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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)
805 King Farm Boulevard, Suite 600
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Donald C. Cacciapaglia
Rydex ETF Trust
805 King Farm Boulevard, Suite 600
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
Date of reporting period: October 31, 2012
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. § 3507.
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Item 1. Reports to Stockholders.
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OCTOBER 31, 2012
GUGGENHEIM ETFs
ANNUAL REPORT
| EWMD | GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF | |
| (formerly, RYDEX S&P MIDCAP 400 EQUAL WEIGHT ETF) | ||
| EWSM | GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF | |
| (formerly, RYDEX S&P SMALLCAP 600 EQUAL WEIGHT ETF) | ||
| EWRM | GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF | |
| (formerly, RYDEX RUSSELL MIDCAP® EQUAL WEIGHT ETF) | ||
| EWRI | GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF | |
| (formerly, RYDEX RUSSELL 1000® EQUAL WEIGHT ETF) | ||
| EWRS | GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF | |
| (formerly, RYDEX RUSSELL 2000® EQUAL WEIGHT ETF) | ||
| EWEF | GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF | |
| (formerly, RYDEX MSCI EAFE EQUAL WEIGHT ETF) | ||
| EWEM | GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF | |
| (formerly, RYDEX MSCI EMERGING MARKETS EQUAL WEIGHT ETF) | ||
| RCD | GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER DISCRETIONARY ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT CONSUMER DISCRETIONARY ETF) | ||
| RHS | GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER STAPLES ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT CONSUMER STAPLES ETF) | ||
| RYE | GUGGENHEIM S&P 500® EQUAL WEIGHT ENERGY ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT ENERGY ETF) | ||
| RYF | GUGGENHEIM S&P 500® EQUAL WEIGHT FINANCIALS ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT FINANCIALS ETF) | ||
| RYH | GUGGENHEIM S&P 500® EQUAL WEIGHT HEALTH CARE ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT HEALTH CARE ETF) | ||
| RGI | GUGGENHEIM S&P 500® EQUAL WEIGHT INDUSTRIALS ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT INDUSTRIALS ETF) | ||
| RTM | GUGGENHEIM S&P 500® EQUAL WEIGHT MATERIALS ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT MATERIALS ETF) | ||
| RYT | GUGGENHEIM S&P 500® EQUAL WEIGHT TECHNOLOGY ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT TECHNOLOGY ETF) | ||
| RYU | GUGGENHEIM S&P 500® EQUAL WEIGHT UTILITIES ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT UTILITIES ETF) |
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| GUGGENHEIM ETFS ANNUAL REPORT | 1 |
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| October 31, 2012 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for 16 of our exchange traded funds (“ETFs”).
The Investment Adviser is part of Guggenheim Investments which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.
This report covers performance of the following ETFs for the annual period ended October 31, 2012, with the name of each Fund followed by its ticker symbol:
| – | Guggenheim S&P MidCap 400® Equal Weight ETF (EWMD) |
| – | Guggenheim S&P SmallCap 600® Equal Weight ETF (EWSM) |
| – | Guggenheim Russell Midcap® Equal Weight ETF (EWRM) |
| – | Guggenheim Russell 1000® Equal Weight ETF (EWRI) |
| – | Guggenheim Russell 2000® Equal Weight ETF (EWRS) |
| – | Guggenheim MSCI EAFE Equal Weight ETF (EWEF) |
| – | Guggenheim MSCI Emerging Markets Equal Weight ETF (EWEM) |
| – | Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF (RCD) |
| – | Guggenheim S&P 500® Equal Weight Consumer Staples ETF (RHS) |
| – | Guggenheim S&P 500® Equal Weight Energy ETF (RYE) |
| – | Guggenheim S&P 500® Equal Weight Financials ETF (RYF) |
| – | Guggenheim S&P 500® Equal Weight Health Care ETF (RYH) |
| – | Guggenheim S&P 500® Equal Weight Industrials ETF (RGI) |
| – | Guggenheim S&P 500® Equal Weight Materials ETF (RTM) |
| – | Guggenheim S&P 500® Equal Weight Technology ETF (RYT) |
| – | Guggenheim S&P 500® Equal Weight Utilities ETF (RYU) |
Rydex Distributors, LLC, the distributor of the Funds, is committed to providing investors with innovative investment solutions; as of the date of this report we offer 26 ETFs with a wide range of domestic and global themes, as well as equity and fixed-income mutual funds. We have built on the investment management strengths of Guggenheim Investments and worked with a diverse group of index providers to create some of the most distinctive ETFs available.
Rydex Distributors, LLC is affiliated with Guggenheim Partners and Security Investors.
| 2 | GUGGENHEIM ETFS ANNUAL REPORT |
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To learn more about economic and market conditions over the 12 months ended October 31, 2012, we encourage you to read the Economic and Market Overview section of the report, which follows this letter, and the Manager’s Analysis for each ETF.
Sincerely,
Donald C. Cacciapaglia
President
November 30, 2012
Read each fund’s prospectus and summary prospectus (if available) carefully before investing. It contains the fund’s investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at www.guggenheiminvestments.com or call 800.820.0888.
Guggenheim Equal Weight and Sector Equal Weight ETFs may not be suitable for all investors. Investing in sector funds is more volatile than investing in broadly diversified funds, as there is a greater risk due to the concentration of the funds’ holdings in issuers of similar offerings. Guggenheim Investments Equal Weight ETFs may not be suitable for all investors. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Most investors will also incur customary brokerage commissions when buying or selling shares of an ETF. Investments in securities are subject to market risks that may cause their prices to fluctuate over time. Please review a prospectus carefully for more information of the risks associated with each ETF.
| GUGGENHEIM ETFS ANNUAL REPORT | 3 |
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Shareholder Expense Example
As a shareholder of the Rydex ETF Trust, you incur transaction costs such as creation and redemption fees or brokerage charges, and ongoing costs including advisory fees, trustee fees and, if applicable, distribution fees. All other Trust expenses are paid by the advisor. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example in the table is based on an investment of $1,000 invested on April 30, 2012 and held for the six months ended October 31, 2012.
Actual Expenses
The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first table under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses attributable to your investment during this period.
Hypothetical Example for Comparison Purposes
The second table below provides information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not a Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| Expense Ratio |
Beginning Account Value 04/30/12 |
Ending Account Value 10/31/12 |
Expenses Paid During Six-Month Period* 04/30/12 to 10/31/12 |
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| Actual |
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| Guggenheim S&P MidCap 400® Equal Weight ETF |
0.40% | $ | 1,000.00 | $ | 996.80 | $ | 2.01 | |||||||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
0.41% | 1,000.00 | 1,012.60 | 2.07 | ||||||||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
0.40% | 1,000.00 | 998.40 | 2.01 | ||||||||||||
| Guggenheim Russell 1000® Equal Weight ETF |
0.40% | 1,000.00 | 1,002.30 | 2.01 | ||||||||||||
| Guggenheim Russell 2000® Equal Weight ETF |
0.40% | 1,000.00 | 1,000.90 | 2.01 | ||||||||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
0.55% | 1,000.00 | 994.70 | 2.76 | ||||||||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
0.62% | 1,000.00 | 983.20 | 3.09 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
0.50% | 1,000.00 | 1,008.20 | 2.52 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
0.50% | 1,000.00 | 1,036.50 | 2.56 | ||||||||||||
| 4 | GUGGENHEIM ETFS ANNUAL REPORT |
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| FEES AND EXPENSES (Unaudited) (concluded)
|
| Expense Ratio |
Beginning Account Value 04/30/12 |
Ending Account Value 10/31/12 |
Expenses Paid During Six-Month Period* 04/30/12 to 10/31/12 |
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| Guggenheim S&P 500® Equal Weight Energy ETF |
0.50% | $ | 1,000.00 | $ | 1,002.80 | $ | 2.52 | |||||||||
| Guggenheim S&P 500® Equal Weight Financial ETF |
0.50% | 1,000.00 | 1,036.40 | 2.56 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
0.50% | 1,000.00 | 1,045.60 | 2.57 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
0.50% | 1,000.00 | 1,011.60 | 2.53 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
0.50% | 1,000.00 | 974.90 | 2.48 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
0.50% | 1,000.00 | 914.10 | 2.41 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
0.50% | 1,000.00 | 1,115.40 | 2.66 | ||||||||||||
| Hypothetical (assuming a 5% return before expenses) |
|
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| Guggenheim S&P MidCap 400® Equal Weight ETF |
0.40% | 1,000.00 | 1,023.13 | 2.03 | ||||||||||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
0.41% | 1,000.00 | 1,023.08 | 2.08 | ||||||||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
0.40% | 1,000.00 | 1,023.13 | 2.03 | ||||||||||||
| Guggenheim Russell 1000® Equal Weight ETF |
0.40% | 1,000.00 | 1,023.13 | 2.03 | ||||||||||||
| Guggenheim Russell 2000® Equal Weight ETF |
0.40% | 1,000.00 | 1,023.13 | 2.03 | ||||||||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
0.55% | 1,000.00 | 1,022.37 | 2.80 | ||||||||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
0.62% | 1,000.00 | 1,022.02 | 3.15 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Financial ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
0.50% | 1,000.00 | 1,022.62 | 2.54 | ||||||||||||
| * | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect one-half year period). |
| GUGGENHEIM ETFS ANNUAL REPORT | 5 |
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Amidst the negative headlines concerning the potential fiscal cliff in the U.S., further turmoil in Europe and worsening economic data from China, the U.S. economy has shown surprising resilience, with signs of rising consumer sentiment and a recovery in housing. The U.S. housing market appears to have passed its bottom and real estate prices have begun to pick up. Our expectation is that a period of continued low interest rates will likely reinforce the rise in home prices and sales. Rising home prices will increase household net worth, which will translate into greater consumption via the wealth effect, and is supportive of overall economic growth. The recent rise in headline inflation, led by increases in energy and food prices, is likely to be transitory. Inflationary pressures should remain muted in the medium-term given the substantial slack in the economy.
The U.S. economy continues to press forward despite the current headwinds, and we believe the current macroeconomic environment remains constructive for risk assets, especially in the U.S. Stocks in the U.S. appear to be undervalued by most measures, and should benefit from continued capital inflow and the Federal Reserve’s accommodative monetary policy. We continue to see attractive value in credit products on a relative basis, though this positive outlook is limited to spread (or non-government) sectors.
On the international front, uncertainty continues to weigh on European markets. European policymakers appear to be coming closer to a consensus on the need for a fiscal union, albeit at a glacial pace. In China, a recent batch of economic data suggests that the odds of a hard landing have increased materially. We expect an announcement of additional stimulus measures after the government transition next year; although a stimulus would be supportive of economic growth, we expect China’s headline growth to slow from its breakneck pace of the past decade.
Beginning in mid-November 2011, the U.S. stock market moved up fairly consistently, except for a second-quarter pullback caused by lower earnings and GDP. For the 12-month period ended October 31, 2012, the Standard & Poor’s 500® Index* (the “S&P 500”) returned 15.21%.
Most international markets had positive returns, but were not nearly as strong as the U.S. market. The Morgan Stanley Capital International Europe-Australasia-Far East (the “MSCI EAFE”) Index* returned 4.61%. The MSCI EAFE Index* is composed of approximately 1,100 companies in 20 developed countries in Europe and the Pacific Basin. The MSCI Emerging Markets Index* returned 2.63%.
The search for yield continued to attract investors to the U.S. bond markets, helping performance, with lower-rated bonds outperforming higher-quality issues. The return of the Barclays U.S. Aggregate Bond Index, which is a proxy for the U.S. investment grade bond market, returned 5.25%, while return of the Barclays U.S. Corporate High Yield Index* was 13.61%. Reflecting the Federal Reserve’s continuing accommodative monetary policy, interest rates on short-term securities remained at their lowest levels in many years; the return of the Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index* was 0.08%.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
* Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees or expenses.
The Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds.
| 6 | GUGGENHEIM ETFS ANNUAL REPORT |
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| ECONOMIC AND MARKET OVERVIEW (continued)
|
The Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index tracks 3-month U.S. government securities.
The MSCI EAFE Index is a capitalization weighted measure of stock markets in Europe, Australasia and the Far East.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
The S&P 500® Index is a capitalization-weighted index that measures the performance of the large-capitalization sector of the U.S. equity market and includes 500 widely held common stocks chosen for market size, liquidity and industry group representation.
The Standard & Poor’s (S&P) MidCap 400® Equal Weight Index is an unmanaged equal-weighted version of the S&P MidCap 400® Index, which measures the performance of the mid-cap segment of the U.S. equity universe. The S&P MidCap 400® Equal Weight Index has the same constituents as the unmanaged capitalization-weighted S&P MidCap 400® Index, but each company in the equal-weighted index is allocated a fixed weight, and is rebalanced quarterly.
The Standard & Poor’s (S&P) MidCap 400® Index is a capitalization-weighted index that measures the performance of the mid-cap segment of the U.S. equity universe and includes 400 domestic mid-cap stocks chosen for market capitalization, liquidity, and industry group representation.
The Standard & Poor’s (S&P) SmallCap 600® Equal Weight Index is an unmanaged equal-weighted version of the S&P SmallCap 600® Index, which measures the performance of the small-cap segment of the U.S. equity universe. The S&P SmallCap 600® Equal Weight Index has the same constituents as the unmanaged capitalization-weighted S&P SmallCap 600® Index, but each company in the equal-weighted index is allocated a fixed weight, and is rebalanced quarterly.
The Standard & Poor’s (S&P) SmallCap 600® Index is a capitalization-weighted index that measures the performance of the small-cap segment of the U.S. equity universe and includes 600 domestic small-cap stocks chosen for market capitalization, liquidity, and industry group representation.
The Russell 1000® Equal Weight Index is an unmanaged equal-weighted version of the Russell 1000® Index, which is an unmanaged capitalization-weighted index representing the U.S. large-cap market. The Russell 1000® Equal Weight Index offers sector equal weight exposure by equally weighting the nine sectors within the Index and then equally weighting the securities within each sector.
The Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000® represents approximately 92% of the U.S. market.
The Russell Midcap® Equal Weight Index is an unmanaged equal-weighted version of the Russell Midcap® Index, which is an unmanaged capitalization-weighted index representing the U.S. mid-cap market. The Russell Midcap Equal Weight Index offers sector equal weight exposure by equally weighting the nine sectors within the Index and then equally weighting the securities within each sector.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 31% of the total market capitalization of the Russell 1000® Index.
The Russell 2000® Equal Weight Index is an unmanaged equal-weighted version of the Russell 2000® Index, which is an unmanaged capitalization-weighted index representing the U.S. small-cap market. The Russell 2000® Equal Weight Index offers sector equal weight exposure by equally weighting the nine sectors within the Index and then equally weighting the securities within each sector.
| GUGGENHEIM ETFS ANNUAL REPORT | 7 |
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| ECONOMIC AND MARKET OVERVIEW (continued)
|
The Russell 2000® Index measures the performance of the small-cap value segment of the U.S. equity universe. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 10% of the total market capitalization of the Russell 3000® Index. The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The MSCI EAFE (Europe, Australasia, Far East) Equal Weighted Index equally weights the issuers in the MSCI EAFE Index (the MSCI EAFE cap-weighted index, which is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada). The MSCI EAFE Equal Weighted Index provides an alternative to market-cap indices, as each issuer has the same weight on the rebalancing date.
The MSCI Emerging Markets Equal Weighted Index equally weights the securities in the MSCI Emerging Markets Index (the MSCI Emerging Markets cap-weighted index), which is a free float-adjusted market capitalization index that is designed to measure the equity market performance of emerging markets. In the MSCI Emerging Markets Equal Weighted Index, each security has the same weight, which means that the weight of each security is set to unity of the rebalancing date.
The S&P 500® Equal Weight Index Consumer Discretionary is an unmanaged equal weighted version of the S&P 500® Consumer Discretionary Index that consists of the common stocks of the following industries: automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing that comprise the Consumer Discretionary sector of the S&P 500® Index.
The S&P 500® Consumer Discretionary Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Consumer Discretionary index includes companies in the following industries: automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing.
The S&P 500® Equal Weight Index Consumer Staples is an unmanaged equal weighted version of the S&P 500® Consumer Staples Index that consists of the common stocks of the following industries: food and drug retailing, beverages, food products, tobacco, household products and personal products that comprise the Consumer Staples sector of the S&P 500® Index.
The S&P 500® Consumer Staples Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Consumer Staples index comprises companies whose businesses are less sensitive to economic cycles. It includes manufacturers and distributors of food, beverages and tobacco and producers of non-durable household goods and personal products. It also includes food & drug retailing companies as well as hypermarkets and consumer super centers.
The S&P 500® Equal Weight Index Energy is an unmanaged equal weighted version of the S&P 500® Energy Index that consists of the common stocks of the following industries: oil and gas exploration, production, marketing, refining and/or transportation and energy equipment and services industries that comprise the Energy sector of the S&P 500® Index.
The S&P 500® Energy Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Energy index comprises companies whose businesses are dominated by either of the following activities: The construction or provision of oil rigs, drilling equipment and other energy-related equipment and services, including seismic data collection; companies engaged in the exploration, production, marketing, refining and/or transportation of oil and gas products, coal and other consumable fuels.
| 8 | GUGGENHEIM ETFS ANNUAL REPORT |
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| ECONOMIC AND MARKET OVERVIEW (continued)
|
The S&P 500® Equal Weight Index Financials is an unmanaged equal weighted version of the S&P 500® Financials Index that consists of the common stocks of the following industries: banks, diversified financials, brokerage, asset management insurance and real estate, including investment trusts that comprise the Financials sector of the S&P 500® Index.
The S&P 500® Financials Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Financials index contains companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, and financial investment, and real estate, including REITs.
The S&P 500® Equal Weight Index Health Care is an unmanaged equal weighted version of the S&P 500® Health Care Index that consists of the common stocks of the following industries: health care equipment and supplies, health care providers and services, and biotechnology and pharmaceuticals that comprise the Health Care sector of the S&P 500® Index.
The S&P 500® Health Care Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Health Care index encompasses two main industry groups. The first includes companies who manufacture health care equipment and supplies or provide health care related services, including distributors of health care products, providers of basic health-care services, and owners and operators of health care facilities and organizations. The first group also includes companies operating in the health care technology industry. The second group includes companies primarily involved in the research, development, production and marketing of pharmaceuticals, biotechnology and life sciences products.
The S&P 500® Equal Weight Index Industrials is an unmanaged equal weighted version of the S&P 500® Industrials Index that consists of the common stocks of the following industries: aerospace and defense, building products, construction and engineering, electrical equipment, conglomerates, machinery; commercial services and supplies, air freight and logistics, airlines, and marine, road and rail transportation infrastructure that comprise the 52 Industrials sector of the S&P 500® Index.
The S&P 500® Industrials Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Industrials index includes companies whose businesses are dominated by one of the following activities: the manufacture and distribution of capital goods, including aerospace & defense, construction, engineering & building products, electrical equipment and industrial machinery; the provision of commercial services and supplies, including printing, environmental, office and security services; the provision of professional services, including employment and research & consulting services; or the provision of transportation services, including airlines, couriers, marine, road & rail and transportation infrastructure.
The S&P 500® Equal Weight Index Materials is an unmanaged equal weighted version of the S&P 500® Materials Index that consists of the common stocks of the following industries: chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products that comprise the Materials sector of the S&P 500® Index.
The S&P 500® Materials Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Materials index encompasses a wide range of commodity-related manufacturing industries. Included in this sector are companies that manufacture chemicals, construction materials, glass, paper, forest products and related packaging products, and metals, minerals and mining companies, including producers of steel.
| GUGGENHEIM ETFS ANNUAL REPORT | 9 |
Table of Contents
| ECONOMIC AND MARKET OVERVIEW (concluded)
|
The S&P 500® Equal Weight Index Technology is an unmanaged equal weighted version of the S&P 500® Information Technology Index that consists of the common stocks of the following industries: internet equipment, computers and peripherals, electronic equipment, office electronics and instruments, semiconductor equipment and products, diversified telecommunication services, and wireless telecommunication services that comprise the Information Technology sector of the S&P 500® Index.
The S&P 500® Information Technology Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Information Technology index covers the following general areas: Technology software & services, including companies that primarily develop software in various fields such as the Internet, applications, systems, databases management and/or home entertainment, and companies that provide information technology consulting and services, as well as data processing and outsourced services; secondly, Technology Hardware & Equipment, including manufacturers and distributors of communications equipment, computers & peripherals, electronic equipment and related instruments; and thirdly, Semiconductors & Semiconductor Equipment Manufacturers.
The S&P 500® Equal Weight Total Return Index Telecommunication Services & Utilities is an unmanaged equal weighted version of the S&P 500® Telecommunication Services Index and S&P 500® Utilities Index that consists of the common stocks of the following industries: electric utilities, gas utilities, multi-utilities and unregulated power and water utilities, telecommunication service companies, including fixed-line, cellular, wireless, high bandwidth and fiber-optic cable networks that comprise the Telecommunications Services and Utilities sectors of the S&P 500® Index.
The S&P 500® Telecommunications Services Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Telecommunications Services index contains companies that provide communications services primarily through a fixed-line, cellular, wireless, high bandwidth and/or fiber optic cable network.
The S&P 500® Utilities Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Utilities index encompasses those companies considered electric, gas or water utilities, or companies that operate as independent producers and/or distributors of power.
| 10 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
Guggenheim S&P MidCap 400® Equal Weight ETF returned 12.19% for the one-year period ended October 31, 2012, compared with the benchmark S&P MidCap 400® Equal Weight Total Return Index (12.76%). The cap-weighted S&P MidCap 400® Total Return Index returned 12.11%. During the period, EWMD achieved over 99% correlation to its benchmark on a daily basis.
The Financials sector was the largest contributor to return for the period, followed by the Industrials sector. The only sector detracting from return was the Energy sector.
Top contributors to Fund return included KB Home and United Rentals, Inc., while Patriot Coal Corp. and RadioShack Corp. and were the largest detractors.
Cumulative Fund Performance: August 1, 2011 – October 31, 2012
| TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||
| One Year | Since Inception (08/01/11) |
|||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
12.19 | % | 5.39 | % | ||||
| S&P MidCap 400 Equal Weight Total Return Index |
12.76 | % | 5.92 | % | ||||
| S&P MidCap 400 Total Return Index |
12.11 | % | 5.28 | % | ||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 11 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 12 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
Guggenheim S&P SmallCap 600® Equal Weight ETF returned 13.30% for the one-year period ended October 31, 2012, compared with the benchmark S&P SmallCap 600® Equal Weight Total Return Index (13.87%). The cap-weighted S&P SmallCap 600® Total Return Index returned 13.60%. During the period, EWSM achieved over 99% correlation to its benchmark on a daily basis.
The Consumer Discretionary sector was the largest contributor to return for the period, followed by the Financials sector. The sectors detracting the most from performance were Energy and Telecommunication Services.
Top contributors to Fund return included Headwaters, Inc. and Lumber Liquidators Holdings, Inc. while Savient Pharmaceuticals, Inc. and Overseas Shipholding Group, Inc. were the largest detractors.
Cumulative Fund Performance: August 1, 2011 – October 31, 2012
| TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||
| One Year | Since Inception (08/01/11) |
|||||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
13.30 | % | 5.79 | % | ||||
| S&P SmallCap 600 Equal Weight Total Return Index |
13.87 | % | 6.33 | % | ||||
| S&P SmallCap 600 Total Return Index |
13.60 | % | 7.05 | % | ||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 13 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 14 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
Guggenheim Russell MidCap® Equal Weight ETF returned 10.52% for the one-year period ended October 31, 2012, compared with the benchmark Russell Midcap® Equal Weighted Total Return Index (10.98%). The cap-weighted Russell Midcap® Total Return Index returned 12.15%. During the period, EWRM achieved over 99% correlation to its benchmark on a daily basis.
The Health Care and Industrials sectors contributed most to return for the period. The sectors detracting from return were Information Technology and Energy.
Top contributors to Fund return included Cobalt International Energy, Inc. and Constellation Brands, Inc., Class A, while Arch Coal, Inc. and Molycorp, Inc. were the largest detractors.
Cumulative Fund Performance: December 3, 2010 – October 31, 2012
| TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||
| One Year | Since Inception (12/03/10) |
|||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
10.52 | % | 7.44 | % | ||||
| Russell Midcap Equal Weight Total Return Index |
10.98 | % | 7.86 | % | ||||
| Russell Midcap Total Return Index |
12.15 | % | 7.11 | % | ||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 15 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 16 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
Guggenheim Russell 1000® Equal Weight ETF returned 10.83% for the one-year period ended October 31, 2012, compared with the benchmark Russell 1000® Equal Weighted Total Return Index (11.34%). The cap-weighted Russell 1000® Total Return Index returned 14.97%. During the period, EWRI achieved over 99% correlation to its benchmark on a daily basis.
The Health Care and Financials sectors contributed most to return for the period. The only sector detracting from return was Information Technology.
Top contributors to Fund return included Cobalt International Energy, Inc. and Sprint Nextel, Inc., while Molycorp, Inc. and NII Holdings, Inc. were the largest detractors.
Cumulative Fund Performance: December 3, 2010 – October 31, 2012
| TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||
| One Year | Since Inception (12/03/10) |
|||||||
| Guggenheim Russell 1000® Equal Weight ETF |
10.83 | % | 7.71 | % | ||||
| Russell 1000 Equal Weight Total Return Index |
11.34 | % | 8.14 | % | ||||
| Russell 1000 Total Return Index |
14.97 | % | 9.66 | % | ||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 17 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 18 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
Guggenheim Russell 2000® Equal Weight ETF returned 9.08% for the one-year period ended October 31, 2012, compared with the benchmark Russell 2000® Equal Weighted Total Return Index (9.78%). The cap-weighted Russell 2000® Total Return Index returned 12.08%. During the period, EWRS achieved over 99% correlation to its benchmark on a daily basis.
The Financials and Health Care sectors contributed most to return for the period. The sectors detracting the most from return were Energy and Information Technology.
Top contributors to Fund return included Smart Balance, Inc. and SureWest Communications, while Patriot Coal Corp. and Dynegy, Inc. were the largest detractors.
Cumulative Fund Performance: December 3, 2010 – October 31, 2012
| TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||
| One Year | Since Inception (12/03/10) | |||||
| Guggenheim Russell 2000® Equal Weight ETF |
9.08 | % | 3.67% | |||
| Russell 2000 Equal Weight Total Return Index |
9.78 | % | 4.29% | |||
| Russell 2000 Total Return Index |
12.08 | % | 5.66% | |||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 19 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 20 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
Guggenheim MSCI EAFE Equal Weight ETF returned 2.21% for the one-year period ended October 31, 2012, compared with the benchmark MSCI EAFE Equal Weighted Index (2.74%). The cap-weighted MSCI EAFE Total Return Index returned 4.61%. During the period, EWEF achieved over 99% correlation to its benchmark on a daily basis.
The Financials and Health Care sectors contributed most to return for the period. The sectors detracting the most from return were Information Technology and Materials.
Top contributors to Fund return included KBC Group N.V. and New World Development Co. Ltd., while Sharp Corp. and Elpida Memory, Inc. were the largest detractors.
Cumulative Fund Performance: December 3, 2010 – October 31, 2012
| TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||
| One Year | Since Inception (12/03/10) |
|||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
2.21 | % | (2.25) | % | ||||
| MSCI EAFE Equal Weighted Index |
2.74 | % | (1.48) | % | ||||
| MSCI EAFE Total Return Index |
4.61 | % | 0.02 | % | ||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 21 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 22 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
Guggenheim MSCI Emerging Markets Equal Weight ETF returned 0.10% for the one-year period ended October 31, 2012, compared with the benchmark MSCI Emerging Markets Equal Weighted Index (3.40%). The cap-weighted MSCI Emerging Markets Total Return Index returned 2.63%. During the period, EWEM achieved over 99% correlation to its benchmark on a daily basis.
The Consumer Staples and Financials sectors contributed most to return for the period. The sectors detracting the most from return were Materials and Information Technology.
Top contributors to Fund return included Cemex SAB de CV ADS and Korea Gas Corp., while iShares MSCI Brazil Index Fund and Wisdom Tree India Earnings Fund were the largest detractors.
Cumulative Fund Performance: December 3, 2010 – October 31, 2012
| TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||
| One Year | Since Inception (12/03/10) |
|||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
0.10 | % | (7.61 | )% | ||||
| MSCI Emerging Markets Equal Weighted Index |
3.40 | % | (4.98 | )% | ||||
| MSCI Emerging Markets Total Return Index |
2.63 | % | (3.58 | )% | ||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 23 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 24 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER DISCRETIONARY ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF returned 17.05%, compared to its benchmark, the S&P 500® Equal Weight Total Return Index Consumer Discretionary, which delivered 17.69%, and the capitalization-weighted S&P 500® Consumer Discretionary Total Return Index, which returned 20.22% in the same time period. RCD achieved over 99% correlation to its benchmark on a daily basis. The ETF outperformed the broad-market S&P 500 Total Return Index by almost two percentage points.
The media industry and household durables group were the largest industries contributing to return. The professional services group and the textiles, apparel and luxury goods group were the largest detractors from return.
Pulte Group, Inc. and Expedia, Inc. were among the stocks with largest positive contributions to performance for the year. Abercrombie & Fitch Co.—Class A and Apollo Group, Inc.—Class A were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
17.05% | 20.23% | 5.76% | 4.71% | ||||||||||||
| S&P 500 Equal Weight Total Return Index Consumer Discretionary |
17.69% | 20.93% | 6.20% | 5.19% | ||||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 2.72% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 25 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER DISCRETIONARY ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 26 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER STAPLES ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Consumer Staples ETF returned 14.19%. For the same period, its benchmark, the S&P 500® Equal Weight Total Return Index Consumer Staples, returned 14.89%, while the cap-weighted S&P 500® Consumer Staples Total Return Index delivered a return of 17.55%. RHS achieved over 99% correlation to its benchmark on a daily basis. The ETF underperformed the broad-market S&P 500 Index by about one percentage point.
The food products industry and the beverages industry were the two largest contributors to return. The personal products group and the household products group were the industries contributing least to return.
Constellation Brands, Inc.—Class A and Dean Foods Co. were among the stocks with largest positive contributions to performance for the year. Monster Beverage Corp. and SUPERVALU Inc. were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
14.19% | 14.47% | 7.53% | 8.17% | ||||||||||||
| S&P 500 Equal Weight Total Return Index Consumer Staples |
14.89% | 15.21% | 8.06% | 8.80% | ||||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 2.72% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 27 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER STAPLES ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 28 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT ENERGY ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Energy ETF returned 0.58%. For the same period, its benchmark, the S&P 500® Equal Weight Total Return Index Energy, returned 1.10%, underperforming the cap-weighted S&P 500® Energy Index’s 6.51% total return. RYE achieved over 99% correlation to its benchmark on a daily basis. The ETF underperformed the S&P 500 Index by about 15 percentage points.
The oil, gas and consumable fuels industry was the largest contributor to return. The only other industry composing this Fund, energy equipment and services, detracted from return.
Tesoro Corp. and Marathon Petroleum Corp. were among the stocks with largest positive contributions to performance for the year. Alpha Natural Resources, Inc. and Peabody Energy Corp. were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
0.58% | 11.17% | 0.25% | 6.03% | ||||||||||||
| S&P 500 Equal Weight Total Return Index Energy |
1.10% | 11.80% | 0.85% | 6.66% | ||||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 2.72% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 29 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT ENERGY ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 30 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT FINANCIALS ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Financials ETF returned 19.32%. For the same period, its benchmark, the S&P 500® Equal Weight Total Return Index Financials, returned 20.01%, underperforming the cap-weighted S&P 500® Financials Index’s 20.17% total return. RYF achieved a daily correlation of over 99% to its benchmark on a daily basis. The ETF outperformed the S&P 500 Index by about four percentage points.
The commercial banks industry and the insurance industry were the largest contributors to return. No industry detracted from return, but the industries contributing least to performance were the real estate management and development industry and the thrifts and mortgage finance group.
Regions Financial Corp. and Discover Financial Services were among the stocks bringing the largest positive contributions to performance for the year. E*Trade Financial Corp. and Unum Group were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) | |||||||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
19.32% | 11.69% | (7.50)% | (6.64)% | ||||||||||
| S&P 500 Equal Weight Total Return Index Financials |
20.01% | 12.32% | (6.57)% | (5.78)% | ||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 2.72% | ||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 31 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT FINANCIALS ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 32 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT HEALTH CARE ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Health Care ETF returned 17.39%. For the same period, its benchmark, the S&P 500® Equal Weight Total Return Index Health Care, returned 18.06% while the cap-weighted S&P 500® Health Care Index delivered a 22.12% return. RYH achieved over 99% correlation to its benchmark on a daily basis. The ETF outperformed the S&P 500 Index by about two percentage points.
The pharmaceuticals and the health care providers and services groups were the largest contributors to return. No industry detracted, but health care technology and life sciences tools contributed least to return.
Gilead Sciences, Inc. and DaVita HealthCare Partners, Inc. were among the stocks with largest positive contributions to performance for the year. Boston Scientific Corp. and Humana, Inc. were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
17.39% | 15.91% | 6.47% | 8.21% | ||||||||||||
| S&P 500 Equal Weight Total Return Index Health Care |
18.06% | 16.56% | 7.36% | 9.10% | ||||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 2.72% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 33 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT HEALTH CARE ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 34 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT INDUSTRIALS ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Industrials ETF returned 12.64% compared to its benchmark S&P 500® Equal Weight Total Return Index Industrials, which returned 13.29%, and the capitalization-weighted S&P 500® Industrials Index, which had a 13.06% return. RGI achieved over 99% correlation to its benchmark on a daily basis. The ETF underperformed the S&P 500 Index by more than two percentage points.
The machinery industry and the aerospace and defense industry contributed the most to return. The air freight and logistics industry was the only detractor from return. The road and rail segment made the least contribution to return.
Masco Corp. and Ingersoll-Rand PLC were among the stocks with largest positive contributions to performance for the year. R.R. Donnelley & Sons Co. and Joy Global, Inc. were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
12.64% | 14.60% | 1.50% | 4.66% | ||||||||||||
| S&P 500 Equal Weight Total Return Index Industrials |
13.29% | 15.20% | 2.08% | 5.24% | ||||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 2.72% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 35 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT INDUSTRIALS ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 36 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT MATERIALS ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Materials ETF returned 8.99% compared to the benchmark S&P 500® Equal Weight Total Return Index Materials return of 9.56% and the capitalization-weighted S&P 500® Materials Index’s 7.41% return. RTM achieved over 99% correlation to its benchmark on a daily basis. The ETF underperformed the S&P 500 Index by about six percentage points.
The chemicals industry and the paper and forest products industry were the largest contributors to return. Metals and mining was the only industry to detract from return. The containers and packaging group contributed least to return.
Sherwin-Williams Co. and Eastman Chemical Co. were among the stocks with the largest positive contributions to performance for the year. Cliff’s Natural Resources, Inc. and Allegheny Technologies, Inc. were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
8.99% | 12.06% | 2.54% | 5.85% | ||||||||||||
| S&P 500 Equal Weight Total Return Index Materials |
9.56% | 12.69% | 3.27% | 6.64% | ||||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 2.72% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 37 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT MATERIALS ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 38 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT TECHNOLOGY ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Technology ETF returned -0.71% compared to its benchmark S&P 500® Equal Weight Total Return Index Technology, which returned -0.19%, and the capitalization-weighted S&P 500® Technology Index, which had a return of 10.71%. RYT achieved over 99% correlation to its benchmark on a daily basis. The ETF underperformed the S&P 500 Index by about 16 percentage points.
The IT services group and the internet software and services group were the largest contributors to return. The semiconductor group and computers and peripherals group were the largest detractors from return.
Akamai Technologies, Inc. and Apple, Inc. were among the stocks with largest positive contributions to performance for the year. Advanced Micro Devices, Inc. and Electronic Arts, Inc. were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
(0.71) | % | 9.35 | % | (0.96) | % | 1.60 | % | ||||||||
| S&P 500 Equal Weight Total Return Index Information Technology |
(0.19) | % | 9.99 | % | (0.41) | % | 2.15 | % | ||||||||
| S&P 500 Total Return Index |
15.21 | % | 13.21 | % | 0.36 | % | 2.72 | % | ||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 39 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT TECHNOLOGY ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 40 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT UTILITIES ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Equal Weight Utilities ETF returned 15.98% while its benchmark, the S&P 500® Equal Weight Telecommunication Services & Utilities Total Return Index, returned 16.71%. RYU had a 99% correlation to its benchmark on a daily basis. The ETF, which includes the telecommunications sector, performed in-line with the S&P 500 Index.
The multi-utilities group and the wireless telecommunications services group were the largest contributors to return. No group detracted from return, but the independent power producers group contributed least to return.
