-----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, PL5TRUoTIQe1AKzKcuLoXR9/DhXZWPDCmBcMJGs3dGS5qJ2FexQcv+a/BGsrJzC1 gtQDp4Y1e2O7mWSkebvxTQ== 0001047469-05-000438.txt : 20050110 0001047469-05-000438.hdr.sgml : 20050110 20050110124021 ACCESSION NUMBER: 0001047469-05-000438 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041031 FILED AS OF DATE: 20050110 DATE AS OF CHANGE: 20050110 EFFECTIVENESS DATE: 20050110 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: 05520144 MAIL ADDRESS: STREET 1: 9601 BLACKWELL RD STREET 2: STE 500 CITY: ROCKVILLE STATE: MD ZIP: 20850 N-CSR 1 a2148261zn-csr.txt N-CSR 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 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, 2004 ----------------- Date of reporting period: October 31, 2004 ----------------- 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. REPORT TO STOCKHOLDERS. The registrant's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: THE RYDEX ETF TRUST RYDEX S&P EQUAL WEIGHT ETF ANNUAL REPORT OCTOBER 31, 2004 [RYDEXINVESTMENTS LOGO] ESSENTIAL FOR MODERN MARKETS(TM) ETF-ANN 1004 This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Distributed by Rydex Distributors, Inc. ANNUAL REPORT TABLE OF CONTENTS LETTER FROM THE CEO 2 MANAGER'S ANALYSIS 4 FEES & EXPENSES 6 PORTFOLIO SUMMARY 7 SCHEDULE OF INVESTMENTS 8 STATEMENT OF ASSETS AND LIABILITIES 18 FINANCIAL HIGHLIGHTS 21 NOTES TO FINANCIAL STATEMENTS 22 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S REPORT 27 SUPPLEMENTAL INFORMATION 28
1 DEAR SHAREHOLDERS: The U.S. economy reached a more mature phase of the business cycle from November 1, 2003 to October 31, 2004. This was marked by lower realized and forecasted gross domestic product (GDP) growth rates and reduced forecasts for future corporate earnings growth. The trade gap widened during the period, factory orders continued to slow and oil prices moved significantly higher. The Federal Reserve (Fed), observing these changes, raised the Fed Funds rate .75% during the period. Inflation, as measured both by the Consumer Price Index and Producer Price Index, rose during this time period. Overall equity markets, which showed strong gains in 2003 and the early months of 2004, were flat during the remainder of the period prior to the election. There was good news, though. The unemployment rate declined, and housing starts continued to rise, although at a much slower pace. During the middle of the year, political and economic uncertainty led investors to return to the relative safety of large-cap stocks. But large-cap fallouts had an impact on the broad market, including Merck & Co.'s recall of arthritis drug Vioxx due to concern that it could increase risk of strokes and heart problems; the effect of the recall on Pfizer, Inc., which produces two arthritis drugs - one of which has been shown to predispose certain heart bypass surgery patients to increased risks; and allegations of "bid rigging" and under-the-table payoffs at big insurance companies like American International Group (AIG) and Marsh & McLennan. OUTPERFORMING THE CAP-WEIGHTED INDEX Since inception (4/22/03), the annualized returns of Rydex S&P Equal Weight ETF (RSP) - which tracks the S&P Equal Weight Index (SPXEW) - is 26.9% versus the annualized returns of S&P 500(R) Index's 17.3%. For the one-year reporting period, RSP returned 14.1% versus the S&P 500's 9.4%. RSP outperformed the cap-weighted index in eight out of 12 months. The SPXEW, the index on which the fund is based, returned 14.5% for the same period. SPXEW differs from its well-known counterpart in that the SPXEW is equally-weighted versus the S&P 500, which is capitalization-weighted. That means that instead of several giants dominating the SPXEW, each stock-no matter what its market capitalization-represents an equal 0.2% position in the index. This may benefit shareholders by avoiding domination by a few stocks and providing more exposure to smaller stocks in the S&P 500. This may especially be the case in the event of large-cap fallouts like those mentioned above. Over the long term, the SPXEW has outperformed the S&P 500. In fact, for the three- and five-year periods ending October 31, 2004, the SPXEW was up 11.5% and 7.0% respectively versus 3.9% and 2.2% for the predominantly large-cap S&P 500. Investors should note that both indices are unmanaged and not available for direct investment. TURNOVER, PERFORMANCE AND CAPITAL GAINS Due to the constant portfolio rebalancing required to meet the benchmark, Rydex S&P Equal Weight ETF will have significant turnover. Therefore, it will be very important to 2 continue to monitor the impact of all transactions on potential capital gains to the shareholder. Despite the significant turnover and favorable returns, we were fortunate to be able to manage the portfolio without any capital gain distributions during the first full year under management. 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 3 MANAGER'S ANALYSIS The U.S. economy reached a more mature phase of the business cycle from November 1, 2003 to October 31, 2004. Because of this, overall equity markets, which showed strong gains in 2003 and the early months of 2004, were flat during the remainder of the period prior to the election. This was due to political and economic uncertainty as investors started to return to the relative safety of large-cap stocks. Over the one-year reporting period, broad based performance with strong performance in smaller companies has helped drive outperformance versus the S&P 500. During this reporting period, the Rydex S&P Equal Weight ETF (RSP) returned 14.1% versus the S&P 500's 9.4%. RSP outperformed the cap-weighted index in eight out of 12 months. The S&P Equal Weight Index (SPXEW), the index on which the fund is based, returned 14.5% for the same period. [CHART] CUMULATIVE FUND PERFORMANCE: APRIL 24, 2003 - OCTOBER 31, 2004
RYDEX S&P EQUAL S&P EQUAL WEIGHT INDEX S&P 500 TOTAL WEIGHT ETF TOTAL RETURN INDEX RETURN INDEX 4/24/2003 $ 10,000.00 $ 10,000.00 $ 10,000.00 4/25/2003 $ 9,845.59 $ 9,845.01 $ 9,861.64 4/28/2003 $ 10,040.58 $ 10,041.17 $ 10,038.84 4/29/2003 $ 10,112.84 $ 10,113.44 $ 10,072.38 4/30/2003 $ 10,113.83 $ 10,114.38 $ 10,063.32 5/1/2003 $ 10,090.07 $ 10,091.72 $ 10,058.17 5/2/2003 $ 10,280.11 $ 10,281.74 $ 10,209.54 5/5/2003 $ 10,300.90 $ 10,303.04 $ 10,171.17 5/6/2003 $ 10,397.90 $ 10,399.44 $ 10,257.24 5/7/2003 $ 10,341.48 $ 10,343.12 $ 10,206.45 5/8/2003 $ 10,240.52 $ 10,242.40 $ 10,104.04 5/9/2003 $ 10,405.82 $ 10,408.41 $ 10,250.69 5/12/2003 $ 10,566.17 $ 10,568.99 $ 10,379.50 5/13/2003 $ 10,566.17 $ 10,569.29 $ 10,350.09 5/14/2003 $ 10,565.18 $ 10,567.74 $ 10,319.80 5/15/2003 $ 10,687.91 $ 10,691.34 $ 10,402.18 5/16/2003 $ 10,723.55 $ 10,727.15 $ 10,377.31 5/19/2003 $ 10,417.70 $ 10,420.74 $ 10,118.98 5/20/2003 $ 10,402.85 $ 10,406.08 $ 10,107.51 5/21/2003 $ 10,457.29 $ 10,461.12 $ 10,149.04 5/22/2003 $ 10,582.01 $ 10,585.66 $ 10,241.93 5/23/2003 $ 10,646.34 $ 10,650.58 $ 10,256.86 5/27/2003 $ 10,878.95 $ 10,883.97 $ 10,457.58 5/28/2003 $ 10,899.73 $ 10,905.24 $ 10,478.22 5/29/2003 $ 10,882.91 $ 10,888.31 $ 10,439.67 5/30/2003 $ 11,089.78 $ 11,095.75 $ 10,593.53 6/2/2003 $ 11,146.19 $ 11,152.37 $ 10,631.40 6/3/2003 $ 11,141.25 $ 11,147.82 $ 10,681.60 6/4/2003 $ 11,363.95 $ 11,371.26 $ 10,846.10 6/5/2003 $ 11,455.01 $ 11,461.88 $ 10,889.71 6/6/2003 $ 11,410.47 $ 11,417.98 $ 10,864.14 6/9/2003 $ 11,217.46 $ 11,224.52 $ 10,734.23 6/10/2003 $ 11,309.51 $ 11,317.39 $ 10,832.41 6/11/2003 $ 11,492.63 $ 11,501.17 $ 10,975.15 6/12/2003 $ 11,522.32 $ 11,530.74 $ 10,986.98 6/13/2003 $ 11,359.99 $ 11,367.74 $ 10,878.13 6/16/2003 $ 11,593.59 $ 11,602.41 $ 11,121.96 6/17/2003 $ 11,588.64 $ 11,596.93 $ 11,132.12 6/18/2003 $ 11,576.76 $ 11,585.91 $ 11,115.64 6/19/2003 $ 11,409.48 $ 11,417.85 $ 10,946.43 6/20/2003 $ 11,390.68 $ 11,399.30 $ 10,957.47 6/23/2003 $ 11,185.79 $ 11,194.72 $ 10,802.98 6/24/2003 $ 11,199.64 $ 11,208.93 $ 10,822.90 6/25/2003 $ 11,137.29 $ 11,145.96 $ 10,733.37 6/26/2003 $ 11,260.02 $ 11,269.02 $ 10,853.09 6/27/2003 $ 11,176.88 $ 11,185.89 $ 10,747.61 6/30/2003 $ 11,168.96 $ 11,178.74 $ 10,728.67 7/1/2003 $ 11,229.34 $ 11,239.44 $ 10,816.57 7/2/2003 $ 11,374.84 $ 11,384.43 $ 10,942.84 7/3/2003 $ 11,287.74 $ 11,298.19 $ 10,854.17 7/7/2003 $ 11,504.50 $ 11,514.81 $ 11,060.50 7/8/2003 $ 11,601.50 $ 11,612.92 $ 11,101.91 7/9/2003 $ 11,573.79 $ 11,585.45 $ 11,040.97 7/10/2003 $ 11,386.72 $ 11,397.90 $ 10,892.19 7/11/2003 $ 11,474.81 $ 