 108,263 1,885,941 Cintas Corp. ................................... 55,576 2,254,718 Equifax, Inc. .................................. 63,800 2,199,186 Monster Worldwide, Inc.*........................ 70,481 2,312,482 Pitney Bowes, Inc. ............................. 50,665 2,131,983 Robert Half International, Inc. ................ 62,464 2,303,672 R.R. Donnelley & Sons Co. ...................... 59,533 2,084,846 Waste Management, Inc. ......................... 78,279 2,310,013 -------------- TOTAL COMMERCIAL SERVICES & SUPPLIES 21,937,106 -------------- COMMUNICATIONS EQUIPMENT 2.6% ADC Telecommunications, Inc.*................... 102,435 1,787,491 Andrew Corp.*................................... 199,051 2,113,922 Avaya, Inc.*.................................... 220,306 2,537,925 CIENA Corp.*.................................... 1,017,269 2,410,928 Cisco Systems, Inc.*............................ 119,841 2,091,225 Comverse Technology, Inc.*...................... 83,019 2,083,777 Corning, Inc.*.................................. 109,011 2,190,031
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 17 ANNUAL REPORT
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) JDS Uniphase Corp.*............................. 1,186,814 $2,492,309 Lucent Technologies, Inc.*...................... 716,713 2,042,632 Motorola, Inc. ................................. 93,182 2,064,913 QUALCOMM, Inc. ................................. 50,957 2,026,050 Scientific-Atlanta, Inc. ....................... 56,442 2,000,305 Tellabs, Inc.*.................................. 231,149 2,209,784 -------------- TOTAL COMMUNICATIONS EQUIPMENT 28,051,292 -------------- COMPUTERS & PERIPHERALS 2.2% Apple Computer, Inc.*........................... 43,106 2,482,475 Dell, Inc.*..................................... 63,324 2,018,769 EMC Corp.*...................................... 175,057 2,443,796 Gateway, Inc.*.................................. 814,566 2,321,513 Hewlett-Packard Co. ............................ 77,893 2,184,120 International Business Machines Corp. .......... 27,480 2,250,062 Lexmark International, Inc. -- Class A*......... 34,040 1,413,341 NCR Corp.*...................................... 69,308 2,094,488 Network Appliance, Inc.*........................ 92,518 2,531,292 QLogic Corp.*................................... 65,002 1,960,460 Sun Microsystems, Inc.*......................... 549,123 2,196,492 -------------- TOTAL COMPUTERS & PERIPHERALS 23,896,808 -------------- CONSTRUCTION & ENGINEERING 0.2% Fluor Corp. .................................... 36,421 2,316,376 -------------- TOTAL CONSTRUCTION & ENGINEERING 2,316,376 --------------
MARKET SHARES VALUE - ------------------------------------------------------------------------------- CONSTRUCTION MATERIALS 0.2% Vulcan Materials Co. ........................... 31,004 $2,015,260 -------------- TOTAL CONSTRUCTION MATERIALS 2,015,260 -------------- CONSUMER FINANCE 0.8% American Express Co. ........................... 37,125 1,847,711 Capital One Financial Corp. .................... 26,920 2,055,342 MBNA Corp. ..................................... 86,977 2,224,002 SLM Corp. ...................................... 41,146 2,284,838 -------------- TOTAL CONSUMER FINANCE 8,411,893 -------------- CONTAINERS & PACKAGING 1.1% Ball Corp. ..................................... 59,039 2,324,365 Bemis Co. ...................................... 87,080 2,300,654 Pactiv Corp.*................................... 123,392 2,430,822 Sealed Air Corp.*............................... 45,760 2,302,186 Temple-Inland, Inc. ............................ 55,970 2,061,375 -------------- TOTAL CONTAINERS & PACKAGING 11,419,402 -------------- DISTRIBUTORS 0.2% Genuine Parts Co. .............................. 48,827 2,166,454 -------------- TOTAL DISTRIBUTORS 2,166,454 -------------- DIVERSIFIED CONSUMER SERVICES 0.4% Apollo Group, Inc. -- Class A*.................. 29,924 1,885,811 H&R Block, Inc. ................................ 90,211 2,242,645 -------------- TOTAL DIVERSIFIED CONSUMER SERVICES 4,128,456 -------------- DIVERSIFIED FINANCIAL SERVICES 1.1% Citigroup, Inc. ................................ 48,612 2,225,457 CIT Group, Inc. ................................ 47,905 2,190,696
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 18
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) JPMorgan Chase & Co. ........................... 63,089 $2,310,319 Moody's Corp. .................................. 43,566 2,320,325 Principal Financial Group, Inc. ................ 47,008 2,333,007 -------------- TOTAL DIVERSIFIED FINANCIAL SERVICES 11,379,804 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.4% AT&T Corp. ..................................... 110,925 2,194,097 BellSouth Corp. ................................ 83,775 2,179,826 CenturyTel, Inc. ............................... 63,270 2,070,827 Citizens Communications Co. .................... 161,130 1,972,231 Qwest Communications International, Inc.*....... 576,363 2,512,943 SBC Communications, Inc. ....................... 91,105 2,172,854 Verizon Communications, Inc. ................... 67,281 2,120,024 -------------- TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 15,222,802 -------------- ELECTRIC UTILITIES 2.3% Allegheny Energy, Inc.*......................... 72,758 2,056,141 American Electric Power Co., Inc. .............. 56,762 2,154,686 Cinergy Corp. .................................. 49,729 1,984,187 Edison International............................ 47,219 2,066,303
MARKET SHARES VALUE - ------------------------------------------------------------------------------- Entergy Corp. .................................. 29,524 $2,087,937 Exelon Corp. ................................... 38,782 2,017,828 FirstEnergy Corp. .............................. 41,911 1,990,773 FPL Group, Inc. ................................ 47,989 2,066,406 Pinnacle West Capital Corp. .................... 48,325 2,018,052 PPL Corp. ...................................... 68,216 2,137,889 Progress Energy, Inc. .......................... 49,617 2,162,805 Southern Co. ................................... 61,047 2,136,035 -------------- TOTAL ELECTRIC UTILITIES 24,879,042 -------------- ELECTRICAL EQUIPMENT 0.8% American Power Conversion Corp. ................ 83,144 1,778,450 Cooper Industries Ltd. -- Class A............... 31,955 2,265,290 Emerson Electric Co. ........................... 32,801 2,281,309 Rockwell Automation, Inc. ...................... 40,151 2,134,026 -------------- TOTAL ELECTRICAL EQUIPMENT 8,459,075 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS 1.3% Agilent Technologies, Inc.*..................... 65,098 2,083,787 Jabil Circuit, Inc.*............................ 75,238 2,245,854 Molex, Inc. .................................... 84,740 2,144,770 Sanmina-SCI Corp.*.............................. 492,739 1,798,497 Solectron Corp.*................................ 567,474 2,003,183
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 19 ANNUAL REPORT
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) Symbol Technologies, Inc. ...................... 220,087 $1,826,722 Tektronix, Inc. ................................ 82,894 1,904,904 -------------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS 14,007,717 -------------- ENERGY EQUIPMENT & SERVICES 2.0% Baker Hughes, Inc. ............................. 37,542 2,063,308 BJ Services Co. ................................ 67,693 2,352,332 Halliburton Co. ................................ 33,961 2,007,095 Nabors Industries Ltd.*......................... 31,657 2,172,620 National-Oilwell Varco, Inc.*................... 34,605 2,161,774 Noble Corp. .................................... 31,468 2,025,910 Rowan Cos., Inc. ............................... 60,429 1,993,553 Schlumberger Ltd. .............................. 26,545 2,409,490 Transocean, Inc.*............................... 37,007 2,127,532 Weatherford International Ltd.*................. 31,992 2,002,699 -------------- TOTAL ENERGY EQUIPMENT & SERVICES 21,316,313 -------------- FOOD PRODUCTS 2.3% Archer-Daniels-Midland Co. ..................... 95,396 2,324,801 Campbell Soup Co. .............................. 73,607 2,141,964 ConAgra Foods, Inc. ............................ 97,246 2,262,914 General Mills, Inc. ............................ 47,606 2,297,466 H.J. Heinz Co. ................................. 61,490 2,182,895 Hershey Co. (The)............................... 38,086 2,164,427
MARKET SHARES VALUE - ------------------------------------------------------------------------------- Kellogg Co. .................................... 49,055 $2,166,759 McCormick & Co., Inc. .......................... 71,071 2,152,741 Sara Lee Corp. ................................. 116,244 2,074,955 Tyson Foods, Inc. -- Class A.................... 122,637 2,182,939 Wm. Wrigley Jr Co. ............................. 32,006 2,224,417 -------------- TOTAL FOOD PRODUCTS 24,176,278 -------------- FOOD & STAPLES RETAILING 1.8% Albertson's, Inc. .............................. 84,903 2,131,914 Costco Wholesale Corp. ......................... 51,111 2,471,728 CVS Corp. ...................................... 73,952 1,805,168 Kroger Co.*..................................... 107,420 2,137,658 Safeway, Inc.*.................................. 88,123 2,049,741 SUPERVALU, Inc. ................................ 69,967 2,199,063 Sysco Corp. .................................... 67,569 2,156,127 Wal-Mart Stores, Inc. .......................... 50,319 2,380,592 Walgreen Co. ................................... 48,870 2,220,164 -------------- TOTAL FOOD & STAPLES RETAILING 19,552,155 -------------- GAS UTILITIES 0.4% Nicor, Inc. .................................... 52,710 2,066,232 Peoples Energy Corp. ........................... 51,265 1,907,058 -------------- TOTAL GAS UTILITIES 3,973,290 -------------- HEALTH CARE EQUIPMENT & SUPPLIES 3.3% Bausch & Lomb, Inc. ............................ 28,003 2,077,543 Baxter International, Inc. ..................... 54,171 2,070,957
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 20
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) Becton, Dickinson & Co. ........................ 41,008 $2,081,156 Biomet, Inc. ................................... 60,396 2,103,593 Boston Scientific Corp.*........................ 91,218 2,291,396 C.R. Bard, Inc. ................................ 32,703 2,040,013 Fisher Scientific International, Inc.*.......... 35,073 1,981,625 Guidant Corp. .................................. 32,226 2,030,238 Hospira, Inc.*.................................. 53,801 2,143,970 Medtronic, Inc. ................................ 38,728 2,194,328 Millipore Corp.*................................ 34,310 2,100,458 PerkinElmer, Inc. .............................. 109,065 2,407,065 St. Jude Medical, Inc.*......................... 47,524 2,284,479 Stryker Corp. .................................. 43,974 1,806,012 Thermo Electron Corp.*.......................... 71,555 2,160,245 Waters Corp.*................................... 51,337 1,858,399 Zimmer Holdings, Inc.*.......................... 30,528 1,946,771 -------------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 35,578,248 -------------- HEALTH CARE PROVIDERS & SERVICES 3.9% Aetna, Inc. .................................... 26,957 2,387,312 AmerisourceBergen Corp. ........................ 28,221 2,152,416 Cardinal Health, Inc. .......................... 34,835 2,177,536 Caremark Rx, Inc.*.............................. 44,713 2,342,961 CIGNA Corp. .................................... 19,179 2,222,271 Coventry Health Care, Inc.*..................... 39,042 2,107,851 Express Scripts, Inc.*.......................... 35,754 2,696,209 HCA, Inc. ...................................... 44,488 2,143,877 Health Management Associates, Inc. -- Class A... 94,055 2,013,718
MARKET SHARES VALUE - ------------------------------------------------------------------------------- Humana, Inc.*................................... 44,940 $1,994,887 IMS Health, Inc. ............................... 81,758 1,899,238 Laboratory Corporation of America Holdings*..... 45,979 2,218,487 Manor Care, Inc. ............................... 56,284 2,096,579 McKesson Corp. ................................. 47,503 2,158,061 Medco Health Solutions, Inc.*................... 40,415 2,283,447 Patterson Cos., Inc.*........................... 6,639 274,722 Quest Diagnostics, Inc. ........................ 43,843 2,047,906 Tenet Healthcare Corp.*......................... 189,320 1,594,074 UnitedHealth Group, Inc. ....................... 40,841 2,364,285 WellPoint, Inc.*................................ 29,815 2,226,584 -------------- TOTAL HEALTH CARE PROVIDERS & SERVICES 41,402,421 -------------- HOTELS, RESTAURANTS & LEISURE 2.2% Carnival Corp. ................................. 45,023 2,236,292 Darden Restaurants, Inc. ....................... 72,022 2,334,953 Harrah's Entertainment, Inc. ................... 31,531 1,906,995 Hilton Hotels Corp. ............................ 99,931 1,943,658 International Game Technology, Inc. ............ 80,565 2,134,167
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 21 ANNUAL REPORT