Sprint Nextel Corp. and Metro PCS Communications, Inc. were among the stocks with largest positive contributions to performance for the year. Exelon Corp. and Windstream Corp. were among the stocks with the largest negative contributions to performance.
Cumulative Fund Performance: November 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (11/01/06) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
15.98% | 17.00% | 3.21% | 5.30% | ||||||||||||
| S&P 500 Equal Weight Total Return Index Telecommunications |
16.71% | 17.77% | 3.80% | 5.90% | ||||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 2.72% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 41 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012
|
GUGGENHEIM S&P 500® EQUAL WEIGHT UTILITIES ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 42 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 43 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
| 44 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 45 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
| 46 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 47 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Amount represents less than 0.05% of net assets. |
| e | Securities lending collateral (Note I). |
| 48 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 49 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| 50 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 51 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| 52 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 53 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| 54 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 55 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
| SHARES | VALUE |
|||||||
| Wireless Telecommunication Services - 0.3% |
| |||||||
| NTELOS Holdings Corp. |
169 | $ | 2,577 | |||||
| USA Mobility, Inc. |
237 | 2,619 | ||||||
|
|
|
|||||||
| Total Wireless Telecommunication Services |
5,196 | |||||||
|
|
|
|||||||
| Total Common Stocks |
|
1,580,293 | ||||||
|
|
|
|||||||
| SHORT TERM INVESTMENTS - 0.1% |
| |||||||
| SSgA Government Money Market Fund |
1,860 | 1,860 | ||||||
|
|
|
|||||||
| Total Short Term Investments |
|
1,860 | ||||||
|
|
|
|||||||
| FACE |
||||||||
| SECURITIES LENDING COLLATERAL - 0.1%d |
| |||||||
| Joint Repurchase Agreements: |
||||||||
| Merrill Lynch, Fenner & Smith, Inc. |
$ | 511 | 511 | |||||
| RBS Securities, Inc. |
869 | 869 | ||||||
|
|
|
|||||||
| Total Securities Lending Collateral |
1,380 | |||||||
|
|
|
|||||||
| Total Investments
100.2%c |
1,583,533 | |||||||
|
|
|
|||||||
| Other Assets and Liabilities, net - (0.2)% |
(3,424 | ) | ||||||
|
|
|
|||||||
| Net Assets - 100.0% |
$ | 1,580,109 | ||||||
|
|
|
|||||||
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| 56 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 57 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| 58 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 59 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| 60 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 61 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| 62 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 63 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| 64 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 65 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| 66 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 67 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| 68 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 69 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| 70 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 71 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| 72 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 73 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| 74 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 75 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| 76 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 77 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| PLC | — Public Limited Company |
| 78 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 79 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 80 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 81 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 82 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 83 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 84 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 85 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 86 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 87 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 88 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 89 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 90 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 91 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 92 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 93 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 94 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 95 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 96 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 97 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| 98 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
| FACE AMOUNT |
VALUE |
|||||||
| RBS Securities, Inc. |
$ | 201,844 | $ | 201,844 | ||||
|
|
|
|||||||
| Total Securities Lending Collateral |
320,558 | |||||||
|
|
|
|||||||
| Total Investments - 102.2%d |
|
14,634,623 | ||||||
|
|
|
|||||||
| Other Assets and Liabilities, net - (2.2)%b |
|
(316,915 | ) | |||||
|
|
|
|||||||
| Net Assets - 100.0% |
$ | 14,317,708 | ||||||
|
|
|
|||||||
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Amount represents less than 0.05% of net assets. |
| c | Values determined based on Level 2 inputs (Note F). |
| d | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| e | Securities lending collateral (Note I). |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 99 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| 100 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 101 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| 102 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 103 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| 104 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 105 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| 106 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 107 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| 108 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Amount represents less than 0.05% of net assets. |
| c | Values determined based on Level 2 inputs (Note F). |
| d | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| e | Securities lending collateral (Note I). |
| ADR | — American Depositary Receipt |
| PLC | — Public Limited Company |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 109 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| 110 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 111 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| 112 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 113 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| 114 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 115 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| ADR | — American Depositary Receipt |
| GDR | — Global Depository Receipt |
| PLC | — Public Limited Company |
| 116 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 117 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER DISCRETIONARY ETF
| 118 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER DISCRETIONARY ETF
| SHARES | VALUE |
|||||||
| Textiles, Apparel & Luxury Goods - 6.1% |
|
|||||||
| Coach, Inc. |
8,660 | $ | 485,393 | |||||
| Fossil, Inc.* |
5,742 | 500,128 | ||||||
| NIKE, Inc. — Class B |
5,562 | 508,255 | ||||||
| Ralph Lauren Corp. |
3,300 | 507,177 | ||||||
| V.F. Corp. |
3,270 | 511,690 | ||||||
|
|
|
|||||||
| Total Textiles, Apparel & Luxury Goods |
|
2,512,643 | ||||||
|
|
|
|||||||
| Total Common Stocks |
|
41,264,335 | ||||||
|
|
|
|||||||
| SHORT TERM INVESTMENTS - 0.1% |
|
|||||||
| SSgA Government Money Market Fund |
43,851 | 43,851 | ||||||
|
|
|
|||||||
| Total Short Term Investments |
|
43,851 | ||||||
|
|
|
|||||||
| FACE |
||||||||
| SECURITIES LENDING COLLATERAL - 4.3%d |
| |||||||
| Joint Repurchase Agreements: |
||||||||
| Merrill Lynch, Fenner & Smith, Inc. |
$ | 665,191 | 665,191 | |||||
| RBS Securities, Inc. |
1,130,991 | 1,130,991 | ||||||
|
|
|
|||||||
| Total Securities Lending Collateral |
|
1,796,182 | ||||||
|
|
|
|||||||
| Total Investments
104.3%c |
43,104,368 | |||||||
|
|
|
|||||||
| Other Assets and Liabilities, net – (4.3)% |
|
(1,790,117 | ) | |||||
|
|
|
|||||||
| Net Assets – 100.0% |
$ | 41,314,251 | ||||||
|
|
|
|||||||
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 119 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER STAPLES ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| 120 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ENERGY ETF
| * | Non-Income Producing Security. |
| a | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 121 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT FINANCIAL ETF
| 122 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT FINANCIAL ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 123 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT HEALTH CARE ETF
| * | Non-Income Producing Security. |
| a | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| b | Amount represents less than 0.1% of net assets. |
| 124 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT INDUSTRIALS ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 125 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT INDUSTRIALS ETF
| FACE AMOUNT |
VALUE |
|||||||
| SECURITIES LENDING COLLATERAL - 2.3%d |
| |||||||
| Joint Repurchase Agreements: |
||||||||
| Merrill Lynch, Fenner & Smith, Inc. |
$ | 143,660 | $ | 143,660 | ||||
| RBS Securities, Inc. |
244,258 | 244,258 | ||||||
|
|
|
|||||||
| Total Securities Lending Collateral |
387,918 | |||||||
|
|
|
|||||||
| Total Investments
102.0%c |
17,422,933 | |||||||
|
|
|
|||||||
| Other Assets and Liabilities, net - (2.0)% |
|
(341,252 | ) | |||||
|
|
|
|||||||
| Net Assets - 100.0% |
$ | 17,081,681 | ||||||
|
|
|
|||||||
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| 126 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT MATERIALS ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 127 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT TECHNOLOGY ETF
| 128 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT TECHNOLOGY ETF
| FACE AMOUNT |
Value |
|||||||
| SECURITIES LENDING COLLATERAL - 3.5%d |
| |||||||
| Joint Repurchase Agreements: |
||||||||
| Merrill Lynch, Fenner & Smith, Inc. |
$ | 1,310,994 | $ | 1,310,994 | ||||
| RBS Securities, Inc. |
2,229,017 | 2,229,017 | ||||||
|
|
|
|||||||
| Total Securities Lending Collateral |
3,540,011 | |||||||
|
|
|
|||||||
| Total Investments
103.5%c |
104,008,049 | |||||||
|
|
|
|||||||
| Other Assets and Liabilities, net - (3.5)% |
|
(3,528,798 | ) | |||||
|
|
|
|||||||
| Net Assets - 100.0% |
$ | 100,479,251 | ||||||
|
|
|
|||||||
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 129 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT UTILITIES ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note F). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note I). |
| 130 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF ASSETS AND LIABILITIES | October 31, 2012 |
| Guggenheim S&P MidCap 400® Equal Weight ETF |
Guggenheim S&P SmallCap 600® Equal Weight ETF |
Guggenheim Russell MidCap® Equal Weight ETF |
||||||||||
| ASSETS: | ||||||||||||
| Investments, at value*—including $15,445; $1,271 and $1,335,014 of securities loaned, respectively |
$ | 3,151,935 | $ | 1,583,533 | $ | 53,982,702 | ||||||
| Cash |
525 | — | — | |||||||||
| Receivables: |
||||||||||||
| Investments sold |
— | 451 | — | |||||||||
| Dividends and interest |
1,580 | 596 | 48,010 | |||||||||
| Total assets |
3,154,040 | 1,584,580 | 54,030,712 | |||||||||
| LIABILITIES: | ||||||||||||
| Payable upon return of securities loaned |
16,323 | 1,380 | 1,392,665 | |||||||||
| Payable for: |
||||||||||||
| Investments purchased |
— | 2,547 | 3,608 | |||||||||
| Accrued management fees |
1,068 | 544 | 17,888 | |||||||||
| Total liabilities |
17,391 | 4,471 | 1,414,161 | |||||||||
| NET ASSETS | $ | 3,136,649 | $ | 1,580,109 | $ | 52,616,551 | ||||||
| NET ASSETS CONSIST OF: | ||||||||||||
| Paid-in capital |
$ | 3,151,339 | $ | 1,645,771 | $ | 51,606,142 | ||||||
| Undistributed net investment income |
314 | — | 34,632 | |||||||||
| Accumulated net realized loss on investments |
(38,445 | ) | (20,081 | ) | (828,345 | ) | ||||||
| Net unrealized appreciation (depreciation) on investments |
23,441 | (45,581 | ) | 1,804,122 | ||||||||
| NET ASSETS | $ | 3,136,649 | $ | 1,580,109 | $ | 52,616,551 | ||||||
| Shares outstanding (unlimited shares authorized), no par value |
100,000 | 50,000 | 1,550,000 | |||||||||
| Net asset value, offering price and repurchase price per share |
$31.37 | $31.60 | $33.95 | |||||||||
| *Total cost of investments |
$ | 3,128,494 | $ | 1,629,114 | $ | 52,178,580 | ||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 131 |
Table of Contents
| STATEMENTS OF ASSETS AND LIABILITIES (continued) | October 31, 2012 |
| Guggenheim Russell 1000® Equal Weight ETF |
Guggenheim Russell 2000® Equal Weight ETF |
Guggenhei MSCI EAFE Equal Weight ETF |
Guggenheim MSCI Emerging Markets Equal Weight ETF |
|||||||||||||
| ASSETS: | ||||||||||||||||
| Investments, at value*—including $781,900; $296,662; $40,479 and $23,264 of securities loaned, respectively |
$ | 39,804,238 | $ | 14,634,623 | $ | 11,052,885 | $ | 13,346,619 | ||||||||
| Foreign currency, at value (cost $—; $—; $4,236 and $13,032, respectively) |
— | — | 4,222 | 13,319 | ||||||||||||
| Cash |
— | 829 | — | — | ||||||||||||
| Receivables: |
||||||||||||||||
| Dividends and interest |
38,265 | 7,746 | 47,176 | 8,581 | ||||||||||||
| Receivable from manager |
— | — | — | 1,254 | ||||||||||||
| Total assets |
39,842,503 | 14,643,198 | 11,104,283 | 13,369,773 | ||||||||||||
| LIABILITIES: | ||||||||||||||||
| Payable upon return of securities loaned |
816,113 | 320,558 | 42,870 | 25,506 | ||||||||||||
| Payable for: |
||||||||||||||||
| Investments purchased |
2,228 | — | 115 | 3 | ||||||||||||
| Accrued management fees |
12,927 | 4,932 | 5,167 | 7,978 | ||||||||||||
| Capital gains tax |
— | — | — | 11,211 | ||||||||||||
| Total liabilities |
831,268 | 325,490 | 48,152 | 44,698 | ||||||||||||
| NET ASSETS | $ | 39,011,235 | $ | 14,317,708 | $ | 11,056,131 | $ | 13,325,075 | ||||||||
| NET ASSETS CONSIST OF: | ||||||||||||||||
| Paid-in capital |
$ | 38,745,656 | $ | 16,196,814 | $ | 12,918,843 | $ | 16,247,347 | ||||||||
| Undistributed (distributions in excess of) net investment income |
32,780 | 18,281 | 19,781 | (1,018 | ) | |||||||||||
| Accumulated net realized loss on investments and foreign currency |
(592,596 | ) | (1,294,462 | ) | (696,422 | ) | (1,794,920 | ) | ||||||||
| Net unrealized appreciation (depreciation) on investments and foreign currency |
825,395 | (602,925 | ) | (1,186,071 | ) | (1,126,334 | ) | |||||||||
| NET ASSETS | $ | 39,011,235 | $ | 14,317,708 | $ | 11,056,131 | $ | 13,325,075 | ||||||||
| Shares outstanding (unlimited shares authorized), no par value |
1,150,000 | 450,000 | 300,000 | 400,000 | ||||||||||||
| Net asset value, offering price and repurchase price per share |
$33.92 | $31.82 | $36.85 | $33.31 | ||||||||||||
| *Total cost of investments |
$ | 38,978,843 | $ | 15,237,548 | $ | 12,237,515 | $ | 14,462,191 | ||||||||
| 132 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF ASSETS AND LIABILITIES (continued) | October 31, 2012 |
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
Guggenheim S&P 500® Equal Weight Energy ETF |
||||||||||
| ASSETS: | ||||||||||||
| Investments, at value*—including $1,756,343; $869,610 and $— of securities loaned, respectively |
$ | 43,104,368 | $ | 41,794,622 | $ | 31,982,255 | ||||||
| Receivables: |
||||||||||||
| Dividends and interest |
24,650 | 56,911 | 35,200 | |||||||||
| Total assets |
43,129,018 | 41,851,533 | 32,017,455 | |||||||||
| LIABILITIES: | ||||||||||||
| Payable upon return of securities loaned |
1,796,182 | 889,413 | — | |||||||||
| Payable for: |
||||||||||||
| Accrued management fees |
18,585 | 17,809 | 13,780 | |||||||||
| Total liabilities |
1,814,767 | 907,222 | 13,780 | |||||||||
| NET ASSETS | $ | 41,314,251 | $ | 40,944,311 | $ | 32,003,675 | ||||||
| NET ASSETS CONSIST OF: | ||||||||||||
| Paid-in capital |
$ | 44,141,085 | $ | 43,118,183 | $ | 39,871,002 | ||||||
| Undistributed net investment income |
13,782 | 67,418 | 21,763 | |||||||||
| Accumulated net realized loss on investments |
(3,232,620 | ) | (785,391 | ) | (3,930,615 | ) | ||||||
| Net unrealized appreciation (depreciation) on investments |
392,004 | (1,455,899 | ) | (3,958,475 | ) | |||||||
| NET ASSETS | $ | 41,314,251 | $ | 40,944,311 | $ | 32,003,675 | ||||||
| Shares outstanding (unlimited shares authorized), no par value |
750,000 | 600,000 | 500,005 | |||||||||
| Net asset value, offering price and repurchase price per share |
$55.09 | $68.24 | $64.01 | |||||||||
| *Total cost of investments |
$ | 42,712,364 | $ | 43,250,521 | $ | 35,940,730 | ||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 133 |
Table of Contents
| STATEMENTS OF ASSETS AND LIABILITIES (continued) | October 31, 2012 |
| Guggenheim S&P 500® Equal Weight Financials ETF |
Guggenheim S&P 500® Equal Weight Health Care ETF |
Guggenheim S&P 500® Equal Weight Industrials ETF |
Guggenheim S&P 500® Equal Weight Materials ETF |
|||||||||||||
| ASSETS: | ||||||||||||||||
| Investments, at value*—including $83,714; $—; $376,486 and $535,095 of securities loaned, respectively |
$ | 14,419,452 | $ | 38,410,927 | $ | 17,422,933 | $ | 33,916,929 | ||||||||
| Receivables: |
||||||||||||||||
| Dividends and interest |
10,673 | 36,933 | 54,270 | 35,625 | ||||||||||||
| Total assets |
14,430,125 | 38,447,860 | 17,477,203 | 33,952,554 | ||||||||||||
| LIABILITIES: | ||||||||||||||||
| Payable upon return of securities loaned |
85,520 | — | 387,918 | 550,406 | ||||||||||||
| Payable for: |
||||||||||||||||
| Accrued management fees |
6,084 | 29,159 | 7,604 | 14,368 | ||||||||||||
| Total liabilities |
91,604 | 29,159 | 395,522 | 564,774 | ||||||||||||
| NET ASSETS | $ | 14,338,521 | $ | 38,418,701 | $ | 17,081,681 | $ | 33,387,780 | ||||||||
| NET ASSETS CONSIST OF: | ||||||||||||||||
| Paid-in capital |
$ | 20,543,214 | $ | 45,026,661 | $ | 18,908,892 | $ | 30,199,497 | ||||||||
| Undistributed net investment income |
— | 67,544 | 49,373 | 9,241 | ||||||||||||
| Accumulated net realized loss on investments |
(6,772,532 | ) | (5,016,058 | ) | (1,213,334 | ) | (1,158,594 | ) | ||||||||
| Net unrealized appreciation (depreciation) on investments |
567,839 | (1,659,446 | ) | (663,250 | ) | 4,337,636 | ||||||||||
| NET ASSETS | $ | 14,338,521 | $ | 38,418,701 | $ | 17,081,681 | $ | 33,387,780 | ||||||||
| Shares outstanding (unlimited shares authorized), no par value |
500,000 | 500,000 | 300,000 | 550,000 | ||||||||||||
| Net asset value, offering price and repurchase price per share |
$28.68 | $76.84 | $56.94 | $60.71 | ||||||||||||
| *Total cost of investments |
$ | 13,851,613 | $ | 40,070,373 | $ | 18,086,183 | $ | 29,579,293 | ||||||||
| 134 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF ASSETS AND LIABILITIES (concluded) | October 31, 2012 |
| Guggenheim S&P 500® Equal Weight Technology ETF |
Guggenheim S&P 500® Equal Weight Utilities ETF |
|||||||
| ASSETS: | ||||||||
| Investments, at value*—including $3,249,683 and $1,027,098 of securities loaned, respectively |
$ | 104,008,049 | $ | 43,385,895 | ||||
| Receivables: |
||||||||
| Dividends and interest |
56,768 | 70,551 | ||||||
| Total assets |
104,064,817 | 43,456,446 | ||||||
| LIABILITIES: | ||||||||
| Payable upon return of securities loaned |
3,540,011 | 1,074,257 | ||||||
| Payable for: |
||||||||
| Accrued management fees |
45,555 | 18,610 | ||||||
| Total liabilities |
3,585,566 | 1,092,867 | ||||||
| NET ASSETS | $ | 100,479,251 | $ | 42,363,579 | ||||
| NET ASSETS CONSIST OF: | ||||||||
| Paid-in capital |
$ | 124,874,976 | $ | 39,497,857 | ||||
| Undistributed net investment income |
52,623 | 53,335 | ||||||
| Accumulated net realized loss on investments |
(9,386,519 | ) | (463,272 | ) | ||||
| Net unrealized appreciation (depreciation) on investments |
(15,061,829 | ) | 3,275,659 | |||||
| NET ASSETS | $ | 100,479,251 | $ | 42,363,579 | ||||
| Shares outstanding (unlimited shares authorized), no par value |
1,950,000 | 700,000 | ||||||
| Net asset value, offering price and repurchase price per share |
$51.53 | $60.52 | ||||||
| *Total cost of investments |
$ | 119,069,878 | $ | 40,110,236 | ||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 135 |
Table of Contents
| STATEMENTS OF OPERATIONS |
For the Year Ended October 31, 2012
| Guggenheim S&P MidCap 400® Equal Weight ETF |
Guggenheim S&P SmallCap 600® Equal Weight ETF |
Guggenheim Russell MidCap® Equal Weight ETF |
||||||||||
| INVESTMENT INCOME: | ||||||||||||
| Dividends, net of foreign taxes withheld* |
$ | 45,557 | $ | 65,950 | $ | 936,609 | ||||||
| Income from securities lending |
90 | 5 | 3,741 | |||||||||
| Total investment income |
45,647 | 65,955 | 940,350 | |||||||||
| EXPENSES: | ||||||||||||
| Management fee |
11,902 | 19,672 | 209,321 | |||||||||
| Trustee fees |
177 | 354 | 3,201 | |||||||||
| Total expenses |
12,079 | 20,026 | 212,522 | |||||||||
| Net investment income |
33,568 | 45,929 | 727,828 | |||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||||||||||
| Net realized gain (loss) on: |
||||||||||||
| Investments |
(7,548 | ) | 120,469 | (652,757 | ) | |||||||
| In-kind redemptions |
131,377 | 693,832 | 2,323,288 | |||||||||
| Net realized gain |
123,829 | 814,301 | 1,670,531 | |||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||
| Investments |
166,102 | (72,825 | ) | 2,095,289 | ||||||||
| Net realized and unrealized gain |
289,931 | 741,476 | 3,765,820 | |||||||||
| Net increase in net assets resulting from operations |
$ | 323,499 | $ | 787,405 | $ | 4,493,648 | ||||||
| * Foreign taxes withheld |
$ | — | $ | — | $ | 163 | ||||||
| 136 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF OPERATIONS (continued) |
For the Year Ended October 31, 2012
| Guggenheim Russell 1000® Equal Weight ETF |
Guggenheim Russell 2000® Equal Weight ETF |
Guggenheim MSCI EAFE Equal Weight ETF |
Guggenheim MSCI Emerging Markets Equal Weight ETF |
|||||||||||||
| INVESTMENT INCOME: | ||||||||||||||||
| Dividends, net of foreign taxes withheld* |
$ | 722,699 | $ | 276,066 | $ | 344,507 | $ | 301,700 | ||||||||
| Income from securities lending |
1,934 | 1,959 | 122 | 96 | ||||||||||||
| Total investment income |
724,633 | 278,025 | 344,629 | 301,796 | ||||||||||||
| EXPENSES: | ||||||||||||||||
| Management fee |
147,413 | 73,829 | 59,179 | 93,028 | ||||||||||||
| Trustee fees |
2,042 | 1,160 | 755 | — | ||||||||||||
| Other fees |
— | — | — | 2,264 | ||||||||||||
| Total expenses |
149,455 | 74,989 | 59,934 | 95,292 | ||||||||||||
| Less: |
||||||||||||||||
| Expenses waived by advisor |
— | — | — | (14,619 | ) | |||||||||||
| Net investment income |
575,178 | 203,036 | 284,695 | 221,123 | ||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||||||||||||||
| Net realized gain (loss) on: |
||||||||||||||||
| Investments |
(595,523 | ) | (1,046,732 | ) | (683,786 | ) | (1,234,896 | ) | ||||||||
| In-kind redemptions |
1,026,078 | 1,418,816 | — | (559,885 | ) | |||||||||||
| Capital gains tax |
— | — | — | (6,862 | ) | |||||||||||
| Foreign currency transactions |
— | (19 | ) | (4,806 | ) | (24,140 | ) | |||||||||
| Net realized gain (loss) |
430,555 | 372,065 | (688,592 | ) | (1,825,783 | ) | ||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||
| Investments |
2,435,374 | 942,940 | 635,910 | 1,130,965 | ||||||||||||
| Capital gains tax |
— | — | — | (8,492 | ) | |||||||||||
| Foreign currency transactions |
— | 15 | (905 | ) | 385 | |||||||||||
| Net change in unrealized appreciation |
2,435,374 | 942,955 | 635,005 | 1,122,858 | ||||||||||||
| Net realized and unrealized gain (loss) |
2,865,929 | 1,315,020 | (53,587 | ) | (702,925 | ) | ||||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 3,441,107 | $ | 1,518,056 | $ | 231,108 | $ | (481,802 | ) | |||||||
| * Foreign taxes withheld |
$ | 1,623 | $ | 510 | $ | 28,788 | $ | 35,481 | ||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 137 |
Table of Contents
| STATEMENTS OF OPERATIONS (continued) |
For the Year Ended October 31, 2012
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
Guggenheim S&P 500® Equal Weight Energy ETF |
||||||||||
| INVESTMENT INCOME: | ||||||||||||
| Dividends |
$ | 762,734 | $ | 1,001,862 | $ | 434,113 | ||||||
| Income from securities lending |
1,028 | 526 | 61 | |||||||||
| Total investment income |
763,762 | 1,002,388 | 434,174 | |||||||||
| EXPENSES: | ||||||||||||
| Management fee |
222,562 | 189,550 | 157,800 | |||||||||
| Total expenses |
222,562 | 189,550 | 157,800 | |||||||||
| Net investment income |
541,200 | 812,838 | 276,374 | |||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||||||||||
| Net realized gain (loss) on: |
||||||||||||
| Investments |
(533,868 | ) | (454,111 | ) | (1,783,897 | ) | ||||||
| In-kind redemptions |
7,134,348 | 8,289,152 | (1,065,936 | ) | ||||||||
| Net realized gain (loss) |
6,600,480 | 7,835,041 | (2,849,833 | ) | ||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||
| Investments |
(739,225 | ) | (3,884,698 | ) | 1,840,307 | |||||||
| Net realized and unrealized gain (loss) |
5,861,255 | 3,950,343 | (1,009,526 | ) | ||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 6,402,455 | $ | 4,763,181 | $ | (733,152 | ) | |||||
| 138 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF OPERATIONS (concluded) |
For the Year Ended October 31, 2012
| Guggenheim S&P 500® Equal Weight Financials ETF |
Guggenheim S&P 500® Equal Weight Health Care ETF |
Guggenheim S&P 500® Equal Weight Industrials ETF |
Guggenheim S&P 500® Equal Weight Materials ETF |
Guggenheim S&P 500® Equal Weight Technology ETF |
Guggenheim S&P 500® Equal Weight Utilities ETF |
|||||||||||||||||||
| INVESTMENT INCOME: | ||||||||||||||||||||||||
| Dividends, net of foreign taxes withheld* |
$ | 297,499 | $ | 941,241 | $ | 590,538 | $ | 706,984 | $ | 1,530,713 | $ | 1,794,513 | ||||||||||||
| Income from securities lending |
140 | — | 666 | 601 | 6,385 | 6,845 | ||||||||||||||||||
| Total investment income |
297,639 | 941,241 | 591,204 | 707,585 | 1,537,098 | 1,801,358 | ||||||||||||||||||
| EXPENSES: | ||||||||||||||||||||||||
| Management fee |
75,196 | 410,661 | 123,324 | 172,917 | 609,160 | 219,503 | ||||||||||||||||||
| Total expenses |
75,196 | 410,661 | 123,324 | 172,917 | 609,160 | 219,503 | ||||||||||||||||||
| Net investment income |
222,443 | 530,580 | 467,880 | 534,668 | 927,938 | 1,581,855 | ||||||||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||||||||||||||||||||||
| Net realized gain (loss) on: |
||||||||||||||||||||||||
| Investments |
(558,279 | ) | (665,714 | ) | (160,651 | ) | (391,640 | ) | (7,911,038 | ) | 388,824 | |||||||||||||
| In-kind redemptions |
590,648 | 8,413,624 | 2,395,274 | 1,549,751 | 18,416,559 | 2,879,519 | ||||||||||||||||||
| Net realized gain |
32,369 | 7,747,910 | 2,234,623 | 1,158,111 | 10,505,521 | 3,268,343 | ||||||||||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||||||||||
| Investments |
2,304,637 | 656,908 | (516,072 | ) | 1,217,258 | (14,282,736 | ) | 1,919,100 | ||||||||||||||||
| Net realized and unrealized gain |
2,337,006 | 8,404,818 | 1,718,551 | 2,375,369 | (3,777,215 | ) | 5,187,443 | |||||||||||||||||
| Net increase in net assets resulting from operations |
$ | 2,559,449 | $ | 8,935,398 | $ | 2,186,431 | $ | 2,910,037 | $ | (2,849,277 | ) | $ | 6,769,298 | |||||||||||
| * Foreign taxes withheld |
$ | — | $ | — | $ | 6 | $ | — | $ | — | $ | — | ||||||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 139 |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS |
| Guggenheim S&P MidCap 400® Equal Weight ETF |
||||||||
| Year Ended October 31, 2012 |
Period from August 1, 2011* to October 31, 2011 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
| Net investment income |
$ | 33,568 | $ | 7,921 | ||||
| Net realized gain (loss) on investments |
123,829 | (9,545 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments |
166,102 | (142,661 | ) | |||||
| Net increase (decrease) in net assets resulting from operations |
323,499 | (144,285 | ) | |||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||
| Net investment income |
(32,938 | ) | (5,601 | ) | ||||
| SHAREHOLDER TRANSACTIONS: | ||||||||
| Proceeds from shares purchased |
3,120,555 | 2,976,024 | ||||||
| Value of shares redeemed |
(3,100,605 | ) | — | |||||
| Net increase in net assets resulting from share transactions |
19,950 | 2,976,024 | ||||||
| Net increase in net assets |
310,511 | 2,826,138 | ||||||
| NET ASSETS | ||||||||
| Beginning of period |
2,826,138 | — | ||||||
| End of period |
$ | 3,136,649 | $ | 2,826,138 | ||||
| Undistributed net investment income at end of period |
$ | 314 | $ | 1,484 | ||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||
| Shares sold |
100,000 | 100,000 | ||||||
| Shares redeemed |
(100,000 | ) | — | |||||
| Net increase in shares |
— | 100,000 | ||||||
| * | Commencement of operations |
| 140 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
Guggenheim Russell MidCap® Equal Weight ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Period from August 1, 2011* to October 31, 2011 |
Year Ended October 31, 2012 |
Period from December 3, 2010* to October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 45,929 | $ | 9,727 | $ | 727,828 | $ | 212,148 | ||||||||
| Net realized gain (loss) on investments |
814,301 | (13,809 | ) | 1,670,531 | (112,004 | ) | ||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
(72,825 | ) | 27,244 | 2,095,289 | (291,167 | ) | ||||||||||
| Net increase (decrease) in net assets resulting from operations |
787,405 | 23,162 | 4,493,648 | (191,023 | ) | |||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(48,916 | ) | (6,163 | ) | (712,539 | ) | (168,415 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
— | 5,629,931 | 14,565,056 | 56,370,615 | ||||||||||||
| Value of shares redeemed |
(4,805,310 | ) | — | (20,237,192 | ) | (1,503,599 | ) | |||||||||
| Net increase (decrease) in net assets resulting from share transactions |
(4,805,310 | ) | 5,629,931 | (5,672,136 | ) | 54,867,016 | ||||||||||
| Net increase (decrease) in net assets |
(4,066,821 | ) | 5,646,930 | (1,891,027 | ) | 54,507,578 | ||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of period |
5,646,930 | — | 54,507,578 | — | ||||||||||||
| End of period |
$ | 1,580,109 | $ | 5,646,930 | $ | 52,616,551 | $ | 54,507,578 | ||||||||
| Undistributed net investment income at end of period |
$ | — | $ | 2,570 | $ | 34,632 | $ | 36,985 | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
— | 200,000 | 450,000 | 1,800,000 | ||||||||||||
| Shares redeemed |
(150,000 | ) | — | (650,000 | ) | (50,000 | ) | |||||||||
| Net increase (decrease) in shares |
(150,000 | ) | 200,000 | (200,000 | ) | 1,750,000 | ||||||||||
| * | Commencement of operations |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 141 |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim Russell 1000® Equal Weight ETF |
Guggenheim Russell 2000® Equal Weight ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Period from December 3, 2010* to October 31, 2011 |
Year Ended October 31, 2012 |
Period from December 3, 2010* to October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 575,178 | $ | 191,289 | $ | 203,036 | $ | 97,504 | ||||||||
| Net realized gain (loss) on investments |
430,555 | 70,622 | 372,065 | (275,792 | ) | |||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
2,435,374 | (1,609,979 | ) | 942,955 | (1,545,880 | ) | ||||||||||
| Net increase (decrease) in net assets resulting from operations |
3,441,107 | (1,348,068 | ) | 1,518,056 | (1,724,168 | ) | ||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(553,925 | ) | (165,561 | ) | (198,196 | ) | (82,186 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
11,210,761 | 37,147,734 | — | 25,390,228 | ||||||||||||
| Value of shares redeemed |
(9,269,418 | ) | (1,451,395 | ) | (10,586,026 | ) | — | |||||||||
| Net increase (decrease) in net assets resulting from share transactions |
1,941,343 | 35,696,339 | (10,586,026 | ) | 25,390,228 | |||||||||||
| Net increase (decrease) in net assets |
4,828,525 | 34,182,710 | (9,266,166 | ) | 23,583,874 | |||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of period |
34,182,710 | — | 23,583,874 | — | ||||||||||||
| End of period |
$ | 39,011,235 | $ | 34,182,710 | $ | 14,317,708 | $ | 23,583,874 | ||||||||
| Undistributed net investment income at end of period |
$ | 32,780 | $ | 21,192 | $ | 18,281 | $ | 11,261 | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
350,000 | 1,150,000 | — | 800,000 | ||||||||||||
| Shares redeemed |
(300,000 | ) | (50,000 | ) | (350,000 | ) | — | |||||||||
| Net increase (decrease) in shares |
50,000 | 1,100,000 | (350,000 | ) | 800,000 | |||||||||||
| * | Commencement of operations |
| 142 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim MSCI EAFE Equal Weight ETF |
Guggenheim MSCI Emerging Markets Equal Weight ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Period from December 3, 2010* to October 31, 2011 |
Year Ended October 31, 2012 |
Period from December 3, 2010* to October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 284,695 | $ | 483,530 | $ | 221,123 | $ | 288,754 | ||||||||
| Net realized gain (loss) on investments |
(688,592 | ) | 338,989 | (1,825,783 | ) | (831,874 | ) | |||||||||
| Net change in unrealized appreciation (depreciation) on investments |
635,005 | (1,821,076 | ) | 1,122,858 | (2,249,192 | ) | ||||||||||
| Net increase (decrease) in net assets resulting from operations |
231,108 | (998,557 | ) | (481,802 | ) | (2,792,312 | ) | |||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(267,803 | ) | (491,348 | ) | (192,786 | ) | (160,394 | ) | ||||||||
| Return of capital |
— | — | (23,454 | ) | (155,130 | ) | ||||||||||
| Total distributions to shareholders |
(267,803 | ) | (491,348 | ) | (216,240 | ) | (315,524 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
— | 24,728,819 | 3,217,848 | 27,283,677 | ||||||||||||
| Value of shares redeemed |
— | (12,146,088 | ) | (6,108,837 | ) | (7,261,735 | ) | |||||||||
| Net increase (decrease) in net assets resulting from share transactions |
— | 12,582,731 | (2,890,989 | ) | 20,021,942 | |||||||||||
| Net increase (decrease) in net assets |
(36,695 | ) | 11,092,826 | (3,589,031 | ) | 16,914,106 | ||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of period |
11,092,826 | — | 16,914,106 | — | ||||||||||||
| End of period |
$ | 11,056,131 | $ | 11,092,826 | $ | 13,325,075 | $ | 16,914,106 | ||||||||
| Undistributed (distributions in excess of) net investment income at end of period |
$ | 19,781 | $ | 19,048 | $ | (1,018 | ) | $ | (372 | ) | ||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
— | 600,000 | 100,000 | 700,000 | ||||||||||||
| Shares redeemed |
— | (300,000 | ) | (200,000 | ) | (200,000 | ) | |||||||||
| Net increase (decrease) in shares |
— | 300,000 | (100,000 | ) | 500,000 | |||||||||||
| * | Commencement of operations |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 143 |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
| Net investment income |
$ | 541,200 | $ | 299,451 | ||||
| Net realized gain on investments |
6,600,480 | 2,977,327 | ||||||
| Net change in unrealized depreciation on investments |
(739,225 | ) | (739,044 | ) | ||||
| Net increase in net assets resulting from operations |
6,402,455 | 2,537,734 | ||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||
| Net investment income |
(540,416 | ) | (291,636 | ) | ||||
| SHAREHOLDER TRANSACTIONS: | ||||||||
| Proceeds from shares purchased |
56,045,159 | 7,384,661 | ||||||
| Value of shares redeemed |
(42,059,685 | ) | (13,588,895 | ) | ||||
| Net increase (decrease) in net assets resulting from share transactions |
13,985,474 | (6,204,234 | ) | |||||
| Net increase (decrease) in net assets |
19,847,513 | (3,958,136 | ) | |||||
| NET ASSETS | ||||||||
| Beginning of year |
21,466,738 | 25,424,874 | ||||||
| End of year |
$ | 41,314,251 | $ | 21,466,738 | ||||
| Undistributed net investment income at end of year |
$ | 13,782 | $ | 12,998 | ||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||
| Shares sold |
1,100,000 | 150,000 | ||||||
| Shares redeemed |
(800,000 | ) | (300,000 | ) | ||||
| Net increase (decrease) in shares |
300,000 | (150,000 | ) | |||||
| 144 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
Guggenheim S&P 500® Equal Weight Energy ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 812,838 | $ | 432,184 | $ | 276,374 | $ | 267,674 | ||||||||
| Net realized gain (loss) on investments |
7,835,041 | 792,268 | (2,849,833 | ) | 4,427,435 | |||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
(3,884,698 | ) | 834,186 | 1,840,307 | (7,248,237 | ) | ||||||||||
| Net increase (decrease) in net assets resulting from operations |
4,763,181 | 2,058,638 | (733,152 | ) | (2,553,128 | ) | ||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(802,431 | ) | (404,016 | ) | (257,933 | ) | (267,926 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
78,347,608 | 18,142,268 | 6,210,249 | 99,253,072 | ||||||||||||
| Value of shares redeemed |
(71,871,221 | ) | (3,145,222 | ) | (8,502,963 | ) | (77,266,420 | ) | ||||||||
| Net increase (decrease) in net assets resulting from share transactions |
6,476,387 | 14,997,046 | (2,292,714 | ) | 21,986,652 | |||||||||||
| Net increase (decrease) in net assets |
10,437,137 | 16,651,668 | (3,283,799 | ) | 19,165,598 | |||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of year |
30,507,174 | 13,855,506 | 35,287,474 | 16,121,876 | ||||||||||||
| End of year |
$ | 40,944,311 | $ | 30,507,174 | $ | 32,003,675 | $ | 35,287,474 | ||||||||
| Undistributed net investment income at end of year |
$ | 67,418 | $ | 57,011 | $ | 21,763 | $ | 3,322 | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
1,150,000 | 300,000 | 100,000 | 1,400,000 | ||||||||||||
| Shares redeemed |
(1,050,000 | ) | (50,000 | ) | (150,000 | ) | (1,150,000 | ) | ||||||||
| Net increase (decrease) in shares |
100,000 | 250,000 | (50,000 | ) | 250,000 | |||||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 145 |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim S&P 500® Equal Weight Financial ETF |