11,485.72 $ 10,996.77 7/14/2003 $ 11,544.10 $ 11,555.21 $ 11,059.96 7/15/2003 $ 11,471.84 $ 11,496.13 $ 11,022.06 7/16/2003 $ 11,389.69 $ 11,398.58 $ 10,952.28 7/17/2003 $ 11,232.31 $ 11,241.24 $ 10,817.22 7/18/2003 $ 11,367.91 $ 11,377.01 $ 10,944.90 7/21/2003 $ 11,218.45 $ 11,227.59 $ 10,785.00 7/22/2003 $ 11,359.00 $ 11,367.95 $ 10,887.54 7/23/2003 $ 11,361.97 $ 11,372.16 $ 10,893.27 7/24/2003 $ 11,313.47 $ 11,323.40 $ 10,816.03 7/25/2003 $ 11,498.56 $ 11,508.67 $ 11,004.39 7/28/2003 $ 11,503.51 $ 11,514.57 $ 10,980.61 7/29/2003 $ 11,427.30 $ 11,438.14 $ 10,902.43 7/30/2003 $ 11,387.71 $ 11,398.38 $ 10,884.16 7/31/2003 $ 11,456.99 $ 11,468.29 $ 10,917.83 8/1/2003 $ 11,368.90 $ 11,380.23 $ 10,806.01 8/4/2003 $ 11,363.95 $ 11,374.92 $ 10,835.47 8/5/2003 $ 11,163.02 $ 11,173.81 $ 10,644.51 8/6/2003 $ 11,158.07 $ 11,169.43 $ 10,664.23 8/7/2003 $ 11,225.38 $ 11,236.38 $ 10,742.27 8/8/2003 $ 11,261.01 $ 11,272.57 $ 10,780.63 8/11/2003 $ 11,311.49 $ 11,323.30 $ 10,816.45 8/12/2003 $ 11,440.17 $ 11,451.64 $ 10,924.23 8/13/2003 $ 11,422.35 $ 11,433.90 $ 10,858.65 8/14/2003 $ 11,518.36 $ 11,530.48 $ 10,930.21 8/15/2003 $ 11,517.37 $ 11,530.61 $ 10,933.79 8/18/2003 $ 11,656.93 $ 11,670.62 $ 11,034.45 8/19/2003 $ 11,737.11 $ 11,751.01 $ 11,063.38 8/20/2003 $ 11,749.98 $ 11,765.49 $ 11,041.76 8/21/2003 $ 11,844.01 $ 11,859.49 $ 11,075.02 8/22/2003 $ 11,714.34 $ 11,729.74 $ 10,962.29 8/25/2003 $ 11,692.57 $ 11,707.88 $ 10,969.45 8/26/2003 $ 11,728.20 $ 11,743.19 $ 11,002.94 8/27/2003 $ 11,767.79 $ 11,783.72 $ 11,005.45 8/28/2003 $ 11,873.70 $ 11,890.12 $ 11,072.58 8/29/2003 $ 11,959.81 $ 11,976.45 $ 11,130.16 9/2/2003 $ 12,124.12 $ 12,142.63 $ 11,285.34 9/3/2003 $ 12,153.82 $ 12,173.62 $ 11,335.88 9/4/2003 $ 12,158.76 $ 12,177.51 $ 11,355.06 9/5/2003 $ 12,086.51 $ 12,105.23 $ 11,282.52 9/8/2003 $ 12,215.18 $ 12,234.68 $ 11,396.55 9/9/2003 $ 12,100.37 $ 12,119.04 $ 11,303.00 9/10/2003 $ 11,893.50 $ 11,909.39 $ 11,168.72 9/11/2003 $ 11,969.71 $ 11,988.09 $ 11,232.89 9/12/2003 $ 12,009.30 $ 12,027.83 $ 11,257.40 9/15/2003 $ 11,966.74 $ 11,986.02 $ 11,215.46 9/16/2003 $ 12,145.90 $ 12,165.65 $ 11,375.92 9/17/2003 $ 12,113.23 $ 12,132.98 $ 11,339.30 9/18/2003 $ 12,263.68 $ 12,285.12 $ 11,489.79 9/19/2003 $ 12,250.50 $ 12,271.67 $ 11,453.76 9/22/2003 $ 12,090.34 $ 12,112.28 $ 11,304.75 9/23/2003 $ 12,170.91 $ 12,192.90 $ 11,373.48 9/24/2003 $ 11,948.09 $ 11,969.73 $ 11,156.32 9/25/2003 $ 11,834.69 $ 11,856.73 $ 11,091.08 9/26/2003 $ 11,731.23 $ 11,753.77 $ 11,022.12 9/29/2003 $ 11,847.62 $ 11,870.50 $ 11,129.98 9/30/2003 $ 11,751.13 $ 11,773.46 $ 11,012.53 10/1/2003 $ 11,988.87 $ 12,011.74 $ 11,259.61 10/2/2003 $ 12,035.63 $ 12,058.65 $ 11,283.43 10/3/2003 $ 12,191.80 $ 12,214.84 $ 11,389.69 10/6/2003 $ 12,257.46 $ 12,281.42 $ 11,439.48 10/7/2003 $ 12,312.17 $ 12,340.84 $ 11,494.20 10/8/2003 $ 12,277.35 $ 12,300.88 $ 11,437.88 10/9/2003 $ 12,356.94 $ 12,381.18 $ 11,492.76 10/10/2003 $ 12,352.96 $ 12,377.26 $ 11,486.21 10/13/2003 $ 12,463.37 $ 12,488.49 $ 11,566.90 10/14/2003 $ 12,512.12 $ 12,537.52 $ 11,612.57 10/15/2003 $ 12,466.36 $ 12,490.96 $ 11,584.79 10/16/2003 $ 12,503.17 $ 12,528.73 $ 11,621.70 10/17/2003 $ 12,352.96 $ 12,378.49 $ 11,502.81 10/20/2003 $ 12,403.69 $ 12,429.02 $ 11,577.25 10/21/2003 $ 12,418.61 $ 12,444.31 $ 11,577.02 10/22/2003 $ 12,240.55 $ 12,265.87 $ 11,404.61 10/23/2003 $ 12,247.51 $ 12,272.98 $ 11,442.52 10/24/2003 $ 12,208.72 $ 12,234.86 $ 11,388.74 10/27/2003 $ 12,288.30 $ 12,314.90 $ 11,413.37 10/28/2003 $ 12,469.34 $ 12,495.97 $ 11,586.76 10/29/2003 $ 12,528.03 $ 12,555.11 $ 11,603.51 10/30/2003 $ 12,541.96 $ 12,569.51 $ 11,593.69 10/31/2003 $ 12,576.78 $ 12,604.75 $ 11,635.56 11/3/2003 $ 12,697.14 $ 12,725.49 $ 11,727.58 11/4/2003 $ 12,643.43 $ 12,672.01 $ 11,663.87 11/5/2003 $ 12,645.42 $ 12,673.41 $ 11,650.17 11/6/2003 $ 12,723.01 $ 12,752.02 $ 11,720.28 11/7/2003 $ 12,708.09 $ 12,737.24 $ 11,669.05 11/10/2003 $ 12,590.70 $ 12,619.96 $ 11,602.37 11/11/2003 $ 12,577.77 $ 12,606.57 $ 11,596.36 11/12/2003 $ 12,748.87 $ 12,779.16 $ 11,733.52 11/13/2003 $ 12,770.76 $ 12,800.65 $ 11,732.07 11/14/2003 $ 12,648.40 $ 12,678.32 $ 11,644.84 11/17/2003 $ 12,526.05 $ 12,556.01 $ 11,570.48 11/18/2003 $ 12,399.71 $ 12,429.05 $ 11,465.81 11/19/2003 $ 12,472.33 $ 12,502.19 $ 11,558.60 11/20/2003 $ 12,384.79 $ 12,414.84 $ 11,461.55 11/21/2003 $ 12,442.48 $ 12,472.74 $ 11,480.20 11/24/2003 $ 12,676.25 $ 12,707.58 $ 11,666.54 11/25/2003 $ 12,748.87 $ 12,780.98 $ 11,687.85 11/26/2003 $ 12,827.46 $ 12,859.73 $ 11,740.45 11/28/2003 $ 12,842.38 $ 12,875.49 $ 11,738.10 12/1/2003 $ 13,000.55 $ 13,034.87 $ 11,870.62 12/2/2003 $ 12,950.81 $ 12,984.12 $ 11,831.94 12/3/2003 $ 12,928.92 $ 12,962.37 $ 11,814.23 12/4/2003 $ 12,953.79 $ 12,988.32 $ 11,870.38 12/5/2003 $ 12,843.37 $ 12,877.27 $ 11,779.39 12/8/2003 $ 12,933.90 $ 12,968.65 $ 11,866.52 12/9/2003 $ 12,811.54 $ 12,845.92 $ 11,765.41 12/10/2003 $ 12,747.88 $ 12,781.55 $ 11,755.02 12/11/2003 $ 12,941.86 $ 12,976.74 $ 11,891.40 12/12/2003 $ 12,987.61 $ 13,022.86 $ 11,923.89 12/15/2003 $ 12,883.16 $ 12,918.23 $ 11,856.60 12/16/2003 $ 12,937.88 $ 12,973.89 $ 11,935.46 12/17/2003 $ 12,972.69 $ 13,008.53 $ 11,951.67 12/18/2003 $ 13,168.66 $ 13,206.13 $ 12,094.40 12/19/2003 $ 13,166.70 $ 13,204.76 $ 12,089.02 12/22/2003 $ 13,247.51 $ 13,286.15 $ 12,136.50 12/23/2003 $ 13,307.36 $ 13,345.73 $ 12,170.77 12/24/2003 $ 13,285.42 $ 13,324.25 $ 12,148.83 12/26/2003 $ 13,314.35 $ 13,353.90 $ 12,169.33 12/29/2003 $ 13,483.94 $ 13,524.18 $ 12,324.71 12/30/2003 $ 13,494.92 $ 13,534.88 $ 12,328.02 12/31/2003 $ 13,502.42 $ 13,542.99 $ 12,353.49 1/2/2004 $ 13,450.03 $ 13,490.85 $ 12,316.29 1/5/2004 $ 13,618.62 $ 13,659.90 $ 12,468.91 1/6/2004 $ 13,642.57 $ 13,684.30 $ 12,485.68 1/7/2004 $ 13,665.51 $ 13,707.12 $ 12,518.39 1/8/2004 $ 13,766.27 $ 13,809.31 $ 12,580.99 1/9/2004 $ 13,684.47 $ 13,727.49 $ 12,469.17 1/12/2004 $ 13,753.30 $ 13,796.32 $ 12,529.29 1/13/2004 $ 13,685.47 $ 13,728.54 $ 12,463.04 1/14/2004 $ 13,816.15 $ 13,859.20 $ 12,566.80 1/15/2004 $ 13,847.08 $ 13,891.29 $ 12,583.87 1/16/2004 $ 13,977.77 $ 14,022.36 $ 12,670.35 1/20/2004 $ 14,011.69 $ 14,057.12 $ 12,658.65 1/21/2004 $ 14,085.51 $ 14,131.46 $ 12,757.92 1/22/2004 $ 14,012.69 $ 14,058.28 $ 12,717.28 1/23/2004 $ 13,978.77 $ 14,024.15 $ 12,690.83 1/26/2004 $ 14,106.46 $ 14,148.44 $ 12,844.47 1/27/2004 $ 13,987.75 $ 14,033.46 $ 12,718.63 1/28/2004 $ 13,801.19 $ 13,847.28 $ 12,547.60 1/29/2004 $ 13,812.16 $ 13,858.10 $ 12,613.44 1/30/2004 $ 13,825.13 $ 13,871.75 $ 12,580.26 2/2/2004 $ 13,853.07 $ 13,900.16 $ 12,626.38 2/3/2004 $ 13,855.06 $ 13,901.83 $ 12,634.99 2/4/2004 $ 13,694.44 $ 13,741.17 $ 12,531.24 2/5/2004 $ 13,737.34 $ 13,784.32 $ 12,554.53 2/6/2004 $ 13,955.82 $ 14,003.87 $ 12,712.78 2/9/2004 $ 13,952.83 $ 14,000.91 $ 12,682.48 2/10/2004 $ 14,032.64 $ 14,081.41 $ 12,746.35 2/11/2004 $ 14,198.25 $ 14,247.85 $ 12,887.01 2/12/2004 $ 14,147.37 $ 14,196.94 $ 12,825.28 2/13/2004 $ 14,047.60 $ 14,097.34 $ 12,756.32 2/17/2004 $ 14,210.22 $ 14,260.41 $ 12,887.04 2/18/2004 $ 14,159.34 $ 14,210.23 $ 12,825.09 2/19/2004 $ 14,084.52 $ 14,134.66 $ 12,772.68 2/20/2004 $ 14,013.69 $ 14,064.10 $ 12,739.97 2/23/2004 $ 13,918.91 $ 13,968.77 $ 12,705.60 2/24/2004 $ 13,886.99 $ 13,937.50 $ 12,684.49 2/25/2004 $ 13,972.78 $ 14,023.79 $ 12,737.11 2/26/2004 $ 14,035.63 $ 14,086.75 $ 12,754.60 2/27/2004 $ 14,099.43 $ 14,151.41 $ 12,755.10 3/1/2004 $ 14,270.08 $ 14,323.32 $ 12,878.41 3/2/2004 $ 14,200.24 $ 14,252.78 $ 12,802.16 3/3/2004 $ 14,218.20 $ 14,271.31 $ 12,827.19 3/4/2004 $ 14,277.06 $ 14,330.20 $ 12,870.27 3/5/2004 $ 14,312.97 $ 14,367.71 $ 12,892.58 3/8/2004 $ 14,175.30 $ 14,228.45 $ 12,785.84 3/9/2004 $ 14,052.59 $ 14,106.02 $ 12,712.24 3/10/2004 $ 13,821.14 $ 13,873.36 $ 12,527.43 3/11/2004 $ 13,617.63 $ 13,668.16 $ 12,340.41 3/12/2004 $ 13,825.13 $ 13,877.16 $ 12,494.20 3/15/2004 $ 13,599.67 $ 13,650.67 $ 12,315.20 3/16/2004 $ 13,659.53 $ 13,711.26 $ 12,384.63 3/17/2004 $ 13,870.03 $ 13,923.08 $ 12,531.24 3/18/2004 $ 13,844.09 $ 13,897.33 $ 12,515.40 3/19/2004 $ 13,722.75 $ 13,777.05 $ 12,375.58 3/22/2004 $ 13,526.26 $ 13,580.26 $ 12,215.42 3/23/2004 $ 13,516.26 $ 13,570.14 $ 12,199.21 3/24/2004 $ 13,479.26 $ 13,533.60 $ 12,170.13 3/25/2004 $ 13,723.28 $ 13,778.54 $ 12,369.26 3/26/2004 $ 13,721.28 $ 13,776.83 $ 12,356.70 3/29/2004 $ 13,905.30 $ 13,961.11 $ 12,519.51 3/30/2004 $ 13,981.30 $ 14,038.14 $ 12,570.36 3/31/2004 $ 14,004.31 $ 14,060.99 $ 12,562.67 4/1/2004 $ 14,079.31 $ 14,136.98 $ 12,629.24 4/2/2004 $ 14,226.33 $ 14,284.94 $ 12,737.63 4/5/2004 $ 14,321.34 $ 14,381.10 $ 12,835.34 4/6/2004 $ 14,296.33 $ 14,355.43 $ 12,812.41 4/7/2004 $ 14,219.33 $ 14,278.47 $ 12,727.98 4/8/2004 $ 14,201.32 $ 14,261.42 $ 12,714.42 4/12/2004 $ 14,256.33 $ 14,316.43 $ 12,780.36 4/13/2004 $ 14,030.31 $ 14,089.57 $ 12,605.08 4/14/2004 $ 13,987.30 $ 14,046.25 $ 12,591.25 4/15/2004 $ 13,976.30 $ 14,036.06 $ 12,598.68 4/16/2004 $ 14,061.31 $ 14,121.65 $ 12,663.14 4/19/2004 $ 14,068.31 $ 14,128.65 $ 12,676.66 4/20/2004 $ 13,858.29 $ 13,918.02 $ 12,479.51 4/21/2004 $ 13,951.30 $ 14,033.75 $ 12,546.72 4/22/2004 $ 14,203.32 $ 14,265.29 $ 12,724.09 4/23/2004 $ 14,179.32 $ 14,241.25 $ 12,731.67 4/26/2004 $ 14,096.31 $ 14,157.97 $ 12,675.14 4/27/2004 $ 14,119.32 $ 14,180.89 $ 12,703.99 4/28/2004 $ 13,907.30 $ 13,968.11 $ 12,530.52 4/29/2004 $ 13,734.28 $ 13,794.62 $ 12,438.90 4/30/2004 $ 13,647.27 $ 13,707.24 $ 12,365.45 5/3/2004 $ 13,760.28 $ 13,820.96 $ 12,479.25 5/4/2004 $ 13,793.29 $ 13,855.20 $ 12,502.39 5/5/2004 $ 13,836.29 $ 13,925.38 $ 12,526.37 5/6/2004 $ 13,706.28 $ 13,773.40 $ 12,443.40 5/7/2004 $ 13,467.26 $ 13,527.94 $ 12,272.59 5/10/2004 $ 13,283.24 $ 13,342.32 $ 12,143.72 5/11/2004 $ 13,418.25 $ 13,478.22 $ 12,239.32 5/12/2004 $ 13,423.25 $ 13,483.81 $ 12,263.76 5/13/2004 $ 13,448.25 $ 13,509.33 $ 12,255.39 5/14/2004 $ 13,440.25 $ 13,501.67 $ 12,248.30 5/17/2004 $ 13,265.24 $ 13,328.55 $ 12,119.77 5/18/2004 $ 13,387.25 $ 13,448.60 $ 12,202.80 5/19/2004 $ 13,376.25 $ 13,437.07 $ 12,173.46 5/20/2004 $ 13,352.25 $ 13,413.99 $ 12,179.31 5/21/2004 $ 13,434.25 $ 13,496.16 $ 12,228.29 5/24/2004 $ 13,510.26 $ 13,573.27 $ 12,249.07 5/25/2004 $ 13,753.28 $ 13,817.54 $ 12,446.37 5/26/2004 $ 13,797.29 $ 13,861.97 $ 12,469.35 5/27/2004 $ 13,870.29 $ 13,936.47 $ 12,541.59 5/28/2004 $ 13,897.30 $ 13,963.34 $ 12,535.12 6/1/2004 $ 13,900.30 $ 13,967.06 $ 12,540.98 6/2/2004 $ 13,943.30 $ 14,010.16 $ 12,587.41 6/3/2004 $ 13,805.29 $ 13,871.57 $ 12,494.24 6/4/2004 $ 13,892.30 $ 13,959.32 $ 12,560.09 6/7/2004 $ 14,135.32 $ 14,204.34 $ 12,761.04 6/8/2004 $ 14,156.32 $ 14,226.15 $ 12,781.82 6/9/2004 $ 13,993.30 $ 14,062.18 $ 12,661.32 6/10/2004 $ 14,056.31 $ 14,125.52 $ 12,719.48 6/14/2004 $ 13,888.30 $ 13,956.87 $ 12,597.54 6/15/2004 $ 14,013.31 $ 14,082.50 $ 12,673.04 6/16/2004 $ 14,035.31 $ 14,104.98 $ 12,690.65 6/17/2004 $ 14,021.31 $ 14,090.61 $ 12,673.81 6/18/2004 $ 14,056.98 $ 14,126.93 $ 12,707.07 6/21/2004 $ 14,015.87 $ 14,086.59 $ 12,654.32 6/22/2004 $ 14,114.13 $ 14,185.21 $ 12,700.68 6/23/2004 $ 14,269.54 $ 14,342.10 $ 12,808.76 6/24/2004 $ 14,231.44 $ 14,303.25 $ 12,773.14 6/25/2004 $ 14,248.49 $ 14,322.31 $ 12,703.57 6/28/2004 $ 14,193.34 $ 14,266.11 $ 12,693.52 6/29/2004 $ 14,232.44 $ 14,305.63 $ 12,725.72 6/30/2004 $ 14,320.68 $ 14,394.50 $ 12,778.89 7/1/2004 $ 14,127.17 $ 14,206.72 $ 12,647.21 7/2/2004 $ 14,080.04 $ 14,153.06 $ 12,607.67 7/6/2004 $ 13,921.63 $ 13,993.49 $ 12,504.94 7/7/2004 $ 13,952.71 $ 14,025.49 $ 12,531.78 7/8/2004 $ 13,791.28 $ 13,862.42 $ 12,429.20 7/9/2004 $ 13,846.43 $ 13,919.21 $ 12,471.32 7/12/2004 $ 13,843.42 $ 13,915.56 $ 12,488.92 7/13/2004 $ 13,847.43 $ 13,920.62 $ 12,498.32 7/14/2004 $ 13,807.33 $ 13,880.06 $ 12,457.62 7/15/2004 $ 13,803.31 $ 13,875.74 $ 12,404.01 7/16/2004 $ 13,718.09 $ 13,790.67 $ 12,344.90 7/19/2004 $ 13,718.09 $ 13,791.27 $ 12,339.42 7/20/2004 $ 13,835.40 $ 13,908.79 $ 12,426.42 7/21/2004 $ 13,616.82 $ 13,689.30 $ 12,261.78 7/22/2004 $ 13,609.81 $ 13,682.08 $ 12,295.19 7/23/2004 $ 13,481.47 $ 13,554.21 $ 12,175.99 7/26/2004 $ 13,405.27 $ 13,477.26 $ 12,152.17 7/27/2004 $ 13,531.60 $ 13,604.60 $ 12,272.74 7/28/2004 $ 13,532.60 $ 13,605.35 $ 12,281.65 7/29/2004 $ 13,655.93 $ 13,729.49 $ 12,341.40 7/30/2004 $ 13,687.01 $ 13,761.20 $ 12,355.94 8/2/2004 $ 13,724.11 $ 13,799.16 $ 12,410.89 8/3/2004 $ 13,592.76 $ 13,667.20 $ 12,333.25 8/4/2004 $ 13,562.68 $ 13,637.20 $ 12,323.51 8/5/2004 $ 13,338.09 $ 13,411.24 $ 12,122.86 8/6/2004 $ 13,104.48 $ 13,172.33 $ 11,935.84 8/9/2004 $ 13,134.56 $ 13,199.49 $ 11,950.23 8/10/2004 $ 13,334.08 $ 13,400.89 $ 12,105.43 8/11/2004 $ 13,272.92 $ 13,338.30 $ 12,075.59 8/12/2004 $ 13,111.49 $ 13,173.15 $ 11,934.93 8/13/2004 $ 13,110.49 $ 13,171.88 $ 11,953.96 8/16/2004 $ 13,324.05 $ 13,389.80 $ 12,117.54 8/17/2004 $ 13,367.17 $ 13,435.20 $ 12,145.17 8/18/2004 $ 13,554.66 $ 13,630.20 $ 12,298.54 8/19/2004 $ 13,494.50 $ 13,569.70 $ 12,254.78 8/20/2004 $ 13,607.80 $ 13,684.02 $ 12,334.70 8/23/2004 $ 13,564.69 $ 13,640.33 $ 12,305.85 8/24/2004 $ 13,565.69 $ 13,639.73 $ 12,311.79 8/25/2004 $ 13,679.99 $ 13,756.36 $ 12,410.97 8/26/2004 $ 13,683.00 $ 13,757.62 $ 12,412.42 8/27/2004 $ 13,714.08 $ 13,787.84 $ 12,444.01 8/30/2004 $ 13,602.79 $ 13,671.29 $ 12,348.48 8/31/2004 $ 13,665.95 $ 13,732.25 $ 12,405.95 9/1/2004 $ 13,709.07 $ 13,776.83 $ 12,428.71 9/2/2004 $ 13,821.36 $ 13,945.41 $ 12,568.15 9/3/2004 $ 13,821.36 $ 13,889.96 $ 12,515.71 9/7/2004 $ 13,924.63 $ 13,997.95 $ 12,602.48 9/8/2004 $ 13,827.38 $ 13,903.28 $ 12,548.21 9/9/2004 $ 13,885.53 $ 13,958.65 $ 12,572.04 9/10/2004 $ 13,966.74 $ 14,041.27 $ 12,634.38 9/13/2004 $ 14,024.90 $ 14,099.47 $ 12,659.19 9/14/2004 $ 14,035.93 $ 14,111.30 $ 12,687.51 9/15/2004 $ 13,931.65 $ 14,005.62 $ 12,598.30 9/16/2004 $ 14,006.85 $ 14,081.91 $ 12,633.92 9/17/2004 $ 14,062.90 $ 14,138.54 $ 12,690.78 9/20/2004 $ 14,009.62 $ 14,085.63 $ 12,619.46 9/21/2004 $ 14,116.17 $ 14,192.80 $ 12,699.46 9/22/2004 $ 13,935.24 $ 14,011.72 $ 12,522.71 9/23/2004 $ 13,882.98 $ 13,958.65 $ 12,466.76 9/24/2004 $ 13,900.06 $ 13,976.00 $ 12,486.40 9/27/2004 $ 13,792.51 $ 13,868.30 $ 12,412.34 9/28/2004 $ 13,875.94 $ 13,952.85 $ 12,488.08 9/29/2004 $ 13,938.26 $ 14,015.59 $ 12,542.65 9/30/2004 $ 14,021.68 $ 14,099.40 $ 12,540.29 10/1/2004 $ 14,242.82 $ 14,322.98 $ 12,730.67 10/4/2004 $ 14,308.15 $ 14,388.84 $ 12,773.37 10/5/2004 $ 14,278.00 $ 14,358.03 $ 12,765.68 10/6/2004 $ 14,381.52 $ 14,462.45 $ 12,855.04 10/7/2004 $ 14,236.78 $ 14,316.80 $ 12,727.55 10/8/2004 $ 14,110.14 $ 14,189.97 $ 12,631.86 10/11/2004 $ 14,119.18 $ 14,199.65 $ 12,657.21 10/12/2004 $ 14,068.93 $ 14,149.26 $ 12,628.52 10/13/2004 $ 13,958.36 $ 14,037.17 $ 12,537.63 10/14/2004 $ 13,852.82 $ 13,931.86 $ 12,421.02 10/15/2004 $ 13,924.19 $ 14,003.61 $ 12,476.36 10/18/2004 $ 13,975.45 $ 14,055.26 $ 12,541.97 10/19/2004 $ 13,830.71 $ 13,909.90 $ 12,420.49 10/20/2004 $ 13,853.83 $ 13,933.20 $ 12,426.19 10/21/2004 $ 13,962.38 $ 14,042.61 $ 12,458.70 10/22/2004 $ 13,851.82 $ 13,931.79 $ 12,337.59 10/25/2004 $ 13,866.89 $ 13,947.12 $ 12,327.16 10/26/2004 $ 14,075.96 $ 14,157.97 $ 12,510.53 10/27/2004 $ 14,271.96 $ 14,355.80 $ 12,673.73 10/28/2004 $ 14,293.07 $ 14,377.46 $ 12,700.68 10/29/2004 $ 14,352.38 $ 14,437.37 $ 12,731.88
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2004
SINCE INCEPTION ONE YEAR (04/24/03) -------- --------------- RYDEX S&P EQUAL WEIGHT ETF 14.11% 26.88% S&P EQUAL WEIGHT TOTAL RETURN INDEX 14.54% 27.37% S&P 500 INDEX 9.42% 17.25%
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, HAS NO MANAGEMENT FEES OR OTHER OPERATING EXPENSES TO REDUCE ITS REPORTED RETURNS. RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN PRINCIPAL AND REINVESTED DIVIDENDS AND CAPITAL GAINS. 4 TOP TEN HOLDINGS AS OF OCTOBER 31, 2004
STOCK % - ---------------------------------------- APPLE COMPUTER INC 0.28% DELTA AIR LINES INC 0.27% CITRIX SYSTMES INC 0.26% TXU CORPORATION 0.26% ADVANCED MICRO DEVICES 0.26% CIENA CORP 0.25% GATEWAY INC 0.25% BMC SOFTWARE INC 0.24% VERITAS SOFTWARE CO 0.24% TERADYNE INC. 0.24%
[CHART] SECTOR ALLOCATION AS OF OCTOBER 31, 2004 Consumer Discretionary 16% Information Technology 17% Financials 16% Industrials 12% Health Care 10% Consumer Staples 7% Utilities 7% Materials 7% Energy 6% Telecom 2%
5 FEES AND EXPENSES As a shareholder of the Rydex ETF Trust, you incur advisory fees and distribution fees. All other Trust expenses are paid by the advisor. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these cost 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 through the six months ended October 31, 2004. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid 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 line under the heading "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the 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 tables are meant to highlight your ongoing costs only, and do not reflect any transactional costs such as sales charges (loads). Therefore the second line in the 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 transactional costs were included, your costs would have been higher.