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) Marriott International, Inc. -- Class A......... 35,894 $2,140,000 McDonald's Corp. ............................... 64,471 2,037,284 Starbucks Corp.*................................ 93,977 2,657,670 Starwood Hotels & Resorts Worldwide, Inc. ...... 37,741 2,205,207 Wendy's International, Inc. .................... 46,650 2,179,488 Yum! Brands, Inc. .............................. 43,643 2,220,119 -------------- TOTAL HOTELS, RESTAURANTS & LEISURE 23,995,833 -------------- HOUSEHOLD DURABLES 2.5% Black & Decker Corp. ........................... 26,532 2,179,073 Centex Corp. ................................... 33,821 2,176,382 D.R. Horton, Inc. .............................. 60,896 1,868,898 Fortune Brands, Inc. ........................... 25,564 1,942,097 KB HOME......................................... 29,433 1,923,447 Leggett & Platt, Inc. .......................... 94,741 1,898,610 Lennar Corp. -- Class A......................... 38,823 2,157,782 Maytag Corp. ................................... 119,001 2,049,197 Newell Rubbermaid, Inc. ........................ 94,417 2,170,647 Pulte Homes, Inc. .............................. 50,237 1,898,456 Snap-On, Inc. .................................. 62,588 2,254,420 Stanley Works................................... 47,812 2,291,629 Whirlpool Corp. ................................ 28,476 2,235,366 -------------- TOTAL HOUSEHOLD DURABLES 27,046,004 --------------
MARKET SHARES VALUE - ------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS 0.8% Clorox Co. ..................................... 38,126 $2,063,379 Colgate-Palmolive Co. .......................... 41,169 2,180,310 Kimberly-Clark Corp. ........................... 35,274 2,004,974 Procter & Gamble Co. ........................... 39,136 2,191,200 -------------- TOTAL HOUSEHOLD PRODUCTS 8,439,863 -------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 1.1% AES Corp.*...................................... 145,229 2,307,689 Calpine Corp.*.................................. 689,836 1,641,810 Constellation Energy Group, Inc. ............... 36,218 1,984,746 Duke Energy Corp. .............................. 75,186 1,990,925 Dynegy, Inc. -- Class A*........................ 473,707 2,103,259 TXU Corp. ...................................... 20,747 2,090,260 -------------- TOTAL INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 12,118,689 -------------- INDUSTRIAL CONGLOMERATES 0.8% 3M Co. ......................................... 30,095 2,286,618 General Electric Co. ........................... 64,040 2,171,596 Textron, Inc. .................................. 31,241 2,250,602 Tyco International Ltd. ........................ 73,927 1,950,934 -------------- TOTAL INDUSTRIAL CONGLOMERATES 8,659,750 -------------- INSURANCE 4.7% ACE Ltd. ....................................... 46,660 2,430,986 AFLAC, Inc. .................................... 48,251 2,305,433 Allstate Corp. ................................. 40,041 2,113,764 Ambac Financial Group, Inc. .................... 31,813 2,255,224
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 22
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) American International Group, Inc. ............. 36,011 $2,333,513 Aon Corp. ...................................... 69,724 2,360,157 Chubb Corp. .................................... 24,362 2,264,935 Cincinnati Financial Corp. ..................... 52,534 2,235,322 Hartford Financial Services Group, Inc. ........ 28,939 2,307,885 Jefferson-Pilot Corp. .......................... 43,437 2,383,823 Lincoln National Corp. ......................... 42,248 2,138,171 Loews Corp. .................................... 23,718 2,205,300 Marsh & McLennan Cos., Inc. .................... 76,146 2,219,656 MBIA, Inc. ..................................... 37,929 2,208,985 MetLife, Inc. .................................. 43,974 2,172,755 Progressive Corp. .............................. 21,638 2,505,897 Prudential Financial, Inc. ..................... 32,573 2,370,989 SAFECO Corp. ................................... 40,978 2,282,475 St. Paul Travelers Cos., Inc. .................. 50,747 2,285,137 Torchmark Corp. ................................ 41,729 2,204,543 UnumProvident Corp. ............................ 109,443 2,220,598 XL Capital Ltd. -- Class A...................... 31,223 2,000,145 -------------- TOTAL INSURANCE 49,805,693 -------------- INTERNET & CATALOG RETAIL 0.2% eBay, Inc.*..................................... 59,389 2,351,804 -------------- TOTAL INTERNET & CATALOG RETAIL 2,351,804 --------------
MARKET SHARES VALUE - ------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES 0.2% Yahoo!, Inc.*................................... 66,550 $2,460,354 -------------- TOTAL INTERNET SOFTWARE & SERVICES 2,460,354 -------------- IT SERVICES 2.1% Affiliated Computer Services, Inc. -- Class A*............................................ 40,925 2,214,452 Automatic Data Processing, Inc. ................ 52,937 2,470,040 Computer Sciences Corp.*........................ 48,870 2,504,587 Convergys Corp.*................................ 152,240 2,473,900 Electronic Data Systems Corp. .................. 96,354 2,246,012 First Data Corp. ............................... 52,039 2,104,978 Fiserv, Inc.*................................... 49,329 2,154,691 Paychex, Inc. .................................. 65,699 2,546,493 Sabre Holdings Corp. ........................... 112,799 2,202,964 Unisys Corp.*................................... 318,999 1,630,085 -------------- TOTAL IT SERVICES 22,548,202 -------------- LEISURE EQUIPMENT & PRODUCTS 0.7% Brunswick Corp. ................................ 50,341 1,919,502 Eastman Kodak Co. .............................. 86,874 1,902,541 Hasbro, Inc. ................................... 101,260 1,907,738 Mattel, Inc. ................................... 121,825 1,796,919 -------------- TOTAL LEISURE EQUIPMENT & PRODUCTS 7,526,700 -------------- MACHINERY 2.5% Caterpillar, Inc. .............................. 38,245 2,011,304 Cummins, Inc. .................................. 23,989 2,047,941 Danaher Corp. .................................. 42,289 2,203,257 Deere & Co. .................................... 35,291 2,141,458
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 23 ANNUAL REPORT
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) Dover Corp. .................................... 53,321 $2,078,453 Eaton Corp. .................................... 34,459 2,027,223 Illinois Tool Works, Inc. ...................... 27,056 2,293,266 Ingersoll-Rand Co. -- Class A................... 55,772 2,107,624 ITT Industries, Inc. ........................... 19,638 1,995,221 Navistar International Corp.*................... 64,983 1,788,332 PACCAR, Inc. ................................... 31,166 2,182,243 Pall Corp. ..................................... 78,141 2,044,169 Parker Hannifin Corp. .......................... 33,071 2,072,890 -------------- TOTAL MACHINERY 26,993,381 -------------- MEDIA 3.1% Clear Channel Communications, Inc. ............. 65,757 2,000,328 Comcast Corp. -- Class A*....................... 72,974 2,030,866 Dow Jones & Co., Inc. .......................... 54,871 1,860,676 Gannett Co., Inc. .............................. 31,078 1,947,348 Interpublic Group of Cos., Inc.*................ 195,872 2,023,358 Knight-Ridder, Inc. ............................ 36,367 1,941,270 McGraw-Hill Cos., Inc. ......................... 46,085 2,255,400 Meredith Corp. ................................. 44,000 2,195,600 New York Times Co. -- Class A................... 68,048 1,853,628 News Corp. -- Class A........................... 137,452 1,958,691 Omnicom Group................................... 26,264 2,178,861 Time Warner, Inc.*.............................. 116,798 2,082,508
MARKET SHARES VALUE - ------------------------------------------------------------------------------- Tribune Co. .................................... 58,709 $1,849,921 Univision Communications, Inc. -- Class A*...... 86,840 2,269,998 Viacom, Inc. -- Class B......................... 64,320 1,991,990 Walt Disney Co. ................................ 91,558 2,231,268 -------------- TOTAL MEDIA 32,671,711 -------------- METALS & MINING 1.4% Alcoa, Inc. .................................... 82,739 2,009,730 Allegheny Technologies, Inc. ................... 76,067 2,183,884 Freeport-McMoRan Copper & Gold, Inc. -- Class B............................................. 50,399 2,490,719 Newmont Mining Corp. ........................... 47,770 2,035,002 Nucor Corp. .................................... 36,976 2,213,014 Phelps Dodge Corp. ............................. 19,535 2,353,381 United States Steel Corp. ...................... 49,055 1,791,979 -------------- TOTAL METALS & MINING 15,077,709 -------------- MULTI-UTILITIES 2.5% Ameren Corp. ................................... 39,216 2,062,762 CenterPoint Energy, Inc. ....................... 145,901 1,931,729 CMS Energy Corp.*............................... 133,141 1,985,132 Consolidated Edison, Inc. ...................... 44,831 2,039,811 Dominion Resources, Inc......................... 26,738 2,034,227 DTE Energy Co. ................................. 47,729 2,061,893 KeySpan Corp. .................................. 57,802 1,998,215 NiSource, Inc. ................................. 90,433 2,138,740
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 24
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) PG&E Corp. ..................................... 57,129 $2,078,353 Public Service Enterprise Group, Inc. .......... 32,607 2,050,654 Sempra Energy................................... 47,209 2,091,359 TECO Energy, Inc. .............................. 121,557 2,102,936 Xcel Energy, Inc. .............................. 111,376 2,041,522 -------------- TOTAL MULTI-UTILITIES 26,617,333 -------------- MULTILINE RETAIL 2.0% Big Lots, Inc.*................................. 191,788 2,218,987 Dillard's, Inc. -- Class A...................... 98,023 2,030,056 Dollar General Corp. ........................... 115,213 2,239,741 Family Dollar Stores, Inc. ..................... 103,930 2,301,010 Federated Department Stores, Inc. .............. 33,265 2,041,473 J.C. Penney Holding Co., Inc. .................. 45,051 2,306,611 Kohl's Corp.*................................... 42,007 2,021,797 Nordstrom, Inc. ................................ 61,524 2,131,807 Sears Holdings Corp.*........................... 17,769 2,136,722 Target Corp. ................................... 41,416 2,306,457 -------------- TOTAL MULTILINE RETAIL 21,734,661 -------------- OFFICE ELECTRONICS 0.2% Xerox Corp.*.................................... 157,789 2,141,197 -------------- TOTAL OFFICE ELECTRONICS 2,141,197 -------------- OIL, GAS & CONSUMABLE FUELS 3.7% Amerada Hess Corp. ............................. 16,533 2,068,278 Anadarko Petroleum Corp. ....................... 23,602 2,140,937
MARKET SHARES VALUE - ------------------------------------------------------------------------------- Apache Corp. ................................... 30,066 $1,919,113 Burlington Resources, Inc. ..................... 29,331 2,118,285 Chevron Corp. .................................. 34,829 1,987,691 ConocoPhillips.................................. 31,923 2,087,126 Devon Energy Corp. ............................. 35,376 2,136,003 El Paso Corp. .................................. 172,729 2,048,566 EOG Resources, Inc. ............................ 31,241 2,117,515 Exxon Mobil Corp. .............................. 34,654 1,945,476 Kerr-McGee Corp. ............................... 23,501 1,998,525 Kinder Morgan, Inc. ............................ 23,239 2,112,425 Marathon Oil Corp. ............................. 32,463 1,952,974 Murphy Oil Corp. ............................... 44,867 2,102,019 Occidental Petroleum Corp. ..................... 25,505 2,011,834 Sunoco, Inc. ................................... 30,021 2,236,565 Valero Energy Corp. ............................ 20,430 2,150,053 Williams Cos., Inc. ............................ 93,577 2,086,767 XTO Energy, Inc. ............................... 55,256 2,401,426 -------------- TOTAL OIL, GAS & CONSUMABLE FUELS 39,621,578 -------------- PAPER & FOREST PRODUCTS 1.0% Georgia-Pacific Corp. .......................... 64,584 2,100,918 International Paper Co. ........................ 69,923 2,040,353 Louisiana-Pacific Corp. ........................ 81,637 2,035,210
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 25 ANNUAL REPORT
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) MeadWestvaco Corp. ............................. 76,622 $2,009,029 Weyerhaeuser Co. ............................... 32,482 2,057,410 -------------- TOTAL PAPER & FOREST PRODUCTS 10,242,920 -------------- PERSONAL PRODUCTS 0.4% Alberto-Culver Co. -- Class B................... 49,440 2,146,191 Avon Products, Inc. ............................ 68,470 1,848,005 -------------- TOTAL PERSONAL PRODUCTS 3,994,196 -------------- PHARMACEUTICALS 2.5% Abbott Laboratories............................. 50,468 2,172,648 Allergan, Inc. ................................. 23,397 2,089,352 Bristol-Myers Squibb Co. ....................... 88,264 1,868,549 Eli Lilly & Co. ................................ 39,990 1,991,102 Forest Laboratories, Inc.*...................... 50,700 1,922,037 Johnson & Johnson............................... 33,867 2,120,752 King Pharmaceuticals, Inc.*..................... 141,505 2,183,422 Merck & Co, Inc. ............................... 76,383 2,155,528 Mylan Laboratories, Inc. ....................... 120,430 2,313,460 Pfizer, Inc. ................................... 85,231 1,852,922 Schering-Plough Corp. .......................... 105,118 2,138,100 Watson Pharmaceuticals, Inc.*................... 62,077 2,145,381 Wyeth........................................... 48,346 2,154,298 -------------- TOTAL PHARMACEUTICALS 27,107,551 --------------