Guggenheim S&P 500® Equal Weight Health Care ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 222,443 | $ | 293,728 | $ | 530,580 | $ | 251,237 | ||||||||
| Net realized gain on investments |
32,369 | 1,299,016 | 7,747,910 | 3,987,029 | ||||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
2,304,637 | (2,262,770 | ) | 656,908 | (524,200 | ) | ||||||||||
| Net increase (decrease) in net assets resulting from operations |
2,559,449 | (670,026 | ) | 8,935,398 | 3,714,066 | |||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(224,168 | ) | (292,247 | ) | (499,910 | ) | (230,946 | ) | ||||||||
| Return of capital |
(51,231 | ) | — | — | — | |||||||||||
| Total distributions to shareholders |
(275,399 | ) | (292,247 | ) | (499,910 | ) | (230,946 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
— | 8,493,107 | 475,933,235 | 182,857,489 | ||||||||||||
| Value of shares redeemed |
(5,078,734 | ) | (6,907,580 | ) | (499,145,695 | ) | (186,914,915 | ) | ||||||||
| Net increase (decrease) in net assets resulting from share transactions |
(5,078,734 | ) | 1,585,527 | (23,212,460 | ) | (4,057,426 | ) | |||||||||
| Net increase (decrease) in net assets |
(2,794,684 | ) | 623,254 | (14,776,972 | ) | (574,306 | ) | |||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of year |
17,133,205 | 16,509,951 | 53,195,673 | 53,769,979 | ||||||||||||
| End of year |
$ | 14,338,521 | $ | 17,133,205 | $ | 38,418,701 | $ | 53,195,673 | ||||||||
| Undistributed net investment income at end of year |
$ | — | $ | — | $ | 67,544 | $ | 36,874 | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
— | 300,000 | 6,550,000 | 2,800,000 | ||||||||||||
| Shares redeemed |
(200,000 | ) | (250,000 | ) | (6,850,000 | ) | (2,900,000 | ) | ||||||||
| Net increase (decrease) in shares |
(200,000 | ) | 50,000 | (300,000 | ) | (100,000 | ) | |||||||||
| 146 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim S&P 500® Equal Weight Industrials ETF |
Guggenheim S&P 500® Equal Weight Materials ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 467,880 | $ | 607,514 | $ | 534,668 | $ | 578,712 | ||||||||
| Net realized gain on investments |
2,234,623 | 7,115,513 | 1,158,111 | 1,631,549 | ||||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
(516,072 | ) | (6,672,032 | ) | 1,217,258 | (2,893,215 | ) | |||||||||
| Net increase (decrease) in net assets resulting from operations |
2,186,431 | 1,050,995 | 2,910,037 | (682,954 | ) | |||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(419,866 | ) | (609,503 | ) | (529,218 | ) | (560,979 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
30,145,279 | 8,408,979 | — | 9,291,043 | ||||||||||||
| Value of shares redeemed |
(30,280,574 | ) | (35,505,013 | ) | (5,763,694 | ) | (5,671,266 | ) | ||||||||
| Net increase (decrease) in net assets resulting from share transactions |
(135,295 | ) | (27,096,034 | ) | (5,763,694 | ) | 3,619,777 | |||||||||
| Net increase (decrease) in net assets |
1,631,270 | (26,654,542 | ) | (3,382,875 | ) | 2,375,844 | ||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of year |
15,450,411 | 42,104,953 | 36,770,655 | 34,394,811 | ||||||||||||
| End of year |
$ | 17,081,681 | $ | 15,450,411 | $ | 33,387,780 | $ | 36,770,655 | ||||||||
| Undistributed net investment income at end of year |
$ | 49,373 | $ | 7,527 | $ | 9,241 | $ | 29,012 | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
550,000 | 150,000 | — | 150,000 | ||||||||||||
| Shares redeemed |
(550,000 | ) | (700,000 | ) | (100,000 | ) | (100,000 | ) | ||||||||
| Net increase (decrease) in shares |
— | (550,000 | ) | (100,000 | ) | 50,000 | ||||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 147 |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (concluded) |
| Guggenheim S&P 500® Equal Weight Technology ETF |
Guggenheim S&P 500® Equal Weight Utilities ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 927,938 | $ | 641,534 | $ | 1,581,855 | $ | 887,068 | ||||||||
| Net realized gain on investments |
10,505,521 | 5,230,243 | 3,268,343 | 2,071,458 | ||||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
(14,282,736 | ) | (7,130,337 | ) | 1,919,100 | (334,844 | ) | |||||||||
| Net increase (decrease) in net assets resulting from operations |
(2,849,277 | ) | (1,258,560 | ) | 6,769,298 | 2,623,682 | ||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(851,718 | ) | (622,234 | ) | (1,512,371 | ) | (868,554 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
132,237,404 | 68,792,638 | 21,944,215 | 18,642,716 | ||||||||||||
| Value of shares redeemed |
(137,742,483 | ) | (45,985,675 | ) | (17,254,801 | ) | (8,090,201 | ) | ||||||||
| Net increase (decrease) in net assets resulting from share transactions |
(5,505,079 | ) | 22,806,963 | 4,689,414 | 10,552,515 | |||||||||||
| Net increase (decrease) in net assets |
(9,206,074 | ) | 20,926,169 | 9,946,341 | 12,307,643 | |||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of year |
109,685,325 | 88,759,156 | 32,417,238 | 20,109,595 | ||||||||||||
| End of year |
$ | 100,479,251 | $ | 109,685,325 | $ | 42,363,579 | $ | 32,417,238 | ||||||||
| Undistributed net investment income at end of year |
$ | 52,623 | $ | — | $ | 53,335 | $ | 40,616 | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
2,350,000 | 1,300,000 | 400,000 | 350,000 | ||||||||||||
| Shares redeemed |
(2,500,000 | ) | (950,000 | ) | (300,000 | ) | (150,000 | ) | ||||||||
| Net increase (decrease) in shares |
(150,000 | ) | 350,000 | 100,000 | 200,000 | |||||||||||
| 148 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM S&P MIDCAP 400® EQUAL WEIGHT ETF
| Year Ended October 31, 2012 |
Period Ended October 31, |
|||||||
| Per Share Data: |
| |||||||
| Net asset value, beginning of period |
$28.26 | $29.76 | ||||||
| Income from investment operations: |
||||||||
| Net investment income** |
0.34 | 0.08 | ||||||
| Net gain (loss) on investments (realized and unrealized) |
3.10 | (1.52 | ) | |||||
|
|
|
|
|
|||||
| Total from investment operations |
3.44 | (1.44 | ) | |||||
| Less distributions from: |
||||||||
| Net investment income |
(0.33 | ) | (0.06 | ) | ||||
| Net asset value, end of period |
$31.37 | $28.26 | ||||||
|
|
|
|
|
|||||
| Total Return*** |
12.19% | (4.81% | ) | |||||
| Ratios/Supplemental Data: |
||||||||
| Net assets, end of period (in thousands) |
$3,137 | $2,826 | ||||||
| Ratio to average net assets of: |
||||||||
| Net investment income |
1.13% | 1.20% | **** | |||||
| Total expenses |
0.41% | 0.40% | **** | |||||
| Portfolio turnover rate† |
24% | 7% | ||||||
| * | Fund commenced August 1, 2011. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 149 |
Table of Contents
GUGGENHEIM S&P SMALLCAP 600® EQUAL WEIGHT ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Period Ended October 31, |
|||||||
| Per Share Data: |
| |||||||
| Net asset value, beginning of period |
$28.23 | $29.85 | ||||||
| Income from investment operations: |
||||||||
| Net investment income** |
0.28 | 0.05 | ||||||
| Net gain (loss) on investments (realized and unrealized) |
3.47 | (1.64 | ) | |||||
|
|
|
|
|
|||||
| Total from investment operations |
3.75 | (1.59 | ) | |||||
| Less distributions from: |
||||||||
| Net investment income |
(0.38 | ) | (0.03 | ) | ||||
| Net asset value, end of period |
$31.60 | $28.23 | ||||||
|
|
|
|
|
|||||
| Total Return*** |
13.30% | (5.30% | ) | |||||
| Ratios/Supplemental Data: |
||||||||
| Net assets, end of period (in thousands) |
$1,580 | $5,647 | ||||||
| Ratio to average net assets of: |
||||||||
| Net investment income |
0.93% | 0.82% | **** | |||||
| Total expenses |
0.41% | 0.40% | **** | |||||
| Portfolio turnover rate† |
26% | 8% | ||||||
| * | Fund commenced August 1, 2011. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 150 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM RUSSELL MIDCAP® EQUAL WEIGHT ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Period Ended October 31, |
|||||||
| Per Share Data: |
| |||||||
| Net asset value, beginning of period |
$31.15 | $30.21 | ||||||
| Income from investment operations: |
||||||||
| Net investment income** |
0.46 | 0.30 | ||||||
| Net gain on investments (realized and unrealized) |
2.80 | 0.85 | ||||||
|
|
|
|
|
|||||
| Total from investment operations |
3.26 | 1.15 | ||||||
| Less distributions from: |
||||||||
| Net investment income |
(0.46 | ) | (0.21 | ) | ||||
| Net asset value, end of period |
$33.95 | $31.15 | ||||||
|
|
|
|
|
|||||
| Total Return*** |
10.52% | 3.80% | ||||||
| Ratios/Supplemental Data: |
||||||||
| Net assets, end of period (in thousands) |
$52,617 | $54,508 | ||||||
| Ratio to average net assets of: |
||||||||
| Net investment income |
1.39% | 1.06% | **** | |||||
| Total expenses |
0.41% | 0.41% | **** | |||||
| Portfolio turnover rate† |
33% | 30% | ||||||
| * | The Fund commenced operations on December 3, 2010. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 151 |
Table of Contents
GUGGENHEIM RUSSELL 1000® EQUAL WEIGHT ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Period Ended October 31, |
|||||||
| Per Share Data: |
| |||||||
| Net asset value, beginning of period |
$31.08 | $30.18 | ||||||
| Income from investment operations: |
||||||||
| Net investment income** |
0.51 | 0.36 | ||||||
| Net gain on investments (realized and unrealized) |
2.83 | 0.85 | ||||||
|
|
|
|
|
|||||
| Total from investment operations |
3.34 | 1.21 | ||||||
| Less distributions from: |
||||||||
| Net investment income |
(0.50 | ) | (0.31 | ) | ||||
| Net asset value, end of period |
$33.92 | $31.08 | ||||||
|
|
|
|
|
|||||
| Total Return*** |
10.83% | 4.00% | ||||||
| Ratios/Supplemental Data: |
||||||||
| Net assets, end of period (in thousands) |
$39,011 | $34,183 | ||||||
| Ratio to average net assets of: |
||||||||
| Net investment income |
1.56% | 1.26% | **** | |||||
| Total expenses |
0.41% | 0.41% | **** | |||||
| Portfolio turnover rate† |
27% | 25% | ||||||
| * | The Fund commenced operations on December 3, 2010. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 152 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM RUSSELL 2000® EQUAL WEIGHT ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Period Ended October 31, |
|||||||
| Per Share Data: |
| |||||||
| Net asset value, beginning of period |
$29.48 | $30.19 | ||||||
| Income from investment operations: |
||||||||
| Net investment income** |
0.34 | 0.22 | ||||||
| Net gain (loss) on investments (realized and unrealized) |
2.33 | (0.75 | ) | |||||
|
|
|
|
|
|||||
| Total from investment operations |
2.67 | (0.53 | ) | |||||
| Less distributions from: |
||||||||
| Net investment income |
(0.33 | ) | (0.18 | ) | ||||
| Net asset value, end of period |
$31.82 | $29.48 | ||||||
|
|
|
|
|
|||||
| Total Return*** |
9.08% | (1.78% | ) | |||||
| Ratios/Supplemental Data: |
||||||||
| Net assets, end of period (in thousands) |
$14,318 | $23,584 | ||||||
| Ratio to average net assets of: |
||||||||
| Net investment income |
1.10% | 0.79% | **** | |||||
| Total expenses |
0.41% | 0.41% | **** | |||||
| Portfolio turnover rate† |
43% | 38% | ||||||
| * | The Fund commenced operations on December 3, 2010. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 153 |
Table of Contents
GUGGENHEIM MSCI EAFE EQUAL WEIGHT ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Period Ended October 31, |
|||||||
| Per Share Data: |
| |||||||
| Net asset value, beginning of period |
$36.98 | $40.63 | ||||||
| Income from investment operations: |
||||||||
| Net investment income** |
0.95 | 1.11 | ||||||
| Net loss on investments (realized and unrealized) |
(0.19 | ) | (3.57 | ) | ||||
|
|
|
|
|
|||||
| Total from investment operations |
0.76 | (2.46 | ) | |||||
| Less distributions from: |
||||||||
| Net investment income |
(0.89 | ) | (1.19 | ) | ||||
| Net asset value, end of period |
$36.85 | $36.98 | ||||||
|
|
|
|
|
|||||
| Total Return*** |
2.21% | (6.33% | ) | |||||
| Ratios/Supplemental Data: |
||||||||
| Net assets, end of period (in thousands) |
$11,056 | $11,093 | ||||||
| Ratio to average net assets of: |
||||||||
| Net investment income |
2.65% | 2.96% | **** | |||||
| Total expenses |
0.56% | 0.56% | **** | |||||
| Portfolio turnover rate† |
26% | 24% | ||||||
| * | The Fund commenced operations on December 3, 2010. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 154 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM MSCI EMERGING MARKETS EQUAL WEIGHT ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Period Ended October 31, |
|||||||
| Per Share Data: |
| |||||||
| Net asset value, beginning of period |
$33.83 | $40.21 | ||||||
| Income from investment operations: |
||||||||
| Net investment income** |
0.55 | 0.69 | ||||||
| Net loss on investments (realized and unrealized) |
(0.53 | ) | (6.35 | ) | ||||
|
|
|
|
|
|||||
| Total from investment operations |
0.02 | (5.66 | ) | |||||
| Less distributions from: |
||||||||
| Net investment income |
(0.48 | ) | (0.36 | ) | ||||
| Return of capital |
(0.06 | ) | (0.36 | ) | ||||
|
|
|
|
|
|||||
| Total distributions |
(0.54 | ) | (0.72 | ) | ||||
| Net asset value, end of period |
$33.31 | $33.83 | ||||||
|
|
|
|
|
|||||
| Total Return*** |
0.10% | (14.13% | ) | |||||
| Ratios/Supplemental Data: |
||||||||
| Net assets, end of period (in thousands) |
$13,325 | $16,914 | ||||||
| Ratio to average net assets of: |
||||||||
| Net investment income |
1.66% | 1.99% | ||||||
| Total expenses |
0.72% | 0.71% | **** | |||||
| Net expenses***** |
0.61% | 0.63% | **** | |||||
| Portfolio turnover rate† |
39% | 63% | ||||||
| * | The Fund commenced operations on January 7, 2011. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| ***** | Net expense information reflects the expense ratios after expense waivers. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 155 |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER DISCRETIONARY ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$47.70 | $42.37 | $32.78 | $24.82 | $44.50 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.64 | 0.56 | 0.35 | 0.40 | 0.53 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
7.46 | 5.31 | 9.56 | 7.93 | (19.59 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
8.10 | 5.87 | 9.91 | 8.33 | (19.06 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.71 | ) | (0.54 | ) | (0.32 | ) | (0.37 | ) | (0.62 | ) | ||||||||||
| Net asset value, end of period |
$55.09 | $47.70 | $42.37 | $32.78 | $24.82 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
17.05% | 13.91% | 30.35% | 34.20% | (43.27% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$41,314 | $21,467 | $25,425 | $11,474 | $3,722 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
1.22% | 1.20% | 0.89% | 1.61% | 1.44% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
25% | 26% | 28% | 42% | 29% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 156 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT CONSUMER STAPLES ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$61.01 | $55.42 | $48.42 | $41.47 | $52.68 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
1.41 | 1.31 | 1.14 | 1.04 | 0.88 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
7.20 | 5.49 | 6.95 | 6.91 | (11.22 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
8.61 | 6.80 | 8.09 | 7.95 | (10.34 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(1.38 | ) | (1.21 | ) | (1.09 | ) | (1.00 | ) | (0.87 | ) | ||||||||||
| Net asset value, end of period |
$68.24 | $61.01 | $55.42 | $48.42 | $41.47 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
14.19% | 12.37% | 16.89% | 19.60% | (19.87% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$40,944 | $30,507 | $13,856 | $9,685 | $10,368 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
2.14% | 2.20% | 2.20% | 2.52% | 1.78% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
18% | 15% | 18% | 25% | 25% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 157 |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT ENERGY ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$64.16 | $53.74 | $47.69 | $39.72 | $67.48 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.55 | 0.36 | 0.44 | 0.46 | 0.33 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
(0.19 | ) | 10.43 | 6.07 | 7.93 | (25.94 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
0.36 | 10.79 | 6.51 | 8.39 | (25.61 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.51 | ) | (0.37 | ) | (0.46 | ) | (0.42 | ) | (0.35 | ) | ||||||||||
| Net realized gains |
— | — | — | — | (1.80 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.51 | ) | (0.37 | ) | (0.46 | ) | (0.42 | ) | (2.15 | ) | ||||||||||
| Net asset value, end of period |
$64.01 | $64.16 | $53.74 | $47.69 | $39.72 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
0.58% | 20.09% | 13.74% | 21.39% | (39.28% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$32,004 | $35,287 | $16,122 | $11,922 | $5,958 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
0.88% | 0.53% | 0.87% | 1.16% | 0.50% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
30% | 23% | 31% | 33% | 38% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 158 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT FINANCIAL ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$24.48 | $25.40 | $21.53 | $21.41 | $46.67 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.39 | 0.42 | 0.31 | 0.36 | 1.02 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
4.32 | (0.96 | ) | 3.87 | 0.18 | (25.40 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
4.71 | (0.54 | ) | 4.18 | 0.54 | (24.38 | ) | |||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.42 | ) | (0.38 | ) | (0.31 | ) | (0.42 | ) | (0.88 | ) | ||||||||||
| Return of capital |
(0.09 | ) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions to shareholders |
(0.51 | ) | (0.38 | ) | (0.31 | ) | (0.42 | ) | (0.88 | ) | ||||||||||
| Net asset value, end of period |
$28.68 | $24.48 | $25.40 | $21.53 | $21.41 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
19.32% | (2.25% | ) | 19.46% | 3.15% | (52.88% | ) | |||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$14,339 | $17,133 | $16,510 | $13,995 | $10,705 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
1.48% | 1.59% | 1.26% | 2.00% | 3.09% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
17% | 18% | 19% | 49% | 51% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 159 |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT HEALTH CARE ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$66.49 | $59.74 | $50.56 | $42.21 | $57.94 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.47 | 0.32 | 0.20 | 0.19 | 0.14 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
11.04 | 6.73 | 9.20 | 8.35 | (15.74 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
11.51 | 7.05 | 9.40 | 8.54 | (15.60 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(1.16 | ) | (0.30 | ) | (0.22 | ) | (0.19 | ) | (0.13 | ) | ||||||||||
| Net asset value, end of period |
$76.84 | $66.49 | $59.74 | $50.56 | $42.21 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
17.39% | 11.80% | 18.64% | 20.31% | (26.98% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$38,419 | $53,196 | $53,770 | $73,308 | $48,537 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
0.65% | 0.47% | 0.35% | 0.42% | 0.26% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
15% | 19% | 20% | 38% | 26% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 160 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT INDUSTRIALS ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$51.50 | $49.54 | $39.76 | $35.73 | $59.37 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
1.05 | 0.83 | 0.61 | 0.67 | 0.61 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
5.42 | 2.05 | 9.78 | 4.12 | (21.82 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
6.47 | 2.88 | 10.39 | 4.79 | (21.21 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(1.03 | ) | (0.92 | ) | (0.61 | ) | (0.76 | ) | (0.65 | ) | ||||||||||
| Net realized gains |
— | — | — | — | (1.78 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(1.03 | ) | (0.92 | ) | (0.61 | ) | (0.76 | ) | (2.43 | ) | ||||||||||
| Net asset value, end of period |
$56.94 | $51.50 | $49.54 | $39.76 | $35.73 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
12.64% | 5.80% | 26.28% | 13.84% | (37.12% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$17,082 | $15,450 | $42,105 | $17,890 | $7,146 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
1.90% | 1.52% | 1.34% | 1.88% | 1.17% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
18% | 15% | 18% | 35% | 30% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 161 |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT MATERIALS ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$56.57 | $57.32 | $45.78 | $34.37 | $59.42 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.92 | 0.82 | 1.52 | 0.60 | 1.40 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
4.14 | (0.76 | ) | 11.65 | 11.49 | (25.11 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
5.06 | 0.06 | 13.17 | 12.09 | (23.71 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.92 | ) | (0.81 | ) | (1.63 | ) | (0.68 | ) | (1.34 | ) | ||||||||||
| Net asset value, end of period |
$60.71 | $56.57 | $57.32 | $45.78 | $34.37 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
8.99% | 0.04% | 29.05% | 35.82% | (40.67% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$33,388 | $36,771 | $34,395 | $41,199 | $5,155 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
1.55% | 1.33% | 2.88% | 1.41% | 2.69% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
20% | 21% | 27% | 57% | 34% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 162 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT TECHNOLOGY ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$52.23 | $50.72 | $39.98 | $29.98 | $55.18 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.41 | 0.29 | 0.12 | 0.11 | 0.06 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
(0.75 | ) | 1.49 | 10.75 | 10.03 | (25.19 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(0.34 | ) | 1.78 | 10.87 | 10.14 | (25.13 | ) | |||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.36 | ) | (0.27 | ) | (0.13 | ) | (0.14 | ) | (0.07 | ) | ||||||||||
| Net asset value, end of period |
$51.53 | $52.23 | $50.72 | $39.98 | $29.98 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
(0.71% | ) | 3.51% | 27.23% | 33.94% | (45.58% | ) | |||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$100,479 | $109,685 | $88,759 | $53,969 | $7,495 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
0.76% | 0.54% | 0.26% | 0.30% | 0.14% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
25% | 29% | 25% | 30% | 36% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 163 |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT UTILITIES ETF
FINANCIAL HIGHLIGHTS (concluded)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$54.03 | $50.27 | $42.13 | $41.18 | $62.28 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
2.03 | 1.89 | 1.84 | 1.89 | 1.81 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
6.45 | 3.71 | 8.13 | 0.88 | (21.09 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
8.48 | 5.60 | 9.97 | 2.77 | (19.28 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(1.99 | ) | (1.84 | ) | (1.83 | ) | (1.82 | ) | (1.82 | ) | ||||||||||
| Net asset value, end of period |
$60.52 | $54.03 | $50.27 | $42.13 | $41.18 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
15.98% | 11.29% | 24.10% | 6.97% | (31.63% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$42,364 | $32,417 | $20,110 | $8,427 | $4,118 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
3.60% | 3.60% | 3.95% | 4.64% | 3.30% | |||||||||||||||
| Total expenses |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||||
| Portfolio turnover rate† |
22% | 15% | 16% | 26% | 25% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 164 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
|
|
| GUGGENHEIM ETFS ANNUAL REPORT | 165 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
| 166 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
| GUGGENHEIM ETFS ANNUAL REPORT | 167 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
In order to present paid-in-capital, undistributed net investment income (loss) and accumulated net realized gain (loss) on investments on the statement of assets and liabilities that more closely represent their tax character, certain adjustments have been made to these accounts. These adjustments have no effect on net assets or NAV. The most significant of these adjustments are for net capital gains resulting from in-kind redemptions, because they are non-taxable to the Funds, and therefore are not distributed to existing Fund shareholders, or net capital losses resulting from in-kind redemptions which are classified to paid-in-capital. For the year ended October 31, 2012, the adjustments for the Funds were as follows:
| Paid-In Capital |
Undistributed Net Investment Income (Loss) |
Accumulated Net Realized Gain (Loss) |
||||||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 155,364 | $ | (1,800 | ) | $ | (153,564 | ) | ||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
821,150 | 417 | (821,567 | ) | ||||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
2,237,813 | (17,642 | ) | (2,220,171 | ) | |||||||
| Guggenheim Russell 1000® Equal Weight ETF |
1,001,254 | (9,665 | ) | (991,589 | ) | |||||||
| Guggenheim Russell 2000® Equal Weight ETF |
1,392,629 | 2,180 | (1,394,809 | ) | ||||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
21,705 | (16,159 | ) | (5,546 | ) | |||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
(585,801 | ) | (5,529 | ) | 591,330 | |||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
6,965,849 | — | (6,965,849 | ) | ||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
8,158,264 | — | (8,158,264 | ) | ||||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
(1,220,273 | ) | — | 1,220,273 | ||||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
470,832 | 64,134 | (534,966 | ) | ||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
8,211,319 | — | (8,211,319 | ) | ||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
2,296,405 | (6,168 | ) | (2,290,237 | ) | |||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
1,299,036 | (25,221 | ) | (1,273,815 | ) | |||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
17,029,231 | (23,597 | ) | (17,005,634 | ) | |||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
2,802,202 | (56,765 | ) | (2,745,437 | ) | |||||||
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended October 31, 2012, the following capital loss carryforward amounts expired or were used to offset current year net realized capital gains:
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 8,840 | ||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
2,011 | |||
| Guggenheim Russell MidCap® Equal Weight ETF |
— | |||
| Guggenheim Russell 1000® Equal Weight ETF |
— | |||
| Guggenheim Russell 2000® Equal Weight ETF |
— | |||
| Guggenheim MSCI EAFE Equal Weight ETF |
— | |||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Energy ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Financials ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Materials ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Technology ETF |
— | |||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
470,178 |
| 168 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributable earnings (accumulated losses) at October 31, 2012 was as follows:
| Undistributed Ordinary Income |
Undistributed Long Term Capital Gain |
Capital Loss Carryfoward |
Unrealized Appreciation (Depreciation) |
|||||||||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 314 | $ | — | $ | — | $ | (15,004 | ) | |||||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
— | — | — | (65,662 | ) | |||||||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
48,015 | — | (743,175 | ) | 1,705,569 | |||||||||||
| Guggenheim Russell 1000® Equal Weight ETF |
40,861 | — | (557,721 | ) | 782,436 | |||||||||||
| Guggenheim Russell 2000® Equal Weight ETF |
22,412 | — | (1,251,319 | ) | (650,207 | ) | ||||||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
59,762 | — | (692,945 | ) | (1,229,529 | ) | ||||||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
— | — | (1,059,097 | ) | (1,863,175 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
13,782 | — | (3,086,530 | ) | 245,914 | |||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
67,418 | — | (745,840 | ) | (1,495,450 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
21,763 | — | (3,825,648 | ) | (4,063,442 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
— | — | (6,724,408 | ) | 519,715 | |||||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
67,544 | — | (5,007,804 | ) | (1,667,700 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
49,373 | — | (1,207,250 | ) | (669,334 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
9,241 | — | (882,006 | ) | 4,061,049 | |||||||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
52,623 | — | (9,001,603 | ) | (15,446,745 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
53,335 | — | (379,253 | ) | 3,191,640 | |||||||||||
A summary of the expiration of capital loss carryforward is as follows:
| Unlimited | ||||||||||||||||||||||||
| 2016 | 2017 | 2018 | 2019 | Short |
Long Term |
|||||||||||||||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
— | — | — | — | — | — | ||||||||||||||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
— | — | — | 201,788 | 85,132 | 456,255 | ||||||||||||||||||
| Guggenheim Russell 1000® Equal Weight ETF |
— | — | — | 312 | 203,035 | 354,374 | ||||||||||||||||||
| Guggenheim Russell 2000® Equal Weight ETF |
— | — | — | 259,648 | 595,748 | 395,923 | ||||||||||||||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
— | — | — | — | 398,198 | 294,747 | ||||||||||||||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
— | — | — | 18,800 | 701,371 | 338,926 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
800,018 | 1,981,333 | — | — | — | 305,179 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
32,363 | 195,890 | — | 61,000 | 82,050 | 374,537 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
— | 1,743,348 | 393,314 | 128,371 | 371,070 | 1,189,545 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
1,772,479 | 4,062,086 | 376,840 | — | 113,885 | 399,118 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
929,808 | 3,545,994 | — | 66,030 | 75,831 | 390,141 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
— | 1,121,641 | — | — | — | 85,609 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
— | 576,552 | — | — | — | 305,454 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
— | 2,331,453 | — | — | 2,723,942 | 3,946,208 | ||||||||||||||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
— | 45,644 | 333,609 | — | — | — | ||||||||||||||||||
The tax character of distributions paid during the year ended October 31, 2012 was as follows:
| Ordinary Income |
Return of Capital |
|||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 32,938 | $ | — | ||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
48,916 | — | ||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
712,539 | — | ||||||
| Guggenheim Russell 1000® Equal Weight ETF |
553,925 | — | ||||||
| Guggenheim Russell 2000® Equal Weight ETF |
198,196 | — | ||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
267,803 | — | ||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
192,786 | 23,454 | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
540,416 | — | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
802,431 | — | ||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
257,933 | — | ||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
224,168 | 51,231 | ||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
449,910 | — | ||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
419,866 | — | ||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
529,218 | — | ||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
851,718 | — | ||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
1,512,371 | — | ||||||
| GUGGENHEIM ETFS ANNUAL REPORT | 169 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
The tax character of distributions paid during the year ended October 31, 2011 was as follows:
| Ordinary Income |
Return of Capital |
|||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 5,601 | $ | — | ||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
6,163 | — | ||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
168,415 | — | ||||||
| Guggenheim Russell 1000® Equal Weight ETF |
165,561 | — | ||||||
| Guggenheim Russell 2000® Equal Weight ETF |
82,186 | — | ||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
491,348 | — | ||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
160,394 | 155,130 | ||||||
| Guggenheim MSCI ACWI Equal Weight ETF |
83,619 | — | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
291,636 | — | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
404,016 | — | ||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
267,926 | — | ||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
292,247 | — | ||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
230,946 | — | ||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
609,503 | — | ||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
560,979 | — | ||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
622,234 | — | ||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
868,554 | — | ||||||
At October 31, 2012, the identified cost of investments in securities owned by each Fund for Federal income tax purposes and the gross unrealized appreciation and depreciation were as follows:
| Identified Cost |
Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 3,150,616 | $ | 229,280 | $ | (244,284 | ) | $ | (15,004 | ) | ||||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
1,647,814 | 174,487 | (240,148 | ) | (65,661 | ) | ||||||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
50,884,469 | 5,491,767 | (3,786,199 | ) | 1,705,568 | |||||||||||
| Guggenheim Russell 1000® Equal Weight ETF |
38,205,689 | 3,588,895 | (2,806,459 | ) | 782,436 | |||||||||||
| Guggenheim Russell 2000® Equal Weight ETF |
14,964,272 | 1,521,813 | (2,172,020 | ) | (650,207 | ) | ||||||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
12,238,103 | 729,528 | (1,957,616 | ) | (1,228,088 | ) | ||||||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
15,199,032 | 879,431 | (2,731,844 | ) | (1,852,413 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
41,062,272 | 3,419,208 | (3,173,294 | ) | 245,914 | |||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
42,400,659 | 224,951 | (1,720,401 | ) | (1,495,450 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
36,045,697 | 1,772,075 | (5,835,517 | ) | (4,063,442 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
13,899,737 | 1,501,659 | (981,944 | ) | 519,715 | |||||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
40,078,627 | 479,773 | (2,147,472 | ) | (1,667,699 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
17,704,349 | 727,361 | (1,396,695 | ) | (669,334 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
29,305,474 | 6,838,783 | (2,777,734 | ) | 4,061,049 | |||||||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
115,914,783 | 2,301,292 | (17,748,037 | ) | (15,446,745 | ) | ||||||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
39,119,998 | 3,901,143 | (709,503 | ) | 3,191,640 | |||||||||||
F. Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or, in the absence of a principal market, the most advantageous market for the investment or liability. A three-tier hierarchy is utilized to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Funds’ investments. The inputs are summarized in the three broad levels listed below:
| Level 1 — | quoted prices in active markets for identical securities. |
| Level 2 — | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
| Level 3 — | significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). |
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| 170 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
The following table summarizes the inputs used to value the Funds’ net assets as of October 31, 2012:
| Fund | Level 1 Investments in Securities |
Level 2 Investments in Securities |
Level 3 Investments in Securities |
Total | ||||||||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 3,135,612 | $ | 16,323 | $ | — | $ | 3,151,935 | ||||||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
1,582,153 | 1,380 | — | 1,583,533 | ||||||||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
52,590,037 | 1,392,665 | — | 53,982,702 | ||||||||||||
| Guggenheim Russell 1000® Equal Weight ETF |
38,988,125 | 816,113 | — | 39,804,238 | ||||||||||||
| Guggenheim Russell 2000® Equal Weight ETF |
14,314,065 | 320,558 | — | 14,634,623 | ||||||||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
11,010,015 | 42,870 | — | 11,052,885 | ||||||||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
13,321,113 | 25,506 | — | 13,346,619 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
41,308,186 | 1,796,182 | — | 43,104,368 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
40,905,209 | 889,413 | — | 41,794,622 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
31,982,255 | — | — | 31,982,255 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
14,333,932 | 85,520 | — | 14,419,452 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
38,410,927 | — | — | 38,410,927 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
17,035,015 | 387,918 | — | 17,422,933 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
33,366,523 | 550,406 | — | 33,916,929 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
100,468,038 | 3,540,011 | — | 104,008,049 | ||||||||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
42,311,638 | 1,074,257 | — | 43,385,895 | ||||||||||||
For the year ended October 31, 2012, there were no Level 3 investments or transfers between levels.
G. Dividends and Distributions
Distributions of net investment income and net realized gains, if any, in all the Funds, are declared and paid at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
H. Risk and Uncertainties
The Funds invest in various investments which are exposed to risk, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect amounts reported in the financial statements. The Guggenheim S&P 500 Equal Weight ETFs are non-diversified funds, subjecting them to a greater risk than funds that are diversified.
Throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience the Funds expect the risk of loss to be remote.
I. Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the statement of operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand.
| GUGGENHEIM ETFS ANNUAL REPORT | 171 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
At October 31, 2012, the Funds participated in securities lending as follows:
| Value of Securities Loaned |
Cash Collateral Received |
|||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 15,445 | $ | 16,323 | ||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
1,271 | 1,380 | ||||||
| Guggenheim Russell MidCap Equal Weight ETF |
1,335,014 | 1,392,665 | ||||||
| Guggenheim Russell 1000® Equal Weight ETF |
781,900 | 816,113 | ||||||
| Guggenheim Russell 2000® Equal Weight ETF |
296,662 | 320,558 | ||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
40,479 | 42,870 | ||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
23,264 | 25,506 | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
1,756,343 | 1,796,182 | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
869,610 | 889,413 | ||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
— | — | ||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
83,714 | 85,520 | ||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
— | — | ||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
376,486 | 387,918 | ||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
535,095 | 550,406 | ||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
3,249,683 | 3,540,011 | ||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
1,027,098 | 1,074,257 | ||||||
The following represents a breakdown of the collateral for the joint repurchase agreements at October 31, 2012:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| Merrill Lynch, Pierce, Fenner & Smith, Inc. |
$ | 40,000,000 | $ | 40,000,311 | US Treasury 0.625% 04/15/13 |
$ | 37,278,800 | $ | 40,788,895 | |||||||||
| RBS Securities, Inc. |
68,010,000 | 68,012,041 | Fannie Mae Note 5.375% 07/15/16 |
58,330,000 | 69,372,283 | |||||||||||||
3. Advisory, Administration and Other Transactions with Affiliates
GI determines the composition of the portfolio of securities that must be delivered in exchange for the issuance of Creation Units and periodically adjusts the composition of the portfolio of the Funds to conform to changes in the composition of the relevant index. For these services, GI receives a management fee at the annual rate shown below as a percentage of the average daily net assets of the Funds.
| Advisory Fee |
||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
0.40 | % | ||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
0.40 | % | ||
| Guggenheim Russell MidCap® Equal Weight ETF |
0.40 | % | ||
| Guggenheim Russell 1000® Equal Weight ETF |
0.40 | % | ||
| Guggenheim Russell 2000® Equal Weight ETF |
0.40 | % | ||
| Guggenheim MSCI EAFE Equal Weight ETF |
0.55 | % | ||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
0.70 | % | ||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
0.50 | % | ||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
0.50 | % | ||
| Guggenheim S&P 500® Equal Weight Energy ETF |
0.50 | % | ||
| Guggenheim S&P 500® Equal Weight Financials ETF |
0.50 | % | ||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
0.50 | % | ||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
0.50 | % | ||
| Guggenheim S&P 500® Equal Weight Materials ETF |
0.50 | % | ||
| Guggenheim S&P 500® Equal Weight Technology ETF |
0.50 | % | ||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
0.50 | % | ||
GI pays all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except: interest, taxes, distribution fees or expenses, Trustee Fees (where applicable) and extraordinary expenses.
For the Guggenheim MSCI Emerging Markets Equal Weight ETF, the Advisor has contractually agreed to reduce fees and/or reimburse expenses to the extent necessary to keep the Fund’s net operating expenses (excluding interest, taxes, brokerage commissions, dividends on securities sold short, distribution fees and expenses, and extraordinary expenses (“Excluded Expenses”))
| 172 | GUGGENHEIM ETFS ANNUAL REPORT |
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| NOTES TO FINANCIAL STATEMENTS (continued)
|
plus Acquired Fund Fees and Expense borne indirectly from exceeding 0.70% of the Fund’s average daily net assets until February 28, 2013. This agreement may be terminated only with the approval of the Fund’s Board of Trustees. In any event, this undertaking will continue until at least February 28, 2013.
Under an Administration Agreement, State Street Bank and Trust Company (the “Administrator”) provides various administrative and accounting services for the maintenance and operations of the Funds. Under a Custodian Agreement with the Trust, the Administrator maintains cash, securities and other assets of the Funds in separate accounts for each Fund, keeps all necessary accounts and records, and provides other services. The Administrator is required, upon the order of the Trust, to deliver securities held by the Custodian and to make payments for securities purchased by the Trust for the Funds. Pursuant to a Transfer Agency and Service Agreement with the Trust, the Administrator acts as a transfer agent for the Trust’s authorized and issued shares of beneficial interest, and as dividend disbursing agent of the Trust. GI compensates the Administrator directly for the foregoing services.
The Funds have adopted a Distribution Plan (the “Plan”) that allows the Funds to pay distribution fees to RDL and other firms that provide distribution services (“Service Providers”). If a Service Provider provides distribution services, the Funds will pay distribution fees to RDL at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. RDL will, in turn, pay the Service Provider out of its fees. No such fee is currently charged to the Funds.
4. Capital
At October 31, 2012, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee per transaction to those persons purchasing or redeeming Creation Units. An additional charge of up to three times the standard transaction fee may be imposed for purchases and redemptions effected outside the National Securities Clearing Corporation usual clearing process or for cash. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV of the Fund on the transaction date. Transaction fees are not charged to or paid by the Funds. The minimum transaction fees are:
| Minimum Transaction Fee |
||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 1,250 | ||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
2,000 | |||
| Guggenheim Russell MidCap® Equal Weight ETF |
2,000 | |||
| Guggenheim Russell 1000® Equal Weight ETF |
2,500 | |||
| Guggenheim Russell 2000® Equal Weight ETF |
3,000 | |||
| Guggenheim MSCI EAFE Equal Weight ETF |
12,000 | |||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
6,000 | |||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
750 | |||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
500 | |||
| Guggenheim S&P 500® Equal Weight Energy ETF |
500 | |||
| Guggenheim S&P 500® Equal Weight Financials ETF |
750 | |||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
500 | |||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
500 | |||
| Guggenheim S&P 500® Equal Weight Materials ETF |
500 | |||
| Guggenheim S&P 500® Equal Weight Technology ETF |
750 | |||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
500 | |||
5. Investment Transactions
For the year ended October 31, 2012, the Funds had investment transactions in-kind associated with subscriptions and redemptions as follows:
| Subscriptions | Redemptions | |||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 1,580,410 | $ | 1,562,063 | ||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
— | 4,799,130 | ||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
12,998,441 | 18,646,373 | ||||||
| Guggenheim Russell 1000® Equal Weight ETF |
11,199,153 | 9,256,312 | ||||||
| Guggenheim Russell 2000® Equal Weight ETF |
— | 10,583,713.37 | ||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
— | — | ||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
2,065,052 | 3,937,244 | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
56,024,776 | 41,990,845 | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
74,567,081 | 68,194,655 | ||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
6,197,147 | 8,495,001 | ||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
— | 5,051,813 | ||||||
| GUGGENHEIM ETFS ANNUAL REPORT | 173 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
| Subscriptions | Redemptions | |||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
$ | 475,343,590 | $ | 498,598,293 | ||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
30,124,739 | 30,226,210 | ||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
— | 5,752,353 | ||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
123,713,078 | 129,177,221 | ||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
21,884,117 | 17,183,403 | ||||||
Purchases and sales of investment securities (excluding short-term investments, U.S. government and government agency obligations) for the Funds were as follows:
| Purchases | Sales | |||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
$ | 722,529 | $ | 725,959 | ||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
1,326,873 | 1,285,349 | ||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
17,080,036 | 17,150,507 | ||||||
| Guggenheim Russell 1000® Equal Weight ETF |
9,932,730 | 10,271,383 | ||||||
| Guggenheim Russell 2000® Equal Weight ETF |
8,291,953 | 7,903,690 | ||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
2,797,585 | 2,742,792 | ||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
5,123,775 | 6,071,993 | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
10,887,676 | 11,697,774 | ||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
6,841,542 | 7,382,111 | ||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
9,565,422 | 9,714,082 | ||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
2,478,694 | 2,609,281 | ||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
12,502,717 | 11,495,245 | ||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
4,285,278 | 4,298,180 | ||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
6,985,013 | 7,197,368 | ||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
31,387,800 | 30,190,589 | ||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
10,023,410 | 9,513,660 | ||||||
There were no purchases or sales of U.S. government or government agency obligations for the year ended October 31, 2012.
6. Legal Proceedings
Tribune Company
Rydex ETF Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons (In re Tribune Co.), No. 12-2652 (S.D.N.Y.) (formerly Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership of shares in the Tribune Company (“Tribune”) in 2007 by certain series of the Rydex ETF Trust when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In its complaint, the Unsecured Creditors Committee (the “UCC”) has alleged that, in connection with the LBO, insiders and major shareholders received proceeds for their Tribune stock using financing that the insiders knew would, and ultimately did, leave the Tribune insolvent. The UCC has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO, and is attempting to obtain from these individuals and entities the proceeds paid out in connection with the LBO.
In June 2011, a group of Tribune creditors, not including the UCC, filed multiple actions involving state law constructive fraudulent conveyance claims against former Tribune shareholders (the “SCLFC actions”). Rydex ETF Trust has been named as a defendant in one or more of these suits. These cases have been consolidated together with the FitzSimons action in a multidistrict litigation proceeding captioned In re Tribune Co. Fraudulent Conveyance Litig., No. 11-2296 (S.D.N.Y.) (the “MDL proceeding”).
On September 7, 2012, the Court issued a Master Case Order in the MDL proceeding. This order designated several law firms to serve as members of executive committees of defense counsel in the FitzSimons action and in the SCLFC actions. The order also established a briefing schedule for motions to dismiss in the SLCFC actions; no schedule has yet been established in the Fitzsimons action. The Court also ordered that the plaintiffs’ deadline to serve summonses and complaints is extended through January 15, 2013. Finally, the Court ordered that merits discovery will be stayed until further order of the Court.
None of these lawsuits allege any wrongdoing on the part of Rydex ETF Trust. The following series of Rydex ETF Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Guggenheim S&P 500® Equal Weight Consumer Discretionary Fund (the “Fund”). The value of the proceeds received by the foregoing Fund was $249,481. At this stage of the proceedings, Rydex ETF Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on the Fund’s net asset value.
| 174 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| ||
The Board of Trustees and Shareholders of Rydex ETF Trust
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Guggenheim S&P MidCap 400® Equal Weight ETF, Guggenheim S&P SmallCap 600® Equal Weight ETF, Guggenheim Russell MidCap® Equal Weight ETF, Guggenheim Russell 1000® Equal Weight ETF, Guggenheim Russell 2000® Equal Weight ETF, Guggenheim MSCI EAFE Equal Weight ETF, Guggenheim MSCI Emerging Markets Equal Weight ETF, Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF, Guggenheim S&P 500® Equal Weight Consumer Staples ETF, Guggenheim S&P 500® Equal Weight Energy ETF, Guggenheim S&P 500® Equal Weight Financials ETF, Guggenheim S&P 500® Equal Weight Health Care ETF, Guggenheim S&P 500® Equal Weight Industrials ETF, Guggenheim S&P 500® Equal Weight Materials ETF, Guggenheim S&P 500® Equal Weight Technology ETF, and Guggenheim S&P 500® Equal Weight Utilities ETF (sixteen of the series constituting the Rydex ETF Trust) (the “Funds”) as of October 31, 2012, and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years or periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds at October 31, 2012, the results of their operations for the year then ended, and the changes in their net assets and their financial highlights for each of the years or periods indicated therein, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
December 21, 2012
| GUGGENHEIM ETFS ANNUAL REPORT | 175 |
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|
|
Federal Income Tax Information
For federal income tax purposes, the following information is furnished with respect to the distributions paid by the Funds during the year ended October 31, 2012:
| Dividend Received Deduction |
Long Term Capital Gains Distribution |
Qualified Income Distribution |
||||||||||
| Guggenheim S&P MidCap 400® Equal Weight ETF |
100.00 | % | $ | — | $ | 36,763 | ||||||
| Guggenheim S&P SmallCap 600® Equal Weight ETF |
100.00 | % | — | 57,715 | ||||||||
| Guggenheim Russell MidCap® Equal Weight ETF |
100.00 | % | — | 865,504 | ||||||||
| Guggenheim Russell 1000® Equal Weight ETF |
100.00 | % | — | 679,315 | ||||||||
| Guggenheim Russell 2000® Equal Weight ETF |
100.00 | % | — | 251,163 | ||||||||
| Guggenheim MSCI EAFE Equal Weight ETF |
0.04 | % | — | 320,943 | ||||||||
| Guggenheim MSCI Emerging Markets Equal Weight ETF |
0.52 | % | — | 186,868 | ||||||||
| Guggenheim S&P 500® Equal Weight Consumer Discretionary ETF |
100.00 | % | — | 728,953 | ||||||||
| Guggenheim S&P 500® Equal Weight Consumer Staples ETF |
100.00 | % | — | 916,629 | ||||||||
| Guggenheim S&P 500® Equal Weight Energy ETF |
100.00 | % | — | 418,775 | ||||||||
| Guggenheim S&P 500® Equal Weight Financials ETF |
100.00 | % | — | 247,841 | ||||||||
| Guggenheim S&P 500® Equal Weight Health Care ETF |
100.00 | % | — | 602,544 | ||||||||
| Guggenheim S&P 500® Equal Weight Industrials ETF |
100.00 | % | — | 566,371 | ||||||||
| Guggenheim S&P 500® Equal Weight Materials ETF |
100.00 | % | — | 697,822 | ||||||||
| Guggenheim S&P 500® Equal Weight Technology ETF |
100.00 | % | — | 1,484,854 | ||||||||
| Guggenheim S&P 500® Equal Weight Utilities ETF |
100.00 | % | — | 1,786,759 | ||||||||
Foreign Taxes Credit
Guggenheim MSCI EAFE Equal Weight ETF and Guggenheim MSCI Emerging Markets Equal Weight ETF designates $24,039 and $34,496 as foreign taxes paid respectively. Guggenheim MSCI Emerging Markets Equal Weight ETF designates $309,947 as foreign source income earned for regular Federal income tax purposes.
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 1.800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities, during the most recent 12-month period ended June 30, 2012 is available, without charge, upon request, by calling 1.800.820.0888. The information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1.800.820.0888.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
40 East 52nd Street
16th Floor
New York, NY 10022
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Premium/Discount Information
Information about the differences between the daily market price on secondary markets for shares and the NAV of each Fund can be found at guggenheiminvestments.com.
| 176 | GUGGENHEIM ETFS ANNUAL REPORT |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)
|
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
TRUSTEE AND OFFICER
| Name and |
Length of Service (Year Began) |
Number of | ||||||
| Donald C. Cacciapaglia* |
Rydex Series Funds – 2012 |
146 | ||||||
| (1951) | Rydex Variable Trust – 2012 |
|||||||
| Rydex Dynamic Funds – 2012 |
||||||||
| Rydex ETF Trust – 2012 |
||||||||
Principal Occupations During Past Five Years: Current: Security Investors, LLC: President and CEO from April 2012 to present; Guggenheim Investments: President and Chief Administrative Officer from February 2010 to present; Previous: Channel Capital Group, Inc.: Chairman and CEO from April 2002 to February 2010
Positions held within the Trust: Trustee from 2012 to present; President from 2012 to present
INDEPENDENT TRUSTEES
| Name and |
Length of Service (Year Began) |
Number of | ||||||
| Corey A. Colehour |
Rydex Series Funds – 1993 |
146 | ||||||
| (1945) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
||||||||
Principal Occupations During Past Five Years: Current: Retired; Previous: President and Senior Vice President of Schield Management Company (registered investment adviser) from 2003 to 2006
Positions held within the Trust: Trustee from 1993 to present; Member of the Audit and Governance and Nominating Committees from 1995 to present
| J. Kenneth Dalton |
Rydex Series Funds – 1995 |
146 | ||||||
| (1941) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired
Positions held within the Trust: Trustee from 1995 to present; Member and Chairman of the Audit Committee from 1997 to present; Member of the Governance and Nominating Committees from 1995 to present; and Member of the Risk Oversight Committee from 2010 to present
| John O. Demaret |
Rydex Series Funds – 1997 |
146 | ||||||
| (1940) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired
Positions held within the Trust: Trustee from 1997 to present; Chairman of the Board from 2006 to present; Member of the Audit Committee from 1997 to present; and Member of the Risk Oversight Committee from 2010 to present
| GUGGENHEIM ETFS ANNUAL REPORT | 177 |
Table of Contents
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued) |
INDEPENDENT TRUSTEES – concluded
| Name and |
Length of Service (Year Began) |
Number of | ||||||
| Werner E. Keller |
Rydex Series Funds – 2005 |
146 | ||||||
| (1940) | Rydex Variable Trust – 2005 |
|||||||
| Rydex Dynamic Funds – 2005 |
||||||||
| Rydex ETF Trust – 2005 |
Principal Occupations During Past Five Years: Current: Founder and President of Keller Partners, LLC (investment research firm) from 2005 to present; Previous: Retired from 2001 to 2005
Positions held within the Trust: Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit and Governance and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present
| Thomas F. Lydon, Jr. |
Rydex Series Funds – 2005 |
146 | ||||||
| (1960) | Rydex Variable Trust – 2005 |
|||||||
| Rydex Dynamic Funds – 2005 |
||||||||
| Rydex ETF Trust – 2005 |
Principal Occupations During Past Five Years: Current: President of Global Trends Investments (registered investment adviser) from 1996 to present
Positions held within the Trust: Trustee and Member of the Audit and Governance and Nominating Committees from 2005 to present
| Patrick T. McCarville |
Rydex Series Funds – 1997 |
146 | ||||||
| (1942) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired; Previous: Chief Executive Officer of Par Industries, Inc., d/b/a Par Leasing from 1977 to 2010
Positions held within the Trust: Trustee from 1997 to present; Member of the Audit Committee from 1997 to present; and Chairman of the Governance and Nominating Committees from 1997 to present
| Roger Somers |
Rydex Series Funds – 1993 | 146 | ||||||
| (1944) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Founder and Chief Executive Officer of Arrow Limousine from 1965 to present
Positions held within the Trust: Trustee from 1993 to present; Member of the Audit and Governance and Nominating Committees from 1995 to present
| 178 | GUGGENHEIM ETFS ANNUAL REPORT |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued)
|
EXECUTIVE OFFICERS
| Name, Position and Year of Birth |
Principal Occupations During Past Five Years | |
| Michael P. Byrum* Vice President (1970) |
Current: President, Security Benefit Asset Management Holdings, LLC; Senior Vice President, Security Investors, LLC; President & Chief Investment Officer, Rydex Holdings, LLC; Director & Chairman of the Board, Advisor Research Center, Inc.; and Manager, Rydex Specialized Products, LLC
Previous: Rydex Distributors, LLC (f/k/a Rydex Distributors, Inc.), Vice President (2009); Rydex Fund Services, LLC, Director (2009-2010), Secretary (2002-2010), Executive Vice President (2002-2006); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.), Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010), Secretary (2002-2010); Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010), Secretary (2002-2010); Rydex Capital Partners, LLC, President & Secretary (2003-2007); Rydex Capital Partners II, LLC, (2003-2007); Rydex Holdings, LLC (f/k/a Rydex Holdings, Inc.), Secretary (2005-2008), Executive Vice President (2005-2006); Advisor Research Center, Inc., Secretary (2006-2009), Executive Vice President (2006); and Rydex Specialized Products, LLC, Secretary (2005-2008) | |
| Nikolaos Bonos* Vice President and Treasurer (1963) |
Current: Senior Vice President, Security Investors, LLC; Chief Executive Officer & Manager, Rydex Specialized Products, LLC; Chief Executive Officer & President, Rydex Fund Services, LLC; Vice President, Rydex Holdings, LLC; Treasurer, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; and Vice President, Security Benefit Asset Management Holdings, LLC
Previous: Security Global Investors, LLC, Senior Vice President (2010-2011); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) Senior Vice President (2006-2011); Rydex Fund Services, LLC (f/k/a Rydex Fund Services, Inc.), Director (2009) & Senior Vice President (2003-2006); and Rydex Specialized Products, LLC, Chief Financial Officer (2005-2009) | |
| Elisabeth Miller* Chief Compliance Officer (1968) |
Current: Chief Compliance Officer, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust, Rydex ETF Trust, Security Equity Fund, Security Income Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, SBL Fund, Security Investors, LLC, and Rydex Distributors, LLC
Previous: Senior Manager, Security Investors, LLC and Rydex Distributors, LLC (2004-2009) | |
| Amy J. Lee* Vice President and Assistant Secretary (1961) |
Current: Senior Vice President & Secretary, Security Investors, LLC; Secretary & Chief Compliance Officer, Security Distributors, Inc.; Vice President, Associate General Counsel & Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation; Associate General Counsel, First Security Benefit Life Insurance and Annuity of New York; Vice President & Secretary, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; Vice President & Secretary, Rydex Holdings, LLC Secretary, Advisor Research Center, Inc., Rydex Specialized Products, LLC, Rydex Distributors, LLC and Rydex Fund Services, LLC; and Assistant Secretary, Security Benefit Clinic and Hospital
Previous: Security Global Investors, LLC, Senior Vice President & Secretary (2007-2011); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Senior Vice President & Secretary (2010-2011); and Brecek & Young Advisors, Inc., Director (2004-2008) | |
| Joseph M. Arruda* Assistant Treasurer (1966) |
Current: Assistant Treasurer, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; Vice President, Security Investors, LLC; and Chief Financial Officer & Manager, Rydex Specialized Products, LLC
Previous: Security Global Investors, LLC, Vice President (2010-2011); and Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Vice President (2004-2011) | |
| * | Officers of the Funds are deemed to be “interested persons” of the Trust, within the meaning of Section 2(a)(19) of the 1940 Act, inasmuch as this person is affiliated with Guggenheim Investments. |
| GUGGENHEIM ETFS ANNUAL REPORT | 179 |
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| GUGGENHEIM INVESTMENTS PRIVACY POLICIES |
Rydex Funds, Guggenheim Funds, Rydex Investments, Rydex Distributors, Inc., Security Investors, LLC, Security Distributors, Inc. and Rydex Advisory Services (Collectively “Guggenheim Investments”)
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”— tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
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| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (concluded) |
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| GUGGENHEIM ETFS ANNUAL REPORT | 181 |
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805 King Farm Boulevard, Suite 600
Rockville, MD 20850
guggenheiminvestments.com
800.820.0888
ETF-ANN-1012x1013
Table of Contents
OCTOBER 31, 2012
GUGGENHEIM ETFs
ANNUAL REPORT
| XLG | GUGGENHEIM RUSSELL TOP 50® MEGA CAP ETF | |
| (formerly, RYDEX RUSSELL TOP 50® ETF) | ||
| RPV | GUGGENHEIM S&P 500® PURE VALUE ETF | |
| (formerly, RYDEX S&P 500 PURE VALUE ETF) | ||
| RPG | GUGGENHEIM S&P 500® PURE GROWTH ETF | |
| (formerly, RYDEX S&P 500 PURE GROWTH ETF) | ||
| RFV | GUGGENHEIM S&P MIDCAP 400® PURE VALUE ETF | |
| (formerly, RYDEX S&P MIDCAP 400 PURE VALUE ETF) | ||
| RFG | GUGGENHEIM S&P MIDCAP 400® PURE GROWTH ETF | |
| (formerly, RYDEX S&P MIDCAP 400 PURE GROWTH ETF) | ||
| RZV | GUGGENHEIM S&P SMALLCAP 600® PURE VALUE ETF | |
| (formerly, RYDEX S&P SMALLCAP 600 PURE VALUE ETF) | ||
| RZG | GUGGENHEIM S&P SMALLCAP 600® PURE GROWTH ETF | |
| (formerly, RYDEX S&P SMALLCAP 600 PURE GROWTH ETF) |
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| GUGGENHEIM ETFS ANNUAL REPORT | 1 |
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| October 31, 2012 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for seven of our exchange traded funds (“ETFs”).
The Investment Adviser is part of Guggenheim Investments which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.
This report covers performance of the following ETFs for the annual period ended October 31, 2012, with the name of each Fund followed by its ticker symbol:
| – | Guggenheim Russell Top 50® Mega Cap ETF (XLG) |
| – | Guggenheim S&P 500® Pure Value ETF (RPV) |
| – | Guggenheim S&P 500® Pure Growth ETF (RPG) |
| – | Guggenheim S&P MidCap 400® Pure Value ETF (RFV) |
| – | Guggenheim S&P MidCap 400® Pure Growth ETF (RFG) |
| – | Guggenheim S&P SmallCap 600® Pure Value ETF (RZV) |
| – | Guggenheim S&P SmallCap 600® Pure Growth ETF (RZG) |
Rydex Distributors, LLC, the distributor of the Funds, is committed to providing investors with innovative investment solutions; as of the date of this report we offer 26 ETFs with a wide range of domestic and global themes, as well as equity and fixed-income mutual funds. We have built on the investment management strengths of Guggenheim Investments and worked with a diverse group of index providers to create some of the most distinctive ETFs available.
Rydex Distributors’, LLC is affiliated with Guggenheim Partners and Security Investors.
To learn more about economic and market conditions over the 12 months ended October 31, 2012, we encourage you to read the Economic and Market Overview section of the report, which follows this letter, and the Manager’s Analysis for each ETF.
Sincerely,
Donald C. Cacciapaglia
President
November 30, 2012
Read each fund’s prospectus and summary prospectus (if available) carefully before investing. It contains the fund’s investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at www.guggenheiminvestments.com or call 800.820.0888.
Pure Style ETFs may not be suitable for all investors. The ETFs are subject to the risk that large, medium and small-capitalization stocks may under-perform other segments of the equity market or the equity market as a whole • Value stocks are subject to the risk that the intrinsic value of the stock may never be realized by the market or that the price goes down. Growth stocks typically invest a high portion of their earnings back into their business and may lack the dividend yield that could cushion their decline in a market downturn. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions regarding the growth potential of the issuing company. • The Funds are subject to the risk that unanticipated early closings of securities exchanges and other financial markets may result in the Funds’ inability to buy or sell securities or other
| 2 | GUGGENHEIM ETFS ANNUAL REPORT |
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| (concluded) |
financial instruments on that day. • In certain circumstances, it may be difficult for the Funds to purchase and sell particular investments within a reasonable time at a fair price. • Investments in securities, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the Funds may lose money. • Unlike many investment companies, the Funds are not actively “managed.” This means that based on market and economic conditions, the Funds’ performance could be lower than other types of funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline. • Tracking error risk refers to the risk that the advisor may not be able to cause the Funds’ performance to match or correlate to that of the Funds’ underlying index, either on a daily or aggregate basis. Tracking error risk may cause the Funds’ performance to be less than you expect. • Shares may trade below their net asset value (“NAV”). The NAV of shares will fluctuate with changes in the market value of the Funds’ holdings. In addition, although the Funds’ shares are currently listed on NYSE Arca, Inc. (the “Exchange”), there can be no assurance that an active trading market for shares will develop or be maintained. • Each Fund is considered nondiversified and can invest a greater portion of its assets in securities of individual issuers than a diversified Fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified Fund. •See prospectus for more details
The Russell Top 50® Mega Cap ETF may not be suitable for all investors. • The Fund is subject to the risk that unanticipated early closings of securities exchanges and other financial markets may result in the Fund’s inability to buy or sell securities or other financial instruments on that day. • In certain circumstances, it may be difficult for the Fund to purchase and sell particular investments within a reasonable time at a fair price. • Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the Fund may lose money. • Unlike many investment companies, the Fund is not actively “managed.” This means that, based on market and economic conditions, the Fund’s performance could be lower than other types of mutual funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline.• Tracking error risk refers to the risk that the advisor may not be able to cause the Fund’s performance to match or correlate to that of the Fund’s underlying index, either on a daily or aggregate basis. Tracking error risk may cause the Fund’s performance to be less than you expect. • Shares may trade below their net asset value (“NAV”). The NAV of shares will fluctuate with changes in the market value of the Fund’s holdings. In addition, although the Fund’s shares are currently listed on NYSE Arca, Inc. (the “Exchange”), there can be no assurance that an active trading market for shares will develop or be maintained. • The Fund is subject to the risk that large-capitalization stocks may underperform other segments of the equity market or the equity market as a whole. See prospectus for more details
| GUGGENHEIM ETFS ANNUAL REPORT | 3 |
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Shareholder Expense Example
As a shareholder of the Rydex ETF Trust, you incur transaction costs such as creation and redemption fees or brokerage charges, and ongoing costs including advisory fees, trustee fees and, if applicable, distribution fees. All other Trust expenses are paid by the advisor. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example in the table is based on an investment of $1,000 invested on April 30, 2012 and held for the six months ended October 31, 2012.
Actual Expenses
The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first table under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses attributable to your investment during this period.
Hypothetical Example for Comparison Purposes
The second table below provides information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not a Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| Expense Ratio |
Beginning Account Value 04/30/12 |
Ending Account Value 10/31/12 |
Expenses Paid During Six-Month Period* 04/30/12 to 10/31/12 |
|||||||||||||
| Actual |
||||||||||||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
0.20% | $ | 1,000.00 | $ | 1,029.10 | $ | 1.02 | |||||||||
| Guggenheim S&P 500® Pure Value ETF |
0.35% | 1,000.00 | 1,048.00 | 1.80 | ||||||||||||
| Guggenheim S&P 500® Pure Growth ETF |
0.35% | 1,000.00 | 977.80 | 1.74 | ||||||||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
0.35% | 1,000.00 | 991.80 | 1.75 | ||||||||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
0.35% | 1,000.00 | 982.30 | 1.74 | ||||||||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
0.35% | 1,000.00 | 1,015.80 | 1.77 | ||||||||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
0.35% | 1,000.00 | 993.50 | 1.75 | ||||||||||||
| Hypothetical (assuming a 5% return before expenses) |
| |||||||||||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
0.20% | 1,000.00 | 1,024.13 | 1.02 | ||||||||||||
| Guggenheim S&P 500® Pure Value ETF |
0.35% | 1,000.00 | 1,023.38 | 1.78 | ||||||||||||
| Guggenheim S&P 500® Pure Growth ETF |
0.35% | 1,000.00 | 1,023.38 | 1.78 | ||||||||||||
| 4 | GUGGENHEIM ETFS ANNUAL REPORT |
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| FEES AND EXPENSES (Unaudited) (concluded)
|
| Expense Ratio |
Beginning Account Value 04/30/12 |
Ending Account Value 10/31/12 |
Expenses Paid During Six-Month Period* 04/30/12 to 10/31/12 |
|||||||||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
0.35% | $ | 1,000.00 | $ | 1,023.38 | $ | 1.78 | |||||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
0.35% | 1,000.00 | 1,023.38 | 1.78 | ||||||||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
0.35% | 1,000.00 | 1,023.38 | 1.78 | ||||||||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
0.35% | 1,000.00 | 1,023.38 | 1.78 | ||||||||||||
| * | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect one-half year period). |
| GUGGENHEIM ETFS ANNUAL REPORT | 5 |
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Amidst the negative headlines concerning the potential fiscal cliff in the U.S., further turmoil in Europe and worsening economic data from China, the U.S. economy has shown surprising resilience, with signs of rising consumer sentiment and a recovery in housing. The U.S. housing market appears to have passed its bottom and real estate prices have begun to pick up. Our expectation is that a period of continued low interest rates will likely reinforce the rise in home prices and sales. Rising home prices will increase household net worth, which will translate into greater consumption via the wealth effect, and is supportive of overall economic growth. The recent rise in headline inflation, led by increases in energy and food prices, is likely to be transitory. Inflationary pressures should remain muted in the medium-term given the substantial slack in the economy.
The U.S. economy continues to press forward despite the current headwinds, and we believe the current macroeconomic environment remains constructive for risk assets, especially in the U.S. Stocks in the U.S. appear to be undervalued by most measures, and should benefit from continued capital inflow and the Federal Reserve’s accommodative monetary policy. We continue to see attractive value in credit products on a relative basis, though this positive outlook is limited to spread (or non-government) sectors.
On the international front, uncertainty continues to weigh on European markets. European policymakers appear to be coming closer to a consensus on the need for a fiscal union, albeit at a glacial pace. In China, a recent batch of economic data suggests that the odds of a hard landing have increased materially. We expect an announcement of additional stimulus measures after the government transition next year; although a stimulus would be supportive of economic growth, we expect China’s headline growth to slow from its breakneck pace of the past decade.
Beginning in mid-November 2011, the U.S. stock market moved up fairly consistently, except for a second-quarter pullback caused by lower earnings and GDP. For the 12-month period ended October 31, 2012, the Standard & Poor’s 500 Index (the “S&P 500”)* returned 15.21%.
Most international markets had positive returns, but were not nearly as strong as the U.S. market. The Morgan Stanley Capital International Europe-Australasia-Far East (the “MSCI EAFE”) Index* returned 4.61%. The MSCI EAFE Index is composed of approximately 1,100 companies in 20 developed countries in Europe and the Pacific Basin. The MSCI Emerging Markets Index* returned 2.63%.
The search for yield continued to attract investors to the U.S. bond markets, helping performance, with lower-rated bonds outperforming higher-quality issues. The return of the Barclays U.S. Aggregate Bond Index*, which is a proxy for the U.S. investment grade bond market, returned 5.25%, while return of the Barclays U.S. Corporate High Yield Index* was 13.61%. Reflecting the Federal Reserve’s continuing accommodative monetary policy, interest rates on short-term securities remained at their lowest levels in many years; the return of the Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index* was 0.08%.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
* Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees or expenses.
The Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds.
The Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index tracks 3-month U.S. government securities.
| 6 | GUGGENHEIM ETFS ANNUAL REPORT |
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| ECONOMIC AND MARKET OVERVIEW (continued)
|
The MSCI EAFE Index is a capitalization weighted measure of stock markets in Europe, Australasia and the Far East.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
The S&P 500® Index is a capitalization-weighted index that measures the performance of the large-capitalization sector of the U.S. equity market and includes 500 widely held common stocks chosen for market size, liquidity and industry group representation.
The Russell Top 50® Mega Cap Index measures the performance of the largest companies in the Russell 3000® Index, which measures the performance of the largest 3,000 U.S. companies and represents approximately 98% of the investable U.S. equity market. The Mega Cap Index includes approximately 50 of the largest securities based on a combination of their market cap and current index membership and represents approximately 40% of the total market capitalization of the Russell 3000.
The S&P 500® Pure Value Index is narrow in focus, containing only those stocks from the S&P (Standard & Poor’s) 500® Index (S&P 500), as selected by S&P, that exhibit strong value characteristics, and weights them by style score. It is a complement to the S&P 500® Value Index, which consists of all value companies in the S&P 500 and measures value across several risk factors, including book value to price ratio, earnings to price ratio, and sales to price ratio. The S&P 500 itself measures the performance of the large-capitalization sector of the U.S. equity market and includes 500 widely held common stocks chosen for market size, liquidity and industry group representation.
The S&P 500® Pure Growth Index is narrow in focus, containing only those stocks from the S&P (Standard & Poor’s) 500® Index (S&P 500), as selected by S&P, that exhibit strong growth characteristics, and weights them by style score. It is a complement to the S&P 500® Growth Index, which consists of all growth companies in the S&P 500 and measures growth across several risk factors, including sales growth, earnings change to price and momentum. The S&P 500 itself measures the performance of the large-capitalization sector of the U.S. equity market and includes 500 widely held common stocks chosen for market size, liquidity and industry group representation.
The Standard & Poor’s (S&P) MidCap 400® Index is a capitalization-weighted index that measures the performance of the mid-cap segment of the U.S. equity universe and includes 400 domestic mid-cap stocks chosen for market capitalization, liquidity, and industry group representation.
The S&P MidCap 400® Pure Value Index is narrow in focus, containing only those S&P (Standard & Poor’s) MidCap 400® Index (S&P 400) companies with strong value characteristics as selected by S&P. It is a complement to the S&P MidCap 400® Value Index, which consists of all value companies in the S&P 400 and measures value across several risk factors, including book value to price ratio, earnings to price ratio, and sales to price ratio. The S&P 400 itself measures the performance of the mid-capitalization sector of the U.S. equity market.
The S&P MidCap 400® Pure Growth Index is narrow in focus, containing only those S&P (Standard & Poor’s) MidCap 400® Index (S&P 400) companies with strong growth characteristics as selected by S&P. It is a complement to the S&P MidCap 400® Growth Index, which consists of all growth companies in the S&P 400 and measures growth across several risk factors, including sales growth, earnings change to price and momentum. The S&P 400 itself measures the performance of the mid-capitalization sector of the U.S. equity market.
The Standard & Poor’s (S&P) SmallCap 600® Index is a capitalization-weighted index that measures the performance of the small-cap segment of the U.S. equity universe and includes 600 domestic small-cap stocks chosen for market capitalization, liquidity, and industry group representation.
The S&P SmallCap 600® Pure Value Index is narrow in focus, containing only those S&P (Standard & Poor’s) SmallCap 600® Index (S&P 600) companies with strong value characteristics as selected by S&P. It is a complement to the S&P SmallCap 600® Value Index, which consists of all value companies in the S&P 600 and measures value
| GUGGENHEIM ETFS ANNUAL REPORT | 7 |
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| ECONOMIC AND MARKET OVERVIEW (concluded)
|
across several risk factors, including book value to price ratio, earnings to price ratio, and sales to price ratio. The S&P 600 itself measures the performance of the small-capitalization sector of the U.S. equity market.