BEGINNING ENDING ANNUALIZED ACCOUNT ACCOUNT EXPENSE RATIO EXPENSES PAID VALUE VALUE BASED ON THE DURING THE 05/01/04 10/31/04 SIX-MONTH PERIOD SIX-MONTH PERIOD* --------- -------- ---------------- ----------------- RYDEX S&P EQUAL WEIGHT ETF Actual $ 1,000.00 $ 1,051.70 0.40% $ 2.06 Hypothetical (5% return before expenses) $ 1,000.00 $ 1,023.13 0.40% $ 2.03
* EXPENSES ARE CALCULATED USING THE ANNUALIZED EXPENSE RATIO, WHICH REPRESENTS THE ONGOING EXPENSES AS A PERCENTAGE OF NET ASSETS FOR THE SIX-MONTHS ENDED 10/31/04. EXPENSES ARE CALCULATED BY MULTIPLYING THE ANNUALIZED EXPENSE RATIO BY THE AVERAGE ACCOUNT VALUE FOR THE PERIOD; THEN MULTIPLYING THE RESULT BY THE NUMBER OF DAYS IN THE MOST RECENT FISCAL HALF-YEAR; AND THEN DIVIDING THE RESULT BY THE NUMBER OF DAYS IN THE CALENDAR YEAR. EXPENSE RATIOS FOR THE MOST RECENT FISCAL HALF-YEAR MAY DIFFER FROM EXPENSE RATIOS BASED ON THE ONE-YEAR DATA IN THE FINANCIAL HIGHLIGHTS. 6 RYDEX S&P EQUAL WEIGHT ETF PORTFOLIO SUMMARY October 31, 2004
INCEPTION DATE PORTFOLIO STATISTICS -------------- -------------------- 4/24/03 Net Assets ($million):$485.6 SECTOR BREAKDOWN ---------------- 0.7% Advertising and Marketing Services 1.5% Aerospace and Defense 0.2% Agricultural 0.5% Airlines 1.1% Aluminum, Steel and Other Metals 2.1% Automotive 5.4% Banking and Finance 4.0% Beverages, Food and Tobacco 0.7% Biosciences 1.4% Building and Building Products 0.8% Business Equipment and Services 2.2% Chemicals 1.6% Communications, Media and Entertainment 2.1% Computer Services 1.4% Computers - Micro 3.9% Computers - Software and Peripherals 0.4% Conglomerates 1.5% Consumer Goods and Services 0.8% Containers and Packaging 0.8% Data Processing Systems 0.2% Education 6.3% Electronic Equipment and Components 6.1% Financial Services 0.9% Forest and Paper Products 0.2% Health and Medical Facilities 5.6% Health Care Products and Services 0.6% Homebuilders 0.8% Hotels and Gaming 2.0% Household and Personal Care Products 0.2% Human Resources 4.1% Insurance 1.2% Machinery and Engineering 2.9% Manufacturing 0.2% Mining 0.7% Networking Products 6.1% Oil and Gas 2.8% Pharmaceuticals 1.0% Publishing 1.2% Real Estate Investment Trusts 0.2% Resorts and Entertainment 1.9% Retail - Apparel and Shoes 1.2% Retail - Department Stores 1.4% Retail - Discount Stores 0.7% Retail - Food Stores 0.8% Retail - Restaurants 2.2% Retail - Specialty Stores 0.6% Retail and Wholesale Distribution 4.4% Telecommunications 0.4% Tire and Rubber 0.2% Tobacco 1.2% Tools and Instruments 1.5% Transportation 0.4% Travel Services 6.1% Utilities - Gas and Electric 0.4% Waste Management.
7 RYDEX S&P EQUAL WEIGHT ETF SCHEDULE OF INVESTMENTS October 31, 2004
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS--99.8% ADVERTISING AND MARKETING SERVICES 0.7% Monster Worldwide, Inc.* 39,953 $ 1,120,682 Omnicom Group, Inc. 13,547 1,068,858 The Interpublic Group of Cos., Inc. 86,926 1,065,713 --------------- TOTAL ADVERTISING AND MARKETING SERVICES 3,255,253 --------------- AEROSPACE AND DEFENSE 1.5% General Dynamics Corp. 9,572 977,492 Goodrich Corp. 29,124 897,893 Lockheed Martin Corp. 17,397 958,401 Northrop Grumman Corp. 17,883 925,445 Raytheon Co. 25,785 940,637 Rockwell Collins, Inc. 25,733 912,750 The Boeing Co. 17,248 860,675 United Technologies Corp. 9,941 922,724 --------------- TOTAL AEROSPACE AND DEFENSE 7,396,017 --------------- AGRICULTURAL 0.2% Monsanto Co. 26,851 1,147,880 --------------- TOTAL AGRICULTURAL 1,147,880 --------------- AIRLINES 0.5% Delta Air Lines, Inc.* 240,139 1,308,757 Southwest Airlines Co. 65,544 1,033,629 --------------- TOTAL AIRLINES 2,342,386 --------------- ALUMINUM, STEEL AND OTHER METALS 1.1% Alcoa, Inc. 31,025 1,008,312 Allegheny Technologies, Inc. 48,422 813,974 Freeport-McMoRan Copper & Gold, Inc., Class B 25,554 925,566 Nucor Corp. 21,212 895,783 Phelps Dodge Corp. 11,435 1,001,020 United States Steel Corp. 25,027 918,991 --------------- TOTAL ALUMINUM, STEEL AND OTHER METALS 5,563,646 --------------- AUTOMOTIVE 2.1% AutoNation, Inc.* 55,804 $ 961,503 AutoZone, Inc.* 12,506 1,023,115 Dana Corp. 52,980 789,932 Delphi Corp. 104,499 878,837 Ford Motor Co. 66,874 871,368 General Motors Corp. 22,610 871,616 Harley-Davidson, Inc. 15,740 906,152 Johnson Controls, Inc. 16,965 972,943 Navistar International Corp.* 25,232 871,766 PACCAR, Inc. 14,639 1,014,628 Visteon Corp. 115,972 824,561 --------------- TOTAL AUTOMOTIVE 9,986,421 --------------- BANKING AND FINANCE 5.4% AmSouth Bancorp. 38,085 1,005,063 Bank of America Corp. 21,293 953,713 BB&T Corp. 23,623 971,142 Comerica, Inc. 15,704 965,953 Fifth Third Bancorp. 19,125 940,759 First Horizon National Corp. 21,419 927,014 Golden West Financial Corp. 8,283 968,448 Huntington Bancshares, Inc. 38,577 923,919 J.P. Morgan Chase & Co. 23,988 925,937 KeyCorp 29,784 1,000,445 M&T Bank Corp. 9,870 1,016,610 Marshall & Ilsley Corp. 23,548 988,310 Mellon Financial Corp. 33,342 963,584 National City Corp. 24,226 944,087 North Fork Bancorp., Inc. 21,672 955,735 Northern Trust Corp. 22,458 955,363 Regions Financial Corp. 28,643 1,004,796 SouthTrust Corp. 22,667 987,601 Sovereign Bancorp, Inc. 42,304 915,882 State Street Corp. 21,251 957,358 SunTrust Banks, Inc. 13,887 977,367 The Bank of New York Co., Inc. 31,708 1,029,242
See Notes to Financial Statements. 8
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) U.S. Bancorp 32,521 $ 930,426 Wachovia Corp. 20,049 986,611 Washington Mutual, Inc. 23,734 918,743 Wells Fargo & Co. 16,030 957,312 Zions Bancorp. 15,666 1,036,619 --------------- TOTAL BANKING AND FINANCE 26,108,039 --------------- BEVERAGES, FOOD AND TOBACCO 4.0% Adolph Coors Co. 13,735 916,125 Altria Group, Inc. 19,612 950,398 Anheuser-Busch Cos., Inc. 18,542 926,173 Archer-Daniels-Midland Co. 57,050 1,105,058 Brown-Forman Corp., Class B 20,352 913,805 Campbell Soup Co. 35,300 947,452 Coca-Cola Enterprises, Inc. 50,185 1,049,367 ConAgra Foods, Inc. 35,300 931,920 General Mills, Inc. 20,135 890,974 H.J. Heinz Co. 25,417 923,908 Hershey Foods Corp. 19,736 1,000,418 Kellogg Co. 22,262 957,266 McCormick & Co., Inc. 27,113 960,614 McDonald's Corp. 34,365 1,001,740 PepsiCo, Inc. 19,131 948,515 SUPER VALU, INC. 34,598 1,020,294 The Coca-Cola Co. 23,598 959,495 The Pepsi Bottling Group, Inc. 34,641 971,334 UST, Inc. 23,891 983,354 Wm. Wrigley Jr. Co. 14,936 976,814 --------------- TOTAL BEVERAGES, FOOD AND TOBACCO 19,335,024 --------------- BIOSCIENCES 0.7% Amgen, Inc.* 16,379 930,327 Biogen Idec, Inc.* 15,412 896,362 Chiron Corp.* 20,996 680,690 Gilead Sciences, Inc.* 25,709 890,303 --------------- TOTAL BIOSCIENCES 3,397,682 --------------- BUILDING AND BUILDING PRODUCTS 1.4% Ecolab, Inc. 30,394 $ 1,028,837 Georgia-Pacific Group 26,946 932,062 Louisiana-Pacific Corp. 37,290 913,978 Masco Corp. 27,764 951,195 The Home Depot, Inc. 24,824 1,019,770 The Sherwin-Williams Co. 22,372 955,732 Vulcan Materials Co. 19,458 968,619 --------------- TOTAL BUILDING AND BUILDING PRODUCTS 6,770,193 --------------- BUSINESS EQUIPMENT AND SERVICES 0.8% Convergys Corp.* 74,292 966,539 Lexmark International, Inc.* 11,361 944,213 Pitney Bowes, Inc. 21,749 951,519 Xerox Corp.* 66,874 987,728 --------------- TOTAL BUSINESS EQUIPMENT AND SERVICES 3,849,999 --------------- CHEMICALS 2.2% Air Products and Chemicals, Inc. 17,697 941,126 Ashland, Inc. 17,339 999,073 duPont (E.I.) de Nemours & Co. 22,294 955,744 Eastman Chemical Co. 20,312 964,211 Great Lakes Chemical Corp. 36,451 933,875 Hercules, Inc.* 68,963 984,792 PPG Industries, Inc. 15,995 1,019,681 Praxair, Inc. 22,505 949,711 Rohm and Haas Co. 23,479 995,275 Sigma-Aldrich Corp. 16,466 916,168 The Dow Chemical Co. 22,431 1,008,049 --------------- TOTAL CHEMICALS 10,667,705 --------------- COMMUNICATIONS, MEDIA AND ENTERTAINMENT 1.6% Clear Channel Communications, Inc. 28,690 958,246 Comcast Corp., Class A* 33,532 989,194 Gannett Co., Inc. 11,027 914,690
See Notes to Financial Statements. 9
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) Meredith Corp. 18,150 $ 889,350 The McGraw-Hill Cos., Inc. 12,226 1,054,492 Time Warner, Inc.* 56,306 936,932 Univision Communications, Inc.* 29,719 920,100 Viacom, Inc., Class B 27,599 1,007,088 --------------- TOTAL COMMUNICATIONS, MEDIA AND ENTERTAINMENT 7,670,092 --------------- COMPUTER SERVICES 2.1% Affiliated Computer Services, Inc., Class A* 17,272 942,188 Computer Sciences Corp.* 20,013 994,046 Compuware Corp.* 192,111 1,112,322 eBay, Inc.* 10,213 996,891 Electronic Data Systems Corp. 47,792 1,016,536 Intuit, Inc.* 21,348 968,345 Network Appliance, Inc.* 41,404 1,013,156 SunGard Data Systems, Inc.* 40,126 1,062,938 Unisys Corp.* 94,253 1,000,967 Yahoo!, Inc.* 28,423 1,028,628 --------------- TOTAL COMPUTER SERVICES 10,136,017 --------------- COMPUTERS - MICRO 1.4% Apple Computer, Inc.* 25,601 1,344,821 Dell, Inc.* 26,754 937,995 Gateway, Inc.* 204,514 1,196,407 Hewlett-Packard Co. 52,511 979,855 International Business Machines Corp. (IBM) 11,091 995,417 Sun Microsystems, Inc.* 241,359 1,093,356 --------------- TOTAL COMPUTERS - MICRO 6,547,851 --------------- COMPUTERS - SOFTWARE AND PERIPHERALS 3.9% Adobe Systems, Inc. 19,750 1,106,593 Autodesk, Inc. 19,537 1,030,577 BMC Software, Inc.* 62,033 $ 1,173,664 Cisco Systems, Inc.* 49,636 953,508 Citrix Systems, Inc.* 52,249 1,260,769 Computer Associates International, Inc. 37,003 1,025,353 Electronic Arts, Inc.* 19,712 885,463 EMC Corp.* 88,058 1,133,306 Mercury Interactive Corp.* 25,785 1,119,843 Microsoft Corp. 34,566 967,502 NCR Corp.* 19,414 1,093,979 NVIDIA Corp.* 64,739 936,773 Parametric Technology Corp.* 192,111 997,056 PeopleSoft, Inc.* 48,224 1,001,612 Siebel Systems, Inc.* 117,404 1,115,338 Symantec Corp.* 18,234 1,038,244 VERITAS Software Corp.* 53,309 1,166,401 Xilinx, Inc.* 33,322 1,019,653 --------------- TOTAL COMPUTERS - SOFTWARE AND PERIPHERALS 19,025,634 --------------- CONGLOMERATES 0.4% General Electric Co. 27,794 948,331 Textron, Inc. 15,035 1,024,636 --------------- TOTAL CONGLOMERATES 1,972,967 --------------- CONSUMER GOODS AND SERVICES 1.5% Avery Dennison Corp. 14,922 907,854 Brunswick Corp. 22,574 1,059,172 Cendant Corp.* 41,236 849,049 Eastman Kodak Co. 29,842 903,616 Fortune Brands, Inc. 12,707 925,324 Hasbro, Inc. 51,685 914,308 Mattel, Inc. 52,392 917,384 Sara Lee Corp. 41,579 967,959 --------------- TOTAL CONSUMER GOODS AND SERVICES 7,444,666 ---------------
See Notes to Financial Statements. 10
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) CONTAINERS AND PACKAGING 0.8% Ball Corp. 26,106 $ 1,040,324 Bemis Co., Inc. 36,789 973,805 Pactiv Corp.* 40,155 951,272 Sealed Air Corp.* 20,902 1,035,485 --------------- TOTAL CONTAINERS AND PACKAGING 4,000,886 --------------- DATA PROCESSING SYSTEMS 0.8% Automatic Data Processing, Inc. 22,308 967,944 First Data Corp. 21,547 889,460 Fiserv, Inc.* 26,822 953,254 Paychex, Inc. 30,275 992,839 --------------- TOTAL DATA PROCESSING SYSTEMS 3,803,497 --------------- EDUCATION 0.2% Apollo Group, Inc., Class A* 12,133 800,778 --------------- TOTAL EDUCATION 800,778 --------------- ELECTRONIC EQUIPMENT AND COMPONENTS 6.3% Advanced Micro Devices, Inc.* 74,881 1,259,498 Agilent Technologies, Inc.* 41,532 1,040,792 Altera Corp.* 47,833 1,087,244 American Power Conversion Corp.* 53,728 1,035,876 Analog Devices, Inc.* 25,311 1,019,021 Applied Materials, Inc.* 56,268 905,915 Applied Micro Circuits Corp.* 293,509 1,068,373 Cooper Industries, Inc., Class A 16,189 1,034,477 Emerson Electric Co. 15,161 971,062 Intel Corp. 46,273 1,030,037 International Game Technology 29,086 961,001 Jabil Circuit, Inc.* 44,562 1,083,302 KLA-Tencor Corp.* 23,835 1,085,208 Linear Technology Corp. 25,634 971,016 LSI Logic Corp.* 214,667 $ 976,735 Maxim Integrated Products, Inc. 22,431 986,740 Micron Technology, Inc.* 74,531 907,788 Molex, Inc. 31,580 933,821 National Semiconductor Corp.* 63,270 1,056,609 Novellus Systems, Inc.* 36,743 952,011 PMC - Sierra, Inc.* 100,416 1,030,268 Power-One, Inc.* 129,212 907,068 QLogic Corp.* 31,318 1,017,835 Rockwell Automation, Inc. 24,221 1,009,773 Sanmina-SCI Corp.* 134,503 1,076,024 Solectron Corp.* 192,111 1,002,819 Symbol Technologies, Inc. 71,398 1,048,837 Tektronix, Inc. 28,596 867,317 Teradyne, Inc.* 69,924 1,157,941 Texas Instruments, Inc. 43,068 1,053,013 --------------- TOTAL ELECTRONIC EQUIPMENT AND COMPONENTS 30,537,421 --------------- FINANCIAL SERVICES 6.1% Ambac Financial Group, Inc. 12,013 937,735 American Express Co. 18,502 981,901 Capital One Financial Corp. 12,995 958,511 CIT Group, Inc. 24,150 975,660 Citigroup, Inc. 20,257 898,803 Countrywide Financial Corp. 25,361 809,777 Deluxe Corp. 23,155 881,974 E*TRADE Financial Corp.* 79,982 1,031,768 Equifax, Inc. 37,181 972,283 Fannie Mae 12,316 863,967 Federated Investors, Inc., Class B 32,190 933,188 Franklin Resources, Inc. 17,331 1,050,604 Freddie Mac 13,944 928,670 H&R Block, Inc. 19,701 936,783