MARKET SHARES VALUE - ------------------------------------------------------------------------------- REAL ESTATE 1.8% Apartment Investment & Management Co. -- Class A............................................. 55,999 $2,150,361 Archstone-Smith Trust........................... 54,506 2,211,308 Equity Office Properties Trust.................. 66,671 2,053,467 Equity Residential Properties Trust............. 56,967 2,235,955 Plum Creek Timber Co., Inc. .................... 56,762 2,208,042 ProLogis........................................ 47,989 2,063,527 Public Storage, Inc. ........................... 32,559 2,155,406 Simon Property Group, Inc. ..................... 29,390 2,104,912 Vornado Realty Trust............................ 25,159 2,037,879 -------------- TOTAL REAL ESTATE 19,220,857 -------------- ROAD & RAIL 0.9% Burlington Northern Santa Fe Corp. ............. 39,617 2,458,631 CSX Corp. ...................................... 49,066 2,247,714 Norfolk Southern Corp. ......................... 59,166 2,378,473 Union Pacific Corp. ............................ 32,535 2,250,771 -------------- TOTAL ROAD & RAIL 9,335,589 -------------- SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT 3.7% Advanced Micro Devices, Inc.*................... 97,460 2,263,021 Altera Corp.*................................... 115,153 1,917,297 Analog Devices, Inc. ........................... 58,322 2,028,439
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 26
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) Applied Materials, Inc.......................... 123,185 $2,017,770 Applied Micro Circuits Corp.*................... 771,844 1,883,299 Broadcom Corp. -- Class A*...................... 48,104 2,042,496 Freescale Semiconductor, Inc. -- Class A*....... 92,055 2,198,273 Intel Corp. .................................... 88,975 2,090,913 KLA-Tencor Corp. ............................... 43,869 2,030,696 Linear Technology Corp. ........................ 57,546 1,911,103 LSI Logic Corp.*................................ 232,366 1,884,488 Maxim Integrated Products, Inc. ................ 50,491 1,751,028 Micron Technology, Inc.......................... 172,324 2,238,489 National Semiconductor Corp. ................... 88,975 2,013,504 Novellus Systems, Inc.*......................... 86,095 1,882,037 NVIDIA Corp.*................................... 66,390 2,227,384 PMC -- Sierra, Inc.*............................ 249,151 1,768,972 Teradyne, Inc.*................................. 135,594 1,835,943 Texas Instruments, Inc. ........................ 67,301 1,921,444 Xilinx, Inc. ................................... 80,068 1,917,629 -------------- TOTAL SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT 39,824,225 --------------
MARKET SHARES VALUE - ------------------------------------------------------------------------------- SOFTWARE 3.1% Adobe Systems, Inc. ............................ 75,008 $2,419,008 Autodesk, Inc. ................................. 52,088 2,350,731 BMC Software, Inc.*............................. 103,105 2,019,827 Citrix Systems, Inc.*........................... 87,877 2,422,769 Computer Associates International, Inc. ........ 79,348 2,219,364 Compuware Corp.*................................ 232,366 1,879,841 Electronic Arts, Inc.*.......................... 36,433 2,072,309 Intuit, Inc.*................................... 48,559 2,230,315 Mercury Interactive Corp.*...................... 57,203 1,990,092 Microsoft Corp. ................................ 84,675 2,176,148 Novell, Inc.*................................... 304,900 2,323,338 Oracle Corp.*................................... 166,602 2,112,513 Parametric Technology Corp.*.................... 331,453 2,157,759 Siebel Systems, Inc............................. 214,110 2,216,038 Symantec Corp.*................................. 100,660 2,400,741 -------------- TOTAL SOFTWARE 32,990,793 -------------- SPECIALTY RETAIL 3.2% AutoNation, Inc.*............................... 107,840 2,143,859 AutoZone, Inc.*................................. 23,731 1,919,838 Bed Bath & Beyond, Inc.*........................ 55,118 2,233,381 Best Buy Co., Inc. ............................. 49,977 2,211,982 Circuit City Stores, Inc. ...................... 137,537 2,446,783 Home Depot, Inc. ............................... 55,325 2,270,538
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 27 ANNUAL REPORT
MARKET SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) Limited Brands, Inc. ........................... 108,529 $2,171,665 Lowe's Cos., Inc. .............................. 33,753 2,051,170 Office Depot, Inc.*............................. 74,276 2,044,818 OfficeMax, Inc. ................................ 67,548 1,892,695 RadioShack Corp. ............................... 86,568 1,913,153 Sherwin-Williams Co. ........................... 47,916 2,038,826 Staples, Inc. .................................. 104,077 2,365,670 The Gap, Inc. .................................. 122,637 2,119,167 Tiffany & Co. .................................. 58,461 2,303,364 TJX Cos., Inc. ................................. 104,620 2,252,469 -------------- TOTAL SPECIALTY RETAIL 34,379,378 -------------- TEXTILES, APPAREL & LUXURY GOODS 1.2% Coach, Inc.*.................................... 68,640 2,208,835 Jones Apparel Group, Inc. ...................... 79,981 2,181,882 Liz Claiborne, Inc. ............................ 54,291 1,911,043 NIKE, Inc. -- Class B........................... 28,135 2,364,747 Reebok International Ltd. ...................... 39,098 2,230,541 V.F. Corp. ..................................... 36,457 1,904,878 -------------- TOTAL TEXTILES, APPAREL & LUXURY GOODS 12,801,926 -------------- THRIFTS & MORTGAGE FINANCE 1.4% Countrywide Financial Corp. .................... 62,819 1,995,759 Federal Home Ln. Mtg. Corp...................... 36,982 2,268,846 Federal Nat'l Mtg. Assn......................... 45,741 2,173,612
MARKET SHARES VALUE - ------------------------------------------------------------------------------- Golden West Financial Corp. .................... 35,871 $2,106,704 MGIC Investment Corp. .......................... 34,203 2,026,186 Sovereign Bancorp, Inc. ........................ 94,579 2,040,069 Washington Mutual, Inc. ........................ 52,310 2,071,476 -------------- TOTAL THRIFTS & MORTGAGE FINANCE 14,682,652 -------------- TOBACCO 0.6% Altria Group, Inc. ............................. 30,181 2,265,084 Reynolds American, Inc. ........................ 27,293 2,319,905 UST, Inc. ...................................... 54,519 2,256,541 -------------- TOTAL TOBACCO 6,841,530 -------------- TRADING COMPANIES & DISTRIBUTORS 0.2% W.W. Grainger, Inc. ............................ 34,156 2,287,769 -------------- TOTAL TRADING COMPANIES & DISTRIBUTORS 2,287,769 -------------- WIRELESS TELECOMMUNICATION SERVICES 0.4% ALLTEL Corp. ................................... 34,956 2,162,378 Sprint Nextel Corp. ............................ 86,977 2,027,434 -------------- TOTAL WIRELESS TELECOMMUNICATION SERVICES 4,189,812 -------------- TOTAL COMMON STOCKS (Cost $1,047,823,172)........................... 1,069,078,784 --------------
See Notes to Financial Statements. RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS (continued) October 31, 2005 - -------------------------------------------------------------------------------- 28
MARKET SHARES VALUE - ------------------------------------------------------------------------------- SHORT TERM INVESTMENTS 0.2% Short-Term Investment Co. ...................... 2,140,912 $2,140,912 -------------- TOTAL SHORT TERM INVESTMENTS (Cost $2,140,912)............................... 2,140,912 -------------- TOTAL INVESTMENTS 100.0% (Cost $1,049,964,084)........................... 1,071,219,696 -------------- OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.0%(A) 189,872 -------------- NET ASSETS--100.0% $1,071,409,568 - -------------------------------------------------------------------------------
(a) Amount represents less than 0.05% of net assets. * Non-Income Producing Security. See Notes to Financial Statements. 29 ANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES October 31, 2005 - --------------------------------------------------------------------------------
RYDEX S&P RYDEX RUSSELL EQUAL TOP 50 ETF WEIGHT ETF ------------- -------------- ASSETS Investments at market value (Cost $139,077,182 and $1,049,964,084, respectively).......................... $137,014,757 $1,071,219,696 Receivables: Dividends.............................. 116,389 889,640 ------------ -------------- TOTAL ASSETS......................... 137,131,146 1,072,109,336 ------------ -------------- LIABILITIES Payables: Accrued Management Fees................ 45,925 699,768 ------------ -------------- TOTAL LIABILITIES.................... 45,925 699,768 ------------ -------------- NET ASSETS............................... $137,085,221 $1,071,409,568 ============ ============== NET ASSETS CONSIST OF: Paid-in Capital.......................... $139,033,869 $1,055,693,728 Undistributed Net Investment Income...... 202,245 569,892 Accumulated Net Realized Gain/(Loss) on Investments............................ (88,468) (6,109,664) Net Unrealized Appreciation/(Depreciation) on Investments............................ (2,062,425) 21,255,612 ------------ -------------- NET ASSETS............................... $137,085,221 $1,071,409,568 ============ ============== Shares Outstanding (Unlimited Shares Authorized), No Par Value.............. 1,500,000 6,751,000 ============ ============== Net Asset Value, Offering Price and Repurchase Price Per Share............. $ 91.39 $ 158.70 ============ ==============
See Notes to Financial Statements. 30 STATEMENTS OF OPERATIONS For the Period Ended October 31, 2005 - --------------------------------------------------------------------------------
RYDEX S&P RYDEX RUSSELL EQUAL TOP 50 ETF* WEIGHT ETF ------------- ----------- INVESTMENT INCOME Dividends................................ $ 971,677 $12,782,316 ----------- ----------- Total Income........................... 971,677 12,782,316 ----------- ----------- EXPENSES Management Fee........................... 99,610 3,381,391 ----------- ----------- Net Investment Income...................... 872,067 9,400,925 ----------- ----------- REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net Realized Gain/(Loss) From: Investments.............................. (88,468) (5,784,906) In-kind Redemptions...................... (10,379) 70,272,626 ----------- ----------- Net Realized Gain/(Loss)............... (98,847) 64,487,720 Net Change in Unrealized Appreciation/(Depreciation) on Investments.............................. (2,062,425) 319,080 ----------- ----------- Net Realized and Unrealized Gain/(Loss) on Investments.............................. (2,161,272) 64,806,800 ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............ $(1,289,205) $74,207,725 =========== ===========
* The Fund commenced operations on May 4, 2005. See Notes to Financial Statements. 31 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
RYDEX RUSSELL RYDEX S&P TOP 50 ETF EQUAL WEIGHT ETF ---------------- ----------------------------------- FOR THE PERIOD MAY 4, 2005* THROUGH YEAR ENDED YEAR ENDED OCTOBER 31, 2005 OCTOBER 31, 2005 OCTOBER 31, 2004 ---------------- ---------------- ---------------- OPERATIONS Net Investment Income............. $ 872,067 $ 9,400,925 $ 3,357,469 Net Realized Gain/(Loss).......... (98,847) 64,487,720 26,567,768 Net Change in Unrealized Appreciation/ (Depreciation) on Investments..................... (2,062,425) 319,080 2,736,534 ------------ -------------- ------------- Net Increase/(Decrease) in Net Assets Resulting From Operations...................... (1,289,205) 74,207,725 32,661,771 ------------ -------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net Investment Income............. (669,822) (8,884,060) (3,196,596) ------------ -------------- ------------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Sold......... 143,626,041 673,529,856 423,777,066 Value of Shares Repurchased....... (4,581,793) (153,080,243) (144,741,249) ------------ -------------- ------------- Net Increase in Net Assets Resulting From Share Transactions.................... 139,044,248 520,449,613 279,035,817 ------------ -------------- ------------- Increase in Net Assets.......... 137,085,221 585,773,278 308,500,992 NET ASSETS--BEGINNING OF PERIOD..... -- 485,636,290 177,135,298 ------------ -------------- ------------- NET ASSETS--END OF PERIOD+.......... $137,085,221 $1,071,409,568 $ 485,636,290 ============ ============== ============= +Including Undistributed Net Investment Income................. $ 202,245 $ 569,892 $ 314,137 ============ ============== ============= CHANGES IN SHARES OUTSTANDING: Shares Sold....................... 1,550,000 4,350,000 3,050,000 Shares Repurchased................ (50,000) (1,000,000) (1,050,000) Shares Outstanding, Beginning of Period.......................... -- 3,401,000 1,401,000 ------------ -------------- ------------- Shares Outstanding, End of Period.......................... 1,500,000 6,751,000 3,401,000 ============ ============== =============
* Commencement of investment operations. See Notes to Financial Statements. 32 FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
RYDEX RUSSELL TOP 50 ETF ---------------- FOR THE PERIOD MAY 4, 2005* THROUGH OCTOBER 31, 2005 ---------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD............... $91.51 ---------------- Net Investment Income**.............................. 0.79 Net Realized and Unrealized Gain on Investments**.... (0.46) ---------------- TOTAL FROM INVESTMENT OPERATIONS..................... 0.33 ---------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income................................ (0.45) ---------------- NET ASSET VALUE AT END OF PERIOD..................... $91.39 ================ TOTAL RETURN***...................................... 0.36% RATIOS/SUPPLEMENTAL DATA: Net assets at End of Period (000's omitted).......... $137,085 RATIO TO AVERAGE NET ASSETS OF: Expenses............................................. 0.20%**** Net Investment Income................................ 1.74%**** Portfolio Turnover Rate+............................. 1%
* Commencement of investment operations. ** 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 distributions at net asset value during the period, and redemption on the last day of the period. Transaction fees and broker commission charges 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. 33 ANNUAL REPORT FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