The S&P SmallCap 600® Pure Growth Index is narrow in focus, containing only those S&P (Standard & Poor’s) SmallCap 600® Index (S&P 400) companies with strong growth characteristics as selected by S&P. It is a complement to the S&P SmallCap 600® Growth Index, which consists of all growth companies in the S&P 600 and measures growth across several risk factors, including sales growth, earnings change to price and momentum. The S&P 600 itself measures the performance of the mid-capitalization sector of the U.S. equity market.
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| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012 |
GUGGENHEIM RUSSELL TOP 50® MEGA CAP ETF
Guggenheim Russell Top 50® Mega Cap ETF (XLG) finished the one-year period ended October 31, 2012, at 18.11%, compared with the Russell Top 50® Mega Cap Total Return Index benchmark, which returned 18.40% for the same period. During the period, XLG achieved over 99% correlation to its benchmark on a daily basis.
The Information Technology sector was the largest contributor to performance, followed by Health Care. No sector detracted from performance. The Telecommunications Services sector contributed least to performance.
The top contributors to Fund return were Apple, Inc. and Exxon Mobil Corp. The largest detractors were Hewlett-Packard Co. and Oracle Corp.
Slow U.S. economic growth and an uncertain investment climate drove investors to safe harbors during the period. This benefited the largest cap stocks, which tend to be less volatile than other areas of the stock market, buoyed by typically more stable business models, steady growth and potential higher dividend yields.
Mega-cap stocks, as represented by the Russell Top 50 Mega Cap Index, outperformed all other cap sizes for the period, including large-cap stocks, mid-cap stocks and small-cap stocks. The returns of the S&P 500® Index, S&P MidCap 400® Index and SmallCap 600® Index, were 15.21%, 12.11% and 13.60%, respectively.
Cumulative Fund Performance: May 4, 2005 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (05/04/05) |
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| Guggenheim Russell Top 50® Mega Cap ETF |
18.11% | 11.96% | 0.02% | 3.88% | ||||||||||||
| Russell Top 50 Total Return Index |
18.40% | 12.21% | 0.16% | 4.07% | ||||||||||||
| S&P 100 Total Return Index |
17.51% | 12.77% | 0.16% | 4.34% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 9 |
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October 31, 2012 |
GUGGENHEIM RUSSELL TOP 50® MEGA CAP ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 10 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012 |
GUGGENHEIM S&P 500® PURE VALUE ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Pure Value ETF returned 15.54%. Over the year, its benchmark, the S&P 500® Pure Value Total Return Index, posted a return of 16.11%. For the period, RPV achieved a correlation of over 99% to its benchmark of the daily price movement of the S&P 500® Pure Value Total Return Index.
The Financials sector was the largest contributor to performance during the period, followed by Energy. The only sector detracting from performance was Information Technology.
Stocks contributing the most to return were Whirlpool Corp. and American International Group, Inc., while Sears Holdings Corp. and R.R. Donnelley & Sons Co. were the largest detractors.
From a style perspective, value pure-style indices outperformed corresponding growth pure-style indices at each cap size (with the greatest differential in large caps). Within the value pure-style space, large-cap value stocks outperformed both mid-cap value stocks and small-cap value stocks.
The 16.11% return of the S&P 500 Pure Value Total Return Index slightly underperformed the S&P 500® Value Total Return Index, which returned 16.73%, but outperformed the broader S&P 500® Total Return Index, which returned 15.21% for the year.
Cumulative Fund Performance: March 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (03/01/06) |
|||||||||||||
| Guggenheim S&P 500® Pure Value ETF |
15.54% | 16.25% | 1.06% | 3.44% | ||||||||||||
| S&P 500 Pure Value Total Return Index |
16.11% | 16.79% | 1.57% | 3.92% | ||||||||||||
| S&P 500 Value Total Return Index |
16.73% | 12.52% | – | 1.90% | 1.95% | |||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 11 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012 | |
|
GUGGENHEIM S&P 500® PURE VALUE ETF | ||
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 12 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012 |
GUGGENHEIM S&P 500® PURE GROWTH ETF
For the one-year period ended October 31, 2012, Guggenheim S&P 500® Pure Growth ETF returned 7.72%. Over the year, its benchmark, the S&P 500® Pure Growth Total Return Index, produced a return of 8.13%. For the period, RPG achieved over 99% correlation to its benchmark on a daily basis.
Health Care was the sector contributing most to performance, followed by Financials. Industrials and Information Technology detracted most from performance for the year.
Stocks contributing the most to return were Gilead Sciences, Inc. and Apple, Inc., while Apollo Group, Inc.—Class A and Fossil, Inc. were the largest detractors from performance.
From a style perspective, growth pure-style indices underperformed corresponding value pure-style indices at each cap size (with the greatest differential in large caps). Within the growth pure-style space, small-cap growth stocks outperformed both large-cap growth stocks and mid-cap growth stocks.
The 8.13% return of the S&P 500 Pure Growth Total Return Index was lower than both the S&P 500® Growth Total Return Index, which returned 13.94%, and the broader S&P 500® Total Return Index, which returned 15.21% for the year.
Cumulative Fund Performance: March 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (03/01/06) |
|||||||||||||
| Guggenheim S&P 500® Pure Growth ETF |
7.72% | 16.31% | 4.44% | 5.62% | ||||||||||||
| S&P 500 Pure Growth Total Return Index |
8.13% | 16.78% | 4.80% | 6.00% | ||||||||||||
| S&P 500 Growth Total Return Index |
13.94% | 13.93% | 2.53% | 5.00% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 13 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012 | |
|
GUGGENHEIM S&P 500® PURE GROWTH ETF | ||
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 14 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® PURE VALUE ETF
For the one-year period ended October 31, 2012, Guggenheim S&P MidCap 400® Pure Value ETF returned 14.46%. Over the year, its benchmark, the S&P MidCap 400® Pure Value Total Return Index, posted a 15.16% return. RFV achieved over 99% correlation to its benchmark on a daily basis.
The Financials and Industrials sectors were the biggest contributors to performance. Two sectors detracted from performance of the fund: Information Technology and Energy.
Stocks contributing the most to return were First American Financial Corp. and Community Health Systems, Inc., while RadioShack Corp. and MEMC Electronic Materials, Inc. were the largest detractors.
From a style perspective, value pure-style indices outperformed corresponding growth pure-style indices at each cap size (with the greatest differential in large caps). Within the value pure-style space, large-cap value stocks outperformed both mid-cap value stocks and small-cap value stocks.
The 15.16% return of the S&P MidCap 400 Pure Value Total Return Index outperformed both the S&P MidCap 400® Value Total Return Index, which returned 14.57%, and the broader S&P MidCap 400® Total Return Index, which returned 12.11% for the year.
Cumulative Fund Performance: March 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (03/01/06) |
|||||||||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
14.46% | 14.56% | 1.55% | 3.58% | ||||||||||||
| S&P MidCap 400 Pure Value Total Return Index |
15.16% | 15.21% | 1.99% | 4.01% | ||||||||||||
| S&P MidCap 400 Value Total Return Index |
14.57% | 14.77% | 2.01% | 3.85% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 15 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012 | |
|
GUGGENHEIM S&P MIDCAP 400® PURE VALUE ETF | ||
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 16 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® PURE GROWTH ETF
For the one-year period ended October 31, 2012, Guggenheim S&P MidCap 400® Pure Growth ETF returned 7.60%. Over the year, its benchmark, the S&P MidCap 400® Pure Growth Total Return Index, produced a 7.86% total return. RFG achieved over 99% correlation to its benchmark on a daily basis.
Health Care and Industrials were the sectors contributing most to performance. The sectors detracting most from performance were Energy and Consumer Staples.
Stocks contributing the most to return were Regeneron Pharmaceuticals, Inc. and Equinix, Inc., while Green Mountain Coffee Roasters, Inc. and Deckers Outdoor Corp. were the largest detractors.
From a style perspective, growth pure-style indices underperformed corresponding value indices at each cap size (with the greatest differential in large caps). Within the growth pure-style space, small-cap growth stocks outperformed both large-cap growth stocks and mid-cap growth stocks.
The 7.86% return of the S&P MidCap 400 Pure Growth Total Return Index underperformed both the S&P MidCap 400® Growth Total Return Index, which returned 9.80%, and the broader S&P MidCap 400® Total Return Index, which returned 12.11% for the year.
Cumulative Fund Performance: March 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (03/01/06) |
|||||||||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
7.60% | 18.75% | 8.25% | 8.29% | ||||||||||||
| S&P MidCap 400 Pure Growth Total Return Index |
7.86% | 19.08% | 8.61% | 8.66% | ||||||||||||
| S&P MidCap 400 Growth Total Return Index |
9.80% | 16.87% | 4.24% | 5.87% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 17 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012 | |
|
GUGGENHEIM S&P MIDCAP 400® PURE GROWTH ETF | ||
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 18 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® PURE VALUE ETF
For the one-year period ended October 31, 2012, Guggenheim S&P SmallCap 600® Pure Value ETF returned 13.52%. Over the year, its benchmark, the S&P SmallCap 600® Pure Value Total Return Index, produced a 14.01% return. RZV achieved over 99% correlation to its benchmark on a daily basis.
The largest contributors to performance were the Consumer Discretionary sector and the Financials sector. Detracting from performance were the Information Technology and Telecommunication Services sectors.
Marriott Vacations Worldwide Corp. and Stewart Information Services Corp. were the holdings contributing most to return, while School Specialty, Inc. and Lincoln Educational Services Corp. were the largest detractors.
From a style perspective, value pure-style indices outperformed corresponding growth pure-style indices at each cap size (with the greatest differential in large caps). Within the value pure-style space, large-cap value stocks outperformed both mid-cap value stocks and small-cap value stocks.
The 14.01% return of the S&P SmallCap 600 Pure Value Index underperformed the S&P SmallCap 600® Value Index, which returned 15.49%, but outperformed the broader S&P SmallCap 600® Index, which returned 13.60% for the year.
Cumulative Fund Performance: March 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (03/01/06) |
|||||||||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
13.52% | 12.71% | 2.60% | 1.87% | ||||||||||||
| S&P SmallCap 600 Pure Value Total Return Index |
14.01% | 12.42% | 2.73% | 2.02% | ||||||||||||
| S&P SmallCap 600 Value Total Return Index |
15.49% | 15.51% | 1.94% | 3.07% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 19 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012 | |
|
GUGGENHEIM S&P SMALLCAP 600® PURE VALUE ETF | ||
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 20 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® PURE GROWTH ETF
For the one-year period ended October 31, 2012, Guggenheim S&P SmallCap 600® Pure Growth ETF returned 9.44%. Over the year, its benchmark, the S&P SmallCap 600® Pure Growth Total Return Index, produced a 9.87% return. RZG achieved over 99% correlation to its benchmark on a daily basis.
The Information Technology and Health Care sectors were the largest contributors to performance. The Financials sector was the only one to detract from performance for the year.
Cirrus Logic, Inc. and Medidata Solutions, Inc. were the holdings contributing most to return, while BJ’s Restaurants, Inc. and Quality Systems, Inc. were the largest detractors.
From a style perspective, growth pure-style indices underperformed corresponding value pure-style indices at each cap size (with the greatest differential in large caps). Within the growth pure-style space, small-cap growth stocks outperformed both large-cap growth stocks and mid-cap growth stocks.
The 9.87% return of the S&P SmallCap 600 Pure Growth Total Return Index underperformed both the S&P SmallCap 600® Growth Total Return Index, which returned 11.87%, and the broader S&P SmallCap 600® Total Return Index, which returned 13.60% for the year.
Cumulative Fund Performance: March 1, 2006 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (03/01/06) |
|||||||||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
9.44% | 17.03% | 4.19% | 5.21% | ||||||||||||
| S&P SmallCap 600 Pure Growth Total Return Index |
9.87% | 17.55% | 4.40% | 5.47% | ||||||||||||
| S&P SmallCap 600 Growth Total Return Index |
11.87% | 17.82% | 2.98% | 4.84% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| GUGGENHEIM ETFS ANNUAL REPORT | 21 |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited)
|
October 31, 2012 | |
|
GUGGENHEIM S&P SMALLCAP 600® PURE GROWTH ETF | ||
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| 22 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM RUSSELL TOP 50® MEGA CAP ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 23 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM RUSSELL TOP 50® MEGA CAP ETF
| * | Non-Income Producing Security. |
| a | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| b | Values determined based on Level 2 inputs. |
FNMA — Federal National Mortgage Association
| 24 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® PURE VALUE ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 25 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P 500® PURE VALUE ETF
| 26 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P 500® PURE VALUE ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 27 |
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note E). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note H). |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® PURE GROWTH ETF
| 28 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P 500® PURE GROWTH ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 29 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P 500® PURE GROWTH ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note E). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. (Note G) |
| d | Securities lending collateral (Note H). |
| 30 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® PURE VALUE ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 31 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® PURE VALUE ETF
| 32 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® PURE VALUE ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note E). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note H). |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 33 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® PURE GROWTH ETF
| 34 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® PURE GROWTH ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 35 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P MIDCAP 400® PURE GROWTH ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note E). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note H). |
| 36 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® PURE VALUE ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 37 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® PURE VALUE ETF
| 38 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® PURE VALUE ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note E). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note H). |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 39 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® PURE GROWTH ETF
| 40 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® PURE GROWTH ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 41 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P SMALLCAP 600® PURE GROWTH ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Amount represents less than 0.05% of net assets. |
| c | Values determined based on Level 2 inputs (Note E). |
| d | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| e | Securities lending collateral (Note H). |
| 42 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF ASSETS AND LIABILITIES | October 31, 2012 |
| Guggenheim Russell Top 50® Mega Cap ETF |
Guggenheim S&P 500® Pure Value ETF |
Guggenheim S&P 500® Pure Growth ETF |
Guggenheim S&P MidCap 400® Pure Value ETF |
|||||||||||||
| ASSETS: | ||||||||||||||||
| Investments, at value*— including $ — ; $2,197,080; $4,239,210 and $863,724 of securities loaned, respectively |
$ | 623,711,770 | $ | 87,809,485 | $ | 336,557,611 | $ | 35,901,864 | ||||||||
| Cash |
769 | — | — | — | ||||||||||||
| Receivables: |
||||||||||||||||
| Fund shares sold |
— | — | — | 1,749,882 | ||||||||||||
| Dividends and Interest |
863,118 | 53,752 | 124,770 | 13,509 | ||||||||||||
| Total assets |
624,575,657 | 87,863,237 | 336,682,381 | 37,665,255 | ||||||||||||
| LIABILITIES: | ||||||||||||||||
| Payable upon return of securities loaned |
— | 2,254,830 | 4,328,414 | 891,213 | ||||||||||||
| Payable for: |
||||||||||||||||
| Investments purchased |
— | — | — | 1,748,949 | ||||||||||||
| Accrued management fees |
108,064 | 25,519 | 100,483 | 9,950 | ||||||||||||
| Total liabilities |
108,064 | 2,280,349 | 4,428,897 | 2,650,112 | ||||||||||||
| NET ASSETS | $ | 624,467,593 | $ | 85,582,888 | $ | 332,253,484 | $ | 35,015,143 | ||||||||
| NET ASSETS CONSIST OF: | ||||||||||||||||
| Paid-in capital |
$ | 728,619,121 | $ | 92,132,381 | $ | 328,447,599 | $ | 37,769,235 | ||||||||
| Undistributed net investment income |
1,107,227 | 36,334 | 58,605 | 8,655 | ||||||||||||
| Accumulated net realized loss on investments |
(109,275,676 | ) | (9,386,769 | ) | (24,339,934 | ) | (4,289,481 | ) | ||||||||
| Net unrealized appreciation on investments |
4,016,921 | 2,800,942 | 28,087,214 | 1,526,734 | ||||||||||||
| NET ASSETS | $ | 624,467,593 | $ | 85,582,888 | $ | 332,253,484 | $ | 35,015,143 | ||||||||
| Shares outstanding (unlimited shares authorized), no par value |
6,000,785 | 2,652,836 | 6,950,299 | 1,000,499 | ||||||||||||
| Net asset value, offering price and repurchase price per share |
$104.06 | $32.26 | $47.80 | $35.00 | ||||||||||||
| *Total cost of investments |
$ | 619,694,849 | $ | 85,008,543 | $ | 308,470,397 | $ | 34,375,130 | ||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 43 |
Table of Contents
| STATEMENTS OF ASSETS AND LIABILITIES (concluded) | October 31, 2012 |
| Guggenheim S&P MidCap 400® Pure Growth ETF |
Guggenheim S&P SmallCap 600® Pure Value ETF |
Guggenheim S&P SmallCap 600® Pure Growth ETF |
||||||||||
| ASSETS: | ||||||||||||
| Investments, at value*—including $20,245,526; $1,472,597 and $2,054,532 of securities loaned, respectively |
$ | 532,266,122 | $ | 73,625,864 | $ | 75,497,083 | ||||||
| Cash |
419,150 | — | 804,523 | |||||||||
| Receivables: |
||||||||||||
| Investments sold |
— | 214,745 | — | |||||||||
| Dividends and Interest |
84,162 | 21,766 | 9,579 | |||||||||
| Total assets |
532,769,434 | 73,862,375 | 76,311,185 | |||||||||
| LIABILITIES: | ||||||||||||
| Payable upon return of securities loaned |
20,737,131 | 1,559,162 | 2,125,121 | |||||||||
| Payable for: |
||||||||||||
| Investments purchased |
— | 33,723 | 804,522 | |||||||||
| Due to custodian |
— | 182,299 | — | |||||||||
| Accrued management fees |
151,688 | 21,581 | 22,059 | |||||||||
| Total liabilities |
20,888,819 | 1,796,765 | 2,951,702 | |||||||||
| NET ASSETS | $ | 511,880,615 | $ | 72,065,610 | $ | 73,359,483 | ||||||
| NET ASSETS CONSIST OF: | ||||||||||||
| Paid-in capital |
$ | 531,532,242 | $ | 96,978,495 | $ | 74,596,663 | ||||||
| Undistributed net investment income |
362,493 | — | — | |||||||||
| Accumulated net realized loss on investments |
(44,680,364 | ) | (23,961,513 | ) | (3,074,211 | ) | ||||||
| Net unrealized appreciation (depreciation) on investments |
24,666,244 | (951,372 | ) | 1,837,031 | ||||||||
| NET ASSETS | $ | 511,880,615 | $ | 72,065,610 | $ | 73,359,483 | ||||||
| Shares outstanding (unlimited shares authorized), no par value |
5,800,021 | 1,800,040 | 1,350,004 | |||||||||
| Net asset value, offering price and repurchase price per share |
$88.25 | $40.04 | $54.34 | |||||||||
| *Total cost of investments |
$ | 507,599,878 | $ | 74,577,236 | $ | 73,660,052 | ||||||
| 44 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF OPERATIONS |
For the Year Ended October 31, 2012
| Guggenheim Russell Top 50® Mega Cap ETF |
Guggenheim S&P 500® Pure Value ETF |
Guggenheim S&P 500® Pure Growth ETF |
Guggenheim S&P MidCap 400® Pure Value ETF |
|||||||||||||
| INVESTMENT INCOME: | ||||||||||||||||
| Dividends, net of foreign taxes withheld* |
$ | 11,701,125 | $ | 1,629,702 | $ | 3,207,045 | $ | 623,520 | ||||||||
| Income from securities lending |
77 | 4,265 | 9,885 | 1,196 | ||||||||||||
| Interest |
74 | 2 | 14 | 1 | ||||||||||||
| Total investment income |
11,701,276 | 1,633,969 | 3,216,944 | 624,717 | ||||||||||||
| EXPENSES: | ||||||||||||||||
| Management fee |
980,674 | 293,053 | 1,061,772 | 127,855 | ||||||||||||
| Other fees |
162 | — | — | — | ||||||||||||
| Total expenses |
980,836 | 293,053 | 1,061,772 | 127,855 | ||||||||||||
| Net investment income |
10,720,440 | 1,340,916 | 2,155,172 | 496,862 | ||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||||||||||||||
| Net realized gain (loss) on: |
||||||||||||||||
| Investments |
(9,608,526 | ) | (1,250,632 | ) | (22,004,166 | ) | (1,580,044 | ) | ||||||||
| In-kind redemptions |
46,133,674 | 2,775,916 | 4,548,262 | 1,346,075 | ||||||||||||
| Net realized gain (loss) |
36,525,148 | 1,525,284 | (17,455,904 | ) | (233,969 | ) | ||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||
| Investments |
29,002,637 | 8,342,608 | 35,947,461 | 5,102,579 | ||||||||||||
| Net realized and unrealized gain |
65,527,785 | 9,867,892 | 18,491,557 | 4,868,610 | ||||||||||||
| Net increase in net assets resulting from operations |
$ | 76,248,225 | $ | 11,208,808 | $ | 20,646,729 | $ | 5,365,472 | ||||||||
| * Foreign taxes withheld |
$ | 2,068 | $ | — | $ | — | $ | — | ||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 45 |
Table of Contents
| STATEMENTS OF OPERATIONS (concluded) |
For the Year Ended October 31, 2012
| Guggenheim S&P MidCap 400® Pure Growth ETF |
Guggenheim S&P SmallCap 600® Pure Value ETF |
Guggenheim S&P SmallCap 600® Pure Growth ETF |
||||||||||
| INVESTMENT INCOME: | ||||||||||||
| Dividends |
$ | 3,144,884 | $ | 687,154 | $ | 494,966 | ||||||
| Income from securities lending |
78,018 | 3,411 | 4,022 | |||||||||
| Total investment income |
3,222,902 | 690,565 | 498,988 | |||||||||
| EXPENSES: | ||||||||||||
| Management fee |
1,946,096 | 242,686 | 239,551 | |||||||||
| Other fees |
— | — | 66 | |||||||||
| Total expenses |
1,946,096 | 242,686 | 239,617 | |||||||||
| Net investment income |
1,276,806 | 447,879 | 259,371 | |||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||||||||||
| Net realized gain (loss) on: |
||||||||||||
| Investments |
(45,895,340 | ) | (3,438,032 | ) | (2,201,565 | ) | ||||||
| In-kind redemptions |
27,326,209 | 270,929 | 1,662,752 | |||||||||
| Net realized loss |
(18,569,131 | ) | (3,167,103 | ) | (538,813 | ) | ||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||
| Investments |
48,063,368 | 9,518,258 | 5,933,299 | |||||||||
| Net realized and unrealized gain |
29,494,237 | 6,351,155 | 5,394,486 | |||||||||
| Net increase in net assets resulting from operations |
$ | 30,771,043 | $ | 6,799,034 | $ | 5,653,857 | ||||||
| 46 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS |
| Guggenheim Russell Top 50® Mega Cap ETF |
Guggenheim S&P 500® Pure Value ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 10,720,440 | $ | 7,875,126 | $ | 1,340,916 | $ | 1,288,269 | ||||||||
| Net realized gain (loss) on investments |
36,525,148 | (1,000,821 | ) | 1,525,284 | 1,122,980 | |||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
29,002,637 | 19,318,113 | 8,342,608 | (2,290,115 | ) | |||||||||||
| Net increase in net assets resulting from operations |
76,248,225 | 26,192,418 | 11,208,808 | 121,134 | ||||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(10,403,624 | ) | (7,603,764 | ) | (1,370,034 | ) | (1,211,677 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
376,572,367 | 150,183,009 | 17,479,492 | 60,757,533 | ||||||||||||
| Value of shares redeemed |
(272,358,663 | ) | (38,031,580 | ) | (21,285,657 | ) | (35,992,276 | ) | ||||||||
| Net increase (decrease) in net assets resulting from share transactions |
104,213,704 | 112,151,429 | (3,806,165 | ) | 24,765,257 | |||||||||||
| Net increase in net assets |
170,058,305 | 130,740,083 | 6,032,609 | 23,674,714 | ||||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of year |
454,409,288 | 323,669,205 | 79,550,279 | 55,875,565 | ||||||||||||
| End of year |
$ | 624,467,593 | $ | 454,409,288 | $ | 85,582,888 | $ | 79,550,279 | ||||||||
| Undistributed net investment income at end of year |
$ | 1,107,227 | $ | 790,411 | $ | 36,334 | $ | 81,520 | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
3,800,000 | 1,700,000 | 550,000 | 2,000,000 | ||||||||||||
| Shares redeemed |
(2,850,000 | ) | (450,000 | ) | (700,000 | ) | (1,350,000 | ) | ||||||||
| Net increase (decrease) in shares |
950,000 | 1,250,000 | (150,000 | ) | 650,000 | |||||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 47 |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim S&P 500® Pure Growth ETF |
Guggenheim S&P MidCap 400® Pure Value ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 2,155,172 | $ | 1,020,216 | $ | 496,862 | $ | 588,491 | ||||||||
| Net realized gain (loss) on investments |
(17,455,904 | ) | 23,480,072 | (233,969 | ) | 1,240,256 | ||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
35,947,461 | (23,088,187 | ) | 5,102,579 | (2,426,037 | ) | ||||||||||
| Net increase (decrease) in net assets resulting from operations |
20,646,729 | 1,412,101 | 5,365,472 | (597,290 | ) | |||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(2,094,006 | ) | (996,112 | ) | (516,543 | ) | (566,319 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
81,232,040 | 259,891,376 | 4,880,240 | 10,618,563 | ||||||||||||
| Value of shares redeemed |
(33,420,035 | ) | (141,889,014 | ) | (10,384,990 | ) | (16,872,735 | ) | ||||||||
| Net increase (decrease) in net assets resulting from share transactions |
47,812,005 | 118,002,362 | (5,504,750 | ) | (6,254,172 | ) | ||||||||||
| Net increase (decrease) in net assets |
66,364,728 | 118,418,351 | (655,821 | ) | (7,417,781 | ) | ||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of year |
265,888,756 | 147,470,405 | 35,670,964 | 43,088,745 | ||||||||||||
| End of year |
$ | 332,253,484 | $ | 265,888,756 | $ | 35,015,143 | $ | 35,670,964 | ||||||||
| Undistributed net investment income at end of year |
$ | 58,605 | $ | 15,198 | $ | 8,655 | $ | 28,336 | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
1,750,000 | 5,700,000 | 150,000 | 300,000 | ||||||||||||
| Shares redeemed |
(750,000 | ) | (3,400,000 | ) | (300,000 | ) | (550,000 | ) | ||||||||
| Net increase (decrease) in shares |
1,000,000 | (2,300,000 | ) | (150,000 | ) | (250,000 | ) | |||||||||
| 48 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (continued) |
| Guggenheim S&P MidCap 400® Pure Growth ETF |
Guggenheim S&P SmallCap 600® Pure Value ETF |
|||||||||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income |
$ | 1,276,806 | $ | 494,420 | $ | 447,879 | $ | 444,600 | ||||||||
| Net realized gain (loss) on investments |
(18,569,131 | ) | 69,090,697 | (3,167,103 | ) | 3,386,071 | ||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
48,063,368 | (51,357,329 | ) | 9,518,258 | 849,778 | |||||||||||
| Net increase in net assets resulting from operations |
30,771,043 | 18,227,788 | 6,799,034 | 4,680,449 | ||||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(980,107 | ) | (494,945 | ) | (452,652 | ) | (444,287 | ) | ||||||||
| Return of Capital |
— | — | (35,405 | ) | — | |||||||||||
| Total distributions to shareholders |
(980,107 | ) | (494,945 | ) | (488,057 | ) | (444,287 | ) | ||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
83,742,986 | 689,925,224 | 12,561,039 | 14,049,940 | ||||||||||||
| Value of shares redeemed |
(254,899,279 | ) | (346,841,356 | ) | (8,936,014 | ) | (43,539,405 | ) | ||||||||
| Net increase (decrease) in net assets resulting from share transactions |
(171,156,293 | ) | 343,083,868 | 3,625,025 | (29,489,465 | ) | ||||||||||
| Net increase (decrease) in net assets |
(141,365,357 | ) | 360,816,711 | 9,936,002 | (25,253,303 | ) | ||||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of year |
653,245,972 | 292,429,261 | 62,129,608 | 87,382,911 | ||||||||||||
| End of year |
$ | 511,880,615 | $ | 653,245,972 | $ | 72,065,610 | $ | 62,129,608 | ||||||||
| Undistributed net investment income at end of year |
$ | 362,493 | $ | — | $ | — | $ | — | ||||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
1,000,000 | 8,250,000 | 300,000 | 350,000 | ||||||||||||
| Shares redeemed |
(3,150,000 | ) | (4,450,000 | ) | (250,000 | ) | (1,150,000 | ) | ||||||||
| Net increase (decrease) in shares |
(2,150,000 | ) | 3,800,000 | 50,000 | (800,000 | ) | ||||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 49 |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS (concluded) |
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
| Net investment income |
$ | 259,371 | $ | 12,081 | ||||
| Net realized loss on investments |
(538,813 | ) | (1,667,405 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments |
5,933,299 | (6,355,046 | ) | |||||
| Net increase (decrease) in net assets resulting from operations |
5,653,857 | (8,010,370 | ) | |||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||
| Net investment income |
(263,737 | ) | (46,996 | ) | ||||
| SHAREHOLDER TRANSACTIONS: | ||||||||
| Proceeds from shares purchased |
46,407,484 | 103,804,934 | ||||||
| Value of shares redeemed |
(13,310,670 | ) | (78,204,381 | ) | ||||
| Net increase in net assets resulting from share transactions |
33,096,814 | 25,600,553 | ||||||
| Net increase in net assets |
38,486,934 | 17,543,187 | ||||||
| NET ASSETS | ||||||||
| Beginning of year |
34,872,549 | 17,329,362 | ||||||
| End of year |
$ | 73,359,483 | $ | 34,872,549 | ||||
| Undistributed net investment income at end of year |
$ | — | $ | — | ||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||
| Shares sold |
900,000 | 1,950,000 | ||||||
| Shares redeemed |
(250,000 | ) | (1,650,000 | ) | ||||
| Net increase in shares |
650,000 | 300,000 | ||||||
| 50 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM RUSSELL TOP 50® MEGA CAP ETF
| FINANCIAL HIGHLIGHTS |
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$89.97 | $85.16 | $78.90 | $76.29 | $116.47 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
2.17 | 1.87 | 1.72 | 1.95 | 2.34 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
14.02 | 4.74 | 6.26 | 2.61 | (40.20 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
16.19 | 6.61 | 7.98 | 4.56 | (37.86 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(2.10 | ) | (1.80 | ) | (1.72 | ) | (1.95 | ) | (2.32 | ) | ||||||||||
| Net asset value, end of period |
$104.06 | $89.97 | $85.16 | $78.90 | $76.29 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
18.11% | 7.80% | 10.22% | 6.35% | (32.92% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$624,468 | $454,409 | $323,669 | $315,662 | $434,878 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
2.19% | 2.08% | 2.09% | 2.79% | 2.37% | |||||||||||||||
| Total expenses |
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | |||||||||||||||
| Portfolio turnover rate† |
7% | 6% | 9% | 12% | 10% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 51 |
Table of Contents
FINANCIAL HIGHLIGHTS (continued)
GUGGENHEIM S&P 500® PURE VALUE ETF
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$28.38 | $25.95 | $21.46 | $17.98 | $34.46 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.48 | 0.42 | 0.35 | 0.49 | 1.00 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
3.89 | 2.40 | 4.49 | 3.53 | (16.44 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
4.37 | 2.82 | 4.84 | 4.02 | (15.44 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.49 | ) | (0.39 | ) | (0.35 | ) | (0.54 | ) | (1.04 | ) | ||||||||||
| Net asset value, end of period |
$32.26 | $28.38 | $25.95 | $21.46 | $17.98 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
15.54% | 10.84% | 22.67% | 23.73% | (45.76% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$85,583 | $79,550 | $55,876 | $30,101 | $17,994 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
1.60% | 1.44% | 1.38% | 2.92% | 3.63% | |||||||||||||||
| Total expenses |
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | |||||||||||||||
| Portfolio turnover rate† |
37% | 23% | 27% | 45% | 53% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 52 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM S&P 500® PURE GROWTH ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$44.68 | $40.40 | $30.85 | $24.40 | $39.59 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.33 | 0.18 | 0.13 | 0.18 | 0.20 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
3.11 | 4.28 | 9.57 | 6.46 | (15.19 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
3.44 | 4.46 | 9.70 | 6.64 | (14.99 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.32 | ) | (0.18 | ) | (0.15 | ) | (0.19 | ) | (0.20 | ) | ||||||||||
| Net asset value, end of period |
$47.80 | $44.68 | $40.40 | $30.85 | $24.40 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
7.72% | 11.06% | 31.51% | 27.41% | (38.00% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$332,253 | $265,889 | $147,470 | $38,568 | $24,398 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
0.71% | 0.41% | 0.37% | 0.69% | 0.57% | |||||||||||||||
| Total expenses |
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | |||||||||||||||
| Portfolio turnover rate† |
35% | 21% | 31% | 27% | 30% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 53 |
Table of Contents
FINANCIAL HIGHLIGHTS (continued)
GUGGENHEIM S&P MIDCAP 400® PURE VALUE ETF
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$31.00 | $30.77 | $24.20 | $20.24 | $35.76 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.46 | 0.41 | 0.36 | 0.59 | 0.87 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
4.01 | 0.22 | 6.57 | 3.92 | (15.54 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
4.47 | 0.63 | 6.93 | 4.51 | (14.67 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.47 | ) | (0.40 | ) | (0.36 | ) | (0.55 | ) | (0.84 | ) | ||||||||||
| Net asset value, end of period |
$35.00 | $31.00 | $30.77 | $24.20 | $20.24 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
14.46% | 2.03% | 28.75% | 23.32% | (41.75% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$35,015 | $35,671 | $43,089 | $22,997 | $10,126 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
1.36% | 1.22% | 1.20% | 2.90% | 2.87% | |||||||||||||||
| Total expenses |
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | |||||||||||||||
| Portfolio turnover rate† |
47% | 49% | 35% | 57% | 64% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 54 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM S&P MIDCAP 400® PURE GROWTH ETF
FINANCIAL HIGHLIGHTS (continued)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$82.17 | $70.46 | $52.89 | $39.10 | $59.75 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.20 | 0.07 | 0.02 | 0.09 | 0.02 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
6.04 | 11.72 | 17.59 | 13.79 | (20.63 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
6.24 | 11.79 | 17.61 | 13.88 | (20.61 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.16 | ) | (0.08 | ) | (0.04 | ) | (0.09 | ) | (0.04 | ) | ||||||||||
| Net asset value, end of period |
$88.25 | $82.17 | $70.46 | $52.89 | $39.10 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
7.60% | 16.73% | 33.32% | 35.59% | (34.52% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$511,881 | $653,246 | $292,429 | $108,432 | $17,596 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
0.23% | 0.09% | 0.03% | 0.19% | 0.04% | |||||||||||||||
| Total expenses |
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | |||||||||||||||
| Portfolio turnover rate† |
56% | 45% | 51% | 29% | 52% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 55 |
Table of Contents
FINANCIAL HIGHLIGHTS (continued)
GUGGENHEIM S&P SMALLCAP 600® PURE VALUE ETF
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$35.50 | $34.27 | $28.50 | $23.21 | $37.38 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.25 | 0.20 | 0.20 | 0.32 | 0.79 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
4.56 | 1.23 | 5.78 | 5.29 | (14.26 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
4.81 | 1.43 | 5.98 | 5.61 | (13.47 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.25 | ) | (0.20 | ) | (0.21 | ) | (0.32 | ) | (0.70 | ) | ||||||||||
| Return of capital |
(0.02 | ) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distribution to shareholders |
(0.27 | ) | (0.20 | ) | (0.21 | ) | (0.32 | ) | (0.70 | ) | ||||||||||
| Net asset value, end of period |
$40.04 | $35.50 | $34.27 | $28.50 | $23.21 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
13.52% | 4.16% | 21.07% | 25.00% | (36.48% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$72,066 | $62,130 | $87,383 | $108,284 | $25,527 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
0.65% | 0.53% | 0.60% | 1.18% | 2.57% | |||||||||||||||
| Total expenses |
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | |||||||||||||||
| Portfolio turnover rate† |
48% | 76% | 62% | 43% | 50% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 56 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM S&P SMALLCAP 600® PURE GROWTH ETF
FINANCIAL HIGHLIGHTS (concluded)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of period |
$49.82 | $43.32 | $34.13 | $29.03 | $44.92 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.20 | 0.02 | 0.06 | 0.06 | 0.17 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
4.50 | 6.57 | 9.18 | 5.13 | (15.87 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
4.70 | 6.59 | 9.24 | 5.19 | (15.70 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.18 | ) | (0.09 | ) | (0.05 | ) | (0.09 | ) | (0.19 | ) | ||||||||||
| Net asset value, end of period |
$54.34 | $49.82 | $43.32 | $34.13 | $29.03 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
9.44% | 15.22% | 27.11% | 17.93% | (35.05% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$73,359 | $34,873 | $17,329 | $11,945 | $7,257 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
0.38% | 0.03% | 0.14% | 0.21% | 0.44% | |||||||||||||||
| Total expenses |
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | |||||||||||||||
| Portfolio turnover rate† |
44% | 33% | 55% | 46% | 63% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 57 |
Table of Contents
|
|
| 58 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
C. Repurchase Agreements
The Funds may enter into repurchase agreements with financial institutions. In a repurchase agreement, a Fund buys a security and the seller simultaneously agrees to repurchase the security on a specified future date at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the Fund’s money is invested in the security. Because the security constitutes collateral for the repurchase obligation, a repurchase agreement can be considered a collateralized loan. The Funds follow certain procedures designed to minimize the risks inherent in such agreements. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose condition will be continually monitored by GI. In addition, the value of the collateral underlying the repurchase agreement will always be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Funds will seek to liquidate such collateral. However, the exercising of the Funds right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Funds could suffer a loss. It is the current policy of the Funds not to invest in repurchase agreements that do not mature within seven days if any such investment, together with any other illiquid assets held by the Funds, amounts to more than 15% of a Funds net assets. The investments of the Funds in repurchase agreements, at times, may be substantial when, in the view of GI, liquidity or other considerations so warrant.