See Notes to Financial Statements. 11
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) Janus Capital Group, Inc. 67,930 $ 1,035,933 Lehman Brothers Holdings, Inc. 12,450 1,022,768 Marsh & McLennan Cos., Inc. 20,403 564,347 MBIA, Inc. 16,337 945,259 MBNA Corp. 38,451 985,499 Merrill Lynch & Co., Inc. 18,486 997,135 MGIC Investment Corp. 14,570 936,997 Moody's Corp. 13,395 1,042,265 Morgan Stanley 18,486 944,450 PNC Financial Services Group 17,733 927,436 Providian Financial Corp.* 63,234 983,289 SLM Corp. 22,509 1,018,757 Synovus Financial Corp. 36,073 980,825 T. Rowe Price Group, Inc. 18,564 1,035,314 The Bear Stearns Cos., Inc. 10,772 1,020,647 The Charles Schwab Corp. 102,918 941,700 The Goldman Sachs Group, Inc. 10,332 1,016,462 --------------- TOTAL FINANCIAL SERVICES 29,560,707 --------------- FOREST AND PAPER PRODUCTS 0.9% Boise Cascade Corp. 29,638 874,914 International Paper Co. 23,830 917,693 MeadWestvaco Corp. 31,337 988,056 Temple-Inland, Inc. 14,460 854,875 Weyerhaeuser Co. 14,782 925,944 --------------- TOTAL FOREST AND PAPER PRODUCTS 4,561,482 --------------- HEALTH AND MEDICAL FACILITIES 0.2% Quest Diagnostics, Inc.* 11,288 988,152 --------------- TOTAL HEALTH AND MEDICAL FACILITIES 988,152 --------------- HEALTH CARE PRODUCTS AND SERVICES 5.6% Abbott Laboratories 22,159 $ 944,638 Allergan, Inc. 12,334 882,621 Anthem, Inc.* 11,040 887,616 Applera Corp. - Applied Biosystems Group 52,249 996,911 Bausch & Lomb, Inc. 14,024 854,903 Baxter International, Inc. 29,516 907,912 Becton, Dickinson & Co. 18,687 981,068 Biomet, Inc. 20,038 935,374 Boston Scientific Corp.* 24,807 875,687 C. R. Bard, Inc. 16,736 950,605 Cardinal Health, Inc. 19,862 928,549 Fisher Scientific International Inc.* 15,988 917,072 Genzyme Corp.* 17,400 912,978 Guidant Corp. 15,173 1,010,825 HCA, Inc. 24,416 896,800 Health Management Associates, Inc., Class A 47,863 988,850 Humana, Inc.* 48,895 936,339 IMS Health, Inc. 39,790 842,752 Johnson & Johnson 16,251 948,733 Manor Care, Inc. 30,876 1,010,880 McKesson Corp. 34,460 918,704 Medtronic, Inc. 19,072 974,770 St. Jude Medical, Inc.* 13,449 1,029,790 Stryker Corp. 19,747 850,898 Tenet Healthcare Corp.* 92,324 989,713 UnitedHealth Group, Inc. 13,618 985,943 WellPoint Health Networks, Inc.* 9,191 897,593 Wyeth 24,426 968,491 Zimmer Holdings, Inc.* 12,375 960,176 --------------- TOTAL HEALTH CARE PRODUCTS AND SERVICES 27,187,191 --------------- HOMEBUILDERS 0.6% Centex Corp. 18,881 980,679 KB HOME 12,316 1,012,991 Pulte Homes, Inc. 15,165 832,255 --------------- TOTAL HOMEBUILDERS 2,825,925 ---------------
See Notes to Financial Statements. 12
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) HOTELS AND GAMING 0.8% Harrah's Entertainment, Inc. 18,237 $ 1,067,229 Hilton Hotels Corp. 50,689 1,008,711 Marriott International, Inc., Class A 19,118 1,041,740 Starwood Hotels & Resorts Worldwide, Inc. 20,810 993,261 --------------- TOTAL HOTELS AND GAMING 4,110,941 --------------- HOUSEHOLD AND PERSONAL CARE PRODUCTS 2.0% Alberto-Culver Co., Class B 20,540 921,424 Avon Products, Inc. 21,893 865,868 Colgate-Palmolive Co. 17,500 780,850 International Flavors & Fragrances, Inc. 24,570 959,459 Kimberly-Clark Corp. 14,276 851,849 Leggett & Platt, Inc. 34,577 972,651 Maytag Corp. 47,477 826,100 The Clorox Co. 17,395 949,767 The Gillette Co. 22,431 930,438 The Procter & Gamble Co. 16,908 865,351 Whirlpool Corp. 15,381 903,634 --------------- TOTAL HOUSEHOLD AND PERSONAL CARE PRODUCTS 9,827,391 --------------- HUMAN RESOURCES 0.2% Robert Half International, Inc.* 34,683 920,140 --------------- TOTAL HUMAN RESOURCES 920,140 --------------- INSURANCE 4.1% ACE Ltd. 23,799 905,790 Aetna, Inc. 9,957 945,915 AFLAC, Inc. 23,865 856,276 American International Group, Inc. 13,267 805,440 Aon Corp. 34,407 702,247 CIGNA Corp. 13,686 868,514 Cincinnati Financial Corp. 23,204 $ 968,767 Jefferson-Pilot Corp. 19,260 930,065 Lincoln National Corp. 20,229 886,030 Loews Corp. 15,981 957,262 MetLife, Inc. 25,293 969,987 Principal Financial Group, Inc. 26,340 994,598 Prudential Financial, Inc. 19,809 920,524 SAFECO Corp. 19,411 897,565 The Allstate Corp. 19,469 936,264 The Chubb Corp. 13,392 965,965 The Hartford Financial Services Group, Inc. 14,974 875,680 The Progressive Corp. 11,114 1,039,714 The St. Paul Cos., Inc. 27,027 917,837 Torchmark Corp. 18,255 986,135 UnumProvident Corp. 59,323 810,352 XL Capital Ltd., Class A 12,997 942,283 --------------- TOTAL INSURANCE 20,083,210 --------------- MACHINERY AND ENGINEERING 1.2% Caterpillar, Inc. 12,496 1,006,427 Cummins, Inc. 13,396 938,792 Deere & Co. 14,627 874,402 Eaton Corp. 15,171 970,185 Fluor Corp. 21,156 982,485 Ingersoll-Rand Co., Class A 14,354 982,388 --------------- TOTAL MACHINERY AND ENGINEERING 5,754,679 --------------- MANUFACTURING 2.9% 3M Co. 11,554 896,244 American Standard Cos., Inc.* 24,737 904,632 Cintas Corp. 21,603 931,953 Crane Co. 33,143 923,695 Danaher Corp. 18,081 996,806 Dover Corp. 24,358 956,539 Honeywell International, Inc. 25,889 871,942 Illinois Tool Works, Inc. 10,337 953,898 ITT Industries, Inc. 11,756 953,882
See Notes to Financial Statements. 13
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) Newell Rubbermaid, Inc. 43,848 $ 945,363 Pall Corp. 39,039 1,009,549 Parker-Hannifin Corp. 16,275 1,149,502 Tyco International Ltd. 30,972 964,778 Waters Corp.* 20,738 856,272 Worthington Industries, Inc. 45,851 910,142 --------------- TOTAL MANUFACTURING 14,225,197 --------------- MINING 0.2% Newmont Mining Corp. 22,883 1,087,400 --------------- TOTAL MINING 1,087,400 --------------- NETWORKING PRODUCTS 0.7% CIENA Corp.* 500,508 1,236,254 Novell, Inc.* 136,242 979,580 Oracle Corp.* 82,625 1,046,033 --------------- TOTAL NETWORKING PRODUCTS 3,261,867 --------------- OIL AND GAS 6.1% Amerada Hess Corp. 11,318 913,476 Anadarko Petroleum Corp. 15,175 1,023,554 Apache Corp. 19,816 1,004,671 Baker Hughes, Inc. 22,458 961,876 BJ Services Co.* 18,903 964,053 Burlington Resources, Inc. 24,416 1,013,264 ChevronTexaco Corp. 18,307 971,369 ConocoPhillips 12,021 1,013,491 Devon Energy Corp. 13,588 1,005,104 Dynegy, Inc., Class A* 212,273 1,046,506 El Paso Corp. 112,545 1,006,152 Engelhard Corp. 34,672 981,218 EOG Resources, Inc. 14,958 995,604 Exxon Mobil Corp. 19,660 967,665 Halliburton Co. 30,175 1,117,682 Kerr-McGee Corp. 17,099 1,012,603 Marathon Oil Corp. 24,570 936,363 Nabors Industries, Ltd.* 20,678 1,015,703 NICOR, Inc. 25,486 956,235 Noble Corp.* 21,285 972,299 Occidental Petroleum Corp. 17,392 $ 970,995 Peoples Energy Corp. 21,710 928,754 Rowan Cos., Inc.* 37,826 965,698 Schlumberger Ltd. 14,416 907,343 Sempra Energy 25,983 871,470 Sunoco, Inc. 14,211 1,056,730 The Williams Cos., Inc. 79,247 991,380 Transocean, Inc. 28,139 991,900 Unocal Corp. 23,613 985,843 Valero Energy Corp. 26,380 1,133,548 --------------- TOTAL OIL AND GAS 29,682,549 --------------- PHARMACEUTICALS 2.8% AmerisourceBergen Corp. 17,275 950,816 Bristol-Myers Squibb Co. 38,527 902,688 Caremark Rx, Inc.* 31,717 950,558 Eli Lilly & Co. 14,328 786,750 Express Scripts, Inc., Class A* 14,966 957,824 Forest Laboratories, Inc.* 21,090 940,614 Hospira, Inc.* 32,331 1,031,682 King Pharmaceuticals, Inc.* 77,191 842,154 Medco Health Solutions, Inc.* 30,487 1,033,814 MedImmune, Inc.* 39,605 1,125,574 Merck & Co., Inc. 21,148 662,144 Mylan Laboratories, Inc. 48,790 840,164 Pfizer, Inc. 29,983 868,008 Schering-Plough Corp. 48,079 870,711 Watson Pharmaceuticals, Inc.* 31,672 887,766 --------------- TOTAL PHARMACEUTICALS 13,651,267 --------------- PUBLISHING 1.0% Dow Jones & Co., Inc. 22,560 998,280 Knight-Ridder, Inc. 14,974 1,026,167
See Notes to Financial Statements. 14
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) R. R. Donnelley & Sons Co. 29,735 $ 935,166 The New York Times Co., Class A 23,312 933,646 Tribune Co. 22,949 991,397 --------------- TOTAL PUBLISHING 4,884,656 --------------- REAL ESTATE INVESTMENT TRUSTS 1.2% Apartment Investment & Management Co., Class A 27,209 998,298 Equity Office Properties Trust 34,208 961,929 Equity Residential 30,411 1,014,207 Plum Creek Timber Co., Inc. 28,027 1,017,100 ProLogis 26,479 1,032,151 Simon Property Group, Inc. 17,438 1,016,984 --------------- TOTAL REAL ESTATE INVESTMENT TRUSTS 6,040,669 --------------- RESORTS AND ENTERTAINMENT 0.2% The Walt Disney Co. 40,605 1,024,058 --------------- TOTAL RESORTS AND ENTERTAINMENT 1,024,058 --------------- RETAIL - APPAREL AND SHOES 1.9% Coach, Inc.* 21,857 1,019,192 Jones Apparel Group, Inc. 26,982 952,465 Limited Brands 43,602 1,080,457 Liz Claiborne, Inc. 24,737 1,011,249 NIKE, Inc., Class B 12,425 1,010,277 Nordstrom, Inc. 24,040 1,038,047 Reebok International Ltd. 26,661 986,457 The GAP, Inc. 47,528 949,609 V.F. Corp. 19,257 1,036,604 --------------- TOTAL RETAIL - APPAREL AND SHOES 9,084,357 --------------- RETAIL - DEPARTMENT STORES 1.2% Dillard's, Inc., Class A 46,938 $ 961,760 Federated Department Stores, Inc. 20,626 1,040,582 J. C. Penney Co., Inc. (Holding Co.) 26,007 899,582 Kohl's Corp.* 19,224 975,810 Sears, Roebuck & Co. 23,593 825,755 The May Department Stores Co. 37,703 982,540 --------------- TOTAL RETAIL - DEPARTMENT STORES 5,686,029 --------------- RETAIL - DISCOUNT STORES 1.4% Big Lots, Inc.* 73,263 907,729 Costco Wholesale Corp.* 23,050 1,105,016 Dollar General Corp. 47,007 904,885 Family Dollar Stores, Inc. 33,796 998,672 Target Corp. 20,979 1,049,369 The TJX Cos., Inc. 42,974 1,030,517 Wal-Mart Stores, Inc. 18,117 976,869 --------------- TOTAL RETAIL - DISCOUNT STORES 6,973,057 --------------- RETAIL - FOOD STORES 0.7% Albertson's, Inc. 39,628 903,915 Safeway, Inc.* 48,224 879,606 The Kroger Co.* 60,491 914,018 Winn-Dixie Stores, Inc. 251,584 865,449 --------------- TOTAL RETAIL - FOOD STORES 3,562,988 --------------- RETAIL - RESTAURANTS 0.8% Darden Restaurants, Inc. 45,193 1,107,228 Starbucks Corp.* 20,655 1,092,236 Wendy's International, Inc. 26,527 885,206 Yum! Brands, Inc. 23,385 1,017,248 --------------- TOTAL RETAIL - RESTAURANTS 4,101,918 --------------- RETAIL - SPECIALTY STORES 2.2% Bed Bath & Beyond, Inc.* 24,206 987,363 Best Buy Co., Inc. 17,816 1,055,063 Circuit City Stores-Circuit City Group 64,606 1,049,848 CVS Corp. 23,151 1,006,142
See Notes to Financial Statements. 15