RYDEX S&P EQUAL WEIGHT ETF ------------------------------------------------------ FOR THE PERIOD APRIL 24, 2003* YEAR ENDED YEAR ENDED THROUGH OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2003 ---------------- ---------------- ---------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD.......................... $142.79 $126.43 $101.03 ---------------- ---------------- ---------------- Net Investment Income**........... 1.73 1.48 0.70 Net Realized and Unrealized Gain on Investments**................ 15.78 16.30 25.32 ---------------- ---------------- ---------------- TOTAL FROM INVESTMENT OPERATIONS...................... 17.51 17.78 26.02 ---------------- ---------------- ---------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income............. (1.60) (1.42) (0.62) ---------------- ---------------- ---------------- NET ASSET VALUE AT END OF PERIOD.......................... $158.70 $142.79 $126.43 ================ ================ ================ TOTAL RETURN***................... 12.29% 14.11% 25.77% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's omitted)........................ $1,071,410 $485,636 $177,135 RATIO TO AVERAGE NET ASSETS OF: Expenses.......................... 0.40% 0.40% 0.40%**** Net Investment Income............. 1.11% 1.09% 1.13%**** Portfolio Turnover Rate+.......... 22% 55% 42%
* Commencement of investment operations. ** 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 distributions at net asset value during the period, and redemption on the last day of the period. Transaction fees and broker commission charges 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. 34 NOTES TO FINANCIAL STATEMENTS October 31, 2005 - -------------------------------------------------------------------------------- 1. ORGANIZATION Rydex ETF Trust (the "Trust") is an open-ended management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust was organized as a Delaware statutory trust on November 22, 2002. The Trust currently consists of two series, Rydex S&P Equal Weight ETF and Rydex Russell Top 50 ETF (the "Funds"). Rydex S&P Equal Weight ETF commenced operations on April 24, 2003 and Rydex Russell Top 50 ETF commenced operations on May 4, 2005. The Funds' investment objective is to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of an index representing publicly traded equity securities (the "Underlying Index"). The Rydex Russell Top 50 ETF tracks the Russell Top 50 Total Return Index and the Rydex S&P Equal Weight ETF tracks the S&P Equal Weight Total Return 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 accounting principles generally accepted in the United States of America 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. 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, at the average of readily available closing bid and asked prices on such exchange. 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. NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 35 ANNUAL REPORT 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 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. Realized gains and losses from portfolio fund transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. C. REPURCHASE AGREEMENTS The Funds may enter into repurchase agreements with financial institutions. 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 Global Advisors, which acts as the Funds investment adviser (the "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 the Advisor, liquidity or other considerations so warrant. For the year ended October 31, 2005, the Funds had not engaged in repurchase 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 distribute all of the taxable income to the shareholders within the allowable time limits. Therefore, no provision for Federal income taxes is required. Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States. These differences are primarily due to differing treatments for in-kind redemptions, income reclassifications from real estate investment trusts and losses deferred due to wash sales. NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 36 For the year ended October 31, 2005, the Funds realized net capital gains and losses resulting from in-kind redemptions and other transactions. Because gains and losses from in-kind redemptions are not taxable to the Funds, and are not distributed to existing Fund shareholders, the gains and losses are reclassified from accumulated net realized gain/loss to paid-in-capital at the end of the Funds tax year. These reclassifications have no effect on net assets or net asset value per share. The in-kind gains and losses for the year ended October 31, 2005 are disclosed in the Funds' Statement of Operations. In order to present paid-in-capital, undistributed net investment income 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 paid-in-capital, undistributed net investment income and accumulated net realized gain/loss, on investments. For the year ended October 31, 2005, the adjustments for the Funds were as follows:
UNDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT NET REALIZED CAPITAL INCOME GAIN/(LOSS) ----------- -------------- ------------ Rydex Russell Top 50 ETF.............. $ (10,379) $ -- $ 10,379 Rydex S&P Equal Weight ETF............ 70,132,808 (261,110) (69,871,698)
At October 31, 2005, the Funds had capital loss carryforwards which may be utilized to offset any net realized capital gains expiring October 31:
2012 2013 -------- ---------- Rydex Russell Top 50 ETF................................. $ -- $ 88,468 Rydex S&P Equal Weight ETF............................... 272,282 5,596,230
The tax character of distributable earnings at October 31, 2005 were as follows:
RYDEX S&P RYDEX RUSSELL EQUAL WEIGHT TOP 50 ETF ETF ------------- ------------- Net Unrealized Appreciation/(Depreciation)........ (2,062,425) 21,042,178 Undistributed Ordinary Income..................... 202,245 542,174 Undistributed Long-term Capital Gains............. -- -- Capital Loss Carryforwards........................ (88,468) (5,868,512) Paid-in Capital................................... 139,033,869 1,055,693,728 ------------- ------------- Net Assets........................................ 137,085,221 1,071,409,568 ============= =============
NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 37 ANNUAL REPORT The tax character of distributions paid during 2005 were as follows: Ordinary Income................................... 669,822 8,884,060 Long-term Capital Gain............................ -- -- Return of Capital................................. -- -- ------------- ------------- Total Distributions............................... 669,822 8,884,060 ============= =============
The tax character of distributions paid during 2004 were as follows: Ordinary Income................................... -- 3,196,596 Long-term Capital Gain............................ -- -- Return of Capital................................. -- -- ------------- ------------- Total Distributions............................... -- 3,196,596 ============= ============= Tax Cost Basis of Securities...................... 139,077,182 1,050,177,518 Gross Tax Unrealized Appreciation................. 3,628,085 77,860,728 Gross Tax Unrealized Depreciation................. (5,690,510) (56,818,550) ------------- ------------- Net Tax Unrealized Appreciation/(Depreciation) on Investments..................................... (2,062,425) 21,042,178 ============= =============
E. DIVIDENDS AND DISTRIBUTIONS The Funds declare and pay dividends from net investment income and distribute from net realized capital gains at least annually. F. 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 Rydex Russell Top 50 ETF is a non-diversified fund, subjecting it to a greater risk than funds that are diversified. 3. ADVISORY, ADMINISTRATION AND OTHER TRANSACTIONS WITH AFFILIATES The Advisor 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, the Advisor receives an advisory fee at the annual rate of 0.20% and 0.40% of the average daily net assets of the Rydex Russell Top 50 ETF and the Rydex S&P Equal Weight ETF, respectively. NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 38 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 (Bank of New York was the Administrator for the Rydex S&P Equal Weight ETF until August 31, 2005). Under a Custodian Agreement with the Trust, the Administrator maintains in separate accounts cash, securities and other assets of the Trust and the Funds, 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 Advisor pays all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services except interest, taxes, brokerage commissions, and other expenses connected with the execution of portfolio transactions, any future distribution fees or expenses and extraordinary expenses. The Funds have adopted a Distribution Plan (the "Plan") that allows the Funds to pay distribution fees to Rydex Distributors, Inc. (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, 2005, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee of $500 and $2,000 for Rydex Russell Top 50 ETF and Rydex S&P Equal Weight ETF, respectively, 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. NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 39 ANNUAL REPORT 5. INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments, U.S. government and government agency obligations) for Rydex Russell Top 50 ETF and Rydex S&P Equal Weight ETF aggregated $176,344 and $81,449, respectively, and $178,375,536 and $179,410,838, respectively, for the year ended October 31, 2005. There were no purchases or sales of U.S. government or government agency obligations for the year ended October 31, 2005. 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Rydex ETF Trust: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Rydex S&P Equal Weight ETF and the Russell Top 50 ETF (the Rydex ETF Trust, hereafter referred to as the "Funds") at October 31, 2005, and the results of its operations, the changes in its net assets and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP December 20, 2005 41 ANNUAL REPORT SUPPLEMENTAL INFORMATION (Unaudited) - -------------------------------------------------------------------------------- FEDERAL INCOME TAX INFORMATION 100% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction and as qualified dividend income. In January 2006, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of the distributions received by you in the calendar year 2005. RYDEX INVESTMENTS BOARD REVIEW AND APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT The Investment Company Act of 1940 (the "1940 Act") requires that the initial approval of, as well as the continuation of, a fund's investment advisory agreement must be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or "interested persons" of any party (the "Independent Trustees"), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund's trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the advisory agreement. In addition, the Securities and Exchange Commission (the "SEC") takes the position that, as part of their fiduciary duties with respect to fund fees, fund boards are required to evaluate the material factors applicable to a decision to approve an investment advisory agreement. Consistent with these responsibilities, the Rydex ETF Trust Board of Trustees (the "Board") calls and holds one meeting each year that is dedicated to considering whether to renew the investment advisory agreement between Rydex ETF Trust (the "Trust") and PADCO Advisors II, Inc., which does business under the name Rydex Investments ("Rydex Investments") (the "Advisory Agreement") with respect to existing funds in the Trust, including the funds discussed in this Annual Report (each a "Fund" and collectively, the "Funds"), and to reviewing certain other agreements pursuant to which Rydex Investments provides investment advisory services to certain other registered investment companies. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by Rydex Investments, including information about Rydex Investments' affiliates, personnel and operations. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to Fund operations and performance. The Board also receives a memorandum from Fund counsel regarding the responsibilities of the Board for the approval of investment advisory agreements. In addition, the Independent Trustees receive advice from independent counsel to the Independent Trustees, meet in executive session outside the presence of fund management, if necessary, and participate in question and answer sessions with representatives of Rydex Investments. SUPPLEMENTAL INFORMATION (Unaudited) (continued) - -------------------------------------------------------------------------------- 42 At a meeting held on August 28 and 29, 2005, the Board approved the selection of Rydex Investments and the continuance of the Advisory Agreement for an additional one-year period, based on its review of qualitative and quantitative information provided by Rydex Investments. The Board's approval of the Advisory Agreement was based on consideration and evaluation of a variety of specific factors discussed at that meeting and at prior meetings, including: NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY RYDEX INVESTMENTS The Board reviewed the scope of services to be provided by Rydex Investments under the Advisory Agreement and noted that there would be no significant differences between the scope of services required to be provided by Rydex Investments for the past year and the scope of services required to be provided by Rydex Investments for the upcoming year. In reviewing the scope of services provided to the Funds by Rydex Investments, the Board reviewed and discussed Rydex Investments' investment experience, noting that Rydex Investments and its affiliates have committed significant resources over time to the support of the Funds. The Board also considered Rydex Investments' compliance program and its compliance record with respect to the Funds. In that regard, the Board noted that Rydex Investments provides information regarding the portfolio management and compliance to the Board on a periodic basis in connection with regularly scheduled meetings of the Board. In addition to the above considerations, the Board reviewed and considered Rydex Investments' investment processes and strategies, and matters related to Rydex Investments' portfolio transaction policies and procedures. The Board further noted that the Funds have met their investment objectives consistently since their relevant inception dates. Based on this review, the Board concluded that the nature, extent and quality of services to be provided by Rydex Investments to the Funds under the Advisory Agreement were appropriate and continued to support the Board's original selection of Rydex Investments as investment adviser to the Funds. FUND EXPENSES AND PERFORMANCE OF THE FUNDS AND RYDEX INVESTMENTS The Board reviewed statistical information prepared by Rydex Investments regarding the expense ratio components, including actual advisory fees, waivers/reimbursements, and gross and net total expenses of each Fund. In addition, the Board reviewed statistical information prepared by Rydex Investments relating to the performance of each Fund, as well as each Fund's ability to successfully track its benchmark over time, and a comparison of each Fund's performance to appropriate indices/benchmarks, in light of total return, yield and market trends. Based on this review, the Board concluded that the investment advisory fees and expense levels and the historical performance of the SUPPLEMENTAL INFORMATION (Unaudited) (continued) - -------------------------------------------------------------------------------- 43 ANNUAL REPORT Funds, as managed by Rydex Investments, were satisfactory for the purposes of approving the continuance of the Advisory Agreement. COSTS OF SERVICES PROVIDED TO THE FUNDS AND PROFITS REALIZED BY RYDEX INVESTMENTS AND ITS AFFILIATES The Board reviewed information about the profitability of the Funds to Rydex Investments based on the advisory fees payable under the Advisory Agreement for the last calendar year. Rydex Investments also presented the Board with material discussing its methodology for determining the level of advisory fees assessable to the Funds. The Board analyzed the Funds' expenses, including the investment advisory fees paid to Rydex Investments. The Board also reviewed information regarding direct revenue received by Rydex Investments and ancillary revenue received by Rydex Investments and/or its affiliates in connection with the services provided to the Funds by Rydex Investments (as discussed below). The Board also discussed Rydex Investments' profit margin as reflected in Rydex Investments' profitability analysis and reviewed information regarding economies of scale (as discussed below). Based on this review, the Board concluded that the profits to be realized by Rydex Investments and its affiliates under the Advisory Agreement and from other relationships between the Funds and Rydex Investments and/or its affiliates, if any, were within the range the Board considered reasonable and appropriate. ECONOMIES OF SCALE In connection with its review of the Funds' profitability analysis, the Board reviewed information regarding economies of scale or other efficiencies that may result from increases in the Funds' asset levels. The Board noted that the Advisory Agreement for the Funds did not provide for any breakpoints in the investment advisory fee rates as a result of increases in the asset levels of such Funds. However, the Board further noted that possible future economies of scale had been taken into consideration by fixing the investment advisory fees at rates at the lower end of the marketplace, effectively giving Fund shareholders, from inception, the benefits of the lower average fee shareholders would have received from a fee structure with declining breakpoints where the initial fee was higher. The Board also reviewed Rydex Investments' historic profitability as investment adviser to the Funds and determined that reductions in fee rates or additions of breakpoints were not warranted at this juncture. Based on this review, the Board, recognizing its responsibility to consider this issue at least annually, concluded that there are limited economies of scale to share with the Funds' shareholders. OTHER BENEFITS TO RYDEX INVESTMENTS AND/OR ITS AFFILIATES The Board noted that Rydex Investments reports its use of soft dollars to the Board on a quarterly basis, as well as any portfolio transactions on behalf of the Funds placed SUPPLEMENTAL INFORMATION (Unaudited) (continued) - -------------------------------------------------------------------------------- 44 through an affiliate of the Funds or Rydex Investments pursuant to Rule 17e-1 under the 1940 Act. The Board concluded that any such ancillary benefits would not be disadvantageous to the Funds' shareholders. Based on the above analysis, the Board determined that the Advisory Agreement, including the investment advisory fee rates thereunder, are fair and reasonable in light of all relevant circumstances and concluded that it is in the best interest of the Funds and their shareholders to continue the Advisory Agreement. - -------------------------------------------------------------------------------- 45 ANNUAL REPORT PROXY VOTING POLICIES AND PROCEDURES A description of the Funds' proxy voting policies and procedures is available, without charge and upon request, by calling (800) 820-0888. This information is also available on the Securities and Exchange Commission's ("Commission") website at 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, is also available, without charge and upon request, by (i) calling (800) 820-0888; or (ii) accessing the Funds' Form N-PX on the SEC's website at www.sec.gov. QUARTERLY PORTFOLIOS The Funds file their complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the Commission's website at . The Funds' Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. INFORMATION ON THE BOARD OF TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- 46 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 (800) 820-0888. All Trustees and Officers may be reached c/o Rydex Investments, 9601 Blackwell Rd., Suite 500, Rockville, MD 20850. TRUSTEES AND OFFICERS
LENGTH OF SERVICE NAME, POSITION AND AS TRUSTEE NUMBER OF FUNDS YEAR OF BIRTH (YEAR BEGAN) OVERSEEN - ------------------------ ---------------------------------- --------------- CARL G. VERBONCOEUR* Rydex Series Funds - 2004 110 Trustee, President Rydex Variable Trust - 2004 (1952) Rydex Dynamic Funds - 2004 Rydex ETF Trust - 2004 Rydex Capital Partners SPhinX Fund - 2005
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Chief Executive Officer of Rydex Fund Services, Inc., PADCO Advisors, Inc., PADCO Advisors II, Inc., and Rydex Distributors, Inc. (2003 to present); Executive Vice President of Rydex Fund Services, Inc. (2000 to 2003); Vice President of Rydex Fund Services, Inc. and Rydex Distributors, Inc. (1997 to 2000) --------------- MICHAEL P. BYRUM* Rydex Series Funds - 2005 110 Trustee, Vice President Rydex Variable Trust - 2005 and Secretary (1970) Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 Rydex Capital Partners SPhinX Fund - 2003
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Secretary of Rydex Series Funds, Rydex Variable Trust, and Rydex Dynamic Funds (2004 to present); Vice President of Rydex Series Funds (1997 to present); Vice President of Rydex Variable Trust (1998 to present); Vice President of Rydex Dynamic Funds (1999 to present); Vice President of Rydex ETF Trust (2002 to present); President and Trustee of Rydex Capital Partners SPhinX Fund (2003 to present); President of Rydex Global Advisors (2004 to present); Chief Operating Officer of Rydex Global Advisors and Rydex Distributors, Inc. (2003 to 2004) - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES
LENGTH OF SERVICE NAME, POSITION AND AS TRUSTEE NUMBER OF YEAR OF BIRTH (YEAR BEGAN) FUNDS OVERSEEN - ------------------------ ---------------------------------- --------------- COREY A. COLEHOUR Rydex Series Funds - 1993 110 Trustee (1945) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 Rydex Capital Partners SPhinX Fund - 2005
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Senior Vice President of Marketing/Co-Owner, Schield Management Company --------------- J. KENNETH DALTON Rydex Series Funds - 1995 110 Trustee (1941) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 Rydex Capital Partners SPhinX Fund - 2005
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Mortgage Banking Consultant and Investor, The Dalton Group --------------- INFORMATION ON THE BOARD OF TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- 47 ANNUAL REPORT JOHN O. DEMARET Rydex Series Funds - 1997 110 Trustee (1940) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 Rydex Capital Partners SPhinX Fund - 2003
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Retired ---------------
LENGTH OF SERVICE NAME, POSITION AND AS TRUSTEE NUMBER OF FUNDS YEAR OF BIRTH (YEAR BEGAN) OVERSEEN - ------------------------ ---------------------------------- --------------- WERNER E. KELLER Rydex Series Funds - 2005 110 Trustee (1940) Rydex Variable Trust - 2005 Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 Rydex Capital Partners SPhinX Fund - 2003
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 110 Trustee (1960) Rydex Variable Trust - 2005 Rydex Dynamic Funds - 2005 Rydex ETF Trust - 2005 Rydex Capital Partners SPhinX Fund - 2003
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: President, Global Trends Investments --------------- PATRICK T. MCCARVILLE Rydex Series Funds - 1997 110 TRUSTEE (1942) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 Rydex Capital Partners SPhinX Fund - 2005
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Founder and Chief Executive Officer, Par Industries, Inc. --------------- ROGER SOMERS TRUSTEE Rydex Series Funds - 1993 110 (1944) Rydex Variable Trust - 1998 Rydex Dynamic Funds - 1999 Rydex ETF Trust - 2003 Rydex Capital Partners SPhinX Fund - 2005
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS: Owner, Arrow Limousine - -------------------------------------------------------------------------------- EXECUTIVE OFFICERS
NAME, POSITION AND PRINCIPAL OCCUPATIONS YEAR OF BIRTH DURING PAST FIVE YEARS - ------------------------- -------------------------------------------------- NICK BONOS* Vice President and Treasurer of Rydex Series Vice President and Funds, Rydex Variable Trust, Rydex Dynamic Funds, Treasurer (1963) Rydex ETF Trust, and Rydex Capital Partners SPhinX Fund (2003 to present); Senior Vice President of Rydex Fund Services, Inc. (2003 to present); Vice President of Accounting of Rydex Fund Services, Inc. (2000 to 2003) JOANNA M. HAIGNEY* Chief Compliance Officer Rydex Series Funds, Rydex Chief Compliance Officer Variable Trust, and Rydex Dynamic Funds (2004 to and Assistant Secretary present); Assistant Secretary of Rydex Series (1967) Funds, Rydex Variable Trust, and Rydex Dynamic Funds (2000 to present); Assistant Secretary of Rydex ETF Trust (2002 to present); Secretary of Rydex Capital Partners SPhinX Fund, (2003 to present); Vice President of Compliance of Rydex Fund Services, Inc. (2000 to present)
* Officers of the fund 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 the Advisor. - -------------------------------------------------------------------------------- 48 The Funds' Statement of Additional Information contains additional information about the Trustees and Officers and is available, without charge, upon request, by calling (800) 207-3390. INVESTMENT ADVISOR Rydex Investments ADMINISTRATOR State Street Bank and Trust Company CUSTODIAN State Street Bank and Trust Company TRANSFER AGENT State Street Bank and Trust Company DISTRIBUTOR Rydex Distributors, Inc. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP [RYDEXINVESTMENTS LOGO] ESSENTIAL FOR MODERN MARKETS(TM) - -------------------------------------------------------------------------------- 9601 Blackwell Road - Suite 500 - Rockville, MD 20850 www.rydexinvestments.com - 800.820.0888 ETF-ANN 1205 X1206 [GRAPHIC] 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. While the members of the audit committee have many years of experience in business and finance, including working with fund financial statements and auditors, they do not feel that the background and experience of any single member would meet the qualifications necessary to be a "financial expert" as that term is defined by the Securities and Exchange Commission. Nonetheless, the committee has determined that, together, its collective financial experience and expertise makes an individual financial expert unnecessary at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a)-(d) The aggregate Audit Fees billed by PricewaterhouseCoopers LLP ("PWC"), 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, 2005 and October 31, 2004 were $32,400 and $21,200, respectively. The aggregate Tax Fees billed by PWC 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, 2005 and December 31, 2004 were $30,000 and $14,840, 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) Not applicable. (h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The Rydex ETF Trust has a separate designated audit committee, which consists of the independent trustees. The audit committee members are J. Kenneth Dalton, John O. Demaret, Patrick T. McCarville, Corey A. Colehour and Roger Somers. 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 9, 2006, 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 Global Advisors ("RGA"), 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, Inc. ("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 RGA 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 RGA, 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 RGA'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/ Carl G. Verboncoeur --------------------------------------------------------- Carl G. Verboncoeur, President Date January 9, 2006 ---------------------------------------------------------------------------- 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/ Carl G. Verboncoeur ------------------------------------------------------- Carl G. Verboncoeur, President Date January 9, 2006 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ Nick Bonos ------------------------------------------------------- Nick Bonos, Vice President and Treasurer Date January 9, 2006 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.12.A.1 2 b57925ssexv99w12waw1.txt CODE OF ETHICS EX-12(a)(1) CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- CODE OF ETHICS PROCEDURE CREATION DATE: Adopted December 11, 1998 (by RDF, RSF, RVT, RGA, RFS, and RDI) Adopted [Date] (by Sphinx and RSP) Adopted by the Advisors, February 1, 2005 Adopted by the Board, February 11, 2005 PROCEDURE REVIEWED AS OF: September 2004 PROCEDURE REVISED AS OF: February 1, 2002 January 30, 2003 August 25, 2003 February 1, 2005 REGULATORY RULES: Rule 17j-1 of the Investment Company Act of 1940 and Rule 204A-1 under the Investment Advisers Act of 1940 BUSINESS UNIT: Compliance Department RESPONSIBILITY: Compliance Administrator MANAGER RESPONSIBLE: Compliance Manager COVERED ENTITIES: This Combined Code of Ethics adopted under Rule 17j-1 under the Investment Company Act of 1940 (the "1940 Act") and Rule 204A-1 under the Investment Advisers Act of 1940 (the "Advisers Act") covers the following companies:
TRUSTS ADVISORS SERVICE PROVIDERS - --------------------------------------------- -------------------------------------- ---------------------------------------- o Rydex Dynamic Funds o PADCO Advisors, Inc. o Rydex Fund Services, Inc. - --------------------------------------------- -------------------------------------- ---------------------------------------- o Rydex Series Funds o PADCO Advisors II, Inc. o Rydex Distributors, Inc. - --------------------------------------------- -------------------------------------- ---------------------------------------- o Rydex Variable Trust o Rydex Capital Partners I, LLC - --------------------------------------------- --------------------------------------- ---------------------------------------- o Rydex ETF Trust o Rydex Capital Partners II, LLC - --------------------------------------------- --------------------------------------- ---------------------------------------- o Rydex Capital Partners Sphinx Fund - --------------------------------------------- ------------------------------------ ----------------------------------------
PROCEDURE: Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, Rydex ETF Trust, and Rydex Capital Partners Sphinx Fund (each a "Trust" and jointly the "Trusts"), and PADCO Advisors, Inc., PADCO Advisors II, Inc., Rydex Capital Partners I, LLC, Rydex Capital Partners II, LLC, Rydex Fund Services, Inc. and Rydex Distributors, Inc. (each a "Company," jointly the "Companies," and together with the Trusts, "Rydex") are confident that their officers, trustees, directors and employees act with integrity and good faith. Rydex recognizes, however, that personal interests may conflict with a Trust's or Company's interests where trustees, directors, officers or employees: o Know about present or future portfolio transactions or o Have the power to influence portfolio transactions; and o Engage in personal transactions in securities. In an effort to prevent these conflicts from arising and in accordance with Rule 17j-1(b)(1) under the 1940 Act and Rule 204A-1 under the Advisers Act, Rydex has adopted this Code of Ethics and all amendments thereto (together, the "Code") to prohibit transactions that create, may create, or appear to create conflicts of interest, and to establish reporting requirements and enforcement procedures. Each trustee, director, officer and employee of Rydex should carefully read and review this Code. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 1 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- 1. ABOUT RYDEX 1.1 Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, and Rydex ETF Trust are separately registered open-end management investment companies. Rydex Capital Partners Sphinx Fund is a non-diversified closed-end management investment company. Each Trust may consist of multiple investment portfolios (each a "Fund" and together, the "Rydex Funds"). The Rydex Funds may be grouped primarily into three broad categories: (1) Benchmark Funds (one of which is exchange-traded), (2) Sector Funds, and (3) Strategic Funds. In addition, there is a Money Market Fund and a closed-end fund of hedge funds (the "Sphinx Fund"). 1.2 PADCO Advisors, Inc., PADCO Advisors II, Inc., Rydex Capital Partners I, LLC, and Rydex Capital Partners II, LLC (the "Advisors") are each investment advisers. PADCO Advisors, Inc. is the investment adviser for Rydex Dynamic Funds and Rydex Series Funds and PADCO Advisors II, Inc. is the investment adviser for Rydex Variable Trust and Rydex ETF Trust. Rydex Capital Partners I, LLC is the investment adviser for the Sphinx Fund and Rydex Capital Partners II, LLC is the investment adviser for Rydex Capital Partners Equity Market Neutral Fund, LP, a private equity fund. 1.3 Rydex Distributors, Inc. serves as the distributor to the Rydex Funds. 1.4 Rydex Financial Services, Inc. provides general administrative services and serves as the transfer agent to the Rydex Dynamic Funds, Rydex Series Funds and Rydex Variable Trust. 2. ABOUT THIS CODE OF ETHICS 2.1 TRANSACTION-RELATED AND REPORTING PROVISIONS This Code sets forth specific prohibitions relating to securities transactions and also sets out certain reporting requirements. They cover the persons identified below: o All Company officers and directors; o Employees who have access to nonpublic information regarding any clients' purchase or sale of securities or the portfolio holdings of any reportable fund, e.g. portfolio management and fund accounting personnel, are involved in making securities recommendations to clients, or have access to such recommendations that are nonpublic; o All Trustees of the Trusts, both Interested and Independent; and o Natural persons in a control relationship with a Company who obtain information concerning recommendations made to a Fund about the purchase or sale of a security and are not specifically covered by any other section of the Code. For the prohibitions and reporting requirements that apply to you, please refer to Parts A-D, as indicated below. (Definitions of underlined terms are included in Appendix A.) o Independent Trustees of the Trusts.......................................Part A o Interested Trustees of the Trusts........................................Part B o Access Persons...........................................................Part C o Natural Control Persons..................................................Part D
2.2 OTHER PROVISIONS The remainder of this Code sets forth general principles, required course of conduct, reporting obligations, and Rydex's review, enforcement and recordkeeping responsibilities as well as other miscellaneous information. 3. STATEMENT OF GENERAL PRINCIPLES In recognition of the trust and confidence placed in Rydex by shareholders of the Trusts, and because Rydex believes that their operations should benefit shareholders, Rydex has adopted the following universally applicable principles. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 2 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- >> Shareholders' interests are paramount. You must place shareholder interests before your own. >> You must accomplish all personal securities transactions in a manner that avoids even the appearance of a conflict of your personal interests with those of a Trust and its shareholders. >> You must avoid actions or activities that allow (or appear to allow) you or your family to profit or benefit from your position with Rydex, or that bring into question your independence or judgment. >> You must comply with all applicable federal securities laws, including the prohibitions against the misuse of material nonpublic information, in conducting yourself and the operations of Rydex. 4. REQUIRED COURSE OF CONDUCT 4.1 PROHIBITION AGAINST FRAUD, DECEIT AND MANIPULATION You cannot, in connection with the purchase or sale, directly or indirectly, of a security held or to be acquired by any Fund: (a) employ any device, scheme or artifice to defraud the Fund; (b) make to the Fund any untrue statement of a material fact or omit to state to the Fund a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (c) engage in any act, practice or course of business which would operate as a fraud or deceit upon the Fund; or (d) engage in any manipulative practice with respect to the Fund. Two of the most common risks associated with personal securities transactions are front-running and trading opposite a fund. For example, front-running would include the purchase of a security any time within seven days ahead of when a fund purchases the same security or the sale of a security any time within seven days ahead of when a fund sells the same security. An example of trading opposite a fund would include the sale of a security any time within seven days after a fund purchases the same security or the purchase of a security any time within seven days after a fund sells the same security. 4.2 LIMITS ON ACCEPTING OR RECEIVING GIFTS Access Persons cannot accept or receive any gift of more than de minimis value from any person or entity that does business with or on behalf of Rydex. This provision does not include: o occasional meals, tickets to a sporting event or the theater, or normal business entertainment; and o any payment or reimbursement for professional training or educational meetings. 5. CONFIDENTIALITY All personal securities transactions reports and any other information filed with Rydex under this Code will be treated as confidential, provided that such reports and related information may be produced to the Securities and Exchange Commission (the "SEC") and other regulatory agencies. 6. INTERPRETATION OF PROVISIONS The Board of Trustees of the Trusts may from time to time adopt such interpretations of this Code as it deems appropriate. 7. ACKNOWLEDGMENT OF RECEIPT AND ANNUAL CERTIFICATION Each interested Trustee, director, officer, employee and affiliated agent of Rydex will receive a copy of the Code and any subsequent amendments to the Code, and each such person must acknowledge receipt of the Code in writing. In addition, each such person is required to certify annually that he/she (i) has read and understands the Code, (ii) is aware that he/she is subject to the provisions of this Code, (iii) has complied with the Code at all times during the - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 3 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- previous calendar year, and (iv) has, during the previous calendar year, reported all holdings and transactions that he/she is required to report pursuant to the Code. The acknowledgement of receipt and certification may be made electronically via the rydex.starcompliance.com web site. EXCEPTION HANDLING: The Compliance Officer, in his or her discretion, may exempt any person from any specific provision of the Code, if the Compliance Officer determines that (a) the services of the person are valuable to Rydex; (b) the failure to grant this exemption will result in an undue burden on the person or prevent the person from being able to render services to Rydex; and (c) granting the exemption does not detrimentally affect the shareholders of the Rydex Funds. The Compliance Officer will prepare a report documenting the nature of any exemption granted, the persons involved and the reasons for granting such exemption. Any person granted an exemption with respect to a particular transaction must furnish the Compliance Officer with a written report concerning that transaction within three (3) days of the transaction. REPORTING REQUIREMENTS: 1. INDIVIDUAL REPORTING OBLIGATIONS See Parts A, B, C or D as appropriate, for your specific reporting obligations. 1.1 OBLIGATION TO REPORT VIOLATIONS OF THE CODE In addition to the individual reporting requirements referenced above, any violation of the Code must be promptly reported to the Compliance Officer. 2. ANNUAL WRITTEN REPORT TO THE BOARD At least once a year, the Compliance Officer, on behalf of Rydex, will provide the Board of Trustees of each Trust a written report that includes: 2.1 ISSUES ARISING UNDER THE CODE The Report will describe any issue(s) that arose during the previous year under the Code, including any material Code violations, and any resulting sanctions. 2.2 CERTIFICATION The Report will certify to the Boards of Trustees that each Company has adopted measures reasonably necessary to prevent its personnel from violating the Code currently and in the future. 3. PERIODIC REVIEW AND REPORTING The Compliance Officer (or his or her designee) will report to the Boards of Trustees at least annually as to the operation of this Code and will address in any such report the need (if any) for further changes or modifications to this Code. TESTING AND REVIEW: Each Trust and Company shall appoint the Compliance Officer. 