D. Federal Income Taxes
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for Federal or state income tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on Federal income tax returns for all open tax years (fiscal years 2009 — 2012), and has concluded that no provision for income tax was required in the Funds’ financial statements.
Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments for in-kind redemptions, distributions in excess of current year earnings, excise taxes paid, income reclassifications from REITs and losses deferred due to wash sales.
The RIC Modernization Act of 2010 was signed into law on December 22, 2010 and sought to simplify some of the tax provisions applicable to regulated investment companies and the tax reporting to their shareholders, and to improve the tax efficiency of certain fund structures. The changes were generally effective for taxable years beginning after the date of enactment.
One of the more prominent changes addresses capital loss carryforwards. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. As a result of this ordering rule, pre-enactment capital loss carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
In order to present paid-in-capital, undistributed net investment income (loss) and accumulated net realized gain (loss) on investments on the statement of assets and liabilities that more closely represent their tax character, certain adjustments have been made to these accounts. These adjustments have no effect on net assets or NAV. The most significant of these adjustments are for net capital gains resulting from in-kind redemptions, because they are non-taxable to the Funds, and therefore are not distributed to existing Fund shareholders, or net capital losses resulting from in-kind redemptions which are classified to paid-in-capital. For the year ended October 31, 2012, the adjustments for the Funds were as follows:
| Paid-In Capital |
Undistributed Net Investment Income (Loss) |
Accumulated Net Realized Gain (Loss) |
||||||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 45,494,431 | $ | — | $ | (45,494,431 | ) | |||||
| Guggenheim S&P 500® Pure Value ETF |
2,745,649 | (16,608 | ) | (2,729,581 | ) | |||||||
| Guggenheim S&P 500® Pure Growth ETF |
4,294,595 | (17,759 | ) | (4,276,836 | ) | |||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
1,218,933 | — | (1,218,933 | ) | ||||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
23,857,960 | 65,794 | (23,923,754 | ) | ||||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
(289,297 | ) | 86,471 | 202,826 | ||||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
1,599,256 | 4,366 | (1,603,622 | ) | ||||||||
| GUGGENHEIM ETFS ANNUAL REPORT | 59 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended October 31, 2012, there were no capital loss carryforward amounts used to offset current year net realized capital gains.
The tax character of distributable earnings (accumulated losses) at October 31, 2012 was as follows:
| Undistributed Ordinary Income |
Undistributed Long Term Capital Gain |
Capital Loss Carryfoward |
Unrealized Appreciation (Depreciation) |
|||||||||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
1,107,227 | $ | — | $ | (108,613,866 | ) | $ | 3,355,111 | ||||||||
| Guggenheim S&P 500® Pure Value ETF |
36,334 | — | (9,203,973 | ) | 2,613,737 | |||||||||||
| Guggenheim S&P 500® Pure Growth ETF |
58,605 | — | (23,560,646 | ) | 27,294,141 | |||||||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
8,655 | — | (4,173,286 | ) | 1,410,539 | |||||||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
362,493 | — | (42,643,817 | ) | 22,629,698 | |||||||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
— | — | (23,541,460 | ) | (1,371,425 | ) | ||||||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
— | — | (2,887,108 | ) | 1,649,928 | |||||||||||
A summary of the expiration of the capital loss carryforward is as follows:
| Unlimited | ||||||||||||||||||||||||||||||||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | Short Term |
Long Term |
||||||||||||||||||||||||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 88,468 | $ | 675,404 | $ | 618,363 | $ | 32,651,414 | $ | 51,313,952 | $ | 10,584,384 | $ | 3,619,667 | $ | 1,098,452 | $ | 7,963,762 | ||||||||||||||||||
| Guggenheim S&P 500® Pure Value ETF |
— | — | — | — | 8,047,369 | — | — | 837,674 | 318,930 | |||||||||||||||||||||||||||
| Guggenheim S&P 500® Pure Growth ETF |
— | — | — | — | 2,292,413 | 138,571 | — | 18,658,510 | 2,471,152 | |||||||||||||||||||||||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
— | — | — | — | 2,758,055 | — | — | 619,140 | 796,091 | |||||||||||||||||||||||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
— | — | — | — | — | — | — | 40,055,248 | 2,588,569 | |||||||||||||||||||||||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
— | — | — | 2,551,142 | 9,954,238 | 8,325,244 | — | — | 2,710,836 | |||||||||||||||||||||||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
— | — | — | — | 799,865 | 46,873 | — | 1,477,788 | 562,582 | |||||||||||||||||||||||||||
The tax character of distributions paid during the year ended October 31, 2012 was as follows:
| Ordinary Income |
Return of Capital |
|||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 10,403,624 | $ | — | ||||
| Guggenheim S&P 500® Pure Value ETF |
1,370,034 | — | ||||||
| Guggenheim S&P 500® Pure Growth ETF |
2,094,006 | — | ||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
516,543 | — | ||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
980,107 | — | ||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
452,652 | 35,405 | ||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
263,737 | — | ||||||
The tax character of distributions paid during the year ended October 31, 2011 was as follows:
| Ordinary Income |
||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 7,603,764 | ||
| Guggenheim S&P 500® Pure Value ETF |
1,211,677 | |||
| Guggenheim S&P 500® Pure Growth ETF |
996,112 | |||
| Guggenheim S&P MidCap 400® Pure Value ETF |
566,319 | |||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
494,945 | |||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
444,287 | |||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
46,996 | |||
At October 31, 2012, the identified cost of investments in securities owned by each Fund for Federal income tax purposes and the gross unrealized appreciation and depreciation were as follows:
| Identified Cost |
Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized (Depreciation) |
|||||||||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 620,356,659 | $ | 44,373,638 | $ | 41,018,527 | $ | 3,355,111 | ||||||||
| Guggenheim S&P 500® Pure Value ETF |
82,936,509 | 8,997,096 | 6,378,950 | 2,618,146 | ||||||||||||
| Guggenheim S&P 500® Pure Growth ETF |
304,935,056 | 44,046,599 | 16,752,458 | 27,294,141 | ||||||||||||
| Guggenheim S&P Midcap 400® Pure Value ETF |
34,491,325 | 3,613,081 | 2,202,542 | 1,410,539 | ||||||||||||
| Guggenheim S&P Midcap 400® Pure Growth ETF |
488,899,293 | 78,505,424 | 55,875,726 | 22,629,698 | ||||||||||||
| Guggenheim S&P Smallcap 600® Pure Value ETF |
74,997,289 | 8,940,558 | 10,311,983 | (1,371,425 | ) | |||||||||||
| Guggenheim S&P Smallcap 600® Pure Growth ETF |
71,722,034 | 8,290,749 | 6,640,821 | 1,649,928 | ||||||||||||
| 60 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
E. Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or, in the absence of a principal market, the most advantageous market for the investment or liability. A three-tier hierarchy is utilized to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Funds’ investments. The inputs are summarized in the three broad levels listed below:
| Level 1 — | quoted prices in active markets for identical securities. |
| Level 2 — | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
| Level 3 — | significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). |
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following table summarizes the inputs used to value the Funds’ net assets as of October 31, 2012:
| Fund | Level 1 Investments in Securities |
Level 2 Investments in Securities |
Level 3 Investments in Securities |
Total | ||||||||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 622,396,770 | $ | 1,315,000 | $ | — | $ | 623,711,770 | ||||||||
| Guggenheim S&P 500® Pure Value ETF |
85,554,655 | 2,254,830 | — | 87,809,485 | ||||||||||||
| Guggenheim S&P 500® Pure Growth ETF |
332,229,197 | 4,328,414 | — | 336,557,611 | ||||||||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
35,010,651 | 891,213 | — | 35,901,864 | ||||||||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
511,528,991 | 20,737,131 | — | 532,266,122 | ||||||||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
72,066,702 | 1,559,162 | — | 73,625,864 | ||||||||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
73,371,962 | 2,125,121 | — | 75,497,083 | ||||||||||||
For the year ended October 31, 2012, there were no Level 3 Investments or transfers between levels.
F. Dividends and Distributions
Distributions of net investment income and net realized gains, if any, in all the Funds, are declared and paid at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
G. Risk and Uncertainties
The Funds invest in various investments which are exposed to risk, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect amounts reported in the financial statements.
The Guggenheim Russell Top 50® Mega Cap ETF is a non-diversified fund, subjecting it to a greater risk than a fund that is diversified. Throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience the Funds expect the risk of loss to be remote.
H. Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the statement of operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to
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| NOTES TO FINANCIAL STATEMENTS (continued)
|
the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand.
At October 31, 2012, the Funds participated in securities lending as follows:
| Value of Securities Loaned |
Cash Collateral Received |
|||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | — | $ | — | ||||
| Guggenheim S&P 500® Pure Value ETF |
2,197,080 | 2,254,830 | ||||||
| Guggenheim S&P 500® Pure Growth ETF |
4,239,210 | 4,328,414 | ||||||
| Guggenheim S&P Midcap 400® Pure Value ETF |
863,724 | 891,213 | ||||||
| Guggenheim S&P Midcap 400® Pure Growth ETF |
20,245,526 | 20,737,131 | ||||||
| Guggenheim S&P Smallcap 600® Pure Value ETF |
1,472,597 | 1,559,162 | ||||||
| Guggenheim S&P Smallcap 600® Pure Growth ETF |
2,054,532 | 2,125,121 | ||||||
The following represents a breakdown of the collateral for the joint repurchase agreements at October 31, 2012:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| Merrill Lynch, Pierce, Fenner & Smith, Inc. |
$ |
40,000,000.00 |
|
$ |
40,000,311 |
|
US Treasury |
$ |
37,278,800 |
|
$ |
40,788,895 |
| |||||
| RBS Securities, Inc. |
$ |
68,010,000.00 |
|
$ |
68,010,529 |
|
Fannie Mae Note 5.375% Due 07/15/16 |
$ |
58,330,000 |
|
$ |
69,372,283 |
| |||||
3. Advisory, Administration and Other Transactions with Affiliates
GI determines the composition of the portfolio of securities that must be delivered in exchange for the issuance of Creation Units and periodically adjusts the composition of the portfolio of the Funds to conform to changes in the composition of the relevant index. For these services, GI receives a management fee at the annual rate shown below as a percentage of the average daily net assets of the Funds.
| Advisory Fee |
||||
| Guggenheim Russell Top 50® Mega Cap ETF |
0.20 | % | ||
| Guggenheim S&P 500® Pure Value ETF |
0.35 | % | ||
| Guggenheim S&P 500® Pure Growth ETF |
0.35 | % | ||
| Guggenheim S&P MidCap 400® Pure Value ETF |
0.35 | % | ||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
0.35 | % | ||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
0.35 | % | ||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
0.35 | % | ||
GI pays all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except: interest, taxes, distribution fees or expenses and extraordinary expenses.
Under an Administration Agreement, State Street Bank and Trust Company (the “Administrator”) provides various administrative and accounting services for the maintenance and operations of the Funds. Under a Custodian Agreement with the Trust, the Administrator maintains cash, securities and other assets of the Funds in separate accounts for each Fund, keeps all necessary accounts and records, and provides other services. The Administrator is required, upon the order of the Trust, to deliver securities held by the Custodian and to make payments for securities purchased by the Trust for the Funds. Pursuant to a Transfer Agency and Service Agreement with the Trust, the Administrator acts as a transfer agent for the Trust’s authorized and issued shares of beneficial interest, and as dividend disbursing agent of the Trust. GI compensates the Administrator directly for the foregoing services.
The Funds have adopted a Distribution Plan (the “Plan”) that allows the Funds to pay distribution fees to RDL and other firms that provide distribution services (“Service Providers”). If a Service Provider provides distribution services, the Funds will pay distribution fees to RDL at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. RDL will, in turn, pay the Service Provider out of its fees. No such fee is currently charged to the Funds.
4. Capital
At October 31, 2012, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee per transaction to those persons purchasing or redeeming Creation Units. An additional charge of up to three times
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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 NAV of the Fund on the transaction date. Transaction fees are not charged to or paid by the Funds. The minimum transaction fees are:
| Minimum Transaction Fee |
||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 500 | ||
| Guggenheim S&P 500® Pure Value ETF |
1,000 | |||
| Guggenheim S&P 500® Pure Growth ETF |
1,000 | |||
| Guggenheim S&P MidCap 400® Pure Value ETF |
750 | |||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
750 | |||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
1,000 | |||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
1,000 | |||
5. Investment Transactions
For the year ended October 31, 2012, the Funds had investment transactions in-kind associated with subscriptions and redemptions as follows:
| Subscriptions | Redemptions | |||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 370,031,720 | $ | 266,226,058 | ||||
| Guggenheim S&P 500® Pure Value ETF |
17,450,694 | 21,255,716 | ||||||
| Guggenheim S&P 500® Pure Growth ETF |
81,193,704 | 33,386,032 | ||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
4,873,141 | 10,373,732 | ||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
83,728,225 | 254,770,113 | ||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
12,538,533 | 8,918,666 | ||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
46,333,333 | 13,300,262 | ||||||
Purchases and sales of investment securities (excluding short-term investments, U.S. government and government agency obligations) for the Funds were as follows:
| Purchases | Sales | |||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
$ | 32,820,092 | $ | 32,455,776 | ||||
| Guggenheim S&P 500® Pure Value ETF |
31,247,681 | 35,305,576 | ||||||
| Guggenheim S&P 500® Pure Growth ETF |
107,053,737 | 118,750,901 | ||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
17,079,604 | 19,076,351 | ||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
338,498,462 | 312,641,202 | ||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
33,289,767 | 33,352,482 | ||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
31,730,623 | 29,775,589 | ||||||
There were no purchases or sales of U.S. government or government agency obligations for the year ended October 31, 2012.
6. Legal Proceedings
Lyondell Chemical Company
Rydex ETF Trust has been named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust v. Fund 1 (In re Lyondell Co.), Adversary Proceeding No. 10-4609 (Bankr. S.D.N.Y.). In this action, the creditors of Lyondell Chemical Company (“Lyondell”) are seeking to recover money paid in connection with a pre-bankruptcy distribution by Lyondell to its shareholders pursuant to a December 2007 merger transaction. When the merger closed on December 20, 2007, all outstanding shares of Lyondell stock were converted into the right to receive $48 in cash. The creditors allege that the merged company, LyondellBasell Industries AF S.C.A., and many of its affiliates and subsidiaries filed for bankruptcy as a direct consequence of the merger transaction. The creditors allege that the shareholder payments constituted a fraud on creditors and should be paid back, and are advancing claims of constructive fraudulent transfer and intentional fraudulent transfer under state law. A motion to dismiss the lawsuit is currently pending before the Court.
This lawsuit does not allege any wrongdoing on the part of Rydex ETF Trust. The following series of Rydex ETF Trust received cash proceeds from the merger in the following amounts: Rydex S&P Midcap 400 Pure Value ETF Fund — $572,640. At this stage of the proceedings, Rydex ETF Trust is not able to make a reliable predication as to the outcome of this lawsuit or the effect, if any, on the Fund’s net asset value.
Tribune Company
Rydex ETF Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons (In re Tribune Co.), No. 12-2652 (S.D.N.Y.) (formerly Adv.
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| NOTES TO FINANCIAL STATEMENTS (concluded)
|
Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership of shares in the Tribune Company (“Tribune”) in 2007 by certain series of the Rydex ETF Trust when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In its complaint, the Unsecured Creditors Committee (the “UCC”) has alleged that, in connection with the LBO, insiders and major shareholders received proceeds for their Tribune stock using financing that the insiders knew would, and ultimately did, leave the Tribune insolvent. The UCC has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO, and is attempting to obtain from these individuals and entities the proceeds paid out in connection with the LBO.
In June 2011, a group of Tribune creditors, not including the UCC, filed multiple actions involving state law constructive fraudulent conveyance claims against former Tribune shareholders (the “SCLFC actions”). Rydex ETF Trust has been named as a defendant in one or more of these suits. These cases have been consolidated together with the FitzSimons action in a multidistrict litigation proceeding captioned In re Tribune Co. Fraudulent Conveyance Litig., No. 11-2296 (S.D.N.Y.) (the “MDL proceeding”).
On September 7, 2012, the Court issued a Master Case Order in the MDL proceeding. This order designated several law firms to serve as members of executive committees of defense counsel in the FitzSimons action and in the SCLFC actions. The order also established a briefing schedule for motions to dismiss in the SLCFC actions; no schedule has yet been established in the Fitzsimons action. The Court also ordered that the plaintiffs’ deadline to serve summonses and complaints is extended through January 15, 2013. Finally, the Court ordered that merits discovery will be stayed until further order of the Court.
None of these lawsuits allege any wrongdoing on the part of Rydex ETF Trust. The following series of Rydex ETF Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Guggenheim S&P 500 Pure Value ETF (the “Fund”). The value of the proceeds received by the foregoing Fund was $197,050. At this stage of the proceedings, Rydex ETF Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on the Fund’s net asset value.
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| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
The Board of Trustees and Shareholders of Rydex ETF Trust
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Guggenheim Russell Top 50® Mega Cap ETF, Guggenheim S&P 500® Pure Value ETF, Guggenheim S&P 500® Pure Growth ETF, Guggenheim S&P MidCap 400® Pure Value ETF, Guggenheim S&P MidCap 400® Pure Growth ETF, Guggenheim S&P SmallCap 600® Pure Value ETF, and Guggenheim S&P SmallCap 600® Pure Growth ETF (seven of the series constituting the Guggenheim ETF Trust) (the “Funds”) as of October 31, 2012, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds at October 31, 2012, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
December 21, 2012
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|
Federal Income Tax Information
For federal income tax purposes, the following information is furnished with respect to the distributions paid by the Funds during the year ended October 31, 2012:
| Dividend Received Deduction |
Long Term Capital Gains Distribution |
Qualified Income Distribution |
||||||||||
| Guggenheim Russell Top 50® Mega Cap ETF |
100.00 | % | $ | — | $ | 11,374,923 | ||||||
| Guggenheim S&P 500® Pure Value ETF |
100.00 | % | — | 1,602,755 | ||||||||
| Guggenheim S&P 500® Pure Growth ETF |
100.00 | % | — | 3,060,295 | ||||||||
| Guggenheim S&P MidCap 400® Pure Value ETF |
100.00 | % | — | 598,310 | ||||||||
| Guggenheim S&P MidCap 400® Pure Growth ETF |
100.00 | % | — | 2,852,988 | ||||||||
| Guggenheim S&P SmallCap 600® Pure Value ETF |
100.00 | % | — | 689,289 | ||||||||
| Guggenheim S&P SmallCap 600® Pure Growth ETF |
100.00 | % | — | 460,641 | ||||||||
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 1.800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities, during the most recent 12-month period ended June 30, 2012 is available, without charge, upon request, by calling 1.800.820.0888. The information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1.800.820.0888.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
40 East 52nd Street
16th Floor
New York, NY 10022
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Premium/Discount Information
Information about the differences between the daily market price on secondary markets for shares and the NAV of each Fund can be found at guggenheiminvestments.com.
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| OTHER INFORMATION (Unaudited) (concluded)
|
| GUGGENHEIM ETFS ANNUAL REPORT | 67 |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)
|
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
TRUSTEE AND OFFICER
| Name and Year of Birth |
Length of Service (Year Began) |
Number of | ||||||
| Donald C. Cacciapaglia* |
Rydex Series Funds – 2012 |
146 | ||||||
| (1951) | Rydex Variable Trust – 2012 |
|||||||
| Rydex Dynamic Funds – 2012 |
||||||||
| Rydex ETF Trust – 2012 |
Principal Occupations During Past Five Years: Current: Security Investors, LLC: President and CEO from April 2012 to present; Guggenheim Investments: President and Chief Administrative Officer from February 2010 to present; Previous: Channel Capital Group, Inc.: Chairman and CEO from April 2002 to February 2010
Positions held within the Trust: Trustee from 2012 to present; President from 2012 to present
INDEPENDENT TRUSTEES
| Name and Year of Birth |
Length of Service (Year Began) |
Number of | ||||||
| Corey A. Colehour |
Rydex Series Funds – 1993 |
146 | ||||||
| (1945) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired; Previous: President and Senior Vice President of Schield Management Company (registered investment adviser) from 2003 to 2006
Positions held within the Trust: Trustee from 1993 to present; Member of the Audit and Governance and Nominating Committees from 1995 to present
| J. Kenneth Dalton |
Rydex Series Funds – 1995 |
146 | ||||||
| (1941) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired
Positions held within the Trust: Trustee from 1995 to present; Member and Chairman of the Audit Committee from 1997 to present; Member of the Governance and Nominating Committees from 1995 to present; and Member of the Risk Oversight Committee from 2010 to present
| John O. Demaret |
Rydex Series Funds – 1997 |
146 | ||||||
| (1940) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired
Positions held within the Trust: Trustee from 1997 to present; Chairman of the Board from 2006 to present; Member of the Audit Committee from 1997 to present; and Member of the Risk Oversight Committee from 2010 to present
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued) |
INDEPENDENT TRUSTEES – concluded
| Name and Year of Birth |
Length of Service (Year Began) |
Number of | ||||||
| Werner E. Keller |
Rydex Series Funds – 2005 |
146 | ||||||
| (1940) | Rydex Variable Trust – 2005 |
|||||||
| Rydex Dynamic Funds – 2005 |
||||||||
| Rydex ETF Trust – 2005 |
Principal Occupations During Past Five Years: Current: Founder and President of Keller Partners, LLC (investment research firm) from 2005 to present; Previous: Retired from 2001 to 2005
Positions held within the Trust: Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit and Governance and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present
| Thomas F. Lydon, Jr. |
Rydex Series Funds – 2005 |
146 | ||||||
| (1960) | Rydex Variable Trust – 2005 |
|||||||
| Rydex Dynamic Funds – 2005 |
||||||||
| Rydex ETF Trust – 2005 |
Principal Occupations During Past Five Years: Current: President of Global Trends Investments (registered investment adviser) from 1996 to present
Positions held within the Trust: Trustee and Member of the Audit and Governance and Nominating Committees from 2005 to present
| Patrick T. McCarville |
Rydex Series Funds – 1997 |
146 | ||||||
| (1942) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired; Previous: Chief Executive Officer of Par Industries, Inc., d/b/a Par Leasing from 1977 to 2010
Positions held within the Trust: Trustee from 1997 to present; Member of the Audit Committee from 1997 to present; and Chairman of the Governance and Nominating Committees from 1997 to present
| Roger Somers |
Rydex Series Funds – 1993 |
146 | ||||||
| (1944) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Founder and Chief Executive Officer of Arrow Limousine from 1965 to present
Positions held within the Trust: Trustee from 1993 to present; Member of the Audit and Governance and Nominating Committees from 1995 to present
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded) |
EXECUTIVE OFFICERS
| Name, Position and Year of Birth |
Principal Occupations During Past Five Years | |
| Michael P. Byrum* Vice President (1970) |
Current: President, Security Benefit Asset Management Holdings, LLC; Senior Vice President, Security Investors, LLC; President & Chief Investment Officer, Rydex Holdings, LLC; Director & Chairman of the Board, Advisor Research Center, Inc.; and Manager, Rydex Specialized Products, LLC
Previous: Rydex Distributors, LLC (f/k/a Rydex Distributors, Inc.), Vice President (2009); Rydex Fund Services, LLC, Director (2009-2010), Secretary (2002-2010), Executive Vice President (2002-2006); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.), Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010), Secretary (2002-2010); Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010), Secretary (2002-2010); Rydex Capital Partners, LLC, President & Secretary (2003-2007); Rydex Capital Partners II, LLC, (2003-2007); Rydex Holdings, LLC (f/k/a Rydex Holdings, Inc.), Secretary (2005-2008), Executive Vice President (2005-2006); Advisor Research Center, Inc., Secretary (2006-2009), Executive Vice President (2006); and Rydex Specialized Products, LLC, Secretary (2005-2008) | |
| Nikolaos Bonos* Vice President and Treasurer (1963) |
Current: Senior Vice President, Security Investors, LLC; Chief Executive Officer & Manager, Rydex Specialized Products, LLC; Chief Executive Officer & President, Rydex Fund Services, LLC; Vice President, Rydex Holdings, LLC; Treasurer, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; and Vice President, Security Benefit Asset Management Holdings, LLC
Previous: Security Global Investors, LLC, Senior Vice President (2010-2011); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) Senior Vice President (2006-2011); Rydex Fund Services, LLC (f/k/a Rydex Fund Services, Inc.), Director (2009) & Senior Vice President (2003-2006); and Rydex Specialized Products, LLC, Chief Financial Officer (2005-2009) | |
| Elisabeth Miller* Chief Compliance Officer (1968) |
Current: Chief Compliance Officer, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust, Rydex ETF Trust, Security Equity Fund, Security Income Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, SBL Fund, Security Investors, LLC, and Rydex Distributors, LLC
Previous: Senior Manager, Security Investors, LLC and Rydex Distributors, LLC (2004-2009) | |
| Amy J. Lee* Vice President and Assistant Secretary (1961) |
Current: Senior Vice President & Secretary, Security Investors, LLC; Secretary & Chief Compliance Officer, Security Distributors, Inc.; Vice President, Associate General Counsel & Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation; Associate General Counsel, First Security Benefit Life Insurance and Annuity of New York; Vice President & Secretary, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; Vice President & Secretary, Rydex Holdings, LLC Secretary, Advisor Research Center, Inc., Rydex Specialized Products, LLC, Rydex Distributors, LLC and Rydex Fund Services, LLC; and Assistant Secretary, Security Benefit Clinic and Hospital
Previous: Security Global Investors, LLC, Senior Vice President & Secretary (2007-2011); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Senior Vice President & Secretary (2010-2011); and Brecek & Young Advisors, Inc., Director (2004-2008) | |
| Joseph M. Arruda* Assistant Treasurer (1966) |
Current: Assistant Treasurer, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; Vice President, Security Investors, LLC; and Chief Financial Officer & Manager, Rydex Specialized Products, LLC
Previous: Security Global Investors, LLC, Vice President (2010-2011); and Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Vice President (2004-2011) | |
| * | Officers of the Funds are deemed to be “interested persons” of the Trust, within the meaning of Section 2(a)(19) of the 1940 Act, inasmuch as this person is affiliated with Guggenheim Investments. |
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| GUGGENHEIM INVESTMENTS PRIVACY POLICIES |
Rydex Funds, Guggenheim Funds, Rydex Investments, Rydex Distributors, Inc., Security Investors, LLC, Security Global Investors, LLC, Security Distributors, Inc. and Rydex Advisory Services (Collectively “Guggenheim Investments”)
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”— tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
| GUGGENHEIM ETFS ANNUAL REPORT | 71 |
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| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (concluded)
|
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| 72 | GUGGENHEIM ETFS ANNUAL REPORT |
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805 King Farm Boulevard, Suite 600
Rockville, MD 20850
guggenheiminvestments.com
800.820.0888
ETF2-ANN-1012x1013
Table of Contents
OCTOBER 31, 2012
GUGGENHEIM ETFs
ANNUAL REPORT
| RSU | GUGGENHEIM 2x S&P 500® ETF | |
| (formerly, RYDEX 2x S&P 500 ETF) | ||
| RSW | GUGGENHEIM INVERSE 2x S&P 500® ETF | |
| (formerly, RYDEX INVERSE 2x S&P 500 ETF) |
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| GUGGENHEIM ETFS ANNUAL REPORT | 1 |
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| October 31, 2012 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for two of our exchange traded funds (“ETFs”).
The Investment Adviser is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.
This report covers performance of the following ETFs for the annual period ended October 31, 2012, with the name of each Fund followed by its ticker symbol:
| • | Guggenheim 2X S&P 500® ETF (RSU) |
| • | Guggenheim Inverse 2X S&P 500® ETF (RSW) |
Rydex Distributors, LLC, the distributor of the Funds, is committed to providing investors with innovative investment solutions; as of the date of this report we offer 26 ETFs with a wide range of domestic and global themes, as well as equity and fixed-income mutual funds. We have built on the investment management strengths of Guggenheim Investments and worked with a diverse group of index providers to create some of the most distinctive ETFs available. Rydex Distributors, LLC is affiliated with Guggenheim Partners and Security Investors.
To learn more about economic and market conditions over the 12 months ended October 31, 2012, we encourage you to read the Economic and Market Overview section of the report, which follows this letter, and the Manager’s Analysis for each ETF.
Sincerely,
Donald C. Cacciapaglia
President
November 30, 2012
Read each fund’s prospectus and summary prospectus (if available) carefully before investing. It contains the fund’s investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at www.guggenheiminvestments.com or call 800.820.0888.
Leveraged and inverse ETFs are not suitable for all investors. • These ETFs should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, (c) understand the risk of shorting, and (d) intend to actively monitor and manage their investments. • The more an ETF invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. • Inverse ETFs involve certain risks, which include increased volatility due to the ETFs’ possible use of short sales of securities and derivatives, such as options and futures. • The ETFs’ use of derivatives, such as futures, options and swap agreements, may expose the ETFs’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. • Short-selling involves increased risks and costs. You risk paying more for a security than you received from its sale. • Leveraged and inverse ETFs seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the ETFs seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those ETFs that use leverage as part of their investment strategy, may prevent an ETF from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse ETFs’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those ETFs that consistently apply leverage, the value of the ETFs’ shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The ETFs rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair an ETF’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse ETFs’ holdings consistent with their strategies, as frequently as daily. • Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Most investors will also incur customary brokerage commissions when buying or selling shares of an ETF. • ETF shares may trade below their net asset value (“NAV”). The NAV of shares will fluctuate with changes in the market value of an ETF’s holdings. In addition, there can be no assurance that an active trading market for shares will develop or be maintained. • For more on these and other risks, please read the prospectus.
| 2 | GUGGENHEIM ETFS ANNUAL REPORT |
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| A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited)
|
The Funds described in this report are benchmarked daily to leveraged or inverse versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period. It is also possible that a fund that performs in-line with its benchmark on a daily basis may seem to outperform its benchmark over longer periods.
An Example of Compounding
For example, consider a hypothetical fund that is designed to produce returns that correspond to 150% of an index. On the first day of a period, the index rises from a level of 100 to a level of 106, producing a 6% gain and an expectation that the fund will rise by 9%. On the same day, the fund’s Net Asset Value per share (“NAV”) increases from $10.00 to $10.90 for a gain of 9.0% — in line with its benchmark.
On day two, assume the index falls from 106 to 99 for a loss of about 6.6%. The fund, as expected, falls 9.9% to a price of $9.82. On each day, the fund performed exactly in line with its benchmark, but for the two-day period, the fund was down 1.8%, while the index was down only 1.0%. Without taking into account the daily compounding of returns, one would expect the fund to lose 1.5% and would see the fund as trailing by 0.3% when in fact it had performed perfectly. This example is summarized in the table below.
| Index Level |
Index Performance |
Fund Expectation |
Fund NAV |
Fund Performance |
Assessment | |||||||||||||||||||
| Start |
100 | $ | 10.00 | |||||||||||||||||||||
| Day 1 |
106 | 6.00 | % | 9.00 | % | $ | 10.90 | 9.00 | % | In Line | ||||||||||||||
| Day 2 |
99 | (6.60 | )% | (9.90 | )% | $ | 9.82 | (9.90 | )% | In Line | ||||||||||||||
| Cumulative |
(1.00 | )% | (1.50 | )% | (1.80 | )% | (0.30 | )% | ||||||||||||||||
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
| GUGGENHEIM ETFS ANNUAL REPORT | 3 |
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|
Shareholder Expense Example
As a shareholder of the Rydex ETF Trust, you incur transaction costs such as creation and redemption fees or brokerage charges, and ongoing costs including advisory fees, trustee fees and, if applicable, distribution fees. All other Trust expenses are paid by the advisor. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example in the table is based on an investment of $1,000 invested on April 30, 2012 and held for the six months ended October 31, 2012.
Actual Expenses
The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first table under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses attributable to your investment during this period.
Hypothetical Example for Comparison Purposes
The second table below provides information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not a Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| Expense Ratio |
Beginning Account Value 04/30/12 |
Ending Account Value 10/31/12 |
Expenses Paid During Six-Month Period* 04/30/12 to 10/31/12 |
|||||||||||||
| Actual |
||||||||||||||||
| Guggenheim 2x S&P 500® ETF |
0.70% | $ | 1,000.00 | $ | 1,029.90 | $ | 3.57 | |||||||||
| Guggenheim Inverse 2x S&P 500® ETF |
0.70% | 1,000.00 | 928.60 | 3.39 | ||||||||||||
| Hypothetical (assuming a 5% return before expenses) |
| |||||||||||||||
| Guggenheim 2x S&P 500® ETF |
0.70% | 1,000.00 | 1,021.62 | 3.56 | ||||||||||||
| Guggenheim Inverse 2x S&P 500® ETF |
0.70% | 1,000.00 | 1,021.62 | 3.56 | ||||||||||||
| * | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect one-half year period). |
| 4 | GUGGENHEIM ETFS ANNUAL REPORT |
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Amidst the negative headlines concerning the potential fiscal cliff in the U.S., further turmoil in Europe and worsening economic data from China, the U.S. economy has shown surprising resilience, with signs of rising consumer sentiment and a recovery in housing. The U.S. housing market appears to have passed its bottom and real estate prices have begun to pick up. Our expectation is that a period of continued low interest rates will likely reinforce the rise in home prices and sales. Rising home prices will increase household net worth, which will translate into greater consumption via the wealth effect, and is supportive of overall economic growth. The recent rise in headline inflation, led by increases in energy and food prices, is likely to be transitory. Inflationary pressures should remain muted in the medium-term given the substantial slack in the economy.
The U.S. economy continues to press forward despite the current headwinds, and we believe the current macroeconomic environment remains constructive for risk assets, especially in the U.S. Stocks in the U.S. appear to be undervalued by most measures, and should benefit from continued capital inflow and the Federal Reserve’s accommodative monetary policy. We continue to see attractive value in credit products on a relative basis, though this positive outlook is limited to spread (or non-government) sectors.
On the international front, uncertainty continues to weigh on European markets. European policymakers appear to be coming closer to a consensus on the need for a fiscal union, albeit at a glacial pace. In China, a recent batch of economic data suggests that the odds of a hard landing have increased materially. We expect an announcement of additional stimulus measures after the government transition next year; although a stimulus would be supportive of economic growth, we expect China’s headline growth to slow from its breakneck pace of the past decade.
Beginning in mid-November 2011, the U.S. stock market moved up fairly consistently, except for a second-quarter pullback caused by lower earnings and GDP. For the 12-month period ended October 31, 2012, the Standard & Poor’s 500 Index* (the “S&P 500”) returned 15.21%.
Most international markets had positive returns, but were not nearly as strong as the U.S. market. The Morgan Stanley Capital International Europe-Australasia-Far East (the “MSCI EAFE”) Index* returned 4.61%. The MSCI EAFE Index is composed of approximately 1,100 companies in 20 developed countries in Europe and the Pacific Basin. The MSCI Emerging Markets Index returned 2.63%.
The search for yield continued to attract investors to the U.S. bond markets, helping performance, with lower-rated bonds outperforming higher-quality issues. The return of the Barclays U.S. Aggregate Bond Index*, which is a proxy for the U.S. investment grade bond market, returned 5.25%, while return of the Barclays U.S. Corporate High Yield Index* was 13.61%. Reflecting the Federal Reserve’s continuing accommodative monetary policy, interest rates on short-term securities remained at their lowest levels in many years; the return of the Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index* was 0.08%.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
* Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees or expenses.
The Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds.
The Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index tracks 3-month U.S. government securities.