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) Lowe's Cos., Inc. 17,760 $ 999,533 Office Depot, Inc.* 63,784 1,032,663 RadioShack Corp. 33,725 1,009,389 Staples, Inc. 32,521 967,175 Tiffany & Co. 30,057 881,572 Toys "R" Us, Inc.* 55,486 999,303 Walgreen Co. 25,652 920,650 --------------- TOTAL RETAIL - SPECIALTY STORES 10,908,701 --------------- RETAIL AND WHOLESALE DISTRIBUTION 0.6% Genuine Parts Co. 25,010 997,649 SYSCO Corp. 30,359 979,685 W.W. Grainger, Inc. 16,931 991,987 --------------- TOTAL RETAIL AND WHOLESALE DISTRIBUTION 2,969,321 --------------- TELECOMMUNICATIONS 4.4% ADC Telecommunications, Inc.* 495,301 1,094,616 ALLTEL Corp. 17,185 943,972 Andrew Corp.* 79,848 1,116,276 AT&T Corp. 60,567 1,036,301 Avaya, Inc.* 66,129 952,258 BellSouth Corp. 34,292 914,568 Broadcom Corp., Class A* 32,947 891,216 CenturyTel, Inc. 27,933 896,370 Citizens Communications Co.* 72,705 974,247 Comverse Technology, Inc.* 51,292 1,058,667 Corning, Inc.* 84,385 966,208 JDS Uniphase Corp.* 272,485 863,777 Lucent Technologies, Inc.* 290,812 1,032,383 Motorola, Inc. 55,907 964,955 Nextel Communications, Inc.* 39,709 1,051,891 QUALCOMM, Inc. 24,490 1,023,927 Qwest Communications International, Inc.* 299,043 1,022,727 SBC Communications, Inc. 35,913 907,162 Scientific-Atlanta, Inc. 36,439 $ 998,064 Sprint Corp. (FON Group) 46,613 976,542 Tellabs, Inc.* 98,035 784,280 Verizon Communications, Inc. 23,444 916,660 --------------- TOTAL TELECOMMUNICATIONS 21,387,067 --------------- TIRE AND RUBBER 0.4% Cooper Tire & Rubber Co. 45,586 888,015 The Goodyear Tire & Rubber Co.* 86,684 873,775 --------------- TOTAL TIRE AND RUBBER 1,761,790 --------------- TOBACCO 0.2% Reynolds American, Inc. 13,137 904,614 --------------- TOTAL TOBACCO 904,614 --------------- TOOLS AND INSTRUMENTS 1.2% Millipore Corp.* 19,428 893,494 PerkinElmer, Inc. 52,132 1,070,791 Snap-on, Inc. 29,379 863,155 The Black & Decker Corp. 12,872 1,033,364 The Stanley Works 21,942 976,858 Thermo Electron Corp.* 33,745 978,605 --------------- TOTAL TOOLS AND INSTRUMENTS 5,816,267 --------------- TRANSPORTATION 1.5% Burlington Northern Santa Fe Corp. 25,299 1,057,751 CSX Corp. 28,234 1,030,541 FedEx Corp. 10,796 983,732 Norfolk Southern Corp. 32,303 1,096,686 Ryder System, Inc. 20,312 1,017,631 Union Pacific Corp. 16,048 1,010,543 United Parcel Service, Inc., Class B 12,670 1,003,211 --------------- TOTAL TRANSPORTATION 7,200,095 --------------- TRAVEL SERVICES 0.4% Carnival Corp. 19,681 995,071 Sabre Holdings Corp. 40,635 874,059 --------------- TOTAL TRAVEL SERVICES 1,869,130 ---------------
See Notes to Financial Statements. 16
MARKET SHARES VALUE - ------------------------------------------------------------------------------------------------ COMMON STOCKS (CONTINUED) UTILITIES - GAS AND ELECTRIC 6.1% Allegheny Energy, Inc. 62,441 $ 1,143,295 Ameren Corp. 20,348 976,704 American Electric Power Co., Inc. 28,960 953,653 Calpine Corp.* 253,590 631,439 CenterPoint Energy, Inc. 89,123 936,683 Cinergy Corp. 23,603 932,791 CMS Energy Corp.* 99,470 931,039 Consolidated Edison, Inc. 22,372 972,063 Constellation Energy Group, Inc. 23,479 953,717 Dominion Resources, Inc. 14,637 941,452 DTE Energy Co. 23,117 987,327 Duke Energy Corp. 42,872 1,051,650 Edison International* 35,599 1,085,770 Entergy Corp. 15,670 1,024,191 Exelon Corp. 25,571 1,013,123 FirstEnergy Corp. 22,826 943,399 FPL Group, Inc. 13,996 964,324 KeySpan Corp. 24,164 965,352 Kinder Morgan, Inc. 15,302 984,990 NiSource, Inc. 44,024 944,315 PG&E Corp.* 31,837 1,020,057 Pinnacle West Capital Corp. 22,760 970,031 PPL Corp. 20,218 1,051,336 Progress Energy, Inc. 21,884 903,809 Public Service Enterprise Group, Inc. 22,850 973,182 TECO Energy, Inc. 70,130 981,820 The AES Corp.* 91,702 999,552 The Southern Co. 31,247 987,093 TXU Corp. 20,584 1,260,151 Xcel Energy, Inc. 54,877 938,397 --------------- TOTAL UTILITIES - GAS AND ELECTRIC 29,422,705 --------------- WASTE MANAGEMENT 0.4% Allied Waste Industries, Inc.* 99,371 $ 810,867 Waste Management, Inc. 34,683 987,772 --------------- TOTAL WASTE MANAGEMENT 1,798,639 --------------- TOTAL INVESTMENTS (Cost $463,947,681)--99.8% 484,884,213 Other Assets Less Liabilities--0.2% 752,077 --------------- NET ASSETS--100.0% $ 485,636,290 ===============
* Non-Income Producing Security See Notes to Financial Statements. 17 STATEMENT OF ASSETS AND LIABILITIES October 31, 2004 ASSETS Investments at Market Value, (Cost $463,947,681) $ 484,884,213 Cash 431,547 Receivables: Capital Stock Sold 14,220,396 Dividends 454,711 --------------- TOTAL ASSETS 499,990,867 --------------- LIABILITIES Payables: Investments Purchased 14,206,578 Accrued Management Fees 147,999 --------------- TOTAL LIABILITIES 14,354,577 --------------- NET ASSETS $ 485,636,290 =============== NET ASSETS CONSIST OF Paid-in Capital $ 465,111,307 Undistributed Net Investment Income 314,137 Accumulated Net Realized Loss on Investments (725,686) Net Unrealized Appreciation on Investments 20,936,532 --------------- NET ASSETS $ 485,636,290 =============== Shares Outstanding (Unlimited Shares Authorized), No Par Value 3,401,000 =============== Net Asset Value, Offering Price and Repurchase Price Per Share $ 142.79 ===============
See Notes to Financial Statements. 18 STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2004 ---------------- INVESTMENT INCOME Dividends $ 4,588,321 Interest 92 --------------- Total Income 4,588,413 --------------- EXPENSES Management Fee 1,230,944 --------------- Net Investment Income 3,357,469 --------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) From: Investments (390,877) In-kind Redemptions 26,958,645 --------------- Net Realized Gain 26,567,768 Net Change in Unrealized Appreciation/Depreciation on Investments 2,736,534 --------------- Net Realized and Unrealized Gain on Investments 29,304,302 --------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 32,661,771 ===============
See Notes to Financial Statements. 19 STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 24, 2003* YEAR ENDED THROUGH OCTOBER 31, 2004 OCTOBER 31, 2003 ---------------- ---------------- OPERATIONS Net Investment Income $ 3,357,469 $ 846,403 Net Realized Gain 26,567,768 10,854,018 Net Change in Unrealized Appreciation/ Depreciation on Investments 2,736,534 18,199,998 --------------- --------------- Net Increase in Net Assets Resulting From Operations 32,661,771 29,900,419 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net Investment Income (3,196,596) (679,052) --------------- --------------- SHAREHOLDER TRANSACTIONS Proceeds From Shares Sold 423,777,066 202,657,673 Value of Shares Repurchased (144,741,249) (54,743,742) --------------- --------------- Net Increase in Net Assets Resulting From Share Transactions 279,035,817 147,913,931 --------------- --------------- Increase in Net Assets 308,500,992 177,135,298 NET ASSETS--BEGINNING OF PERIOD 177,135,298 -- --------------- --------------- NET ASSETS--END OF PERIOD $ 485,636,290 $ 177,135,298 =============== =============== CHANGES IN SHARES OUTSTANDING: Shares Sold 3,050,000 1,851,000 Shares Repurchased (1,050,000) (450,000) Shares Outstanding, Beginning of Period 1,401,000 -- --------------- --------------- Shares Outstanding, End of Period 3,401,000 1,401,000 =============== ===============
* COMMENCEMENT OF INVESTMENT OPERATIONS. See Notes to Financial Statements. 20 FINANCIAL HIGHLIGHTS
FOR THE PERIOD APRIL 24, 2003* YEAR ENDED THROUGH OCTOBER 31, 2004 OCTOBER 31, 2003 ---------------- ---------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE AT BEGINNING OF PERIOD $ 126.43 $ 101.03 --------------- --------------- Net Investment Income** 1.48 0.70 Net Realized and Unrealized Gain on Investments 16.30 25.32 --------------- --------------- TOTAL FROM INVESTMENT OPERATIONS 17.78 26.02 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income (1.42) (0.62) --------------- --------------- NET ASSET VALUE AT END OF PERIOD $ 142.79 $ 126.43 =============== =============== TOTAL RETURN*** 14.11% 25.77% RATIOS/SUPPLEMENTAL DATA: Net Assets at End of Period (000's omitted) $ 485,636 $ 177,135 RATIO TO AVERAGE NET ASSETS OF: Expenses 0.40% 0.40%**** Net Investment Income 1.09% 1.13%**** Portfolio Turnover Rate+ 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 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. 21 NOTES TO FINANCIAL STATEMENTS October 31, 2004 1. ORGANIZATION Rydex ETF Trust (the "Trust") is an open-end, diversified, 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 and commenced operations on April 24, 2003. The Trust currently consists of one series, Rydex S&P Equal Weight ETF (the "Fund"). The Fund's investment objective is to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P Equal Weight Index (the "Underlying Index"), an index representing publicly traded equity securities. The Fund seeks to achieve its objective by investing in common stocks that comprise the Underlying Index. The Fund uses 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 Fund operates as an index fund and is not actively managed. Adverse performance of a security in the Fund's portfolio will ordinarily not result in the elimination of the security from the Fund's portfolio. The Fund issues and redeems 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 Fund's financial statements are reasonable and prudent; however, actual results could differ from these estimates. Under the Fund's organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. 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 22 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. 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 cost, operating 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. FUTURES AND PURCHASED OPTIONS The Fund may buy and sell stock index futures contracts with respect to any stock index traded on a recognized stock exchange or board of trade. A stock index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. The Fund may enter into futures and option contracts for the purpose of either hedging its exposure to the market fluctuations of the portfolio or an individual security position. As of October 31, 2004, the Fund had not entered into any futures or options transactions. There are several risks in connection with the use of futures contracts. Futures contracts involve, in varying degrees, risk of loss in excess of amounts reflected in the financial statements. Risks may be caused by an imperfect correlation between movements in the price of the instruments and the price of the underlying securities. In addition, there is the risk that a fund may not be able to enter into a closing transaction because of an illiquid secondary market. D. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements with financial institutions. The Fund follows certain procedures designed to minimize the risks inherent in such agreements. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose condition will be continually monitored by Rydex Investments, which acts as the Fund's 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 Fund will seek to 23 liquidate such collateral. However, the exercising of the Fund's 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 Fund could suffer a loss. It is the current policy of the Fund 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 Fund, amounts to more than 15% of the Fund's net assets. The investments of the Fund 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, 2004, the Fund had not engaged in repurchase transactions. E. FEDERAL INCOME TAXES The Fund's 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, futures and options, losses deferred due to wash sales and excise tax regulations. For the year ended October 31, 2004, the Fund realized net capital gains resulting from in-kind redemptions and other transactions. Because gains from in-kind redemptions are not taxable to the Fund, and are not distributed to existing Fund shareholders, the gains are reclassified from accumulated net realized gains to paid-in-capital at the end of the Fund's tax year. These reclassifications have no effect on net assets or net asset value per share. The in-kind gains for the year ended October 31, 2004 are disclosed in the Fund's Statement of Operations. In order to present paid-in-capital, undistributed net investment income and accumulated net realized losses 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 losses on investments. For the year ended October 31, 2004, the adjustments were to increase paid-in capital by $26,946,208, and to decrease accumulated net realized gain on investments by $26,946,208 due to the difference in the treatment for book and tax purposes of in-kind redemptions. For federal income tax purposes, the Fund has a capital loss carryforward of $272,281, which expires October 31, 2011. Capital loss carryforwards are available to offset future capital gains, if any. During the current fiscal year the Fund utilized capital loss carryforwards of $56,771, to offset current year realized gains. 24 The tax character of distributable earnings at October 31, 2004 were as follows: Net Unrealized Appreciation 20,483,127 Undistributed Ordinary Income 314,137 Undistributed Long-term Capital Gains -- Capital Loss Carryforwards (272,281) Paid-in Capital 465,111,307 ----------- Net Assets 485,636,290 ===========