1. DUTIES OF THE COMPLIANCE OFFICER 1.1 The Compliance Officer will, on a quarterly basis, compare all reported personal securities transactions with the Trusts' completed portfolio transactions and a list of securities being considered for purchase or sale by the Advisors to determine whether a Code violation may have occurred. The Compliance Officer may request additional information or take any other appropriate measure that the Compliance Officer decides is necessary to aid in this determination. Before determining that a person has violated the Code, the Compliance Officer must give the person an opportunity to supply explanatory material. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 4 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- 1.2 If the Compliance Officer determines that a Code violation may have occurred, the Compliance Officer must submit the determination, together with the confidential quarterly report and any explanatory material provided by the person, to the President of the Trust or Company and fund counsel ("Counsel"). The President of the Trust or Company and Counsel will independently determine whether the person violated the Code. 1.3 No person is required to participate in a determination of whether he or she has committed a Code violation or of the imposition of any sanction against himself or herself. If a securities transaction of the President is under consideration, a Vice President will act for the President for purposes of this Section. 2. SANCTIONS If the President and Counsel find that the person violated the Code, the President will impose upon the person sanctions that the President deems appropriate and will report the violation and the sanction imposed to the Board of Trustees of the Rydex Funds at the next regularly scheduled board meeting unless, in the sole discretion of the Trusts' President, circumstances warrant an earlier report. RECORDKEEPING: The Companies will maintain records as set forth below. These records will be maintained in accordance with Rule 31a-2 under the 1940 Act and Rule 204-2(a)(12) under the Advisers Act and will be available for examination by representatives of the SEC. o A copy of this Code and any other code which is, or at any time within the past five years has been, in effect will be preserved in an easily accessible place; o A list of all persons who are, or within the past five years have been, required to submit reports under this Code will be maintained in an easily accessible place; o A copy of each report made by a person under this Code will be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; o A copy of each duplicate brokerage confirmation and each periodic statement provided under this Code will be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place. o A record of any Code violation and of any sanctions taken will be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurred; o A copy of each annual report to the Board of Trustees will be maintained for at least five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; o A copy of all Acknowledgements of Receipt and Annual Certifications as required by this Code for each person who is currently, or within the past five years was required to provide such Acknowledgement of Receipt or Annual Certification; and o The Companies will maintain a record of any decision, and the reasons supporting the decision, to approve the acquisition of securities in an initial public offering ("IPO") or a private placement, for at least five years after the end of the fiscal year in which the approval is granted. DISCLOSURE: The Code of Ethics will be disclosed in accordance with the requirements of Forms ADV, N1-A, and N-2. REVISIONS: These procedures shall remain in effect until amended, modified or terminated. The Boards of Trustees must approve any material amendments to the Code within six months of the amendment. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 5 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- PART A PROCEDURES FOR INDEPENDENT TRUSTEES AND DIRECTORS GENERAL OBLIGATIONS. 1. REQUIRED TRANSACTION REPORTS 1.1 On a quarterly basis you must report any securities transactions, as well as any securities accounts established. You must submit your report to the Compliance Officer no later than 30 calendar days after the end of the calendar quarter in which the transaction to which the report relates was effected. Quarterly Personal Securities Transactions Reports will be made electronically, via the rydex.starcompliance.com web site. You will receive notification via email when the Quarterly Transaction Report is due, including instructions on how to access the information and complete the report. 1.2 If you had no reportable transactions or did not open any securities accounts during the quarter, you are not required to submit a report. 1.3 Reports of individual securities transactions are required only if you knew at the time of the transaction or, in the ordinary course of fulfilling your official duties as a Trustee, should have known, that during the 15-calendar day period immediately preceding or following the date of your transaction, the same security was purchased or sold, or was being considered for purchase or sale, by a Fund. Note: The "should have known" standard does not: (a) imply a duty of inquiry; (b) presume you should have deduced or extrapolated from discussions or memoranda dealing with the Fund's investment strategies; or (c) impute knowledge from your prior knowledge of the Fund's portfolio holdings, market considerations, or investment policies, objectives and restrictions. 2. WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING OBLIGATION? If the transaction is reportable because it came within paragraph (1), above, you must report all transactions in securities that: (i) you directly or indirectly beneficially own or (ii) because of the transaction, you acquire direct or indirect beneficial ownership. The report must also contain any account you established in which any securities were held during the quarter. 3. WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR REPORT? You are not required to detail or list the following securities or transactions on your quarterly report: (a) Purchases or sales effected for any account over which you have no direct or indirect influence or control. (b) Purchases you made solely with the dividend proceeds received in a dividend reinvestment plan or that are part of an automatic payroll deduction plan or other similar type of plan, where you purchase securities issued by your employer. (c) Purchases arising from the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, as long as you acquired these rights from the issuer, and sales of such rights so acquired. (d) Purchases of securities issued by the U.S. Government or its agencies, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments, including repurchase agreements, and registered open-end mutual funds, other than reportable funds. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 6 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- (e) Purchases or sales which are non-volitional on your part, including purchases or sales upon exercise of puts or calls written by you and sales from a margin account to a bona fide margin call. You may include a statement in your report that the report shall not be construed as your admission that you have any direct or indirect beneficial ownership in the security included in the report. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 7 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- PART B INTERESTED TRUSTEES AND DIRECTORS GENERAL OBLIGATIONS. 1. PROVIDING A LIST OF SECURITIES You must provide the Compliance Officer with a complete listing of all securities you beneficially own as of December 31 of the previous year. Each following year, you must submit a revised list to the Compliance Officer showing the securities you beneficially own as of December 31. You must submit the initial listing within 10 calendar days of the date you first become a Trustee, and each update no later than 30 calendar days after the start of the year. The Initial Holdings Report and Annual Holdings Report, as applicable, will be delivered electronically, via the rydex.starcompliance.com web site. You will receive notification via email when the applicable report is due, including instructions on how to access the information and complete the report. You are not required to provide this list of securities if you are not currently affiliated with or employed by a Trust's investment adviser(s) or distributor. 2. REQUIRED TRANSACTION REPORTS On a quarterly basis you must report any securities transactions, as well as any securities accounts established. You must submit your report to the Compliance Officer no later than 30 calendar days after the end of the calendar quarter in which the transaction to which the report relates was effected. Quarterly Personal Securities Transactions Reports will be made electronically, via the rydex.starcompliance.com web site. You will receive notification via email when the Quarterly Transaction Report is due, including instructions on how to access the information and complete the report. If you had no reportable transactions or did not open any securities accounts during the quarter, you are still required to submit a report. Please sign in the space provided and submit the report with no transactions listed. 3. WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING OBLIGATION? You must report all transactions in securities that: (i) you directly or indirectly beneficially own or (ii) because of the transaction, you acquire direct or indirect beneficial ownership. The report must also contain any account you established in which any securities were held during the quarter. 4. PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS You must obtain approval from the Compliance Officer before acquiring beneficial ownership of any securities offered in connection with an IPO or a private placement. 5. WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR REPORT? You are not required to detail or list the following securities or transactions on your report: (a) Purchases or sales effected for any account over which you have no direct or indirect influence or control. (b) Purchases you made solely with the dividend proceeds received in a dividend reinvestment plan or that are part of an automatic payroll deduction plan or other similar type of plan, where you purchase securities issued by your employer. (c) Purchases arising from the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, as long as you acquired these rights from the issuer, and sales of such rights so acquired. (d) Purchases of securities issued by the U.S. Government or its agencies, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments, including repurchase agreements, and registered open-end mutual funds, other than reportable funds. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 8 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- (e) Purchases or sales which are non-volitional on your part, including purchases or sales upon exercise of puts or calls written by you and sales from a margin account to a bona fide margin call. You may include a statement in your report that the report shall not be construed as your admission that you have any direct or indirect beneficial ownership in the security included in the report. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 9 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- PART C ACCESS PERSONS GENERAL OBLIGATIONS 1. THIRTY-DAY PROHIBITION ON SELLING SECURITIES You cannot sell a security within 30 calendar days of acquiring that security. 2. PROVIDING A LIST OF SECURITIES You must provide the Compliance Officer with a complete listing of all securities you beneficially own as of December 31 of the previous year. Each following year, you must submit a revised list to the Compliance Officer showing the securities you beneficially own as of December 31. You must submit the initial listing within 10 calendar days of the date you first become an Access Person, and each update no later than 30 calendar days after the start of the year. The Initial Holdings Report and Annual Holdings Report, as applicable, will be delivered electronically, via the rydex.starcompliance.com web site. You will receive notification via email when the applicable report is due, including instructions on how to access the information and complete the report. You are not required to provide this list of securities if you are not currently affiliated with or employed by a Trust's investment adviser(s) or distributor. 3. DUPLICATE BROKERAGE CONFIRMATION AND STATEMENTS You must direct your brokers to provide the Compliance Officer with duplicate copies of confirmations of all securities transactions in which you will acquire beneficial ownership of a security and copies of periodic statements for all personal securities accounts. 4. PRE-CLEARANCE REQUIREMENT You must submit a report detailing every proposed securities transaction in which you will acquire a beneficial ownership interest to the Compliance Officer and obtain pre-clearance for each securities transaction prior to engaging in the transaction. The report shall include the name of the security, date of the proposed transaction, quantity, price, and broker-dealer through which the transaction is to be effected. 4.1 PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS You must obtain approval from the Compliance Officer before acquiring beneficial ownership of any securities offered in connection with an IPO or a private placement. 