The MSCI EAFE Index is a capitalization weighted measure of stock markets in Europe, Australasia and the Far East.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
The S&P 500® Index is a capitalization-weighted index that measures the performance of the large-capitalization sector of the U.S. equity market and includes 500 widely held common stocks chosen for market size, liquidity and industry group representation.
| GUGGENHEIM ETFS ANNUAL REPORT | 5 |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM 2x S&P 500® ETF
For the one-year period ended October 31, 2012, Guggenheim 2x S&P 500® ETF maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the S&P 500® Total Return Index. Guggenheim 2x S&P 500® ETF returned 28.44%, while the S&P 500 Total Return Index had performance of 15.21% over the same time period.
All sectors contributed to return for the period. The biggest performance contributors to the index were the Financials and Health Care sectors while Utilities and Materials contributed least. Apple, Inc. and Exxon Mobile Corp. were the stocks contributing most to the index return, while Hewlett-Packard Co. and Oracle Corp. were the largest detractors.
In order to gain leveraged exposure in the S&P 500 Index, the Guggenheim 2x S&P 500® ETF employs as its investment strategy a program of engaging in investing in leveraged derivative instruments, such as equity index swaps and futures contracts on stock indices. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily. The effects of compounding may cause the longer-term correlation of the fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 3 of this report.
Cumulative Fund Performance: November 5, 2007 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||
| One Year | Three Year | Since Inception |
||||||||
| Guggenheim 2x S&P 500® ETF |
28.44% | 22.64% | (6.57)% | |||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.98% | |||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| 6 | GUGGENHEIM ETFS ANNUAL REPORT |
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|
|
October 31, 2012
|
GUGGENHEIM 2x S&P 500® ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| GUGGENHEIM ETFS ANNUAL REPORT | 7 |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited)
|
October 31, 2012
|
GUGGENHEIM INVERSE 2x S&P 500® ETF
For the one-year period ended October 31, 2012, Guggenheim Inverse 2x S&P 500® ETF achieved a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the S&P 500 Total Return Index. Guggenheim Inverse 2x S&P 500® ETF delivered a total return of –30.31%, while the S&P 500® Total Return Index had performance of 15.21% over the same time period.
All sectors contributed to return for the period. The biggest performance contributors to the index were the Financials and Health Care sectors while Materials and Utilities contributed least. Apple, Inc. and Exxon Mobile Corp. were the stocks contributing most to the index return, while Hewlett-Packard Co. and Oracle Corp. were the largest detractors.
In order to gain leveraged exposure in the S&P 500 Index, the Guggenheim Inverse 2x S&P 500 ETF employs as its investment strategy a program of engaging in investing in leveraged derivative instruments, such as equity index swaps and futures contracts on stock indices. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily. The effects of compounding may cause the longer-term correlation of the fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 3 of this report.
Cumulative Fund Performance: November 5, 2007 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||
| One Year | Three Year | Since Inception (11/05/07) |
||||||||
| Guggenheim Inverse 2x S&P 500® ETF |
(30.31)% | (30.02)% | (18.62)% | |||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.98% | |||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| 8 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM 2x S&P 500® ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 9 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM 2x S&P 500® ETF
| 10 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM 2x S&P 500® ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 11 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM 2x S&P 500® ETF
| 12 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM 2x S&P 500® ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 13 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM 2x S&P 500® ETF
| 14 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM 2x S&P 500® ETF
| * | Non-Income Producing Security. |
| ** | Price return based on S&P 500 Index +/- financing at a variable rate. |
| a | Amount represents less than 0.05% of net assets. |
| b | All or a portion of this security was on loan as of October 31, 2012. |
| c | Values determined based on Level 2 inputs (Note G). |
| d | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| e | Securities lending collateral (Note K). |
| FHLB | — Federal Home Loan Bank |
| PLC | — Public Limited Company |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 15 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM INVERSE 2x S&P 500® ETF
| 16 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
| * | Price return based on S&P 500 Index +/- financing at a variable rate. |
| a | Values determined based on Level 2 inputs (Note G). |
| b | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| FNMA | — Federal National Mortgage Association |
Table of Contents
| STATEMENTS OF ASSETS AND LIABILITIES | October 31, 2012 |
| Guggenheim 2x S&P 500® ETF |
Guggenheim Inverse 2x S&P 500® ETF |
|||||||
| ASSETS: | ||||||||
| Investments, at value* — including $32,623 and $— of securities loaned, respectively |
$ | 42,439,908 | $ | — | ||||
| Repurchase agreements, at value |
1,196,883 | 27,324,000 | ||||||
| Total investments* |
43,636,791 | 27,324,000 | ||||||
| Segregated cash for swaps |
6,100,972 | 8,679,862 | ||||||
| Margin deposit for future contracts |
731,500 | 612,500 | ||||||
| Unrealized appreciation on swaps |
6,822 | — | ||||||
| Receivables: |
||||||||
| Dividends and Interest |
55,419 | 8 | ||||||
| Variation margin on futures contracts |
— | 24,938 | ||||||
| Equity index swap settlement |
4,839 | 1,009,151 | ||||||
| Total assets |
50,536,343 | 37,650,459 | ||||||
| LIABILITIES: | ||||||||
| Unrealized depreciation on swap agreements |
— | 9,451 | ||||||
| Payable upon return of securities loaned |
33,883 | — | ||||||
| Payable for: |
||||||||
| Variation margin on futures contracts |
29,783 | — | ||||||
| Due to custodian |
415 | 1,014,462 | ||||||
| Accrued management fees |
33,666 | 22,053 | ||||||
| Total liabilities |
97,747 | 1,045,966 | ||||||
| NET ASSETS | $ | 50,438,596 | $ | 36,604,493 | ||||
| NET ASSETS CONSIST OF: | ||||||||
| Paid-in capital |
$ | 45,371,790 | $ | 169,601,203 | ||||
| Undistributed (distributions in excess of) net investment income |
9,397 | (237,255 | ) | |||||
| Accumulated net realized gain (loss) on investments, futures and swaps |
(3,104,248 | ) | (132,993,464 | ) | ||||
| Net unrealized appreciation on investments, futures and swaps |
8,161,657 | 234,009 | ||||||
| NET ASSETS | $ | 50,438,596 | $ | 36,604,493 | ||||
| Shares outstanding (unlimited shares authorized), no par value |
1,000,002 | 1,600,000 | ||||||
| Net asset value, offering price and repurchase price per share |
$50.44 | $22.88 | ||||||
| *Total cost of investments |
$ | 35,190,651 | $ | 27,324,000 | ||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 17 |
Table of Contents
| STATEMENTS OF OPERATIONS |
For the Year Ended October 31, 2012
| Guggenheim 2x S&P 500® ETF |
Guggenheim Inverse 2x S&P 500® ETF |
|||||||
| INVESTMENT INCOME: | ||||||||
| Dividends |
$ | 1,237,635 | $ | — | ||||
| Interest |
311 | 3,651 | ||||||
| Income from securities lending |
81 | — | ||||||
| Total investment income |
1,238,027 | 3,651 | ||||||
| EXPENSES: | ||||||||
| Management fee |
472,657 | 300,684 | ||||||
| Trustee fees |
4,580 | 3,467 | ||||||
| Total expenses |
477,237 | 304,151 | ||||||
| Net investment income (loss) |
760,790 | (300,500 | ) | |||||
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||||||
| Net realized gain (loss) on: |
||||||||
| Investments |
(292,990 | ) | — | |||||
| In-kind redemptions |
12,968,748 | — | ||||||
| Futures contracts |
4,816,938 | (3,407,968 | ) | |||||
| Swap contracts |
7,783,828 | (12,473,618 | ) | |||||
| Net realized gain (loss) |
25,276,524 | (15,881,586 | ) | |||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||
| Investments |
(5,574,570 | ) | — | |||||
| Futures contracts |
(1,747,258 | ) | 1,536,527 | |||||
| Swap contracts |
537,837 | (1,279,041 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments |
(6,783,991 | ) | 257,486 | |||||
| Net realized and unrealized gain (loss) |
18,492,533 | (15,624,100 | ) | |||||
| Net increase (decrease) in net assets resulting from operations |
$ | 19,253,323 | $ | (15,924,600 | ) | |||
| 18 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS |
| Guggenheim 2x S&P 500® ETF | Guggenheim Inverse 2x S&P 500® ETF | |||||||||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||||||||||
| Net investment income (loss) |
$ | 760,790 | $ | 832,050 | $ | (300,500 | ) | $ | (414,624 | ) | ||||||
| Net realized gain (loss) on investments |
25,276,524 | 7,271,159 | (15,881,586 | ) | (21,831,711 | ) | ||||||||||
| Net change in unrealized appreciation (depreciation) on investments |
(6,783,991 | ) | 1,517,229 | 257,486 | 1,679,620 | |||||||||||
| Net increase (decrease) in net assets resulting from operations |
19,253,323 | 9,620,438 | (15,924,600 | ) | (20,566,715 | ) | ||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
| Net investment income |
(748,751 | ) | (849,031 | ) | — | — | ||||||||||
| SHAREHOLDER TRANSACTIONS: | ||||||||||||||||
| Proceeds from shares purchased |
— | 2,087,505 | 12,808,120 | 22,017,345 | ||||||||||||
| Value of shares redeemed |
(47,453,355 | ) | (11,417,222 | ) | (16,080,537 | ) | (29,862,599 | ) | ||||||||
| Net decrease in net assets resulting from share transactions |
(47,453,355 | ) | (9,329,717 | ) | (3,272,417 | ) | (7,845,254 | ) | ||||||||
| Net decrease in net assets |
(28,948,783 | ) | (558,310 | ) | (19,197,017 | ) | (28,411,969 | ) | ||||||||
| NET ASSETS | ||||||||||||||||
| Beginning of year |
79,387,379 | 79,945,689 | 55,801,510 | 84,213,479 | ||||||||||||
| End of year |
$ | 50,438,596 | $ | 79,387,379 | $ | 36,604,493 | $ | 55,801,510 | ||||||||
| Undistributed (distributions in excess) of net investment income at end of year |
$ | 9,397 | $ | 2,326 | $ | (237,255 | ) | $ | — | |||||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||||||||||
| Shares sold |
— | 50,000 | 500,000 | 600,000 | ||||||||||||
| Shares redeemed |
(1,000,000 | ) | (250,000 | ) | (600,000 | ) | (800,000 | ) | ||||||||
| Net increase (decrease) in shares |
(1,000,000 | ) | (200,000 | ) | (100,000 | ) | (200,000 | ) | ||||||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 19 |
Table of Contents
GUGGENHEIM 2x S&P 500® ETF
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008* |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of year |
$39.69 | $36.34 | $28.22 | $27.65 | $75.00 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income** |
0.51 | 0.41 | 0.33 | 0.31 | 0.61 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
10.74 | 3.36 | 8.13 | 0.57 | (47.27 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
11.25 | 3.77 | 8.46 | 0.88 | (46.66 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.50 | ) | (0.42 | ) | (0.34 | ) | (0.31 | ) | (0.69 | ) | ||||||||||
| Net asset value, end of year |
$50.44 | $39.69 | $36.34 | $28.22 | $27.65 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return*** |
28.44% | 10.36% | 30.12% | 3.51% | (62.68% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of year (in thousands) |
$50,439 | $79,387 | $79,946 | $117,126 | $113,364 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
1.13% | 0.98% | 1.01% | 1.43% | 1.35% | **** | ||||||||||||||
| Total expenses |
0.71% | 0.71% | 0.71% | 0.70% | 0.70% | **** | ||||||||||||||
| Portfolio turnover rate† |
12% | 41% | 23% | 69% | 44% | |||||||||||||||
| * | The Fund commenced operations on November 5, 2007. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| † | Portfolio turnover rate is calculated without regard to instruments having a maturity of less than one year from acquisition or derivative instruments (including swap agreements and futures contracts). |
| 20 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
GUGGENHEIM INVERSE 2x S&P 500® ETF
FINANCIAL HIGHLIGHTS (concluded)
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008* |
||||||||||||||||
| Per Share Data: |
| |||||||||||||||||||
| Net asset value, beginning of year |
$32.82 | $44.32 | $66.76 | $132.21 | $75.00 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income (loss)** |
(0.19 | ) | (0.25 | ) | (0.35 | ) | (0.61 | ) | 1.04 | |||||||||||
| Net gain (loss) on investments (realized and unrealized) |
(9.75 | ) | (11.25 | ) | (22.09 | ) | (46.79 | ) | 57.20 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(9.94 | ) | (11.50 | ) | (22.44 | ) | (47.40 | ) | 58.24 | |||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
— | — | — | — | (1.03 | ) | ||||||||||||||
| Net realized gains |
— | — | — | (18.05 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
— | — | — | (18.05 | ) | (1.03 | ) | |||||||||||||
| Net asset value, end of year |
$22.88 | $32.82 | $44.32 | $66.76 | $132.21 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return*** |
(30.31% | ) | (25.94% | ) | (33.61% | ) | (41.45% | ) | 78.27% | |||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of year (in thousands) |
$36,604 | $55,802 | $84,213 | $103,474 | $66,106 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
(0.70% | ) | (0.68% | ) | (0.65% | ) | (0.64% | ) | 1.09% | **** | ||||||||||
| Total expenses |
0.71% | 0.71% | 0.71% | 0.71% | 0.71% | **** | ||||||||||||||
| Portfolio turnover rate† |
— | — | — | — | — | |||||||||||||||
| * | The Fund commenced operations on November 5, 2007. |
| ** | Based on average shares outstanding. |
| *** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| **** | Annualized. |
| † | Portfolio turnover rate is calculated without regard to instruments having a maturity of less than one year from acquisition or derivative instruments (including swap agreements and futures contracts). |
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 21 |
Table of Contents
|
|
| 22 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
| GUGGENHEIM ETFS ANNUAL REPORT | 23 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
In order to present paid-in-capital, undistributed net investment income (loss) and accumulated net realized gain (loss) on investments on the statement of assets and liabilities that more closely represent their tax character, certain adjustments have been made to these accounts. These adjustments have no effect on net assets or NAV. The most significant of these adjustments are for net capital gains resulting from in-kind redemptions, because they are non-taxable to the Funds, and therefore are not distributed to existing Fund shareholders, or net capital losses resulting from in-kind redemptions, which are classified to paid-in-capital. For the year ended October 31, 2012, the adjustments for the Funds were as follows:
| Paid-In Capital |
Undistributed Net Investment Income (Loss) |
Accumulated Net Realized Gain (Loss) |
||||||||||
| Guggenheim 2x S&P 500® ETF |
$ | 18,666,056 | $ | (4,968) | $ | (18,661,088) | ||||||
| Guggenheim Inverse 2x S&P 500® ETF |
(63,245) | 63,245 | — | |||||||||
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended October 31, 2012, the following capital loss carryforward amounts expired or were used to offset current year net realized capital gains:
| Guggenheim 2x S&P 500® ETF |
$ | 249,795 | ||
| Guggenheim Inverse 2x S&P 500® ETF |
— |
The tax character of distributable earnings (accumulated losses) at October 31, 2012 was as follows:
| Late Year Ordinary Loss Deferral |
Undistributed Ordinary Income |
Undistributed Long Term Capital Gain |
Capital Loss Carryfoward |
Unrealized Appreciation (Depreciation) |
||||||||||||||||
| Guggenheim 2x S&P 500® ETF |
$ | — | $ | 9,397 | $ | — | $ | — | $ | 5,057,409 | ||||||||||
| Guggenheim Inverse 2x S&P 500® ETF |
(237,255) | — | — | (132,767,941) | 8,486 | |||||||||||||||
A summary of the expiration of the capital loss carryforward is as follows:
|
|
2017 | 2018 | 2019 | Unlimited | ||||||||||||||||
| Short Term | Long Term | |||||||||||||||||||
| Guggenheim 2x S&P 500® ETF |
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Guggenheim Inverse 2x S&P 500® ETF |
57,618,386 | 39,488,221 | 21,311,018 | 13,224,297 | 1,126,019 | |||||||||||||||
The tax character of distributions paid during the year ended October 31, 2012 was as follows:
| Ordinary Income |
||||
| Guggenheim 2x S&P 500® ETF |
$ | 748,751 | ||
| Guggenheim Inverse 2x S&P 500® ETF |
— | |||
The tax character of distributions paid during the year ended October 31, 2011 was as follows:
| Ordinary Income |
||||
| Guggenheim 2x S&P 500® ETF |
$ | 849,031 | ||
| Guggenheim Inverse 2x S&P 500® ETF |
— | |||
At October 31, 2012, the identified cost of investments in securities owned by each Fund for Federal income tax purposes and the gross unrealized appreciation and depreciation were as follows:
| Identified Cost |
Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||
| Guggenheim 2x S&P 500® ETF |
$ | 38,530,902 | $ | 5,976,737 | $ | (904,731 | ) | $ | 5,072,006 | |||||||
| Guggenheim Inverse 2x S&P 500® ETF |
27,324,000 | — | (9,451 | ) | (9,451 | ) | ||||||||||
G. Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or, in the absence of a principal market, the most advantageous market for the investment or liability. A three-tier hierarchy is utilized to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Funds’ investments. The inputs are summarized in the three broad levels listed below:
| Level 1 — | quoted prices in active markets for identical securities. |
| 24 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
| Level 2 — | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
| Level 3 — | significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). |
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following table summarizes the inputs used to value the Funds’ net assets as of October 31, 2012:
| Fund | Level 1 Investments in Securities |
Level 1 Other Financial Instruments |
Level 2 Investments in Securities |
Level 2 Other Financial Instruments |
Level 3 Investments in Securities |
Total | ||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Guggenheim 2x S&P 500® ETF |
$ | 42,439,908 | $ | — | $ | 1,196,883 | $ | 6,822 | $ | — | $ | 43,643,613 | ||||||||||||
| Guggenheim Inverse 2x S&P 500® ETF |
— | 243,460 | 27,324,000 | — | — | 27,567,460 | ||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||
| Guggenheim 2x S&P 500® ETF |
— | 291,305 | — | — | — | 291,305 | ||||||||||||||||||
| Guggenheim Inverse 2x S&P 500® ETF |
— | — | — | 9,451 | — | 9,451 | ||||||||||||||||||
For the year ended October 31, 2012, there were no Level 3 Investments or transfers between levels.
H. Disclosures About Derivative Instruments and Hedging Activities
U.S. GAAP requires disclosures to enable investors to better understand how and why the Funds use derivative instruments, how these derivative instruments are accounted for and their effects on the Funds’ financial position and results of operations. None of the derivatives currently held by the Funds are being used as hedging instruments.
The Funds utilized derivatives for the following purposes:
| Fund | Index Exposure |
|||
| Guggenheim 2x S&P 500® ETF |
X | |||
| Guggenheim Inverse 2x S&P 500® ETF |
X | |||
The following table represents the notional amount of derivative instruments outstanding, as an approximate percentage of the Funds’ net assets on a daily basis, while the risk to the Fund is limited to the profit earned on such derivatives.
| Approximate percentage of Fund’s net assets on a daily basis | ||||||||
| Fund | Long | Short | ||||||
| Guggenheim 2x S&P 500® ETF |
115 | % | — | |||||
| Guggenheim Inverse 2x S&P 500® ETF |
— | 200 | % | |||||
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of October 31, 2012:
| Location on the Statements of Assets and Liabilities | ||||||||
| Derivative Investment Type | Asset | Liability | ||||||
| Equity Index Swap Contracts |
Unrealized Appreciation on Swap Agreements | Unrealized Depreciation on Swap Agreements | ||||||
| Equity Index Futures Contracts |
Receivables: Variation Margin on Futures Contracts | Payables: Variation Margin on Futures Contracts | ||||||
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at October 31, 2012:
| Asset Derivative Investments Value | ||||||||||||
| Portfolio | Total Value at October 31, 2012 |
Equity Index Swap Contracts |
Equity Index Futures Contracts* |
|||||||||
| Guggenheim 2x S&P 500® ETF |
$ | 6,822 | $ | 6,822 | $ | — | ||||||
| Guggenheim Inverse 2x S&P 500® ETF |
243,460 | — | 243,460 | |||||||||
| Liability Derivative Investments Value | ||||||||||||
| Portfolio | Total Value at October 31, 2012 |
Equity Index Swap Contracts |
Equity Index Futures Contracts* |
|||||||||
| Guggenheim 2x S&P 500® ETF |
$ | 291,305 | $ | — | $ | 291,305 | ||||||
| Guggenheim Inverse 2x S&P 500® ETF |
9,451 | 9,451 | — | |||||||||
| * | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
| GUGGENHEIM ETFS ANNUAL REPORT | 25 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations year ended October 31, 2012:
| Derivative Investment Type | Location of Gain (Loss) on Derivatives | |
| Equity Index Swap Contracts |
Net Realized Gain (Loss) from: Swap Contracts | |
| Net Change in Unrealized Appreciation (Depreciation) on: Swap Contracts | ||
| Equity Index Futures Contracts |
Net Realized Gain (Loss) from: Futures Contracts | |
| Net Change in Unrealized Appreciation (Depreciation) on: Futures Contracts |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended October 31, 2012:
| Realized Gain (Loss) on Derivative Investments Recognized in the Statement of Operations |
||||||||||||
| Portfolio | Total | Equity Index Swap Contracts |
Equity Index Futures Contracts |
|||||||||
| Guggenheim 2x S&P 500® ETF |
$ | 12,600,766 | $ | 7,783,828 | $ | 4,816,938 | ||||||
| Guggenheim Inverse 2x S&P 500® ETF |
(15,881,586 | ) | (12,473,618 | ) | (3,407,968 | ) | ||||||
| Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized in the Statement of Operations |
||||||||||||
| Portfolio | Total | Equity Index Swap Contracts |
Equity Index Futures Contracts |
|||||||||
| Guggenheim 2x S&P 500® ETF |
$ | (1,209,421 | ) | $ | 537,837 | $ | (1,747,258 | ) | ||||
| Guggenheim Inverse 2x S&P 500® ETF |
257,486 | (1,279,041 | ) | 1,536,527 | ||||||||
I. Dividends and Distributions
Distributions of net investment income and net realized gains, if any, in all the Funds, are declared and paid at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
J. Risk and Uncertainties
The Funds invest in various investments which are exposed to risk, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect amounts reported in the financial statements. The risk inherent in the use of futures and options contracts, and swap agreements, include i) adverse changes in the value of such instruments; ii) imperfect correlation between the price of the instruments and movements in the price of the underlying securities, indices, or futures contracts; iii) the possible absence of a liquid secondary market for any particular instrument at any time; and iv) the potential of counterparty default. The Funds have established strict counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience the Funds expect the risk of loss to be remote.
K. Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the statement of operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand.
| 26 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
At October 31, 2012, the Funds participated in securities lending as follows:
| Value of Securities Loaned |
Cash Collateral Received |
|||||||
| Guggenheim 2x S&P 500® ETF |
$ | 32,623 | $ | 33,883 | ||||
| Guggenheim Inverse 2x S&P 500® ETF |
— | — | ||||||
The following represents a breakdown of the collateral for the joint repurchase agreements at October 31, 2012:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| Merrill Lynch, Pierce, Fenner & Smith, Inc. |
US Treasury | |||||||||||||||||
| 0.28% |
0.625% | |||||||||||||||||
| Due 11/01/12 |
$ | 40,000,000 | $ | 40,000,311 | 04/15/13 | $ | 37,278,800 | $ | 40,788,895 | |||||||||
| RBS Securities, Inc. |
Fannie Mae Note | |||||||||||||||||
| 0.28% |
5.375% | |||||||||||||||||
| Due 11/01/12 |
68,010,000 | 68,012,041 | 07/15/16 | 58,330,000 | 69,372,283 | |||||||||||||
3. Advisory, Administration and Other Transactions with Affiliates
GI determines the composition of the portfolio of securities that must be delivered in exchange for the issuance of Creation Units and periodically adjusts the composition of the portfolio of the Funds to conform to changes in the composition of the relevant index. For these services, GI receives a management fee at the annual rate shown below as a percentage of the average daily net assets of the Funds.
| Advisory Fee |
||||
| Guggenheim 2x S&P 500® ETF |
0.70 | % | ||
| Guggenheim Inverse 2x S&P 500® ETF |
0.70 | % | ||
GI pays all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except: trustee fees, interest, taxes, distribution fees or expenses and extraordinary expenses.
Under an Administration Agreement, State Street Bank and Trust Company (the “Administrator”) provides various administrative and accounting services for the maintenance and operations of the Funds. Under a Custodian Agreement with the Trust, the Administrator maintains cash, securities and other assets of the Funds in separate accounts for each Fund, keeps all necessary accounts and records, and provides other services. The Administrator is required, upon the order of the Trust, to deliver securities held by the Custodian and to make payments for securities purchased by the Trust for the Funds. Pursuant to a Transfer Agency and Service Agreement with the Trust, the Administrator acts as a transfer agent for the Trust’s authorized and issued shares of beneficial interest, and as dividend disbursing agent of the Trust. GI compensates the Administrator directly for the foregoing services.
The Funds have adopted a Distribution Plan (the “Plan”) that allows the Funds to pay distribution fees to RDL and other firms that provide distribution services (“Service Providers”). If a Service Provider provides distribution services, the Funds will pay distribution fees to RDL at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. RDL will, in turn, pay the Service Provider out of its fees. No such fee is currently charged to the Funds.
4. Capital
At October 31, 2012, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee per transaction to those persons purchasing or redeeming Creation Units. An additional charge of up to three times the standard transaction fee may be imposed for purchases and redemptions effected outside the National Securities Clearing Corporation usual clearing process or for cash. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV of the Fund on the transaction date. Transaction fees are not charged to or paid by the Fund. The minimum transaction fees are:
| Minimum Transaction Fee |
||||
| Guggenheim 2x S&P 500® ETF |
$ | 2,000 | ||
| Guggenheim Inverse 2x S&P 500® ETF |
50 | |||
| GUGGENHEIM ETFS ANNUAL REPORT | 27 |
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| NOTES TO FINANCIAL STATEMENTS (concluded) |
5. Investment Transactions
For the year ended October 31, 2012, the Funds had investment transactions in-kind associated with subscriptions and redemptions as follows:
| Subscriptions | Redemptions | |||||||
| Guggenheim 2x S&P 500® ETF |
$ | — | $ | 37,783,809 | ||||
| Guggenheim Inverse 2x S&P 500® ETF |
— | — | ||||||
Purchases and sales of investment securities (excluding short-term investments, U.S. government and government agency obligations) for the Funds were as follows:
| Purchases | Sales | |||||||
| Guggenheim 2x S&P 500® ETF |
$ | 14,996,376 | $ | 6,700,068 | ||||
| Guggenheim Inverse 2x S&P 500® ETF |
— | — | ||||||
6. Legal Proceedings
Tribune Company
Rydex ETF Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons (In re Tribune Co.), No. 12-2652 (S.D.N.Y.) (formerly Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership of shares in the Tribune Company (“Tribune”) in 2007 by certain series of the Rydex ETF Trust when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In its complaint, the Unsecured Creditors Committee (the “UCC”) has alleged that, in connection with the LBO, insiders and major shareholders received proceeds for their Tribune stock using financing that the insiders knew would, and ultimately did, leave the Tribune insolvent. The UCC has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO, and is attempting to obtain from these individuals and entities the proceeds paid out in connection with the LBO.
In June 2011, a group of Tribune creditors, not including the UCC, filed multiple actions involving state law constructive fraudulent conveyance claims against former Tribune shareholders (the “SCLFC actions”). Rydex ETF Trust has been named as a defendant in one or more of these suits. These cases have been consolidated together with the FitzSimons action in a multidistrict litigation proceeding captioned In re Tribune Co. Fraudulent Conveyance Litig., No. 11-2296 (S.D.N.Y.) (the “MDL proceeding”).
On September 7, 2012, the Court issued a Master Case Order in the MDL proceeding. This order designated several law firms to serve as members of executive committees of defense counsel in the FitzSimons action and in the SCLFC actions. The order also established a briefing schedule for motions to dismiss in the SLCFC actions; no schedule has yet been established in the Fitzsimons action. The Court also ordered that the plaintiffs’ deadline to serve summonses and complaints is extended through January 15, 2013. Finally, the Court ordered that merits discovery will be stayed until further order of the Court.
None of these lawsuits allege any wrongdoing on the part of Rydex ETF Trust. The following series of Rydex ETF Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Guggenheim 2x S&P 500 ETF (the “Fund”). The value of the proceeds received by the foregoing Fund was $1,699. At this stage of the proceedings, Rydex ETF Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on the Fund’s net asset value.
| 28 | GUGGENHEIM ETFS ANNUAL REPORT |
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| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
The Board of Trustees and Shareholders of Rydex ETF Trust
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Guggenheim 2x S&P 500® ETF and Guggenheim Inverse 2x S&P 500® ETF (two of the series constituting the Guggenheim ETF Trust) (the “Funds”) as of October 31, 2012, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended and the period November 5, 2007 (commencement of operations) through October 31, 2008. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds at October 31, 2012, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the four years in the period then ended and the period November 5, 2007 (commencement of operations) through October 31, 2008, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
December 21, 2012
| GUGGENHEIM ETFS ANNUAL REPORT | 29 |
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|
|
Federal Income Tax Information
For federal income tax purposes, the following information is furnished with respect to the distributions paid by the Funds during the year ended October 31, 2012:
| Dividend Received Deduction |
Long Term Capital Gains Distribution |
Qualified Income Distribution |
||||||||||
| Guggenheim 2x S&P 500® ETF |
100.00 | % | $ | — | $ | 1,205,363 | ||||||
| Guggenheim Inverse 2x S&P 500® ETF |
0.00 | % | — | — | ||||||||
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 1.800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities, during the most recent 12-month period ended June 30, 2012 is available, without charge, upon request, by calling 1.800.820.0888. The information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1.800.820.0888.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
40 East 52nd Street
16th Floor
New York, NY 10022
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Premium/Discount Information
Information about the differences between the daily market price on secondary markets for shares and the NAV of each Fund can be found at guggenheiminvestments.com.
| 30 | GUGGENHEIM ETFS ANNUAL REPORT |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
TRUSTEE AND OFFICER
| Name
and |
Length of Service (Year Began) |
Number of | ||||||
| Donald C. Cacciapaglia* |
Rydex Series Funds – 2012 |
146 | ||||||
| (1951) | Rydex Variable Trust – 2012 |
|||||||
| Rydex Dynamic Funds – 2012 |
||||||||
| Rydex ETF Trust – 2012 |
Principal Occupations During Past Five Years: Current: Security Investors, LLC: President and CEO from April 2012 to present; Guggenheim Investments: President and Chief Administrative Officer from February 2010 to present; Previous: Channel Capital Group, Inc.: Chairman and CEO from April 2002 to February 2010
Positions held within the Trust: Trustee from 2012 to present; President from 2012 to present
INDEPENDENT TRUSTEES
| Name
and |
Length of Service (Year Began) |
Number of | ||||||
| Corey A. Colehour |
Rydex Series Funds – 1993 |
146 | ||||||
| (1945) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired; Previous: President and Senior Vice President of Schield Management Company (registered investment adviser) from 2003 to 2006
Positions held within the Trust: Trustee from 1993 to present; Member of the Audit and Governance and Nominating Committees from 1995 to present
| J. Kenneth Dalton |
Rydex Series Funds – 1995 |
146 | ||||||
| (1941) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired
Positions held within the Trust: Trustee from 1995 to present; Member and Chairman of the Audit Committee from 1997 to present; Member of the Governance and Nominating Committees from 1995 to present; and Member of the Risk Oversight Committee from 2010 to present
| John O. Demaret |
Rydex Series Funds – 1997 |
146 | ||||||
| (1940) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired
Positions held within the Trust: Trustee from 1997 to present; Chairman of the Board from 2006 to present; Member of the Audit Committee from 1997 to present; and Member of the Risk Oversight Committee from 2010 to present
| GUGGENHEIM ETFS ANNUAL REPORT | 31 |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued)
|
INDEPENDENT TRUSTEES – concluded
| Name
and |
Length of Service (Year Began) |
Number of | ||||||
| Werner E. Keller |
Rydex Series Funds – 2005 |
146 | ||||||
| (1940) | Rydex Variable Trust – 2005 |
|||||||
| Rydex Dynamic Funds – 2005 |
||||||||
| Rydex ETF Trust – 2005 |
Principal Occupations During Past Five Years: Current: Founder and President of Keller Partners, LLC (investment research firm) from 2005 to present; Previous: Retired from 2001 to 2005
Positions held within the Trust: Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit and Governance and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present
| Thomas F. Lydon, Jr. |
Rydex Series Funds – 2005 |
146 | ||||||
| (1960) | Rydex Variable Trust – 2005 |
|||||||
| Rydex Dynamic Funds – 2005 |
||||||||
| Rydex ETF Trust – 2005 |
Principal Occupations During Past Five Years: Current: President of Global Trends Investments (registered investment adviser) from 1996 to present
Positions held within the Trust: Trustee and Member of the Audit and Governance and Nominating Committees from 2005 to present
| Patrick T. McCarville |
Rydex Series Funds – 1997 |
146 | ||||||
| (1942) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired; Previous: Chief Executive Officer of Par Industries, Inc., d/b/a Par Leasing from 1977 to 2010
Positions held within the Trust: Trustee from 1997 to present; Member of the Audit Committee from 1997 to present; and Chairman of the Governance and Nominating Committees from 1997 to present
| Roger Somers |
Rydex Series Funds – 1993 |
146 | ||||||
| (1944) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Founder and Chief Executive Officer of Arrow Limousine from 1965 to present
Positions held within the Trust: Trustee from 1993 to present; Member of the Audit and Governance and Nominating Committees from 1995 to present
| * | Officers of the Funds are deemed to be “interested persons” of the Trust, within the meaning of Section 2(a) (19) of the 1940 Act, inasmuch as this person is affiliated with Guggenheim Investments. |
| 32 | GUGGENHEIM ETFS ANNUAL REPORT |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded) |
EXECUTIVE OFFICERS
| Name, Position and Year of Birth |
Principal Occupations During Past Five Years | |
| Michael P. Byrum* Vice President (1970) |
Current: President, Security Benefit Asset Management Holdings, LLC; Senior Vice President, Security Investors, LLC; President & Chief Investment Officer, Rydex Holdings, LLC; Director & Chairman of the Board, Advisor Research Center, Inc.; and Manager, Rydex Specialized Products, LLC
Previous: Rydex Distributors, LLC (f/k/a Rydex Distributors, Inc.), Vice President (2009); Rydex Fund Services, LLC, Director (2009-2010), Secretary (2002-2010), Executive Vice President (2002-2006); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.), Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010), Secretary (2002-2010); Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010), Secretary (2002-2010); Rydex Capital Partners, LLC, President & Secretary (2003-2007); Rydex Capital Partners II, LLC, (2003-2007); Rydex Holdings, LLC (f/k/a Rydex Holdings, Inc.), Secretary (2005-2008), Executive Vice President (2005-2006); Advisor Research Center, Inc., Secretary (2006-2009), Executive Vice President (2006); and Rydex Specialized Products, LLC, Secretary (2005-2008) | |
| Nikolaos Bonos* Vice President and Treasurer (1963) |
Current: Senior Vice President, Security Investors, LLC; Chief Executive Officer & Manager, Rydex Specialized Products, LLC; Chief Executive Officer & President, Rydex Fund Services, LLC; Vice President, Rydex Holdings, LLC; Treasurer, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; and Vice President, Security Benefit Asset Management Holdings, LLC
Previous: Security Global Investors, LLC, Senior Vice President (2010-2011); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) Senior Vice President (2006-2011); Rydex Fund Services, LLC (f/k/a Rydex Fund Services, Inc.), Director (2009) & Senior Vice President (2003-2006); and Rydex Specialized Products, LLC, Chief Financial Officer (2005-2009) | |
| Elisabeth Miller* Chief Compliance Officer (1968) |
Current: Chief Compliance Officer, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust, Rydex ETF Trust, Security Equity Fund, Security Income Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, SBL Fund, Security Investors, LLC, and Rydex Distributors, LLC
Previous: Senior Manager, Security Investors, LLC and Rydex Distributors, LLC (2004-2009) | |
| Amy J. Lee* Vice President and Assistant Secretary (1961) |
Current: Senior Vice President & Secretary, Security Investors, LLC; Secretary & Chief Compliance Officer, Security Distributors, Inc.; Vice President, Associate General Counsel & Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation; Associate General Counsel, First Security Benefit Life Insurance and Annuity of New York; Vice President & Secretary, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; Vice President & Secretary, Rydex Holdings, LLC Secretary, Advisor Research Center, Inc., Rydex Specialized Products, LLC, Rydex Distributors, LLC and Rydex Fund Services, LLC; and Assistant Secretary, Security Benefit Clinic and Hospital
Previous: Security Global Investors, LLC, Senior Vice President & Secretary (2007-2011); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Senior Vice President & Secretary (2010-2011); and Brecek & Young Advisors, Inc., Director (2004-2008) | |
| Joseph M. Arruda* Assistant Treasurer (1966) |
Current: Assistant Treasurer, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; Vice President, Security Investors, LLC; and Chief Financial Officer & Manager, Rydex Specialized Products, LLC
Previous: Security Global Investors, LLC, Vice President (2010-2011); and Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Vice President (2004-2011) | |
| * | Officers of the Funds are deemed to be “interested persons” of the Trust, within the meaning of Section 2(a)(19) of the 1940 Act, inasmuch as this person is affiliated with Guggenheim Investments. |
| GUGGENHEIM ETFS ANNUAL REPORT | 33 |
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| GUGGENHEIM INVESTMENTS PRIVACY POLICIES
|
Rydex Funds, Guggenheim Funds, Rydex Investments, Rydex Distributors, Inc., Security Investors, LLC, Security Distributors, Inc. and Rydex Advisory Services (Collectively “Guggenheim Investments”)
Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone — whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies” — tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
| 34 | GUGGENHEIM ETFS ANNUAL REPORT |
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| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (concluded) |
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| GUGGENHEIM ETFS ANNUAL REPORT | 35 |
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805 King Farm Boulevard, Suite 600
Rockville, MD 20850
guggenheiminvestments.com
800.820.0888
ETF3-ANN-1012x1013
Table of Contents
OCTOBER 31, 2012
GUGGENHEIM ETFs
ANNUAL REPORT
| RSP | GUGGENHEIM S&P 500® EQUAL WEIGHT ETF | |
| (formerly, RYDEX S&P 500 EQUAL WEIGHT ETF) |
Table of Contents
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| GUGGENHEIM ETFS ANNUAL REPORT | 1 |
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| October 31, 2012 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for Guggenheim S&P 500® Equal Weight ETF (RSP).