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 464,401,086 =========== Gross Tax Unrealized Appreciation 34,531,004 Gross Tax Unrealized Depreciation (14,047,877) ----------- Net Tax Unrealized Appreciation on Investments 20,483,127 ===========
F. DIVIDENDS AND DISTRIBUTIONS The Fund declares and pays dividends from net investment income and distributes from net realized capital gains at least annually. 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 Fund 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 0.40% of the average daily net assets of the Fund. Under an Administration agreement, The Bank of New York (the "Administrator") provides various administrative and accounting services for the maintenance and operations of the Fund. Under a Custodian Agreement with the Trust, the Administrator maintains in separate accounts cash, securities and other assets of the Trust and the Fund, keeps all necessary accounts and records, and provides other services. The Administrator is required, upon the order of the Trust, to deliver securities held by the Custodian and to make payments for securities purchased by the Trust for the Fund. 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 Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services except interest, taxes, brokerage 25 commissions, and other expenses connected with the execution of portfolio transactions, any future distribution fees or expenses and extraordinary expenses. The Fund has adopted a Distribution Plan (the "Plan") that allows the Fund 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 Fund 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 Fund. 4. CAPITAL At October 31, 2004, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee of $2,000 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. 5. INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments, U.S government and government agency obligations) aggregated $449,781,434 and $171,136,355, respectively, for the year ended October 31, 2004. There were no purchases or sales of U.S. government or government agency obligations for the year ended October 31, 2004. At October 31, 2004, gross unrealized appreciation of investments was $34,531,004 and gross unrealized depreciation of investments was $14,047,877, resulting in net unrealized appreciation of $20,483,127 based on cost for U.S. Federal income tax purposes. 26 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of Rydex S&P Equal Weight ETF In our opinion, the accompanying statement of assets and liabilities, including the schedule 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 The Rydex S&P Equal Weight ETF (the "Fund") at October 31, 2004, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the periods indicated, 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 Fund's 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland December 28, 2004 27 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 2005, 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 2004. MEMBERS OF THE BOARD. Set forth below are the names, ages, position with the Trust, length of term of office, and the principal occupations for a minimum of the last five years of each of the persons currently serving as Trustees of the Trust. Unless otherwise noted, the business address of each Trustee is 9601 Blackwell Road, Suite 500, Rockville, Maryland 20850. TRUSTEES CARL G. VERBONCOEUR (51) Trustee of Rydex Series Funds, 2004 to present; Trustee of Rydex Variable Trust, 2004 to present; Trustee of Rydex Dynamic Funds, 2004 to present; Trustee of Rydex ETF Trust, 2004 to present; President, Chief Executive Officer and Treasurer of Rydex Variable Trust, 2003 to present; President and Chief Executive Officer of Rydex Series Funds, 2003 to present; Treasurer of Rydex Series Funds, 1997 to present; Vice President of Rydex Series Funds, 1997 to 2003; President and Chief Executive Officer of Rydex Variable Trust, 2003 to present; Treasurer of Rydex Variable Trust, 1998 to present; Vice President Rydex Variable Trust, 1998 to 2003; Treasurer of Rydex Dynamic Funds, 1999 to present; Vice President of Rydex Dynamic Funds, 1999 to 2003; President and Chief Executive Officer of Rydex ETF Trust, 2003 to present. Treasurer of Rydex ETF Trust, 2002 to 2003; Vice President of Rydex ETF Trust, 2002 to 2003. Treasurer of Rydex Capital Partners SPhinX Fund, 2003 to present. President and Chief Executive Officer of Rydex Fund Services, Inc., 2003 to present; Executive Vice President of Rydex Fund Services, Inc., 2000 to 2003; President and Chief Executive Officer of Rydex Distributors, Inc., 2003 to present; Executive Vice President of Rydex Distributors, Inc., 1997 to 2003; Executive Vice President of Rydex Capital Partners I, LLC., investment advisor, 2003 to present; Executive Vice President of Rydex Capital Partners II, LLC., investment advisor, 2003 to present; Senior Vice President, Crestar Bank, 1995 to 1997; Senior Vice President, Crestar Asset Management Company, a registered investment advisor, 1993 to 1995; Vice President of Perpetual Savings Bank, 1987 to 1993. COREY A. COLEHOUR (58) Trustee of Rydex Series Funds, 1993 to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present; Trustee of Rydex ETF Trust, 2003 to present; Senior Vice President of Marketing of Schield Management Company, a registered investment advisor, 1985 to present. 28 J. KENNETH DALTON (63) Trustee of Rydex Series Funds, 1995 to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present; Trustee of Rydex ETF Trust, 2003 to present; Mortgage Banking Consultant and Investor, The Dalton Group, a real estate company, 1995 to present; President, CRAM Mortgage Group, Inc., 1966 to 1995. JOHN O. DEMARET (64) Trustee of Rydex Series Funds, 1997 to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present; Trustee of Rydex ETF Trust, 2003 to present; Trustee, Rydex Capital Partners SPhinX Fund, 2003 to present. Founder and Chief Executive Officer, Health Cost Controls America, Chicago, Illinois, 1987 to 1996; sole practitioner, Chicago, Illinois, 1984 to 1987; General Counsel for the Chicago Transit Authority, 1981 to 1984; Senior Partner, O'Halloran, LaVarre & Demaret, Northbrook, Illinois, 1978 to 1981. PATRICK T. MCCARVILLE (61) Trustee of Rydex Series Funds, 1997 to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present; Trustee of Rydex ETF Trust, 2003 to present; Founder and Chief Executive Officer, Par Industries, Inc., Northbrook, Illinois, 1977 to present; President and Chief Executive Officer, American Health Resources, Northbrook, Illinois, 1984 to 1986. ROGER SOMERS (59) Trustee of Rydex Series Funds, 1993 to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present; Trustee of Rydex ETF Trust, 2003 to present; President, Arrow Limousine, 1963 to present. 29 The Fund's 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 The Bank of New York CUSTODIAN The Bank of New York TRANSFER AGENT The Bank of New York DISTRIBUTOR Rydex Distributors, Inc. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 30 PROXY VOTING POLICIES AND PROCEDURES A description of the Fund's 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 Fund 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 Fund's Form N-PX on the SEC's website at www.sec.gov. QUARTERLY PORTFOLIOS The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's website at www.sec.gov. The Fund's 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. 31 This page intentionally left blank. [RYDEXINVESTMENTS LOGO] ESSENTIAL FOR MODERN MARKETS(TM) 9601 BLACKWELL ROAD SUITE 500 ROCKVILLE, MD 20850 800.820.0888 www.rydexfunds.com 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. The Code is on file with the Securities and Exchange Commission, and is available to the public. 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, 2004 and October 31, 2003 were $21,200 and $20,000, 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, 2004 and October 31, 2003 were $14,840 and $14,000, 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)-(h) Not applicable ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The Rydex S&P Equal Weight ETF has a separately 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. The Schedule of Investments is included as a 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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable ITEM 10. CONTROLS AND PROCEDURES. a) Based on their evaluation on December 28, 2004, the President (principal executive officer) and the Treasurer (principal financial officer) of the Rydex S&P Equal Weight ETF (the "Fund") believe that there were no significant deficiencies in the design or operation of the internal controls of the Fund or Rydex Investments ("RI"), the investment adviser, and The Bank of New York ("BNY"), administrator of the Fund, or Rydex Distributors, Inc. ("RD"), which acts as distributor for the Fund, including disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) that adversely affected the ability of the Fund, or RI, or BNY, on behalf of the Fund, to record, process, summarize, and report the subject matter contained in this Report, and the President and Treasurer of the Fund have identified no material weaknesses in such internal controls on behalf of the Fund. There was no fraud, whether or not material, involving officers or employees of RI, or BNY, or RD, or the Fund who have a significant role in the Fund's internal controls, including disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) that has come to the attention of the Adviser or the officers of the Fund, including its President and Treasurer. b) There were no significant changes in the Fund and the RI's internal controls, including disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) that apply to the Fund or in other factors with respect to the Fund that could have significantly affected the Fund's or the RI's internal controls during the period covered by this Form N-CSR, and no corrective actions with regard to significant deficiencies or material weaknesses were taken by the Fund or the RI during such period. ITEM 11. EXHIBITS. (a)(1) Code of Ethics. (a)(2) Certification of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (b) Certification of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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: /s/ Carl Verboncoeur ---------------------------------------------- Name: Carl Verboncoeur Title: President Date: December 28, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Carl Verboncoeur ---------------------------------------------- Name: Carl Verboncoeur Title: President Date: December 28, 2004 By: /s/ Nick Bonos ----------------------------------------- Name: Nick Bonos Title: Treasurer Date: December 28, 2004 EX-99.CODEETH 2 a2148261zex-99_codeeth.txt EX 99.CODEETH Exhibit 99.Code Eth EXHIBIT (a)(1) COMBINED CODE OF ETHICS ADOPTED UNDER RULE 17j-1 COVERING THE FOLLOWING COMPANIES: RYDEX DYNAMIC FUNDS RYDEX SERIES FUNDS RYDEX VARIABLE TRUST RYDEX ETF TRUST PADCO ADVISORS, INC. PADCO ADVISORS II, INC. RYDEX DISTRIBUTORS, INC. RYDEX FUND SERVICES, INC. EFFECTIVE JANUARY 1, 1999 AS REVISED AUGUST 6, 2003 Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, Rydex ETF Trust, PADCO Advisors, Inc., PADCO Advisors II, Inc., Rydex Distributors, Inc. and Rydex Fund Services, Inc. (the "Companies") are confident that their officers, trustees, directors and employees act with integrity and good faith. The Companies recognize, however, that personal interests may conflict with a Company's interests where officers, directors, trustees or employees: - Know about present or future portfolio transactions or - Have the power to influence portfolio transactions; and - 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 Investment Company Act of 1940 (the "1940 Act"), the Companies have adopted this Code of Ethics (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 officer, director, trustee and employee of the Companies should carefully read and review this Code. I. ABOUT THE RYDEX FUNDS. Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, and Rydex ETF Trust (the "Trusts") are separately registered open-end management investment companies. Each Trust may consist of multiple investment portfolios (the "Rydex Funds"). The Rydex Funds may be grouped primarily into three broad categories: (1) Benchmark Funds, (2) Sector Funds, and (3) Strategic Funds. In addition, there is a Money Market Fund. PADCO Advisors, Inc. and PADCO Advisors II, Inc. (the "Advisors") are each investment advisers. PADCO Advisors, Inc. is the investment adviser for Rydex Dynamic Funds and for Rydex Series Funds and PADCO Advisors II, Inc. is the investment adviser for Rydex Variable Trust and Rydex ETF Trust. Rydex Distributors, Inc. serves as the distributor of the Rydex Funds. Rydex Financial Services, Inc. provides general administrative services to the Rydex Funds, and serves as the transfer agent to the Rydex Series Funds, Rydex Dynamic Funds and Rydex Variable Trust. II. ABOUT THIS CODE OF ETHICS. (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: - All Company officers and directors; - Portfolio Management Persons, Fund Accounting Persons and all other employees who regularly obtain information concerning recommendations made to a Fund about the PURCHASE OR SALE of a security (herein called ACCESS EMPLOYEES); - All Trustees of the Trusts, both INTERESTED and INDEPENDENT; and - 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.) - Independent Trustees of the Trusts Part A - Interested Trustees Part B - Company officers, directors and ACCESS EMPLOYEES Part C - Natural CONTROL persons Part D (2) OTHER PROVISIONS. The remainder of this Code sets forth general principles (Section III), required course of conduct (Section IV), reporting obligations (Section V), the Companies' review, enforcement and recordkeeping responsibilities (Sections VI, VII and VIII) and miscellaneous information (Section IX). III. STATEMENT OF GENERAL PRINCIPLES. In recognition of the trust and confidence placed in the Companies by shareholders of the Trusts, and because the Companies believe that their operations should benefit shareholders, the Companies have adopted the following universally applicable principles. (1) Shareholders' interests are paramount. You must place shareholder interests before your own. (2) 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. (3) You must avoid actions or activities that allow (or appear to allow) you or your family to profit or benefit from your position with a Company, or that bring into question your independence or judgment. IV. REQUIRED COURSE OF CONDUCT. (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. (2) LIMITS ON ACCEPTING OR RECEIVING GIFTS. Officers of the Advisors and Portfolio Management Personnel 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 a Company. THIS PROVISION DOES NOT INCLUDE: - occasional meals, tickets to a sporting event or the theater, or normal business entertainment; and - any payment or reimbursement for professional training or educational meetings. V. REPORTING OBLIGATIONS. See Parts A, B, C or D as appropriate, for your specific reporting obligations. VI. REVIEW AND ENFORCEMENT OF THE CODE. Each Company shall appoint a Compliance Officer. However, with respect to the Trusts, the Compliance Officer shall be the President of the Trust or his designee. (1) COMPLIANCE OFFICER. The Compliance Officer will perform the following duties: (A) 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. (B) 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 and fund counsel. The President of the Trusts and counsel to the Rydex Funds (the "Fund Counsel") will independently determine whether the person violated the Code. (C) 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 VI. (2) SANCTIONS. If the President and Fund 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. (3) EXCEPTIONS. 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 the Rydex Funds; (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 the Rydex Funds; 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. VII. ANNUAL WRITTEN REPORT TO THE BOARD. At least once a year, the Compliance Officer, on behalf of each Company, will provide the Board of Trustees of each Trust a WRITTEN report that includes: (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) CERTIFICATION. The Report will certify to the Board of Trustees that each Company has adopted measures reasonably necessary to prevent its personnel from violating the Code currently and in the future. VIII. 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 will be available for examination by representatives of the Securities and Exchange Commission. (1) 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; (2) 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; (3) 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; (4) 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; (5) 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; and (6) 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 (AIPO=~) or a PRIVATE PLACEMENT, for at least five years after the end of the fiscal year in which the approval is granted. IX. MISCELLANEOUS. (1) CONFIDENTIALITY. All personal SECURITIES transactions reports and any other information filed with a Company under this Code will be treated as confidential, provided that such reports and related information may be produced to the Securities and Exchange Commission and other regulatory agencies. (2) 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. (3) PERIODIC REVIEW AND REPORTING. The Compliance Officer or President of the Trust (or his or her designee) will report to the Board 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. (4) ANNUAL ACKNOWLEDGMENT. Each interested Trustee, officer, employee and affiliated agent of the Companies 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 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. This certification may be made electronically via the http://rydex.starcompliance.com website. Adopted December 11, 1998 Revised February 11, 2002 Revised January 30, 2003 Revised August 25, 2003 PART A PROCEDURES FOR INDEPENDENT TRUSTEES GENERAL OBLIGATIONS. (1) REQUIRED TRANSACTION REPORTS. (A) 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 10 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 website. 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. (B) If you had no reportable transactions or did not open any SECURITIES accounts during the quarter, you are not required to submit a report. (C) 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: - imply a duty of inquiry; - presume you should have deduced or extrapolated from discussions or memoranda dealing with the Fund's investment strategies; or - 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. (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. PART B INTERESTED TRUSTEES 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 website. 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 10 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 website. 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. (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. PART C COMPANY OFFICERS, DIRECTORS AND ACCESS EMPLOYEES I. 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 officer or ACCESS EMPLOYEE, 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 website. 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) 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 10 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 website. 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. (4) 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. (5) 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. (6) 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. (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. (7) 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 Fund. This provision will only apply if you obtain specific information regarding the PURCHASE OR SALE of a SECURITY by a Fund. (A) 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. 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 website. 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 10 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 website. 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. (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. APPENDIX A DEFINITIONS ACCESS EMPLOYEE includes any director or officer of a Trust or of a Trust's investment adviser, or an employee of a Trust's investment adviser who, in connection with his or her regular functions or duties, participates in the selection of a Trust's portfolio SECURITIES or who has access to information regarding a Trust's future purchases or sales of portfolio SECURITIES. 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 SECURITIES 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 25, 2000, the Trusts' INDEPENDENT TRUSTEES are: Corey A. Colehour J. Kenneth Dalton Roger Somers John O. Demaret Patrick T. McCarville 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 25, 2000, the Trusts' only INTERESTED trustee is: Albert P. Viragh, Jr. 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. 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 and high quality short-term debt instruments, including repurchase agreements. A SECURITY does not include index futures or other commodities. A SECURITY HELD OR TO BE ACQUIRED by the Trust (or any Fund) means any SECURITY which, within the most recent 15 days, (i) is or has been held by the Trust (or any Fund) or (ii) is being or has been considered by the Trust's adviser 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 the 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. EX-99.CERT 3 a2148261zex-99_cert.txt EX 99.CERT Exhibit 99.Cert EXHIBIT(a)(2) Rule 30a-2(a) CERTIFICATIONS I, Carl 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(s) 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) 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 registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual 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(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (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: December 28, 2004 -------------------- /s/ Carl Verboncoeur ----------------------------- Carl Verboncoeur, President Rule 30a-2(a) 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(s) 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) 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 registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual 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(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (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: December 28, 2004 -------------------- /s/ Nick Bonos ----------------------- Nick Bonos, Treasurer EX-99.906CERT 4 a2148261zex-99_906cert.txt EX 99.906CERT Exhibit 99.906 Cert EXHIBIT (b) Rule 30a-2(b) CERTIFICATIONS Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Rydex ETF Trust (the Registrant), do hereby certify, to such officer's knowledge, that: (1) the Rydex ETF Trust on Form N-CSR of the Registrant for the annual period ended October 31, 2004 (the "Form N-CSR") 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 Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: December 28, 2004 --------------------- /s/ Carl Verboncoeur - ----------------------------------- Name: Carl Verboncoeur Title: President Dated: December 28, 2004 ---------------------- /s/ Nick Bonos - ----------------------------------- Name: Nick Bonos Title: Treasurer This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----