5. REQUIRED TRANSACTION REPORTS On a quarterly basis you must report transactions in securities, as well as any securities accounts established. You must submit your report to the Compliance Officer no later than 30 calendar days after the end of the calendar quarter in which the transaction to which the report relates was effected. Quarterly Personal Securities Transactions Reports will be made electronically, via the rydex.starcompliance.com web site. You will receive notification via email when the Quarterly Transaction Report is due, including instructions on how to access the information and complete the report. If you had no reportable transactions or did not open any securities accounts during the quarter, you are still required to submit a report. Please sign in the space provided and submit the report with no transactions listed. 6. WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING OBLIGATION? You must report all transactions in securities that: (i) you directly or indirectly beneficially own or (ii) because of the transaction, you acquire direct or indirect beneficial ownership. The report must contain any account you established in which any securities were held during the quarter. 7. WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR REPORT? You are not required to detail or list the following securities or transactions on your report. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 10 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- (a) Purchases or sales effected for any account over which you have no direct or indirect influence or control. (b) Purchases you made solely with the dividend proceeds received in a dividend reinvestment plan or that are part of an automatic payroll deduction plan or other similar type of plan, where you purchase securities issued by your employer. (c) Purchases arising from the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, as long as you acquired these rights from the issuer, and sales of such rights so acquired. (d) Purchases of securities issued by the U.S. Government or its agencies, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments, including repurchase agreements, and registered open-end mutual funds, other than reportable funds. (e) Purchases or sales which are non-volitional on your part, including purchases or sales upon exercise of puts or calls written by you and sales from a margin account to a bona fide margin call. You may include a statement in your report that the report shall not be construed as your admission that you have any direct or indirect beneficial ownership in the security included in the report. 8. SEVEN-DAY BLACKOUT PERIOD ON PERSONAL SECURITIES TRANSACTIONS You cannot purchase or sell, directly or indirectly, any security in which you had (or by reason of such transaction acquire) any beneficial ownership at any time within seven calendar days before or after the time that the same (or a related) security is being purchased or sold by any Rydex Fund. This provision will only apply if you obtain specific information regarding the purchase or sale of a security by a Rydex Fund. 8.1 EXCEPTION TO BLACKOUT PERIOD The seven-day blackout period does not apply to the purchase or sale of any security (i) of a company with a market capitalization in excess of $500 million, (ii) included in either the S&P 500 Composite Index or the NASDAQ 100 Index, and (iii) made in dollar amounts less than $25,000. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 11 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- PART D NATURAL CONTROL PERSONS GENERAL OBLIGATIONS. 1. PROVIDING A LIST OF SECURITIES You must provide the Compliance Officer with a complete listing of all securities you beneficially own as of December 31 of the previous year. Each following year, you must submit a revised list to the Compliance Officer showing the securities you beneficially own as of December 31. You must submit the initial listing within 10 calendar days of the date you first become a natural control person, and each update no later than 30 calendar days after the start of the year. The Initial Holdings Report and Annual Holdings Report, as applicable, will be delivered electronically, via the rydex.starcompliance.com web site. You will receive notification via email when the applicable report is due, including instructions on how to access the information and complete the report. You are not required to provide this list of securities if you are not currently affiliated with or employed by the Trusts' investment adviser(s) or distributor. 2. REQUIRED TRANSACTION REPORTS On a quarterly basis you must report any securities transactions, as well as any securities accounts established. You must submit your report to the Compliance Officer no later than 30 calendar days after the end of the calendar quarter in which the transaction to which the report relates was effected. Quarterly Personal Securities Transactions Reports will be made electronically, via the rydex.starcompliance.com web site. You will receive notification via email when the Quarterly Transaction Report is due, including instructions on how to access the information and complete the report. If you had no reportable transactions or did not open any securities accounts during the quarter, you are still required to submit a report. Please sign in the space provided and submit the report with no transactions listed. 3. WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY OBLIGATION? You must report all transactions in securities that: (i) you directly or indirectly beneficially own or (ii) because of the transaction, you acquire direct or indirect beneficial ownership. The report must also include any account you established in which securities were held during the quarter. 4. PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS You must obtain approval from the Compliance Officer before acquiring beneficial ownership of any securities offered in connection with an IPO or a private placement. 5. WHAT SECURITIES AND TRANSACTIONS ARE EXCLUDED FROM YOUR REPORTING OBLIGATION? You are not required to detail or list the following securities or transactions on your report: (a) Purchases or sales effected for any account over which you have no direct or indirect influence or control. (b) Purchases you made solely with the dividend proceeds received in a dividend reinvestment plan or that are part of an automatic payroll deduction plan, where you purchase securities issued by your employer. (c) Purchases arising from the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, as long as you acquired these rights from the issuer, and sales of such rights so acquired. (d) Purchases of securities issued by the U.S. Government or its agencies, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments, including repurchase agreements, and registered open-end mutual funds, other than reportable funds. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 12 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- (e) Purchases or sales which are non-volitional on your part, including purchases or sales upon exercise of puts or calls written by you and sales from a margin account to a bona fide margin call. You may include a statement in your report that the report shall not be construed as your admission that you have any direct or indirect beneficial ownership in the security included in the report. - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 13 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- APPENDIX A DEFINITIONS Access person includes: (a) any trustee, director or officer and (b) any supervised person who has access to nonpublic information regarding any clients' purchase or sale of securities or the portfolio holdings of any reportable fund, e.g. portfolio management and fund accounting personnel, is involved in making securities recommendations to clients, or has access to such recommendations that are nonpublic. Beneficial ownership means the same as under Section 16 of the Securities Exchange Act of 1934 and Rule 16a-1(a)(2) thereunder. You should generally consider yourself the beneficial owner of any security in which you have a direct or indirect pecuniary interest. In addition, you should consider yourself the beneficial owner of securities held by your spouse, your minor children, a relative who shares your home, or other persons by reason of any contract, arrangement, understanding or relationship that provides you with sole or shared voting or investment power. Control means the same as that under Section 2(a)(9) of the 1940 Act. Section 2(a)(9) provides that "control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. Ownership of 25% or more of a company's outstanding voting securities is presumed to give the holder of such securities control over the company. This presumption may be countered by the facts and circumstances of a given situation. Independent trustee means a trustee of a Trust who is not an "interested person" of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. As of February 1, 2005, the Trusts' independent trustees are: Corey A. Colehour J. Kenneth Dalton Roger Somers John O. Demaret Patrick T. McCarville Werner E. Keller Thomas F. Lydon Jr. Initial public offering ("IPO") means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Interested trustee means a trustee of a Trust who is an "interested person" of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. As of February 1, 2005, the Trusts' only interested trustees are: Carl G. Verboncoeur Michael P. Byrum Private placement means an offering that is exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) in the Securities Act of 1933. Purchase or sale of a security includes, among other things, the writing of an option to purchase or sell a security. Reportable fund means any fund for which you serve as investment adviser, any fund whose investment adviser or principal underwriter controls you, is controlled by you, or is under common control with you, or any closed-end fund regardless of affiliation. For purposes of this Code definition, control has the same meaning as it does above. Security means the same as that set forth in Section 2(a)(36) of the 1940 Act, except that it does not include securities issued by the U.S. Government or its agencies, bankers' acceptances, bank certificates of deposit, commercial paper, shares of registered open-end mutual funds other than reportable funds, and high quality short-term debt instruments, - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 14 of 15 CodeOfEthics.doc Procedure Number: IC02.2.2 - -------------------------------------------------------------------------------- including repurchase agreements. A security does not include index futures or other commodities. For purposes of this Code, a security does include futures, options, options on futures, and other types of derivatives. A security held or to be acquired by a Trust (or any Fund) means any security which, within the most recent 15 days, (i) is or has been held by a Trust (or any Fund) or (ii) is being or has been considered by a Trust's Advisor or sub-adviser for purchase by the Trust (or any Fund), and any option to purchase or sell, and any security convertible into or exchangeable for any security. A security is being purchased or sold by a Trust from the time a purchase or sale program has been communicated to the person who places buy and sell orders for the Trust until the program has been fully completed or terminated. Compliance Officer means the chief compliance officer of Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, Rydex ETF Trust, and the Sphinx Fund pursuant to Rule 38a-1 under the 1940 Act and the chief compliance officer of PADCO Advisors, Inc., PADCO Advisors II, Inc., Rydex Capital Partners I, LLC, and Rydex Capital Partners II, LLC pursuant to Rule 206(4)-7 under the Advisers Act, or any person designated by such chief compliance officer to act in the chief compliance officer's absence. As of February 1, 2005, the Compliance Officer is: Joanna M. Haigney - -------------------------------------------------------------------------------- 1-WA/2302161.8 Page 15 of 15 EX-99.12.A.2 3 b57925ssexv99w12waw2.txt CEO & CFO CERTIFICATIONS EX.-12(a)(2) CERTIFICATIONS I, Carl G. Verboncoeur, certify that: 1. I have reviewed this report on Form N-CSR of Rydex ETF Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the fiscal period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 9, 2006 s/ Carl G. Verboncoeur ------------------------------------ Carl G. Verboncoeur, President EX.-12(a)(2) CERTIFICATIONS I, Nick Bonos, certify that: 1. I have reviewed this report on Form N-CSR of Rydex ETF Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the fiscal period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 9, 2006 s/ Nick Bonos --------------------------------- Nick Bonos, Vice President and Treasurer EX-99.12.B 4 b57925ssexv99w12wb.txt 906 CERTIFICATIONS EX. 12(b) CERTIFICATIONS I, Carl G. Verboncoeur, President of Rydex ETF Trust (the "Trust"), certify that: 1. The Form N-CSR of the Trust (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. A signed original of this written statement required by Section 906 has been provided to the Trust and will be retained by the Trust and furnished to the Securities and Exchange Commission or its staff upon request. Dated: January 9, 2006 /s/ Carl G. Verboncoeur ------------------------ Carl G. Verboncoeur, President EX. 12(b) CERTIFICATIONS I, Nick Bonos, Treasurer of Rydex ETF Trust (the "Trust"), certify that: 1. The Form N-CSR of the Trust (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. A signed original of this written statement required by Section 906 has been provided to the Trust and will be retained by the Trust and furnished to the Securities and Exchange Commission or its staff upon request. Dated: January 9, 2006 /s/ Nick Bonos -------------------------------- Nick Bonos, Vice President and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----