The Investment Adviser is part of Guggenheim Investments which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.
This report covers performance of Guggenheim S&P 500® Equal Weight ETF (RSP) for the annual period ended October 31, 2012.
Rydex Distributors, LLC, the distributor of the Funds, is committed to providing investors with innovative investment solutions; as of the date of this report we offer 26 ETFs with a wide range of domestic and global themes, as well as equity and fixed-income mutual funds. We have built on the investment management strengths of Guggenheim Investments and worked with a diverse group of index providers to create some of the most distinctive ETFs available.
Rydex Distributors, LLC is affiliated with Guggenheim Partners and Security Investors.
To learn more about economic and market conditions over the 12 months ended October 31, 2012, we encourage you to read the Economic and Market Overview section of the report, which follows this letter, and the Manager’s Analysis for the ETF.
Sincerely,
Donald C. Cacciapaglia
President
November 30, 2012
Read each fund’s prospectus and summary prospectus (if available) carefully before investing. It contains the fund’s investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at www.guggenheiminvestments.com or call 800.820.0888.
The Guggenheim S&P 500® Equal Weight ETF may not be suitable for all investors. • The Fund is subject to the risk that unanticipated early closings of securities exchanges and other financial markets may result in the Fund’s inability to buy or sell securities or other financial instruments on that day. • In certain circumstances, it may be difficult for the Fund to purchase and sell particular investments within a reasonable time at a fair price. • Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the Fund may lose money. • Unlike many investment companies, the Fund is not actively “managed.” This means that, based on market and economic conditions, the Fund’s performance could be lower than other types of mutual funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline. • Tracking error risk refers to the risk that the Advisor may not be able to cause the Fund’s performance to match or correlate to that of the Fund’s Underlying Index, either on a daily or aggregate basis. Tracking error risk may cause the Fund’s performance to be less than you expect. • Shares may trade below their net asset value (“NAV”). The NAV of shares will fluctuate with changes in the market value of the Fund’s holdings. In addition, although the Fund’s shares are currently listed on NYSE Arca, Inc. (the “Exchange”), there can be no assurance that an active trading market for shares will develop or be maintained. • The Fund is subject to the risk that large-capitalization stocks may underperform other segments of the equity market or the equity market as a whole. See prospectus for more details.
| 2 | GUGGENHEIM ETFS ANNUAL REPORT |
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Shareholder Expense Example
As a shareholder of the Rydex ETF Trust, you incur transaction costs such as creation and redemption fees or brokerage charges, and ongoing costs including advisory fees, trustee fees and, if applicable, distribution fees. All other Trust expenses are paid by the advisor. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example in the table is based on an investment of $1,000 invested on April 30, 2012 and held for the six months ended October 31, 2012.
Actual Expenses
The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first table under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses attributable to your investment during this period.
Hypothetical Example for Comparison Purposes
The second table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| Expense Ratio |
Beginning Account Value 04/30/12 |
Ending Account Value 10/31/12 |
Expenses Paid During Six-Month Period* 04/30/12 to 10/31/12 |
|||||||||||||
| Actual |
||||||||||||||||
| Guggenheim S&P® 500 Equal Weight ETF |
0.40% | $ | 1,000.00 | $ | 1,013.60 | $ | 2.02 | |||||||||
| Hypothetical (assuming a 5% return before expenses) |
| |||||||||||||||
| Guggenheim S&P 500® Equal Weight ETF |
0.40% | 1,000.00 | 1,023.13 | 2.03 | ||||||||||||
| * | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect one-half year period). |
| GUGGENHEIM ETFS ANNUAL REPORT | 3 |
Table of Contents
|
|
Amidst the negative headlines concerning the potential fiscal cliff in the U.S., further turmoil in Europe and worsening economic data from China, the U.S. economy has shown surprising resilience, with signs of rising consumer sentiment and a recovery in housing. The U.S. housing market appears to have passed its bottom and real estate prices have begun to pick up. Our expectation is that a period of continued low interest rates will likely reinforce the rise in home prices and sales. Rising home prices will increase household net worth, which will translate into greater consumption via the wealth effect, and is supportive of overall economic growth. The recent rise in headline inflation, led by increases in energy and food prices, is likely to be transitory. Inflationary pressures should remain muted in the medium-term given the substantial slack in the economy.
The U.S. economy continues to press forward despite the current headwinds, and we believe the current macroeconomic environment remains constructive for risk assets, especially in the U.S. Stocks in the U.S. appear to be undervalued by most measures, and should benefit from continued capital inflow and the Federal Reserve’s accommodative monetary policy. We continue to see attractive value in credit products on a relative basis, though this positive outlook is limited to spread (or non-government) sectors.
On the international front, uncertainty continues to weigh on European markets. European policymakers appear to be coming closer to a consensus on the need for a fiscal union, albeit at a glacial pace. In China, a recent batch of economic data suggests that the odds of a hard landing have increased materially. We expect an announcement of additional stimulus measures after the government transition next year; although a stimulus would be supportive of economic growth, we expect China’s headline growth to slow from its breakneck pace of the past decade.
Beginning in mid-November 2011, the U.S. stock market moved up fairly consistently, except for a second-quarter pullback caused by lower earnings and GDP. For the 12-month period ended October 31, 2012, the Standard & Poor’s 500 Index* (the “S&P 500”) returned 15.21%.
Most international markets had positive returns, but were not nearly as strong as the U.S. market. The Morgan Stanley Capital International Europe-Australasia-Far East (the “MSCI EAFE”) Index* returned 4.61%. The MSCI EAFE Index is composed of approximately 1,100 companies in 20 developed countries in Europe and the Pacific Basin. The MSCI Emerging Markets Index returned 2.63%.
The search for yield continued to attract investors to the U.S. bond markets, helping performance, with lower-rated bonds outperforming higher-quality issues. The return of the Barclays U.S. Aggregate Bond Index*, which is a proxy for the U.S. investment grade bond market, returned 5.25%, while return of the Barclays U.S. Corporate High Yield Index* was 13.61%. Reflecting the Federal Reserve’s continuing accommodative monetary policy, interest rates on short-term securities remained at their lowest levels in many years; the return of the Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index* was 0.08%.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees or expenses.
The Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds.
The Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index tracks 3-month U.S. government securities.
| 4 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| ECONOMIC AND MARKET OVERVIEW (concluded)
|
The MSCI EAFE Index is a capitalization weighted measure of stock markets in Europe, Australasia and the Far East.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
The S&P 500® Index is a capitalization-weighted index that measures the performance of the large-capitalization sector of the U.S. equity market and includes 500 widely held common stocks chosen for market size, liquidity and industry group representation.
The Standard & Poor’s (S&P) 500® Equal Weight Index is an unmanaged equal-weighted version of the S&P 500® Index, which measures the performance of the large-capitalization sector of the U.S. equity market and includes 500 widely held common stocks chosen for market size, liquidity and industry group representation. The S&P 500 Equal Weight Index has the same constituents as the unmanaged capitalization-weighted S&P 500 Index, but each company in the equal-weighted index is allocated a fixed weight, and is rebalanced quarterly.
| GUGGENHEIM ETFS ANNUAL REPORT | 5 |
Table of Contents
| MANAGER’S ANALYSIS (Unaudited) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
Guggenheim S&P 500® Equal Weight ETF returned 12.42% for the one-year period ended October 31, 2012, compared with the benchmark S&P 500® Equal Weight Total Return Index which returned 12.96%. The cap-weighted S&P 500 Total Return Index returned 15.21%. During the period, RSP achieved over 99% correlation to its benchmark on a daily basis.
The Financials sector contributed most to performance, followed by the Consumer Discretionary sector. Information Technology was the only sector detracting from return.
Top contributors to Fund return included Pulte Group, Inc. and Sprint Nextel Corp., while Alpha Natural Resources, Inc. and Abercrombie & Fitch Co.—Class A were the largest detractors.
Cumulative Fund Performance: April 24, 2003 – October 31, 2012
| AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2012 | ||||||||||||||||
| One Year | Three Year | Five Year | Since Inception (04/24/03) |
|||||||||||||
| Guggenheim S&P 500® Equal Weight ETF |
12.42% | 14.55% | 2.05% | 9.28% | ||||||||||||
| S&P Equal Weight Total Return Index |
12.96% | 15.09% | 2.74% | 9.89% | ||||||||||||
| S&P 500 Total Return Index |
15.21% | 13.21% | 0.36% | 6.84% | ||||||||||||
The returns presented above do not reflect the effect of taxes. Index returns represent total returns. Performance displayed represents past performance, which is no guarantee of future results.
Fund performance is subject to daily market volatility and may be better or worse since the end of the last quarter. For up-to-date fund performance, call 800.820.0888 or visit guggenheiminvestments.com.
| 6 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| PORTFOLIO SUMMARY (Unaudited) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| * | The Fund’s Top Ten Holdings are expressed as a percentage of net assets and the Sector Allocations are expressed as a percentage of the Fund’s equity investments market value. These percentages may change over time. |
| GUGGENHEIM ETFS ANNUAL REPORT | 7 |
Table of Contents
| SCHEDULE OF INVESTMENTS | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| 8 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 9 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| 10 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 11 |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| 12 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| SCHEDULE OF INVESTMENTS (continued) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 13 |
Table of Contents
| SCHEDULE OF INVESTMENTS (concluded) | October 31, 2012 |
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| * | Non-Income Producing Security. |
| a | All or a portion of this security was on loan as of October 31, 2012. |
| b | Values determined based on Level 2 inputs (Note E). |
| c | Unless otherwise indicated, the values of the Investments are determined based on Level 1 inputs. |
| d | Securities lending collateral (Note H). |
| 14 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENT OF ASSETS AND LIABILITIES | October 31, 2012 |
| Guggenheim S&P 500® Equal Weight ETF |
||||
| ASSETS: | ||||
| Investments, at value*—including $62,708,611 of securities loaned |
$ | 2,835,416,864 | ||
| Cash |
306 | |||
| Receivables: |
||||
| Investments sold |
23,272,948 | |||
| Dividends and interest |
3,143,125 | |||
| Total assets |
2,861,833,243 | |||
| LIABILITIES: | ||||
| Payable upon return of securities loaned |
65,141,123 | |||
| Payable for: |
||||
| Fund shares repurchased |
23,293,937 | |||
| Accrued management fees |
958,223 | |||
| Total liabilities |
89,393,283 | |||
| NET ASSETS | $ | 2,772,439,960 | ||
| NET ASSETS CONSIST OF: | ||||
| Paid-in capital |
$ | 3,272,191,996 | ||
| Undistributed net investment income |
1,012,830 | |||
| Accumulated net realized loss on investments |
(560,129,277 | ) | ||
| Net unrealized appreciation on investments |
59,364,411 | |||
| NET ASSETS | $ | 2,772,439,960 | ||
| Shares outstanding (unlimited shares authorized), no par value |
53,558,863 | |||
| Net asset value, offering price and repurchase price per share |
$51.76 | |||
| *Total cost of investments |
$ | 2,776,052,453 | ||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 15 |
Table of Contents
| STATEMENT OF OPERATIONS |
For the Year Ended October 31, 2012
| Guggenheim S&P 500® Equal Weight ETF |
||||
| INVESTMENT INCOME: | ||||
| Dividends, net of foreign taxes withheld* |
$ | 57,426,486 | ||
| Income from securities lending |
98,018 | |||
| Interest |
495 | |||
| Total investment income |
57,524,999 | |||
| EXPENSES: | ||||
| Management fee |
11,437,956 | |||
| Total expenses |
11,437,956 | |||
| Net investment income |
46,087,043 | |||
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||
| Net realized gain (loss) on: |
||||
| Investments |
(71,611,588 | ) | ||
| In-kind redemptions |
139,305,943 | |||
| Net realized gain |
67,694,355 | |||
| Net change in unrealized appreciation (depreciation) on: |
||||
| Investments |
179,598,926 | |||
| Net realized and unrealized gain |
247,293,281 | |||
| Net increase in net assets resulting from operations |
$ | 293,380,324 | ||
| * Foreign taxes withheld |
$ | (316 | ) | |
| 16 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| STATEMENTS OF CHANGES IN NET ASSETS |
| Guggenheim S&P 500® Equal Weight ETF | ||||||||
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
| Net investment income |
$ | 46,087,043 | $ | 42,464,646 | ||||
| Net realized gain on investments |
67,694,355 | 277,178,204 | ||||||
| Net change in unrealized appreciation (depreciation) on investments |
179,598,926 | (197,398,983 | ) | |||||
| Net increase in net assets resulting from operations |
293,380,324 | 122,243,867 | ||||||
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||
| Net investment income |
(44,494,825 | ) | (40,649,421 | ) | ||||
| SHAREHOLDER TRANSACTIONS: | ||||||||
| Proceeds from shares purchased |
746,295,733 | 2,816,559,505 | ||||||
| Value of shares redeemed |
(1,286,550,125 | ) | (1,988,604,371 | ) | ||||
| Net increase (decrease) in net assets resulting from share transactions |
(540,254,392 | ) | 827,955,134 | |||||
| Net increase (decrease) in net assets |
(291,368,893 | ) | 909,549,580 | |||||
| NET ASSETS | ||||||||
| Beginning of year |
3,063,808,853 | 2,154,259,273 | ||||||
| End of year |
$ | 2,772,439,960 | $ | 3,063,808,853 | ||||
| Undistributed net investment income at end of year |
$ | 1,012,830 | $ | 818,113 | ||||
| CHANGES IN SHARES OUTSTANDING: | ||||||||
| Shares sold |
15,100,000 | 58,750,000 | ||||||
| Shares redeemed |
(27,050,000 | ) | (42,350,000 | ) | ||||
| Net increase (decrease) in shares |
(11,950,000 | ) | 16,400,000 | |||||
| See Notes to Financial Statements. | GUGGENHEIM ETFS ANNUAL REPORT | 17 |
Table of Contents
GUGGENHEIM S&P 500® EQUAL WEIGHT ETF
| Year Ended October 31, 2012 |
Year Ended October 31, 2011 |
Year Ended October 31, 2010 |
Year Ended October 31, 2009 |
Year Ended October 31, 2008 |
||||||||||||||||
| Per Share Data: |
||||||||||||||||||||
| Net asset value, beginning of year |
$46.77 | $43.87 | $35.99 | $30.01 | $50.63 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income* |
0.80 | 0.69 | 0.60 | 0.54 | 0.72 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) |
4.97 | 2.87 | 7.87 | 5.98 | (20.64 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
5.77 | 3.56 | 8.47 | 6.52 | (19.92 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.78 | ) | (0.66 | ) | (0.59 | ) | (0.54 | ) | (0.70 | ) | ||||||||||
| Net asset value, end of year |
$51.76 | $46.77 | $43.87 | $35.99 | $30.01 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
12.42% | 8.12% | 23.67% | 22.21% | (39.75% | ) | ||||||||||||||
| Ratios/Supplemental Data: |
||||||||||||||||||||
| Net assets, end of year (in thousands) |
$2,772,440 | $3,063,809 | $2,154,259 | $1,499,351 | $843,417 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Net investment income |
1.61% | 1.45% | 1.48% | 1.75% | 1.65% | |||||||||||||||
| Total expenses |
0.40% | 0.40% | 0.40% | 0.40% | 0.40% | |||||||||||||||
| Portfolio turnover rate† |
20% | 21% | 20% | 37% | 32% | |||||||||||||||
| * | Based on average shares outstanding. |
| ** | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distribution at net asset value during the period, and redemption on the last day of the period. Transaction fees are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. |
| † | Portfolio turnover does not include securities received or delivered from processing creations or redemptions. |
| 18 | GUGGENHEIM ETFS ANNUAL REPORT | See Notes to Financial Statements. |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS |
| GUGGENHEIM ETFS ANNUAL REPORT | 19 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
| 20 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended October 31, 2012, there were no capital loss carryforward amounts used to offset current year net realized capital gains.
The tax character of distributable earnings (accumulated losses) at October 31, 2012 was as follows:
| Undistributed Ordinary Income |
Undistributed Long Term Capital Gain |
Capital Loss Carryfoward |
Unrealized Appreciation |
|||||||||||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 1,012,830 | $ | — | $ | (558,137,156 | ) | $ | 57,372,290 | |||||||
A summary of the expiration of the capital loss carryforward is as follows:
| Unlimited | ||||||||||||||||||||||||
| 2016 | 2017 | 2018 | 2019 | Short Term | Long Term | |||||||||||||||||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 119,981,602 | $ | 313,762,207 | $ | 35,251,288 | $ | 20,782,942 | $ | 12,983,445 | $ | 55,375,672 | ||||||||||||
The tax character of distributions paid during the year ended October 31, 2012 was as follows:
| Ordinary Income |
Return of Capital |
|||||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 44,494,825 | $ | — | ||||
The tax character of distributions paid during the year ended October 31, 2011 was as follows:
| Ordinary Income |
Return of Capital |
|||||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 40,649,421 | $ | — | ||||
At October 31, 2012, the identified cost of investments in securities owned by the Fund for Federal income tax purposes and the gross unrealized appreciation and depreciation were as follows:
| Identified Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation |
|||||||||||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 2,778,044,574 | $ | 261,402,083 | $ | (204,029,793 | ) | $ | 57,372,290 | |||||||
E. Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or, in the absence of a principal market, the most advantageous market for the investment or liability. A three-tier hierarchy is utilized to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund’s investments. The inputs are summarized in the three broad levels listed below:
| Level 1 — | quoted prices in active markets for identical securities. |
| Level 2 — | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
| Level 3 — | significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). |
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following table summarizes the inputs used to value the Fund’s net assets as of October 31, 2012:
| Fund | Level 1 Investments in Securities |
Level 2 Investments in Securities |
Level 3 Investments in Securities |
Total | ||||||||||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 2,760,139,741 | $ | 75,277,123 | $ | — | $ | 2,835,416,864 | ||||||||
| GUGGENHEIM ETFS ANNUAL REPORT | 21 |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued)
|
For the year ended October 31, 2012, there were no Level 3 investments or transfers between levels.
F. Dividends and Distributions
Distributions of net investment income and net realized gains, if any, in the Fund, are declared and paid at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
G. Risk and Uncertainties
The Fund invests in various investments which are exposed to risk, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect amounts reported in the financial statements. The Guggenheim S&P 500 Equal Weight ETF is a non-diversified fund, subjecting it to a greater risk than funds that are diversified.
Throughout the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund and/or its affiliates that have not yet occurred. However, based on experience the Fund expects the risk of loss to be remote.
H. Portfolio Securities Loaned
The Fund may lend its securities to approved brokers to earn additional income. Security lending income shown on the statement of operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Fund act as the lender, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Fund receives cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Fund’s securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies. The Fund bears the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund the next business day. Although the collateral mitigates the risk, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
At October 31, 2012, the Fund participated in securities lending as follows:
| Value of Securities Loaned |
Cash Collateral Received |
|||||||
|
Guggenheim S&P 500® Equal Weight ETF |
$ | 62,708,611 | $ | 65,141,123 | ||||
The following represents a breakdown of the collateral for the joint repurchase agreements at October 31, 2012:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| Merrill Lynch, Pierce, Fenner & Smith, Inc. |
US Treasury | |||||||||||||||||
| 0.28% |
0.625% | |||||||||||||||||
| Due 11/01/12 |
$ | 40,000,000 | $ | 40,000,311 | 04/15/13 | $ | 37,278,800 | $ | 40,788,895 | |||||||||
| RBS Securities, Inc. |
Fannie Mae Note | |||||||||||||||||
| 0.28% |
5.375% | |||||||||||||||||
| Due 11/01/12 |
68,010,000 | 68,012,041 | 7/15/16 | 58,330,000 | 69,372,283 | |||||||||||||
3. Advisory, Administration and Other Transactions With Affiliates
GI 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, GI receives a management fee at the annual rate shown below as a percentage of the average daily net assets of the Fund.
| Advisory Fee | ||||
| Guggenheim S&P 500® Equal Weight ETF |
0.40 | % | ||
GI pays all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except: interest, taxes, distribution fees or expenses and extraordinary expenses.
Under an Administration Agreement, State Street Bank and Trust Company (the “Administrator”) provides various administrative and accounting services for the maintenance and operations of the Fund. Under a Custodian Agreement with the Trust, the Administrator
| 22 | GUGGENHEIM ETFS ANNUAL REPORT |
Table of Contents
| NOTES TO FINANCIAL STATEMENTS (continued) |
maintains cash, securities and other assets of the Fund in a separate account for 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. GI compensates the Administrator directly for the foregoing services.
The Fund has adopted a Distribution Plan (the “Plan”) that allows the Fund to pay distribution fees to RDL and other firms that provide distribution services (“Service Providers”). If a Service Provider provides distribution services, the Fund will pay distribution fees to RDL at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. RDL 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, 2012, there were an unlimited number of no par value shares of beneficial interest authorized. There is a minimum transaction fee per transaction to those persons purchasing or redeeming Creation Units. An additional charge of up to three times the standard transaction fee may be imposed for purchases and redemptions effected outside the National Securities Clearing Corporation usual clearing process or for cash. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV of the Fund on the transaction date. Transaction fees are not charged to or paid by the Fund. The minimum transaction fees are:
| Minimum Transaction Fee |
||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 2,000 | ||
5. Investment Transactions
For the year ended October 31, 2012, the Fund had investment transactions in-kind associated with subscriptions and redemptions as follows:
| Subscriptions | Redemptions | |||||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 693,729,555 | $ | 1,232,701,089 | ||||
Purchases and sales of investment securities (excluding short-term investments, U.S. government and government agency obligations) for the Fund was as follows:
| Purchases | Sales | |||||||
| Guggenheim S&P 500® Equal Weight ETF |
$ | 580,454,317 | $ | 597,479,858 | ||||
There were no purchases or sales of U.S. government or government agency obligations for the year ended October 31, 2012.
6. Legal Proceedings
Tribune Company
Rydex ETF Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons (In re Tribune Co.), No. 12-2652 (S.D.N.Y.) (formerly Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership of shares in the Tribune Company (“Tribune”) in 2007 by certain series of the Rydex ETF Trust when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In its complaint, the Unsecured Creditors Committee (the “UCC”) has alleged that, in connection with the LBO, insiders and major shareholders received proceeds for their Tribune stock using financing that the insiders knew would, and ultimately did, leave the Tribune insolvent. The UCC has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO, and is attempting to obtain from these individuals and entities the proceeds paid out in connection with the LBO.
In June 2011, a group of Tribune creditors, not including the UCC, filed multiple actions involving state law constructive fraudulent conveyance claims against former Tribune shareholders (the “SCLFC actions”). Rydex ETF Trust has been named as a defendant in one or more of these suits. These cases have been consolidated together with the FitzSimons action in a multidistrict litigation proceeding captioned In re Tribune Co. Fraudulent Conveyance Litig., No. 11-2296 (S.D.N.Y.) (the “MDL proceeding”).
On September 7, 2012, the Court issued a Master Case Order in the MDL proceeding. This order designated several law firms to serve as members of executive committees of defense counsel in the FitzSimons action and in the SCLFC actions. The order also established a briefing schedule for motions to dismiss in the SLCFC actions; no schedule has yet been established in the Fitzsimons action. The
| GUGGENHEIM ETFS ANNUAL REPORT | 23 |
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| NOTES TO FINANCIAL STATEMENTS (concluded)
|
Court also ordered that the plaintiffs’ deadline to serve summonses and complaints is extended through January 15, 2013. Finally, the Court ordered that merits discovery will be stayed until further order of the Court.
None of these lawsuits allege any wrongdoing on the part of Rydex ETF Trust. The following series of Rydex ETF Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Guggenheim S&P 500 Equal Weight ETF (the “Fund”). The value of the proceeds received by the foregoing Fund was $4,766,035. At this stage of the proceedings, Rydex ETF Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on the Fund’s net asset value.
| 24 | GUGGENHEIM ETFS ANNUAL REPORT |
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| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
The Board of Trustees and Shareholders of Rydex ETF Trust
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Guggenheim S&P 500® Equal Weight ETF (one of the series constituting the Guggenheim ETF Trust) (the “Fund”) as of October 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. The financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Guggenheim S&P 500® Equal Weight ETF at October 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
December 21, 2012
| GUGGENHEIM ETFS ANNUAL REPORT | 25 |
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|
|
Federal Income Tax Information
For federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the year ended October 31, 2012:
| Dividend Received Deduction |
Long Term Capital Gains Distribution |
Qualified Income Distribution |
||||||||||
| Guggenheim S&P 500® Equal Weight ETF |
100.00% | $ | — | $ | 54,056,135 | |||||||
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds portfolio is available, without charge and upon request, by calling 1.800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities, during the most recent 12-month period ended June 30, 2012 is available, without charge, upon request, by calling 1.800.820.0888. The information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1.800.820.0888.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
40 East 52nd Street
16th Floor
New York, NY 10022
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Premium/Discount Information
Information about the differences between the daily market price on secondary markets for shares and the NAV of each Fund can be found at guggenheiminvestments.com.
| 26 | GUGGENHEIM ETFS ANNUAL REPORT |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
TRUSTEE AND OFFICER
| Name and |
Length of Service (Year Began) |
Number of | ||||||
| Donald C. Cacciapaglia* |
Rydex Series Funds – 2012 |
146 | ||||||
| (1951) | Rydex Variable Trust – 2012 |
|||||||
| Rydex Dynamic Funds – 2012 |
||||||||
| Rydex ETF Trust – 2012 |
Principal Occupations During Past Five Years: Current: Security Investors, LLC: President and CEO from April 2012 to present; Guggenheim Investments: President and Chief Administrative Officer from February 2010 to present; Previous: Channel Capital Group, Inc.: Chairman and CEO from April 2002 to February 2010
Positions held within the Trust: Trustee from 2012 to present; President from 2012 to present
INDEPENDENT TRUSTEES
| Name and |
Length of Service (Year Began) |
Number of | ||||||
| Corey A. Colehour |
Rydex Series Funds – 1993 |
146 | ||||||
| (1945) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired; Previous: President and Senior Vice President of Schield Management Company (registered investment adviser) from 2003 to 2006
Positions held within the Trust: Trustee from 1993 to present; Member of the Audit and Governance and Nominating Committees from 1995 to present
| J. Kenneth Dalton |
Rydex Series Funds – 1995 |
146 | ||||||
| (1941) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired
Positions held within the Trust: Trustee from 1995 to present; Member and Chairman of the Audit Committee from 1997 to present; Member of the Governance and Nominating Committees from 1995 to present; and Member of the Risk Oversight Committee from 2010 to present
| John O. Demaret |
Rydex Series Funds – 1997 |
146 | ||||||
| (1940) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired
Positions held within the Trust: Trustee from 1997 to present; Chairman of the Board from 2006 to present; Member of the Audit Committee from 1997 to present; and Member of the Risk Oversight Committee from 2010 to present
| GUGGENHEIM ETFS ANNUAL REPORT | 27 |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued) |
INDEPENDENT TRUSTEES - concluded
| Name and |
Length of Service (Year Began) |
Number of | ||||||
| Werner E. Keller |
Rydex Series Funds – 2005 |
146 | ||||||
| (1940) | Rydex Variable Trust – 2005 |
|||||||
| Rydex Dynamic Funds – 2005 |
||||||||
| Rydex ETF Trust – 2005 |
Principal Occupations During Past Five Years: Current: Founder and President of Keller Partners, LLC (investment research firm) from 2005 to present; Previous: Retired from 2001 to 2005
Positions held within the Trust: Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit and Governance and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present
| Thomas F. Lydon, Jr. |
Rydex Series Funds – 2005 |
146 | ||||||
| (1960) | Rydex Variable Trust – 2005 |
|||||||
| Rydex Dynamic Funds – 2005 |
||||||||
| Rydex ETF Trust – 2005 |
Principal Occupations During Past Five Years: Current:
President of Global Trends Investments (registered investment adviser) from 1996 to present
Positions held within the Trust: Trustee and Member of the Audit and Governance and Nominating Committees from 2005 to present
| Patrick T. McCarville |
Rydex Series Funds – 1997 |
146 | ||||||
| (1942) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Retired; Previous: Chief Executive Officer of Par Industries, Inc., d/b/a Par Leasing from 1977 to 2010
Positions held within the Trust: Trustee from 1997 to present; Member of the Audit Committee from 1997 to present; and Chairman of the Governance and Nominating Committees from 1997 to present
| Roger Somers |
Rydex Series Funds – 1993 |
146 | ||||||
| (1944) | Rydex Variable Trust – 1998 |
|||||||
| Rydex Dynamic Funds – 1999 |
||||||||
| Rydex ETF Trust – 2003 |
Principal Occupations During Past Five Years: Current: Founder and Chief Executive Officer of Arrow Limousine from 1965 to present
Positions held within the Trust: Trustee from 1993 to present; Member of the Audit and Governance and Nominating Committees from 1995 to present
| 28 | GUGGENHEIM ETFS ANNUAL REPORT |
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| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued) |
EXECUTIVE OFFICERS
| Name, Position and Year of Birth |
Principal Occupations During Past Five Years | |
| Michael P. Byrum* Vice President (1970) |
Current: President, Security Benefit Asset Management Holdings, LLC; Senior Vice President, Security Investors, LLC; President & Chief Investment Officer, Rydex Holdings, LLC; Director & Chairman of the Board, Advisor Research Center, Inc.; and Manager, Rydex Specialized Products, LLC
Previous: Rydex Distributors, LLC (f/k/a Rydex Distributors, Inc.), Vice President (2009); Rydex Fund Services, LLC, Director (2009-2010), Secretary (2002-2010), Executive Vice President (2002-2006); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.), Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010), Secretary (2002-2010); Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010), Secretary (2002-2010); Rydex Capital Partners, LLC, President & Secretary (2003-2007); Rydex Capital Partners II, LLC, (2003-2007); Rydex Holdings, LLC (f/k/a Rydex Holdings, Inc.), Secretary (2005-2008), Executive Vice President (2005-2006); Advisor Research Center, Inc., Secretary (2006-2009), Executive Vice President (2006); and Rydex Specialized Products, LLC, Secretary (2005-2008) | |
| Nikolaos Bonos* Vice President and Treasurer (1963) |
Current: Senior Vice President, Security Investors, LLC; Chief Executive Officer & Manager, Rydex Specialized Products, LLC; Chief Executive Officer & President, Rydex Fund Services, LLC; Vice President, Rydex Holdings, LLC; Treasurer, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; and Vice President, Security Benefit Asset Management Holdings, LLC
Previous: Security Global Investors, LLC, Senior Vice President (2010-2011); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) Senior Vice President (2006-2011); Rydex Fund Services, LLC (f/k/a Rydex Fund Services, Inc.), Director (2009) & Senior Vice President (2003-2006); and Rydex Specialized Products, LLC, Chief Financial Officer (2005-2009) | |
| Elisabeth Miller* Chief Compliance Officer (1968) |
Current: Chief Compliance Officer, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust, Rydex ETF Trust, Security Equity Fund, Security Income Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, SBL Fund, Security Investors, LLC, and Rydex Distributors, LLC Previous: Senior Manager, Security Investors, LLC and Rydex Distributors, LLC (2004-2009) | |
| Amy J. Lee* Vice President and Assistant Secretary (1961) |
Current: Senior Vice President & Secretary, Security Investors, LLC; Secretary & Chief Compliance Officer, Security Distributors, Inc.; Vice President, Associate General Counsel & Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation; Associate General Counsel, First Security Benefit Life Insurance and Annuity of New York; Vice President & Secretary, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; Vice President & Secretary, Rydex Holdings, LLC Secretary, Advisor Research Center, Inc., Rydex Specialized Products, LLC, Rydex Distributors, LLC and Rydex Fund Services, LLC; and Assistant Secretary, Security Benefit Clinic and Hospital
Previous: Security Global Investors, LLC, Senior Vice President & Secretary (2007-2011); Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Senior Vice President & Secretary (2010-2011); and Brecek & Young Advisors, Inc., Director (2004-2008) | |
| Joseph M. Arruda* Assistant Treasurer (1966) |
Current: Assistant Treasurer, SBL Fund; Security Equity Fund; Security Income Fund; Security Large Cap Value Fund & Security Mid Cap Growth Fund; Vice President, Security Investors, LLC; and Chief Financial Officer & Manager, Rydex Specialized Products, LLC
Previous: Security Global Investors, LLC, Vice President (2010-2011); and Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) & Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), Vice President (2004-2011) | |
| * | Officers of the Funds are deemed to be “interested persons” of the Trust, within the meaning of Section 2(a)(19) of the 1940 Act, inasmuch as this person is affiliated with Guggenheim Investments. |
| GUGGENHEIM ETFS ANNUAL REPORT | 29 |
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| GUGGENHEIM INVESTMENTS PRIVACY POLICIES
|
Rydex Funds, Guggenheim Funds, Rydex Investments, Rydex Distributors, Inc., Security Investors, LLC, Security Distributors, Inc. and Rydex Advisory Services (Collectively “Guggenheim Investments”)
Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
| 30 | GUGGENHEIM ETFS ANNUAL REPORT |
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| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (concluded) |
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| GUGGENHEIM ETFS ANNUAL REPORT | 31 |
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805 King Farm Boulevard, Suite 600
Rockville, MD 20850
guggenheiminvestments.com
800.820.0888
ETF4-ANN-1012x1013
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Item 2. Code of Ethics.
The registrant’s Board of Trustees has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Trustees has determined that Werner Keller, an “independent” Trustee serving on the registrant’s audit committee, is an “audit committee financial expert,” as defined in Item 3 of Form N-CSR. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)-(d) The aggregate Audit Fees billed by the Trust’s principal accountant, for the audit of the annual financial statements in connection with statutory and regulatory filings for the fiscal years ended October 31, 2012 and October 31, 2011 were $264,500 and $322,000, respectively. The aggregate Tax Fees billed by the Trust’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended October 31, 2012 and October 31, 2011, were $69,400 and $74,250, 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.
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(f) Not applicable.
(g) The aggregate non-audit fees were for Tax Fees billed by the Trust’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended October 31, 2012 and October 31, 2011, were $69,400 and $74,250, respectively.
(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. As such, the audit committee has considered these services in maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
(a) The Registrant has a separately standing Audit Committee, which includes the following independent members: John O. Demaret, Corey A. Colehour, Roger Somers, J. Kenneth Dalton, Patrick T. McCarville, Thomas F. Lydon, and Werner E. Keller.
(b) Not applicable.
Item 6. Schedule of Investments
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
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Item 11. Controls and Procedures.
(a) The registrant’s President (principal executive officer) and Treasurer (principal financial officer) have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.
(a)(2) Separate certifications by the President (principal executive officer) and Treasurer (principal financial officer) of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)) are attached.
(b) A certification by the registrant’s President (principal executive officer) and Treasurer (principal financial officer) as required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)) is attached.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) |
Rydex ETF Trust |
| By (Signature and Title)* |
/s/ Donald C. Cacciapaglia | |
| Donald C. Cacciapaglia, President | ||
| Date |
January 7, 2013 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* |
/s/ Donald C. Cacciapaglia | |
| Donald C. Cacciapaglia, President |
| Date |
January 7, 2013 | |
| By (Signature and Title)* |
/s/ Nikolaos Bonos | |
| Nikolaos Bonos, Vice President and Treasurer |
| Date |
January 7, 2013 | |
| * | Print the name and title of each signing officer under his or her signature. |